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Implementing new enterprise systems requires real expertise to configure them to fit the business, convert legacy data, and integrate them with other third-party and internal systems. But few organizations today have the skills and experience to do it with in-house personnel alone. Because of this reality, the percentage of organizations that outsource system implementation/integration tasks is relatively high, and those that do outsource some or all of those tasks generally find a successful service experience.
That is a key finding from our full report, System Implementation/Integration Outsourcing Trends and Customer Experience. The report, which compares the customer experience of system implementation/integration outsourcing with the outsourcing of 10 other functions, finds that the service success is fairly strong, Figure 1 shows. Most companies using an outside service provider for systems integration find that service levels are the same as or better than when attempting to do it in-house. Using a systems integrator does not always save money (as shown in the cost success bar), cost is usually not a major reason to use an outside service provider. The main reasons are to make sure the new system implementation is a success.
Figure 1 also shows that the frequency is high, meaning that this is a popular area of outsourcing. Systems are getting so complicated that companies almost always need outside integration experts. The net growth trend is low and the volatility is moderate, but there is a key reason for this. (Volatility is the percentage of organizations that are changing the amount of system implementation/integration work they outsource year over year, whether up or down.) The need for SI firms varies greatly from year to year, depending on what new systems an organization has planned.
“In theory, it’s not absolutely necessary to engage a systems integrator, especially for bigger companies,” said Tom Dunlap, director of research of Computer Economics, a research and analyst firm based in Irvine, Calif. “However, our research shows that it is increasingly easier to outsource this function. Of course, you still have to manage the service providers and hold them accountable. But, if you do that, our research shows that systems integration outsourcing generally produces a good outcome.”
Outsourcing of system implementation/integration involves giving an outside systems integrator responsibility for implementing new systems, which often involves integration of those systems with other new or existing systems. The systems integration (SI) firm can help or also be responsible for some or all of the following: identifying system requirements, understanding and redesigning business processes, selecting a new system, and deploying the system.
In the current environment, some big companies augment their IT team with integration specialists, who do all the integration and implementation tasks. But hiring in-house integration specialists is exceedingly rare. System implementation/integration is getting more complicated all the time with new technologies and methodologies. Thus, most enterprises hire SI firms. Systems integrators offer specialists who are (hopefully) well-versed in the software a company is seeking to implement.
To help IT executives understand their options, our full report examines adoption trends in the outsourcing of system implementation and integration. We report on the percentage of organizations outsourcing system implementation/integration (frequency), the average amount of work outsourced (level), and the change in the amount of work being outsourced (net growth trend and volatility). We also present the cost- and service-success ratings, which provide insight into the potential risks and rewards IT organizations take in turning to outside systems integrators. We show how these trends differ by organization size and sector and provide recommendations for engaging with system integrators.
This Research Byte is based on our report on this subject, System Implementation/Integration Outsourcing Trends and Customer Experience. The full report is available at no charge for Computer Economics clients, or it may be purchased by non-clients directly from our website (click for pricing).