Dan Khabie describes the company he co-founded as an interactive agency, not a Web developer. Of course San Diego-based Digitaria does Web development and design, but that’s not enough these days, Khabie said.
Web developers who don’t keep up with technology, he said, will be left tangled in the fast-growing Web.
“Clients aren’t just looking to take their existing brand online,” said Khabie, director of business development for the 3-year-old Digitaria, which lists clients such as American Express, Britannica, Sempra Energy, Petco Corp. and Airwalk. “They’re looking for an organization to manage their interactive brand and to manage that brand for different platforms.”
Those different platforms include wireless applications such as Palm Pilots and interactive television, Khabie said, adding Digitaria is building sites that have the ability to be seen through interactive TV.
“Our focus is providing creative interface solutions via the Internet. If you convert a brand from traditional media to interactive media, you have to rethink how that interactive brand is going to look and feel to the end user.”
Khabie said Web development companies must think convergence in order to be competitive in this marketplace.
“People who aren’t thinking about convergence are out of the loop. They’re too busy building databases or big E-commerce solutions. We’re not trying to be this huge technology firm. We’re looking to fulfill client needs and team up with a company like Oracle.”
Khabie said there is a real misconception about what E-building really is. He said Web developers have to be very focused on the solutions they provide.
“You have too many people who have been trying to do everything and they’re not being honest. It has a trickle-down effect on the whole industry. As soon as the market starts dying, people who have been trying to do everything are going to fail. As the market gets bigger, we have to become more focused.”
The industry has already seen several traditional Web developers fall by the wayside.
Such is the case with San Diego-based Inspired Arts Digital Media Group, which quietly closed its doors at the end of March. The company, founded in 1994, was one of San Diego’s oldest Web development and design firms.
Inspired Arts , which had big-name clients like Kyocera America Inc., BFGoodrich Aerospace/Aerostructures Group (formerly Rohr. Inc.), Buck Knives, Inc., Foodmaker Inc. and Chicken-of-the-Sea , charged annual fees from $5,000 to $100,000 and up for services like site design, connectivity, security and site management. In 1997, executives at the privately held company even boasted revenues had increased 300 percent a year.
So what happened?
– Number Of Factors
Involved In Closures
Local industry leaders say companies like Inspired Arts close due to mismanagement, lack of communication, lack of focus and failure to change with technology.
“They wanted to do a lot of things,” said Patricia Soler, former online marketing coordinator and account executive at Inspired Arts and now account executive for IP Strategy Inc., a full-service Web development firm in Mission Valley. “They had a lot of money but they didn’t have focus.”
Soler said her former company also lacked effective, internal communication.
“It’s very important to work as a team and communicate in the company,” she said.
Natasha Radushkevich, another former Inspired Arts employee, said Web development firms also need to work harder to keep valuable employees.
“You need to educate yourself and you need to spend time to keep your employees on the cutting edge,” said Radushkevich, a former Web designer and art director for Inspired Arts and now creative director for IP Strategy.
– Web Firms Losing
Their Distinction
Dave Heistein, IP Strategy’s co-founder and president, has his own ideas on why Web development and Internet-based companies fail.
“There are a lot of dot-coms out there that add dot-com to their name and say they’re on the Internet,” he said. “You really have to set yourself apart. There are so many companies out there saying ‘I’m an E this, I’m an E that.’ It’s becoming so blurred and generic that companies are beginning to lose their effectiveness.”
Heistein said the bottom line is if a Web developer is good, the company will generate business. It’s a matter of doing high-level work and creating a name for yourself, he said.
IP Strategy, which is 1 & #733;-years old, has already begun creating a name for itself. The company is developing a marketing campaign and plans to do joint-events with other companies. To get its brand out there, IP Strategy has also hired a naming consultant to name the company’s new creative division.
“One of the critical things to have is a name that will work well with your target audience,” Heistein said.
