Too fast for our own good

Margaret Manning, commercial director of the web consultancy Reading Room, fears that rapid growth and a lack of skilled staff threaten the future of the New Economy.

The accepted wisdom was that this was going to be the year of e-business in the UK, with internet companies scrambling to cash in on the e-pound. The sound of lastminute.com's share price crashing to the ground brought at least a temporary end to that kind of feverish hand-rubbing by investors and a rethink by several big players within the industry.

One of the first to speak out against the rose-tinted view of unbridled profits and never-ending economic well-being has been Margaret Manning, commercial director of the web consultancy Reading Room. She highlights some severe structural problems that do not bode well for the future of the e-economy.

And her comments carry weight. Reading Room has been at the forefront of developing net business packages for multinationals and household names including Glaxo Wellcome, as well as carrying out work for HM Treasury. She's one of the few people in the industry with a firm background in the more traditional business environment, having worked at Price WaterhouseCoopers, KPMG and 3i.

The problem, as Manning sees it, lies with those developing e-business strategies for corporate clients who may have no understanding of the technology or what can be achieved with it.

"The whole thing is in danger of going belly-up for a variety of reasons," she explains. "There's a massive demand in the industry, certainly, but because it's so new, the management structures are underdeveloped. What we have are very young companies growing far too quickly without experienced managers.

"That has led to some very significant problems. The massive demand means consultancies are coming under tremendous pressure to build websites. They're not about to turn the work down so they desperately try to get the job done on thin resources. They end up being forced to recruit inexperienced people at vastly inflated wages.

"They don't have the project managers to manage the new team so they fail to meet the clients' deadlines. The inevitable consequence is angry, frustrated clients who find telephone calls unanswered or staff unresponsive because they're dealing with excessive workloads."

While this obviously breeds a lot of mistrust and bitterness, Manning is concerned about the wider implications. "Venture capital is currently available for dot.com businesses, which is important for the whole industry," she says. "Say a venture capital business gives £1m to build a website, but the site doesn't get built to the deadline or the expected standard. The venture capital company naturally gets upset and will take their money elsewhere. That is actually the experience of a dot.com business which has come to us after their last developers let them down.

"If a website doesn't go live to deadline, money is lost. And if the venture capital people get fed up, the whole e-business industry is going to suffer."

Manning's stance comes after producing an in-house report which she freely admits shocked her. Interviews with current and prospective Reading Room clients showed 70 per cent were dissatisfied with their previous web design company. Of these, 63 per cent felt their experience of previous web development had been soured by inadequate project management, with a further 26 per cent suffering from inadequate technology and 11 per cent from inadequate design. Many of the clients brought with them a widespread disillusion with the future of e-business, inversely proportionate to the wild promises made for what it could offer.

"The problem is, because it's a young industry, it's very difficult to recruit people with both the technical and business skills required to lead large projects," Manning explains. "And it's a problem which can't be solved quickly. There aren't enough experienced people at the higher levels.

"The understanding of the internet, what it does and what it can create, should trickle down from the top - from the highest levels of government and the corporate world. Unfortunately, a lot of decision makers are washing their hands of this responsibility because it's too complicated," she says. "All too often there's a knee-jerk reaction to creating an online presence. Responsibility is given to anyone who expresses an interest. A website is now a core business activity and this should be reflected in the level of commitment senior management give to it."

Alongside the lack of good management runs another, just as important, problem - a shortage of quality technical people. While virtually every IT course in the country is oversubscribed and a career in the new media seems the dream job of every teenager, most web consultancies are having trouble recruiting staff up to the rigours of the work.

"This is leading to a wage spiral that will cause major upheavals in dot.com businesses this year," Manning predicts. "We have taken a decision to grow slowly, and we now close our order books when we have reached the optimum level of work, but, really, this is a problem that affects the whole industry and there are no easy answers."