The Strategic Promise of SOA

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Editorial Director and current Faculty Member,
Tom Dwyer is the Editorial Director and current Faculty Member of He writes, presents and consults on topics that include Business Process Management, Business-to-Business, Enterprise Application Integration, and Service-Oriented Architecture. Mr. Dwyer has conducted primary research and published extensive reports on the Application Software Infrastructure markets. Before becoming an industry analyst in 1998, Mr. Dwyer spent 28 years in the computer industry in various engineering, marketing, professional services, and sales functions. He was a co-founder and general manager of a new software venture at Xerox, which became a wholly owned subsidiary. Mr. Dwyer has held senior management positions in marketing and engineering at Wang Laboratories and Prime Computer and has developed and launched more than 15 software products.

How are the business and IT environments changing to meet the challenges of today’s fast-paced global business landscape?  They are both striving to become more agile.  IT is being focused more on increasing profits, revenues and efficiency than just reducing costs.  The business is examining ways to improve customer satisfaction and competitive advantage by collaborating throughout the value chain to deliver more innovative and competitive products and services.  The orchestration of new services among partners and suppliers located throughout the world requires an IT infrastructure that is less rigid and fragmented.  One that does not hinder what the business wants to accomplish. Companies can no longer tolerate a disjointed view of the customer, inconsistent common services across a stove-piped product portfolio, long business process cycle times, conflicting customer information, and missed cross- and up-sell opportunities.

Enterprises are continually striving to meet business challenges – investing in IT to deliver periodic improvements.  In the past five years many web services and SOA initiatives have been part of the IT projects budgeted to help the business achieve one or more of its objectives.  For example, many call center operations have been transformed into profit centers using SOA to integrate information from disparate applications and databases to deliver a real-time, global view of a customer so that proactive cross-selling and up-selling can be achieved from a service call.

The inherent characteristics of SOA help organizations meet their strategic goals of speed, flexibility and innovation.  Hence, SOA is beginning to achieve strategic significance in the corner office.  CIOs are embracing it as a way to meet some of the pent-up frustrations from CEOs and Line-of-Business executives.

By organizing enterprise IT around services instead of around applications, SOA provides key benefits:

  • Improves productivity, agility and speed for both Business and IT Allows IT to deliver services faster and align closer with business
  • Allows the business to respond quicker and deliver optimal user experience
  • Masks the underlying technical complexity of the IT environment resulting in more rapid development and more reliable delivery of new and enhanced business services
  • Rapidly introduce differentiated products to the market
  • Deliver consistent products and customer experiences across all channels
  • Lower operating costs by improving operational efficiency
  • Comply with new and stringent regulations
  • Support new customers resulting from mergers and acquisitions, and ensure real-time or near real-time customer information is available through all channels

The promise of agility – enabled through adoption of SOA principles – goes beyond a single company to its entire value chain.  Interacting more directly with value chain participants,  securely sharing critical business information, and more rapidly responding to business events can reduce process cycle times, improve operational efficiency and deliver competitive advantages. With business processes organized and exposed as services over the Internet and an SOA infrastructure in place to manage them, companies are in a position to capitalize on a service-oriented approach to their business engaging the entire value chain.

For example, utilizing SOA concepts an agile retail enterprise can:

  • Analyze demand data, and relay changes in procurement requirements to suppliers more quickly, getting the most appropriate products, in the most appropriate quantity to the retail locations at the most appropriate time
  • Access customer information, to quickly recognize its most valuable customers, and offer them premium services, be it targeted discounts or cross-sell/up-sell opportunities
  • Utilize published logistics data to track orders in process, either going from the supplier to the warehouse, or the warehouse to the retail store
  • Afford on-line and in-store customers the latest product availability information, based on ubiquitous inventory information.

One of the most important investments a company can make is in optimizing its Supply Chain.  SOA provides a method by which modern B2B commerce can be implemented in a flexible and economical manner.  Optimizing a supply chain starts with electronically exchanging business documents in support of core B2B transactions such as sending and receiving purchase orders, backorder status inquiries, shipment notifications, invoices, and electronic funds transfer payments. Advanced Transactions use electronic documents to further optimize a supply chain.  For example, transactions such as Available-to-Promise, Capable-to-Promise and Capable-to-Deliver enable support for Advanced Global Order Promising – increasing a company’s percentage of on-time delivery and improving the ability to make accurate and aggressive order promises to its key customers. Once the basic supply chain transactions are digitized and automated, the possibilities for further optimizing the supply chain can be accomplished by gathering and centralizing information about products and trading partners.   By improving the ability to more precisely match the availability of products and shippers in specific geographic regions with the location of a company’s partners ordering the goods, a company can reduce delivery times as well as shipping and warehousing costs. Another important value of exchanging and capturing information electronically is improved visibility and analytics – higher-quality information about how well the supply chain is performing.  For example, real time views of inventory levels ensure that orders are filled completely and that reliable delivery promises are made.  Electronic tracking of transactions enables potential problems to be surfaced more quickly. The end goal of supply chain optimization is to enable real time collaboration among suppliers and buyers to ensure that all members of the supply chain avoid order and delivery problems.  Advanced supply chain management techniques such as Vendor Managed Inventory (VMI) and Collaborative Planning, Forecasting and Replenishment (CPFR) illustrate a strategic alliance and commitment among the members to continually provide the most competitive supply chain. Supply and demand management consists of business principles that manage the interrelationship between predicting demand for a product and fulfilling the demand.  The globalization and outsourcing of supply chain processes and activities has made it more difficult for companies to manage the supply and demand network. Significant advancements in technology such as RFID and XML coupled with SOA and increased processing power have made it easier for companies to manage the increased complexity globally.

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