CIOs are chasing a distant dot on the horizon called agility (the ability to change IT quickly to fit business needs) and the dot is receding.
A recent survey by the Business Performance Management Institute found that only 11 percent of executives say they’re able to keep up with business demand to change technology-enabled processes—40 percent of which, according to the survey, are currently in need of IT attention. Worse, 36 percent report that their company’s IT departments are having either "significant difficulties" (27 percent) or "can’t keep up at all" (9 percent).
Service-oriented architecture, or SOA, is the latest in a long line of highly hyped strategies designed to bring that disappearing dot back into view. By mirroring in technology important chunks of business processes ("credit check" or "customer record," for example), SOA promises to give companies a portfolio of services that can be mixed quickly and matched expeditiously to create automated business processes, thereby reducing application development time and costs by as much as 50 percent.
From its humble origins in object-oriented design and component-based software development methodologies, SOA has moved into a rarefied realm of expectations. SOA, the story goes, isn’t merely designed to remake IT; it’s going to be a magic bullet to transform the businesses that IT serves too.
CIOs, usually a skeptical crowd, are helping drive these expectations. According to a recent Forrester Research survey, 46 percent of large-enterprise SOA users (and about 27 percent of SOA users at midsize and smaller enterprises) said they’re using SOA to "achieve strategic business transformation." Surveys from other research companies report the same enthusiasm, with "competitive advantage" being the most popular expectation in a Summit Strategies survey, and the ability to "develop new capabilities and products" topping the list for Aberdeen Group’s respondents. In a recent CIO/Computerworld survey, 77 percent of respondents said SOA would result in greater business flexibility.
And it may do all that and more.
Just not yet.
Even Harder Than You Think
SOA is far from being a proven concept (only 16 percent of companies in the Aberdeen survey have more than 24 months of experience with SOA technologies), and the companies that have had the most success with it so far are those that always have success with technology: big companies with big IT budgets whose business is technology-based (think telecom and financial services). They also tend to have supportive, technologically sophisticated business leaders.
For companies without these advantages, SOA may not be the panacea it’s being made out to be.
That’s because SOA demands a bigger investment and a longer strategic commitment than CIOs may think. The tactical part—service-oriented development—is a surmountable technical challenge. But the strategic part—creating an architecture based on a portfolio of services—asks that CIOs make a compelling case for enterprise architecture, a centralized development methodology and a centralized staff of project managers, architects and developers. It also requires a willing CEO and executive staff to pave the way for IT to dive in to the core business processes of the company. Understanding those processes and getting buy-in on enterprise sharing are the real sine qua nons of SOA-based business transformation.
For companies without technology products, big budgets or business leaders who chant the CIO’s name every time he comes into the room, SOA is neither a guaranteed path to business transformation nor, in some cases, even desirable. For smaller companies, for companies that have made big bets on integrated application suites and for companies that already have solid application integration strategies in place, SOA isn’t a "when," it’s an "if." CIOs need to pursue an SOA strategy carefully because the service development and architecture planning pieces of SOA are distinct but not independent—they need to be considered and executed in parallel. Services built in isolation, without taking into account the architectural and business goals of the company, may have little potential for reuse (one of SOA’s most important benefits) or may fail outright. Grand architectural planning exercises may drag on endlessly, without providing any real business benefit.
And that dot on the horizon, agility, is difficult to quantify. "We can’t say, Do SOA because it will give you a much more flexible set of systems," says Daniel Sholler, Gartner’s vice president of research. "There’s no metric that says if I’m more agile I will save X percent. The number-one difficulty with SOA is that it’s hard to get the ROI down to the spreadsheet level." Indeed, a survey by integration software maker WebMethods found that the top two inhibitors to SOA were, respectively, a lack of general knowledge and the difficulty of quantifying its ROI.
Indeed, there’s no inherent ROI in any technology strategy, cautions David Johns, senior vice president, CIO and chief supply chain officer for Owens Corning, a building materials manufacturer. Therefore, he says, "Developing a service-oriented architecture is not our goal. Driving productivity and driving waste out of the supply chain are the goals, and we’ll look at technology solutions from that aspect rather than what the industry may say is the latest, greatest thing."
Some are even more dubious. "Companies are creating a complex bureaucracy around something that 90 percent of the time is overkill," says Thomas Gagn¿CTO of InStream Financial, a software and financial services vendor. "Why are we replacing technology and obsolescing our employees’ skills faster than we’re realizing the benefits of the previous, now supposedly inadequate technologies?"
That’s a difficult question CIOs need to ask themselves before entering SOA’s business transformation revival tent. Here are a few more:
The Questions, The Answers
Q: SOA is a technology architecture. How do you make a business case for a new technology architecture?
A: You don’t. "Don’t talk to the business about SOA because the business doesn’t care," says Forrester Research analyst Randy Heffner. The business’s interest in SOA extends only as far as it cuts the cost of applications and gets them running faster. But simply rewriting code in the form of a service doesn’t deliver those kinds of benefits. To start down the road to building an SOA, there needs to be multiple redundant IT applications that can be consolidated into a single service, or the possibility for multiple areas of the business to use a single service. To speak to the business, quantifying the redundancy helps. "I know for a fact that the same data is being extracted by at least 26 different applications in our environment for different purposes," says Jeff Gleason, director of IT strategies for Transamerica Life Insurance, annuity products and services division. "We’re extracting it and paying to store it in all those different places. Just getting rid of those support costs is a big deal."
