Focusing On Future Tech Trends

Doculabs' consulting work with Fortune 1000 companies has helped VARBusiness identify some of the major technology trends for 2003. Some key trends we see emerging next year are: increased specialization in business solutions, increased competition from end-user organizations positioning themselves as solution providers, the need to optimize previous technology investments, sustained momentum in integration technology

and continued consolidation in the marketplace. What follows is a discussion of how those trends will affect your businesses and your customers'.

Understanding what will be hot,and what will not,is only half the battle. For any solution-provider organization to compete effectively in 2003, it needs to know how to capitalize on trends. VARs also must position themselves to enable customers to address their key pain points. By focusing your efforts on the issues confronting your customers to help them succeed in a tight market, you won't just win the battle, you'll win the war.

Solutions For Specific Business Problems

Organizations are searching for solutions that address not only horizontal business problems, but also highly specialized vertical-business problems. Facing yet another year of tight budgets, companies will continue to carefully justify their IT spending on new technology. That means organizations will be far less likely to purchase large-scale, horizontal solutions and will instead identify specific areas of pain (e.g., line-of-business challenges such as claims processing or accounts payable) and actively look for solutions that are easier to justify because they're designed to solve specific problems. The more specific a VAR's solution, the more likely it will attract business next year.

For example, organizations may not be able to justify purchasing a content-management product simply for the sake of establishing an enterprisewide platform for managing all content. However, design and implementation of a content-management system for a well-defined challenge, such as managing content for the company's product catalog, corporate Web site, or partner portal, will be an easier sell to the powers in charge. Smaller, well-defined projects will provide greater chances for success, offering greater project visibility, controllable costs, well-defined scope and shorter implementation timelines.

In response to customer demands for specialized solutions, many vendors have begun to package their technologies into editions, or applications, designed for specific problems. For example, content-management vendors such as Divine, Documentum, FatWire, FileNET and Vignette have packaged their products into solutions designed specifically for portals. Pleasanton, Calif.-based Documentum was at the forefront of the specialization trend and has numerous targeted solutions, including those for marketing, compliance and Web-content management. Similarly, Costa Mesa, Calif.-based FileNET offers insurance and mortgage-processing solutions in its content-management product line.

Vendors are also addressing increased demand for solutions specialized to vertical industries. Many of the vendors in the integration-technology space, for example, have added specialized functionality, including industry-process templates, data-access components and management tools for specific business processes in industries such as health care (to achieve HIPAA compliance), high-tech manufacturing (such as RosettaNet standards for processes and information-sharing) and brokerage in financial services (in the move to global straight-through processing). Microsoft, SeeBeyond, TIBCO, Vitria and WebMethods all feature prebuilt templates in their offerings for such industries.

While the specialization trend is pushing vendors to develop software for unique problems, many vendors are taking pains to ensure specialization doesn't come at the cost of creating technology stovepipes. For example, by keeping their solutions open and scalable, vendors position themselves to expand their presence in an organization by addressing additional business problems, applications or departments over time, as needs arise. With such an approach, they can prove their immediate value to customers, while shortening sales cycles for add-on opportunities and improving upsell close rates.

Competition From Vertical Industries

Also in the vertical vein, specific industries,most notably insurance and banking,will increasingly become the suppliers of self-developed technologies for their customers. More than ever, those specific industries are facing significant competitive challenges from external solution providers. To drive additional revenue and retain customers and market share, expect to see financial institutions aggressively developing their own products or services to meet,and even beat,the competition.

Banks are a perfect example of organizations pursuing this approach. In their endeavors to secure additional consumer and corporate clients and keep costs in check, financial institutions are choosing to build or deploy their own solutions,and are looking more like software vendors than financial institutions. The majority of today's largest banks offer treasury-management products and services that include electronic banking and billing solutions, among others.

Thus, a bank's corporate clients now have the option of turning to the bank for an e-billing solution, rather than a traditional technology vendor or service provider. That allows the corporate client to provide e-billing services to its own customer base, delivered by the same company that is already handling its payment processing and other cash-management services.

For the bank, that approach provides a way to offer additional value to its commercial clients, protect its existing customer base and differentiate itself from competitors. And by developing the solution in-house, the bank has full control over the technology investment. It's not at the mercy of third-party vendors and their release schedules or sales agendas that may not be in line with the best interests of the bank or its clients.

