Justifying payback on a service-oriented architecture (SOA) investment can be relatively straightforward and productive for CIOs as long as they know what to expect from SOA and how to manage or govern SOA projects, according to industry experts. Bottom line: CIOs need to analyze ROI through the lens of business objectives, not technology ones.
SOA's big promise is that it enables affordable, consistent integration of heterogeneous applications across the enterprise using open source, Web-based technology. Open source standards not only make interoperability and reuse possible, but they also reduce development costs by opening interfaces and providing more options. The flexibility of SOA makes core system upgrades less risky, and more manageable, effective and secure.
However, measuring ROI on SOA is far from a walk in the park. Before embarking on an SOA project, companies need to have a governance plan that addresses decision-making, measurements and controls, and achievements from SOA, said Rod Butters, senior vice president of worldwide marketing at Tidal Software Inc. in Palo Alto, Calif.
Butters, whose company offers application scheduling and performance management software to customers including General Mills Inc., Hewlett-Packard Co., Microsoft and others, said effective SOA governance always involves more than just technology.
"Companies need a plan that integrates its people, processes, assets and business goals,"
Butters noted that even when CIOs know what they are looking for, unforeseen risks arise from using new software and integrating business processes that were once standalone.
"Before companies deploy an SOA solution they have to determine their goal of measuring ROI -- that's key," he said.
Butters said the goal for nine out of 10 of Tidal Software's clients is to improve business operations -- to achieve better, faster production and processes, and to reduce inefficiencies.
Of course, not all SOA projects are created equal -- some projects are easier to measure ROI on than others.
"The easiest ones to measure are those that deliver new services for customers, allowing companies to track customers' adoption of and satisfaction with the services through customer retention rates," said Ravi Kalakota, managing partner and vice president of open source strategy and solutions management at Unisys Corp. in Blue Bell, Pa. "For example, when a telecom company such as Nextel uses SOA to provide more and more services to the handheld, Nextel can easily tell from customer retention rates whether its innovations are accepted by the market or not."
ROI on SOA is really difficult to measure when the project involves upgrading from a proprietary version of a mission-critical software to an open source version of it, Kalakota said. "Usually companies don't get any more functionality from the upgrade software, so they are hard-pressed to measure any ROI."
To sharpen their focus on ROI, Kalakota recommends looking at infrastructure consolidation and server and application virtualization, areas he said are critical for any cost-effective SOA project.
"CIOs can quickly determine whether a SOA project is cost-effective by counting the number of different servers and apps they have been able to consolidate -- thereby reducing their costs," Kalakota said.
About the author: Herman Mehling is a freelance writer based in San Anselmo, Calif.