Some of IP Strategy’s clients include SeraCare, a public pharmaceutical company in Oceanside; Aero-Tech Engineering, a Boeing manufacturer based in San Diego; GrooveJet.com, an online dance music site based in Miami; and Dr. Christine Wood, a nationally recognized pediatrician based in Encinitas.
– Relationships A
Valued Investment
Soler said establishing a good relationship with clients and keeping them happy are critical. “People don’t care about paying (a lot of money) if they are well taken care of,” she said.
Although this is an Internet age, companies still need to be educated on the value of comprehensive Web sites. So says Jerry Tomaiolo, IP Strategy’s director of business development.
“A lot of small businesses can’t differentiate between a $2,000 Web site and a $10,000 Web site,” he said.
For higher-end, interactive Web sites, Tomaiolo said $500,000 isn’t unreasonable.
“You’re going to create a Web site that’s going to help a company make millions of dollars,” he said.
Today’s Web developers don’t only need to deliver a top-notch, quality product and services, but they also need to be sure they can handle the job, Heistein said.
– Starting Off Requires
Financial Back-Ups
Another piece of advice for start-up Web development firms: Make sure you have enough money to survive for six to eight months, he said.
“There is a small window of opportunity now,” Heistein said. “That’s why you see a lot of these incubators trying to help these companies get to the market.”
Survival in this industry will also come from building and maintaining strong alliances, Digitaria’s Khabie said.
“A couple of years ago, people said, ‘We can do that.’ Today, we are saying, ‘We can’t do that but we have alliances with people who can do that,'” he said, adding that Digitaria is forming a strategic alliance with Deloitte & Touche.
– Honesty With Customers
Is Always A Good Policy
Honesty, Khabie said, is the best policy.
“You have to be real honest about the real issues, from the vision of the company to a project being overbudgeted,” he said. “Most companies fail because they’re in a project too deep and people are afraid to take responsibility for it. They’ll blame it on the sales manager or the team leader.
“If you’re honest with your customers, they’ll trust you more as vendors. Companies fail because they’re not setting the right expectations for their clients.”
Khabie said a lot of the smaller Web development companies will eventually be acquired, adding the industry is already going through a lot of mergers.
The future of the industry, Khabie said, is the adoption of different digital platforms.
“An organization in our space has to think about how they’re going to migrate into these different areas,” he said.
“I’d be very leery of anyone who called themselves just a Web developer,” Khabie said. “If you’re not providing multiple digital platforms, you are going to fail, regardless of how big you are.”
– Clients Look For A
Robust Infrastructure
Tracy Trent, president and CEO of San Diego-based Stellcom Inc., agrees. He said companies looking to take their businesses online expect a secure, robust infrastructure, not just a fancy-looking site. He said the evolution of Web sites has gone from designing pretty things to creating a portal and true electronic businesses.
Trent said the questions that online businesses have these days include, “How do you make sure I have a bulletproof Web infrastructure?” and “How can I make sure I can deal with streaming video?”.
“Venture capital firms are no longer going to fund people unless they have a robust infrastructure,” Trent said. “If you look at the eBay outages a couple years ago, they’re still recovering from that. The cost for someone’s site to go down is now tremendous. A lot of what we’re focused on is making sure the system we put together is going to be able to be scalable and have a high-level default tolerance.”
According to Forrester Research, Amazon. com lost $22,500 per hour of downtime as of Jan. 15, 1999, while Dell Computer’s Web site lost $91,320 per hour.
Trent said it’s important to have employees who have a mix of creative skills and good systems engineering skills so they can design screens and user interfaces that can operate on a wide range of devices.
He said as more and more applications are adapted for the Internet, more infrastructure concerns and problems will follow. Stellcom, which expects $60 million in revenues this year, is well positioned to take advantage of that trend, Trent said.
“We’ve always been focused on solving the hard-core technology issues,” he said about Stellcom, which was founded in 1984. “With wireless applications, we have found ourselves in an interesting spot in the market.
“You have to put people out there who are on the forefront of technology. If you’re not solving the tough problems then they don’t need you.”
