Software as a Service and the End of the Systems Integrator

Wednesday Oct 3rd 2007 by Joshua Greenbaum
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The bloated implementation projects – the ones that cost anywhere from two to ten times the software license cost – are clearly on the way out. And none too soon.

If software as a service takes hold in a big way, it will spell the beginning of the end of what has become in many cases a necessary evil that the world of enterprise software may be finally able to do without: the systems integrators and the high-priced, and failure-prone, implementation projects that have been their calling card since the early 1990s.

It will be, for many, the end of a error that has too often wrongly cast software vendors in the role of evil perpetrators of bad technology, while sucking billions of dollars out of IT budgets and frustrating attempts at deriving cost-effective value out of enterprise software. In that role, the SIs won’t be missed by anyone. But their exit from the enterprise applications scene, or a least a diminution of their role, will also be the end of a major channel for big software vendors like SAP and Oracle, and a major source of revenue for everyone’s favorite coopetitor: IBM.

In other words, SaaS promises to upend one of the time-honored fixtures of the enterprise software world, and do so in a way that will be highly disruptive for the vendors. But as disruptive as it might be for vendors, the demise of the SIs would spell a great day for the end-user community. As long as SaaS is there to take their place.

Don’t get me wrong, we will still need the expertise in integration and customization that only SIs can bring to the table. With vendor products still more generic than specialized, the added competitive edge that customization can bring will still require some intervention on the part of SIs. But the classic big implementation project – the ones that cost anywhere from two to ten times the software license cost – are clearly on the way out. And none too soon, in my book.

The fact is that the money trail that leads to these big SIs is so deep in hooey that you need hip waders to sort out legitimate costs from padded expenses. This is where the cost overrun, scope creep, and the school bus syndrome (where an army of very junior programmers show up –hence the school bus metaphor – to take on the work that the customer had assumed would be done by senior, experienced SI employees) all became firmly rooted in the day-to-day frustrations of CIOs, CEO, and the few honest vendor executives who actually gave a hoot about how these so-called partners were mucking things up in the customer base.

What is ironic about the whole mess is how laissez-faire – laissez screw-up, really – most vendors have been about what SIs have been up to lo these many years. This despite the fact that every ERP failure lands the vendor’s name in the headlines, while the real culprit is the implementation partner’s mismanagement, greed, and incompetence (often in cahoots with IT and business management at the customer site, to give bad credit its due.)

Next page: Am I being too harsh?

As someone who has reviewed dozens of failures over the years, it’s clear that the times in which bad software killed a project are virtually non-existent. What’s more common is the projects were poorly run, that specifications weren’t translated in to a workable system, go-live took place before the data transfer was verified and the users trained: All of which gave the appearance that the main goal of the SI was to latch on to the client and suck as much revenue out of the project as possible, while hopefully leaving things messed up enough to guarantee the project extensions and modifications that could turn the project into an annuity for the SI.

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Am I being too harsh? Even when things have gone remarkably well, and the majority of project have been successful, the cost burden of the traditional SI implementation has hampered attempts to get total cost of ownership under control and deliver a genuine return on investment. Again, this isn’t just the SI’s fault, the vendors have been colluding with them along these lines for years. To the mutual benefit of all. But if you look at the money pot that has flowed into enterprise software over the years, too much, way too much, has ended up with the SIs – certainly with respect to the value they have been able to deliver.

So here’s to SaaS and its upending of one of the worst things about enterprise software. Marc Benioff of Salesforce.com has definitely exaggerated when he talks about SaaS representing the end of software. But SaaS is definitely heralding the end of the SI, at least with respect to bloated projects that fail to deliver anything but excessive costs. Their demise will be a good thing, even if it means that the vendors have to find a new channel for selling high-end projects to big companies. It’s time for the industry to move beyond these issues, and I for one won’t miss those over-priced implementations one little bit.

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