Doing Your IT Housekeeping

While some organizations have decided to focus new technology spending only on specific line-of-business challenges and solutions, others have decided to curb purchasing new technology altogether. Many of those organizations purchased multiple technologies in the late '90s and have decided to make do with whatever they have in-house. As the first step in implementing such a strategy, some organizations will get back to basics and eliminate many of the technologies that are stalled somewhere in the implementation phase or are delivering sub-par results.

In the wake of such IT housekeeping, organizations will need to leverage their existing investments to solve new challenges as they arise. Some companies will need to build some new areas of functionality to address their requirements. That's where a VAR can be invaluable.

The situation provides an excellent opportunity for solution providers and integrators to perform customization

and integration work. That will extend existing systems to meet the changing needs of businesses that are unwilling or unable to invest in new technology or in in-house

development.

However, with customization efforts, pressures are high on both ends of the spectrum,end users' and solution providers'. For example, solution providers can be good partners or huge impediments to organizations that are leveraging what they already have. Specifically, executive management of companies making these technology decisions must ensure that technology upgrades, or new development will not conflict with their own best interests.

Solution providers should recognize that the partnership model is dramatically different than the model for selling products. Most importantly, the suppliers will need to work closely with organizations. For example, several stakeholders within the end-user organization will need to sign off on development or transition plans.

Suppliers will have to work with the customer throughout this process, including detailed action plans and the ability to answer questions from several areas of the company; companies should ask and vendors should be able to answer the following question: "What happens if this system does not meet our expected adoption goals or does not have the ability to be optimized across our enterprise?" Recognizing and respecting these issues can make the solution provider a good long-term business partner,as well.

Integration Technology,Inside And Out

Doculabs expects the demand for integration technology to continue to increase in 2003. Mergers and acquisitions, as well as the streamlining of a glut of disparate in-house systems, will continue to drive integration demands. In both cases, organizations will need to make their systems communicateand interoperate.

We also expect to see the continued blurring of internal and external integration. Internal integration, sometimes referred to as application-to-application integration, deals with tying disparate systems within an organization together. External integration, which is also known as business-to-business integration, involves connecting to systems outside of a particular organization, such as the systems of partners to those of customers.

Until recently, the technologies used to facilitate these two types of integration were provided by different vendors. Recently, however, there has been a convergence of functionality, and most integration-technology vendors have begun,and will continue,to offer unified solutions for both types of integration.

The new cornerstone of integration technology is business-process management (BPM). BPM, along with workflow technology, allows a business to define rules and processes for the purpose of automation. The end result is streamlined operations that take advantage of all relevant systems and resources in an organization. Decisions can be automated or passed on to human operators as appropriate. Solutions that include BPM allow approved users, with a minimum of training, to modify business processes without heavy involvement from IT resources.

The Consolidation Race

Will there be more consolidation? In short, the answer is yes. Doculabs sees end-user organizations consolidating and integrating the technologies they have in-house. Businesses that saw rapid growth as a result of mergers or acquisitions through the late 1990s and into the new millennium are especially ripe for consolidation. Those types of organizations have,seemingly suddenly,found themselves in need of slashing costs, and will find they can save a considerable amount of money through system consolidation and integration. In addition, streamlining business processes will take on new prominence.

Doculabs also sees continued consolidation across a variety of technology markets, thanks to increased competition and current economic conditions that encourage vendors to add to their capabilities and their customer bases as quickly as possible. That expectation can yield both pros and cons for buyers and sellers of technology.

Consolidation will also encourage vendors to create more attractive product packages or bundles, along with more competitive pricing. Technology buyers will benefit as they will be able to purchase more complete platforms or suites with smaller price tags. More available options and deeper discounts will attract new purchasers for technologies that had been previously considered cost-prohibitive. Furthermore, broader suites will stimulate companies to seriously consider technologies that had been too narrowly focused or niche-oriented.

From the solution-provider's perspective, future consolidation will help them evolve narrowly defined products to integrate additional features, and expand market share as a result. We expect the winners of the consolidation race to be aggressive vendors who do business with solution providers whose offerings complement their own, and together develop a plan to partner and bring to the market a wider range of capabilities or offerings. n

This article was written by analysts with Doculabs, a research and consulting firm that helps organizations plan for, select and optimize technology for their business strategies. Contact them at (312) 433-7793, [email protected] or at www.doculabs.com.