MAR-APR 2019

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INTECH MARCH/APRIL 2019 45 Tips and Strategies for Integrators | channel chat Digital transformation creates new opportunities for system integrators By Jose M. Rivera (IT SI) closed its acquisition of Cimation, an OT SI in oil and gas, pipeline, chemicals, metals, and mining. Similar deals could become more common. By successfully delivering on the digital transformation opportunity, SIs can address several of their own current challenges: n core business commoditization and competition from equipment vendors n thinning tech pool at manufacturers and frequent changes in their organiza- tion affecting established relationships n competing market entrants (e.g., IT) to the acquisition, development, and re- tainment of talent, increasing pressure on wages Digital transformation gives SIs the fol- lowing options: n Stay ahead of the curve to create dif- ferentiation. n Develop stronger links to manufactur- ers through deeper expertise and on- going services. n Offer new and valuable business mod- els that reduce plant capital expenditure and demand on the client's thinning tech pool. n Update their culture, work environment, and pay grade to attract and retain next- generation talent. The need to support manufacturers in their digital transformation is real. Those SIs able to do this will have an immense opportunity and competitive advantage in the coming years. Will SIs step up and seize this opportunity? This challenge comes at a time when business for SIs in the U.S. has been very strong. More than half of Con- trol System Integrators Association (CSIA) members indicated that their current or- der activity was somewhat or significantly stronger compared to six months ago, ac- cording to a survey of CSIA members in the spring and fall of 2018 conducted by the CSIA and JP Morgan. In a less formal sur- vey on business sentiment from December this is a big accomplishment. Although this core function is still valuable today, standardization and smart tools are simplifying and automating the process and reducing the value-add at this level. On the other hand, the solution scope delivered by SIs is growing to meet the demand for ever-more interconnected systems. This, in turn, increases the need for more comprehensive cybersecurity systems. New technologies come into the mix and need to be mastered. All of this means SIs will be kept busy. Solution-centric SIs Next are the solution-centric SIs. From the perspective of their manufactur- ing clients, the value added by the SIs grows with the expertise in their vertical and, sometimes, in a specific application within that vertical. New technology, e.g., digital twins, requires not only mastering the tool and the approach, but also gain- ing a deep understanding of the client's underlying assets and applications. When SIs are regarded as the experts, they be- come trusted advisors to their clients, and their involvement can start earlier in the process. Geographical proximity, impor- tant in the past, becomes secondary. Transformation-centric SIs Digital transformation brings the opportu- nity for value creation to a new level. SIs can use their solid technical and vertical applica- tion expertise to complement a front-end consulting engagement that also tackles the other complexities, particularly those related to the human element (culture and organization). This creates immense value to those manufacturers joining the digi- tal transformation. These are brand new areas of expertise for SIs. To achieve this level, many SIs will turn to partnerships or outright acquisitions to complement their capabilities. The information technology/ operational technology (IT/OT) convergence could also take place at the system integra- tor level. In December 2015, Accenture T here is limited value in discerning between smart industry, Industrial Internet of Things (IIoT), Industry 4.0, digitalization, and digital transforma- tion, to name a few trendy terms. They are all pulling in the same direction and repre- sent a powerful disruptive force. These ini- tiatives are much more than a mere tech- nology play. Technology is important and a key enabler, but only one of the several complexities to be addressed to achieve success. Viewing these concepts as buzz- words or as an effort to place new labels on past concepts comes with the grave risk of missing immense opportunities. All you have to do is look around you to see the disruption—the use of mobile smart devices, connectivity, and new busi- ness models has exploded. Uber and Lyft have disrupted the taxi industry, while Airbnb is giving the lodging industry a run for its money. Manufacturing digital transformation is not far behind; in fact, many indus - try experts tell you it is well under way. Digital transformation creates an enticing proposition for manufacturers; leaders among them understand that this is vital for their survival. Some are planning their initiative, starting their journey, or scal - ing pilot programs. Most have struggled, because the transformation collides with cultural (organization), technological, and application complexities that may not have been properly addressed. This digital transformation will, in turn, disrupt system integrators (SIs). Their ways of adding value will evolve into new areas, creating three basic segments: product-centric SIs, solution-centric SIs, and transformation-centric SIs. Product-centric SIs For product-centric SIs, ingenuity and deep product knowledge are paramount and, most likely, their value proposition to date. They often bridge platforms from various vendors to deliver solutions that manufacturers demand. On its own, Continued on p. 46

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