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How do we effectively measure SOA pay off? (Network Member Question)

Written by: Jon Hansen

Article Overview: Member Question: How do we effectively measure SOA pay off?? Some benefits, such as improved customer service, might be difficult to quantify. But others, like increased productivity and cost savings, should be measured. Any idea’s on how?? Question Submitted By: Anoop Kumar Development Manager of Enterprise Services (SOA) Group Harrah's Operating Company, Inc. Memphis

How do we effectively measure SOA pay off? (Network Member Question)

In their 2001 book, The Seven Steps to Nirvana: Strategic Insights into eBusiness Transformation, authors Mohanbir Sawhney and Jeff Zabin discussed the emergence of the Metaprise and in particular its impact on enterprise application development. Sawney and Zabin referred to it as meta-enterprise software development. I would strongly recommend that you read the book as it provides a useful hindsight perspective that is both interesting and informative today.

In short a Metaprise is a synchronized versus sequential architecture (private hub) that leverages the Internet to simultaneously link or incorporate the unique operating attributes of all transactional stakeholders on a real-world, real-time basis. This is a far cry from what Larry Ellison referred to as the “near” real-time capabilities of the much touted Service Oriented Architecture (SOA) which simply links disparate systems or processes often referred to as the “loose coupling of services.”

With the emergence of Web 2.0, an option that many organizations are beginning to investigate (the Commonwealth of Virginia is one such organization), any calculation of savings would have to be made within the context of these developments.

With this understanding, and dependent on your organization's core application, areas upon which you might focus include Full Time Equivalent (FTE) calculated savings.

A specific example in this area relates to a Department of National Defence Case Study relative to the number of escalations associated with order fulfillment.

Prior to implementing a web-based solution that automatically tracked orders throughout the acquisition, delivery and administrative process, the group that managed fulfillment handled 75 escalations per week.

Each escalation took a total of 3 people approximately 2 hours and 45 minutes to resolve.

Once the new system was put in place, the number of escalations dropped to an average of less than 1 per week. Combined with other process improvements, the total number employees managing the DND account dropped from 23 to 3 within 18 months.

This said, the next step is to then engage finance to determine how said savings would ultimately be applied to the company's bottom line.

This is an important, and unfortunately often overlooked collaboration that can reduce the expected savings.

Referencing a December 20, 2007 article by Paul Teague, he indicated that CPOs and CFOs are on the same page, but speak a different language. As a result, of the 11.9% of the average annual savings identified by CPOs only 3.2% actually get booked. This represents a 73% difference between identification and realization.

Since the "language" of finance is the dialect of business, you need to make certain that your definition of savings is the same as your organization's bean counters.

An article titled Straight to the Bottom Line which referred to the effectiveness of technology summed it best when the authors concluded that "New technology is of value only if it provides a suitable financial return. Many articles have been published on the potential economic benefits and return on investment (ROI) of installation of new automation and advanced automation technology in the process industries. Unfortunately the benefits claimed are often unrealistic and unsubstantiated. This leads to significant credibility issues when the forecast benefits are not achieved and to a lack of confidence on the part of management on proposals in this area."

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To obtain the corresponding reference material, please contact the author

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Article Tags: administrative process, application areas, commonwealth of virginia, core application, department of national defence, disparate systems, enterprise application development, enterprise software development, escalations, full time equivalent, jeff zabin, larry ellison, order fulfillment, process improvements, sawhney, service oriented architecture, service oriented architecture soa, seven steps, strategic insights, time basis



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