Whether a company should go with a larger, tier 1 systems integrator for its software implementation projects or a smaller, tier 2 niche provider depends on the kind of project the company has in mind -- and whom it asks.
Many companies consider tier 1 systems integrators, such as IBM or Accenture, because they're well-known brands or because they can bring a wide range of implementation resources to a particular project, but that can be a mistake, according to Liz Herbert, principal analyst with Forrester Research Inc. in Cambridge, Mass. Tier 2 implementation firms often specialize in certain industries or geographical regions and can offer expertise and advantages that some of the larger firms can’t, she said.
“What companies should be most interested in is who can help drive their business forward,” Herbert said. “The important thing is to be open-minded to considering providers beyond those 15 or 20 that [companies] might hear about that are the global, largest multinational ones.”
The case for niche systems integrators
Tier 2 implementation service providers can be a better fit for smaller deployments as well as for small and medium-sized businesses (SMBs), according to Joshua Greenbaum, an independent analyst and head of Enterprise Applications Consulting in Berkeley, Calif.
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“If you are a small or medium-sized enterprise, you don’t really want to send in the Marines. You want to find a company more your size and more of a cultural fit,” Greenbaum said, adding that niche firms also often possess specialized expertise that sets them apart from their larger competitors. Herbert agreed, noting that smaller vendors can provide harder-to-find assistance with newer areas, such as CRM and analytics.
“Success is dependent on both technology and business understanding,” Greenbaum said, adding that SMBs should look for a “boutique” firm that’s “knocked it out of the ballpark for companies like you and your region and your industry and go with that.”
There can also be a price benefit associated with going with a smaller firm, according to Herbert. For example, smaller firms can be as much as 10% cheaper on average, she said. They can also be more flexible when it comes to pricing plans.
“Sometimes our clients just want to work with tier 2s just because they can get more attention, better pricing, better flexibility,” Herbert said. “But in other cases, they also are the best source of niche, sometimes industry-specific, skills.”
Many companies also look to smaller systems integrators because they can deliver better service than many of the bigger shops, according to R. “Ray” Wang, an analyst and CEO of Constellation Research Inc.
“We see many firms leaving the large, traditional firms for boutiques that are more relationship-focused. In large firms, the top talent in project teams graduate and are ready to move on to the next hot project to burnish their resumes,” Wang said.
Going big for software implementation projects
Larger firms are still the best option for huge projects with the aim of transforming the business, Greenbaum said.
For these projects “you need not just technology consulting, but very significant and deep process management consulting,” Greenbaum said. “Then you might need one of those big firms that doesn’t just bring technology expertise to the table, but also process change and best practices that you might not get elsewhere.”
Wang agreed, noting that boutique firms may have a limited number of specialists on hand and often lack the full coverage to deliver in multiple geographies, especially when it comes to high-demand skill sets. Furthermore, multinational partners can offer a range of services that cover the entire project lifecycle, including process consulting, technology implementation and support, Herbert said.
Two implementation projects, two providers
Some companies -- especially larger ones that are growing -- may opt for both kinds of systems integrators.
Commercial Metals Company (CMC) has used a IBM for a range of deployments, from its ERP to its supply chain management applications. Generally, the results were positive, though it depended on who the consultants were for that particular project, according to Taylor Lindsey, a supply and demand planner with the company, based in Irving, Texas.
For example, the team for the materials management implementation had skilled consultants assigned to it, he said. But that wasn’t always the case.
“Some consultants didn’t have quite as much experience in how the steel group operated. In those process areas, we’ve had to play catch-up a little bit,” he said.
CMC chose the smaller, niche implementation provider MySupplyChainGroup when it came to recent changes to its global available-to-promise application, a project with a much narrower scope.
CMC hired the tier 2 service provider because of the niche technical skills it could bring and also because CMC felt it was being heard, Lindsey said.
Despite some occasional disadvantages with going with large providers, Lindsey said CMC would continue to use two classes of implementation partners, depending on the type and size of the project.
More companies are pursuing the same approach, according to Herbert, the Gartner analyst.
“There’s an opportunity for those companies to go with a multi-provider approach. They can get the best of both worlds. If they have those more [overarching] strategic needs, they can go with IBM or Accenture or Deloitte or whoever,” Herbert said. “But to get price competitiveness, or specialized skills, they can have some of those niche suppliers in there.”
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