To this end, over the past two years, Keane has continued the transition of its company from a project-based, technology-focused applications services provider to a full-service applications and solutions provider. Keane has successfully accomplished the following challenges:

• Leveraged strategic acquisitions
• Expanded into management and IT consulting
• Deliberately sought exposure with the more senior-level decision-makers in client organizations
• Migrated year 2000 project clients into other service offerings
• Made its first stake in non-North American territory
• Continued to optimize its unique, local branch sales and service delivery model

As a billion-dollar publicly traded company, Keane strives to scale up its operations while maintaining a local-community presence and espousing the merits of guiding a business based on customer intimacy and delivering value.

This Dataquest Perspective will provide a comprehensive review of Keane's success to date, including an analysis of its financial performance, organizational structure, service lines, market/competitive position, sales modes, and strategic focus and future directions.

THE BIG PICTURE
Keane positions itself as a company that "helps clients plan, build, and manage business systems to achieve competitive advantage." With more than 10,000 employees located in the United States, Canada, and the United Kingdom, Keane has steadily gained stature and recognition for its "applications-centric" focus in the IT services market. Keane predicates its current business model on the following four assumptions:

• To be perceived as a full-service IT professional services company
• To gain greater exposure with CEOs — increasingly influential in IT decisions — as well as CIOs
• To maintain a business model that maximizes recurring revenue
• To leverage and maximize its cost-effective service delivery model

Keane's traditional customer was the CIO. Playing almost exclusively in the applications development and management space, Keane was viewed favorably as a partner to CIOs — but primarily as a "technology" firm bringing applications bandwidth and process expertise. In the 1997-1998 time frame, Keane made a strategic decision to expand its exposure at the CEO, COO, or CFO level of organizations and to transform its image to that of a full-service applications solutions company that enables business value. As such, Keane made a key acquisition in 1998 in the area of business consulting — Bricker & Associates, a Chicago-based management consultancy with expertise in organizational processes — that would become a separately branded entity in the Keane organization. The first of other consulting acquisitions to follow, this acquisition enabled Keane to round out its IT planning capabilities and offerings into the front-end consulting services.

Keane's Mission
Keane's mission is to be the leading IT solutions company focused on helping clients plan, build, and manage business systems for competitive advantage.

Strategic Objectives
Keane's direction is to ensure that its plan, build, and manage services deliver quantifiable business value as desired by the client, such as cost savings, improved processes, and shortened delivery. Keane's growth has spurred an expanded list of service capabilities. Importantly, Keane is migrating into IT and business consulting support as well as focused business applications solutions in selected areas of enterprise applications, customer relationship management (CRM), and e-Solutions. Keane's strategic focus encompasses the following components:

• Delivering full life cycle business solutions via its "plan, build, manage" delivery framework
• Adhering to rigorous project management disciplines and processes
• Creating/integrating best-in-class training processes in its projects and Keane management
• Building critical mass and local distribution via its branch strategy
• Creating a global distribution strategy and infrastructure (via acquisition and organic growth)
• Refining the Keane brand and market identity

KEANE ORGANIZATIONAL STRUCTURE AND CULTURE
John Keane, Sr. is Keane's CEO and Chairman of the Board (see Figure 1). In 1997, Brian Keane and John Keane, Jr. were promoted to the office of the president. Each has specific responsibilities. Brian Keane is responsible for the Information Services Division (ISD), the Healthcare Service Division (HSD), Keane's operations improvement/management consulting practice, marketing communications, and emerging services practices. John Keane, Jr. is responsible for strategic planning, Finance, Human Resources, IT, Employee Organizational Development, and Keane's U.K. operations.

Culture is an important aspect in Keane's organization and integral to its success. Keane's founder, John Keane, Sr. (John Sr.), while not directly involved in day-to-day operations anymore, is still the visionary for the company. He is credited with establishing the culture of the company that reflects the core values of integrity, respect for the individual, continuous improvement, achievement through teamwork, and commitment to client success.

Organizationally, Keane operates as a highly matrixed services company, with corporate level resources and practice areas supporting Keane's well-perfected strategy to use local branch offices for client contact. Keane seeks to have a combined service delivery model companywide; it does not want a confederation of companies. As such, corporate functions such as finance and administration and human resources, as well as service practice areas such as CRM, data warehousing, e-Solutions, management consulting, and applications outsourcing, exist to support a common local service delivery model comprised of more than 50 local branch offices. Corporate-level functions play a critical role in ensuring consistent, high levels of expertise when customers require coordination of processes across multiple locations, domestic or international.

Brian Keane and John Keane, Jr. (John Jr.) are the principal spokesmen for the company. Supporting Brian and John Jr. are "well-credentialed" executives who frequently accompany them on analyst and press tours. The members of the senior management team have enjoyed a long tenure with the company, maintaining a consistency of vision. Understanding that services is a relationship business, the Keanes are a great asset in customer and prospect relations efforts. Focusing on the big accounts, Brian and John Jr. can be present to assure access to the top of the company.

