yale case 06-017 november 17, 2006

Sapient Defining Success Was Both the Challenge and the Opportunity Andrea Nagy1

Jaan Elias2

Joel Podolny3

Although Sapient was generally categorized as a marketing, business, and technology consulting company, employees insisted that they never sold consulting or provided mere deliverables. Instead, Sapient promised “client success” and to this end had articulated a model with three principles of client success that the company perceived as central to its unique value proposition. For Sapient, “client success” was not a rhetorical gesture or a marketing slogan but a philosophy that permeated the way the company approached every client.

Maintaining a client focus was one of the core values that the founders of Sapient, Jerry Greenberg and Stuart Moore, articulated soon after they started their company in 1990. The other values (creativity, leadership, openness, people growth, and relationships) all melded together to form a culture that the founders identified as being a critical factor in Sapient’s growth. Working from its core values, Sapient had created numerous processes that allowed the company to identify a client’s core business needs; to align its team with the client’s various constituencies; and to create whatever business, technical, or marketing solution was required to make a measurable positive impact on the client’s bottom line. As co-founder Jerry Greenberg insisted, “Sapient needs to be focused on our clients’ success like no one else. And our desire for our clients’ success has to be unparalleled.”

While maintaining its values and client focus, Sapient had found that it had to adapt some of its internal processes to stay afloat in the turbulent times following the burst of the Internet bubble. Before the client success model had been articulated, it had made “right results, on time, on budget” supported by fixed-price/fixed-time contracts its value proposition. However, a change in business mix and client preferences meant that nearly half of Sapient’s business came through more traditional time and materials contracts. In addition, Sapient’s delivery system had undergone a major overhaul as the company now located over half of its employees in India in order to remain competitive. By rethinking the traditional offshoring model, Sapient had managed to integrate this new workforce into its culture and work flow.

Sapient faced challenges with external constituencies as well. Sapient’s approach was difficult to explain to new clients, but the company resisted being put into a box that would limit its ability to innovate on behalf of its clients. Also, some clients proved resistant to Sapient’s methods of gaining alignment and working for success. And the United States government, the world’s largest consumer of IT services, continued to present some challenges. Nonetheless, Sapient’s leaders remained convinced that if the company remained true to its core values and its relentless pursuit of client success, it would adapt whatever behaviors were necessary to thrive and grow.

The Client Success Model

Define the Company by What the Customer Needs

Sapient co-founders Greenberg and Moore believed that most consulting companies wrongly defined their business by what the company provided rather than by what the customer wanted. The distinction might appear abstract to some, but Greenberg and Moore believed it was crucial to creating a successful business. For example,

• Sports Illustrated may have missed becoming ESPN because they thought they were in the magazine business and not the sports entertainment, information, and inspiration business.

• A key insight that helped save Cadillac in the 1930’s was that they were in the prestige business, not the car business. They understood that they competed with diamonds and furs and began to market themselves differently.

• Hanna-Barbara and Disney both started out making cartoons. Hanna-Barbara stayed in the cartoon business, but Disney defined itself to be in the entertainment business and created movies, theme parks, cruises, and TV networks.

• One of the attractions of Nordstrom’s is that its salespeople really seem to think of their job as “making customers look good” and not just selling them clothes.

• Because GE Aircraft Engines understands that customers want reliable, cost effective planes, it bundles engines, maintenance services, parts, financing, software, and information together. It sells “Power by the Hour” instead of engines to many of its customers.

In Greenberg and Moore’s view, customers spent money not for a product or service but for something that the product or service would help them get. Therefore, any business had to be clear on what customers ultimately wanted. A focus on customer wants created a much broader role for a company and highlighted many new opportunities to create value.

When it came to their own business, Greenberg and Moore discovered that defining what success meant to a client was a tricky challenge. Sapient only formalized a client success model in the early 2000s after much experience with clients and engagements. Their experience told them that there was no easy template; even companies within the same industry could have very different needs. Consequently, the specifics of the client success model had to be delineated for each engagement. “Our client should feel that we are more committed to their company and personal success than anyone they will ever meet,” said Moore. “And it is their definition of success that matters, not ours.”

Greenberg, Moore, and the rest of the Sapient leadership also came to realize that success was not a unitary concept. Accordingly, Sapient developed a client success model with three key principles: the success of the client initiative, the success of the client organization, and the success of the client as an individual.

The Success of the Initiative Means More than a Fancy Deliverable

At Sapient, the success of a client initiative could not be reduced to the creation of a deliverable that answered the specs, but instead hinged on whether Sapient and their client created something that measurably improved that client’s business. For example, an auto manufacturer

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might ask Sapient to build a complex website for its consumers. But rather than just building a website, the Sapient team would focus on how the website would be used to sell more cars. The team would ask the client, “How many cars do you want to sell next year? How is your current website helping or hindering the achievement of that goal? What kind of people buy your cars? How do they find you?” Vice President Mike Reid commented,

We always ask why. We want to know what success means for the client. What are you trying to achieve? If I don’t understand the problem you’re trying to solve, then I can’t jump in the boat and row in the same direction and help you get there. The better I understand the problem you are trying to solve, the more value I can add to your company.

The answers to these questions helped the team design an application and processes that truly increased sales as opposed to an application that had a lot of bells and whistles that were expensive to implement but contributed little.

Once Sapient understood the business problem, it defined a set of Measurable Business Results (MBR) to be achieved by a project. For example, one financial services organization asked Sapient to automate its loan application process. Rather than simply giving the company an application that would accomplish this task, Sapient committed to reducing the time required to approve a loan by 66 percent, shaving 20 days off the process.

In another example, a financial services client in the late 1990s asked Sapient to help slow and reverse declining margins in its fund business. Sapient conducted workshops with the client and was able to discover that one factor leading to falling margins was over-utilization of the call center. The client’s customers were calling with address changes and other requests that could have been fulfilled more inexpensively on the web. Sapient not only built a website that would handle the simple requests but also worked with the client to develop systems that would teach customers how to use the services effectively. Sapient committed to helping the client move 60 percent of the requests from the call center to the web, and it delivered this measurable business result. (In this instance, Sapient also created success for its organizational sponsor, who subsequently became the chief technology officer of the company.)

The Success of the Organization Goes Beyond the Measurable Business Results

Above and beyond realizing the business goals of a particular project, Sapient sought to promote the success of the client organization as a whole. There were many low-cost, high-impact ways Sapient could help its clients. For example, Sapient had nominated clients for awards in their industry. On other occasions, Sapient had helped clients find candidates to fill key open positions. For other clients, Sapient had identified new suppliers and new sources of business.

