Where Integration Is Heading

In early October, CRN held a roundtable meeting with a trio of systems integrators, including New York-based boutique firm Intrasphere; SBI.enteris, a Warren-N.J.-based midsize powerhouse in the manufacturing vertical; and New York-based global powerhouse Accenture. Bob Suh, partner with Accenture; Marie Rielly, client vice president at SBI.enteris; and Woo Song, chairman of Intrasphere, gave their perspective on such topics as Sarbanes-Oxley, offshore outsourcing and building global delivery capabilities. Here are excerpts of the discussion:

CRN: If you had to do a general state of the integration market overview, where would you see things going?

BOB SUH, ACCENTURE: It's hard to generalize. I think that we're seeing still quite a bit of emphasis on productivity and quick returns, and that's pretty tough to come by after three years of cost-cutting and with growth in investments actually decreasing and head counts down. So we're still seeing a lot of emphasis on--[now that] we've taken the easy stuff off the table--[going] after some of the more difficult things that are curbing our productivity potential. If we want to spend any more, we're going to have to find it inside our costs and reallocate it. So, we're still seeing quite a bit of that, interestingly, on anything outside Sarbanes-Oxley and security. That's actually been given clearance and doesn't have to have the ROI hurdle.

CRN: How much piggybacking is there off Sarbanes-Oxley or security?

SUH: I don't think there's enough of it, actually. I think there's a lot of focus on how we can do the audit, what we are going to say about our systems and procedures. There's a lot of focus on data. Our storage partners are doing great, and it's not decisions for strategic data. It's being used so that if someone asks in a board meeting, 'Do you know where all the data is, and can you retrieve the e-mails?', the answer is 'yes'.

WOO SONG, INTRASPHERE: I would agree with Bob that Sarbanes-Oxley is driving new business. I think that what's happening is that most companies are struggling to meet with Section 404, which has a deadline of Nov. 15 and really involves policies and procedures. What's happening is that past that, hopefully there is going to be a wave of re-engineering and new systems building related to SOX.

MARIE RIELLY, SBI.ENTERIS: Some clients are starting to ask, 'Great, we're compliant. How do we make sure we stay that way?' This isn't a onetime deal where we just check the box and we're all done. The business changes on a regular basis. You start new initiatives, you start new offerings, there are different flows of revenue over time. What do we do differently, and how do we keep up with it? That's where I think some of the larger offerings--if we were using information better and could get clients to see the bigger picture--are going. They're just starting to realize, 'OK, if we really log this and start to use the tools in a more intelligent way, we can not only be compliant now, but we also can make sure we stay that way.'

CRN: Do you think those projects will convert into reality in 2005?

RIELLY: The first thing they have to do is get past the minimum bar, and that's what they're trying to do. They're just trying to clear the first round of the high jump.

SUH: We did an adoption rate survey of technologies, and virtualized storage technologies were absolutely at the top of the list. We did a very deliberate study, not just No. 1 or last quarter or whatever. We asked companies, 'Are you piloting the technologies? Are you reading about it or committing a major part of your business to it?'

CRN: What's the next wave underneath that?

RIELLY: One of the things that we're just starting to see is people really looking at how to align their strategies. They have all this information. Now they're asking, 'What do we do with it?' How do we say, 'OK, this is where we're going,' and get actively moving in that direction? And that's where we're starting to see some things coming in that piggyback a bit off Sarbanes-Oxley. The executive dashboards and balanced scorecards are becoming more common, much more requested items. We're seeing them layered. And that's the way to drive change, where each level of the business has a different level of detail and different items that are measured so that it all rolls up. And that's where having the information and then starting to pull it together makes things different in terms of how the organization operates and the control and accountabilities in the organization.

CRN: What will the impact of Web services be on the integration business? Some predict that it will decrease the need for integration.

SONG: Probably the same people who predicted the death of the mainframe. I started my career maintaining other people's Cobol programs. Then we migrated to client/server and rapid development tools and CASE tools. I think CASE tools come to mind where they would sort of let you do it on your own. ... With Web services, one of the primary things it will bring is a standard way for two completely different systems to talk to each other. But that doesn't mean you don't need smart people to make sure that that helps in the most efficient manner. I think a lot of the byproducts of the scorecard and dashboard initiatives are that companies are looking to build data warehouses. They need to put the data together and process it in a way that generates meaningful information that can be perceived by these dashboards. One of the ways in which you can get that done now is through middleware and Web services, using that to connect all the systems.

SUH: There is no question that customers want faster integrations, less reliance on anything or anyone, more reliability and ease of implementation. The raging bubble, high-PE [price-earnings ratio] era forced many companies to issue products before they were ready for prime time. That just became the industry norm, which is not accepted anymore. So I would say that the take-up on [service-oriented architecture] is slower than some people would like, but there's an active interest in it because it represents flexibility, productivity.

