SOA Return On Investment (ROI)

“Not everything that can be counted counts, and not everything that counts can be counted.”

- Albert Einstein

Benefits vs Costs

Benefits	Costs
Cutting costs Increasing revenue Increasing speed Mitigating risks	SOA Training SOA Consultants SOA Suits Documentation and coordination Performance tuning Security Physical infrastructure

Cutting Costs

Costs of development

• Outsourcing
• Buying services
• Re-usability

Cost of integration

• Legacy integration
• New system integration
• Unified monitoring and BAM

Cost of labour

• Reduced IT workforce
• Reduced administration work due to automation, especially with BPM
• Reduce induction costs

Increasing Revenue

• Introduction of new services
  • Introduction of new services is fast as the infrastructure and process of introducing them is well defined
  • New services can be bought and connected to existing infrastructure giving immediate benefit
• Improved monitoring and reaction to the changing environment
  • High level monitoring is already build in the infrastructure (service invocation count, etc...)
  • Changing, removing, adding services is easier and well defined in the governance processes
• Process optimization
  • Processes can be composed from services
  • Services which are needed can be easily discovered and implemented
  • Discovering of new services is based on the processes themselves and business value they can bring rather than on guessing

Speed

• Speed of modification of existing system
• Speed of migration
• Speed of introducing new changes
• Speed of integration along the supply chain

Mitigation Risks

• Vendor-lock risks
• Platform-lock risks
• Hit-by-a-space-craft factor
• Auditing and logging risks
• Non-compliance risk (Sarbanes Oxley, the PATRIOT Act)

Metrics

• Service Re-usibility (Service Reused/Total Services)
• Cost of reused development (Services which would be developed * costs)
• Costs of integration

As-is versus To-Be Process

• Gather statistics of the as-is process
• Design the to-be process
• Usual Goals, reduction in:
  • cost
  • resource demand
  • completion time
  • customer wait time
  • customer line-up size

Calculating SOA ROI

• Only 11 % of companies calculate ROI for IT expenditures through any sort of formal methodology (E-Skills 2005 fourth-quarter ICT Inquiry Report)
• 89% rely on ‘‘informed guesswork’’ or ‘‘personal intuition’’
• 2006 and found that more than half of all executives both IT and business executives, doubt that ROI measures used within their organizations are even accurate (CIO Insight)

Benefits

• Can be Quantifiable (AKA Hard)
  • Reduced TCO
  • Increased Revenue
• Soft, not easily quantifiable
  • Customer Satisfaction
  • Flexibility

Quantifiable Benefits Categories

Short-term tactical ROI

Easily quantifiable on a project-specific basis by measuring the reduction in integration expenses required

Medium-term operational ROI

Tougher to quantify; savings is derived through reuse of enterprise assets.

Long-term strategic ROI

Difficult to quantify; savings and increased revenue are based on agility afforded through service infrastructure and business alignment.

Computing Tactical ROI

• Projections are based on project-specific savings that are realized via SOA
• No formal cost models exist
• You need to clearly define:
  • the project scope
  • the initial investment
  • the short term financial objectives

Computing Tactical ROI Steps

Compute the savings realized due to:

• reduced middleware licensing costs
• due to reduced development time
• lower costs for system maintenance and system configuration

Operational SOA ROI

• Achieved through reuse of capabilities and services over time on the enterprise level
• The use of standard:
  • protocols
  • messaging formats
  • loosely coupled interfaces
  • service and business process reuse

Operational SOA ROI

“I can guarantee there’s a cheaper way to build your next product, but there’s no cheaper way to build your next 20 products [than SOA].” Christopher Crowhurst, VP and principal architect at Thomson Learning

Operational SOA ROI Models

Iterative reuse model

Investment return is measured based on number of times a service or process is reused rather than an arbitrary time frame

Calculated reuse model

This mathematical model computes SOA value based on a few key variables such as number of services available for reuse, degree of reuse, and service complexity.

Iterative Reuse Model

• Although the initial investment in reusable services is expensive, an ROI can be achieved based on reuse
• The savings achieved through reuse of existing assets versus creating capabilities from scratch each time eventually outweigh the added initial investment.

Iterative Reuse Model

	Base Cost	Reuse Impact	Project Cost	Running Cost	Return On Investment
Initial Development	$10,000	+60%	$16,000	$16,000	-$6,000
First Reuse	$10,000	-80%	$2,000	$18,000	$2,000
Second Reuse	$10,000	-80%	$2,000	$20,000	$10,000
Third Reuse	$10,000	-80%	$2,000	$22,000	$18,000

Calculated Reuse Model

• Service development cost (SDC) cost associated with initial development of services
• Cost per function (CPF) development cost per function, object point, or line of code
• Number of reusable services (NRS)
• Service complexity factor (SCF) the average number of functions or object points within each service.
• Degree of reuse (DR) This is the percentage reflecting the number of times services are reused out of possible usage scenarios and/or the percentage of operations reused.

 Development cost  
 - Number of services
 * Reuse percentage
 * Number of functions
 * Cost per function
 = - (Return on investment)

SDC	No of Srv	Reuse	No of Func	Cost/func	ROI
50,000	50	0.40	200	10	-10,000
50,000	75	0.40	200	10	10,000
50,000	50	0.60	200	10	10,000

Strategic SOA ROI

• Medium-to-long-term time frame
• Made via business agility
• Manifested through cost controls,
• Risk mitigation, and new revenue generation as a result of agility
• No proper SOA ROI model exists

Computing Strategic ROI

• Modify information systems with little or no coding required (rearrange the orchestration)
• Legal costs and fines are avoided due to faster and more reliable responsiveness to regulatory changes
• Rapid creation of new services as well as the manipulation and reconfiguration of existing ones.
• Ability to expose internal capabilities as consumable services by business partners and clients

More architecture less technology

In order to make right decisions:

• Get familiar with the concepts and existing patterns
• Hire a consultant who already did the hell
• Try to be technology independent to avoid yet another vendor lock