Change of Course for Technology Trade Winds

As the Internet matures, the focus of technology will shift away from
innovation and towards implementation as businesses lick the wounds
inflicted by the billions of dollars worth off losses stemming from
experimenting with unproven Internet software, according to a new report.

As such, the focus will now be the integrators of proven software
services as opposed to the innovators of them. That’s the conclusion of the
latest research from Goldman Sachs analysts Thomas Berquist and Gregory
Gould.

“We believe a new era is beginning in which technology will become more
tightly intertwined with corporations’ business rules. While innovation is
still important, experimentation is over,” the analysts wrote in their
report.

And according to that premise, smaller software vendors — those
innovators that have been the predominant focus over the last few years with
the proliferation of the World Wide Web — will suffer the greatest.
Integrators are more likely to work with fewer software vendors going
forward because of steep learning curves in adopting new products and
training administrators to maintain those services, the report said.

“Integrators are more risk averse at selecting software vendors as
partners than organizations are because they need to educate a large body of
people on how to sell and install the software and they want to chose
vendors that are going to be market leaders for the long term,” the research
said.

Integrators that will benefit the most include the Big 5
consulting firms, EDS, Computer Sciences Corp., Cap Gemini and IBM Global
Services. Larger enterprise-level application software vendors such as SAP,
Oracle, Siebel and PeopleSoft will also benefit.

Of course, to put the findings in the proper context will require some
background.

Does anyone out there remember … COBOL?

Prior to the 1980s, there was not an abundance of shrink-wrapped
applications available to the corporate user. Most software applications
were custom-built on mainframes and/or minicomputers to the needs of a
business and maintained in-house by COBOL-skilled administrators. But by the
end of the 80s, vendors like Microsoft, Oracle, Borland and Sybase were
offering PC-based client/server tool to developers — both within an
organization and at systems integration shops. And organizations quickly
realized they didn’t have the resources (money, skilled labor, etc.) to
build their own applications. The era of innovation was in full swing.

The end of that decade brought about new buzz words like “empowering,”
“re-engineering” and “globalization.” With those mantras came a call-to-arms
from systems integrators, which were developing a new approach of selling
solutions by supplying and implementing software. There was little doubt
that software could increase productivity through automation. By the 1990s,
this market opportunity introduced a whole new buzz word to the business
world and culminated in a new era of Enterprise Resource Planning (ERP).

In fact, ERP systems integrators became vital to the success of a
software vendor. On the supply side, systems integrators became new
distribution channels for software applications. At the same time on the
demand side, those very same systems integrators became the key
decision-makers in selecting the software for the business. Dataquest
estimated that Big 5 consulting firms, for example, selected the software to
be implemented over 60 percent of the time — not their clients. In time,
the role of the systems integrator was relegated (or promoted — depending
on your view) to strategist, rather than implementer.

By the time the Internet first opened its doors for commerce in the
mid-1990s, smaller startups were anxious to take advantage of the door left
open by bureaucratic, established firms. At first, these larger firms
ignored the efforts of the startups looking upon their products as low-end.
Innovation was in full bloom and shops sprung open with catchy names like
USWeb and Agency.com.

As the pendulum swings…

By now, the mistakes of the dot-commers have been well-documented. And the established
firms have caught up to the Internet Protocol (IP) approach to customer
relationship management, supply chain management and commerce. Big companies
will now take the lead from the smaller innovators because they have a
better understanding of how to leverage technology into the business
processes, Goldman predicted.

“The way to gain competitive edge going forward will not only be what new
technology is used, but how corporations leverage all of their technology
investments,” the report said.

To be sure, the Goldman analysts dismiss the notion that innovation is
completely dead. In some areas such as commerce or collaboration, innovation
is still redefining betters ways of conducting business. But those
companies, Goldman warns, need to improve their distribution and integration
skills or face consolidation into larger branded vendors.

Get the Free Newsletter!

Subscribe to our newsletter.

Subscribe to Daily Tech Insider for top news, trends & analysis

News Around the Web