During the exuberant days of the technology boom of the 1990s, few companies were as giddily successful as those providing IT services. With total worldwide enterprise IT expenditures soaring from $175 billion at the decade’s start to more than $525 billion in 2000 and in-house IT talent becoming more and more scarce, customers lined up to sign sweeping service deals that were increasingly lucrative for providers.

Systems integrators such as Accenture, Cap Gemini Ernst & Young, and IBM prospered by implementing large enterprise-resource-planning (ERP), supply-chain-management (SCM), and customer-relationship-management (CRM) application packages developed by vendors including i2 Technologies, SAP, and Siebel Systems. Besides installing these packages, systems integrators advised their customers on ways of implementing the changed business processes needed to capture the efficiencies the new software promised, and they developed custom applications that expanded and tied it together. The price of a project, often running into the tens of millions of dollars, was based on estimated labor costs and a standard profit margin, without any guarantee that business benefits would follow.

Meanwhile, outsourcers such as EDS and IBM offered to free chief information officers (CIOs) from the burden of operating complex IT systems. Unlike systems integrators, outsourcers took responsibility...