Major Operating Units
Keane's services are delivered through the following major operating units:

• North American Branch Operations: Keane's largest operating unit comprises 45 branch operations throughout the United States and Canada.
• Keane Ltd.: This is Keane's U.K. subsidiary, which provides services to U.K.- and European-based corporate organizations and has a strong presence in the financial services and utilities sectors. Keane Ltd. services solutions include business consultancy, application management, CRM, workflow and imaging, and e-Solutions.
• Strategic Practices: The Strategic Practice areas are chartered with developing world-class expertise. They form a matrix across all branch operations and consist of the following nine core practice areas:
  • e-Solutions
  • CRM
  • Data warehousing
  • Enterprise resource planning (ERP)
  • Applications outsourcing
  • Industry practices
  • Project Management Services Group (PMSG)
  • Quality assurance
  • Frameworks development

• Management Consulting: Keane delivers its management consulting services through two closely aligned and synergistic business units: Bricker Associates and Keane Management Consulting (formerly Amherst Consulting). These groups provide business operational improvement and management and IT consulting services, with focus expertise in e-Strategy, CRM, mergers and acquisitions, change management, organization design, and work flow improvement.
• Healthcare Service Division (HSD): HSD is a health care information systems provider that serves the U.S. market and provides financial, patient care, and clinical software packages and services. HSD is broadening its focus to provide enterprise solutions for health care organizations.
• Keane Federal Systems (FSD): FSD is backed by Keane's corporate infrastructure and provides the entire spectrum of plan, build and manage services to government clients.

GROWTH AND FINANCIAL PERFORMANCE
Becoming a billion-dollar company two years ahead of schedule was a noteworthy accomplishment for Keane. This elevates Keane into a league of IT services providers that, by virtue of size and growth performance, are well recognized by Wall Street and prospects alike; furthermore, an extensive client list gives Keane a foothold in many accounts. Keane's revenue and net income performance has been very strong. As shown in Figure 2, Keane's revenue grew from $351.3 million in 1994 to reach $1.1 billion in 1998, a five-year compound annual growth rate of 32 percent. Keane's 1998 revenue ($1.1 billion) and net income ($96 million) grew 52 percent and 87 percent, respectively, over 1997 performance. Much of this revenue growth in the past year is attributed to Keane's expansion into IT consulting, development services, and outsourcing activities — each of which, on average, grew more than 40 percent over last year. Keane views 1999 as an important transition year for revenue. With year 2000 business declining rapidly through the end of the year, Keane is replacing virtually all of this "year 2000 revenue" (estimated by Dataquest at about $390 million in 1998 and $200 million in 1999) with its core "plan, build, and manage" services business. The result of this will be that aggregate revenue will be fairly flat at $1.1 billion in 1999. Nevertheless, by year-end 1999, Keane will have successfully turned transient year 2000 business into longer-term, sustainable revenue.

Acquisition Strategy
In addition to organic growth and aggressive hiring, Keane has relied on acquisition as a key component of its growth strategy. Through selective acquisitions, which it describes as a "string of pearls" approach, Keane has been able to ensure that it maintains continued strong revenue growth, fills capability gaps, broadens geographic coverage, and expands into new business areas. Table 1 provides a list of some of Keane's more recent acquisitions. For the most part, Keane has targeted "smaller" companies (less than $25 million in revenue); this strategy has enabled it to more easily integrate companies and employees. Keane's ability to integrate acquired companies and preserve key assets is the measure of success. With the exception of Bricker & Associates, all other acquisitions have been merged into the Keane organization and have assumed the Keane brand identity. While Bricker has retained its name, partially in recognizing that management consulting is a different business than IT solutions, it should be noted that it is also co-branded as a "Keane Consulting Company."

Revenue Mix
Keane views international expansion as an inevitable and desirable part of its growth. In terms of geographic opportunity, North America and Europe represent the lion's share of IT professional services opportunities and are the focus of Keane's targeted expansion. Today, 90 percent of Keane's total revenue is generated in the U.S. and Canadian markets; 10 percent is from Europe. Keane anticipates the percentage of revenue outside the United States will increase in the future as operations are expanded in Canada and Europe.

From a services offering perspective, Keane is striving to have its revenue mix emulate customer spending across the full life cycle of support (plan, build, and manage) that it estimates as follows:

• Plan: Management/operations improvement consulting (organization design, technology strategy, change management, e-Strategy, workflow improvement): 10 percent of customer spend
• Build: Application development, systems integration, enterprise application integration (EAI): 30 percent of customer spend
• Manage: Managing and optimizing existing software assets 60 percent of customer spending

Today, Keane's revenue mix is about 10 percent "plan," 34 percent "build," and 56 percent "manage."

