Tuesday, April 8, 2014

Cloud integration will change Professional Services

 
This work by Marcelo Bernardes (@marcelobern) was originally posted on LinkedIn.

Since the mass adoption of cloud computing started, it has dramatically impacted Professional Services practices and their P&L. Now a new aspect of cloud computing, cloud integration - also known as Integration Platform as a Service (iPaaS), is poised to deepen this impact. Let me share with you why.

A Typical Professional Services Practice

Because not all Professional Services organizations are the same, let us start by level setting on the roles a TSIA Level 2 Professional Services (PS) organization has traditionally been accountable for:
  • Consulting: either before a business solution is acquired, or after such solution is in operation, a PS team may be engaged to gather business needs and define the best architecture to address these needs.
  • Project management: project managers are critical to coordinate the activities of all involved parties, and are likely part of the PS team.
  • Subject matter expertise: in order to satisfy the business needs of the customer, a PS team will deploy the specific vendor products. This includes "unboxing" the products, and configuring them to meet customer requirements.
  • System integration: it is necessary to integrate the new components to the existing customer systems. The PS team will often configure or custom develop connectors to make this happen.
  • Custom development: when out-of-the-box product features are unable to address customer needs, the PS team may develop custom code to account for such feature gaps.

Cloud Computing Terminology Revisited

Before we start to delve into the inner works of iPaaS, here is a quick diagram (Wikipedia), so we can get our cloud terminology straight. For more details, please check this cool infographic.

IaaS, Paas, and SaaS Impact to Professional Services P&L

While IaaS and PaaS are merely a different deployment option and have little to no impact on a Professional Services P&L, a SaaS environment, when compared to traditional premise based solutions, negatively impacts the Professional Services P&L, by reducing revenue.

By integrating the necessary software components, a SaaS solution is negating the need for overall installation, and configuration of ancillary services (e.g. operating systems, databases, etc.). Only a fraction of the premise-based subject matter expertise billable hours in required in a SaaS solution.

iPaaS Impact to Professional Service P&L

Gartner defines Integration Platform as a Service (iPaaS) as "a suite of cloud services enabling development, execution and governance of integration flows connecting any combination of on premises and cloud-based processes, services, applications and data within individual or across multiple organizations."
The iPaaS market leaders (fill form to download the 2014 Gartner's iPaaS Magic Quadrant and report) offer capabilities so business analysts can perform system integration graphically, without any software development knowledge. So, once integration connectors are available to iPaaS customers, the corresponding PS system integration billable hours are gone forever, further reducing the Professional Services revenue.

In case you would like to experience iPaaS as a user, please check this article on iPaaS capabilities already available to the non-technical audience.

Conclusion

Continuing the trend started with SaaS, iPaaS will further reduce the Professional Services billable hours, and revenue, which may impact overall practice margin and profitability. It would be wise to take the time and start to evaluate the specific revenue and profitability impact to your specific situation, based on your services mix, and determine which steps can be taken to minimize any negative impact to your Professional Services P&L. And I would appreciate if you could use the comment box below to share your thoughts on how to address this issue on your practice.

Please feel free to follow me if you would like to be notified about a future post where I will explore how cloud computing can strengthen the demand for Professional Services and how to get your organization ready to ride this wave.