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Is There Real Business Value Behind the Hype
of SOA?
The No. 1 business priority for
CIOs in 2006 is business process improvement - implementing
technology to help the business become more streamlined and easier
to do business with. The good news is that IT executives realize
that collaborating with business leaders to drive business process
improvements is vital to company success; the bad news is that even
though business/IT alignment has been a top priority for the past
eight years and IT organizations are transforming, the issue of
business/IT alignment remains.
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Alinean CEO Tom Pisello finds ROI on both the
business and the IT sides when service-oriented architecture is
employed.
This article was also published
on Computerworld »
Learn how to quantify the value
of SOA to prospects and customers - with Alinean's
ROI Analyst
and ROI
Calculator »
Alinean develops and launches SOA Planning Guide for TIBCO
» |
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Now comes service-oriented
architecture (SOA) with promises to change the way that IT helps
drive business process improvements and even how IT and business
work together. The idea behind SOA is that a services-centric
application and IT infrastructure can be assembled flexibly to
support changing business demands, growth and innovation. But is
SOA just another vendor initiative to sell more hardware,
software and services, or is it truly an industry-changing
construct? In other words, is there real business value behind
the hype?
SOA is being sold as a flexible way to configure all IT assets,
both current and future, so that each is available as a service.
SOA is supposed to provide the foundation for rapid, dynamic
adaptation to changing business conditions. |
The ills SOA is meant to cure
are well known. Application and infrastructure investments have
created islands, with applications developed to support a specific
business function or need -- a payroll application, say, or an
order-entry application. The IT group works with the business to
identify a specific business process need, then procures, develops
or customizes software to solve the problem. It deploys the software
on dedicated server and storage hardware. Later, when the business
realizes that these islands need to communicate and interact with
one another, large integration projects are undertaken. And when the
applications are modified, vendor enhancements, upgrades and support
are all in jeopardy. In the end, much of the dedicated capital
investment in hardware and purchased software has been
underutilized, highly customized and inflexible to change.
With SOA, the organization begins by trying to better understand
business processes, mapping out various process steps and then
devising Web service-enabled applications and integrations in
support of these steps. Process improvement has its roots in the
Total Quality Management movement in the late '80s, but the goal of
process automation wasn't possible until the Internet became part of
a global network that can provide a foundation for
program-to-program communication and standards-based information
exchange. Today, Web service enablement allows for application
components to deliver data and processing to other applications. And
as the library of service-enabled applications grows, each service
can be reused to optimize other business processes.
Visa offers a real-world example of an early SOA success story.
Member banks had to process cardholder disputes via a paper system.
Automating the process was difficult because the banks had
incompatible back-end and legacy systems. SOA allows direct
communication between member banks and the back-end systems,
simplifying transaction research, dispute case search and retrieval,
and requests for copies of original paper receipts. Savings are said
to total $52 million a year in direct operating costs and $300
million in ancillary savings. What's more, new projects have been
able to reuse services from this project, helping to reduce
development time and risks.
Grass-root implementations of SOA such as this example are typical.
As the deployments prove their value to the organization, they grow
organically. SOA
Drives IT Savings for Quick Payback
 How can a typical organization expect to benefit from SOA? Most
organizations demand that investments have a quick payback. One of
the easiest ways to justify SOA is to look for near-term savings.
These are typically realized by IT, helping to improve application
integration and streamline development. Some examples follow:
Application integration savings: Today, applications are
typically custom-integrated point to point, and each integration
requires development and testing. Having a service-oriented
interface to each application can save 30% to 40% on each
integration point. Rather than point-to-point integration, SOA has a
hub-and-spoke configuration, reducing integration points
substantially.
Reuse of applications: Web services can be reused by other
applications. For example, an application to retrieve and report on
employee data from a human resources database can be used as a
service by identity management systems, employee portals and other
applications, rather than redeveloping the code or embedding it in
each of these applications. The direct benefits are immediate
avoidance of development-and-test labor costs. And as an
organization moves more applications to SOA, reuse benefits grow.
