Making Breakthrough Ideas a Reality

Imaginet plans national rollout

The Business Journal of the Twin Cities - September 29, 2000
By Mark Reilly, Staff reporter

As Sapient Inc. and other national Internet consulting firms plot expansions into the Twin Cities, growing eservices firm Litman Imaginet is planning to launch an expansion of its own to cities beyond Minnesota.

Minneapolis-based Imaginet, which was spun out of Oakdale-based Imation Corp. in 1999, is preparing to open offices in several other central U.S. cities beginning next year, Imaginet President Scott Litman said.

The decision to expand comes as Imaginet is enjoying strong growth of its consulting practice, which helps companies develop Web-based businesses. The firm, which had about 40 workers and $5 million in annual revenue when it split from Imation, employs 110 people and projects $14 million in sales this year and $27 million in 2001.

Imaginet also is nearly doubling the size of its 23,000-square-foot downtown Minneapolis headquarters.

"We wanted to build a really solid core business, to get to a critical mass here in Minnesota," Litman said. "We think we've done a great job on that and that it's a great time to expand."

Imaginet hasn't picked which cities it will enter next year, though Litman said the firm is focusing on markets in the central United States - essentially from Detroit to Denver. Cities in that area, he argued, have been largely ignored by the national e-services firms with which Imaginet frequently competes for its core business of Fortune 1000 clients.

"We looked at where our competition is, and they're primarily on the coasts," Litman said. "The East Coast has maybe half of the Fortune 1000, and of course everybody has offices there. But in the Midwest, there's a quarter of the Fortune 1000 but only a fraction of the competition."

That wide-open field is also present in Minneapolis, which only this month attracted its first big-name consultant presence when Massachusetts-based Sapient said it would open an office here. Litman noted that while Sapient and other big players may have a handful of consultants scattered in cities like Kansas City, Mo., and Milwaukee, their larger office s have been concentrated in Chicago.

Kathy Carroll, vice president and general manager of Sapient-Minnesota, said she previously worked at another large e-services firm that realized the Midwest was underserved. "There was really a struggle to get the Midwest organized," she said. Sapient chose to open offices here, she said, based on the concentration of large companies that were still shaping their Internet strategies.

Imaginet's decision to expand also comes at a time when many of the largest e-consulting firms are having a rough time and have put their own rollout plans on hold. Companies such as Razorfish Inc. of New York and Viant Corp. of Boston, which are periodically rumored to be expanding here, are both trading near their 52-week lows on the stock market, victims of the technology culling that has claimed many of their dot-com clients. (Sapient, which like Imaginet focuses on Fortune 1000 companies in a variety of industries, has done better.)

Litman said his firm's emphasis on larger companies will pay off now that many smaller tech firms are retrenching. "All the low-hanging fruit, the new dot-com companies, is taken, and business development among the Fortune 1000 becomes more important," he said. "We've been focusing on that since we started."

With the market valuations lower for eservices consultants, the larger companies will find it more expensive to finance expansions to new markets through acquisitions or similar strategies.

Litman wouldn't comment on how Imaginet planned to finance its own rollout. The company, which is partially owned by Plymouth-based Gage Marketing Group, has been self-funded so far, he said.

Copyright © 2000 City Business/Twin Cities