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INPUT SystemsIntegrationProgram ExecutiveResearchBulletins me Vol. No.1 II.. 21.. NIeBtMwoArppklIinctaetgiroantiSoo—nl—utiAonKseLyiCneomopfoBnuesninteosfsSystemsIntegration I. 3. ElectronicImaging VisionsofFutureInformationSystems I. 4. LANDevelopmentandManagement n. 1. SystemsIntegrationMarketForecast n. 2. GroupeBullSystemsIntegrationStrategy n. 3. MarketingSystemsIntegration n. 4. SystemIntegrationTechnologyTrends n. 5. SystemsIntegration: Subcon—tractingtoClientIntegrators n. 6. SystemsIntegrationMarket 1991-1996 n. 7. SystemsManagementPrioritiesandDirections — n. 8. SystemsIntegration AnEvolvingIndu—stry * ii. 9. StateGovernmentInformationSystems EBTtoTheRescue -in. 1. SubcontractingtoClientSystemIntegrators t/ 3oo/<~ -in. 2. VendorsLearnformSuccessful—IntegrationContracts -m. 3. SuccessfulSystemsIntegrators TelltheWorld -hi. 4. SIUsersMatchVendorProgramManagementTechniques -hi. 5. CourtsIntegration: DevelopingaBusinessPartnershipistheKeystone toSuccess 6. SoftwareFactoryDrivesSuccessfulSIProgram 7. TheLaggingEconomyHitsSIGrowth StSfP-10/27/92 9 INPUT SystemsIntegrationProgram ExecutiveResearchBulletins Vol. No. Title IV. 1. TimetoChange—IndustryTerminology? IV. 2. Re-engineering AChangeinProcesses—andaChangeforSIVendors IV. 3. BusinessProcessRe-engineering(BPR) NotforAllVendors IV. 4. WhereIstheComputer? — IV. 5. InSystemsIntegration BestValueRules SIP-5/24/93 t 9 i yi*i !»' !*’ April1992 INPUT Vol.Ill,No.1 SIP Routeto: Research Bulletin APublicationfromINPUT’SSystemsIntegrationProgram Subcontracting to Client Systems Integrators Theclient-managedsystemsintegrationmarket ReasonsforOutsourcing iswidelyconsideredtobelargerthanthatof vendor-managedprojects. INPUTresearch Vendorswillbesoughtbyclientintegratorsto suggeststhatclientexpendituresforinternally participateintheirprojectsforavarietyof managedprojectswasthreetimesthe$4.4 reasons,asillustratedinExhibit1. billionspentforvendorprojectsin1991. Under Respondentscloselyrankedthefirstthree,with favorableconditionsthissecondarymarket emphasisonmaintainingorrestoring couldgrowatacompoundannualrateof15%. implementationschedules. Thisexhibitalso comparescurrentandfutureprojects. Despitethisattention-gettinggrowth,INPUT’S surveyindicatedthatanaverageofonly19%of Respondentscitedstaffsupplementationasa theinternallymanagedprojectexpendituresgo primaryreasonforsubcontracting. Acquisition tooutsidevendors. ofvendor-providedskillsalsoacceleratesthe implementationofaproject. Note,however, Clientintegratorscontinuetobeskepticalabout thattheintervieweesexpectgreaterimportance theuseofvendors,andreluctanttogivecontrol tobegiventostaffsupplementsandadditional ofcriticalsystemchangestooutsiders. Vendors skillsfromvendorsonfutureprojects. havenotconvincedclientstoanysignificant Implementationaccelerationisseenasless extentthattheycanprovidebetteralternatives. importantforthefuture,onthepresumption Andwhentheydo,vendorsaregenerally thatschedulingwillimprovewithexperience. viewedasbeingmoreexpensive,exceptwhen skillsprovidedarenotavailableinternally. InternalSImanagers,however,donotgenerally considertheuseofsubcontractorstobecost Becauseclientintegratorswanttominimize effective. Thisismarkedlydifferentfromthose subcontractingrisks,theyprefervendorswith whooutsourcetheirbusinessinformation whomtheyhavepriorexperience,unlessthey processing. Itissurprisingtoseethatlower neednewertechnologyordifferentapplications laborcostsareexpectedtobecomemore experience. Atbest,theselectionprocessis importantinfutureprojects. basedonsubjectiveassessmentofvendor capability. £>1992byINPUT.Reproductionprohibited. RESEARCHBULLETIN MostSIprojects Exhibit1 requiretheacquisition ofvaryingamountsof ComparisonofReasonsforOutsourcing equipmentand Currentvs.FutureProjects softwareproducts, generallyfromoutside suppliers,without SupplementStaff 4.0 regardforwho managestheprojects. Emphasiswasplaced 3.8 onprofessional AcquireSkills servicestasksin examiningthemost likelykindsofactivity. ImpleAmcecnetlaetriaotne BSsasrassag^ss^^sBssssssa®^®®^3^*.