Year 2000
Keane has taken advantage of the revenue growth opportunity presented by year 2000 compliance projects with both existing and non-Keane clients. With about 500 year 2000 clients, Keane is among the top service providers in terms of year 2000 business volume (its solution is called Resolve 2000), according to GartnerGroup. Although revenue growth from year 2000 work has been extremely positive, Keane also faces the realities of diminishing revenue streams as year 2000 nears. The following facts point out that Keane is adjusting its year 2000 revenue mix to ensure that its long-term revenue growth and viability remains strong:

• In third quarter 1998, year 2000-related revenue was $103 million (or 36 percent of total revenue).
• In fourth quarter 1998, year 2000-related revenue was $96 million (or 33 percent of total revenue).
• In first quarter 1999, year 2000-related revenue was $80 million (or 28 percent of total revenue).
• In second quarter 1999, year 2000-related revenue was $60 million (or 22 percent of total revenue).
• In first and second quarter 1999, non-year 2000 business grew at 32 percent and 28 percent, respectively.
• Year 2000 revenue as of June 1999 (and not the quarter) was 19 percent of total revenue.

Keane believes that its transition from year 2000 revenue is on track, evidenced by continued success in cross-selling, successful staff redeployment, and tremendous customer retention. Furthermore, strong growth of Keane's non-year 2000 business is a positive indicator, offsetting the slowdown in year 2000 services. This is consistent with Keane's strategy to transfer year 2000 clients into other Keane-delivered services. In the final analysis, Keane believes that despite some short-term negative repercussions related to its year 2000 business, ultimately the year 2000 opportunities it pursued will prove positive in the long-term business that these client relationships will provide.

SERVICE OFFERINGS AND SOLUTIONS
Keane's core service offerings are as follows:

• Consulting: Management Consulting, Operations Improvement Consulting (organization design, technology strategy, change management, workflow improvement), e-Strategy, and IT Strategy.
• Application Development and Integration: e-Solutions, CRM, Data Warehousing/Business Intelligence, Workflow/Imaging, Systems Integration, and ERP.
• Application Management: Application Outsourcing, EAI, and Call Center Management. Keane's application management processes conform to Level 3 standards on the Software Engineering Institute's Capability Maturity Model.
• Enterprise Healthcare Solutions: Keane's solutions encompass application development and outsourcing, data center outsourcing, and implementation and support of Keane's open-systems suite of health care information systems. These solutions are delivered to integrated health care delivery networks, hospitals, physician practices, and long-term care centers.

Business Solutions
Building on its core services expertise, Keane has developed practice areas that combine specific technology expertise to provide more focused business solutions.

Customer Relationship Management
Keane identifies CRM (defined as "the combination of people, process and technology to enhance a company's effectiveness in marketing, sales and customer services [to result in] improved revenue and profit performance") as an area of key strategic importance. Not only has Keane been identified as a strategic partner with Siebel, Retail Target Marketing Systems, and Oracle, it has acquired Fourth Tier to accelerate Keane's position in the CRM market by complementing its application development services in the areas of data warehousing, workflow, imaging, and Web-based technologies.

e-Solutions
Keane's e-Solutions plan, build, and manage strategy is designed to help clients create new channels of revenue, lower cost structures, and provide increased value to customers and shareholders by leveraging the power of the Internet. Keane's end-to-end e-Solutions capability includes the following three phases:

• e-Strategy, in which industry and market dynamics are assessed and specific business transforming recommendations are made
• e-Development, a multidisciplinary approach to Web development combining expertise in business analysis, creative design, and technical design and development
• e-Management, which includes site management and refresh, community management, ongoing competitive analysis, and opportunity analysis

Keane estimates that as of mid-year 1999, it has about 350 active Internet-related projects. Although most projects are relatively small, Keane sees the opportunity to evolve these into larger, follow-on projects.

Data Warehousing/Business Intelligence
Keane's DW/BI solutions incorporate scalability to provide clients with solutions that can manage large data sets, as well as the rapid growth of data, end users, application complexity, and application functionality. This differentiator enables a company's data warehouse to grow as its needs increase and to adapt as its needs evolve over time.

METHODOLOGIES
A common principle across Keane's combined service delivery model, and a source of real competitive differentiation, is the company's rigorous adherence to process and management disciplines. Keane's processes, best practices, and project management approach are well documented in its framework methodologies, knowledge management system, and white papers. Equally important, these processes and management disciplines are continuously reinforced through comprehensive training provided to Keane consultants. Finally, to ensure that processes are consistently applied and that metrics and best practices are captured, Keane has an extensive Quality Assurance organization that reviews every project on a monthly basis (see Figure 3).

