Capgemini's Financial Services Business Unit (FS SBU) recently announced that it has achieved AWS Financial Services Competency status. The designation recognizes the systems integrator for its delivery of insurance and banking solutions on the AWS Cloud. It also reminds us of an era when a hugely popular infrastructure platform dominated the midmarket business solutions market. The parallels are striking, and IT service providers would do well to take note of how to be an effective solutions partner on a common platform.
In the era of public cloud, IT service providers can learn from the past
Back in the late 1980s, IBM introduced its most successful midmarket business machine ever, the IBM AS/400 minicomputer. It went on to become the de facto hardware platform for small to midsize banks and insurance companies across the US. Software and solutions developers loved the AS/400 because it presented them with a fully integrated application programming interface (API) – a relational database management system, network management, and object storage were all built into the OS/400 system software. It was all they needed to build the solutions that businesses in a variety of industry sectors needed.
AWS is the modern-day equivalent of the IBM AS/400 minicomputer. As with AS/400, developers and solutions providers have enthusiastically embraced the AWS API – and better still, they don't have to buy a ton of hardware to do so.
AS/400 generated a formidable global partner network, and again there are similarities with AWS and Microsoft Azure. AS/400 partners earned their revenues and substantial margins from developing industry-specific applications and solutions – and not just for financial services. The modern-day equivalents such as Capgemini FS SBU are adding their intellectual property (IP) in the form of industrialized, templated, and repeatable industry solutions built on AWS and Azure. In addition to Capgemini, SIs such as CGI, CSC, Atos, HCL, and Cognizant are among those now looking to earn a larger proportion of their revenues from IP, either organically developed or acquired, and delivered as integrated solutions via public, hybrid, or private cloud.
AS/400 solutions were aimed at midmarket and high-end midmarket businesses. It's this market too that would seem to have the most to gain from well-thought-out solutions developed on AWS, Azure, and IBM SoftLayer: Midmarket customers can't afford private clouds; they often own expensive licensed software assets (such as Oracle and SAP), which need substantial hardware investments when it's time to upgrade; and they don't usually need custom solutions. A new generation of cloud-based "service integrators" is happy to forgo complex, long-term, low-margin strategic outsourcing for simpler subscription-based managed cloud solutions and better margins, serving midmarket customers.
It may look like a race to the bottom, but if history repeats itself, the success of AWS and Azure will rub off on their partners. But SIs and ICT service providers in particular will have to accept a greater level of mutual dependency than they're used to. They may own the customer relationship, but they cannot own all of the solution, especially if they want to deliver the full benefits of cloud. Some service providers will find that a difficult pill to swallow.
Ian Brown, Senior Analyst, Network and Cloud Services