But beyond these extras, Sapient’s engagements frequently produced profound changes in the way client organizations functioned. Since Sapient’s core values stressed openness and its processes depended on gaining alignment, client organizations would often find themselves more open and better aligned after an engagement with Sapient. Moore remembered a particular engagement:

One large European client had longstanding hostilities between the marketing department and technology department. We could have just worked around it, but we couldn’t own the success of the organization and turn a blind eye to that. We saw the fundamental dynamic, suggested some workshops to bring the two sides together, and took ownership for improving the relationship beyond the scope of our initiative.

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More often, Sapient’s legacy was not as direct. Instead, Sapient introduced subtle changes to the ways the client ran meetings, identified goals, delivered projects, and recognized employees. One project manager referred to this process as disseminating a bit of “Sapient’s cultural DNA.” According to Janet Holder, Vice President of Operations at Enbridge Gas Distribution, “Sapient brought value to Enbridge in two ways. First, they helped us find specific solutions to specific problems. The other value is more long-term in that they’ve left behind processes they have used in solving problems that we can use to solve our future problems.”

The Success of the Individual Means the Experience Is as Pleasant as the Result

Sapient recognized the fact that their primary contacts in the client organizations were individuals, and Sapient sought to help their personal success, as long as this did not conflict with organizational or project goals. Under the new model, Sapient had come to view the client not just as a business partner but also as a whole person with a career and family life. Promoting the success of the individual client meant asking some intimate questions about the client’s personal and career goals. The client executive might want to improve his leadership skills or receive recognition from his boss or get home for dinner every night at 6:00, and Sapient looked for opportunities to promote these personal objectives. For example, Sapient might create a report so that the client could show progress to the boss. Or Sapient might nominate the client for a key award, such as the CIO 100 Award. On one occasion, the Sapient team got involved with an AIDS research organization that was the client representative’s favorite charity.

It was in the area of individual success that articulating the new client success model had the greatest impact on Sapient’s behavior. When the company had been exclusively fixed-price/fixed-time, Sapient had frequently driven the client as hard as it had driven its own teams. One Sapient executive remembered that after a particularly difficult engagement the client sponsor had wearily told him,

You guys are great. You delivered a solution to one of our toughest problems and pushed our company to new levels. No other company could have done that. But I hope that I never have a problem so difficult that I have to call you again.

When the idea of success broadened to include the individual, Sapient client executives focused on improving the experience for its client representatives. The interventions could be as simple as celebrating the completion of a project with a party that included other members of the company; as Moore recognized, success is not success if there is no recognition.

Sapient’s Evolution

A Wild Ride

To an outside observer, Sapient’s history might seem like one of the wildest rollercoaster rides in business history. Moore and Greenberg formed the company in 1991 with $80,000 of their own capital. Initially, they worked out of a small office in a building owned by Moore’s father in Beverly Farms, Massachusetts. In the early years, most of the company’s business came from helping large companies develop and integrate complex client-server applications, and Sapient quickly built a client base. By 1994 they company had reached $9.4 million in annual revenue.

It was in 1994 that Sapient first saw business opportunities with the Internet, and the company’s senior leadership decided to add capacity in this area. Not long afterward, the dot-com boom began, Internet work became 70 percent of the company’s revenues, and the company prospered.

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In 1996, Sapient went public at $21 per share; over the next four years, the company’s market capitalization increased by 25 times its initial offering value, and revenues rose to $502 million.

Sapient built a strong client list, including airlines, such as American and United; financial services firms, such as Merrill Lynch and Janus Capital Group; utilities, such as AGL Resources and United Illuminating; telecommunications firms, such as Verizon and Vodafone; auto manufacturers, such as Nissan and Volkswagen; government agencies, such as the United States Marines Corps and the Department of Justice; and retailers, such as Staples and Wal-Mart.com. Sapient also expanded its capabilities to include graphic designers, information architects, marketers, brand strategists, and management consultants, in addition to programmers proficient in Java, Oracle, SQL, C++, ERP, and other applications.

However, in 2000, the NASDAQ lost 74 percent of its value. As the U.S. economy shifted from irrational exuberance to recession, the IT consulting industry contracted tremendously. A number of start-ups with names like Zefer, Razorfish, and Scient failed. More established vendors like Accenture and IBM were forced to slash the prices of their services. Sapient found they, too, had to cut prices and costs. Between 2000 and 2002, Sapient’s headcount declined from 3,300 to 1,806. During the depths of the recession, Sapient’s stock price dropped to less than $1.00 per share.

Fortunately, even before the Internet bubble burst, Sapient had invested resources in building capacity in India. Therefore, even in an extremely price-sensitive environment, Sapient was able to offer competitive services with its Global Distributed Delivery. In time, Sapient’s India presence came to account for half of the company’s headcount. Revenues began to increase, and the stock price rose to over $8.00 a share in 2005. (See Exhibit 1 for Sapient financial data.)

Value-Driven: From Fixed Price to Client Success

While the competitive environment had forced certain adaptations to its methods, Sapient’s senior leadership believed they had remained true to the company’s initial vision. Indeed, many in the company credited these bedrock principles with saving the company when other start-ups failed.

Greenberg and Moore had founded the company with the purpose of helping companies realize the promise of technology in improving their revenue and operations. While working together at Cambridge Technology Group, the duo had come to see how frequently information technology service providers failed to satisfy their customers. Despite talented engineers, flexible software, and powerful hardware, IT projects would blow apart and clients would gain no benefit. In 2004 an industry study by The Standish Group quantified the level of dissatisfaction, finding that only 29 percent of industry projects were completed on time and on budget. Of the remaining 71 percent, some projects were cancelled before completion, while others fell into a “challenged” category; these projects had average cost overruns of 56 percent and average time overruns of 84 percent, and they delivered less than half the promised capacity.4 If a company could actually deliver on its commitments, Moore and Greenberg reasoned, they would find an eager client base.

But beyond a shared purpose, Greenberg and Moore believed that the company had to share a set of values, and the values had to be “mission-critical.” As the company grew, the founders involved all of their employees in an ongoing discussion of what values would make the company successful with clients and employees. Over the years, the company identified six core values:

• Client-focused delivery: Amaze our clients with the business value we deliver and their positive experience working with us;

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• Creativity: Create maximum value for our clients and our company by deploying innovative ideas and approaches;

• Leadership: Focus, inspire, motivate, and grow our clients and ourselves to achieve exceptional results;

• Openness: Be open, honest, and direct to build trust and get at the right answers with our clients and each other;

• People Growth: Rapidly and continuously grow ourselves and others to build a great company and deliver exceptional results;

• Relationships: Build long-term, trusted, and valuable relationships with our clients, our people, and our partners.