SERVICE DELIVERY
Keane's service delivery model has focused on a direct presence at customer sites, supported by off-site development centers and corporate practice areas. For its off-site support, Keane has favored a "near shore" delivery model as being most suited in terms of language issues and proximity to its client base, as well as addressing customer concern with security with off-shore programming models. Keane has a near-shore development center in Halifax, Nova Scotia. In addition, it has multiple development sites in the United States (Connecticut, Massachusetts, Florida, North Carolina, Ohio, California, and Maryland) and the United Kingdom, many that have specific technical expertise.

Keane's matrix organization is made up of two key components. The first is comprised of several strategic practices positioned across the "Plan-Build-Manage" spectrum. The second is its network of 50 local branch operations.

Plan-Build-Manage
A prerequisite for Keane to be considered a full-service IT professional services firm is its capability to offer an integrated, end-to-end service offering. In 1998, Keane introduced further enhancements to its delivery model with its "Plan-Build-Manage" framework, aimed at delivering predictable results to clients and also ensuring the benefits of their IT investments.

The "plan" portion of Keane's combined service delivery model emanates from Bricker & Associates (Bricker) and Keane Management Consulting (formerly Amherst Consulting); in total, Keane's consulting resources consist of about 125 consultants, with plans to further expand this number. Consulting projects delivered by these organizations aim to help clients with the important, yet difficult task of "operationalizing" business strategy. To achieve this, Bricker and Keane Management Consulting take a holistic view, recognizing that sustainable change requires an integrated approach to organizational design, business processes and technology strategy. In addition to operations improvement consulting for the business, Keane's management consulting practice provides e-Strategy consulting to help companies define how to best leverage the Internet to transform their businesses. Keane creates recommendations on how companies can capture new revenue opportunities, significantly improve cost structure and operational efficiency, and increase company differentiation. Consulting is typically sold as a standalone engagement; optimally, but not necessarily, these consulting engagements create the opportunity for pull through of Keane's other services. The objectivity of these engagements is implied in that Keane makes recommendations that it can stand behind and implement. Many clients are asking consultants to "guarantee" their work; while Keane is open to the concept of shared risk/reward contracts, it will not promote them for the sake of jumping on a bandwagon. For those engagements where there is mutual, quantifiable business benefit, a shared risk/reward arrangement is an option.

The "build" component of Keane's integrated service delivery model focuses on application development and systems integration initiatives. Keane has extensive application development initiatives, with a major focus on e-Solutions. Additional initiatives include CRM, data warehousing/business intelligence systems, workflow and imaging, ERP and custom application development. Today, most of Keane's branches have expertise in e-commerce and Internet solutions.

The "manage" component of Keane's integrated service delivery model positions customers to "optimize business value from existing IT assets." Central to Keane's applications outsourcing projects are the existence of service level agreements, performance metrics, and continuous improvement. These factors help customers realize such business benefits as higher quality, reduced cycle times, lower support costs, and a more effective IT organization. Keane is focused on ensuring that its customers realize the benefits of process improvement by outsourcing their applications management to Keane. Using the Software Engineering Institute's Capability Maturity Model (CMM) standards, Keane has developed a sound reputation for process improvement via applications outsourcing. Keane is proud that as of August 1999, 21 of its engagements were certified as CMM Level 3 and two at Level 4; this is up from three clients a year earlier. Also, Keane's application engineering facility in Halifax, Nova Scotia, which delivers application outsourcing and development projects, has been independently certified at CMM Level 3.

Local Branch Offices Support Corporate Practices
Keane maintains about 50 branch offices in major U.S., U.K., and Canadian markets. Keane remains steadfastly committed to its unique service delivery model that is premised upon local branch offices that maintain customer relationships and account control. Keane believes that its branch office network ensures consistency of offerings and processes, high utilization of staff, and lower overhead costs, compared to competitors. These branch offices, all located within roughly an hour from a customers' site, are responsible for the following:

• Servicing existing customer relationships
• Developing new business
• Interfacing with corporate resources including strategic practices
• Nurturing community ties

Branches may have as few as 50 employees or as many as 600; each has a managing director responsible for running the branch as a profit and loss center. Reporting to the branch managing director are managers of various functional areas including sales, staffing/employee development, and service delivery. Keane is unique because these functions, which are highly centralized in most companies, are managed at the branch level. Keane's experience with this model indicates that it is working, based on the following:

• High customer satisfaction indicators
• Lower operating costs compared to competitors
• Steadily improving revenue performance

Not every branch can maintain a full spectrum of local capabilities. To support those branches where specific skills are not resident, Keane established both infrastructure and several corporate-level practice areas for management consulting, e-Solutions, CRM, data warehousing, and application outsourcing. In addition, Keane has invested in a comprehensive Knowledge Management System (KMS) that houses its methodologies, best practices, templates, and organizational experience. All Keane branches and consultants can have instant access, via the Internet, to Keane's intellectual capital, which resides on its Lotus Notes-based KMS.

