Scient Corp

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SCIENT CORP.

Scient Corp. is an Internet services consultant with offices in North America, Europe, and Asia. Like other upstart competitors who survived the dot.com fallout of 2000, it continues to reduce its reliance on newer dot.com s in favor of pursuing accounts with larger, better established clients looking to use e-business tools to improve operations. The firm is also working to change its reputation from one as a World Wide Web site designer and builder, to an integrator of new technology with existing business systems. Extensive layoffs and mounting losses prompted Scient to agree to merge with iXL Enterprises in 2001.

Scient was founded in late 1997 by Eric Greenberg, who had also founded Internet and e-commerce consultancy Viant, which mainly targeted industry leaders like Compaq Computer Corp., in February of 1996. After being ousted by Viant's board in June of 1997, due to Greenberg's deteriorating relationship with Viant CEO Robert Gett, Greenberg decided to use his $1.7 million severance package to establish a competitor to Viant. Benchmark Capital, Sequoia Capital, and Stanford University contributed another $20.5 million in capital for the new venture. Recognizing that experience and name recognition would lend his new business credibility with potential clients, Greenberg recruited seasoned executives for his management team. He lured CEO Robert Howe—known for shaping IBM Global Services into a top information technology (IT) consultancy and overseeing the development of the industry-leading firm's online financial services offerings—away from IBM by offering him an 11.7 percent stake in Scient. Other executives came from Anderson Consulting, EDS Corp., Bank of America, AT&T Corp., and other industry powerhouses. Greenberg balanced his traditional management team with young programmers and designers from the most respected technology and business schools in the U.S.

Heavy marketing of the company's slogan, "It takes courage to be legendary," proved lucrative for the firm when Scient landed several accounts, including dot.com upstarts like furniture e-tailer Living.com, PlanetRx Inc., and ePhysician, within a few months of its inception. The firm also hosted presentations such as "Lead or Get Crushed," to stress to potential customers the importance of being among the first to embrace new e-business technology and to warn business managers that their failure to develop an e-business strategy quickly might jeopardize their jobs. According to Scient chief marketing officer Christopher Lochhead, as quoted in a June 1999 Computer Reseller News article, "If it's worth doing, it's worth doing wrong fast." Although some industry analysts criticized Scient for using fear tactics to solicit business, speed was seen by many technology experts at the time, even those without a vested interest in selling e-business products and services, as the key to e-business success.

In 1999, Wineshopper.com hired Scient to create the wholesale wine database it needed for its online wine venture. In addition to securing business from fledgling Internet ventures like Wineshopper, the firm also helped to launch sites such as Chase Online for Chase Manhattan Corp. Domestic and international expansion efforts began in earnest with the creation of offices in Chicago, Texas, Singapore, and London. In May, Howe took the firm public at $10 a share, and by the year's end, shares were trading at ten times that amount, despite the fact that Scient had posted a $12 million loss on sales of $21 million. With Scient's market capitalization at a whopping 20 times anticipated yearly sales, Greenberg became a billionaire. In roughly two years, his firm had completely constructed a total of 15 e-businesses and had offered e-business integration services to another 85 companies.

In December of 1999, Texas Pacific Group hired Scient to create Hotwire, a Web site sponsored by six major airlines who wanted to compete with Priceline.com in offering inexpensive airline tickets to travelers. The site, hotwire.com, was launched in September of 2000. While 20 of Scient's consultant were working on the project, the Internet consultancy industry dramatically shifted gears in the wake of the dot.com meltdown. When dot.com startups began disappearing in the spring of 2000, larger companies no longer faced looming competition from these smaller, more technologically savvy firms. As a result, issues such as quality and added value replaced speed to market as the primary focus. According to a February 2001 issue of Fast Company, "Hotwire wanted to get to market quickly, because every week that lingered, after all, was one more week for priceline.com to win new customers. But speed wasn't the only priority, or even the most important one." It was more important that Scient ensure the site worked impeccably since it would likely attract high traffic volumes and media attention from the start.

The early months of 2000 proved to be the golden age for Scient. Sales grew more than sevenfold to $156 million, and employees totaled 1,180. The firm achieved profitability, and stock prices peaked at $133 per share. By May, however, as dot.com s found it increasingly difficult to secure funding, Scient and other Internet consultancies started to feel the effects of the technology industry's downturn. In August, competitors like iXL, Viant, and Marchfirst Inc. announced layoffs. Scient watched its stock prices plunge to roughly $10 per share. Many of the Web sites Scient had helped to build—Living.com, environmental news hub Verde Media, and jewelry etailer Miadora.com—shuttered operations. Realizing that the portion of its revenues that had come from dot.com startups—nearly 50 percent—had disappeared, Scient announced in December that its quarterly sales would fall by nearly 30 percent.

In 2001, the office in Austin, Texas, was closed, and headquarters moved from San Francisco to New York. Scient laid off 675 employees, nearly half of its workforce. According to a July 2001 article in The Financial Times, "the small-scale Internet consultancies, which shot to prominence by building Web sites during the dot.com bubble, are fighting for survival in the wake of the technology slowdown and resurgence of larger, more established consultancies, who have made up for lost time in the e-business market." Recognizing that it needed to strengthen its ability to secure larger accounts, particularly when faced with increased competition from formidable competitors, Scient agreed to merge with rival iXL Enterprises Inc. in July. Howe will take over as chairman of the newly merged company, while iXL head Chris Formant will serve as CEO. Scient and iXL expect to finalize the deal in early 2002.