Short-term savings are typically 5% to 10%, growing to 40% or more
for an enterprise-wide deployment.
Reduced project risks: Success rates for application
development have been steadily improving, but 15% of all projects
are still canceled prior to deployment, and another 35% fail to meet
schedule, budget or feature/function requirements. With reduced
complexity of integration and application reuse, project risk can be
reduced.
Improved application quality: Reducing application
integration complexity and allowing reuse also improves application
quality. There are fewer issues with deployed applications and
improved customer service levels and satisfaction.
Deployment savings: SOA limits platform dependency of
applications, which streamlines the deployment and update processes.
Improved asset utilization and consolidation: Beyond Web services
and applications, SOA enables service-oriented infrastructures,
where applications are supported by middleware to optimize
performance and can be run in a virtualized hardware environment,
optimized by workload demands -- the right application on the right
server at the right time. This can help improve the utilization of
application servers to 80% or more, reducing server capital costs,
administration and support.
Substantial Business Benefits Add Up for SOA in the Long Run
IT savings are relatively easy to quantify and are realized early in
the SOA investment, but the more substantial benefits of SOA are the
business benefits -- helping to automate and streamline business
processes, and providing new applications and faster responsiveness
to changing business needs. Here are a few of the business benefits
organizations can bank on in the longer term from SOA:
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Improved productivity:
Automation can eliminate process steps, reduce the time it
takes to perform remaining tasks and make it possible for
lower-skilled workers to perform higher-level tasks.
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Reduced exceptions and
costs of exceptions: Process exceptions must be mitigated
and resolved using costly labor resources, and there may be other
costs, such as shipping charges on returns or reissue check
charges. Worse are the costs incurred because a customer is lost.
By optimizing each process using SOA, process-exception rates and
costs can often be substantially reduced.
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Faster deployment:
Development projects can be completed faster, with less time
needed to conceive, design, develop, test and deploy new
applications. Processes can thus be improved more quickly, and
revenue-generating applications can be in use faster.
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Improved agility:
With SOA, companies can adapt quickly to unexpected market
changes and other variables. A virtualized infrastructure and
service-enabled applications make it easier to reconfigure
applications and processes and reuse assets when changes occur.
The flexibility can drive the organization to embrace change
proactively as a strategy -- for example, helping to make it more
able to absorb acquisitions -- or to respond better reactively,
making changes irrelevant to maintaining cost advantages and
meeting revenue forecasts.
Real ROI
The coverage SOA has received recently may make it seem like pure
hype. However, the benefits are tangible and substantial. Those who
have taken even minor steps on the road to implementing SOA are
reaping immediate IT cost reductions and incremental business
benefits. Those that have gone farther down the road, embracing
enterprise-wide implementation of service-oriented applications and
a service-oriented, virtualized infrastructure, are finding that
they have made a fundamental change in the way IT and the business
invest in technology and work together. 
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The ROI of RFID in the
Supply Chain
Although RFID implementations are not
without costs and risks, a number of companies in
manufacturing, warehousing and distribution and retailing have
achieved a 200 percent return on investment.
Many organizations that produce, distribute, handle or sell
goods are researching what RFID can do to improve operating
efficiency, reduce business risk and drive additional revenue
opportunities. According to Alinean Research, these early RFID
projects could cut supply chain costs by 3 to 5 percent and
achieve a 2 to 7 percent increase in revenue, thanks to the
better visibility and accuracy RFID provides.
Alinean studies show that on average, more than 90 percent of
projects require a formal business case justification in order
to gain approval. For an organization considering RFID
projects that might require significant up-front investment,
how can these general early adopter guidelines and case
studies be used to ensure that individual programs generate
positive business benefits and a tangible ROI? Most
importantly, does the value of RFID tagging exceed the
implementation costs?
