Establishments in this industry are primarily engaged in developing or modifying computer software and packaging or bundling the software with purchased computer hardware—computers and computer peripheral equipment—to create and market an integrated system for a specific application. Establishments in this industry must provide each of the following services: the development or modification of the computer software; the marketing of purchased computer hardware; and involvement in all phases of systems development from design through installation. Establishments primarily engaged in selling computer hardware are classified in SIC 5045: Computers and Computer Peripheral Equipment and Software and SIC 5734: Computer and Computer Software Stores; those manufacturing computers and computer peripheral equipment are classified in SIC 3570: Computer and Office Equipment.
Computer Systems Design Services
Spurred by e-commerce development and other trends, systems integration revenues grew more than 13 percent each year during the late 1990s. According to the latest data available from the U.S. Census Bureau in early 2003, revenues totaled $87.8 billion in 2000. However, in 2001 and 2002 systems integrators were victims of a weak economy and related reductions in corporate spending that affected virtually every sector of the information technology (IT) industry, especially service providers. Although IDC, a world leader in IT industry analysis, estimated that overall technology spending would improve in 2003 by some 6 percent, following an unprecedented fall of 2.3 percent in 2002. The research firm predicted a somewhat slower recovery for software spending, which affects the integration industry.
Roughly 48 percent of the industry's revenues in 2000 were specifically attributable to integrated systems design services, while the remainder came from things like computer programming and systems management services. E-commerce integration, which involves linking Internet-based data and applications with corporate databases and other non-Internet applications, has been one of the fastest-growing segments of the systems integration industry. Other growth drivers in recent years have included corporate migration to large enterprise application environments like enterprise resource planning (ERP) and supply-chain management (SCM) systems, mergers and acquisitions that require marrying the separate data systems of the merged entity, and the ongoing need to share business data and applications across diverse platforms and software environments.
In 2002, according to the U.S. Census Bureau, combined industry revenues totaled $78.6 billion, down from $87.8 billion in 2000. There were about 38,877 companies engaged in computer integration employing some 466,119 people. The industry continued to feel the effects of an economic downturn with revenues falling further in 2004 to $70,976.60 million. There were approximately 23,243 firms engaged within the industry employing an estimated 350,075 people. On average, an individual firm employed 15 people while generating revenues of $3.40 million.
The largest sector of the industry was computer integrated systems design with 10,515 firms and more than 45 percent of the overall market. Combined they shared 154,683 people and an estimated $3.2 million in revenues. Systems software development services represented 2,725 firms, or about 11 percent of the market. Together, they employed 42,360 people while garnering some $1.2 million in revenues. Systems integrated services numbered 2,410 firms with a workforce of 65,870 people and revenues of about $1.3 million. Another significant sector was computer systems analysis and design with 1,797 firms employing 24,038 people, generating about $4.9 million in revenues. Lastly, Local Area Network (LAN) represented some 1,365 firms with revenues of about $1.2 million. LAN employed approximately 11,834 people.
Once a company identifies the specific design, operational, or management functions it wants its information system to perform—and the level of that performance—a systems integrator creates a system to meet those objectives. Systems integration services combine expertise in hardware, software, and communications to deliver complete information systems, including their design and development, the management of vendor contracts, the purchase of equipment and its technical integration, the implementation of the system, and any training necessary for the company to run its new or modified system.
The Information Technology Association of America, a trade group for the computer hardware and services industries, used the following analogy to explain systems integration: "In construction industry terms, the systems integrator would compare to the general contractor who interfaces with the electrician, the plumber, the mason, and any other trades that are necessary for the job, and who may undertake part of the task (for example, the role of architect). In systems integration, this general or 'prime' contractor responsibility may be assumed by an outside vendor or by the user, who may also wish to provide some of the core skills."
Integration services are, in practice, commonly offered as part of a broader package of services, many of which are not considered integration. These activities range from consulting to application development to system management. Indeed, few, if any, large systems integrators practice integration exclusively.
Companies wishing to establish or upgrade an information system turn to systems integrators for a variety of reasons. In an industry where knowledge about computers is not central to the business—such as health care, insurance, automobile manufacturing, and numerous others—engaging the services of a systems integrator gives companies access to cutting-edge skills and technologies. Having a single contract with a systems integrator, rather than separate contracts with numerous separate vendors, gives companies a fixed price and delivery date for an entire system and assurance that the system will meet their stated needs. In addition, the integrator protects the user from problems that are typical when engaging multiple vendors—including incompatible platforms, interfacing difficulties, and contract loopholes.
Like most computer service industries, systems integration has attracted...