Future Framework for IT Savings

The world's largest companies can save up to $53 billion in information technology (IT) spending over the next five years by implementing service-oriented architectures (SOA), according to recent research from Aberdeen Group. Beyond question, this is a bold statement and one that means very little to the Editorial Advisory Board (EAB) of Consumer Goods Technology. Still, the author of the report, William Mougayar, stands behind his research.

Defining SOA
Feedback from our EAB indicates that many members are in the dark about SOA, some even suggesting that it's just another buzz word to complicate an already confusing IT marketplace. Others derided the research outright, claiming that any IT exec worth his or her salt is obviously employed to deliver superior service with the help of robust technological tools. Others had no idea what an SOA actually is.

According to a one definition, Service Oriented Architectures provide patterns for the design, development, deployment and management of a loosely coupled business application infrastructure. Within this framework, business functionality is published, discovered and consumed as part of a business ecosystem of network-aware and reusable technical and business services.

Regardless of SOA familiarity, the reaction from the EAB backs up the Aberdeen research titled, "The SOA in IT Benchmark Report", which says business benefits of SOA remain largely untapped. Of the nearly 300 IT and business executives that formed the basis for this report, only 16 percent of companies have had more than 24 months of experience with SOAs.

"Companies cannot expect business benefits from SOA before the IT department has been able to assimilate what SOA can do for them," says William Mougayar, VP and service director for Aberdeen Group's CIO's Strategic Agenda practice, and author of the report. "The number one cascading effect of SOA's benefits for IT is the development of new products and capabilities, but this is only possible after full-lifecycle SOA implementations."

Aberdeen also found that companies that have had experience in the full cycle of SOA implementations have been able to quantify their benefits in three major categories that include speed of deployment, easier integration and faster customization and updates.

SOA and Product Innovation
Savings from SOA implementations, according to Mougayar, result in two major undertakings: Reinvestment in new IT capabilities and direct business impact from SOA enablement to generate new revenues or enable new business capabilities, such as product innovation.

"It's no surprise that the top factor for implementing SOA, cited by 50 percent of survey respondents, was 'development of new capabilities'," says Mougayar.

Product Innovation can be affected by SOA because SOA speeds up IT implementation, in addition to allowing business demands that are dictated to take effect much faster. So, when IT costs are lowered, and IT is more responsive to business demands, product innovation benefits from a better lubrication of collaboration.

Direct Cost Savings
Where do the direct cost-savings come by implementing a robust SOA? Quantifying the results from SOA projects is a key requirement for proving its value and securing further commitments on expanding its footprint. Based on the Aberdeen report, the savings can categorized into three areas:

Speed of deployment. One manager of a high-volume application development center cited 40 percent faster implementation than competitors. For this respondent, the software development time did not go down with SOA. It was the same, but the overall deployment period was drastically shortened due to reductions in the QA, build and test cycles. Overall, this resulted in a 40 percent faster deployment period.

Ease of integration. SOA forces users to separate application components into logical services. There is less reliance on API's for integration purposes. With an SOA approach to integration, you don't need to get into the application's complexity to integrate with it. Since you are dealing with the encapsulated services, the bugs are not as critical because you're not breaking-up the application.

Faster customization. SOA makes it easier to customize or upgrade applications with a step-wise fashion. The concept of live changes during run-time gets closer to reality because it is an integral part of the design requirements. One respondent from a large bank saw a significant outcome after implementing an entire customer-facing Web application with a total of 120 services. They are now able to roll-out four to six major releases per year, instead of two to three before an SOA, so this has become a competitive differentiator.

Getting Started
So how, exactly can companies reap business benefits from an SOA before it is fully implemented? Mougayar suggests avoiding the common pitfalls which are implementing SOAs in "too big" or "too small" environments.

"It's tempting to do small projects that have less risk potential and less up front costs, but often, they will fail to make a visible impact in terms of business value or even IT value in some cases," says Mougayar. "And taking a strategic approach too early in the experience-cycle may be too risky- as it will require too many resources to pull together, a higher up front cost and a longer pay-back period."

The best way to start is with a medium-scale project that has visibility and touches a customer or supplier process where there is value that can be seen. A lot of the value of the SOA application is in the "change-time" cycle, after the launch. On the first day of a roll-out, an application may look the same to an end-user if written with SOA or Cobol from 25 years ago. How quickly, inexpensively and easily changes can be made determines value for the business.

SOA Solutions to Consider
Consumer goods firms looking for a turn-key consulting/SI approach to SOA, should check out the companies such as BearingPoint, Capgemini, Fujitsu, IBM, MW2 Consulting, ThoughtWorks and xWebServices. Leading consumer goods firms have also found SOA success in webMethods.

Johnson & Johnson, the world's most comprehensive and broadly-based manufacturer of health care products, is a highly decentralized organization with numerous operating companies. Each operating company has its own processes, applications and data that limit collaboration and knowledge exchange across operating companies. Johnson & Johnson's Integration Services group turned to webMethods to integrate the myriad of business processes and applications shared between each operating company, which allowed the company to operate more holistically and efficiently as a result.

Johnson & Johnson launched a major initiative using its Total Business Integration methodology to bring together its operating companies and partners, a monumental endeavor that could not have succeeded without webMethods Fabric, which is the integration platform that enabled Johnson & Johnson to share information and streamline business processes. Aligning the business processes of its many operating companies as one has made a significant impact on the company's bottom line.

According to Dave Kuttler, Worldwide VP of Information Architecture at Johnson & Johnson, as his company consolidates and executes on its global strategic plan, the ability to create substantial, rich and strong partnerships becomes paramount to the company's success.

"webMethods has become a strong partner for J&J," says Kuttler. "We use webMethods to help enable and change the way we deliver products and services in the market. They keep us agile and on top of what is going on because we can use their products to enable speed-to-market and meet the customer-changing requirements as they occur."

Unless more leading-edge firms such as Johnson & Johnson continue to adopt the technology fabric that constitutes a sound SOA strategy, this sector will remain one of the best kept secrets in the consumer goods industry.