(See Exhibit 2 for an expanded version of the core values.) To underline their commitment to “right results, on time, on budget,” Moore and Greenberg instituted a “fixed-time/fixed-price” contracting approach. This meant that if it did not deliver on time or on budget, Sapient would cover the costs. While other larger competitors such as EDS or Andersen Consulting (later Accenture) might offer fixed-time/fixed price bids on particular projects, Sapient tied its identity to this particular contracting approach, and in so doing, it distinguished itself from the rest of the industry.

The fixed-time/fixed price approach was risky. While larger firms might be able to absorb the costs of a project that went over time or over budget, Sapient did not have deep pockets. Therefore, this approach gave the company extraordinary discipline. “We quickly came to see how important openness was,” one manager commented. “You just couldn’t have a project start going down the wrong track, because you would lose a lot of money.”

But as the competitive environment tightened, Sapient found it needed more flexibility. It began doing long-term maintenance of software applications and outsourcing, engagements that were often more conducive to a “time-and-materials” contract framework. In addition, some clients did not want to be forced to define a specific goal in the beginning of an engagement, but instead wanted to determine objectives in an ongoing fashion. Sapient began taking on more time-and-materials contracts and expanded the company’s value proposition from “right results, on time, on budget” to “client success.” While this expansion opened certain market opportunities and allowed Sapient to be more flexible, it also eliminated some of the easy means of brand differentiation. However, because client success was the ultimate goal, the company believed that the new model better captured the services they provided.

There was some internal resistance to the change. The fixed-time/fixed-price contract had become an important differentiator for employees as well as clients. One executive admitted that he thought time-and-materials contracts were for “wimps.” Sapient staff at all levels went through numerous discussions before they became comfortable with alternative contracting arrangements. In looking back on the change, Greenberg noted,

We had been dogmatic about fixed price at first, because it worked for us and led to an unbelievable track record. But we had to change to accommodate clients and work for client success. We told our employees it was important to distinguish values from behaviors. While behaviors can change quickly, values are much more persistent. Fixed price was a behavior, but it came to be thought of as a value. It took a long time for us to make that clear inside the company. We still do fixed-price contracts if it is appropriate, but we also consider alternatives.

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We have to do what it takes to make our clients successful and manage their risk and our own.

Discovering What a Client Really Wants

In order to achieve client success, Sapient had to first define it. The process was not easy, because client organizations frequently were themselves unclear about their objectives. “A company will come in wanting a new website,” one Sapient executive observed. “But the marketing department will want it for one set of reasons, and IT will want it for a totally different set of reasons. If we don’t get alignment within the client, the project is going to fail.” Another executive observed that “companies sometimes do things because everyone else in the industry is doing it.”

For Sapient, gaining alignment between the different parts of a client organization, and between the client and Sapient, was the most important prerequisite to delivering a successful project. From Sapient’s first engagement, Greenberg and Moore had stressed the importance of these social and political goals, because once the social aspects were resolved, the technological development could be done much more reliably. “Defining the ‘why’ is one of the most powerful things we do,” Senior Vice President Chris Davey observed. “We elevate our client’s thinking by helping them define why they are doing a particular project. Once they know that, getting to the ‘what’ is much easier. We are the stewards of the why, the consistent link.”

The first step in any engagement, then, was to lay out the objectives, scope, and Measurable Business Results of the project. These goals were defined through an intensive, cross-functional, cross-hierarchical workshop that Sapient called a “fusion.” While scope-definition documents were common in consulting services, Sapient’s fusion was unique. During the workshop, all stakeholders were brought together in one room. There were no tables, no note-taking, and no cell phones or pagers. One executive described the process:

We manage the entire day from breakfast on. We have it down to a science. The physical space allows us to solve problems in parallel and check them with the entire group so we can get consensus and signoff. We get feedback from the client every day. We make the client present the solution to their peers and get their agreement. Junior and senior client people work together. The junior people describe exactly what it will take to get it done; the senior people sign off on it and make the decision.

Throughout the 1990s, fusions took five days and were run at Sapient’s facilities to ensure focus and completeness. Later Sapient found that some clients were not willing to go off site, and so Sapient started running shorter fusions in the client’s own facilities. While a few felt that this change made it harder to define the problem, most Sapient employees believed the change of location had little effect. Indeed, some argued that they were able to get a better understanding of the client’s situation because they were able to observe more of the client’s organization.

No matter where the workshops were held, Sapient involved individuals from all levels of the client organization as well as all the members of its own team. Moore noted that this approach was significantly different from the typical consulting model:

In most companies, the systems analyst and project manager define the project and break up the project into chunks and then hand it off to the architect, who further refines the requirements into objects for programmers to code. In this assembly line type of structure, business context is stripped away. So the poor guy who is coding knows very little about the business and the business objectives. What happens in such a case is that you have 100 people on a team, and 97 of them do not know what is going on businesswise. So you have exactly

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three percent of the brain power engaged in trying to achieve the business objective. But in our system we want all 100 minds to be fully in the game. I want 100 people thinking about how you make a profit in trading gas, and I want them to know that as well as the trader knows it himself, because then you have 100 percent of your intellectual capital focused on the results, and the solutions you can come up with are incredible.

The purpose of the fusion, then, was not to discuss technical specifications but to define a business objective and a set of concrete, measurable results. Consensus was often achieved through sketches and outlines on a whiteboard. As Mike Reid noted, “Nothing is as important to knowing that someone understands a process, as drawing a diagram.”

Once the fusion was completed, the MBRs functioned as the “true north” of the engagement, aligning program architects, graphic designers, marketers, programmers and the client to the same end. Members of the team kept in constant contact with each other and the client. Sapient would deliver bad news as quickly as good news, in order to make sure everyone understood where a particular project stood, and at the conclusion of a major portion of the project, Sapient would solicit client feedback. (See Exhibit 3 for sample feedback form.) In terms of software design and development, Sapient had long used what is termed the “agile” method of programming. This method stressed quick creation of workable prototypes that could be tested and changed before the entire system was finalized. Frequent iterations allowed a client to see whether a piece of code was actually going to work in the completed project.

Going Beyond the Initial Scope

In most engagements, alignment between Sapient and the client was so good that the client would say, “You were the best member of my team” or “You understood the business better than most of the people working here.” This kind of alignment allowed Sapient to go beyond the scope of the project and deliver success in ways that the client did not expect.

For example, Essent Energie, a large utility company in the Netherlands and a client since 1999, had asked Sapient to help optimize a multi-billion dollar gas portfolio. Essent purchased gas from different entities and sold it to industrial and retail customers, but it was paying penalties of up to 50,000 euros a day because of problems with manually matching supply to demand on an hourly basis. Through a series of workshops and meetings, Sapient developed an in-depth understanding of Essent’s business objectives. The focus was not on the technical specifications of the system but on the larger needs of the organization. “With Essent we talk about the business problem they are trying to solve, not about the Java code. The entire team thinks this way,” said Vice President Milind Godbole.