CRN: Sarbanes-Oxley will get customers to have some discipline around data that they never had in years past. What other projects come along behind that, since the data is cleaner and more accessible?

SUH: I think that you definitely see an emphasis on, 'The pipes are in. Let's increase the water pressure.' Let's start delivering real valuable information. We actually are very bullish on business intelligence, content management. Not the 1980s 'throw it all in a data warehouse' and by the time we get it all merged together, it's too old to do anything with. But real creative and interesting business-intelligence content. We call it information management in our firm. And we think that information management is something that people are going to be looking at. They're not going to be viewing it as a five-year journey. It's putting another tap in the well of an existing investment.

RIELLY: One of the things we've seen is this combination of all the things that you've been talking about that affects the clients. Often when large corporations have spread out--and even when a medium-size organization has spread out--what you find is that people aren't always talking about the same thing when they think they are. And when you start to do some of the data warehouse scenarios, the large data-cleansing things, you start to realize that when this person is talking about something as simple as how or when you measure a sale. And getting everyone to talk the same the language and store data in a similar way and mean the same thing when they are using a term is a pretty significant effort in itself. It has to be tied in with the technology that underlies all of this, whether it's the data warehouse all the way to the Web services that bring things through to the desktop.

SONG: Regarding your earlier question about what types of products are selling. I think Sarbanes-Oxley has a similar effect as Y2K did on our industry. People used Y2K as an excuse to re-engineer their systems, to allow these systems to get off the mainframes. You could have fixed the data problem very easily, and I know because I have done some of this work myself. IT managers decided it was time to change things. So similar things are happening now and will continue to happen.

CRN: Some of the offshore companies seem to want to partner with integrators. How do you view them?

SONG: I've been approached by so many--mostly Indian firms--who want to acquire the company. And I think they are realizing that they need a U.S. presence. They cannot survive without it. Conversely, companies or any others in this space, for that matter, cannot survive without a lower-cost component. Whether you choose to call it offshore or global delivery, I don't think it really matters. I think there is tremendous price pressure in IT every day. We just bid on a very small project. We bid $200,000, and then we lowered the price to $165,000. We lost out to a company that bid $100,000. There is no way that they can make money. Now this is a small project example, but we have similar examples of larger engagements where we just chose not to go that low. Some of these may be won by an offshore company, and others are not. Nevertheless, there is price pressure, and I think the only way to deal with it is [through] a global work force so you can shift different cost resources depending on the nature of the project.

CRN: Are there hidden costs associated with that?

RIELLY: We certainly have heard back from some clients that they didn't think through how detailed the requirements needed to be. That cost them a couple of additional development iterations. When you think about the communication difficulties half a world away. ... One of the things that our clients seem to have come to is that the initial builds don't seem to be working well for them. But the maintenance projects seem to be working.

SONG: Most clients are not in the IT or systems business. They have no business setting up their offshore centers and even managing their own IT departments here. They should be hiring an Accenture, SBI or Intrasphere to manage that for them. So the model that we're pitching now is a collaborative one, where they give the project to us here, on shore, at the client site. Let us stay up all night managing the Indian resources.

CRN: So what economics is this changing?

SUH: We have over 40 delivery centers in Asia, North America, South America--everywhere in the world. Eastern Europe and China. We are very big believers in global delivery. It's not cheap labor, and we don't actually think from a technology perspective it's one lost job and one gained job. There's actually a shortage of technology specialists. And our clients raise it as an issue, and they work with people like us to retain that expertise and that continuity with service providers that can deliver a bench.

SONG: We decided that to go out on our own was the best way for us, so we built an office in New Delhi [India]. For us, it's so big that we think that by end of 2006, India--or some other countries plus India--will comprise at least 50 percent of our work force.

CRN: Back to Sarbanes-Oxley. Between now and January, can you speak to specific things your company will be doing around the regulation?

SONG: I think a common theme that is emerging is Web services. So we're seriously looking, after so many years of hype, [at whether] finally there's some proof of companies saying they're going to put this in. ... I don't want these in a flat file anymore. Let's take this opportunity to put a Web services interface to my old legacy mainframe system so that it's going to integrate with my other Web services front end or with a brand-new product that has a Web services front end.

SUH: I think we're seeing, as well, products like Mercury IT Governance, formerly known as Kintana. [This answers the questions of ] 'What are my people doing, what are they touching and how do I know they touched it at 11:01 a.m. on Sept. 9?' Dashboards ... We're seeing companies interested in taking all of the uptime technical metrics and linking those implications to the business. So products like Managed Objects [Business Services Dashboard] are very popular right now, and people are very interested in things like that because at the heart of Sarbanes-Oxley is [the question], 'What are you doing that could risk an earnings surprise to your own operations?'

RIELLY: It's not just, 'Here's the answer.' It's 'Here's an easy way to investigate that answer.' It lets them understand the 'why,' not just the 'what' in it, which again has operational implications.