Earlier this year, in a survey conducted by Aberdeen Group to determine technology priorities among GL&SCS readers, service oriented architecture (SOA) barely registered as an issue, with a scant 7 percent seeing it as important to their operations or budgets. Most respondents apparently think of SOA-if they think about it at all-as something for the IT guys to sort out. To a certain extent that is true, but at least a basic understanding of SOA and its impact is important for supply chain managers today and will become crucial in the future. There are a number of reasons for this.

"¢ First, SOA is the next big thing in process and application design and companies are earmarking substantial portions of their IT budgets to SOA projects. Moreover, the giants of enterprise software-SAP, Oracle, IBM and Microsoft-all are investing heavily in SOA enablement of their products, a move that will have ripple effects throughout enterprises.

"¢ Two, SOA is changing the dynamic between IT and business users. In a survey of thousands of corporate managers attending a recent IBM event, 68 percent said a combination of business and IT skills are required to apply SOA to meet business goals. Additionally, 67 percent said the key decision makers in their company responsible for moving to an SOA strategy are business leaders and managers and 65 percent said that business leaders are primarily responsible for selecting an IT partner to help achieve SOA.

"¢ Third, the supply chain is a good candidate for early SOA adoption within an enterprise and many supply chain application vendors already are embracing this architecture. If your company has recently purchased or upgraded supply chain solutions, you likely are already benefiting from some aspects of SOA. The change at this stage may be transparent, but as SOA becomes widespread, SOA skills-which are in short supply-will become a valuable corporate and career asset.

So, what exactly is SOA? There is no widely agreed upon technical definition, but basically it is an architecture or approach to software design that exposes functionality as loosely coupled, independent services. These services are standards-based and interoperable, which means they can be accessed and used regardless of the underlying technology.

"SOA is all about breaking up monolithic applications into smaller components, called services, that can be used and reused as needed to meet changes in business processes," says  Rob Meyer, a member of the SOA product team at TIBCO, Palo Alto, Calif. One widely recognized example is the lookup service that express carriers like Federal Express use to let customers check the location of packages, he says. The FedEx solution, which is built on a TIBCO platform, handles a billion queries a day.

Unlocking functionality from single, monolithic applications enables greater flexibility and agility, says Krish Mantripragada, a supply chain and SOA expert at SAP, Newton Square, Pa. "Companies constantly need to adapt to market changes so they are always reinventing themselves and changing processes to better meet customer requirements and operational goals. By breaking up software into reusable pieces, SOA enables the software to keep pace with these changes." SAP is transitioning all its products to an open SOA architecture, based on its NetWeaver platform.

Modularized services can be used in different configurations to perform specific business functions. "In the traditional world, especially in the supply chain, you have to try and figure out how to integrate multiple applications and multiple platforms in order to achieve a desired business result. Often getting there is just too difficult or too expensive," says Sanjeev Nagrath, a Global Business Solutions partner at IBM, Armonk, N.Y. "In the new world of SOA, those boundaries go away because you can orchestrate functions in whatever sequence you want given your business process. Over time if you want to go from a process using functions A-B-C-D to one using functions B-A-C-D or A-C-D-E, you can do that by just changing the process orchestration."

Of course, this level of simplicity lies at the end of what is typically a long and complex journey, but the example does encapsulate a key promise of SOA- instead of making the business fit the software, the software can be tailored to fit the business. 

"In a global economy, it's not just about the ability to make widgets, but how to make them more competitively," says Gary So, vice president of WebMethods, Fairfax, Va., a provider of business integration and process management solutions that is now a division of Software AG.  "As a result, organizations today are more interested in process-driven initiatives like Lean and Six Sigma. Process improvement is a big driver for SOA."

It also is a driver for business process management (BPM), a discipline closely tied to SOA.

"One of the key technologies that enables companies to assemble applications out of services is BPM," says Meyer. "BPM and SOA together give companies the ability to implement and support the process that looks like their business rather than having to adopt a process that is forced on them by a packaged application."

John Cummings, senior vice president-solutions at i2 Technologies, Dallas, calls the combination of BPM and SOA the "secret sauce." He says, "It's the opposite of what you had in the old days, when you had to reengineer all your processes to fit the software. With SOA and BPM the process dictates the software -a very different approach." 

It is an approach that requires business managers as well as technicians who are skilled at mapping efficient business processes.