Sapient then went beyond the initial scope of the project to create a system that forecasted supply and demand and prices, optimized Essent’s entire portfolio, and helped Essent plan investment for the next 20 years. Essent was hoping for a modest level of automation of its optimization system, but it received a comprehensive solution. This system saved Essent $4 million in its first day of operation, literally paying for itself in four hours.

At certain times during the project, Sapient was so familiar with the client’s needs that the team went ahead with a small project without getting pre-approval from Essent. Godbole noted, “We didn’t get approval; we didn’t get payment; we just built it and then had a business innovation meeting and said we’ve got something we want to show you. We presented the solution and the client said that was exactly what he was looking for!”

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Offices without Walls

Sapient supported its culture through a variety of methods, from the way its office space was configured to the way it hired, trained, and compensated employees.

At Sapient’s offices there was almost no personal space, neither cubicles nor private offices. In an effort to emphasize openness, the company designed open areas filled with desks and whiteboards. In the Manhattan office, for example, Sapient staff sat at large zig-zag tables, each station with its own laptop and telephone. (See Exhibit 4 for photograph.) There were no drawers or file cabinets; instead, staff stored personal belongings in a locker room. At the Cambridge headquarters, Sapient’s chief operating officer sat at a two-foot by four-foot desk with a swing-arm lamp and a three-drawer storage unit underneath. Nearby sat the chief financial officer, chief legal counsel, and a few administrative assistants. Conference rooms featuring floor-to-ceiling whiteboards lined the outside of the office suite. “In the early years of our company, we decided that whiteboards were cheaper than artwork, and they were very useful,” said Senior Vice President Bob Van Beber. “They became integral to our culture and processes, which are highly visual.”

To work in such an environment, Sapient hired people who were smart, adaptable, capable of multi-tasking, and able to demonstrate that they shared Sapient’s core values. In a process known as a “Sapient-fit interview,” applicants were asked to provide examples of how they had demonstrated Sapient’s values in their previous workplace. Interviewers paid particular attention to the passion that applicants demonstrated. While technological acumen was important, Sapient was wary of hiring individuals who cared more about advanced technology than about making the client successful.

Newly hired staff would spend their first week in a “boot camp” known as Sapient Start. Employees from the beginning associate level to the senior executive level would learn Sapient’s purpose, values, vision, goals, and client value proposition, and they would gather together in a simulated fusion workshop to discuss how to formulate the business objectives of a client.

In the early years, Sapient compensated employees at a level below the industry average because they wanted to be sure that they were choosing to work at Sapient because of a belief in the company’s values. In later years, Sapient offered compensation that was competitive with the rest of the industry. For senior executives, 30 to 40 percent of their compensation was determined by performance. Sapient also stressed non-monetary forms of compensation, from weekly small-group recognitions of exemplary employees to company-wide annual awards.

Employees were evaluated by superiors, subordinates, and peers according to a three-part competency model. First, they were evaluated in terms of their skill in their particular area of expertise; these skills were labeled domain skills. Second, they were evaluated according to fundamental consulting skills, which were termed core skills. Finally, they were assessed in terms of the degree to which their behavior reflected the core values. When an evaluator provided feedback on an individual’s competencies, they used a scale in which the high end was “teaches and inspires” and the mid-point was “regularly demonstrates” the particular competency.

Because people growth was one of Sapient’s core values, considerable organizational resources were devoted to managing an employee’s career. Sapient prided itself on giving its employees challenging assignments, with appropriate organizational support. The company also assigned each staff member a career manager, who served not as a supervisor but as a mentor who helped the employee understand feedback and improve.

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Erasing the Shoreline

With the rise of fast global Internet connections in the 2000s, an increasing number of American and European firms were moving their technical operations to India, which had an excellent technical education system, a workforce that spoke English, and much lower wage rates than in the United States and Europe. However, many companies were reporting disappointment with their offshoring ventures in India. Because of poor communication, projects were delayed or did not work properly. In contrast, Sapient was successfully integrating its Indian offices into its existing corporate structures. “My perspective is that we are all one community,” noted Sapient Canada president Hank Summy. “Our two offices in Delhi and Bangalore are fully integrated into our operations. They are just another location like San Francisco or Munich.”

Sapient started looking to India for talent well before the Internet bubble burst. Then, when the recession hit, Sapient significantly expanded its capacity, so that, by the start of 2006, over half of Sapient’s employees were based in India. (See Exhibit 5 for complete staff allocations.) This growth enabled Sapient to cut its project costs by 20 to 50 percent and compete for contracts it might not otherwise consider.

Sapient had built its operations in India with a commitment to recreating the same Sapient culture in its Indian offices as was found in its other offices around the world. A key challenge to this commitment was cultural. For example, whereas Sapient stressed the importance of openness and equality, Indian culture emphasized respect for hierarchy. In order to insure that the Sapient culture was adopted, the company sent over 50 employees from its other global offices to work alongside the new hires in India. “The key innovation was bringing over not just a team of senior executives but a slice of the entire company, including managers, directors, architects, senior associates, and associates,” said Soumya Banerjee, the Managing Director of Sapient India. “That way new hires in India could see how the values were lived and how even entry level people were empowered to have meaningful dialogue with their managers.”

Sapient invested significant time in the enculturation process. “Indian hires got surrounded by the Sapient culture. It was in their face all the time,” said Chief Operating Officer Sheeroy Desai. “We hired in batches. We would expose 50 people to the culture, then bring in another group a year later. It took two or three years to get a stable base of people, but we have now built a team that looks and feels like the rest of Sapient.”

While Indian employees had strong technical backgrounds, Sapient’s focus on the business context introduced additional challenges. Indian employees were technically oriented, and many looked to increase their technical credentials rather than their business knowledge. It was also difficult to explain the business context of Western companies to an Indian associate who had never seen these firms in operation. “If you grew up in India,” Moore conceded, “you probably don’t know why and how a potato farmer in Idaho buys a Chevy truck.” To meet this challenge, Sapient invested heavily in education, creating a mini-business school for its Indian employees with courses in capital markets and overall strategy. In addition, the company encouraged employees to study specific business subject areas. For example, over 50 of Sapient’s Indian employees that worked in financial services studied and received certification as traders.

