Table Of Content

INPUT Research Bulletin APublicationfromINPUT’SBusinessIntegration Programme-Europe Business Operations Presents New Challenge to Business Integration Vendors AsITbecomesmoreintegratedintothe Thusanadditionalchallengehasnowpre- businessenviroment,sotheproblemsof senteditselftobusinessintegration managingbusinesschangeinvolvingIT vendors,namelybusinessoperations increase.Onestrategyforaddressingthis outsourcing. issueistotransfermoreofthe Businessoperationsoutsourcingisarising responsibilityforeffectingchangeto outofthedesire,evidentinmany vendors.Accordinglyoverthelasttwo organisations,tooutsourceentirebusiness years,ISoutsourcinghasestablisheditself functionsorprocesses. asamajormeansofachievingsystems renewal.Forexample,EDSandCSChave Businessintegrationvendorsshould wonanumberofmajorcontracts,suchas considerdevelopingbusinessoperations thoseatKFandBhSwheretheprimary capability,sincebusinessoperations: focusofthesecontractsisnewsystern development. • canbeadirectsubstituteforbusiness integrationservices Howeverthescopeofthesecontracts extendsbeyondthatoftypicalbusiness • isarapidlygrowingopportunity. integrationcontractsandincludes outsourcingelementssuchasIT ASubstituteforBusiness infrastructuremanagementservicesand Integration Services thepermanenttransferofsystems developmentpersonnelfromtheclientto Theprincipaldrivingforcesbehind thevendor. businessoperationsoutsourcingareshown inExhibit1. ©1994byINPUT.Reproductionprohibited. E-BIPR INPUT Research Bulletin Exhibit2 ExamplesofBusiness OperationsContracts Contract Vendor FulfilmentforTimeLife EDS booksandmagazines ParkingFineCollection EDS forSevilleMunicipal Authority AccountingforBP Andersen Exploration Consulting Businessoperationsoutsourcingand EDS’contractforparkingfine systemsintegrationaretwoapproachesto administrationinSevilleisanexample menegeitnienegritnhge.nAeepdrifnocribpaulsidnreisvsinrge-forcein iofmmaecdoinattraectret-heantgiinnecelruidnegsasingdnisfyisctanetms bothcasesistherealisationthatabusiness integrationactivity. processrequiresre-engineeringtoimprove itseffectivenessdramatically. Itisoftenarguedthatorganisationswill notoutsourceactivitiesthatareapartof Ifthebusinessprocessistoremainin- theircorebusinessandprovidethem house,thensystemsintegrationor withcompetitiveadvantage.However, applicationsoperationscanbeusedto thisappearstobeamyth.Organisations supportthere-engineeringprocess. arealreadyoutsourcingactivitieswhich However,toincreasetheflexibilityofthe areimportantsourcesofcompetitive corogmapnainsiaetsiomnatyordeeaccitdetotomaoruktseoturccheantghees, raedlvuacnttaangte.toFdoirsceuxsasmpthlee,naVtauurxehaolflitiss businessprocessratherthanre-engineer CustomerAssistanceCentrerunbyEDS, theprocessthemselves.Forexample,BP becausethisbusinessoperationscontract Explorationwishedtore-engineerits isasourceofcompetitiveadvantage. accountingfunction.Howeverratherthan Sincethecentrewasestablished, re-engineeritthemselvesandjust Vauxhallclaims“asubstantialrisein subcontracttheredevelopmentofthe customersatisfactionaswellasan supportingISsystems,theydecidedto increaseinthosepreparedtorecommend outsourcetheentirebusinessprocesstoa Vauxhallproducts.” single,externalvendornamelyAndersen Consulting. Providedthattheclientretainsthe meansofestablishingpolicyand Examplesofcurrentbusinessoperations directiontogetherwiththemeansto contractswhichhavebeenawardedtoIT monitorservicedeliveryandmanagethe vendorsarelistedinExhibit2. vendor,thereareprobablyfewactivities 2 C1994byINPUT.Reproductionprohibited. ! INPUT Research Bulletin thatcannotbeeffectivelyoutsourcedatthe Alternativelybusinessoperationscanbe administrativeoroperationallevel.Many usedtopre-emptfuturesystemsintegration businessoperationscontractsinvolvethird contracts.Forexample,EDShasacontract partiesliaisingdirectlywiththeclients’ withTimeLifetoprovidefulfilment customersandsuppliers. services.Atpresent,theprocessremains labour-intensive.However,EDSwill j Indeed,EDSistargetingcustomerservice endeavourtoapplytechnologytothe functionswithbusinessoperations