Service Oriented Architecture Solutions

Add comment March 30th, 2006 David Bush - Iasta

In IBM’s recent white paper “Five SOA Projects that can pay for themselves six months” in their “Service Oriented Architecture Solutions to Support Your Business Objectives” series, October 2005, they point out that the value of SOAs is in the standard services and business processes SOAs provide, enabling a single view for each customer, supplier, and business partner and a single process for each specific need - allowing for smooth business operations.

Although the paper describes five projects that are expected to result in an immediate payback while providing a foundation for more flexible IT systems, and proclaims that “SOA offers an approach that can be incrementally adopted as organizations start the necessary but daunting task of bringing order to what might have become chaos” as they try to integrate coexisting IT systems that duplicate functions or data, there is one project in particular that stands out.

Project 3, “Document Verification Service: Delivering cost savings through service reuse”. Although not a sourcing project per se, it notes that services can be provided to a second set of users for a fraction of the cost of providing them to the first set of users. In other words, the project delivers payback simply through economies of scale, or the fact that the cost of a system decreases as the number of uses increases.

Why does this matter? Consider a large company that undertakes an e-auction or e-sourcing initiative for the first time. Even though the payoff might be huge (10% to 20% savings are common in first events), a company still might be reluctant to apply these technologies across their purchasing organization because such a project usually involves purchasing an expensive software platform, and expensive hardware to run it, ramping up tech support, extensive process re-engineering, and time-consuming training. In other words, a big undertaking with a big up front cost – all for a potentially huge payback that can not be realized until a significant cash outlay is made up front.

However, this is not the case if the solution is of the Service Oriented Architecture variety - or, in terms the rest of us can understand, already built, running, and waiting to be utilized - which is true of many well designed e-sourcing systems that run in ASP mode. In other words, not only is a second e-sourcing ASP event no more expensive then the first, but actually cheaper as each event builds the database and the process knowledgebase, allowing for faster setup of subsequent events. So, even if a provider did not reduce the event cost, a company would still save money on a subsequent event due to reduced time and effort! Moreover, most vendors will provide discounts for bulk event purchases or organizational licenses since they understand that their incremental cost for successive events decreases as well.

In other words, for a non-technical sourcing organization, ASP hosted e-sourcing solutions, be they e-auctions, e-RFP/e-RFQ, or e-decision analysis, are the service oriented architectures a purchasing department can bring to bear to immediately increase their productivity, decreasing their costs, and tame their IT nightmare, regardless of the degree of savings such events produce.

Entry Filed under: General, Technology, e-Sourcing Marketplace