Time and distance also presented a constant challenge. On any engagement that would require Indian employees, Sapient would typically include two or three people from its India office during the initial fusion exercises. This practice increased Sapient’s costs, but it insured that there would be people on the project with an understanding of the business context when development shifted to Delhi or Bangalore. It also facilitated relationships between Indian employees and those working with clients in the United States and Europe. In contrast to the dominant practice of writing specifications and shipping them “over the wall” to India, Sapient practiced constant

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iteration. “The spec-and-development model, which seems like the easy way to use India, is a recipe for disaster,” said Vice President Josh Sutton. He added,

Consistent communication between the business and people writing the application is critical to its success. If you don’t have that communication, it’s like playing the telephone game. You wind up having something built to exactly what the spec says, but it’s not what was meant. You might be able to check off every box, but you’re not hitting the spirit of what you were trying to achieve.

Tom Miglis, CIO of Citadel Investment Group, L.L.C, and a long-time client, was pleased that Sapient was able to go beyond using India as an inexpensive back office. “With traditional outsourcing work, I never felt a partnership,” he said. “But Sapient is interested in a long-term relationship. Our CEO was impressed by the Sapient India team’s knowledge of our business and their ambition to do great work for us. That was my goal: to build a partnership rather than a client-vendor relationship.” Sapient built long-term relationships by encouraging clients to visit India in order to help employees understand the client’s business. These visits boosted morale and gave Indian workers the feeling that they were part of the larger initiative. For their part, clients were amazed not only by the enthusiasm of Sapient’s Indian employees, but also by how well they understood their business and by the fact that the offices in India were exactly like those in the United States and Europe.

Perhaps the best indicator of Sapient’s success in implementing the GDD system was its performance results in 2005. Although in the industry as a whole, less than one-third of projects were completed on time and on budget, Sapient completed 84 percent on time and on budget. Less than one percent of Sapient projects were cancelled midstream, and although the remaining 15 percent were classified as “challenged,” most were finished within four to eight weeks, and Sapient absorbed the additional costs.

Challenges to Gaining and Completing Engagements

As successful as it had been in pioneering a distinct way of engaging clients, Sapient nonetheless faced several challenges: prospecting for clients, ensuring proper alignment among the different factions within a client organization, and expanding its model to the public sector.

Prospecting for Clients

One of the most difficult challenges for Sapient was selling its services to new clients. Whereas other companies might have been comfortable describing their role as “management consulting” or “IT consulting for the financial services and trading sectors,” Sapient was hard pressed to present its unique value proposition in a two-minute elevator speech. Sapient’s brief description of itself was “We help our clients innovate their businesses in the areas of marketing, business operations, and technology.” But that description did not always communicate the ways in which Sapient differentiated itself from its competitors.

Sapient senior managers were all too familiar with the problem. One said, “The Sapient value proposition is experiential. It is different from product sales because you can’t list all of the features.” Another said, “Sapient is very difficult to explain to a new client. We try to focus on the industry perspective and the problems the clients are facing, but Accenture and IBM go to market the same way.” Or as Moore put it, “In the ultimate trust-based buy, advertising and cold calling are not going to work for you, unless you are targeting a very specific solution area.”

sapient 11

Biannual benchmarking of the company’s brand seemed to confirm these concerns. Customers who were familiar with the company had a strong likelihood of buying. However, prospective customers who were not already acquainted with the company did not have a clear understanding of what Sapient did. Even after visiting the company website, they said they did not know what Sapient could offer them. One story from the early days of Sapient’s history shows that this nebulous identity was a challenge from the beginning. As Jerry Greenberg recalled,

Our first client was the CEO of Au Bon Pain. He hired us to do a program for them, and after we had completed it, the CEO said to us, “You guys have a great story, an interesting business, but what the hell are you? You’ve got to have a name for the box you are in.” That was in 1991. And I said, “When you find out the name of that box, let me know.” The market likes boxes, but we operate across the boxes, and that can cause confusion.

In response to this challenge, Sapient had developed several strategies for prospecting for clients. First, in the initial conversation with the client, Sapient executives spent as little time as possible talking about themselves and as much time as possible talking about the client. To be sure, sometimes they would discuss the benefits achievable in a specific area in order to get the conversation going. As one Sapient executive put it, “When you’re on an initial visit, you may lead with a specific expertise area that will get you in the door, such as rapid enterprise architecture planning.” The introductory sales pitch was made easier by Sapient’s strong reputation in certain well-defined areas. For example, in the area of financial services trading and risk management, Sapient’s standing was so high that they won the vast majority of contracts in this arena.

But Sapient executives would move quickly beyond talking about a specific technology to ask prospective clients what they were trying to accomplish. Typically there would be no slides or sales deck or presentation about Sapient. Rather, the goal was to identify the locus of emotional energy for the client and his organization: what was exciting about his business and what was causing him to lie awake at night. The emotional connection would then open doors for Sapient to introduce solutions. The result, said Van Beber, was that clients often said, “I’ve never seen anyone work with more passion for the success of my organization and for me personally.”

The challenge of generating new business was made considerably easier by Sapient’s high level of customer satisfaction. By 2006 the majority of Sapient’s revenue came from repeat business from existing clients. Another portion, up to 20 percent, came from satisfied client representatives who changed jobs and then hired Sapient on behalf of the new organization. For example, one executive, Patrick Vogt, hired Sapient to perform work for four different companies: first, as an executive for Dell, he brought in Sapient to produce sales force training systems; then, as head of business-to-business e-commerce for Hewlett-Packard, he hired them to perform strategy and technology work; next, Vogt went to Sony and used Sapient to help launch a new B-to-B system; and finally, as CEO of an Internet marketing technology company named Viewpoint, he engaged Sapient to help launch a newly branded corporate website.

Equally impressive was the amount of business acquired through referrals. So many of Sapient’s client contacts came through referrals—90 percent, according to one estimate—that one executive with 10 years of experience at the company stated, “I have never received a cold call from a client wanting our services.” Sapient executives knew that it was difficult to announce to a potential client “we deliver client success” and be taken seriously. But when they could show tangible examples of problem-solving for other customers, it was much easier to bring the esoteric mission statement to life.

Developing new business practice areas remained a difficult task. Unlike other consulting companies, Sapient would not go out and poach an executive from a rival firm to bring in their

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“book” and start a new practice. Sapient worked more organically, drawing on the solutions that it had developed for one client to see if other clients might benefit from similar solutions. For example, BP had hundreds of websites, all with a different look and feel. Sapient created a common platform for all its websites that would save BP money and allow for quick changes; then, after completing the project, Sapient started telling its other customers about the work and suggesting that they might be interested in a similar project.

The fact that clients would introduce Sapient to new trends stood the company in good stead. For example, Sapient’s capabilities in the Internet space came about after a banking client hired Sapient in mid-1994 to see if the Internet was something the bank should be concerned about. After researching the area and conducting workshops with the client, Sapient became aware that it needed to add capabilities in the area and it quickly became a leading Internet solutions provider.

