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Sydney, 17 July 2007
IBM SOA EXECUTIVE SUMMIT
IBM SOA
© 2007 IBM Corporation
Dollars & Cents, Justifying Your Business Flexibility Project
Matt English Strategy & Change Consulting Leader Australia / New ZealandIBM
IBM SOA
3
Justifying and Financing Investments in SOA
Many companies have realized the benefits of aligning IT and business via SOA – as demonstrated in IBM proprietary research
These benefits are crucial for justifying the business case for the investment in SOA – a framework for measuring those benefits
Financing hurdles can be overcome with flexible financing solutions to meet the funding requirements of SOA projects - and help deliver business value rapidly
IBM SOA
4
We collected data from over 35 projects, in 5 sectors covering 11 industries world wide
Global34%
Asia Pacific9%
Europe6%
South America
3%
North America
48%
Financial Services
33%
Industrial19%
Communication10%
Distribution38%
Project Breakdown by Sector Project Breakdown by Geography
Source: IBV analysis
IBM SOA
5
Our thought leadership confirms the drivers of business value that we have seen consistently in SOA engagements
Benefits Resulting from SOA Solution
97%
71%
51%
43%
26%
100%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Enable Compliance
Enable New Products
Increase Revenue
Reduce Risk
Decrease Cost
Improved Flexibility
% of Projects
Source: IBV analysis
IBM SOA
6
We used the study findings to create a framework for looking at the business value of a Service-Oriented Architecture
Reduced Risk
Compliance
Increased Profitability
Improved Flexibility
Reduced Risk
Compliance
Increased Profitability
Improved Flexibility
Select a group of simplified benefits
Structure cost benefits around three basic cost scenarios
Calculate simple return using benefits and costs first
Select cost scenarios for second and subsequent implementations
Look at the return for second and subsequent implementation (keeping benefits constant) relative to first implementation
Source: IBM Institute for Business Value “The Business Value of Service-Oriented Architecture” 2006
IBM SOA
7
The intuitive framework guides the examination of the business benefits of SOA for the non technical user
Decrease Costs
IncreasedProfitability
IncreaseRevenue
Generate new revenue
Increase existing revenue
Reduced processing
time
errors Reduced
Reduced system
downtimeEnable new product
development
Ease of integration
Improved flexibility
Reduced integration
cost
Increased reuse
Reduced integration
time
Reducedtime-to-market
Improved Ability to Change
Protect existing revenue
Reduced maintenance
cost
Improved ability for
compliance
Reduced Operational
Risk
Profitability value drivers
Flexibility value drivers
IBM SOA
8
To gain these benefits, you will incur costs in one of the following patterns
Change or build Front-end application $A
Infrastructure software $
Hardware (as needed) $
Implementation (labor) $
Total infrastructure $B1
Develop new or alter existing application $
Generate interfaces $
Total Service Provider $B2
Scope A: Service user Scope B: Service provider
+
Scope C: Scope A + Scope B
Full Implementation
Service ProviderService User
ServiceInterface
SOA Infrastructure
Business Application
Front-end Application
IBM SOA
9
A simple return can be calculated using the business value trees and the cost scenarios
$
$
Simple
ROI=Full Implementation
Service ProviderService User
ServiceInterface
SOA Infrastructure
Business Application
Front-end Application
Decrease Costs
IncreasedProfitability
IncreaseRevenue
Generate new revenue
Increase existing revenue
Reduced processing
time
Reduced errors
Reduced system
downtimeEnable new product
development
Ease of integration
Improved flexibility
Reduced integration
cost
Increased reuse
Reduced integration
time
Reducedtime- to-market
Improved Ability to Change
Protect existing revenue
Reduced maintenance
cost
Improved ability for
compliance
Reduced Operational
Risk
Decrease Costs
IncreasedProfitability
IncreaseRevenue
Generate new revenue
Increase existing revenue
Reduced processing
time
Reduced errors
Reduced system
downtimeEnable new product
development
Ease of integration
Improved flexibility
Reduced integration
cost
Increased reuse
Reduced integration
time
Reducedtime- to-market
Improved Ability to Change
Protect existing revenue
Reduced maintenance
cost
Improved ability for
compliance
Reduced Operational
Risk
IBM SOA
10
Subsequent implementations = less spend
Second & Subsequent Implementations
First Implementation
$$$Full Implementation
Service ProviderService User
ServiceInterface
SOA Infrastructure
Business Application
Front-end Application
Full Implementation
Service ProviderService User
ServiceInterface
SOA Infrastructure
Business Application
Front-end Application
$$Full Implementation
Service ProviderService User
ServiceInterface
SOA Infrastructure
Business Application
Front-end Application
or
$Full Implementation
Service ProviderService User
ServiceInterface
SOA Infrastructure
Business Application
Front-end Application
IBM SOA
11
Over time, cost decreases & return increases
Number of implementations
Retu
rn
First Implementation
Second & Subsequent Implementations
Return of succeeding SOA Implementations
$$$$
$$$
Decrease Costs
IncreasedProfitability
IncreaseRevenue
Generate new revenue
Increase existing revenue
Reduced processing
time
Reduced errors
Reduced system
downtimeEnable new product
development
Ease of integration
Improved flexibility
Reduced integration
cost
Increased reuse
Reduced integration
time
Reducedtime-to-market
Improved Ability to Change
Protect existing revenue
Reduced maintenance
cost
Improved ability for