But there is also a flexibility quotient to SOA that can add value—if it is focused on a critical business process. At ProFlowers.com, for example, there are no redundant applications or multiple business units clamoring for services. But splitting the flower ordering process into discrete services means each component can be isolated and changed as needed to handle the spikes in demand that occur around holidays, according to ProFlowers CIO Kevin Hall. When ProFlowers had a single, monolithic application handling the process, a single change in the process or a growth in transaction volume (on, say, Valentine’s Day) meant tearing apart the entire system and rebuilding it.
In the new system, a server farm responds to spikes in activity during each phase of the ordering process by transferring storage capacity to the specific service that needs it most. The system is much more predictable now, and there have been no outages since the service-enabled process was rolled out beginning in 2002, according to Hall. "Because we can scale horizontally [more servers] and vertically [splitting up services], I don’t have to buy all the hardware to serve every service at its peak load," he says. "You don’t have to be able to eat the elephant in one bite anymore."
Q: When is SOA not a good idea?
A: Complexity is the prime prerequisite for SOA. Small companies that are consolidated on a single infrastructure (like Microsoft) and don’t have complex application integration requirements are not candidates for SOA. Larger companies whose application infrastructure comes mostly from a single vendor (60 percent or more, according to experts we spoke to) will want to think carefully about whether building their own SOA is necessary or wise.
Then comes speed, and the need for it. If processes don’t need to change quickly, then transforming IT in order to be able to change them more quickly is pointless.
At Owens Corning, 75 percent of its software applications come from SAP. Owens Corning’s products are manufactured and sold in similar ways around the globe, which means CIO Johns has long driven a strategy of business process integration through SAP’s applications. "SAP is the integration strategy," Johns says. His goal is to unify all of the company’s worldwide divisions on a single version, or "instance," of SAP running on a single database. He is also monitoring SAP’s strategy of service-enabling its applications to create a ready-made SOA for its customers. (See "If You Can’t Beat ’Em, Integrate ’Em," Page 58.)
Global manufacturer Whirlpool has also placed a big bet on SAP and global process integration, which, to Esat Sezer, the company’s corporate VP and CIO, makes more sense than application integration. "I’m not dealing with that anymore," he says. "I have outsourced that to SAP. I look forward to SAP handling integration requirements that I used to have to handle myself."
Q: Creating a service requires more planning and design than traditional application development and integration. How much extra does service-enablement cost?
A: Forrester’s Heffner estimates that the extra work involved in service-oriented development can range from 30 percent to 100 percent more at the design stage, which makes up 10 percent or less of the overall cost of an application project. The extra effort is necessary to create a service that can be used in many areas of the business, each with their own particular needs. Transamerica’s Gleason says that, for example, services that deal with insurance premium payments from customers generally need to accommodate multiple delivery channels—say, a website, a bank wire transfer or a call center—depending on the process for each business unit. Understanding the ways each unit wants to consume the services is part of the design work and is critical to getting units to agree to use the same service.
But businesspeople are often aware of the extra effort required for services and may not want to pay for them. "I’ve heard this a hundred times," says Gleason. "A business sponsor says, ‘Well, if you’re going to make me pay for creating this service the first time, you just blew away the cost benefit of my project, and it’s not going to get sponsored. And so I want you to go ahead and hard-code the integration because I need that functionality.’ But then my job is to help them see how creating that service is not really a project artifact; it is a business architecture artifact. We’re creating a piece of our business infrastructure that can be reused and changed. Once you get people to understand the requirement for doing that, then they stop worrying about whether it costs more to create it initially than it would to hard-code the thing."
Q: How much reuse can I expect from services? And what does that mean in real dollars?
A:¿Reuse of services can vary widely and depends on the rigor of the design, which in turn depends on the abilities and experience of the developers and project managers, says Heffner. Reuse also depends on the level of architectural planning that surrounds the specific service. For example, a service has more chance for reuse if it is developed as part of a broad SOA strategy that includes uniform development methodologies, a centralized architecture planning staff and business analysts who can examine processes across the company and incorporate the unique needs of the business units into the design of the service. "If a service isn’t designed with knowledge of how other parts of the organization may want to use it, it’s unlikely that those groups will adopt it," says Gleason. Worse, designing a one-off service could lead to duplication of effort down the road. "You may need to create a second service to complement it because you don’t have time to modify the first, or perhaps you’re going to have to rebuild the thing because now it doesn’t meet your requirements," says Gleason. "In the long run, there’s no hope for business process integration, or business process management, if I don’t look at services from an architecture perspective."
But if a service can be reused even once, it can have an exponential effect on savings, according to Heffner. Even though services require more up-front design work, reuse means there will be no costs for design, coding or unit testing the next time around. Together, these steps account for about 40 percent of a software project cost.