Creating A More Alert Enterprise

Aug. 30, 2006
Our reliance on standarized systems has come with a cost: We're often unable to modify these processes.

"Not a company exists whose management doesn't say, at least for public consumption, that it wants an organization flexible enough to adjust quickly to changing market conditions, lean enough to beat any competitor's price, innovative enough to keep its products and services technologically fresh, and dedicated enough to deliver maximum quality and customer service."
-- Michael Hammer, James Champy, "Reengineering The Corporation"

Using this perspective and implementing enterprise resource planning (ERP) systems to view their enterprises, corporations soon recognized that they were defined by their processes, with technology serving as the underlying network linking these processes together. However, our reliance on these standardized systems has come with a cost: We're often unable to modify these processes, as the supporting systems lack the necessary flexibility to easily accommodate change.These systems often fail to deliver sufficient operational visibility, since the processes are locked away. It's like knowing when the train departed and when it's expected to arrive, but having no idea where it is in route.

Familiar Challenges

As such, the results of our recent Alert Enterprise Audit shouldn't be surprising. In this survey, a majority of business executives responded that they:
  • Lack sufficient real-time operational visibility;
  • Are unable to implement process changes as rapidly as they would like; and
  • Feel IT is challenged in keeping pace with the demands of the business.

For readers of IndustryWeek, this situation is probably familiar. Manufacturers have long been confronted by a host of challenges -- globalization, new regulatory mandates, more empowered buyers -- that are forcing them to reengineer the corporation on a nearly daily basis.They need to improve their fundamental ability to sense and respond to business, operational and regulatory change.

Unfortunately, these efforts to become a more "Alert Enterprise" have only just begun for most organizations. Only a third of all respondents and a quarter of those from larger companies are satisfied with their ability to anticipate and respond to change. Among larger companies with revenues above $500 million, some 45%, say their IT organizations are either having "significant difficulties" or "can't keep up at all."

This is not an indictment of the IT department -- in fact, these executives believe IT is critical.They recognize the need to become more closely attuned to their customers and more adaptive in their responses, and they recognize that only IT is empowered and equipped to make these changes.

The Benefits Of A Service Orientation

With this in mind, IT departments have been equally innovative in championing a new approach to IT -- service-oriented architecture (SOA). SOA deconstructs existing systems into more usable and flexible components, making it possible to create unique solutions that mirror actual business requirements. More specifically, SOA uses a building-block approach to provide enterprises with the ability to quickly and cost-effectively reconfigure existing IT assets into end-to-end business processes.

A new study of this subject, conducted by the Business Performance Management Forum ( and sponsored by webMethods, found significant sentiment among business executives that this approach -- SOA -- will become a critical enabler of the Alert Enterprise, with 64% of executives from companies with revenues about $500 million concurring with this point.

SOA delivers three distinct benefits to the enterprise:

  • Reduced development costs through service reuse;
  • Productivity enhancements through the use of composite applications that are more closely aligned with specific roles and requirements; and
  • Enhanced business agility and efficiency through the use of "loosely coupled" systems.

One of the central premises of SOA is the re-use of existing components and services as the basis for creating new systems and processes with this reuse driving significant cost savings of 30-40% throughout the IT process. Additional IT benefits include speed-of-delivery and improved application quality.

SOA also enhances user productivity as "composite applications," encompassing functionality from multiple applications can be used to streamline existing workflows and decision-making. Consider a call-center example, where a user may need to toggle between CRM, ERP and SCM applications to complete a customer order. Through the use of an SOA to create a composite application, a single screen could be used to access and capture customer histories, order status and billing information for multiple systems, processes and applications.

For the business itself, SOA increases business agility and flexibility as these more adaptive systems can be more easily reconfigured to meet a variety of dynamic requirements. Tangible benefits include the cost benefits associated with switching suppliers and partners to capitalize on cost-saving opportunities, the competitive benefits associated with configuring business processes more closely to end-user requirements, and the strategic value (e.g., streamlining M&A, restructuring, business process outsourcing initiatives) associated with simplified system integration.

What's clear is that the demands of a shrinking world will make the "Alert Enterprise" model of rapid decision-making in response to the demands of constant change the predominant business model of the 21st century. Enterprises will need to enhance their ability to sense and respond to business, operational and regulatory change. Due to the flexibility and transparency inherent in the model, SOA will be fundamental to this business revolution.

David Mitchell is president & CEO of webMethods, Inc. which provides business integration software to integrate, assemble and optimize available IT assets to drive business process productivity.

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