Executive Briefings

Driving innovation in retail with SOA

An Eqos white paper

Executive Summary

You'd be forgiven for thinking that service-oriented architecture (SOA) is a buzzword that represents all that's cynical about the IT industry - old ideas rebadged as new ones, over-inflated stories of amazing customer transformations, and a focus on cool technology rather than practical advice. However, survey after survey shows that the topic of SOA is high on CIO agendas; that organisations are actively embarking on SOA initiatives; and those early adopters are seeing real results.

This paper shows why adopting SOA can help retailers rapidly adopt best practices in global sourcing, supplier management, product innovation, and quality management. Although not always seen at the technological forefront in industry, many retailer IT organizations are fertile environments for SOA initiatives. It explains the value of SOA in the context of retail industry best practices and competitive strategies, and illustrates how Eqos can support your journey toward an SOA environment.

 

Retail: new and old worlds colliding

The two decades since electronic data communication became widely available to businesses has transformed retail - from a constellation of independently owned one-off shops and small chains to an industry dominated by multinational corporations which are shaping consumer demand and emerging economies. As that same electronic communication has become cheaper and easier to consume over the past 10 years, e-commerce and POS technologies are transforming much of the retail industry again.

 

Only now, though, are the changes wrought by those technology enablers coming together to impact the way that retailers work across the supply chain from the supplier's supplier to the end consumer. The very technology that has enabled retailers to flourish and grow has also made competition much more diverse and distributed. When buying opportunities for consumers are pervasive, retailers have to continually drive down costs, introduce a steady stream of new products and more effectively manage suppliers.

 

Supply chain relationships have moved from being primarily adversarial in nature, to being collaborative partnerships. The new reality for retailers, their partners and their suppliers is founded on the ability to effectively manage complexity and uncertainty - and do it better than everyone else.

 

Take global sourcing as an example. Industry leaders have moved beyond the simplistic view of global sourcing as way of minimising costs, and are using the increased choice and flexibility that global networks of contract manufacturers, designers, and associated partners can bring in order to create differentiation through price-competitive "private label" lines. Global sourcing has become a mechanism for growth and margin protection - and also a means to rapidly grow product choice without significantly increasing investment footprints.

 

However the opportunity that global sourcing brings doesn't come without additional challenges and risks. As retailers bring private label goods to market, their brands become ever more closely associated with the quality of goods produced by likely remote manufacturers. When problems occur, it's not possible to hide behind third-party organizations. Consequently, managing risks associated with product quality become very much the retailer's responsibility. And as regulators demand ever more transparency into foreign factories, and as consumers increasingly reward ethical sourcing practices, the stakes are higher than they've ever been. For retailers to succeed in this environment, it's imperative that effective quality management processes and practices are put in place, and enforced, in order to ensure product safety and regulatory compliance.

Crucial to improving collaboration and supplier performance while managing risk is the ability to sense, analyse and respond to conditions in complex, distributed, multi-party business environments.

 

To do this, retail IT teams needs to provide solutions that can:

·         Capture business data efficiently and effectively, from a wide range of supplier and partner systems - so that process compliance and performance can be accurately gauged.

·         Bring the right information to the right people, at the right time, across a variety of communities according to predefined priorities preferences, and delivery mechanisms - so that the right decisions can be made.

·         Rapidly configure and reconfigure business processes and relationships, across ever more complex supply chains - so that change can be implemented quickly, enabling trade, collaboration, and innovation.

 

This is where the new world frequently collides with the old.

 

Although innovations such as EDI, barcoding and ecommerce have been enthusiastically taken up by the retail industry, pragmatic historical approaches to IT investment and renewal have created retail IT environments that are dominated by older technologies resistant to integration and change; and hamstrung by islands of information and automation that don't enable information and business processes to flow effectively within and between organisations. For most retailers, trying to implement "new world" innovations in global sourcing, supplier management, product innovation, and quality management is a deeply frustrating exercise where IT is perceived as a huge brake on progress.

