Solutions for Integrated Systems

Background

Integrated systems are becoming prevalent in a large number of industries (Davies, Brady, & Hobday, 2006; Galbraith, 2002; Oliva & Kallenberg, 2003). The diffusion of integrated systems is particularly significant in the IT sector (Gager, 2006; Gerstner, 2002), where they are rapidly transforming the competitive landscape of the industry. In order to remain competitive in a sector where value creation is shifting from hardware manufacturing or software development to service-oriented activities (Dolbeck, 2007), product and service providers face increasing pressure to supply bundled systems rather than individual subsystems (Tidd, Bessant, & Pavitt, 2000). These bundles, often linked by proprietary interfaces, tie customers into a solution with a single point of purchase and after-sales support, and guarantee higher margins than stand alone products or services (Wise & Baumgartner, 1999).

Whilst economically appealing, the provision of bundled products and services poses a number of challenges for IT firms. In this new competitive environment, firms become integrators of components, resources, and services that are developed by external organizations (Brusoni & Geuna, 2001). Supplying integrated systems thus entails a change in the boundaries of the firm. It also requires a redesign of the firm’s offers and the reconfiguration of its capabilities (Ceci & Prencipe, 2008; Davies et al., 2006). Compared to firms focusing only on either products or services, integrated systems providers must develop multiple capabilities to address a broader set of customer needs. They must also carefully evaluate the trade-off between the development of specialized and generic capabilities. In today’s hypercompetitive markets, the development of multiple capabilities may dilute the firm’s core competences and, ultimately, erode its sources of competitive advantage.

Restructuring the organizational architecture of a firm, reconfiguring its internal capabilities, and developing new competences are challenging tasks that can be approached through different strategies. Firms in this industry have developed a variety of different capabilities and have historically followed different paths to become integrated systems providers (Ceci & Masini, 2011; Davies et al., 2006). However, none of the strategies adopted has yet emerged as generally superior. For instance, firms originally specializing in manufacturing must integrate their manufacturing-oriented competences with service-oriented capabilities. However, the delivery of services requires organizational principles and structures that are almost completely new to a product manufacturer. By the same token, service companies that choose to offer bundles of products and services also need to acquire new competences.