By now, we're used to enterprise cloud application vendors paving their IPO roadmap with mega funding announcements, but last week saw the first such news for an enterprise cloud integrator. Appirio's $60 million Series D round mostly from General Atlantic is a different order of funding from its previous total of $20 million. It's especially notable in the context of my suggestion a week earlier that we might see "the virtual extinction of the traditional systems integrator" as the new breed of cloud integrators "scale up their own more customizable automation to address the high-end enterprise market." Or as the Forbes headline more bluntly expressed it, Appirio Raises $60M to Take on Accenture.
Appirio's founders have always portrayed the company as a challenger to the established players (disclosure: Appirio is an occasional consulting client). Three years ago I wrote about Appirio, shafting the global SIs: "the established SIs are leaving the field clear for Appirio and its peers because they simply can't adapt their culture and business model to the new paradigm." But at the time it seemed such a long shot that I added: "Of course the big global SIs are still huge in comparison to the likes of Appirio, and I know many readers may be tempted to dismiss a post like this as shilling rather than substance. But the really smart bets are the ones that are placed at this early stage in the cycle, before it becomes obvious to everyone else what's happening."
Appirio's latest funding is a new bell tolling for today's top integrators, a warning signal that, rather than acquiring these cloud upstarts, they may indeed be challenged and replaced by them. While that narrative of disruptive innovation and creative destruction is a familiar story when talking about cloud software vendors, it's a novel development for the professional services industry. The last time we saw start-up services companies considered as IPO candidates was back in the dot-com boom days of now forgotten e-consultancies such as Viant, Scient, Razorfish, USWeb/CKS and Organic. But whereas those newcomers merely repurposed the high-cost IT services project model to a new market, Appirio and its ilk are transforming the model into something quite different.
What Appirio has mastered is the automation of professional services using today's global networked connections — part of a trend I call frictionless enterprise. It's not just a matter of automating repeatable processes within the service model (though that's a helpful starting point). It's also breaking them down into more readily assembled components so that some can be productized or cloudsourced, as appropriate. Most important of all though, it's doing so in a way that accommodates rapid change, iteration and feedback — delivering professional services not as a project but as-a-service, with all of the collaboration, value-for-money and constant improvement implicit in that alternative model.
General Atlantic's investment has been motivated by evidence that the automation and processes Appirio has developed will get much more out of the skilled people and teams it acquires as it accelerates its growth roadmap. This is not a typical services investment play, which would merely sink money into acquiring headcount fast enough to scale to meet demand. This is an investment in a new order of automated professional services.