processtoimproveitsefficiency.Thiswill services.Thispresentsasignificantthreat probablyentailre-engineeringtheprocess ; tovendorssuchasUnisyswhoare andperformingasystemsintegration targetingcustomerservicesapplications projectatsomefuturedate.Inthisway, fromabusinessintegrationperspective. EDShaseffectivelypre-emptedtheaward ofasystemsintegrationproject.Thevendor; Manytraditionaladministrativefunctions, hasalsoavoidedthepricecompetition suchasclaimsadministrationforan inherentinacompetitivetenderforsucha i insurancecompany,arepotentialtargets project. forbusinessoperationsservices.Inthis case,technologiessuchasworkflowand Growingat27% PerAnnum documentimageprocessingcouldbe ibumsmiendeisasteplroyceaspsp.liedtotransformthe Ebxuhsiibnietss3oppreorvaitdieosnsamfaorrkeceatstinfoErurtohpee. r:9f Exhibit3 BusinessOperationsMarket Europe 500 500 400 fir-t Market |!0 Size 300 ($M) .;u 200 idt .'-i 100 nor rn .fijno ,off -<oO msxvi ‘-o-jjnoo ;-.\i'-ilr.v ©1994byINPUT.Reproduction0?o)ifb"rted. INPUT Research Bulletin Althoughconsiderablysmallerthanthe businessintegrationmarket,business operationsoutsourcingisnowbeginningto emergeasasignificantopportunity. Approximatelyone-thirdofthismarket valueisaccountedforbyoutsourcingwithin thepublicsectorintheUnitedKingdom.In thissegmentofthemarket,thetraditional systemsintegrationIToutsourcingvendors arefindingthattheymustnowadditionally offerbusinessoperationsoutsourcingor “managedservices”inordertoretaintheir presenceinthismarketsegment.Thiscould alsohappenintimeinthewider commercialmarketplaceposinga significantthreattoIToutsourcingvendors andsystemsintegrationvendors. Accordinglyitisimportantthatvendors recognisethenatureofthebusiness operationsopportunityandthethreatto theircurrentbusinessactivitiesfromother vendorsofferingsuchservices. ThisResearchBulletinisissuedaspartofINPUT'SBusinessIntegrationProgramme—Europeforthe infolromcaaltiIoNnPsUerTviocregsainnidsuasttiroyn.orIfPyeotuerhaLvineeasnaytqIuNePstUiTo,ns1o7rHcilolmSmterneetts,oLnonthdiosnbuWllIetXin7,FpBleEansgelcaanlldyour (071)4939335,Fax(071)6290179 4 ©1994byINPUT.Reproductionprohibited. Research Bulletin APublicationfromINPUT’SBusinessIntegrationProgramme-Europe Vol.V,No.2 February1994 European Project Services Market Valued at $41 billion In1993,INPUT’SEuropeanSystems avarietyofinformationsystemsproducts IntegrationProgrammefocusedspecifically andservices.Foraprojecttoqualifyasa onthesystemsintegrationmarket. systemsintegrationproject,theclientmust appointasingleprimecontractorresponsible In1994,weareexpandingthescopeofthis foroverallprojectmanagementand programmetocoverthewholeoftheproject responsibleforthedeliveryofthecomplete servicesmarketandrenamingitt—he informationsystemtotheagreedschedule BusinessIntegrationProgramme Europe andprice. Theprojectsservicesmarket: Theprojectservicesmarketincludesawider rangeofservices.Indeeditincludesall •Coversawiderrangeofservicesthan project-relatedservicesexcludingproducts systemsintegration purchasedasoff-the-shelfsoftwareproducts tobeinstalledbytheclientorproductsand •Iseighttimeslargerthanthesystems servicespurchasedaspartofanoutsourcing integrationmarket contract. •Willbestronglydrivenbytheadoptionof Examplesofserviceswithinthescopeofthe softwareproducts projectservicesmarketare: • Isbeingtargetedbytheequipment •Managementconsultancyaspartofa vendors. businessre-engineeringproject WiderRangeofServices • StrategicISconsultingservices Systemsintegrationprojectsprovide •Technicalconsulting completesolutionstoinformationsystem requirementsthroughthecustomselectionof • Implementationsupport ©1994byINPUT.Reproductionprohibited. E-BIPR INPUT Research Bulletin •Bespokesoftwaredevelopment Exhibit1 9 •Educationandtraining ProjectServicesandSystems IntegrationMarkets,Europe Equipmentandsoftwareproductrevenues arealsoincludedwherethesearepurchased asanintegralpartofaninformationsystems project.Inthoseinstanceswheresoftware productsandequipmentarepurchased Systems Integration separately,theseelementsarenotincluded