RFID Defined
RFID is being implemented, along with key business-process
improvements in many industries, to reliably track goods of
all kinds—from cases, pallets and individual items in
manufacturing, wholesale distribution and retail applications,
to equipment and supplies in government applications, to
overnight mail packages and passenger luggage in
transportation and shipping. Many of these early adopters have
experienced the benefits of bar codes, but realize that RFID
can take supply-chain management to the next level. The
network effects of a synchronized supply chain will result in
numerous benefits, including improved scan reliability,
process automation and real-time information access.
[more...]
 Read
the whole
story:
Shrinking the Supply Chain Expands the Return: The ROI of RFID in
the Supply Chain,
an Alinean White Paper
» |
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Click here to view
Alinean study on the ROI of RFID featured in IT Business Edge
Click here to view this study as published in the RFID Journal »
----------------------------------
Case studies developed in this white paper were developed by
Alinean to explore the business case for RFID, quantifying the
potential value of RFID for various industries and business
processes. Alinean used RFID ROI modeling tools based on
specific organization case studies.
Learn how to Maximize the return on your
Business Value Selling program investment with a customized
White Paper » |
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WHAT'S NEW...
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Who should attend:
IT managers, IT staff, database managers, database administrators,
PDM professionals, CAD engineers, engineering managers
Speakers:
• Tom Pisello,
CEO, Alinean Inc.
• Sharon Bjeletich,
SQL Program Manager,
Microsoft Inc.
• Gareth Evans,
Global PDM Program Mgr,
Hewlett-Packard
Company |
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WEBINAR:
The Future of Product Data Management -
Is it Time
to Make a Move?
Most technology buyers require sound financial analyses before
approving
major purchases, but lack the tools, expertise and
underlying research required
for high quality financial analyses.
HP and Microsoft have partnered with Alinean, who has over 10 years
experience in analyzing
the TCO and ROI of technology solutions, to
build business cases for server consolidation,
migration and
re-hosting projects.
Understand the technical and financial benefits, costs, and risks
before making a change and
make a high confidence decision about
whether to move forward with a migration.
Originally broadcast live on Nov. 30, this on-demand informational
web-based seminar
addresses these questions:
• What things should I consider when making a PDM transition?
• How do I measure my total cost of ownership with my existing
infrastructure?
• What factors influence total PDM database management costs?
Click here to view the Webinar
»
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Alinean launches several new ROI Analysis Tools
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 2007 Value Expert(TM) Certification Courses Announced
Make it official! Get Certified
in Business Value Selling by attending one of IDC
| Alinean ValueExpert(TM) Certification courses. The sessions are held regionally throughout the year. Upcoming
classes:
»
February 28, 2007 (Wednesday) in Orlando, FL
»
April 26, 2007 (Thursday) in San Francisco, CA
»
June 19, 2007 (Tuesday) in Boston, MA
Register for one of our next sessions by
calling 407-382-0005 x332 or via email at
roiexpert@alinean.com.
Hurry! Space is very limited.
For more information
& a complete schedule of upcoming classes, click here »
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Alinean 2007 Annual Client Summit
Please join the team at Alinean and IDC on Thursday,
February 22, 2007 in Orlando, Florida for our annual client summit.
The goal of our annual summit is to gather Alinean’s principal
practitioners from all over the world, to converge and communicate
ideas for improving selling effectiveness using ROI/TCO techniques
and software models. The meeting will include a collaborative
session on best practices and an exchange of user knowledge with our
group of experts. Attendees will have the opportunity to present their
deployments, best practices and experiences.
Alinean is committed to ensuring your success - please join
us for this insightful event. RSVP to
ROIexpert@alinean.com.
Space is limited.
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Learn how Alinean can turbo-charge your sales with a customized business
value selling solution.
Visit our web site at
www.alinean.com
or contact us at 407-382-0005 or
ROIexpert@alinean.com.
Alinean - The Business Value Selling Experts
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866.693.6271 
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