Strategy

By Michael Fitzgerald  |  Posted 10-13-2006 Print Email
Strategy

SOA can help IT departments become more efficient while allowing them to put together systems that can boost their company's business.
At many companies, IT falls on the cost side of the ledger. Which is why so many technology executives are attracted to the idea of SOA, or service-oriented architecture.

SOA is basically a computing architecture built around services—computing components that can be flexibly reused and recombined. In an SOA environment, which leverages standard mechanisms including eXtensible markup language (XML), software components advertise themselves on the corporate network as offering a service, such as a verification message, that other applications can discover and use. This makes IT more productive because, in part, it's much simpler to change a service, such as a verification message, than to change each verification message in every application that has one.

At Railinc Corp., a transportation logistics firm based in Cary, N.C., Garry Grandlienard, director of enterprise architecture, notes that many of his company's applications draw on certain basic information about railcars, stored in one main database. Before SOA, changing one element of that database might have meant changing 100 applications. With SOA in place, he may not need to make any application changes at all, since he can change the service layer and it will translate the database change for all applications.

Farmington Hills, Mich.-based RouteOne LLC is an exchange established by the finance arms of General Motors Corp., Ford Motor Co., DaimlerChrysler AG and Toyota Motor Corp. to provide auto dealers with access to a variety of financing options and services. Here, SOA gives CIO Joel Gruber a cost-effective way to make changes to his internal infrastructure without disrupting all the firms that use the exchange. In August, RouteOne began piloting an electronic contract feature, called eContracts, to allow auto dealers to forego paper contracts. Key to the eContracts pilot is a service the company built to test its messaging environment. At RouteOne, a transaction, such as an auto loan application, is treated as a type of message, and the testing environment lets the company see if new message types will cause any problems. "It doesn't sound like a service," notes Gruber. "But it's a utility service that means we don't break anything for our customers when we change something."

The kinds of efficiencies being realized at Railinc, RouteOne and elsewhere are leading corporate America to embrace SOA technology. Forrester Research Inc. predicted in April that more than half of all large U.S. companies will be using SOA by the end of this year, and of those currently using it, almost 70 percent intend to increase their use of it in the future.

And many of these companies—46 percent—are looking at SOA for more than just cost-cutting. They believe it has the potential to make a strategic impact on their businesses, helping to expand partnerships, connect more effectively with customers and suppliers, and develop entirely new offerings. IBM Corp. claims that about two-thirds of its 2,700 SOA customers are using the technology to help create new revenue streams.

That's what Automatic Data Processing Inc. is trying to do. Best known as a payroll processor, Roseland, N.J.-based ADP is using SOA in part to create a portal that gives the same look-and-feel to the dozens of products it offers, ranging from its famous payroll processing application to human resources administration tools.

Its product line, built in part by acquisition, uses many interfaces, which makes it harder for ADP to sell multiple applications to clients, who would have to train employees to use each one and remember different passwords. Now ADP is moving to put a common interface on its applications, using SOA behind the scenes to call up application data through the service layer.

Bob Bongiorno, senior vice president and CIO of ADP's Employer Services unit—the company's largest, encompassing payroll, tax and compliance, benefit, and human resources administration, each of which has multiple products at ADP—says SOA allows the company to offer bundles of its products to potential customers, as well as expand the number of products used by existing customers.

While he's careful to point out that SOA does not by itself generate revenue, Bongiorno says that the Web portal has been a success. And he notes that ADP's revenue growth is solidly back into double digits since the portal went into place—the company grew 11 percent last year, and expects to grow another 10 percent in fiscal 2007.

Meanwhile, last year ADP started selling payroll services through Microsoft Corp.'s Small Business Accounting Package. ADP's payroll product for small businesses is hooked into the Microsoft package using a service architecture to exchange data. And the Microsoft partnership is a harbinger of more such arrangements to come, Bongiorno says.

Despite ADP's successes, however, Bongiorno cautions other CIOs to beware of the hype, and make sure the technology fits their business needs before going down the SOA path. But how do companies make sure SOA fits their business needs? For ADP, it was simple, since most of the company's applications involve similar data: name, address, employee ID number, phone number. Each bit of information is a transaction, and ADP can write a service for it that

applies to all its applications. By adopting SOA, the company also created the potential for partnerships like the one with Microsoft. "The technology we have now has opened up a world of opportunities," Bongiorno says.

Ask the business side:

Will creating data services help you more effectively cross-sell products?

Ask developers:

Which data is most easily represented as a service?

Click here to download a PDF of our SOA fact sheet.



 

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