June 8, 2006 Saugatuck Research Note

What Is Happening?: Service-oriented architecture (SOA) has been a major focus of many of the major IT vendors and service providers for the past two years. However, despite this concerted focus and the related sizeable investments by IT vendors, customer adoption and implementation of SOA continues to grow at a moderate pace.

Why Is It Happening?: Research conducted last fall (see Research Alert "SOA Adoption: Business Benefits Drives Demand" RA-206 02Nov05) suggested that SOA adoption would build slowly but steadily throughout the remainder of the decade. However, more recent customer contacts through phone interviews and at several recent conference events suggests that SOA adoption might be stalling in the short-run, as the transition from "trial" projects to broad-based and enterprise-wide adoption slows. Saugatuck suggests two dominant causes may be at work:

1. Vendor sales efforts aimed at the wrong target audience. IT vendors tend to focus their sales efforts in the CIO chain of command, and SOA is no exception. Given the heritage of most IT vendors and the typical target audience, it is understandable (albeit, not acceptable) for IT vendors to focus on SOA in IT-metric terms. Thus, SOA is frequently presented to customers as an objective unto itself: a method of reducing IT infrastructure and support costs. While there are significant IT benefits inherent in SOA (e.g., reduced resource requirements, improved technology integration, reduction in the number of software licenses required), our research indicates that successful SOA projects are almost always business-led, with strong bottom-line business benefits attached. These include an improved ability to adapt/change business operations, to better respond to changing market conditions, and to reduce the long-term costs of software development and the overall costs of IT growth. At its core, SOA is about improving business - and most IT vendors and service providers are not yet accomplished at delivering that message.

2. Sales messages surrounding SOA are confusing and conflicting for too many customers - and vendors. Saugatuck experience with both vendor sales executives and user IT and business executives, reveals that neither party is well-versed in SOA. As a result, SOA sales and purchasing are badly fragmented. We seldom see enterprise-level SOA sales or user strategies. Most initiatives are around tactical or project-specific deployments thus far, with only a small minority of organizations establishing enterprise-wide SOA approaches. This is not entirely the fault of IT vendors and service providers - as we see many user organizations implementing SOA projects with the assumption that all will neatly fit together at some future point, based on vague information or promises about standardization. The net of it is that there is an overall lack of a coherent SOA strategy on both sides, resulting in point-specific SOA deployments and "islands of automation" - all the result of disjointed SOA selling and buying.

Market Impact: SOA adoption -- and its' long-term market benefits -- will continue to grow slowly (or potentially begin to lag) if SOA continues to be sold as an end objective. Rather, SOA needs to be sold, and purchased, as a means to achieve an end. That "end" is re-structuring the customer's business processes.

The true value of SOA lies in the economies, agilities, competitiveness, and collaboration that the re-engineered business processes provide; re-engineered business processes which can be achieved more rapidly and cost effectively with an IT application structure which is effectively aligned via SOA.

Saugatuck believes there should be a logical and well defined linkage between a company's business objectives and the IT infrastructure which supports the company.Thus, while SOA adoption can yield a reduction in IT costs, more importantly (and, higher up the food chain) SOA is an enabler of business objectives. This dualism yields: SOA as both the IT "means" which enables the business "end" and a means which helps cost justify the end.

Selling, buying, and realizing this value proposition requires:

  • Enlisting the IT organization as an "inside" sales partner
  • Focusing sales efforts on business executives outside of the typical IT organization
  • Justifying the sale/investment based on business-centric metrics (e.g., increased customer satisfaction, increased competitiveness, rapid entry into new market, etc.)

Vendor Impact: Business and IT executives should consider the following alternatives:

  • Develop a strategic SOA adoption plan, enabled by tactical investments with definable ROI. While "beach-head" and "trial" projects are important, they need to be tied to longer-term business goals and objectives. Such projects help fine-tune a methodology for projecting potential benefits such as reduced development time, or reduced support costs.
  • Broader implementation of SOA across several major application streams. Such an effort should yield substantial savings in support. These savings could then fund additional development projects.
  • Viewing SOA as the means to transform their IT infrastructure to support new/re-engineered business processes. Savings produced within IT by implementation of SOA could fund the efforts to transform the business processes.

Vendors should adopt the following "rules of the road":

  1. Sell to the business buyer, and use IT to support your case
  2. Sell business improvement (often couched as business transformation) rather than SOA
  3. The CIO is almost always a key element of the solution rather than part of the problem
  4. Sell with the CIO rather than to him/her
  5. Seek to build a reputation for objective/progressive business process expertise rather than as an IT product house

Note that the first four recommendations can be accomplished by appropriate training of a vendor sales force, combined with supplemental hiring of new staff with industry specific business acumen/experience. However, the fifth recommendation is likely a sizeable challenge. Most customers cling to their experience and view traditional IT vendors as hardware or software "box peddlers" rather than business strategists.

The author invites your comments and inquiries on this Resarch Alert. Please contact Charlie Burns at charlie.burns@saugatech.com or Bruce Guptill at bruce.guptil@saugatech.com

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