To the Cloud – Vertical Integration

Business transformation changes the game for systems integrators

By Lou Antonucci

The growth of the integrated enterprise depends on connecting disparate systems to make them work for today’s dynamic business environment, and innovative systems integrators (SIs) are fast becoming the catalyst of this growth. What’s driving this new role of the SI is the cloud, which is changing the business model of systems integrators everywhere. Gone are the days of one-off integrations and complex on-premises implementations. While SIs traditionally earned up to 75 percent of their revenue from complex software customization and implementation, the cloud has introduced software that is simple to deploy and maintain without the same expectations of deep customization.

This marks the death of a long-time revenue stream for SIs, but the cloud has also introduced a new, more lucrative revenue model. Rather than just earning revenue through constant labor-intensive customization, SIs now can create pre-built, industry-specific solutions that deliver substantial, repeatable revenue with minimal ongoing labor. Leading SIs are unlocking a new revenue stream from the cloud through fully baked, integrated offerings that require marginal customization to drive added value from application sales with a vertical focus.

Further, these pre-packaged solutions help up-level the SI’s role as a long-term collaborator helping clients tackle business challenges in real time through proven, business-specific solutions for a more agile business. However, this up-leveling requires that SIs understand the shifting power dynamic in businesses. They also now need to learn and follow a few new tenants of integration and budgeting in the cloud.

SIs must adapt to the emerging cloud reality where line of business (LOB) leaders have quick access to new applications on demand, without the need for IT approval or intervention. This maverick adoption creates challenges for IT and opportunities for SIs – as LOB users adopt their preferred cloud solutions, they create insulated silos of cloud applications. While integration projects with one or two massive systems may be a thing of the past, this new isolated cloud enterprise gives SIs the opportunity to bring cloud islands into an integrated, responsive and agile technology hub for the business. And with this opportunity, SIs must be more prepared than ever with pre-built integrations to many cloud apps so they can quickly step in and save the day while freeing up IT’s time to focus on a progressive cloud technology roadmap.

SIs must focus on four key strategies to capitalize on the transformation toward the cloud-based integrated enterprise:

  1. Rebrand from an IT shop to a business solution provider: With business users in command of cloud apps, successful SIs will cater to both these new users and IT by providing pre-packaged, easily configurable solutions specific to the needs of customers and their businesses. By providing integrated solutions out of the box, business users get the easy and flexible functionality they need without causing an integration headache for IT.

In the cloud age, custom code gives way to flexible solution configurations that enable businesses to nimbly adjust software and systems integration to their needs in a matter of days, not months – the SIs that can deliver these solutions will be the winners.

  1. Invest in new business processes: As the industry is migrating away from big, $100+MM implementations toward iterative, agile implementations, SIs are accruing and productizing their deep understanding of business processes. In their new role as the partner to both business and IT leaders, the best SIs will package their unique knowledge and best practices to form the foundation for sustainable, long-term growth.

This comes back to pre-packaged solutions; SIs need to work with businesses in a vertical to understand how their business processes run, and determine how integrated solutions can improve those processes. After completing this step, SIs will be equipped to help multiple businesses with similar, highly industry-specific needs to invest in the right tailored solution that can be implemented to minimize costs and maximize ongoing value.

  1. Adjust to changing fee structures: The cloud has forced new realities on the consulting business model – moving it away from large, upfront fees to smaller, recurring revenues. Because sky-high IT budgets and never-ending IT implementations are a thing of the past, growth for progressive SIs is increasingly coming from selling configurable solutions that address specific cloud-to-cloud or cloud-to-premises initiatives. The new fee structure involves learning how to build a packaged cloud solution once, and then offering it to many for a broader base of recurring revenue rather than focusing on a few megaprojects.
  2. Empower IT to innovate: Forrester found that only 28 percent of the IT budget goes toward innovative development of new applications to drive revenue and differentiate the business. IT is stuck in the past, where 72 percent of the budget is spent on keeping the lights on – this means that SIs can provide value from multiple angles. First, by providing IT with pre-packaged cloud solutions, SIs can allow IT to spend less time maintaining and upgrading these systems, as the SI will handle those issues in-house. Second, the SI can work with IT to understand its needs and cater future solutions to meet those needs even more closely, creating repeat customers for SIs and empowering IT to up-level from janitorial status to corporate change agents.

By serving up pre-packaged solutions that address specific business problems and working closely with companies to address these problems, SIs are becoming true long-term business partners for their clients. The best SIs are embracing rather than fighting the cloud, which involves changing the way they implement, converse and consult with clients.

Ultimately, the cloud is allowing SIs to become a more integral part of client strategy and help drive the move toward the integrated enterprise.

Lou Antonucci is vice president of sales at Scribe Software


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