The System Integrator Problem
Part 1
The System Integrator (SI) is a division of a big corporation which is active in telecommunications. Its other divisions are: fixed-voice telephony for residential users, mobile telephony. In fixed-voice and mobile telephony the company is the market leader, which ensure the sales volumes for which the company’s operations and scale are perfectly suitable. The SI division provides high value-added IT service, consulting corporate clients who demand tailor-made solutions. The division has started 10 projects and all of them are currently active. The clients are among the TOP-200 Hungarian companies.
On the system-integration market there is a huge competition from subsidiaries of big foreign companies, who add up to the 10 biggest market players. The biggest company’s market share is 10%, while the TOP-10 add up to 50% of the market. SI’s market share is minimal: below 0.5%, and the total market growth is decreasing.
Question: Based on the structure of the industry what kind of challenges does Systems Integration (SI) face?
Indicative answers:
Part 2
Penetration of the high value-added IT solution and services differs across company segments. The TOP-200 companies generate the lion’s share of demand but big and medium enterprises are lagging behind tremendously. Of the total 700 big companies with revenues between EUR 16-80 million, only 10% have an integrated IT system. Their IT requirements are far behind those of the TOP-200: they do not need so complex and tailor-made solutions as the TOP-200, smaller-scale and cheaper projects completely suit their needs.
There are 4,700 medium enterprises with revenues between EUR 4-16 million. Penetration of integrated IT solutions is practically 0%. They require cheap, simple and easily implementable solutions.
The average system integration project fee is EUR 800,000 and the length of the project is approximately 9 months.
Question: Which segment should SI focus on and why?
Indicative answers:
Part 3
The SI division was formed a few months ago and the management team is comprised of newly hired professionals who do not know each other very well and communication among them is ineffective. On all 10 current projects deadlines have been missed, partly because SI needs to adapt to the processes within the mother company. Typically, these processes slow down operations and the decision-making process.
The current project teams are comprised of one project manager and three employees, each of which is an expert in the field. The team members have also taken responsibility for sales of off-the-shelf solutions. There is a deficiency of experts, that is why not all of the team-members are employees of the SI - some of them come from other divisions of the mother company. This makes the operations of the project team even more difficult.
Question: Define issues SI must handle if it aims to succeed.
Indicative answers:
Final question: Based on the above what do you suggest SI should do and why?