"Most organizations have not thought through their business processes clearly enough to enable their partitioning," says Indu Navar, CEO of Serus Corp., Mountain View, Calif., which provides SOA-based management solutions for companies that outsource manufacturing. "There also has to be a partitioning of the data content within the set of applications and services: which services need which data objects?"

To help companies with this challenge, many vendors offer tools for creating a process or workflow in a visual environment. Users of i2's Visual Studio "can select different services and data targets to bring into that environment, versus the old fashioned coded type of approach," says Cummings.

"For example, if a client wants inventory status from an SAP system, we can enable that as a service in the workflow, which can stretch all the way from the retail shelf back to a Tier-2 supplier," he says. Because i2 has service-enabled all of its standard planning engines, these also can be integrated into a workflow or process. "We have worked with customers where we have leveraged two or three different enterprise systems and our planning and transportation engines in the same workflow. This allows companies to move beyond the old world where enterprise systems were very siloed and execution was separate from planning. Now they are able to knit it all together into a single, continuous process-regardless of underlying systems. That is something they could never do before," Cummings says.

Internally, i2 has used this same development approach to introduce a number of new solutions. One example is Cycle Time Optimization, a services-based application for retailers that manufacture private brands. "There is a huge trend toward private labels because of their higher margins, but retailers are not known for being good at manufacturing or manufacturing-oriented sourcing," he says. "CTO is a composite solution that allows retailers to track and maintain control of cycle times, from the outsource manufacturer to the retail shelf," he says.

"An interesting thing about these composite solutions is that we don't have competition for them," Cummings adds. "When you develop solutions in conjunction with customers based on an outcome they are trying to achieve, it is not a shrink-wrapped product-other vendors are not going to bring the same thing to the table."

Developing, maintaining and upgrading software with SOA is faster and less costly for vendors and users alike. "In the past companies have been locked into upgrade cycles from their software developers or have had to wait for months for vendors to change the software to support a new business process," says Nari Viswanathan, research director at Aberdeen Group, Boston. "Having the kind of flexibility that SOA provides will actually allow some larger corporations to makes these changes themselves."

By leveraging existing resources, SOA "definitely saves money," adds Meyer. "It makes existing resources more productive."

Those resources can include legacy systems, says Sean Walsh, CEO of Skyway Software, Tampa, Fla. Skyway's Visual Workspace helps companies discover existing software assets that can be converted to services. As an example, Walsh cites Southern States, a retail cooperative that had an ERP system from JD Edwards, now a part of Oracle. "They were using the JD Edwards standard pricing module, which allowed one price per SKU," he explains. To remain competitive, Southern States needed to flex prices based on region and competitive factors, but the company didn't want to upgrade to a whole new version of ERP. "We discovered the pricing data model being used in JDE," Walsh says. "Employing the SOA concept, we built a zone pricing application that works with the rest of the JDE system." Southern States has no SOA strategy, per se, he says, "but because of this project they now have 70 reusable services they can begin to leverage."

This is how SOA supports innovation and competitive advantage, says Walsh. "It enables companies to focus on just those areas where they need to differentiate themselves."

NetManage, Cupertino, Calif., is another provider that SOA-enables legacy applications. "Obviously, new systems built on SOA work better, but the majority or organizations can't discard existing systems," says Archie Roboostoff, director of product management. "We can expose as a service anything in back-end legacy systems, including green screen systems."

NetManage has about 10,000 customers worldwide, including Expedia, which uses NetManage technology to connect to different reservations systems and quickly provide users with information on hotel availability and pricing. "Imagine if all those different hotels were suppliers and customers were checking inventory," he says. "They could do it very easily and quickly."

WebMethods also helps legacy systems participate within SOA, especially in terms of system integration. "Newer packages will support SOA or Web Services standards out of the box, but older ones can be renovated," says So. "Our integration technology wraps older applications in an SOA interface so they can become first-class citizens." He reiterates that enabling legacy systems to participate in a service environment is important "because companies aren't going to throw away 25 years of IT investment just because SOA seems like an interesting approach. They have to be able to use what they have in an SOA context."

Cost of Integration

Reducing the complexity and cost of application integration, which can be as high as 40 percent of a typical IT budget, is perhaps the most immediate and most prevalent benefit of SOA. This is particularly true in the supply chain, where the inability to easily and cost-effectively integrate across systems has been the biggest barrier to seamless, end-to-end operations.

