Computer Integrated Systems Design - Organization and Structure

Organization and Structure

Once a company identifies the specific design, operational, or management functions it wants its information system to perform—and the level of that performance—a systems integrator creates a system to meet those objectives. Systems integration services combine expertise in hardware, software, and communications to deliver complete information systems, including their design and development, the management of vendor contracts, the purchase of equipment and its technical integration, the implementation of the system, and any training necessary for the company to run its new or modified system.

The Information Technology Association of America, a trade group for the computer hardware and services industries, used the following analogy to explain systems integration: "In construction industry terms, the systems integrator would compare to the general contractor who interfaces with the electrician, the plumber, the mason, and any other trades that are necessary for the job, and who may undertake part of the task (for example, the role of architect). In systems integration, this general or 'prime' contractor responsibility may be assumed by an outside vendor or by the user, who may also wish to provide some of the core skills."

Integration services are, in practice, commonly offered as part of a broader package of services, many of which are not considered integration. These activities range from consulting to application development to system management. Indeed, few, if any, large systems integrators practice integration exclusively.

Like most computer service industries, systems integration has attracted many entrepreneurs. In the past, relatively little capital was needed, compared to the computer hardware industry. Agreements with equipment manufacturers for the products to be placed in the system are made on a current-period basis. Cash outlays increase as contracts increase; there is no need to manufacture anything in anticipation of growth. The majority of the investment is made in highly specialized staff with experience in several complex fields—systems and applications software, hardware, telecommunications products, and networks. In addition, experts are needed to oversee the entire process and work with customers. When selling a service, marketing also proves an important component in the structure of the business.

Systems integration companies generally grow geographically at first, simply providing their service to a wider range of customers. Because profits do not need to be invested in increased manufacturing or in research and development, systems integration companies generate a positive cash flow more easily than manufacturers. Cash flow makes acquisitions a common method of expansion, particularly into new service fields. Many systems integration companies have expanded into other computer or business services in order to avoid becoming overly dependent on one service, which might allow a competitor to undercut them or new products or regulations to jeopardize their business.

Like most computer service industries, systems integration is offered by many small, entrepreneurial companies. The majority are privately owned. Still, larger integrators account for much of the industry's revenue. With the increased popularity of systems integration in the 1990s, a strong middle tier of companies with revenues between $50 and $100 million developed. A few companies offering systems integration generated $500 million to more than $1 billion in revenues.

Systems integration companies generally cater to either federal customers or commercial customers. Large systems integration firms maintain separate departments for the two types of customers. This division was common because soliciting contracts differs markedly between the two sectors, and the projects themselves were often fulfilled differently.

Federal regulations dictated the bidding process for government agencies. Government contracts are generally longer term, whereas commercial ones might be either long or short term and tend to be more dynamic. Government agencies frequently contract with systems integrators in order to avoid lengthy procurement cycles and still keep up with technological advances. A systems integrator may be hired to design and buy a whole system, so that no competitive bidding is required for each separate component of the network or system. The contract might also stipulate that the systems integrator will update the system as necessary to meet the agency's functional specifications. Recent revisions in federal procurement policies, however, have made government contracts more like commercial ones in some respects.

Commercial companies contract with systems integrators because they see a competitive advantage. For instance, incorporating new technologies could improve their efficiency, save them money in the long run, or help them match their competitors.