Do System Integrators Work Just for You?
When a big company buys big HCM software, it never works out of the box. The vendor's consultants, or more often a separate system integrator, have to be engaged to implement it. But is that SI really independent and working just for you? It's complicated, and history matters.
By Bill Kutik
If you've never been personally involved, it's hard to imagine what a big deal it is making big-company HCM software work. And the path to selecting it beforehand is not always as straightforward as it seems.
Understanding the history is important.
Sixty years ago, when businessmen still wore hats and neckties, companies started buying their own computers. Generally, they wanted to use them for keeping track of the money. What else? GE was the first commercial entity (outside the government) to be sold a computer, a UNIVAC 1, in 1954.
GE promptly shipped it to Lexington, Ky., and programmed it to do payroll, making that the first commercial software application in the world! I know this because I've talked with Burton Grad who worked on the project as a young programmer.
Once the courts stopped IBM from selling both the boxes and the software, buyers went to their big accounting firms asking for help with financial applications. What were then the Big Eight recognized a new market when it fell into their laps and started separate divisions to help clients with their computer problems.
At first, they were called consultants and wrote (or re-used) their own custom software. Later when pre-written software packages dominated the market, they became known as system integrators.
As the Big Eight consolidated and became larger organizations, and then the Enron scandal broke, many of them spun off those divisions into separate companies to avoid the conflicts of doing other work for audit clients. You'll remember Andersen becoming Accenture. Well, there is still an Andersen doing accounting and more. The new firms often grew larger than the original accounting and audit firms.
Deloitte and Ernst & Young kept both pieces together. IBM developed a huge SI business. In our world it did this by acquiring all of PwC's HR implementation practice. More recently, PwC has rebuilt its own HR SI practice.
Packaged software running on mainframes started the first boom years for SIs. The important mainframe dates for HR were from InSci's first package in 1972 to PeopleSoft's client/server offering in 1989. Companies coming off their own custom business programs wanted these new packages to work exactly the same way. Really smart, huh?
So the SIs were paid literally for years (if you remember Tesseract, the mainframe HRMS gold standard, its larger implementations took four years!) to write new code to customize the packages to work exactly as the new owner wanted.
Kids right out of college or business school would arrive in your office with their cots figuratively strapped to their backs and live there for years learning how to do the job on your dime -- and then would actually do it. Always at breathtaking hourly rates, considering their lack of experience. Though, to be fair, they always had some adult supervision.
As in all service businesses -- think legal, consulting, public relations -- terrific profits are made on the difference between the juniors' weekly salaries and what the customers are paying for those services by the hour, especially when those juniors work 80 or 100 hours per week and got no overtime.
When client/server software came along in 1989, corporate thinking didn't change all that much. SIs continued to customize the new software heavily, making upgrading the packaged software from one major version to another an enormous job. Which they were often called back to perform.
Right up until now, some executives have thought the SIs they engaged were dedicated exclusively to them, when they actually have a complicated business relationship with the vendors whose products they implement.
First, since SIs largely took over the vendor-selection process, rumors have always been rife that they would only recommend a package they also knew how to implement, getting the inside track on that much larger piece of business.
Second, the vendors charge SIs to train each staff member, many of whom have to pass an examination, which is certainly a good thing. Then the SI pays the vendor annually to be a certified partner, sometimes at various levels and costs. The status level brings all sorts of critical information and sometimes tools with it. With this much invested, they have to get an ROI, which can mean recommending that vendor.
Third, to maintain certified status and access to all that great stuff, SIs are required to sell a certain number of new customers for the vendors completely on their own! Do you find that sort of surprising? The people helping you select a vendor having to meet a quota of selling various products?
In a briefing last August, Oracle was very candid about its partner criteria for SIs. Pipeline requirements for up-market were $500,000 in HCM sales every quarter or three deals with a three-year SaaS contract. I'm sure Oracle is not alone in having these requirements, just in being so transparent about them.
Every quarter, research firm OTR Global publishes a report based on interviews with SIs for enterprise- software vendors. I only see the report based on 13 of Workday's SIs. Though no specific quotas are mentioned, the most recent report states, Most Workday partners managed to meet their internal MayAugust targets for deal closures. One SI is quoted as saying, [We're] in line with Workday's expectations.
Now, none of this is news to the thousands of people working in the software and SI community, nor to large-corporate IT people. But with HR now going it alone more often in the SaaS world -- a bad idea not to include at least IT procurement -- this is important to know.
Plus SaaS has changed the process of system implementation from the on-premise days. You still need an SI or a consultant, but the cots are gone, the time and numbers are down, and you need personally to verify you're getting the critical skills you need.
Plus with the SaaS push to standard processes, you need to think about changing your processes (remember Business Process Re-engineering?) before the implementation starts, because the software will not replicate your old ones. This is the reason cloud implementation firm Appirio bought Knowledge Infusion years ago: to get people with that kind of thinking. Not every SI has it.
Independent SIs Jarret Pazahanick and Luke Marson happen to work exclusively on SAP and SuccessFactors HCM software. But they offer some great advice applicable to everyone hiring an SI today on their recent Firing Line with Bill Kutik episode.
And remember, those ignorant of history are doomed to repeat it.
HR Technology Columnist Bill Kutik is co-chair emeritus of the 18th Annual HR Technology® Conference & Exposition. Comment on this column at the Conference LinkedIn Group, which doesn't require prior or future conference attendance to join. Listen to the archive of The Bill Kutik Radio Show® with 183 of his provocative interviews with HR thought-leaders. Watch the eighth episode of his new video series, Firing Line with Bill Kutik® with advice from Gartner's Ron Hanscome on The Big Three. He can be reached at email@example.com.