Keane finds that the local distribution model, combined with corporate practice areas, is the best solution for its business because it creates the highest margins and brings intellectual capital to each and every engagement. A significant challenge that Keane faces is to ensure that its branch office model is scalable and replicable as the company expands globally.

SALES STRATEGY
Area vice presidents oversee the managing directors for each of the Keane branches and facilitate access to resources that might help close new business. However, most account development and sales activity takes place at the local Keane branch location. Keane has a direct salesforce of between 130 and 150 individuals. Decisions regarding individual or team selling are evaluated by account (versus by corporate policy). Sales representatives in small branches assume "jack-of-all-trade" roles, while those in larger branches may have aligned themselves according to areas of specialization. For example, there may be sales representatives who specialize in a various technology, application area, or industry. National accounts are also handled in a manner that best suits the customers' needs, rather than conforming to a rigid policy. That is, there may be one primary sales person who is named, or multiple sales representatives assigned to respond to multiple decision-makers within the client organization. A virtual team is named, with one branch (managing the majority of the client's business) serving as the prime. At the corporate level, a project audit team performs a full analysis of all Keane accounts, to ensure performance and profitability are on track.

With the launch of its consulting practice in 1998 via the acquisition of Bricker & Associates, Keane is now introducing a new sales approach via the use of business consultants. Keane believes that high-level consulting relationships serve a unique — and alternative — sales function, as follows:

• To gain access into the senior business of functional executives of companies
• To fuel follow-on business for the actual design, implementation, and management of solutions

Target Customer and Deal Size
Keane primarily targets larger customers (revenue greater than $1 billion), and secondarily, medium-size customers ($100 million to $1 billion). Keane estimates that 90 percent of its contracts result from repeat business with existing clients. In most cases, Keane provides services as a single source provider, though it has successfully partnered in larger, full-service outsourcing contracts (for example, it has partnered with Lockheed Martin at Fieldcrest Cannon and at Gateway). Keane's applications management contracts are typically in the $20 million to $70 million range, though many projects are of substantially less value and some are higher. In contrast, "plan" deals often range from $200,000 to $2 million; and "build" deals from $500,000 to $10 million. Outsourcing contracts are on average $5 million to $20 million in value per year, and three years in length. Some examples of Keane's clients in selected areas are as follows:

• Applications Outsourcing: GMAC, AT&T, JP Morgan, Gateway, SUPERVALU, Bell Atlantic, Carrier Corporation, and Williams
• Management Consulting: Chicago Stock Exchange, Acxiom Corporation, United States Gypsum, and Kodak Polychrome Graphics
• CRM Solutions: Princess Cruise Lines, Honeywell, BellSouth, Sun Microsystems, E-Stamp, Yamaha Corporation of America
• e-Solutions: GE, Invacare, Allied Signal, Pepsi, Energizer, and Dreamworks

MARKETING AND COMMUNICATIONS: "WE GET IT DONE"
Keane's marketing and communications efforts have accelerated in the past three years as it strives to enhance its brand recognition with a broader set of clients and market influencers. The company has developed a well-rounded campaign that encompasses such venues as radio sponsorships on NPR, trade print ads, trade shows, direct mail, airport dioramas, and industry conferences; it has also used topical white papers, success stories, and analyst briefings to communicate its thought leadership and accomplishments. In 1998, Keane took an unprecedented step and began an advertising campaign, "We Get IT Done," for the purpose of enhancing its image.

"We Get IT Done" is Keane's market slogan, seen and heard as part of a very targeted marketing campaign. Although the slogan has been used for a while, only recently has it been associated with Keane's logo. This is part of the image-building initiative that is occurring now with an expectation for lead generation in the future. Keane considers its "wheel of influencers," comprised of clients, prospects, employees, future employees, high technology analysts, financial analysts, the media, and shareholders, when developing its marketing materials. For example, the trade press is targeted with success stories or testimonials, industry analysts are provided briefings on Keane's services and future directions, and customers and prospects at trade shows are exposed to Keane's market positioning information.

Thought leadership is promoted through the use of direct mail (letters, white papers, topic briefs, and 3-D mailings) to executives as well as speaking at selective industry conferences and events. Keane is also dabbling with sponsorship of VIP relationship events, such as golf outings. This marketing strategy allows Keane to narrowly define and target markets according to technology and vertical market.

DEVELOPING HUMAN ASSETS
Over the years, Keane has aggressively built its workforce. It has done so via new hires, transferred employees (from outsourcing contracts), and as a result of acquisitions. Given this aggressive expansion, Keane has placed considerable emphasis on recruiting and retaining key employees.