Still, the process meant that the company had to remain alert to current trends to explore relationships with companies in new industries. Executives constantly scanned existing engagements for potential new practices and markets and talked with clients who had gone to industries in which Sapient did not have relationships, in the hopes of bridging into the area.

Alignment Problems

Another challenge for Sapient was achieving alignment among the various groups of the client organization. Sapient had committed itself to a process in which the creation of consensus at all levels was essential. Even in the best of times, this commitment compounded the challenge of setting up an engagement. As Moore noted,

We have to sell much higher in the organization than most of our competitors. We can’t sell just to a project manager or director, because he or she is not going to be able to get the vice presidents of operations, marketing, and technology into the same room. We usually sell one level below the CEO—the head of a business unit, technology, marketing, sales, etc.—and usually it has to be a joint sale. We have to sell there so that they can get all of the relevant people to the table for the initiative to be truly successful.

But even after Sapient had gotten all of the relevant people to the table to discuss the business problem, there were several reasons why alignment might break down. Sometimes a particular faction might resist committing to measurable business results. According to Hank Summy, the greatest challenge with MBRs was to get clients to formalize their business results. Sapient’s iterative management process and frequent measurement of progress made some clients uncomfortable. Not every client was prepared to accept the visibility and responsibility of producing concrete financial results.

At other times the process of achieving alignment might flounder because of political tensions. Sometimes Sapient could work around this obstruction. For example, one client organization was crippled by a split between the business group and the IT group. The business managers had brought Sapient in, but the engineers and technical staff wanted to do the work themselves. In this case Sapient built a bridge between the two and helped them to achieve something they could not have done as independent teams. Even though Sapient was engaged by the business side, they went outside of the scope of their engagement to help the IT group succeed in the interest of the client’s overall success.

When it was not possible to navigate the political obstacles, Sapient was willing to walk away from an engagement. Senior Vice President Amy Shah recalled a time when Sapient turned down a $40 million contract because it was clear that the leadership of a major division of the client

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organization was not behind the program that had been initiated by their CEO. “We got four weeks into it, and they were looking for any reason to stop the program, including orchestrating meetings to undermine the credibility of the sponsoring executives,” said Shah. “We told the CEO that an influential senior executive wanted to sabotage the program and he would not get any value out engaging us until this issue was addressed.” It was hard to walk away from the 40 million dollars. But the former CFO of that organization still remembers the benefits of our decision. At one point, he told me, ‘No other consulting firm would have done what you did. They would have taken the $40 million. What you did was the right thing for our business.’” This kind of drastic action was actually rare; in the majority of cases, even if there was serious misalignment in the organization, Sapient could usually work around the obstacles to get the right result for the client in the end.

A client’s reliance on outside contractors might be another source of misalignment. Although Sapient and the client might be aligned, the team could encounter resistance from other organizations already working with the client. Often these companies had an interest in maintaining their status with the client. In these situations, Sapient would attempt to bring the contractors into the fusion process, but there were times when competing interests would make alignment difficult. On one occasion, for example, Sapient was supposed to develop a system using a software package sold by a separate vendor. However, the other vendor had not met its obligations, and the software was not yet written. Sapient ended up taking over the management of that project, overseeing the development and testing of the vendor’s software package. “We ended up making the software vendor look more successful, as well,” said Moore. “We became committed to the success of the software company as well as the success of our client. Our senior client told us that he did not know of another firm in the world that would have done that and been able to pull this off.”

Another hindrance to alignment was cultural differences, which required Sapient to adapt its fusion process. Although the task of discussing conflict openly in a fusion workshop came fairly easily to North American clients, to Europeans it felt unnatural. In many European countries, it was necessary to hold discussions in private interviews rather than in a large-group workshop. “It’s a different way of building consensus,” said Milind Godbole. “Because of the importance of hierarchy, you build consensus offline.” In engagements with European clients, Sapient’s role was more to mediate tensions away from the public setting and then to use the workshop to sort out minor issues and announce the final results.

Even if alignment was reached, a project might not go forward. Sometimes circumstances would change so that there was no work to be done. For example, an energy company in Canada had signed a four-million-dollar contract with Sapient, but when the project came close to implementation, there were sudden changes in government regulations. Rather than push forward in an uncertain environment, Sapient refused to go ahead with the engagement. As Godbole tells the story,

They said we were the first systems integrator in 18 years to say no to their money. And we said we want your money, but we also want to be able to sleep at night because we do the right thing for our client. This decision generated tremendous loyalty. They are now a customer for life. Three months later they called with a problem for us to solve, and in 25 minutes we signed a $3.5 million contract. They trusted us that much.

Such moves meant a short-term loss of business, but they strengthened the bond between Sapient and its clients. “You’re never more credible with a client than when you say no,” said Bob Van Beber.

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Working for Uncle Sam

The third challenge was applying Sapient’s methods to the federal government client. Despite a record of successful engagements, Sapient had not been able to achieve the kind of growth that it desired in the government space.

The largest obstacle was the procurement process. For any new contractor, just understanding the rules for submitting a bid required a massive investment of time and money. For Sapient, the procurement system created additional problems, because it required major adjustments to the fusion method. Whereas the commercial client was open to a discussion about their business objectives and their definition of success, the government client was prohibited from talking in detail with any particular contractor before the contract was awarded. Instead, the agency would issue a request for proposals (RFP), and contractors would then respond in writing with a proposal describing the work to be done and the proposed cost. The scope of the contract was generally defined rigidly, and there was no give and take on identifying problems. “There is a tension between the way the government buys and the way we are best equipped to sell. Sapient is extremely interactive and desires to understand the business problem at a very detailed level so our response can provide the best possible solution,” said Senior Vice President of Government Services Hank Summy.

Because the government has to demonstrate that it is being neutral, it doesn’t realize as much differentiation amongst the competitive responses. It wants everyone to conform to a certain system, and this takes away from our advantage. We can’t always have the conversations and workshops that enable us to understand what success means for the project or program. We’ve struggled with getting government work because it doesn’t naturally align with Sapient’s methods.

Sapient sometimes adjusted to this reality by entering the government market as a subcontractor. This strategy had the advantage that Sapient could rely on prime contractors with decades of experience in the government sector to go through the procurement process, while Sapient was left free to perform the actual work. At other times, Sapient could compete and win government business on its own as a prime contractor. In both cases, however, the fusion was performed later in the relationship with the client, and the parties entered the fusion with additional constraints that might not have been present in an engagement with a commercial client.

