Service-Oriented Architectures Are Becoming Established

Feature Article | October 18, 2006 by SAP News

Challenges by Enterprise Size

Challenges by Enterprise Size

Both globally operating corporate groups and SMEs need to adapt their IT-supported business models and processes to new market requirements rapidly and flexibly. However, companies will not achieve the necessary agility with monolithic application landscapes in which integration costs can soar. Above all, they require improved and transparent business process management, shorter implementation times, and web service-based business processes that can be reused. These are the main challenges, according to a study – led by Peter S. Kastner, Vice President of Aberdeen Group – of more than 120 IT managers and decision-makers in large corporate groups and SMEs.

All aboard the SOA train

As a result, many have already jumped on board the SOA train, or are at least seriously considering introducing a service-oriented architecture. According to Aberdeen Group, 90 percent of those questioned in the survey said that SOA was on the agenda in 2006. One in five companies with sales of more than one billion US dollars had already been working with SOA for more than a year. For companies with annual sales of between 50 million and one billion US dollars, the figure is 6 percent, falling to three percent for small companies with sales of less than 50 million US dollars.
Market researchers Ovum and IT and management consultants Capgemini also arrived at similar results. Ovum polled more than 300 decision-makers in corporate groups and SMEs and found that 27 percent of the largest companies used the new technology and no less than 17 percent of SMEs said they used service-oriented architectures in some areas of the enterprise. According to Capgemini, almost one third of enterprises are currently executing SOA projects, 18 percent are still working on the design and 44 percent are in the concept phase.

Different requirements

Phases of Implementation

Phases of Implementation

It’s therefore no longer a question of whether SOA will arrive, but when. Service-oriented architectures are becoming established. With SOA Lite, SOA ERP, and Enterprise SOA, analysts at Aberdeen Group are already differentiating between three categories of SOA projects, which reflect the different requirements companies have with regard to SOA. Their considerations start from the premise that SOA projects in large groups are far more complex than those in the SME sector. Because of the wider variety of processes and applications, large groups need to meet the greatest number of integration requirements.
The SOA Lite category is dominated by midsize enterprises with sales of less than 50 million US dollars. These companies use practically no integration platforms and are introducing web services for the first time.
With SOA ERP, an enterprise can embed an SOA in its ERP environment to extract greater business benefit. In any case, analysts regard Enterprise Resource Planning (ERP) as the engine for SOA. Future ERP solutions will be increasingly service-oriented, so every user purchases the “ingredients” for an SOA with the software.
According to Aberdeen Group, only corporate groups with sales of more than one billion US dollars per year are relevant for the Enterprise SOA category. These enterprises have invested the most in SOA projects because of their more complex, cross-platform integration requirements, but at the same time extract the greatest benefit. 40 percent of enterprises in this category have already had several years’ experience with SOA projects, and Aberdeen Group therefore calls them the “most mature group.”

A concept to fit every size

SAP has the right answer for each of these categories on its roadmap for enterprise service-oriented architecture (enterprise SOA). An enterprise SOA consists of service-based enterprise solutions based on the SAP NetWeaver platform in terms of technology. Business logic is provided in the form of enterprise services, which can be quickly and flexibly combined to meet future challenges. This creates the necessary flexibility and openness to enable new business models to be implemented more quickly and processes to be automated.
In line with the roadmap, mySAP ERP is already fully service-oriented, as the software is based on the flexible and open SAP NetWeaver platform. As a result, mySAP ERP supports cross-enterprise business processes and also makes it possible to connect all core business processes with each other by means of an intelligent base. By 2010, all new functions of the ERP standard software will be available as optional enhancements. SAP customers can thus add new technologies and process innovations to their central business applications as required, and can therefore meet a wide variety of different requirements.

Achieving business and IT goals

Goals by Industry

Goals by Industry

Enterprises that introduce an SOA expect to see a rapid return on investment and a long-term fall in the costs for IT operation – for example through consolidation. On the other hand, an SOA in the form of a new and innovative business model should also bring direct business benefit and improve competitiveness. According to the Aberdeen study, on average in the industries more than 50 percent of enterprises primarily implement an SOA in order to develop and introduce new business models and processes, but in some cases, the different industries apply completely different weightings to their IT and business goals.
The all-important question now is whether enterprises can equally achieve IT and business goals with an SOA. According to a survey of more than 330 enterprises, conducted by analysts Ovum, the answer has to be: yes – to some extent. Ten percent of large groups and seven percent of SMEs assume that they have achieved all IT and business goals with an SOA. 36 percent of groups and 33 percent of SMEs have achieved either IT or business goals.
Aberdeen found that among companies enjoying above-average business success – “best in class” enterprises – the costs of an SOA implementation were around 11 percent below the industry average. The analysts at Berlecon Research also came up with interesting findings in an evaluation of SOA projects in practice, the results of which were published in anonymized form. All the enterprises report far more flexibility in their IT, which is often accompanied by cost savings. According to its internal calculations, one internationally active financial group has already saved 20 million euros because it has been able to reuse services and did not have to develop them from scratch. In the same way, a midsize IT service provider was able to reduce its development costs by around 50 percent and can now offer services more efficiently and economically, as well as with greater focus on the customer.

Good planning is half the battle

But care must be taken! Money first has to be spent before savings can be achieved. The costs of implementing an SOA should not be underestimated, as the work involved in defining concepts and guidelines and developing initial services is high. “The first SOA projects therefore need higher personnel and technical resources and budgets,” explains Joachim Quantz, head analyst at Berlecon Research. To successfully conclude SOA projects – which can extend over several years – tight planning and implementation are essential, as is efficient IT service management.
But SOA projects do not affect just the IT, they impact the enterprise as a whole. “While information technology sets the prerequisites in place, it is basically a question of company strategy,” says Martin Raab, Vice President at IT and management consultants Capgemini. Consensus between the IT organization and individual user departments is absolutely essential. An SOA team can plan, create, and implement organizational tasks far more efficiently and monitor compliance requirements if it consists of employees from both areas. The chances of success are good if an SOA project is linked with modern and flexible IT service management (ITSM) based on best practices such as ITIL. According to Ovum analyst Mary Johnston Turner, the likelihood of achieving IT and business goals is twice as high among enterprises using modern ITSM in SOA implementation than among those with “traditional” service management.
Whether it’s SOA Lite, SOA ERP, or Enterprise SOA, one thing is certain for Aberdeen analyst Peter S. Kastner: every SOA implementation is like a journey whose route has to be defined at the outset. If you change or stray from the path later on, you run the risk of causing the project to falter and costs to escalate, which may mean you do not reach your destination.

Dr. Andreas Schaffry

Dr. Andreas Schaffry

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