So everyone in the interactive agency business is hunting for solutions to the problems of technology, new business development, and sustaining revenue growth. As a result, suddenly there are a half a dozen strategies in play for the reinvention of the interactive agency business. And the success or failure of these new strategies and business models will be crucial for New York as Silicon Alley's first core business sector -- interactive agencies -- matures. Here are some of the trends to watch.

1. Consulting firms and systems integrators will begin buying into interactive services start-ups.

The chief battle for a service company is to own the client relationship. The rationale is that he who owns the client relationship owns the work for years to come; everyone else will have to aspire to be an outsource vendor. One of the best ways for a small start-ups to get a foot in the door at a Fortune 500 company is to have an Ernst & Young or an Arthur Andersen or an IBM or EDS carry their water. They call it channel sales, and it is going to begin happening in a big way as Internet service firms begin pairing off with consultants in strategic alliances and eventually, financial ones. Most of those consulting companies won't buy Internet start-ups at the current valuations. But they will very shortly begin putting equity investment money into these companies. And if the stock market falls, look for the big systems integrators and consulting firms to start gobbling up interactive agency start-ups.

2. Interactive services start-ups will function more an more like service bureaus.

Sustaining recurring revenues isn't easy for a project driven company. Consider the case of K2 Design, one of the first of the publicly traded Silicon Alley Webshops and a company that began life as a traditional graphics design shop. Last fall, K2 lost its biggest client, WavePhore, which had accounted for more than 23 percent of the company's revenue in 1998. The loss had an immediate impact on the company's bottom line. K2's answer was, in part to "cultivate existing relationships with clients" often in the form of handling the client's ad banner buying on the Internet -- a traditional agency model -- and expand its consultancy business. Other shops have tried to be more creative. For example MethodFive has recently started a site maintenance practice that charges clients hourly fees to maintain and update Websites. Many of those Websites were built by MethodFive competitors, but are being serviced in-house by clients who no longer want the hassle. Look for companies to invent more services they can sell on a non-project basis.

3. Interactive service start-ups will start looking like venture capitalists and holding companies.

In the past, Web service firms have traded work for financial participation -- building an e-commerce system of a mortgage broker, for example, and being paid in a mix of cash and a piece of the financial action. But the model of trading Web solutions work for financial participation took a major jump last this month when Rare Medium received an investment of $85 million from LBO guru Leon Black's Apollo Capital Management for the purposes of turning Rare Medium into an incubator and holding company that would acquire equity stakes in companies for a mix of cash and services. Look for other firms to follow suit.

4. Attempts by interactive service shops to develop proprietary software will tank, and service firms will have to focus, more than ever, on service.

The cost and quality advantages of building with off-the-shelf software has just become too competitive. Interactive service shops who have long dreamed of building a proprietary workflow system and exploiting it across multiple clients, perhaps even generating licensing fees, will quickly discover that they're too late into a well established market. Increasingly it will be obvious that the service firms' best chance to add value is to build systems using off-the-shelf software and add services like e-commerce fulfillment to client companies.