Systems integration: a core capability of the modern corporation

TLDR

Leading firms are shifting to systems integration, building design and integration capabilities and managing supplier networks, with integrators moving downstream into services and component producers using it upstream, shaping strategy across product life cycles. The article traces systems integration from its military engineering origins to its current status as a core strategic capability of high‑technology firms. Using a resource‑based view, the article shows that systems integration enables firms to move selectively up‑ and downstream through simultaneous vertical integration and disintegration. The article concludes that systems integration is now a core capability of modern high‑technology corporations.

Abstract

Many of the world’s leading firms are developing a new model of industrial organization based on systems integration. Rather than performing all productive tasks in-house, companies are building the capabilities to design and integrate systems, while managing networks of component and subsystem suppliers. This article illustrates how systems integration evolved from its military, engineering-based, origins in the 1940s and 1950s to a modern-day strategic capability across a wide variety of sectors. Taking a resource-based view of the firm, the article shows how systems integration capabilities underpin the way high-technology companies compete by moving selectively up- and downstream in the marketplace through the simultaneous “twin” processes of vertical integration and disintegration. Systems integrators of capital goods move downstream into service-intensive offerings to expand revenue streams and increase profitability. By contrast, producers of high-volume components and consumer goods use systems integration capabilities to exploit upstream relationships with input suppliers. In both cases, strategic options and capabilities are shaped by the life cycle of each product. The article develops a clearer understanding of systems integration, arguing that it now represents a core capability of the modern high-technology corporation.