By Doree Shafrir

Incubators aren't just for venture capital firms and Internet companies anymore. Consulting firms, ranging from Big 5 companies like PricewaterhouseCoopers to boutiques like L.E.K. Consulting, are hopping on the incubator bandwagon, hoping to cash in on the Internet boom and retain some of their most valuable employees. Incubators are particularly attractive to consulting firms because they allow the firms to leverage several of their preexisting strengths - strategy, e-business, human resources, operations, and financial consulting - in one profitable project. Oddly, though, several consulting-based incubators are reluctant to term themselves such, preferring terms like "integrated service" and "dot-com launch centres" - perhaps to differentiate themselves from the competition, or just to exercise that unique consulting knack for coming up with new jargon.

Take Ceptonet, for example. This arm of Ernst & Young takes pains to describe itself as "a comprehensive and fully integrated service with a 'nest' in New York's Silicon Alley," though it walks and talks just like an incubator. Like its counterparts at Andersen and PricewaterhouseCoopers, Ceptonet relies on the expertise, and the finances, of its parent company. By taking advantage of Ernst & Young's strengths in marketing, IT, and global strategy, Ceptonet is able to offer its clients services that an incubator connected solely with a venture capital firm cannot.

Andersen Consulting also recently jumped on the incubator train with the announcement that it would start 17 "dot-com launch centres" worldwide in the next three years. Andersen will work with companies that have management in place and between $1 million and $2 million in funding. Not targeting startups adds another layer of insurance against failure - all-important in a business whose goal it is to see companies become "viable, revenue-producing e-business," as Andersen global managing partner for growth and strategy Mary Tolan put it. ~

Cash only no longer

Incubators (or dot-com launch centers, or fully integrated services, or Internet investments, or what have you) also signal a significant departure in the way consulting companies collect their fees. Early-stage companies don't have a lot of cash on hand, even if they've already raised a couple of million dollars. Consulting companies eager to get in on the Internet boom must, for the first time, accept equity in lieu of pay, ensuring that their stake in the nascent firms' well-being extends far beyond the parameters of a typical engagement.

All the rewards - and none of the risk

Consultancies' incubators can also provide opportunities for employees that might otherwise venture into the dot-com world, with little of the risk associated with actually joining a startup. And given the constraints of the current labor market, it's up to consultancies to ensure that their best employees - especially those with e-business skills - are happy. PricewaterhouseCoopers is giving staff with Internet "ideas" up to three months' leave to work on their proposals alongside PwC consultants, thereby ensuring that entrepreneurial types can grow their ideas within the confines of the parent firm. Consulting firms are quietly encouraging consultants itching for the startup experience to take their wanderlust to the firms' own incubators, where they can get a taste of the dot-com world, while maintaining their position on the corporate payroll. Other firms are more blunt - in December, Cambridge Technology Partners' vice president of marketing told CNET that CTP's incubator was their solution for increasing employee retention. ~

Venturing further afield

While most incubators are based in traditional dot-com hotspots like New York and San Francisco, several consulting firms have begun to expand worldwide. In March 2000, PricewaterhouseCoopers announced they would be investing $500 million in a series of European incubators within the year; London and Paris offices are already in service, and Amsterdam, Hamburg, and Oslo sites are coming soon. Two U.K.-based incubators, K-Incubator and Future-wealthuk.com, are run by KPMG International and Ernst & Young, respectively, and Deloitte Consulting has a hand in Epark, an Australian-based venture backed by investment firm Allen & Buckeridge. The traditionally conservative investment climate in Europe, which has historically been reluctant to back high tech startups, means that incubators - with their combination of financing, technical skill, and strategic guidance - are uniquely poised to have a major impact on the development of Internet startups in Europe.

CHART: Consulting Companies with Incubators

Consultancy	Incubator	Country	Partner
LEK Consulting	IdeaShed	U.K.	Hawkpoint Partners
Andersen	dot-com launch centres worldwide	-	-
PricewaterhouseCoopers	-	Europe	-
KPMG	K-Incubator	U.K.	-
Ernst & Young	Future-wealhuk.com	UK	-
Deloitte & Touche	Epark	Australia	Allen & Buckeridge
Ernst & Young	Ceptonet	U.S.	-
Scient	Accelerator Program	U.S.	-
Cambridge Technology Partners	NEWCO	U.S.	-
Boston Consulting Group*	Cambridge Incubator	U.S.	Draper Fisher Jurvetson
Braun Consulting	.com incubator	U.S.	-
Cap Gemini	incubator labs	U.S./Europe	-

*BCG has an investment in Cambridge Incubator.