San Francisco Business Times
Robert Shaw is an anomaly in the world of Internet CEOs. For starters, the newly minted chief executive of USWeb/CKS is 51, ancient in an industry that likes to see a little baby fat on its leaders.
More importantly, Shaw knows how to build a business that makes real money. Prior to joining USWeb/CKS in November, Shaw was a senior member of Oracle Corp.'s executive team in charge of its worldwide consulting business. His resume also includes a stint leading the West Coast technology consulting practice of Booz-Allen & Hamilton.
These are the kinds of credentials that interactive marketer CKS Group and Internet systems integrator USWeb were looking for in a CEO when the two companies decided to merge in a $540 million stock deal last September. The merger created an Internet services giant employing more than 1,800 people in 50 offices in six countries.
By bringing together Internet marketers and engineers under one roof, USWeb/CKS was promising to help customers design a web site, implement an online marketing and e-commerce plan and build the back-end technology infrastructure required to run it all.
But delivering on that post-merger promise would be a challenge, since each partner brought a different corporate culture to the table. Designers and marketers tend not to be interested in technology and systems, while engineers lack creativity. Further complicating the integration issue was the fact that both CKS Group and USWeb were themselves created through the acquisition of nearly three dozen smaller companies spread across the country.
A chance to run the show
This was precisely the sort of challenge Shaw sought when he left Oracle in August 1998, eager to run his own company and bring his 20-plus years of consulting and technology experience to the Internet. So when he was approached by CKS Chief Executive Mark Kvamme and his USWeb counterpart, Toby Corey, Shaw saw an opportunity to build the first global Internet professional services firm.
"USWeb/CKS is based on the premise that the Internet is fundamentally transforming business," said Shaw from his San Francisco office. "Companies that once just dipped their toes into the Internet waters with an e-commerce web site are now asking, `What's next? How do I use the Internet to change my supply chain or manage customers? How do I create new marketing and sales channels?' That's the large opportunity for us."
The Internet service market is one of the fastest-growing segments of the larger information technology services arena, projected to grow from $4.5 billion in 1997 to $43.6 billion by 2002, according to International Data Corp.
Shaw is starting with a lot more at USWeb/CKS than he had when he joined Oracle in 1992. At that time, Oracle's consulting business was a small, 500-person division of the Redwood Shores software giant. When he departed last summer,
Shaw had 15,000 employees working under him, generating $2.5 billion in revenue.
But for all his success, Shaw said he was eager to move on. Larry Ellison's vise-grip on power at Oracle meant he'd never get the chance to run the whole show. He also came to believe that Oracle's slavish devotion to its own technology platform was shortsighted. The most successful Internet consulting business would be technologically agnostic, able to patch together multiple platforms and systems.
Built for speed
It's taken Shaw a long time to reach the CEO chair, so he's not wasting any time now. Shaw is an experienced sailor who taught his former boss Ellison a thing or two about winning aboard large ocean-going racing boats (the two sailed together in the infamous Sydney-to-Hobart race three years ago). Speed is crucial, both on the water and on the Internet, so Shaw moved quickly to get the USWeb/CKS house in order.
Within the first 60 days -- he refers to them as "the ugly days" -- he had put together an integration plan to reorganize the combined companies into six super-regions, each offering a full menu of Internet consulting services. The company is also integrating its administrative and internal computer systems and has put a marketing and public relations plan in place.
Later this year, the company will relocate its corporate headquarters and Northern California regional offices into a new South of Market office building.
And instead of focusing solely on technology, Shaw is concentrating on attracting and retaining the best employees.
"People are the only real asset we have as consultants," he said, adding that the best and brightest in the company are beginning to use an internal system to share their knowledge with others so that solutions aren't reinvented every time a customer comes calling.
"The key to our profitability is reusing our knowledge and experience. Our customers are telling us that they don't want to deal with five different firms for their Internet strategy. They want complete solutions and they want them quickly."
Wooing Wall Street
Wall Street received the initial USWeb/CKS merger announcement with some concern, driving the stock of both companies down in the first week. But reaction to the final deal, especially since Shaw's hiring in November, has since been positive. The company's stock closed Friday, Feb. 5 at $39.50, just off its 52-week high of $40.44.
When the deal was announced in September, USWeb was trading at just over $10 per share, while CKS stock was trading at just under $14 per share.
"USWeb/CKS' focus on consulting is well timed and is what interactive agencies as a whole need to do a lot more of," said Drew Ianni, a senior analyst at technology research firm Jupiter Communications. "Companies have a lot of strategic questions about the Internet and its impact on business, but these questions are not being answered by most interactive agencies."
The closing of the merger capped a good year financially for the company. Revenue in 1998 increased 100 percent over the previous year to $228.6 million. In the fourth quarter, the company was able to boost annualized average revenue per client to $4.5 million, from $3.6 million in the previous quarter.
Costs and other charges associated with the merger put the company into the red for 1998 to the tune of $188.3 million, or $3.07 per share. Net income excluding the merger-related costs was $13.4 million, or $0.18 per share.
Bigger is better
For an industry that didn't exist six years ago, USWeb/CKS faces some stiff competition. The traditional consulting firms like PricewaterhouseCoopers and Andersen Consulting are ramping up their Internet technology practices, while relatively new players like Sapient and Cambridge Technology Partners are a serious challenge for IT systems work.
On the marketing and design side, USWeb/CKS battles fast-growing firms like Think New Ideas, Agency.com and Modem Media.Poppe Tyson, which launched a successful initial public offering on Feb. 5.
Jupiter analyst Ianni sees even more competition ahead, predicting as inevitable a merger of a large traditional marketing/advertising company like Saatchi & Saatchi with a large systems integrator like Cambridge Technology.
"We're in the midst of a major land grab for Internet professional services. Size is important and the breadth and depth of our company is going to be key," said Shaw. "There are a lot sleeping giants out there that I want to blow right by."
**Reprinted from San Francisco Business Times, February 15, 1999