"The supply chain is all about access to information, but in a non-homogeneous systems environment that spans not only your enterprise but you partners' enterprises, that access is not always easily available," says Russell Scherwin, global director of product marketing at Sterling Commerce, Columbus, Ohio.  In such a disparate systems environment, things tend to end up being batched and downloaded overnight or even weekly, which does not result in an effective supply chain, he says. "What an SOA structure allows you to do is move information more quickly within your company and then with external trading partners. That ability becomes a competitive advantage." Sterling's GenTran Integration Suite and many of its supply chain applications are SOA-based.

Lorenzo Martinelli, senior vice president of E2open, agrees that the promise of simpler and lower-cost integration is why many vendors and users are embracing SOA. "With most of the investments in IT that have been made so far, the different applications need to be integrated point to point. Each of those integration points cost money to operate and maintain and they lock down flexibility because changing them requires a lot of work," he says.

E2open provides a collaboration hub and solutions built on an SOA framework. "The fact that we were able to build our solution from bottom up to be SOA-based was a matter of timing and luck," Martinelli says. "We started the company in the 2000-2001 time frame and were able to take advantage of some early work done by companies like IBM."

E2open uses standard Web services configurations to connect companies to its hub, which operates on a publish-and-subscribe model. It uses services to collect published information from one company's system, perhaps applies some application logic or business intelligence to the data, and then exposes it to a trading partner that has subscribed to the information in a way that the partner can understand. It is the same concept that banks use to make ATMs interoperable, Martinelli says. "The advantage is that companies don't have to change the way they are doing business." E2open supports 25 different formats for information exchange.

Even with this structure, the process of integrating companies still takes two to three weeks, Martinelli says. "A lot of hand-holding is involved in mapping every single process and transaction," he notes. "But as more companies with enterprise solutions move up to an SOA framework, integration to them will become easier and easier. Imagine a world where everyone is running the latest and greatest SAP and all functions are available in a directory. The company gives us secure access to the directory, we pick up five or six objects, point and click. Integration could be done in minutes."

Web Services

That vision is probably several years in the future. Today, many companies are easing into an SOA architecture with Web services, which makes services accessible over standard internet protocols, or even XML messaging. Amber Road, a global trade management software provider based in East Rutherford, N.J., uses these mechanisms to share its information with other systems. "We have one customer that is interested in just the event information from our supply chain visibility solution so we provide that via Web services," says Stephanie Miles, senior vice president of commercial service. "Another customer is interested in integrating our duty and tax information with their own consumer web site. For that we use an XML callout to our duty and tax information to integrate it to a total landed cost, then send it via XML over the internet. Another is looking to pull in ocean rate information and that is an XML call. So the primary mechanisms that our customers use are Web services and XML."

While Web services is a valid starting point for most companies, the endgame for many will be a complete SOA infrastructure, which includes all the other technology outside the business logic of the service. This includes things like an enterprise service bus, tools for developing and testing services and composite applications, a repository for registering and storing reusable services, a security framework, and policies and procedures for governing access and use. The leading providers for this type of infrastructure are IBM, SAP, Oracle, BEA Systems, TIBCO and WebMethods.

Implementing a full infrastructure is a major undertaking for an enterprise, but a recent report from Aberdeen Group indicates that there is significant payback for those willing to make the investments in time and budget. An analysis of 400 companies over 18 months shows that companies deploying an SOA infrastructure outperform those with just Web services-which Aberdeen calls SOA Lite-on several counts. Best-in-class companies are twice as likely as laggards to have deployed SOA middleware, Aberdeen says.

Hitachi Consulting, Dallas, has developed a maturity model for SOA adoption. "Through experience, we have learned that while no two organizations, or their SOA implementations, are exactly the same, all service-oriented architecture initiatives go through the same stages and experience comparable challenges and similar results," says Brian Erickson, managing vice president for Hitachi's strategic technology solutions practice. The Hitachi maturity model has the acronym IDEA, for initiation, deployment, enablement and agility, with each phase having goals in the areas of strategy, process, governance, data, services and architecture. "SOA adoption is a complex, multi-stage process that requires a good deal of thought and preparation at each phase," says Erickson. "No organization should enter the path without having a clear road map that provides critical markers business and IT executives can use to chart the progress."