intheprojectservicesmarketcoveredbythe EuropeanBusinessIntegrationprogramme. Project Revenuesfortheserviceslistedaboveare Services includedwithinthesystemsintegration marketwheretheseservicesaresupplied 10 20 30 40 50 withinthecontextofasystemsintegration MarketSize($Billion) project. Howevermanyprojectservicesare theexternalmarket.Indeedthissametrend purchasedoutsidethiscontext,oftenas hasservedtoreducethegrowthelsewherein individualconsultingassignmentsorsupport theprofessionalservicesmarketwithin- services.Historically,individualprofessional houseITdepartmentsoftennolongerina serviceshavetendedtobepurchasedona positiontorecruitlargenumbersof timeandmaterialsbasis. temporarydevelopmentstaff. Whilethesystemsintegrationmarket Thisoveralltrendisexpectedtocontinue. includescombinationsofservicesbundled Similarlythetrendtofixedpriceratherthan intoanoverallfixedpricecontract,the timeandmaterialsisextendingitselfto projectservicesmarketalsoincludes smallerprojects. standaloneservicesandservicespurchased onatimeandmaterialsbasis. Exhibit2providesabreakdownoftheproject servicesmarketforFrance,Germany,and EightTimes LargerthanSystems theUnitedKingdom. Integration Market Theprojectservicesmarketineachofthese Exhibit1contraststhesizeandgrowthof countriesiscurrentlydepressedbytheir theEuropeansystemsintegrationand economiccircumstances.Themarketin projectservicesmarkets. Franceisthemostadverselyaffectedwith usersendeavoringtoreducetheirIT Thegrowthinthesystemsintegration expenditure,andlittlesignofoverall markethasbeenconsiderablyhigherthan economicrecovery.Howevernew thatintheoverallprojectservicesmarketin technologies,suchasclient/serverthatoffer recentyears,asmajorprojectexpenditure userstheprospectofreducingtheiroverall hasshiftedfromin-housedevelopmentsto 2 ©1994byINPUT.Reproductionprohibited. INPUT Research Bulletin ITexpenditurewhileimprovingthevalueof ITtotheirbusiness,providesome Exhibit2 encouragementforgrowthintheproject ProjectServicesbyCountry servicesmarket. DrivenbytheAdoptionofSoftware Products Exhibit3providesabreakdownofthe Europeanprojectservicesmarketby component. TheEuropeansystemsintegrationmarketis showingashiftfromlargebespoke developmentprojectstoprojectsbasedon clienfrserverarchitectureandoriented aroundtheassemblyofstandardsoftware Thistrendismirroredintheoverallproject servicesmarketwheretheproportionof revenuesderivedfromsoftwareproductsis forecasttogrowsubstantiallyoverthenext fiveyears. Exhibit3 Increaseduseofsoftwareproductsand ProjectServicesbyComponent,Europe kernelswillhelptomeetusers’needsfor flexibilityandimmediacyofimplementation. Themainimplicationsofthesetrendsfor Professional vendorsistheirneedtofocusskills: Services •Aroundtheleadingapplicationsoftware productsintheirchosensectors Equipment • Onthetechnicalskillsnecessaryto integratetheseproductsintodistributed, multi-vendorenvironments. Software StronglyTargeted bytheEquipment Products Vendors 0 10 20 30 40 Exhibit4liststheleadingprojectservices MarketValue($Billion) vendorsinEurope. i ©1994byINPUT.Reproductionprohibited. 3 INPUT Research Bulletin Overallthelistofleadingvendorsinthe Exhibit4 projectservicesmarketisverysimilarto thatforthesystemsintegrationmarket. LVeeanddionrgsP—roEjuercotpSee,rv1i9c9e2s Howeverlargeprojectspecialistssuchas European AndersenConsultingandEDSreceivelower Vendor ProjectServices Revenues rankingsintheprojectservicesmarket. ($M) OntheotherhandSiemens-Nixdorfand IBM 2,300 Olivetti,whohadyettoestablishthemselves CapGeminiSogeti 1,800 inthesystemsintegrationmarketin1992, SiemensNixdorf 1,100 achievehigherrankingsintheproject Digital 1,100 servicesmarket. AndersenConsulting 950 Olivetti 700 Asinthesystemsintegrationmarket,the SernaGroup 550 equipmentvendorsaresteadilyincreasing Finsiel 550 theirpresenceintheprojectservicesmarket. ICL 450 EDS 400 Bull 400 Unisys 300 ThisResearchBulletinisissuedaspartofINPUT’SBusinessIntegrationProgramme—Europe Ifyouhavequestionsorcommentsonthisbulletin,pleasecallyourlocalINPUTorganization orPeterLinesatINPUT,17HillStreet,LondonW1X7B,(+44)714939335. 