^6^®4.3 Trehsepornelsaetsivfeornuthmebmeorroef ^ significanttasksare 11 Now displayedinExhibit2. LowerLaborCosts g-4 Future Softwaredevelopment i 1 i L, j leadsbecauseit 0 1 2 3 4 5 frequentlyinvolves specialskillsnot ImportanceRating readilyavailablein Rating: 1=Low,5=High Source: INPUT mostorganizations,and atalevellesslikelyto beneededafter implementationis completed. Equipmentinstallationisneeded ComponentExpenditure wheregeographicdispersionofdistributed Distribution systemsisinvolved,andusersarenotlikelyto beabletoperformthefunctions. Installationof Client- Vendor- LANsandclient/serversystemswereidentified managed managed assubsetsneedingoutsidespecialists. Component (Percent) (Percent) Currently,thoseinterviewedgenerallydidnot ProfessionalServices 55 53 subcontractprojectmanagementactivities. The Equipment 30 36 exceptionnowisforcomplexreplacement SoftwareProducts —15 8 systems. Somedidindicateconsiderationof OtherServices 3 vendor-managersfornewertechnologies. INPUT S199?by-INPUT npprnrinr-tinnpmhihiloH — RESEARCHBULLETIN andsoftware Exhibit2 productsvendors PotentialTaskstoSubcontract gainstrongmarket sharesthrough longstandingclient relationships. Application knowledgeand specialtechnical skillshavehigh secondaryappeal. Vendorswith experienceare soughtbytheclient integratorwith majorintegration challenges. Industry knowledgedoesnot appeartobeas criticaltoin-house managerswhoknow theirbusinessbest andrelyonvendors onlyforspecialized, oftenindustry- Source: INPUT independentskills. — Themostfrequently Somesupportelements forfeasibilitystudies, mentionedcriterioninthe“other”categoryis equipmentselectionandacceptancetesting training,whichmightbeproduct-specific,or areemployedwherethecurrentworkloadis forspecialskillsonPCs,workstationsordata high. bases. SubcontractorSelectionCriteria ThelastcriterionwasconsistentwithI—NPUT’S findingsonthereasonsforoutsourcing costis Subcontractingsupporttoclientintegratorsis nothighlyrated. Theclientintegratorismore selectedforavarietyofreasons,mostofwhich concernedwithcompletingtheprojectthan i aresubjectivelyassessed. Two-thirdsofthose doingitattheleastpossiblecost. interviewedsaidthattheprocurementwas yfr- basedoneitherpreviousexperienceoftheIS SubcontractingVendor > departmentorrecommendationsoftheuser Characteristics department. Exhibit3showstheratingsofthe criteriamostoftenused. Onemeasureofvendorparticipationinthis marketistheportionofSIrevenuesgenerated Exceptforspecialtechnicalskills,thefirstfour inthesecondarymarket. Whilesomevendors criteriaclearlyillustratetherelativeimportance donotaggressivelypursuesecondary offamiliarityoftheclientwiththepotential opportunities,othersconsidercontractsinthis vendor. Thisexplainswhycertainequipment ©1992byINPUT.Reproductionprohibited. INPUT- RESEARCHBULLETIN Theunlisted categoryis equipment manufacturers,who generallyleave clientintegrationto VARsortheother vendortypes. IBM andDECareprime examplesof vendorswhohave restructuredto addressthegamut ofsystems integrationand outsourcing activities,along withawiderrange ofotherinformation servicesactivities. Thereisnowayat thistimetoseparate subcontracting revenuesfromthe wholeoftheirSI activities. Full-service vendors,likeCSC, EDSandPRC,do notparticipate aggressivelyinthis secondarymarket. Theywillaccept engagementswhere theyanticipate marketanimportantpartoftheirtotalsystems futureprospectivebusiness. Thismarket integrationrevenue. representslessthan5%oftheirrevenue,so theydonottrackthesubcontractingseparately. Thereisinsufficientdatatoidentifythemarket leadersbecauseofdefinitionalproblemsand The“Big6”firmsgenerallyhavealarger thewiderrangeofvendorsparticipatinginthe consultingandstrategycomponentthandofull- market. Itisuseful,therefore,toclassifythem servicevendors. Respondentsindicatedthat inmoretraditionalsuppliercategoriesinorder morethan50%oftheirSIbusinessinvolves tolookatstrategiesandpotentialrevenue closeworkwithclients,sothatmuchofthen- contributionfromthesecondarymarket. revenueisinthesecondarymarket. Atleast Exhibit4listsallbutoneoftheconventional onesaidthattheclientisgenerallyresponsible vendortypesandrevenuerangesthatshow forprojectmanagement. significantvariabilityofresponses. 