SOA: managing change, enabling innovation

The ability to apply a consistent approach to configuring, reconfiguring and integrating business processes, and exchanging data between systems, devices and people, has historically proved elusive - for all industries. Much of the integration work that links today's processes, systems and data has been carried in a haphazard way. The resulting IT environments are characterized by islands of information and integration, powered by mish-mashes of proprietary technologies and design approaches. This situation doesn't just cause technological difficulties: it also causes skills issues. Finding professionals with up-to-date skills in out-of-date technologies and approaches is time-consuming and expensive, and those individuals command sky-high fee rates.

 

Service-oriented architecture (SOA) is now being used across industries as a breakthrough method of delivering software systems. Pursued correctly, SOA initiatives enable businesses to incrementally harmonize the technologies and approaches they use to integrate and change processes, and exchange data between systems, devices and people - first linking islands of integration and information, and then transforming them to become more efficient.

So what is SOA?

The standards body OASIS offers a simple definition of SOA[1]:

 

Service-oriented architecture (SOA) is a paradigm for organizing and utilizing distributed capabilities that may be under the control of different ownership domains.

 

Practically put, SOA involves designing and delivering software solutions as interacting sets of "services" - independent software components that are exposed through well-defined, independently addressable programming interfaces.

 

There's a lot of talk in industry about whether pursuit of SOA requires the use of particular technologies (such as an Enterprise Service Bus, or ESB) and particular standards (such as SOAP, WSDL, UDDI and the "WS-*"[2] set of advanced web services protocols). Some take a very strict approach when considering SOA - but most of the organizations now seeing solid business results from their SOA initiatives have pressed ahead by focusing primarily on the architecture philosophy of SOA, and less on the use of particular standards (although standards do almost always feature). Note that OASIS' SOA definition says nothing about the use of particular technologies or standards.

Figure 1 illustrates the five key benefits that arise from implementing SOA.

 


Executive Summary

You'd be forgiven for thinking that service-oriented architecture (SOA) is a buzzword that represents all that's cynical about the IT industry - old ideas rebadged as new ones, over-inflated stories of amazing customer transformations, and a focus on cool technology rather than practical advice. However, survey after survey shows that the topic of SOA is high on CIO agendas; that organisations are actively embarking on SOA initiatives; and those early adopters are seeing real results.

This paper shows why adopting SOA can help retailers rapidly adopt best practices in global sourcing, supplier management, product innovation, and quality management. Although not always seen at the technological forefront in industry, many retailer IT organizations are fertile environments for SOA initiatives. It explains the value of SOA in the context of retail industry best practices and competitive strategies, and illustrates how Eqos can support your journey toward an SOA environment.

 

Retail: new and old worlds colliding

The two decades since electronic data communication became widely available to businesses has transformed retail - from a constellation of independently owned one-off shops and small chains to an industry dominated by multinational corporations which are shaping consumer demand and emerging economies. As that same electronic communication has become cheaper and easier to consume over the past 10 years, e-commerce and POS technologies are transforming much of the retail industry again.

 

Only now, though, are the changes wrought by those technology enablers coming together to impact the way that retailers work across the supply chain from the supplier's supplier to the end consumer. The very technology that has enabled retailers to flourish and grow has also made competition much more diverse and distributed. When buying opportunities for consumers are pervasive, retailers have to continually drive down costs, introduce a steady stream of new products and more effectively manage suppliers.

 

Supply chain relationships have moved from being primarily adversarial in nature, to being collaborative partnerships. The new reality for retailers, their partners and their suppliers is founded on the ability to effectively manage complexity and uncertainty - and do it better than everyone else.

