Big opportunity for system integrators

As slowdown forces firms to optimise resources, a multi-billion dollar opportunity is staring at information technology (IT) system integrators, who can bring greater efficiencies to the way IT is deployed by companies.

System integration is the process of connecting different kinds of software to a firm’s main business application to integrate data from various departments. For example, a website that allows clients to carry out transactions with a company and obtain information about it integrates a customer relationship management (CRM) software with the firm’s core business application.

Val Sribar, vice-president (application research) at IT research firm Gartner, said chief information officers (CIOs) these days are looking to integrate smaller tools with their companies’ core business applications for better utilisation of resources. This opens doors for IT services firms, such as Gurgaon-based HCL Technologies, which has three projects of over Rs 100 crore each and about 30 smaller ones worth Rs 1-50 crore each. Kiran Bhagwanani, senior vice-president (India and Middle East) at HCL Technologies, said, “Small integration projects end up being more profitable as the cost involved is lower, competition is not intense and they involve delivery of services.”

K Gopalakrishnan, managing director and CEO, Infosys Technologies, said the company is seeing the trend of small integration projects. “It is global and small currently. This could accelerate due to the downturn. These services are provided by our enterprise services group,” he said.

Besides giving cost benefits, such projects help improve customer stickiness, say experts. “IT is gradually becoming a medium to enable self-service. A classic example is the App Store from Apple’s iPhone that allows a user to build his own small applications using tools from the store,” said Gartner’s Sribar. He said web-based as well as pay-per-use services are the ones that companies would look at integrating with their core applications. The need for convenience, reduction in IT budgets and growing complexity of existing IT set-ups will drive this market. “In the next 2-3 years, this will throw up a market worth a couple of billion dollars for Indian IT firms such as Infosys, TCS and HCL, among others,” he said.

Gartner sees IT spends by firms in India growing by 5.5% in calendar 2009, down from the growth rate of 13% witnessed in 2008 and 16% in 2007. The IT budgets of US companies are expected to grow 2.6%. Among major core business applications providers are US-based Oracle Inc, Germany-based SAP AG, and US-based Microsoft Corporation.

Most top Indian firms such as TCS, Infosys, Wipro and HCL Tech provide system integration services on SAP, Oracle and Microsoft applications.
Wipro Technologies, the third largest IT services firm in the country, said it has seen an increase in smaller integration projects coming its way.

A Wipro spokesperson said, “Wipro has consistently been involved in integrating independent applications, components off the shelf (COTS) products and appliances into core applications of our customers. These engagements run simultaneous to our large integration projects as part of long-term ongoing deals we have with organisations.” Wipro has partnerships with middleware product vendors such as IBM, TIBCO, Web Methods, Oracle, SAP etc.

The spokesperson added that such projects have been increasing “significantly” as modernisation of existing systems and applications has gained priority for customers these days. Quoting independent research firms, the spokesperson pegged the market potential for small integration projects at $5 billion.