Why Organizations are Choosing Niche System Integrators for Cloud Implementations
The last decade of Cloud adoption has triggered an IT arms race among organizations. At this point, most companies have moved a significant amount of their applications to public Cloud and the hyperscale providers (AWS, Google Cloud, and Microsoft Azure) are reaching new heights of influence in the business world. The conversation is no longer centered around how cheaply companies can scale and manage infrastructure. Instead, it has shifted to how companies can rise above their competition by leveraging Cloud technology to implement additional capabilities.
In this Cloud arms race, companies are pursuing three cumulative objectives:
- The first is IT operational innovation– technology and IT operational changes that do not impact the company’s specific business processes.
- The second is business process innovation– changing the way the business operates in significant ways
- The third is market (product/service) innovation– significantly enhancing the company’s product/service offering for existing customers or enabling entry into new markets.
To realize these objectives in the Cloud, companies are leveraging the expertise of system integrators (SIs). The only question then is this: what kind of system integrator should you partner with to increase your chances of success?
7 Reasons It May Be Time to Think Outside the Large GSI Box
There are many SIs out there for you to choose from, but most of them fall into one of two categories: the large system integrators—also known as global system integrators (GSIs)—like Accenture, Deloitte, and Capgemini or smaller, niche system integrators.
Naturally, large and midsized organizations tend to think that the big system integrators have the recipe for success. After all, these well-known GSIs have prestige—respect based on the perception of their achievements and quality. When it comes to realizing business transformation in the Cloud, however, perception quickly makes way for experience. Rather than go with well-known GSIs, we’re seeing more companies go with smaller, expert SIs. In the blog, we go through 7 reasons why this shift is happening.
1. The Exponential Growth of Innovation
There tends to be an assumption that a big system integrator is going to be the one-stop shop in providing all the answers on your Cloud transformation journey, and it simply isn’t true. No organization or system integrator can be everything to everyone and no skillset can manage all the diverse needs of a Cloud transformation, especially when you consider how fast hyperscalers are rolling out new capabilities.
The hyperscalers are innovating at a pace that has never been seen before and this makes it difficult, if not impossible, to know everything that is going on across all three hyperscalers at a proficient level. Gone are the days when you have everything in one datacenter owned by one provider that handled everything. That plug-and-play simplicity, a sweet spot for GSIs, has been disrupted by the hyperscalers. Companies are beginning to realize this and are engaging with niche players to get the right answers.
2. Divergent Business Models
The business model of GSIs is centered around selling people and time. With hundreds of thousands of people on standby waiting on the next bit of work, the focus of larger system integrators is to utilize as many of their resources as possible by taking control of an entire project and offering everything across the board—even if the allocated team doesn’t have experience with every part of the solution.
Smaller system integrators that operate within a specific niche aren’t selling people and time. They lead with solutions and specialization. For example, if a smaller system integrator focuses exclusively on SAP in the hyperscale Cloud and has developed deep expertise in that domain, it can leverage its knowledge to introduce innovation into the process through automation. In this case, the SI would add as much automation as it can into SAP workloads running in the Cloud because it isn’t focused on keeping an army of consultants and architects busy and billable.
There’s certain affinity companies and consumers have for big brands, but what smaller SIs lack in brand recognition, they make up for with their deep level of expertise in their area of focus. Customers see this difference in experience between niche players and larger SIs during the sales cycle. And when it comes to customized solutions, the niche players tend to be able to rapidly spot the problems customers are likely to face and come up with solutions very quickly.
Smaller niche providers may have a relatively narrow scope of services (SAP on Hyperscale Cloud is one example) but have gone deep and have accumulated many years of experience in their respective space. This gives them an edge over the larger GSIs whose workforce does not typically have that depth of expertise. In my experience, this difference between them and GSIs is usually evident from the initial conversation and is something that should not be ignored when undertaking a critical Cloud transformation project.
4. Thought Leadership
Part of being an expert in any field or area of focus is the ability to push boundaries. This goes back to experience and being a master rather than a jack of all trades. Niche players tend to raise the bar on customer expectations. As an example, in one SAP on hyperscale Cloud implementation I was involved in, the customer asked for an improved Recovery solution over their on-premises target to 15 min RPO. We explained to the CIO that they should really be asking us for an RPO of 0 mins on Cloud. Up until that point, the incumbent never offered to provide higher levels of service at no extra cost.
This limitation in thought leadership on the part of GSIs goes back to their business model. They have strength in numbers but to effectively utilize their large workforce, standardization is a necessity. In an environment where hyperscalers are driving innovation at a rapid pace, this strength turns into a weakness because the idea of going outside the box would upset the standardization that is needed to effectively deploy and manage a large workforce. Smaller Sis do not have this restriction and can be more nimble, making them better equipped to stay on the cutting edge.
To realize superior performance with Cloud technology, organizations, providers, and system integrators need to become much more collaborative than ever before. The kind of collaboration needed involves mutual flexibility, trust, reciprocity, risk sharing and investment in resources and time. When it comes to flexibility, a key ingredient of effective collaboration, GSIs tend to be less flexible than niche players.
GSIs have a process and model that works very well and standardized training that teaches everyone to do things in the same way. This has its benefits, but when it comes to areas that need a little bit more customization, a necessity when realizing new capabilities through Cloud technology, GSIs often don’t have the flexibility to adapt. Without flexibility, collaboration becomes more difficult and the chances of realizing your desired business outcomes decrease.
Smaller system integrators on the other hand tend to be more flexible and it’s because of some of the points previously mentioned. They are interested in selling solutions not people, so they tend to be flexible when it comes to implementing the right solution for each customer scenario. The experience of niche players also plays a role in their flexibility. Having seen so many customer scenarios within their specialization, they can draw upon their experience to facilitate better collaboration.
When it comes to cost there are a couple of factors to consider. The first is unnecessary costs. While most GSIs have a large offshore presence to reduce their blended rate card, they still tend to have a higher price tag on complex Cloud projects. This is because they need to add contingency to cover the risk of working on technology with a less skilled team. Additionally, having more people on a team tends to increase overhead costs too. Expert SIs, on the other hand, know their area of specialization well so they can give a fair price without the need to add unnecessary contingency.
The second is funding. SIs who are focused on hyperscalers intimately, understand how to secure funding from hyperscalers and their partners to cover much of the costs to do projects such as Cloud migrations. This can often lower the costs of the smaller SI, leading to a much more compelling cost model.
Historically, companies defaulted to a global Integrator brand to offload the risk associated with complex technology projects. However, we increasingly see situations where GSIs hit problems delivering Cloud projects and mitigating the subsequent risks.
In these situations, a specialist SI is called in by either the customer, Hyperscaler, or even the GSI themselves, to rescue the project. Customers are beginning to recognize that specialists offer lower risk when it comes to Cloud and newer technologies.
So, what does this mean for your Cloud transformation? Does it mean you should avoid the big GSIs altogether? Not necessarily. You always want to evaluate your options and look at the strengths of GSIs and smaller SIs to see which type of system integrator is best equipped to help you realize your business objectives. That said, the moral of the story here is this: don’t be afraid to think outside of the big GSI box. It might make sense to bet on a smaller service provider if their unique approach to Cloud migration and operation meshes better with your organization’s needs. Or it might make sense to bet on both. I have seen many successful collaborations between GSIs and niche providers that delivered the best of both worlds.