Customers are moving to the cloud - where are the system houses going?
A lmost all major software vendors are pushing their cloud solutions. Their promise is lower implementation costs and continuous innovation through regular updates, e.g. quarterly in the case of S/4 Hana Cloud.
The critical voices and debates so far concern data security, the expandable range of functions or the (deliberately) limited adaptability to specific customer requirements.
But what are the possible implications for the business models of system houses that specialize in the introduction of on-premise solutions? A first challenge is to guide their customers through the thicket of existing solutions.
Instead of end-to-end platforms, companies today are confronted with a multitude of options from on-premise and cloud solutions of varying degrees of maturity in terms of functionality and connectivity. From these, they have to assemble their target landscape and decide which promises made by marketing strategists they want to believe and which they do not.
System houses have to familiarize themselves with the new, rapidly changing functionality and help customers to make often not easy, resilient decisions.
A big change awaits the consultants who are in daily contact with customers. Capturing customer requirements and translating them into system functionality does not work in a cloud environment. It is not the software that is adapted to the customer processes, but the other way around.
The business model is more or less fixed and can only be changed rudimentarily. The task now is to introduce its customers to this model and convince them that they can live with it.
Where specialists with module knowledge used to be in demand, generalists with end-to-end process knowledge and change management expertise will set the tone in the future.
The introduction of a cloud solution is not just a technical change, but a paradigm shift. Consultants are called upon to initiate and successfully accompany it.
Cloud solutions are still best-of-breed solutions, even if the manufacturers swear by the consistency of their individual cloud products. System houses are challenged to find ways to create solution integration that is robust against quarterly updates. Interface stability and anticipation of possible disruptive effects are essential for this.
Customers need individual functional building blocks that are essential to their business model. It is hard to imagine how competitive advantages should arise if everyone uses exactly the same IT solution.
At Allgeier, for example, we not only master the technologies offered and try to influence the functionality offered. We offer Metasonic as the next generation business software, a powerful set of tools for highly agile business activities that can be used to extend the functional scope of an ERP solution.
The promise of a fast, low-effort rollout is also the announcement of reduced cash flows for the system houses. Even if the faster ones can expect higher market penetration, the overall pie will initially be smaller.
System houses are challenged not only to cut as large a slice as possible, but also to enlarge this pie with innovative ideas. There is the chance of a simple reallocation of existing resources to create "more IT", but in times of continuous efficiency increase this is hard to believe.
A business opportunity is more likely to arise from the constant increase in the functional scope of cloud solutions, by identifying the new functionalities that bring added value to each customer and helping them to implement them technically and organizationally.
The consultant thus mutates into an instigator of creative unrest. Cloud solutions seem to strengthen the importance of software manufacturers at the expense of system houses. The latter can best survive in this new world if they develop their business models further, manage their customers better and offer them more agility and more innovation.
