System Integration

It’s busy today, but don’t lose sight of tomorrow

While the economy for system integrators is good, the future remains unclear as companies struggle to hire and retain young talent.
By Jose Rivera December 14, 2018
Courtesy: CSIA

While the system integration industry is highly diversified, current business for system integrators (SIs) in the U.S. has been strong across the board. The Control System Integrators Association (CSIA) conducts periodic business surveys of our members in collaboration with JP Morgan. When CSIA members were asked to compare their current order activity to that of six months ago, more than half of respondents indicated that activity was somewhat or significantly stronger. The actual percentage showed a small decline from 57% in the spring to 53% in the fall. In a less formal survey on business sentiment from July, 87% of CSIA SIs reported “things are looking good,” while only 13% “saw trouble ahead.”

The current business boom is linked to an expanding economy. SIs are benefiting by delivering along their traditional SI business model—one that follows the economic cycles, either for the entire economy or for the specific industry verticals they serve. For the most part, this translates into the delivery of:

  • Installed base modernization
  • New manufacturing capacity expansion or setup.

These days, the biggest challenge faced by SIs in the U.S. are related to order delivery. As with all people-intensive businesses, recruiting and retaining talent has become the main obstacle. There is an increasingly competitive landscape for recruiting and retaining talented employees, intensified by demographic shifts with fewer post-Baby-Boom workers to replace the retiring Baby-Boom workers in the U.S. and Europe. When it comes to recruiting talent, SIs find they are competing with a new set of companies, often from the tech space.

But organizational leaders understand that busy times today could still lead to problems tomorrow, which is why it is important to keep an eye on the future. To quote former GE Chairman and CEO Jack Welch: “A leader’s job is to look into the future and see the organization, not as it is, but as it should be.”

The need to prepare for the future

The Industrial Internet of Things (IIoT) and smart industries represent a huge opportunity for the SI community and the current boom in the SI business is related tangentially to emerging drivers. But this new opportunity won’t be arriving in the traditional way and will require adjustments to SI businesses along the following axes:

Innovation: Traditionally, SI business have centered on technical product and application/industry expertise, along with the operational efficiency demanded by the modest margins in which SIs operate. IIoT provides SIs with real opportunities for innovation, which has serious implications for future recruitment, as current employees most likely do not have the attributes required to deliver innovation. In their drive for efficiency, SI organizations typically do not provide employees with ‘spare time’ to dabble or experiment—a method used by companies known for innovation such as 3M.

Innovation requires companies to acknowledge that failure is part of the road to success. Fear of failure is understandable—as in the automation industry it can translate into catastrophic damage such as an explosion of a chemical plant—but the idea of “failing fast, failing forward” is often touted as a necessary path to follow.

Organization: For quite some time, the goal to ‘attract, retain and develop talent’ has kept SI companies awake at night. Not only are retiring Baby Boomers (also known as “the gray wave”) making this process harder, but today’s SIs are competing with companies like Apple and Google for talent. These tech companies not only have better brand recognition, but younger generations are drawn to them because they identify with their values, approach to life, and economic success. For SIs to succeed in the future, they will have to modernize their company cultures, values, policies, and workspaces—not only to make themselves more enticing to the newer generations, but also to drive higher engagement.

What older generations may perceive as difficult “millennial traits” are often the traits now needed in today’s working world. As Sarah Sladek writes in her latest book about millennials, Talent Generation, “This is a generation that was born into and has only known a world powered by the trademarks of a Talent Economy: innovation, interconnectedness, globalization and opportunity. Anything else will seem foreign and irrelevant to them.” The newer workforce is different, but these workers often bring what is needed for the future of SIs, including a better predisposition for innovation.

The very core work performed by SIs in the past is being challenged by technology. Tools aid configuration work, forcing SIs to deliver in areas of higher value. In many ways, this removes a repetitive, unattractive element of the job—particularly to the younger generations. SIs may want to have this external push to revisit their organizational set up and adapt to the changing times.

Business Models: The business model for most SIs is centered around the delivery of projects. Because of the modest margins for typical SI work, successful delivery of projects determines if an assignment makes a profit or a loss and potentially affects the fate of the company. An entire chapter of the CSIA Best Practices manual is dedicated to project management.

New business models have emerged in other industries, inspired and enabled by tech companies. Subscription for ongoing services is becoming more accepted and stands to challenge the traditional, project-centered business of SIs. The following are a few examples of innovative SIs who have developed ongoing services. This provides a good starting point for the delivery of potential subscription-based services:

  • End users face similar challenges with talent acquisition and retention. The younger generations prefer to work in urban settings and some SIs are providing the humanpower to end users by combining regular site visits with remote work. This allows the engineering resources provided by the SI to continue to work in the urban environment and gather incremental experience by working on multiple accounts.
  • Some SIs are providing on-going services related to cybersecurity measures, including regular updates to the installed base on the manufacturing floor across the nation or even globally.

Marketing: Once viewed as an afterthought, SI’s perception of marketing and its investments has changed dramatically in recent years. While the fundamentals remain intact, tools, channels, and consumption habits have changed considerably. Having a functional company website and social media presence is a must have today. The audiences for these efforts are multiple: potential customers, business partners, and providers; and yes, even potential employment candidates. SIs need to stand out in an increasingly busy marketplace and develop thought leadership through regular contributions of relevant content to industry media, industry database platforms, the websites of automation industry vendors, and other sites. As business models change, SIs will need to reach new audiences to develop new customers, way beyond word of mouth and immediate business circles. Marketing has acquired a higher status within SI companies.

Where does CSIA come into play?

CSIA celebrates its 25th anniversary in 2019. Since its founding, the association’s mission has been to advance the industry of control system integration by focusing on the management of SI companies through its Best Practices manual and associated certification program. The association continually dedicates effort to keep SIs abreast of emerging opportunities in the marketplace. We do this through relevant presentations at our annual Executive Conference, smaller regional SI events, webinars throughout the year, SI discussions through our community forums on our website, etc.

While the SI market is currently very strong, SIs are scrambling to deliver on this great opportunity. It is still very important to start preparing for the emerging opportunities. Significant changes will need to be made to our businesses on multiple fronts and it won’t be a small task. Better get going now!

Jose Rivera is CEO of the Control System Integrators Association (CSIA), a global, nonprofit professional association with a mission to advance the practice of control system integration to benefit members and their clients. CSIA has more than 400 system integration company members and 100 vendor partners in 27 countries. CSIA is a CFE Media content partner.

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Jose Rivera
Author Bio: CEO, Control System Integrators Association (CSIA)