Computer Integrated Systems Design - Current Conditions

Current Conditions

By the late 1990s annual growth had slowed down, amounting to 22 percent in 1998 and about 13 percent in 1999 and 2000, when industry revenue nearly totaled $88 billion. Although more current Census Bureau data was not available in early 2003, it is likely that growth slowed in 2001 and 2002 amidst a weak economic climate and reduced IT spending in the corporate sector. While traditionally higher than government figures, private sector data indicate the industry's growth rate did slow down in the early 2000s. For example, the June 2002 IT Services Business Report found that U.S. IT service revenues in the system integration category were expected to increase 3 percent in 2002 to $116 billion, and 9 percent in 2003 to $126 billion. According to some reports, many companies were forced to table all but the most critical systems integration projects in 2002 due to budgetary restrictions.

Competitive Environment. The competitive landscape for integrators has changed in recent years. Some smaller firms, for instance, have had an advantage in the market for rapid e-commerce integration, where they may be seen as more flexible, more responsive, possibly more knowledgeable, and better able to meet tight deadlines. Meanwhile, large integrators like EDS and IBM Global Services bring tremendous resources and bargaining power to the table, and have been able to win larger, more complex contracts through their name recognition and stable brand image—even though they sometimes subcontract the actual work to smaller, less-well-known firms. The industry has also seen a wave of mergers and acquisitions, as companies seek the right mix of competencies and market access to best meet new demand.

Enterprise Application Integration. Another important growth driver, especially in the large corporate market, has been the widespread adoption of enterprise applications aimed at unifying data storage and management across broad swaths of corporate activities—from human resources and payroll to manufacturing and logistics. Many also have industry-specific components intended for, say, telecommunications providers or financial services. These applications, offered by vendors like Oracle, PeopleSoft, and SAP, come with many preconfigured functions and tools, but generally require customization and integration for specific users. Thus, systems integrators often sell, install, and customize them for individual clients. In a corporate survey conducted by Accenture Ltd.'s Institute for Strategic Change and reported in the December 2, 2002, issue of Computerworld, 46 percent of respondents acknowledged the use of enterprise application integration (EAI) systems, and 9 percent indicated that they planned to use EAI software within two years.

Web Services. Just as basic point-to-point integration, in which the focus was on enabling communication between two specific systems, gave way to broader EAI frameworks that enabled communication among multiple applications, a simpler, more cost-effective means of systems integration known as Web services was making major waves in the early 2000s. Simply put, Web services involve programming standards like Extensible Markup Language (XML) that allow communication between newer applications and legacy systems—within or between organizations—that were not designed to be co-operable.

Web services will likely impact the systems integration industry in several ways. One impact is potentially negative, since companies can use Web services in-house to achieve integration that once required trained application integrators. This is good news for the corporate sector, given that for every $1 spent on software, companies spend anywhere from $3 to $20 on integration services, based on different estimates.

Given circumstances such as these, many feel that the role of system integrators is changing from a technical one to more of a consultative one, in which the integration of business processes is the primary focus. However, some industry players argued that in the early 2000s Web services still were no match for traditional EAI adaptations, and that the demise of the system integrator was not yet in sight. Indeed, along with security, systems integration was a top priority for many organizations in 2002 and 2003.

Exactly how this will play out remains to be seen. For example, in 2002 some EAI vendors were making the switch from their own systems to those based on Web services, indicating that the two elements may coexist in harmony to some degree. One thing seems certain—Web services are of great interest within the corporate world. According to the Accenture survey cited in Computerworld, 87 percent of respondents revealed that they planned to "experiment with Web services technology for possible application integration uses."