Recruiting
Keane views its recruiting function as a core competency — and a strategic differentiator. Unlike many of its competitors, Keane maintains recruiting as a separate corporate function to ensure best practices; recruiting is not part of the Human Resources organization. Recruiting practices are aligned with the local branches and business units to facilitate local recruiting efforts. Each business unit has two to five dedicated recruiters that are supported by a corporate team of 30 to 50 recruiters; in all, the company has about 100 full-time recruiters. The branch recruiters and management staff are specifically trained on how to negotiate and to present Keane's merits (for example, career advancement and mobility) as a place to work. This is particularly important in a job market where qualified candidates are evaluating multiple options and job offers. Keane finds that its branch structure is helpful in recruiting new people who are attracted by the ability to remain in their current location.

Keane characterizes its current recruiting efforts as "explosive." Even though employee attrition is down considerably from a year ago, the growth of the company warrants considerable effort be placed on recruiting in all areas.

When an outsourcing deal is signed and employee transition is involved, there is a front-end spike in staffing. Keane gains key skill sets for the individual client, but can also leverage these skill sets on a broader basis as needed. The local branch office assumes responsibility for seeking out opportunities for transferred people, using an intranet tool that serves as a clearing house for available resources.

Evolving Skill Sets
The focus of recruiting efforts continues to evolve with Keane's business composition. Although in the past Keane recruited mostly talented mainframe experts and project managers, today Keane's recruiting focus is on advanced technology areas, especially those areas that involve the Internet. As software becomes more of a competitive advantage for customers, Keane needs to recruit technical people with more vertical industry savvy and more highly seasoned sales professionals with a business benefit orientation.

International Expansion
Keane views its recruiting policies as global, however, it realizes the challenges inherent in global expansion. For instance, the recent acquisition of ICOM (now known as Keane Ltd.) required accommodation to local labor laws and code of conduct. One example is that in the United States, it is common for employees to give current employers two weeks notice prior to departing. In the United Kingdom, management-level employees provide three months notice. Therefore, there is a significant lag time between the time a candidate is recruiting and the time he or she commences employment.

Training and Retention
Keane makes a tremendous commitment to training, which emanates from four different parts of the organizations. First, the Employee and Organization Development group trains the management teams for the branches. This would include training for the branch's managing director, as well as for the branch managers in charge of employee development, sales, and delivery. Second, there is a Project Manager Services Group that is a centralized function chartered to train project managers across all business units. The third training resource comes from the corporate practices (for example, CRM, operational improvement consulting, e-commerce, applications outsourcing), which train the methodologies for that practice as well how to sell and deliver solutions in that area. Finally, the branches have a training coordinator for local or specialized skill development and enhancement, and employees have access to more than 400 technical training courses via the Internet.

The management team at Keane is credited with driving the dedication to training, and identifies it as one of the six key strategies of the corporation. The commitment is there; however, implementing robust training curriculums becomes harder as the company grows. Operationally, there are learning teams assigned to each functional team within the organization. The learning teams comprise a mix of experts in the field of training and employee development and those who are experienced in "the Keane way." The curricula offered by the learning teams are continually refreshed and emphasize process improvement, best practices, and innovation.

Keane maintains a Learning Center, which is available to all employees for management and technical training. Some examples of the programs offered at the Learning Center are as follows:

• Accelerated Software Development Program (ASDP): A six-week "boot camp" for software programs on Keane's culture, methods, processes, and technologies
• Leadership Development Program: A four-module, mandatory program for senior managers on vision/strategy/change, managing process, managing people, and applied process (incidentally, piloted by Brian and John Jr.)

A curriculum similar to the ASDP exists for sales personnel, comprising a two-week boot camp. As Keane acquires new companies, The Learning Center is particularly valuable as a way to communicate the Keane culture to new employees, to help Keane preserve that which was acquired, and to reskill employees for new areas (for example, year 2000 work to CRM or e-commerce projects).

Another integral part of Keane's training and development vision is a Lotus-based KMS. This system houses all of Keane's knowledge assets including those related to its service capabilities (for example, templates, methods, process planning, architectures), functions (for example, sales, recruiting, service delivery, staff and employee development), and industries (for example, enterprise models for various vertical sectors).

COMPETITIVE MARKET POSITION
Keane has created a unique market identity by focusing exclusively on the applications area of the IT services opportunity. However, its broad focus to cover the entire life cycle of applications services, and more recently business functions, means that Keane meets a variety of competition. In the applications outsourcing and applications development areas, for larger opportunities, it meets the full-service tier-one providers such as Andersen Consulting, IBM, CSC, and EDS. It will also see Cap Gemini, Compuware, and SAIC for the medium-size deals. Keane's competition in the enterprise applications solutions is extensive, including Cambridge Technology Partners, Sapient, Andersen Consulting, and the other Big Five consultancies.

In CRM, an emerging opportunity for Keane, it will see Andersen Consulting, PricewaterhouseCoopers, Sapient, and KPMG. In data warehousing, Keane competes mostly with boutique shops. For Internet and electronic commerce solutions, Keane most often meets IBM in addition to regional players.