The good news is that companies can adopt SOA in phases and they can start anywhere in the business, says Scherwin.

"One company may be most concerned with inbound supply chain visibility while another's primary issue is around order entry. The whole modular concept that comes with an SOA environment means you can start where it is most important for you and add other pieces later. As a result, time to value is shorter and cost of ownership is lower because you have systems that integrate well, even in a complex environment."

"The days of big bang monolithic implementations are over," adds Meyer. "People want incremental results and payback with each project."

Within the enterprise, supply chain projects are good candidates for SOA. "The supply chain lends itself to this kind of model because it is no longer a linear process," says Romit Dey, who heads industry solutions consulting for the high-tech and discrete manufacturing industries at Infosys, a software company based in Bangalore, India. "As a result of globalization, the supply chain is now a complex grid, which cannot be managed by monolithic applications operating in self-contained footprints and talking to each other in very structured ways," he says. Another reason is the demand for collaboration between companies, adds Dey, and a third is the imperative for agile operations. "Speed and agility in areas like time to market and demand response are possible only if IT is up to the task," he says.

A number of supply chain vendors are well along in their SOA implementations. In addition to those already noted, RedPrairie, a supply chain execution provider based in Waukesha, Wis., began adopting an SOA design philosophy a decade ago, says Jim Hoefflin, chief marketing officer. As a result, every function in RedPrairie's suite can be accessed as a service.

Many customers are making uses of obvious services, such as enabling customers to update their information or track orders, says Hoefflin. But there also have been some more unusual applications. In one example, he says, "we hooked into a customer's ERP system and allowed the customer to determine when to 'push the button' to generate a wave of picks in the warehouse. We just exposed that as a service and the ERP application executed it."

In another example, Cingular AT&T, a RedPrairie customer, was awarded distribution rights for Apple's iPhone. Apple wanted to ship the phones direct to stores just a few days before the launch, bypassing the warehouse. This was not Cingular's normal business process and its internal systems could not accommodate the change. "Because of SOA processes we were able to go in and just shift some of our components so the application would allocate inventory that wasn't physically in the warehouse," Hoefflin says. "We did it very quickly and Cingular was able to deal with the iPhone launch very successfully."

Infor, an Atlanta-based software company with a range of business products, has service enabled its transportation solutions and recently brought out an SOA-based warehousing solution, including new capabilities in the area of labor forecasting, says Eric Nilsson, vice president, product management.

"We already had labor forecasting in our base application, but we wanted to extend that and provide more capabilities," says Nilsson. "Through our SOA framework we created an application so that someone who is running a warehouse can effectively plan labor within shifts." The application uses orders in the WMS to determine the number of people that will be needed for a shift or other relevant time period, he says.

"It also provides dashboards and monitors to let users see how actual operations stack up against plan. With this information, they can shift people between operations as needed." Actual operations are used by the application to improve future labor forecasts, he says.

"With an SOA framework, we can bring solutions to market faster and integrate faster, which improves time to value for our customers," Nilsson, says.

Syncron is a supply chain software provider based in Stockholm, Sweden. Its suite of products is completely SOA-enabled and are widely used in Europe by multinational manufacturing and distribution companies.

In a deployment with Volvo construction equipment, Syncron enabled a direct delivery model that had not been possible before because orders were spread across several different ERP systems globally. "Before implementing our Global Order Management solution, Volvo had to bring products into a central or regional warehouse where orders were processed and filled, says Tony Abouzolof, managing director. "Our solution has connected Volvo's systems with the systems of its suppliers and customers, enabling them to implement the direct ship concept."

Another solution implemented for Volvo was Global Price Management. "With this solution, we help them calculate what the price of various products should be for different customers around the world and to distribute that price list to all customers with virtually no time lag," says Abouzolof. "Again, our technology made it possible for Volvo to connect to many customer systems so they could easily distribute the correct prices for their products."

The adoption curve for SOA will be gradual, but it will not be optional, says So. "SOA will become a fact of life for all companies because software application packages will be built on SOA technology and will require an SOA approach. Moreover, he says, as standards around SOA become more pervasive, "they will create an irresistible gravity."

Companies will acquire SOA whether they want it or not. The question is how proficient will they be at using it."

"This is a brave new world and we think it's an exciting world," says Cummings. "SOA lets us really leverage our domain expertise in the supply chain and enables our customers to do things they could never do before."