This new balance has simultaneously prompted a profound change in what customers expect from their enterprise software vendors, Aberdeen says. It cites "a growing expectation among IT buyers that software services providers understand their business, assume a larger role in both business process and application planning activities, and take on greater responsibility for delivering measurable benefits."

The trick for IT decision makers today, Aberdeen believes, is to identify precisely what skills they need and which vendor can best provide them. Sometimes that vendor will be the company that makes the application; sometimes it will be a systems integrator. Regardless of who is involved, however, all of the players must learn to build a fundamentally different relationship than prevailed just a few years ago.

The fact that today's enterprise application decisions are being driven by business imperatives, Aberdeen says, leads to a new focus on cost management, IT complexity, process silos and market challenges:

• Today, cost management means that new IT projects must delivery measurable results in three- to six-month periods. Cost savings or increased revenues are the only way to justify follow-up initiatives, so vendors who hope to sell more need to deliver results early and often.
• IT complexity was introduced, in part, through the implementation of hundreds of different applications, including multiple versions of the same package. Standardization and consolidation can reduce cost and complexity but involve their own risks - including the challenges and planning and implementing these changes while continuing to run the business.
• Process silos exist because, while "many companies have achieved operational efficiencies and reduced costs of discrete business functions" much work remains to integrate traditionally separate but interrelated disciplines such as sourcing, finance and accounting to achieve even greater efficiencies.
• Market challenges include globalization, new competitive threats and rapidly changing customer requirements, so one important new role of technology "is to enable companies to better identify and respond to change. The ultimate role of IT organizations in this context is to help transform companies from static organizational and process models to responsive, resilient ones."

Out of style: The next big thing

For application vendors, Aberdeen says, the challenge is no longer to create "the next big thing." Instead, it is to deliver the next big return by identifying and applying those applications in their portfolio that will best map to the business processes clients are seeking to improve. To succeed, Aberdeen says vendors and their clients must now focus on five priorities:

• Benchmarking and gap analysis. Start by identifying potential areas for operational improvement by assessing the company's key performance indicators against those of peers inside and outside their specific industry. This, Aberdeen says, will lead to insights about how to integrate and transform core business functions.
• Identifying opportunities and measuring ROI. In the current economic environment, companies must find quick returns and then reinvest the savings in more strategic initiatives.
• Maximizing existing investments. Again, this tends to involve standardizing multiple instances of a software package to a single instance while consolidating the supporting database and computing infrastructure. Doing so "requires a thorough understanding of the relationships between application functions, data flows and business processes," which helps explain why customers expect their IT partners to understand not only the technology, but also the business it supports.
• Business architecture design. If IT design is to support business processes and enable business transformation, the parties implementing it must understand the architecture of the business itself so they can map dependencies and interactions. "Business architectures allow planners to see the impact of individual changes on the entire business and accelerate change while at the same time minimizing potential negative outcomes."
• Enabling and managing organizational change. This must now be planned for on the front end of a project rather than left for post-implementation training or not at all.

Aberdeen observes that "advances in data gathering and analytics, modeling and related technologies have helped to bridge the gap between business planning and process optimization and EBA (enterprise business application) implementation and systems integration. In the hands of trained individuals with appropriate vertical industry and business process expertise, such tools play an important role in identifying opportunities for improvement and better understanding the relationships between business and software transactions and information requirements."

In style: ISVs competing with SIs

But the focus on bringing IT and business into alignment is turning the once cooperative relationship between independent software vendors (ISVs) and system integrators (SIs) into an increasingly competitive one as both scramble for their share of a shrinking pie.

Traditionally, Aberdeen says, enterprises have preferred SIs when projects require software packages to be integrated with other third-party or in-house applications and when the scope crosses departmental or geographic boundaries. ISVs have been preferred for implementations of new product versions or additional modules of an existing implementation because vendors have direct access to the product developers and have more intimate knowledge of the product structure.

But as ISVs and SIs increasingly compete for the same business, are these old assumptions still true? Yes and no.

"Given that in the new global economy the fundamental challenges facing companies require more than just application expertise, the question of whether ISV consultants or SIs are better suited to implement enterprise applications would still favor the latter, especially in situations involving business transformation and large multi-vendor implementation and integration projects," Aberdeen reports. "On the other hand, ISVs would argue that their products are designed with optimized business processes and specific industry requirements built in and that the transformational capabilities of their software obviates extensive integration and customization." In addition, ISVs argue, when such activities are required their consultants are up to the challenge.

The bottom line, Aberdeen concludes, is not whether an enterprise choose an SI or an ISV, but "what service supplier, regardless of the category, is best able to help solve the business problem in question."

The new model: IBM

In evaluating potential suppliers in that context, Aberdeen suggests looking at some of the metrics that define the company it considers the gold standard for delivering business transformation capabilities: IBM.

Aberdeen believes that IBM has fundamentally transformed itself from a leading provider of technology and consulting services into a company "that aims to materially improve the effectiveness of its clients' businesses through the application of technology and process expertise." It does this with a 60,000-person Business Consulting Services unit, including more than 8,000 experts in supply chain and operations, nearly 6,000 in financial management solutions, more than 4,000 in CRM solutions and 3,000 specializing in human capital services.

Aberdeen points out that IBM has the world's largest global SAP practice with 11,000 consultants, the largest stable of i2 skills and resources (500 experts), 1,400 Oracle experts, 2,900 who specialize in PeopleSoft and J.D. Edwards, and 1,500 certified Siebel consultants.

Of course, having all of those experts doesn't mean a thing unless they have the processes and tools to do their jobs well. Here again, Aberdeen believes IBM shines.

IBM's approach is focused on a three-step process that involves optimizing the business model, aligning a client's people and organization and then creating the technology platforms to support the model and the organization. By putting the client's business needs ahead of the technology decisions, Aberdeen believes, IBM has become the model for what both SIs and ISVs need to offer their clients - and what clients need to demand of their IT providers - to meet the demands of today's fundamentally changed competitive dynamic.