compliance
Reduced Operational
Risk
Decrease Costs
IncreasedProfitability
IncreaseRevenue
Generate new revenue
Increase existing revenue
Reduced processing
time
Reduced errors
Reduced system
downtimeEnable new product
development
Ease of integration
Improved flexibility
Reduced integration
cost
Increased reuse
Reduced integration
time
Reducedtime-to-market
Improved Ability to Change
Protect existing revenue
Reduced maintenance
cost
Improved ability for
compliance
Reduced Operational
Risk
Full Implementation
Service ProviderService User
ServiceInterface
SOA Infrastructure
Business Application
Front-end Application
$$$$
$$
Decrease Costs
IncreasedProfitability
IncreaseRevenue
Generate new revenue
Increase existing revenue
Reduced processing
time
Reduced errors
Reduced system
downtimeEnable new product
development
Ease of integration
Improved flexibility
Reduced integration
cost
Increased reuse
Reduced integration
time
Reducedtime-to-market
Improved Ability to Change
Protect existing revenue
Reduced maintenance
cost
Improved ability for
compliance
Reduced Operational
Risk
Decrease Costs
IncreasedProfitability
IncreaseRevenue
Generate new revenue
Increase existing revenue
Reduced processing
time
Reduced errors
Reduced system
downtimeEnable new product
development
Ease of integration
Improved flexibility
Reduced integration
cost
Increased reuse
Reduced integration
time
Reducedtime-to-market
Improved Ability to Change
Protect existing revenue
Reduced maintenance
cost
Improved ability for
compliance
Reduced Operational
Risk
Full Implementation
Service ProviderService User
ServiceInterface
SOA Infrastructure
Business Application
Front-end Application
$$$$
$
Decrease Costs
IncreasedProfitability
IncreaseRevenue
Generate new revenue
Increase existing revenue
Reduced processing
time
Reduced errors
Reduced system
downtimeEnable new product
development
Ease of integration
Improved flexibility
Reduced integration
cost
Increased reuse
Reduced integration
time
Reducedtime-to-market
Improved Ability to Change
Protect existing revenue
Reduced maintenance
cost
Improved ability for
compliance
Reduced Operational
Risk
Decrease Costs
IncreasedProfitability
IncreaseRevenue
Generate new revenue
Increase existing revenue
Reduced processing
time
Reduced errors
Reduced system
downtimeEnable new product
development
Ease of integration
Improved flexibility
Reduced integration
cost
Increased reuse
Reduced integration
time
Reducedtime-to-market
Improved Ability to Change
Protect existing revenue
Reduced maintenance
cost
Improved ability for
compliance
Reduced Operational
Risk
Full Implementation
Service ProviderService User
ServiceInterface
SOA Infrastructure
Business Application
Front-end Application
IBM SOA
12
An example
Source: IBV analysis
SOA Implementations
Re
turn
Example A Example B
1 2 3Company A 63% 107% 350%Company B 67% 233% 648%
Implementation
Company A
- Insurance, Group Products Division, SOA investment used across Life, Disability, and Long Term Care Company B
- Insurance, Property & Casualty Division, SOA investment used for personal property quotes, agency interaction, and quotes extended to auto
=
$
$ Full implementationService ProviderService User
Inte
rfa
ce
SOA Infrastructure
Inte
rfa
ce
Business Application
Front-end Application
Decrease Costs
IncreasedProfitability
IncreaseRevenue
Generate new revenue
Increase existing revenue
Reduced processing
time
Reduced errors
Reduced system
downtimeEnable new product
development
Ease of integration
Improved flexibility
Reduced integration
cost
Increased reuse
Reduced integration
time
Reducedtime-to-market
Improved Ability to Change
Protect existing revenue
Reduced maintenance
cost
Improved ability for
compliance
Reduced Operational
Risk
Decrease Costs
IncreasedProfitability
IncreaseRevenue
Generate new revenue
Increase existing revenue
Reduced processing
time
Reduced errors
Reduced system
downtimeEnable new product
development
Ease of integration
Improved flexibility
Reduced integration
cost
Increased reuse
Reduced integration
time
Reducedtime-to-market
Improved Ability to Change
Protect existing revenue
Reduced maintenance
cost
Improved ability for
compliance
Reduced Operational
Risk
IBM SOA
13
SOA business value outweighs the problems and challenges
Significant business value can result from well-managed SOA solutions- Measure, but simplify and measure long term!
Don’t abandon building a business case for SOA- Take a simpler, more intuitive approach
- Measure beyond the first implementation
A sea-change for system communication and collaboration will drive equal change in business processes- Industry structure change is inevitable
- Collaboration within and between industry players will increase
- Table stakes!
IBM SOA
14
Full study details and white paper
IBM Institute for Business Value
Available on the web: http://www.ibm.com/iibvttpContact Information:
Jay DiMare [email protected]@us.ibm.comAssociate PartnerIBM Global Business Services, Institute for Business Value
Service-Oriented Architecture: A practical guide to measuring return on that investment
IBM Global Business Services
Service-oriented architecture
A practical guide to measuring return on investment
IBM Institute for Business Value
Application Innovation Services
IBM Global Business Services
Service-oriented architecture
A practical guide to measuring return on investment
IBM Institute for Business Value
Application Innovation Services
© Copyright IBM Corporation 2006
IBM Institute for Business Value
IBM Global Business Services
Service-oriented architecture: A practical guide to measuring return on that investment
An IBV Value Realization Study
October 23rd, 2006