There were other difficulties, too. While Sapient had done a few fixed-price contracts for the government, most of the government worked on a cost-plus basis, which required a specific billing structure. The government also required private contractors to reveal financial information that a private-sector firm typically would not share. Sapient adapted to these requirements first by changing its billing procedure and then by creating a fully-owned subsidiary called Sapient Government Services.

There were other challenges presented by the time required to work in the government space. A project might be defined but take several years to become fully funded. Also, each contract fit a defined budgetary period, so even if a Sapient could win an initial phase of a project, there was no guarantee that it would be able to complete the project. Contract winners were decided by sometimes arcane procedures that discounted existing relationships and emphasized quantitative counts of qualifications, such as the number of aggregate years of experience for a project team.

Government work also constrained Sapient’s allocation of people. Because nearly all federal contracts had to be staffed with U.S. citizens or green card holders, Sapient’s substantial capacity in India and Europe could not be leveraged to complete projects. Even when the staff was available, many contracts required security clearances, a long and involved procedure.

sapient 15

Despite these constraints, when Sapient did secure a government contract, it performed in a way that exceeded client expectations.

An example of Sapient’s success in working with the federal government was a ten-year engagement with the United States Marine Corps. While Sapient employees would go to the ends of the earth to ensure their clients’ success, working for the Marines really proved this commitment. Having undertaken an engagement to improve the Marines’ logistical system, Sapient engineer Dan Roche found himself in full chemical warfare gear sitting in a Kuwaiti bunker on the eve of Operation Iraqi Freedom. As Scud missiles flew overhead, he briefed a general on using Sapient’s new logistical system. Later, in the summer of 2005, Sapient employees went to Fallujah for 90 days to continue field testing the system.

Sapient’s relationship with the Marines evolved from the company’s work as a subcontractor for an Advanced Concept Technology Demonstration (ACTD) for a new web-based logistics system. ACTDs had the reputation for having a very low success rate and were derided as “expensive science projects.” But through their work on the project, Sapient became a prime contractor on what became an official Program of Record. Sapient developed a system to handle request management, order management, inventory management, and logistics for specific missions. The new system was first implemented in the U.S. operations in Afghanistan and Iraq.

With the Marines engagement, Sapient found a supportive organizational sponsor in Lynn Torres, a manager who was willing to try alternative approaches. Torres found Sapient to be different from other defense contractors. “Sapient was much more interactive with both the sponsor and the end user,” she said. “They would engage users at all levels, while other contractors would talk primarily to the senior leadership or contracting offices. Sapient was also much more adaptable. If you changed the development environment with other contractors, they would tell you we can’t change; we don’t have the people. But Sapient would give you equally qualified technical people to work in any development environment.” Torres was also impressed by Sapient’s speed and productivity:

Generally when you hire a large defense contractor, the first two or three months is spent picking their staff from other projects. Other contractors also minimally use key performers, so that the expert with the resume in the package is only going to do ten percent of the work. Sapient was far more consistent: when the contract was in place, they had a team ready to go. They were also more efficient. When you look at other contractors’ teams, they have four or five managers and three or four former military people whose value to the product is government expertise. But with Sapient, most of people on the contract were creating the product, so that we achieved more technical scope for the same investment. Sapient extracted government and military expertise through their customer-client interactions to achieve the same results.

In the Marines, Sapient also found a client with a similar organizational style. The Marines liked the idea of getting all of the organization’s stakeholders together at the same time in a workshop. And they appreciated Sapient’s focus on concrete results. “They look at the type of mission they have been tasked to accomplish and then organize the structure and assemble the team around that mission,” said executive Nathan Brewer. “They use this task-organized approach for a variety of different missions. The Marines would rather focus on getting something done than on the process, and Sapient is like that, too.” At times Sapient was so successful in understanding the military’s goals and style that retired Marines would approach the Sapient team after a meeting and ask them when they had served in the military.

In spite of these successes, the government space remained a difficult area for Sapient to navigate. In 2005 Sapient’s government practice produced eight percent of the company’s revenues, and it

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was unclear whether the company could expand that practice significantly. Nevertheless, Sapient had several motivations for persisting in the government sector. First, it was a massive market that was counter-cyclical and could provide reliable business during an economic downturn. Second, it was a market where Sapient believed it could make an impact with its focus on measurable business results. And third, Sapient believed that there was potential for generating a large amount of business in this sector because it could offer a significantly more effective approach than the typical government contractor. “We can have huge impact and huge client success in that area,” said CEO Alan Herrick. “But the question is whether we can really operate on a large scale in the U.S Government. We don’t know yet whether that is possible. The jury is still out.”

A General Contractor for Success?

In 2006 Sapient underwent a series of upheavals when first Moore and then Greenberg handed over their positions of executive responsibility to others. However, while the founders had been critical to Sapient’s development, they believed that the strength of the firm lay in its philosophy and methods, not in particular personalities. “We are not formulated around a person,” said Greenberg. “And we are not about a technological trend.”

Indeed, although the company set specific business goals, such as branching into new markets and expanding its global distributed delivery to other countries, every Sapient executive insisted that these goals were secondary. What differentiated Sapient from its competitors was not technological prowess but its culture of client success and its set of disciplined organizational methods. As Alan Herrick put it, “We’re very good with large organizations in cross-functional settings, where we can drive consensus and closure, force disagreement and agreement so that you can actually execute. We really know how to orchestrate people, psyches, teamwork, and decision making.”

With the adoption of the client success model, the end product started in some ways to become incidental. As one Sapient manager put it, “We’re not about consulting; we’re not about IT; we’re not about building websites. We’re really about asking our clients to give us the hairiest problems that they have so that we can help them achieve measurable results.” Greenberg went even farther: “I cringe when people think Sapient is about technology,” he said. “What we do is less important than what we are. People ask could there be a day when Sapient doesn’t do any technology work, and I say that’s possible—we don’t have to do any one thing.”

Indeed, as Moore reflected on the possibilities for the future, it seemed that if Sapient continued to focus on client success, very little would be outside of its scope. He drew a diagram in which the client was at the center of a circle, with all of its functions and responsibilities orbiting around: marketing, advertising, IT, training, hiring, change management, strategy. “Right now the client is all alone in the center and they have to find a partner in each area,” said Moore. “They have to go out and evaluate each partner and then hire them, monitor them, and integrate them.” Then further burdens are added because each partner firm looks at its own piece of work but does not see the whole problem. The typical consultant only sees the client through the services it provides.

But what if one firm, a kind of meta-consultant, could come in and really examine the big picture? “If we could either provide all of the services they need or help them integrate all of the contributions of others, how much more value would we be to the client?” asked Moore. “This is a revolutionary model of consulting, being a general contractor for success. Ultimately, I want Sapient to be an executive’s secret weapon. For the rest of their career, they will take us wherever they go.”