For consulting engagements, its Bricker practice meets regional consultancies, as well as such national companies as McKinsey and Co., Booz-Allen, and PricewaterhouseCoopers.

To enhance its competitiveness, and particularly to compete for full-service IT outsourcing deals, Keane will selectively partner. It has done so very successfully. Most recently Keane won a major contract with Gateway in a partnering engagement with Lockheed Martin (Gateway previously was a Keane client for J.D. Edwards solutions); and it signed a strategic partnership with Cerebellum Software for rapid applications development. In the future, as Keane seeks to compete for larger deals, and expand globally, it will likely seek opportunities to broaden its partnering relationships. Most recently, Keane announced a partnership with Sterling Commerce to deliver e-Solutions.

Overall, Keane's market/competitive position is well-established, and it has found it can successfully compete against the most formidable competition; Keane is competing successfully against the Tier 1 outsourcers where its size, proven process expertise, quality delivery, customer focus, and local service delivery, among other attributes, offer a compelling advantage. As Keane moves into the areas of consulting and business solutions, it will also face a new set of niche competitors that have focused expertise and are highly aggressive and nimble. Keane's proven success in winning repeat business, and its extensive local presence, will be core differentiators against some of these emerging players.

FUTURE DIRECTIONS AND KEY CHALLENGES
The following are some of the most significant directions and associated challenges for Keane as it looks ahead:

• Service line expansion: Keane is continually looking to expand its breadth of services, either by internal development or through acquisition. Branch offices will serve as the distribution network for those services in highest demand (with local talent); corporate practice areas will consolidate specialized resources.
  • While Keane's branch service delivery model helps it to control the cost of service delivery, as Keane moves into higher-value services, it will need to perfect its model to ensure effective and high utilization rates of corporate resources and also keep its costs under control.
• Win larger outsourcing deals (greater than $100 million in contract value): To keep its revenue growth on target, Keane will need to win its fair share of some larger applications outsourcing deals.
  • Keane has been most successful with medium-size deals (those between $30 million and $70 million). Ensuring that the "large" deals are profitable is a challenge for all service providers; with greater size comes greater complexity. Keane will need to ensure that its revenue growth is also profitable growth, and also be disciplined to "walk away" from cost-based deals.
• Expansion of consulting and business solutions: With the acquisition of Amherst, Keane established Boston operations for its management consulting practice. In time, the company expects to open other regional offices on the West Coast and then, in the South East. This may occur in concert with Keane's acquisition of another management consultancy (focusing on areas such as change management, cultural, and organizational evolution).
  • The challenges Keane faces are to ensure all branches work effectively with the strategic practices such as management consulting; that clarity of sales/support roles and responsibilities are well understood; and that the customer contact and client relationships are seamlessly managed. Furthermore, Keane will need to continue to develop new sales and marketing skills to effectively address a "solutions" (versus a technical) sale.
• Leverage year 2000 client business for future growth: Via year 2000 business, Keane gained visibility with executive management in many clients, and proved it was able to deliver solutions successfully. More than 60 percent of Keane's year 2000 clients were "new," thus presenting a significant opportunity for the future. A key initiative for Keane is to leverage the new client relationships it formed via year 2000 compliance services into other Keane services. There are many examples of clients who have expanded their relationships with Keane such as The Dominion of Canada General Insurance Company for legacy applications outsourcing.
  • Keane's greatest challenge in this regard is to educate Wall Street analysts about its transition plan to "back-fill" year 2000 revenue stream, and ensure confidence in its strategic plan and corporate direction. Keane, as stated earlier, views 1999 as a transition year. Despite the substantial cross-selling opportunities from these relationships, some organizations that used external providers for the year 2000 "crunch" are not necessarily seeking to outsource other applications work immediately. Keane's salesforce indeed has new leads, but many of these engagements involve long sales cycles.
• Change its market perception: Keane is focused on changing its market image from a service provider to CIOs, to a full-service solution partner to senior business executives. The company's launch of a consulting practice via Bricker & Associates and its CRM and e-Solutions practices are cornerstones of this effort. Keane's marketing and branding campaigns also support a new image.
  • Keane will need a solid plan to integrate the "consultative approach" at the branch level; up to this point, Keane's salesforce is most comfortable — and has built relationships — at the CIO level. Also, Keane will be challenged to balance the Bricker brand with that of the Keane brand, to ensure that clients understand the collective value of the two entities. Furthermore, Keane must remain committed to making the critical financial investments in marketing and communications to ensure the redefinition of its brand continues.
• Leverage the full-service relationship model: Keane believes that an essential ingredient for its success is its ability to establish long-term client relationships and garner recurring revenue via annuity-based relationships. The Plan-Build-Manage framework is well-suited to this effort.
  • The challenge Keane faces is to change the customers' views of their capabilities, and also retrain its sales force to identify the opportunities to "up-sell" business solutions. New service relationships at the executive/boardroom and functional level will be required in the "Plan" (consulting) phase — where many of its key competitors have already built relationships. Fortunately, Keane's management consulting practice has many years of experience in successfully selling to this audience.
• International expansion: Keane has its sights set on becoming a global, full-service solutions provider. To this end, it has already made some key acquisitions, but this has been limited to the United Kingdom.
  • Building infrastructure with consistent processes and methodologies on a global basis is the nemesis of many IT service providers. Keane still has a long way to go to penetrate such geographies as Asia/Pacific, Japan, and Latin America. Keane also has a unique challenge in this regard: Can its local branch office strategy, which is the core of its business model, be replicated on a global basis?

