Systems Integration: evolution
With the role of systems integrators constantly evolving in the regional channel, how are SIs increasing their competitiveness and staying relevant in a rapidly evolving IT market?
The Middle Eastern systems integration (SI) market has reached a fascinating stage in its evolution. Major government initiatives are creating major opportunities for multinational players to play integral roles in innovative projects throughout the region. But crucially, in the lower tiers of the SI channel, the demand for specialist services and solutions that allow organisation to exploit the latest cloud and mobile technology across their business is opening up the market at considerable speed.
The challenge – for the new breed of software-focused SI as much as the traditional player rooted in the provision of hardware infrastructure – is to maintain a similar space. Services have long been at the heart of the SI’s business model, but in 2015 they are more likely to be delivered around a nucleus of cloud-based software.
Revenues are shifting inexorably from tin and boxes to virtualised systems that meet the expectations of tech-savvy end-users in secure enterprise environments, and deliver the business benefits of a much lighter, often hybrid, IT infrastructure, which is dominated far less by hardware choices.
“The SI market is at a nascent stage in the Middle East, except in government, telecoms, banking, and the oil and gas sectors, which were early adopters of SI,” said Jonas Zelba, industry analyst at Frost & Sullivan’s Information & Communication Technologies Practice.
“The market accounts for approximately 35.2% of the total IT services expenditure in the MENA market, which is expected to reach $25.7bn by the end of 2015. With the influx of smart cities and brownfield projects, investment in IT and subsequently SI is expected to be high.”
Frost & Sullivan sees the MENA SI market as one of the fastest-growing globally, and estimates it will expand from $8.2bn in 2014 to $14.3bn by 2020 – a compound annual growth rate (CAGR) of 9.7%.
Zelba said a number of key trends are shaping market growth: data integrity and cleansing solutions for better management; the rise of integrated software solutions for social media, such as Jive; data centre and private cloud consolidation; predictive analytics in data-intensive sectors such as banking and telecoms; and fraud management and security, particularly in banking.
It is a picture that resonates with Maged Eid, regional director at end-user analytics specialist Nexthink, who said the business is experiencing “massive” growth in the region, especially around smart city and eService projects.
“Organisations are heavily investing in upgrading their IT infrastructures to support rapid growth,” he said. “Governments have announced smart city initiatives across the region with Dubai, Doha, and the Kingdom of Saudi Arabia taking the lead, followed by Kuwait, Oman and Bahrain accelerating their own understanding and adoption of smart city initiatives within their diverse sectors.
“SIs are critical partners in the value chain concerned with accelerating the completion of projects and plans to develop smart initiatives. Organisations need to be able to process information coming from multiple sources and technologies using IT analytics solutions.”
The shift to a software – and more specifically, application – focus will have a profound effect on the types of services that customers expect from SIs. And cloud is the keyword of this trend.
“In general terms, cloud is having a major impact on the SI business as outsourcing becomes less desirable with the advent of simpler, cheaper cloud services delivered on a pay-as-you-need basis,” said Chris Burnet, business development manager, Cloud Services at NetApp. “Many SIs will transform their business to become cloud integrators.”
Burnet pointed out that SIs have always been service providers, although their services have tended to target the needs of specific customers rather than a horizontal provision of specific workloads.
“I don’t think the individual service providing of their business will go away, especially where they have expertise in a given vertical,” said Burnet. “They have to ensure and become more interoperable, even if it’s easier with open systems and standards. Public cloud will probably note be reached by the bigger SIs, but private cloud will remain the key space they continue to operate in.
“The ‘hyperscalers’ will more than likely prevent SIs from going after the mass market, with partnering being more desirable – perhaps along the model that we have seen NetApp adopt.”
For Meera Kaul, CEO at distributor Optimus, the challenge for SIs is to align themselves more closely than ever with the customer’s business processes, becoming an indispensable part of the business operation by providing in-depth selling support. She said 2015 will be a year of change, with customers requiring more complex solutions to address increasingly integrated business processes.
“SI’s are always looking for new and fresh revenue streams and in 2015, a lot of these will come from software vendors, from cloud services, and SIs will try to create a niche in the entire ecosystem where they become relevant not only to the manufacturer, who has the potential of going direct but chooses to stay with an SI that adds value, and the customer, who has the choice of buying direct but chooses the SI because of the value it brings to the table.”
Optimus’ Kaul added that SIs will have to focus on verticals, become trusted solution advisors and develop core competencies in business processes.
“They will have to go bigger, thinking about their own IP, define their core strategy in terms of new business models, become more international rather than niche and very local,” she said. “Then of course there are cloud technology companies that can help SIs transition their business models into something where they create value for themselves, suppliers and customers – becoming an important block in the entire system integration value chain.”