 

Take global sourcing as an example. Industry leaders have moved beyond the simplistic view of global sourcing as way of minimising costs, and are using the increased choice and flexibility that global networks of contract manufacturers, designers, and associated partners can bring in order to create differentiation through price-competitive "private label" lines. Global sourcing has become a mechanism for growth and margin protection - and also a means to rapidly grow product choice without significantly increasing investment footprints.

 

However the opportunity that global sourcing brings doesn't come without additional challenges and risks. As retailers bring private label goods to market, their brands become ever more closely associated with the quality of goods produced by likely remote manufacturers. When problems occur, it's not possible to hide behind third-party organizations. Consequently, managing risks associated with product quality become very much the retailer's responsibility. And as regulators demand ever more transparency into foreign factories, and as consumers increasingly reward ethical sourcing practices, the stakes are higher than they've ever been. For retailers to succeed in this environment, it's imperative that effective quality management processes and practices are put in place, and enforced, in order to ensure product safety and regulatory compliance.

Crucial to improving collaboration and supplier performance while managing risk is the ability to sense, analyse and respond to conditions in complex, distributed, multi-party business environments.

 

To do this, retail IT teams needs to provide solutions that can:

·         Capture business data efficiently and effectively, from a wide range of supplier and partner systems - so that process compliance and performance can be accurately gauged.

·         Bring the right information to the right people, at the right time, across a variety of communities according to predefined priorities preferences, and delivery mechanisms - so that the right decisions can be made.

·         Rapidly configure and reconfigure business processes and relationships, across ever more complex supply chains - so that change can be implemented quickly, enabling trade, collaboration, and innovation.

 

This is where the new world frequently collides with the old.

 

Although innovations such as EDI, barcoding and ecommerce have been enthusiastically taken up by the retail industry, pragmatic historical approaches to IT investment and renewal have created retail IT environments that are dominated by older technologies resistant to integration and change; and hamstrung by islands of information and automation that don't enable information and business processes to flow effectively within and between organisations. For most retailers, trying to implement "new world" innovations in global sourcing, supplier management, product innovation, and quality management is a deeply frustrating exercise where IT is perceived as a huge brake on progress.

SOA: managing change, enabling innovation

The ability to apply a consistent approach to configuring, reconfiguring and integrating business processes, and exchanging data between systems, devices and people, has historically proved elusive - for all industries. Much of the integration work that links today's processes, systems and data has been carried in a haphazard way. The resulting IT environments are characterized by islands of information and integration, powered by mish-mashes of proprietary technologies and design approaches. This situation doesn't just cause technological difficulties: it also causes skills issues. Finding professionals with up-to-date skills in out-of-date technologies and approaches is time-consuming and expensive, and those individuals command sky-high fee rates.

 

Service-oriented architecture (SOA) is now being used across industries as a breakthrough method of delivering software systems. Pursued correctly, SOA initiatives enable businesses to incrementally harmonize the technologies and approaches they use to integrate and change processes, and exchange data between systems, devices and people - first linking islands of integration and information, and then transforming them to become more efficient.

So what is SOA?

The standards body OASIS offers a simple definition of SOA[1]:

 

Service-oriented architecture (SOA) is a paradigm for organizing and utilizing distributed capabilities that may be under the control of different ownership domains.

 

Practically put, SOA involves designing and delivering software solutions as interacting sets of "services" - independent software components that are exposed through well-defined, independently addressable programming interfaces.

 

There's a lot of talk in industry about whether pursuit of SOA requires the use of particular technologies (such as an Enterprise Service Bus, or ESB) and particular standards (such as SOAP, WSDL, UDDI and the "WS-*"[2] set of advanced web services protocols). Some take a very strict approach when considering SOA - but most of the organizations now seeing solid business results from their SOA initiatives have pressed ahead by focusing primarily on the architecture philosophy of SOA, and less on the use of particular standards (although standards do almost always feature). Note that OASIS' SOA definition says nothing about the use of particular technologies or standards.

Figure 1 illustrates the five key benefits that arise from implementing SOA.