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This case has been developed with the cooperation of Sapient for pedagogical purposes. The case is not intended to

furnish primary data, serve as an endorsement of the organization in question, or illustrate either effective or ineffective

management techniques or strategies.

Copyright 2006 © Yale University School of Management. To order copies of this material or to receive permission to

reprint any or all of this document, please contact the Yale SOM Case Study Research Team, 135 Prospect Street, New

Haven, CT 06520.

Endnotes

1 Case Writer, Yale School of Management.

2 Director of Case Study Research, Yale School of Management.

3 Dean, Yale School of Management.

4 “The Chaos Chronicles,” The Standish Group, 2004.

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Exhibit 1: Sapient Financials Sapient Corporation Selected Consolidated Financial Data

Years Ended December 31,

2005 2004 2003 2002 2001

(In thousands, except per share data)

Statement of Operations Data:

Service revenues $319,496 $253,936 $184,795 $173,811 $325,165

Operating expenses:

Project personnel costs, before reimbursable expenses 190,084 143,202 112,925 136,138 234,002

Selling and marketing costs 14,029 15,208 18,560 26,428 28,138

General and administrative costs 86,323 71,371 57,595 79,400 129,344

Restructuring and other related charges 7,218 1,108 2,135 66,885 100,079

Impairment of goodwill and intangible assets — — — 107,430 —

Amortization of intangible assets 1,104 515 1,772 4,328 28,126

Income (loss) from operations 20,738 22,532 (8,192) (246,798) (194,524)

Gain on equity investment change in interest — — — 1,755 1,407

Other income (expense) 108 65 2,729 33 (4,677)

Interest income 4,240 2,655 1,902 4,312 9,393

Income (loss) before income taxes, net equity loss from

investees and loss from discontinued operations 25,086 25,252 (3,561) (240,698) (188,401)

Provision for (benefit from) income taxes:

Provision for income taxes 3,677 3,068 1,337 (18,585) (3,091)

Benefit from income taxes (4,289) (635) — — —

Provision for (benefit from) income taxes (612) 2,433 1,337 (18,585) (3,091)

Income (loss) before net equity loss from investees and loss

from discontinued operations 25,698 22,819 (4,898) (222,113) (185,310)

Net equity loss from investees — — — (349) (499)

Income (loss) from continuing operations 25,698 22,819 (4,898) (222,462) (185,809)

Loss from discontinued operations — — — (6,741) (3,959)

Net income (loss) $25,698 22,819 $ (4,898)$ (229,203) $ (189,768)

Basic net income (loss) per share:

Income (loss) from continuing operations $0.21 $0.19 $ (0.04) $ (1.78) $ (1.50)

Loss from discontinued operations — — — $ (0.05) $ (0.03)

$0.21 $0.19 $ (0.04) $ (1.83) $ (1.53)

Diluted net income (loss) per share:

Income (loss) from continuing operations $0.20 $0.18 $ (0.04) $ (1.78) $ (1.50)

Loss from discontinued operations — — — $ (0.05) $ (0.03)

$0.20 $0.18 $ (0.04) $ (1.83) $ (1.53)

Weighted average common shares 124,725 123,040 121,188 124,961 124,256

Weighted average dilutive common share equivalents 4,573 5,418 — — —

Weighted average common shares and dilutive common share

equivalents 129,298 128,458 121,188 124,961 124,256

19 sapient

EXHIBIT 1 (CONTINUED)

Sapient Corporation Consolidated Balance Sheets

ASSETS

December 31, 2005 December 31, 2004

(In thousands, except share and per share data)

Current assets:

Cash and cash equivalents $69,948 $66,779

Marketable investments 86,288 38,172

Restricted cash 319 3,168

Accounts receivable, less allowance

for doubtful accounts of $889 and

$1,896 at December 31, 2005 and

2004, respectively 60,062 51,278

Unbilled revenues on contracts 16,849 16,875

Deferred tax assets 112 —

Prepaid expenses 7,263 5,922

Other current assets 3,108 3,130

Total current assets 243,949 185,324

Marketable investments — 64,006

Restricted cash 1,217 3,454

Property and equipment, net 20,561 14,612

Purchased intangible assets, net 2,940 643

Goodwill 11,770 —

Deferred tax assets 5,030 815

Other assets 716 749

Total assets $286,183 $269,603

20 sapient

EXHIBIT 1 (CONTINUED)

LIABILITIES, REDEEMABLE COMMON STOCK AND STOCKHOLDERS’ EQUITY

December 31, 2005 December 31, 2004

(In thousands, except share and per share data)

Current liabilities:

Accounts payable $5,396 $6,125

Accrued expenses 17,010 18,832

Accrued restructuring costs, current

portion 6,565 10,560

Accrued compensation 24,403 17,722

Income taxes payable 4,093 4,116

Deferred tax liabilities 161 —

Deferred revenues on contracts 5,537 9,285

Total current liabilities 63,165 66,640

Accrued restructuring costs, net of current

portion

15,010

Deferred revenues on contracts 1,154

Deferred tax liabilities 188

Other long term liabilities 3,360

Total liabilities 82,877

Commitments and contingencies

Redeemable common stock par value

$0.01 per share, 313,943 issued and

outstanding at December 31, 2005. 671

Stockholders’ equity:

Preferred stock, par value $0.01 per share,

5,000,000 shares authorized and none

outstanding at December 31, 2005 and

2004 —

Common stock, par value $0.01 per share,

200,000,000 shares authorized,

130,482,574 shares issued at December 31,

2005 and 2004 1,304

Additional paid-in capital 494,556

Treasury stock, at cost, 6,956,140 and

6,221,679 shares at December 31, 2005 and

2004,

(18,601)

Deferred compensation (11,489)

Accumulated other comprehensive income 1,046

Accumulated deficit (264,181)

Total stockholders’ equity 202,635

Total liabilities, redeemable common

stock and stockholders’ equity

$286,183

21 sapient

Exhibit 2: Core Values Summary

22 sapient

Exhibit 3: Fusion Feedback Form

23 sapient

Exhibit 4: Sapient’s New York Office

24 sapient

Exhibit 5: Sapient Staff Allocations, 1999-2005

2005 2004 2003 2002 2001 2000 1999

US 1,034 700 497 613 1,451 2,874 1,948

Canada 153 132 63 41 32 5 0

UK 305 256 162 178 264 239 114

Germany 106 85 72 108 102 54 0

Italy 0 0 0 2 4 7 0

Australia 0 0 0 0 0 80 49

Japan 0 0 0 4 31 25 0

India 1,515 1,141 689 549 543 76 0

Total 3,113 2,314 1,483 1,495 2,427 3,360 2,111

25 sapient