Commentary from Judith Hurwitz, President of Hurwitz Group in the December 2004 newsletter:
IBM Business Consulting Services intends to transform its industry knowledge of industries into software. This move could have interesting implications for the future of service as software.
I predict that we are about to embark on a major change in how companies implement and use packaged software. While we have seen the emergence of vertically packaged applications as a way for companies to move away from expensive custom programming efforts, they are still spending enormous amounts customizing these packages based on best practices within their company or industry. We are about to see the emergence of what I will call composite packaged software that will incorporate a variety of packages combined with best practices and industry knowledge.
Before I explain precisely where I think we are heading, let me provide some context. In the good old days, it was easy to answer the question: what is a packaged application? A packaged application is software designed to meet the needs of a specific horizontal function (accounting application, human resources application, to name a few obvious ones). Other packages are designed to meet the needs within a specific vertical industry (i.e., manufacturing supply chain software). While companies buy this type of software in droves there are problems. In most cases, companies are required to customize these packages in order to add their own unique business processes into the software. This customization usually accounts for most of the additional cost in implementing packaged software. The other huge cost is integrating that software with other horizontal and vertical packages. This is why we have seen implementation and consulting organizations continue to experience double digit growth over the past few years.
Now, let's put this in context with the cost and efficiency of implementation services. While clearly most organizations do not have the resources or capabilities to implement their own complex integrated packaged software environments, the implementation organizations are caught in a bind. Their expenses for hiring top notch staff are high. Utilization must be controlled or the companies suffer losses. To be profitable, implementation organizations must find ways to minimize their costs. Given this scenario, I predict that we will see a dramatic change in the systems integration market. These organizations will begin to slowly codify their best practices knowledge into software modules that can be linked together with traditional packaged software offerings. This new business practice will both cut down on the most time intensive parts of the implementation process and will provide value to customers. What prevents this approach from being widely implemented now? Simply put, it is cultural issues in systems integration organizations. Most consulting organizations do not like to think that their knowledge can be put in a box like a commodity. However, this change is inevitable. One only needs to look at IBM's Global Services Organization for a sneak preview. Global Services has started taking about its Business Component Models. In essence, Global Services has taken its best practices across the industries it focuses on and has created a vast number of best practices models. I expect as a next step you will see IBM turning these methods and approaches into software. Within the next three years, services as software no longer be an interesting idea - it will become the norm.
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