Too Much Work, Too Few Web Pros
by Amanda L. Milligan
Four years after it’s first foray on the Internet, Komatsu America International Co. has great business expectations for the Web.
Like other technologies that have morphed from an asset to a necessity, the Web has significantly changed business relationships and operational practices at the Vernon Hills-based subsidiary of Japanese equipment manufacturer Komatsu Ltd.
Now, the company is demanding more and more Web applications, because Internet use and the value derived from it have grown quickly over the past few years, says Keith Sanderson, manager of e-commerce and Web development at Komatsu America.
Komatsu is one of thousands of companies growing in the interactive world that is pushing Web developers for tools to propel their business to the top of the competitive heap.
The hunger for more complex Internet functions is creating a paradox for Chicago-area Web developers.
The Web design and development business has never been stronger, but burgeoning client demands are testing the ability of local firms to respond. In some cases, companies are walking away from potential clients – particularly those seeking high-flying sites at low-ball prices – to concentrate on established businesses with deeper pockets and more realistic expectations.
“Yes, we have turned away quite a bit of business,” say Michael Minik, president of Naperville-based DataSturctures Inc., which develops e-commerce applications for the real estate industry. “We are very choosy about our clients. In general, the degree of understanding of what (companies are) trying to accomplish (on the Web) is more fully developed in larger groups.”
Douglas Turk, senior vice-president of the consumer experience management practice at Chicago-based Inforte Corp., says his firm is now “more stringent” in choosing what companies to work with.
“You don’t want to be tying yourself to business failures,” he says.
Gone are the days when Web developers took on interesting projects, with little chance of a payout, simply for the exposure.
“In the very beginning, we were a lot less choosy about our clients because we had to build a portfolio and a reputation.” says Ari Golan, president of Chicago-based Atomic Imaging Inc. “Now, we barely even market. We’ve become more accurate in our forecasting and budgeting.”
Unrealistic expectations are the main reason Atomic Imaging turns away a potential client, says Mr. Golan. Business interested only in creating what amounts to a “digital brochure” are not considered good leads, he adds.
Web developers also recognize that working with successful, well-established companies benefits their reputation as in Internet player. For example, Mr. Sanderson of Komatsu America says, a design firm with a big-name client list is more attractive to companies shopping for a Web developer.
Meanwhile, as demand for building Web sites soars, developers are racing to find qualified employees, much as building contractors scramble to find skilled trades people during housing booms.
Four years ago, Mike Ysteboe, vice-president of NorthStudio Inc., in North Chicago, laid off some of his staff because there wasn’t enough work. Now, he’s hired nine people since November and is still interviewing.
“We cannot add people as fast as we can add the business,” Mr. Ysteboe says. “I think I could keep 100 people busy.”
Some major clients, including Komatsu America, are asking for StudioNorth’s developers to travel domestically and internationally to assist them with interactive projects.
“I don’t know what to do with the opportunities,” Mr. Ysteboe concedes. “Our customers are turning away the business for us because they know we can’t handle it.”
Adds Brandon Wilson, president of LaGrange Park-based Distance Horizon, “There are a lot of people that need Web sites done, but there are so few people out there who can get it done. We are dying to find Web development help.”
Developers are backing up project schedules and hiking rates to accommodate the frenzy. Redevelopment of Web sites can range from $35,000 to several hundred thousand dollars, developers say.
Mr. Wilson says the cost of the projects at Distance Horizon are based on a one-third principle: salary, profit and overhead. Project rates are swelling, he says, because he’s had to pay aggressively to keep staff.
Atomic Imaging is not “price gouging based in demand,” says Mr. Golan, but he adds, “We’re more expensive than the newbies. We’re not competing with college students working in their basement at their lowest price.”
Developers says companies that have procrastinated on Internet issues and now are trying to develop their first Web incarnation are bad business prospects, especially when they get a glimpse of the cost.
“Frequently, they’ve sat on it so long that you give them a proposal and they keep waiting,” says Distance Horizon’s Mr. Wilson. “By then, you have to raise prices. When they see what they have to spend for design and development, they’re shocked.”
The result: At lease half of the company’s business comes from clients who want existing sites redesigned.
Not everyone accepts the theory that Web talents is in short supply as e-commerce applications balloon.
Candace Renwall, president of the Chicago Software Assn. in Palatine, says it’s easy to find qualified Wed developers.
“There are a lot of good business out there that are looking for business,” she says.
Crain’s Chicago Business
May 15, 2000
Pg. SR18, SR19