Next-gen integrators automate how you buy IT

With Dell targeting the volume SMB sector and cloud SIs serving larger enterprises, traditional IT providers could face extinction as cloud adoption spreads.
Written by Phil Wainewright, Contributor

For a long while I thought that the old-school systems integrators led by Accenture, Deloitte, Cap Gemini and others would gradually give up market share to the up-and-coming cloud integrators and ultimately join forces with them through acquisitions and mergers. Yesterday's news of the merger of Cloud Sherpas with GlobalOne is further evidence of the onward march of this new breed, along with Appirio, Bluewolf, Astadia and others.

But what will the future hold for traditional SIs and solution providers if cloud enables an entirely new, more automated way to acquire IT? Yesterday Dell released new research on SMB cloud adoption in support of its ambitions to become a one-stop-shop for mid-sized and smaller companies to source cloud applications and services. If providers like Dell can sweep up the volume market with highly automated, low-touch cloud provision while the new cloud integrators scale up their own more customizable automation to address the high-end enterprise market, then traditional SIs, IT resellers and solution providers may end up marginalized.

The trouble with the old, labor-intensive, craftwork approach to delivering, implementing and maintaining IT is that it's becoming obsolete in an increasingly cloud-oriented world — too slow, inflexible and expensive compared to more automated approaches. Traditional IT service providers may not feel under threat for now — business is still good, though not as good as it used to be — but textile weavers probably felt similarly insulated at the onset of the industrial revolution, and look what happened to them. Once automation becomes established as an alternative to customized craftwork, the switchover from old to new quickly becomes a rapid, powerful and devastating avalanche.

There's still a demand from larger customers for sophisticated custom capabilities, but the new generation of providers such as Cloud Sherpas, Appirio and others offer that custom service on top of a bedrock of highly automated processes. As CEO of the newly enlarged Cloud Sherpas David Northington confirmed to me this week, "Work can be carried out offsite, in many ways automated. There's clearly an industrialized approach that works in many segments of the market and people are quite happy with that."

Meanwhile, for those parts of the market that lack the budget or motivation to insist on custom design, Dell is a company with a track record of economically delivering highly repeatable IT. There's a striking parallel in what it's attempting with cloud business applications today with what Michael Dell originally did in the PC market in the 1990s. He saw business people going out to source PCs and spending a lot of effort or money setting them up. He let them simply order their PCs direct, using economies of scale to deliver the configurations they wanted, on demand. Today the cloud presents a similar opportunity. "The early SaaS people were buying Salesforce.com and so on and cobbling it together for themselves," says Bill Odell, the company's director of SMB cloud solutions marketing. "Now they're saying, why isn't there someone here to help me do it?"

Dell is able to leverage its existing relationships with IT buyers as they grapple with the unfamiliar challenges of the cloud. "Part of what's happening in the marketplace is that SMBs are looking for help to figure out which application is right for them and to manage all of the contracts," says Odell.

The vendor launched its cloud offering last year with a reseller relationship for Salesforce.com's Sales Cloud and Service Cloud, supplemented by integration services based on its acquisition of cloud integration platform Boomi, alongside a portfolio of Dell-branded implementation, training and support services, and a set of cross-application analytics that it's building in-house. It intends to add other vendors' cloud applications to the portfolio as time goes on.

The bad news for incumbent solution providers is that — just like the old days when it started selling PCs direct — there's not enough margin for Dell to share with a reseller tier. "The traditional way that the channel has engaged might not lend itself to this type of offering," warns Odell. "The channel needs to figure out how they're going to add value."

Similarly, traditional SIs will have to find new ways to play if they want to participate in the emerging cloud ecosystem. "It is a different ballgame — you have to be willing to move quickly and keep up with things that are changing," says Cloud Sherpas' Northington. "There's disruption happening all around us as a result of the cloud. Our two [now merged] organizations were born in the cloud and we don't have to morph. This is what we do."

Traditional SIs, IT resellers and solution providers are going to have to learn to morph too, but many of them will leave it too late or do too little to compete. If Dell becomes successful and others emulate its approach, then the automation of IT buying as applications move to the cloud is going to accelerate far faster and more extensively than anyone currently expects. It could mean the virtual extinction of the traditional systems integrator.

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