System integration--where program management is literally the business
South America is facing a tremendous competition in the System Integration business, from 4 main segments, interested in take a significant part of the cake :
- IT Supplier
- Industry Equipment Supplier (ex : Telecom, E&U, Finance)
- Consulting Companies
- ISVs (Independent SW Vendors)
In spite of that, those Companies are neither real System Integrators, nor have a consistent Business Model to efficiently manage such profitable (however extremely risk) activity .
The intend of the presentation is to reflect, under a management perspective, the key aspects of the System Integration Business and why Program Management should be considered the own business .
During the presentation, the following topics are supposed to be covered :
- System Integration in Latin America
- Nature of the System Integration Business
- Golden rules to manage SI
- SI Business and Management Model
- SI Programme Management
- Business Key Indicators
- The Quality Diamond
- Business Pitfalls
System Integration in Latin America – The Telecom Industry Example
Competitive Landscape :
- Privatisation process of South America ‘s Telecom System under consolidation, with massive investments in infrastructure on the past 3 years.
- On going process of Telecom's de-regulation, in Brazil, that will allow the full competition from any player in any domain (Fixed, Wireless, Internet Services Providers, etc).
- Merges and acquisitions constantly present . The South American market is forecasted to fall to 5 (or maximum 6) major players on wireless space (trend similar to Europe).
- Time to market will be mandatory in Telco projects.
- Multi standards (CDMA, TDMA, GSM) for mobile in place.
- South American Incumbents (fixed) with huge problems in basic issues as : billing, provisioning, inventory management & activation
- Huge losses from interconnection process
- OSS (Operation Support Systems) and BSS (Business Support Systems) finishing their life cycle, in spite of the huge investments performed, in both, wire-line and wireless .
- Poor results from WAP are postponing the decision to invest in 2,5, 3 G .
- ISP players are extremely cautious on their investments.
- Almost 70% of the mobile subscribers are under pre-paid system.
- The decisions to invest have still a strong local and political component.
- CRM (Customer Relationship Management) and Telco Solution Outsourcing are still under a strong demand.
Such scenario gives us a solid idea about the huge opportunities of the Integration Business in the Region. Consequently, South America is facing a tremendous competition, from 4 main segments, interested in getting significant part of the business :
- IT Supplier
- Telco Supplier
- Consulting Companies – Big 5
In spite of that, no real System Integrators are strongly present .
Nature of the System Integration Business
The diagram below (Exhibit 1), gives us an overview about the nature of the system integration business, and related cycle and mandatory rules to be respected in order to succeed in such very profitable (however risky) arena.
Golden rules to manage SI
The golden rules to be respected are highlighted in the green rectangles (Exhibit 1) :
- To keep focused
- To get a minimum 1:3 as hit ratio (some business advisors are already recommending 1:2), mainly due to the high costs involved on the pre-sales phase.
- To obtain 80%, as a minimum billable rate of the Delivery people .
- Project Management as the key of the business
- To have a solid partnership strategy (to have solid, trusted and mutually beneficial relationships with key delivery partners)
- To get and diffuse references
- To treat knowledge (consequently people) as the most valuable asset of the business
SI Business and Management Model
The Integrated Services Management Model is generically based on the 3 layers Model described on Exhibit 2 :
SI Program Management
The proper (AND PROFESSIONAL) Project Management is certainly the key factor of success to the result of the Project . Its relevance is directly related to the complexity level of the Project to be implemented .
Project Management Axes
The proposed method is based on the standards defined by PMI (Project Management Institute), and covers the global cycle of the Project management, within the following axes :
- Project Panning and Execution
- Quality Management
- Contract Management
- Third Party Management
- Financial Management
- Team and Resource Management
- Risk Management
- Technical Management
- Documentation Management
Such approach is summarised, throughout the diagram :”Project Management Framework” (Exhibit 3)
Business Key Indicators
Usually the real business indicators are not the financial ones . Particularly in System Integration this statement is much more sensitive than the other regular business .
The pictures furnished in the Exhibit 4 and 5, intend to demonstrate how the business is affected by the balance (or unbalance) of five indicators :
Pre Sales Indicators :
- Walk Ratio
- Bid Cost
- Hit Ratio
Post Sales Indicators :
- Project Completion Ration
- Project Overruns .
The Quality Diamond
Quality in SI is necessarily more than a simple Quality System and Quality Assurance Procedures . Quality should be considered the essence of the Business .
A Quality Model, named “Quality Diamond” (Exhibit 6), is proposed, within six main axis:
- 1) Strong methodology implementation.
- 2) Quality System (+ ISO certification)
- 3) Partnership Management
- 4) Customer Relationship Management
- 5) Risk Management
- 6) Talents Development Management (including trainee program)
The experience demonstrates that some specifics issues are extremely sensitive, with regards to SI business . Those issues have systematically generated unrecoverable losses to the enterprises .
The list below, covers some axes which are highly recommended to be cautious, in order to minimise / eliminate the negative impacts that normally occur during an SI Project :
- Respect of the “Golden Rules”
- Precise establishment of an SLA (Service Level Agreement)
- Contract <-> Change Management
- Customer Relationship Management (all levels)
- Acceptance Criteria
- Transition from the Project Phase to the Support / On-Going Phase
- Operation phase
- Strategy of Outsourcing definition, based on tangible criteria of TCO (total cost of ownership) .
The above presented list has not the presumption to cover all (or even the majority) pitfalls, however the extreme precaution with the mentioned axes, avoids the usually verified situation of the “ENDLESS “Projects, and consequently the “BLEEDING” Projects .
System Integration is really a singular business . Customer are interested in a Company that proves its capability to deliver a Project, that normally represents a huge added value to their business (and are mission critical to them) . Additionally, they demand from SI Companies to assume all risks related to the results and success of the Project, what allow us to make a comparison between System Integrators and Insurance Companies, in terms of risk and responsibilities taken .
© 2004, Francisco Calmon Gama
Originally published as a part of 2004 PMI Global Congress Proceedings – Buenos Aires, Argentina