DATAQUEST PERSPECTIVE
In the past two years, Keane has taken steps to dramatically transform itself from an "applications outsourcer" to a full-service solutions provider. The company has proven its ability to change and respond to changing user demands and market conditions, as evidenced in its success in replacing year 2000 revenue streams in a relatively short time frame with sustainable client relationships. As Keane goes forward, it will need to rely on this same nimbleness and flexibility — a requirement for leading IT services companies to maintain their leadership — to identify subtle shifts in the market. As it ventures into such areas as CRM, e-Solutions, and management IT consulting, and attempts to expand internationally, Keane faces challenges pertaining to the rapid assimilation of a new business model and a new market image.

Keane's Plan-Build-Manage construct for depicting the breadth of its offerings supports its efforts to gain recognition with senior business executives who select IT providers based on their ability to deliver change and business value across the full life cycle. Nevertheless, changing its perception from that of delivering "technical" applications support to becoming a strategic applications and business partner is not an easy one — from either an internal perspective or an external one.

Keane believes that its largest and most strategic client projects will come as a result of consulting engagements that affect major organizational change for its customers. These projects are likely to generate the downstream, recurring revenue that Keane views as the most important ingredient for the success of an IT professional services company. For Keane, recurring revenue is not viewed narrowly in terms of outsourcing engagements, but rather in terms of satisfied customers returning to Keane for subsequent projects. In this scenario, Keane also hopes to expand its share of the customer's IT spending, hopefully encompassing a larger portion of Keane's strategic services — essentially, more of the "plan" and "build" solutions in consulting and design of business applications.

Dataquest Recommendations
As Keane forges ahead toward becoming a more diversified applications solutions provider, its foremost goals should be as follows:

• Growth management
• Creativity and thought leadership
• Execution
• Client relationships

What strategies will best serve Keane as it seeks to break through the barriers of common practices and ensure the Keane brand is unique? Dataquest recommends the following:

• Keane must re-engineer itself from the inside out — in that order: To change its market perception to that of a value-add solutions provider, Keane must change how the more than 10,000 Keane employees operate, act, and think on a daily basis.
• Showcase successes: To gain mind share among the business executives and migrate into business-based solutions, Keane should consider establishing a center of expertise. A dedicated, first-class facility, designed for customer/prospects visits, will serve as a corporate resource to demonstrate in tangible ways the Keane culture, value proposition, and solutions expertise.
• Continue with market-driven initiatives: Keane's direction to map its service offerings and revenue growth with customers' "plan-build-manage" spending patterns is positive. Working in conjunction with Bricker and Keane Management consultants who are on the front lines of business decisions, Keane management must continuously revitalize this service model to uncover the next wave, the next shift, in customer demand.
• Expand globally — deliberately and with caution: How will an international presence enhance Keane's brand equity and long-term success? The push for IT services companies to expand globally is being driven by the globalization that occurs in almost all industry sectors. However, this is costly and Keane must be highly selective about where and how it goes about this expansion. Integration and cultural transfer are complex and time consuming.
• Balance the past with the present and future: Keane must be cognizant that it is walking a fine line between retaining a "small company" heritage with charting new opportunities as a "big company." Keane must continuously infuse its organization with new talent and new ideas at the same time it protects those parts of its heritage that will serve it well as it reaches for the next $1 billion milestone.
• Keane must continuously evaluate its talent base to determine gaps in management and staff capabilities, and aggressively compete for external resources to complement its skills mix.

Keane is a bold and aggressive company with an exciting future. The company understands its strengths and opportunities, as well as the areas where it must build competencies. Keane is focused on ensuring quality revenue growth, as exhibited by its strategy in transferring year 2000 relationships into long-term revenue opportunities. While building on its rich company heritage and loyal customer base, Keane recognizes that success over the long term requires that it continuously respond to evolving client demand. Dataquest believes that Keane has the right ingredients and the corporate commitment to transform itself to move into higher-value business solutions and garner the revenue growth objectives that will ensure its long-term viability.

Dataquest IT Outsourcing Services North America, PFOT-NA-DP-9910, October 18, 1999.

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