4 ©1992byINPUT.Reproductionprohibited. - INPUT RESEARCHBULLETIN vendors. Thesecondclass Exhibit4 usuallyhasabaseof knowledgeorasoftware VendorRevenueContribution packagespecifictoan industryorcross-industry VendorType RevenueRange function. Policy (Percent) ManagementSystems, InformationAssociatesand Fullservice 1 -2 DecisionFocusaretypicalof Big6 60-80 thisclass. Otherprofessionalservices 10-30 The“other”category Platform/systemsspecialists 10-15 ilinkceluFdleusorenDgainnieeelrianngdfirms Applicationsspecialists 20-40 Harnischfeger,andvendor Other 20-30 cPaorntsnoerrtsiaalnidkethUe.S“.ChCiocnangeoct Six.” Thelatterexemplifyan Source: INPUT emergingtrendofalliances betweensmaller,regionally basedvendors. Othervendorsareprimarilycustomsoftware developersthatarebeingaskedtotakeonSI Conclusions tasksbecauseofclientorganizationfamiliarity. ExamplesincludeTSC,KeaneAssociates, Clientsstillwanttoexercisecontrol,butneed BusinessSystemsGroupandLanteCorp.,allof technicalskillstosatisfythedemandsof whichhavebecomemoreactiveinthe complexprojects. Althoughsignificant secondarymarket. potentialisimplied,themarketsizeand specificsarenotwelldefined. Wheretheneed Technicalspecialistsaresmallervendorswith tomeetschedulesoracquireexpertassistance establishednichesintheSImarketbasedon isurgent,usersarenotcostsensitive. implementationofparticularplatformsor industryapplications. Theyrelyontheir Vendorscancapitalizeontechnicalnichesand reputationintheusercommunitytodevelop specializedindustryexperience. Expansionto newbusiness. DickensDataSystems,Network nationalcoverageaswellasawiderrangeof Management,Inc.andEvemetareexamplesof availableservicescancomethroughgrowthor platform/systemsspecialists. Someofthese effectivealliances. Buildingonexistingclient haveoraredevelopingallianceswithlargerSI relationshipscontinuestobeastrongstrategy. ThisResearchBulletinisissuedaspartofINPUTSSystemsIntegrationProgram fortheinformationservicesindustry.Ifyouhavequestionsorcommentsonthisbulletin, pleasecallyourlocalINPUTorganizationorAlanNilsenatINPUT, 1953GallowsRoad,Suite560,Vienna,VA22182,Telephone(703)847-6870,Fax(703)847-6872. e199?byINPUT.Reproductionprohibited. & INPUT- 1 RESEARCHBULLETIN About INPUT INPUTprovidesplanninginformation, ParticularareasofexpertiseincludeCASE analysis,andrecommendationsforthe analysis,infomiationsystemsplanning,and informationtechnologyindustries. Through outsourcing. marketresearch,technologyforecasting,and competitiveanalysis,INPUTsupportsclient ManyofINPUT’Sprofessionalstaff managementinmakinginformeddecisions. membershavemorethan20years’experiencein theirareasofspecialization. Mosthaveheld Subscriptionservices,proprietaryresearch/ seniormanagementpositionsinoperations, consulting,merger/acquisitionassistance,and marketing,orplanning. Thisexpertiseenables multiclientstudiesareprovidedtousersand INPUTtosupplypracticalsolutionstocomplex vendorsofinformationsystemsandservices. businessproblems. INPUTspecializesinthesoftwareandservices industrywhichincludessoftwareproducts, Formedasaprivatelyheldcorporationin systemsoperations,processingservices,network 1974,INPUThasbecomealeadinginternational services,systemsintegration,professional researchandconsultingFirm. Clientsinclude services,turnkeysystems,andcustomerservices. morethan100oftheworld’slargestandmost technicallyadvancedcompanies. INPUTOFFICES NorthAmerica International SanFrancisco London 1280VillaStreet INPUTLTD. MountainView,CA94041-1194 PiccadillyHouse Tel.(415)961-3300 Fax(415)961-3966 33/37RegentStreet LondonSW1Y4NF,England NewYork Tel.(071)493-9335 Fax(071)629-0179 AtriumatGlenpointe 400FrankW.BurrBlvd. Paris Teaneck,NJ07666 INPUTSARL Tel.(201)801-0050 Fax(201)801-044 24,avenueduRecteurPoincare 75016Paris,France WIaNsPhUiTn,gtIoNnC,.D.C. Tel.(1)42774277 Fax(1)42778582 1953GallowsRoad,Suite560 Frankfurt Vienna,VA22182 INPUTLTD. Tel.(703)847-6870 Fax(703)847-6872 Sudetenstrasse9 W-6306Langgons-Niederkleen,Germany Tel.06447-7229 Fax06447-7327 Tokyo INPUTKK SaidaBuilding,4-6 KandaSakuma-cho,Chiyoda-ku Tokyo101,Japan Tel.(03)3864-0531 Fax(03)3864-4114 - INPUT 6 ©1992byINPUT.Reproductionprohibited.