4 ©1994byINPUT.Reproductionprohibited INPUT Company Profile APublicationfromINPUT’SBusinessIntegrationProgramme-Europe March1994 Hewlett-Packard Establishes an International SAP Practice HPisnowofferingconsultancyservices dominanceofSAPinstallationswithinthe basedaroundleadingthird-partyapplication Germanhomemarket. However,SAPisnow softwareproducts.HPbecamethefirst establishingamajorpresenceoutside equipmentvendortoofferapplication Germany. SAP’sinternationalinstalledbase consultingforSAP’sR/3enterpriseresource grewrapidlyin1993,andinternationalsales planningsystem.ByJanuary1994,HPhad ofthecompany’sproductscontinuetoshow establisheditselfasoneofSAP’sleading muchhighergrowththanthoseinGermany. partnersandhadreceivedordersforSAP projectservicesvaluedat$15million. Exhibit1 HPisplanningtodevelopitscurrent HP’sInvolvementwithSAPR/3 positionasamajorsupplierofSAPR/3 January1994 servicesby: Category Number •Targetingmultinationalorganizations R/3InstallationsWorld-wide 700 •Actingasprimecontractorfora InstallationsonHP comprehensiverangeoforganizational equipment andtechnologicalconsultancyservicesto -World-wide 300 R/3usersinternationally -Germany 150 •ExtendingitsSAPservicescapability R/3Projectsundertaken EstablishedasaLeadingSAP byHP Partner -World-wide 100 Source:SAP-HPCompetenceCentre HP’sinvolvementwithR/3issummarizedin Exhibit1,whichhighlightsthecurrent ©1994byINPUT.Reproductionprohibited. BIPR-E INPUT Company Profile ByJanuary1994,therewereapproximately HPwasthefirstequipmentvendorto 700customerinstallationsofR/3world-wide. establishajointR/3competencecentrewith SThAiPsafingdurietsepxacrltundeerss.R/F3oritnys-tfaloluartpieonrscewnitthoifn cSoAmPp.eHtePncfeorcmeendtrtehiwsitjhoiinntthSeAPS-AHPP rtithuhmeenpsnlleieenamcgdeuisntntthgoeemdsReu/opr3pnilanHipsePptrlaileoclfqaauettiiqipoounmni.sepnCmwtuee,rnrrtemeanftkolriyn,gSHAPP ieSdnseettvpeaetrblenloamitpsbihmeoiernnnag1tl9ac9dRe0d/n.i3ttIricneoapnioaanrbldiWlecairoltmltydpo,oesHrttfPer,neicGnsegentrchomeewnantnriyetssin hasappointedsixhardwarepartners inTokyo,Philadelphia(U.S.), FosterCity includingIBM,Digital,SNI,BullandSun. (U.S.),Feltham(UK),andJohannesburg (SouthAfrica). TargetingMultinationalOrganizations WiththeintroductionofR/3,SAP’spartners lSoAgPophaarstnaelrrefaodryR/a3ppsoeirnvticeeds.HLPogasoapagrltonbearls arebecomingmoreinvolvedinadvisingand areappointedtosafeguardthequalityofR/3 assistingorganizationsinimplementing implementations. SAP’sapplications.Manyoftheinitial customersforR/3aremedium-sized PrimeContractorforOrganizational companiesthatcouldnotjustifytheirown andTechnologicalConsultancy mainframetosupportR/2.HoweverR/3is alsoattractivetomultinationalswhofavour OrganizationsintendingtoimplementR/3 adecentralizedapproachtoenterprise facetwoconsiderablechallengesnamely: resourceplanningsystemsratherthanthe centralizedapproachimposedbyR/2. • theorganizationalissuesofre-shaping theirbusinessprocessesandapplyingR/3 HP’sgoalistoprovidemultinational totheseprocesses organizationswithco-ordinated, internationalR/3projectmanagementand • thetechnologicalissuesinvolvedin consultingservices,andtoestablishan designingandimplementingadistributed internationalSAPpracticethatwilltarget client/serverarchitecture allthemajormarketsforR/3. AlthoughthescopeofHP’sinvolvementinBJ cBaepcaabuilsietyo,fHitPsobwelniemvuelstiitnaistiaonnaalppsruoppproiratte p3riacmtpilcee,meHnPtataiiomnsstvoartiaeksecoonnstihdeerroalbelyofin vendortotargetothermultinationals primecontractorforR/3implementations, requiringtoimplementR/3onamulti-site andtoassistusersinaddressingthisrange basis.HP’sProfessionalServices ofissues.Thecompanyoffersthefollowing Organization(PSO)hasalreadycarriedout servicecomponents: approximatelyadozenimplementationsofR/ 3wheretheimplementationwasofamulti- • applicationandorganizationalconsulting site/multinationalnature.Forexample,HP’s •educationservices PSOhasassistedaleadingGermancar •projectdelivery manufacturerinimplementingR/3inSouth • technologyconsulting. Carolina(U.S.). 2 ©1994byINPUT.Reproductionprohibited.