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September 04, 2003

The End of Systems Integrators?

The End of Systems Integrators?

Systems integrators, though, are feeling the pinch from application vendors, albeit not from their integration technology, he added. More and more, packaged-application vendors are relying on services to make up for dwindling licensed-software sales. That, coupled with the fact that a lot of integration work is now being done in offshore centers, is having a big impact.

Oracle (Nasdaq: ORCL) , for example, has opened a service center in India, Kempf said. For its part, PeopleSoft, which also has facilities there, recently has contracted with an Indian company to help it further support PeopleSoft engagements, Kempf reports.

"It's ironic when you really think about it," Kempf said. "In one breath, the application vendors are saying they want to make it cheaper for customers by providing integration tools. But, in another, they are saying -- at least to shareholders and Wall Street analysts -- that they want to grow their services revenues."

In short, it is the competition from the application vendors' services division that is starting to cause SIs angst, rather than the integration technologies.

Greater Focus

Indeed, services have become an increasing focus among most of the major application vendors. There is PeopleSoft's Global Services group, for example, and Microsoft (Nasdaq: MSFT) has its Rapid Adoption Teams. Siebel, as well, has some 65 professionals on staff -- many of which have management-consulting or investment-banking backgrounds -- to provide consulting services.

"We assist with any senior-management problem that a customer might have that is strategic, business or financial in nature," Peter McCullagh, group vice president of CRM strategy and manager of the customer solutions team told NewsFactor's CIO Today.

These services are free, McCullagh says -- a perk for customers or serious potential customers. They vary somewhat from traditional consulting services, in that the team, on average, spends three to four weeks on a client site -- as opposed to the months-long projects that are SIs' bread and butter.

Small comfort, though, to SIs, who not only have to face more competition, but also -- in Siebel's case -- free competition.

Small comfort, as it turns out, for the end users too. Despite the growing number of choices companies have, systems-integration costs are not likely to decrease significantly, Kempf said.

"Why do you think the vendors are moving into this space, anyway? It's not for altruistic reasons."

September 4, 2003 in Economics of IT | Permalink


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