Over the past three decades, manufacturers and other organizations using enterprise software applications have essentially created a series of independent silos of information that defy most integration efforts. As a result, Gartner Inc. (Stamford, CT) estimates that the implementation and installation of these applications can cost six times more than the purchase price of the application.
Service-oriented architecture (SOA) hopes to cut this cost dramatically. By placing all the applications in the same silo, they will share the same middleware and data, and possibly hardware. In most, but not necessarily all, cases this will be accomplished through the use of standard protocols such as Web services.
The result? Boston-based Forrester Research analysts Ken Vollmer and Mike Gilpin report that, according to early case studies, using SOA can reduce integration, project development and maintenance costs by 30% or more. Gartner estimates an implementation cost decline to roughly double the software cost.
Most of the savings come from component re-use. Also, less time is required to develop and maintain functionality, and there is more effective sharing of information across organization boundaries, both internal and external. But the savings do not come in a simple, linear fashion.
Forrester's cost analysis is based on a four-stage enterprise development effort:
(1) initial building stage
(2) integrating internal components
(3) enabling new integration channels
(4) integrating with trading partners
The initial construction stage of the application may cost more with SOA than with traditional methods, reports Forrester's Vollmer and Gilpin. The cost of defining the system components and the shared services may actually double the cost of the initial building stage of a project.
According to Forrester, the cost of SOA and traditional methods will be neck-and-neck in the second phase, but traditional methods will be noticeably more costly than SOA by the third phase. By the fourth phase, cumulative costs involved with SOA should be 30% below that of traditional methods.
Additionally, the cost of integrating with additional trading partners should be minimal, while they could be considerable with traditional methods.
By 2008, Gartner Group foresees the cost of implementation and installation falling to between $2 and $2.50 for each dollar spent on the purchase price of an application, versus the current cost of almost $6.
Note that the benefits of SOA will not be as evident if the overall integration environment is not properly managed, adds Forrester Research; especially the model of business services and the documents they operate from.
SOAs Leverage Web Services
On the other hand, SOA is usually (although not necessarily) based on Web services -- and Web services are not easily and quickly deployed, reports AMR Research, a Boston-based analyst and market research firm.
A recent poll by AMR found that experience, rather than investment, was the gating factor. Most of those enterprises that were implementing Web services were investing less than $100,000 per year.
And while having five Web services in operation does not sound like much, only 39% of those enterprises that had two or more years of Web services experience had at least that many running. For those with six months to two years' experience, the amount fell to 18%. For those with less than six months experience, the amount was only five %, according to AMR Research.
As for the return on investment achieved by those Web services, most of the enterprises that responded to the AMR Research poll did not even track ROI on their Web services projects. Of those that did, 19% of the projects failed to meet expectations in terms of personnel cost reductions, and 17% failed to reduce the costs of internal integration. Probably more interesting to those considering SOA is that a little more than 14% failed to meet their objectives in terms of re-using code to reduce costs.
Improving the ROI through re-use and other techniques may depend on next generation products. Basically, advise AMR Research analysts Eric Austvold, Tom Whiteford and David O'Brien, users will want the kind of SOA software that will let them drag and drop from a library of services. But they warn that SOA tools of that maturity will not arrive in the market for a couple of years -- i.e., at least until after 2005.
For more information about the Forrester report, "Integration in a Service-Oriented World," June 6, 2004, contact the company at www.forrester.com
For more information about the AMR Research poll and report, "Web Services 2004: Overhyped and Unlikely To Transform Business Anytime Soon," June 2004, contact the firm at www.amrresearch.com