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| Can We Get Some Service Here? |
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| By Richard M. Melnicoff, Deepak K. Goyal and Gary A. Curtis | |
| Friday, 01 June 2007 | |
 Far-sighted executives are asking how SOA can help them solve business challenges. It’s not an atypical scenario for many CEOs: the eyebrow-raising budget request for new IT systems to replace most of the creaky legacy systems that support the company’s finance activities, with another multimillion-dollar proposal tacked on to fix the antique software that handles customer interactions. These days, most CEOs are acutely aware of the trade-offs inherent in such requests. They know the technology problems must be tackled before vulnerable systems come under more strain and the continuity of business operations is put at even higher risk. But they also know that the proposals have to compete for funds with many equally compelling business initiatives. The usual compromise? Negotiate for a better deal from the vendors or postpone the investment – fingers crossed – until the next budget cycle or after a major system meltdown. Now, however, with the emergence of SOA, there is a strong case to be made for less compromise and more collaboration with IT. SOA is a design approach for building flexible IT solutions. These SOA-based solutions enable business process components to be assembled and orchestrated more efficiently and to deliver distinctive business services and capabilities. By focusing on business processes and using standard software interfaces, an SOA environment supports rapid change without the need to rebuild software systems. It also provides the flexibility to access the best applications in the market, rather than creating new applications in-house. Generating Business Value With the advent of SOA, top management’s conversation with the IT leadership can – and should – be quite different. The CEO now has reason to ask why large, complex systems need to be replaced or rebuilt from scratch at all. As awareness of SOA’s advantages ripples out to business leaders, they can resurrect their questions about IT project proposals that previously had been too costly or too risky to run with. They can start asking how incremental funding of IT projects can generate real business value. And they can push hard to learn how quickly it can happen. By posing such questions, senior managers can start mapping out a new economic domain – one in which current technology investments can be extended for surprisingly little money, and where specific solutions can be deployed quickly and effectively. In fact, farsighted business leaders are already asking these questions. Armed with new insights into SOA’s potential, executives in industries as diverse as airlines, healthcare, telecommunications and financial services are beginning to revisit solutions to business challenges they really hadn’t expected to solve anytime soon. Further, a number of leading companies are discovering that SOA can be a gateway to business differentiation. It enables IT to support faster changes to existing business processes as well as the speedier creation of new processes, paving the way for new business capabilities and the resultant new sources of revenue. At the same time, SOA enables easier collaboration among business units and external partners. Equally important, SOA does not compromise existing IT systems. In fact, it acts as a tailwind for these systems, extending their usefulness at a cost that is manageable compared to what is needed for the usual replace or rebuild alternatives. A New Alliance A key goal of service-oriented architecture is to enable the different business functions of stand-alone or poorly integrated systems to interoperate so they can execute a business process. Thanks to SOA, support for the business process can be orchestrated by a separate mechanism rather than being hard-wired into the applications. It is critical to understand that SOA does not replace the business functions and the processes that are embodied by the applications. As such, SOA presents a compelling value proposition for delivering processes geared to business needs, rather than parts of processes supported by existing custom or packaged applications. SOA requires business and IT to work as allies, with closer and more frequent interaction. For its part, IT must develop a better understanding of business processes and needs. Similarly, the business side must learn what SOA can do. In fact, senior management already bears responsibility for ensuring that business managers are equipped to design and redesign business processes, with the right knowledge, skills and strategic perspectives. The CEO’s first priority is to discuss SOA’s potential with the company’s IT leadership. Of course, CEOs could be forgiven for filing SOA in the “heard it all before” folder. It is true that the promise of easily implemented, enterprise-spanning technology has surfaced regularly in the past few decades. But only in the most stable business environments – in, for example, heavy industrial manufacturing, where customer needs and business processes change relatively slowly – have those IT systems ever come close to matching the claims made about them. Unlike conventional application-integration technologies, SOA does not require IT departments to develop today’s many point-to-point interfaces between applications – the glue that, in effect, makes it difficult to change business processes, because doing so usually means modifying many applications and interfaces. With SOA, common business-level services are exposed and reused across the enterprise, and process orchestration is used to assemble specific business services into a single integrated process. These benefits can be harnessed with modest incremental spending. The proof of SOA’s impact is in the stories that companies tell – albeit with increasing reluctance when they see benefits they would rather their competitors did not have. What follows is one example of SOA at work. Far More Efficient A leading U.S. healthcare payer had been finding it hard to meet customer demands for new-product introductions because such initiatives required big changes to a range of mainframe-based custom legacy systems. Yet new products were imperative in this highly competitive corner of the healthcare sector as new consumer-directed programs and other healthcare payment options emerged. The healthcare company was burdened with cumbersome legacy applications – many with millions of lines of code – that were becoming even messier, patchier and therefore harder and much more expensive to maintain. As for the development of new capabilities, well, they were becoming increasingly expensive and taking too long to deliver. The problems added up to big constraints on the payer’s prospects for long-term growth. The decision to make a substantial investment in an SOA-based, end-to-end legacy modernization system was justified as a survival issue. Given the magnitude of the investment, it was a decision made not only by the CIO, but also approved by the CEO and his other direct reports and with formal sign-off by the board of directors. On the IT side, the initiative began with a cleanup drive to sweep out obsolete and duplicate code. Meanwhile, the business users of IT had already started drafting their vision of the future of the healthcare claims business before the SOA road map was drawn up. With those elements in place, the IT group began defining the SOA components that would allow new business process applications to be built, adding a crucial governance component to the new approach to application development. The first phase of the project is still underway, but expectations are high that the delivery of new capabilities to customers will be far more efficient. Regardless of whether customers have HMO plans or indemnity based healthcare, the payer’s more flexible system will enable easier online self-service as well as smoother transactions with customer service staff who can access more data more easily. The healthcare payer is also on track to get new products to market far faster than before, and with lower costs to maintain the applications that support the products. For a variety of reasons, many IT solutions fall short of enabling organizations to operate at the efficient frontier; that is, delivering the desired business value at the optimal cost point. There are three target zones for optimizing business value and IT cost. The role of C-level executives is to help their business and IT organizations evaluate options and choose the right target. A CEO To-Do List How should CEOs respond to the opportunities that SOA presents? And how should they be equipped to respond? Let’s dispel one notion right away: Although business leaders do need to be ready for deeper involvement in discussions of technology’s changing role, they absolutely do not have to immerse themselves in technology arcana. The focus must be on business processes. Here are some key action items: • Get curious about your company's plans for SOA – A first priority is to discuss SOA's potential with IT leadership. • Revisit problem areas – How can those projects be tackled with an SOA approach? • Make sure the efforts are practical – It is crucial that CEOs can address the practicalities of implementing SOA. USBR Richard M. Melnicoff is the managing director of the Accenture Strategic Information Technology Effectiveness (SITE) practice in North America. He can be reached at richard.m.melnicoff@accenture-com. Deepak K. Goyal is a partner in the Accenture SITE practice. He can be reached at This e-mail address is being protected from spam bots, you need JavaScript enabled to view it '; document.write( '' ); document.write( addy_text72866 ); document.write( '<\/a>' ); //-->\n This e-mail address is being protected from spam bots, you need JavaScript enabled to view it Gary A. Curtis is the global co-lead for Accenture Technology Consulting. He can be reached at This e-mail address is being protected from spam bots, you need JavaScript enabled to view it . |
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