SOA can be viewed as a management tool

IT publications are full of reports on service-oriented architectures, or SOA, but business managers seem to have little interest in the new IT concept. IT has lost its glamour; technology buzzwords are a thing of the past. Today, technologies must demonstrate direct benefits for CIOs or managers to justify the cost. SOA provides financial benefits through quicker application development, but that is not the impressive part of the whole concept. The innovative new business models are the exciting part.

The fundamental driver when it comes to implementing SOA is the alignment of the IT system with the company's value-added services. It is therefore essential to know and understand the company processes if we are to derive and realize self-contained, independent services. Conceived in this way, SOA can be viewed as a management tool.

Well, the principles of SOA are not really new at all. For decades, information technology industry has been working to make software modular and reusable to improve its flexibility and cost-effectiveness. But SOA is succeeding because major manufacturers are now integrating these principles by bundling various technologies, such as workflows, portals and EAI, on what are known as “process platforms”. The software is separated into services, which are then assembled into applications via the platforms.

This is initiating a paradigm change in software development. We are moving away from application-centric software design to user-centric software development. Users can participate in application development and assembly themselves. This paradigm indicates that a provided service should be self-contained and suitable for independent use. Service-oriented architectures break open the rigid interlinking of IT systems and process workflows. With this in mind, IT applications are broken down into modular, reusable services.

We expect that new business models will emerge from this. In the past, the rigid application concepts of IT often limited companies' creativity; the smallest changes in operational business models and processes resulted in major IT expenses. Now SOA is opening up considerably more flexible possibilities for realizing new business models. A business model is determined by three components: What I deliver, how I deliver it, and to whom. Many business models, in particular those of large-scale enterprises, rely on a few mass-produced products for a major market. However, there are also a great number of niche markets, which can be very lucrative, with specialized product variations and customized supply-chain concepts for individual customer segments. This is called a market's long tail. In the music industry, for example, pop music is the biggest market and is addressed by major suppliers, while jazz, classical music and experimental music enjoy fewer fans and are served by smaller, specialized music publishers. Through SOA, these specialized business processes can be realized more easily, making them interesting for major suppliers as well. SOA Brings Flexible Processes.

The main reason is that SOA enables a company to easily change its delivery processes or outsource sub-processes. Machinery manufacturers, for example, can offer more variations. IT managers can position SOA as ”setting the stage” for next generation enterprise in companies. To be able to do so, they must learn to think in terms of business processes rather than technology. SOA is an enabler technology – a platform for new business models, similar to the way a new automotive technology, like the hybrid engine, becomes a framework for new vehicle models.

The benefits of this type of architecture are enhanced flexibility and improved options for the reuse of related services, meaning that a company's adaptability, to rapidly changing market situations for instance, can be drastically improved. T he IT industry must show the business world the benefits of SOA, how IT can contribute to developing new customer groups or reducing time-to-market. Unfortunately, the benefits of new technology are often difficult to recognize at the beginning. Even Deutsche Telecom managers were hard pressed to explain why they were ready to invest billions when UMTS licenses were auctioned. Today, they have a growing business with UMTS applications like mobile TV, “jukebox” cell phones, and video telephony. It takes a visionary to perceive new business opportunities. SOA designers, and in particular SOA users, must be more imaginative about the corporate objectives of new technology.

Requirements for SOA
The business processes requiring support must be clearly documented to ensure that the benefits of SOA can be tapped. Aligning the service description with the requirements of the specialist departments allows for a close relationship between business and the IT system — a must for a successful SOA. Precise knowledge of the business processes is therefore indispensible during SOA planning. This business process-based SOA approach is therefore called "Business-Driven SOA." 

SOA in practice at KAESER KOMPRESSOREN  

New IT: The business
Companies can discuss the technical aspects of SOA till they get blue in the face. But management is only interested in how it can improve business. So, the IT Department at KAESER KOMPRESSOREN has restructured its global customer service organization. Is IT little more than an afterthought?

KAESER has used technical innovations in air-compression technology to become one of the largest, most successful companies in its industry. Nevertheless, says Falko Lameter, “Innovative products on their own are not enough to secure and expand our competitive position. Customer service plays an increasingly important role today.” For that reason Lameter – the IT director for this family-owned enterprise founded in Coburg, Germany in 1919 – has launched a project that is creating a new foundation for the company’s service organization worldwide. KAESER’s IT organization has always considered itself the engine that drives the company’s efforts toward modernization.

IT is engine of modernization
Optimizing the service management process should accomplish various objectives:

• Reduce throughput times for order processing;
• Standardize the way service incidents are recorded, with focus on a single location; and
• Ensure that only an on-site service technician is necessary by recording all the details of the reported defect.

The ambitious concept envisions a decentralized network of service technicians spanning the globe. Subsidiary branches in 40 different countries will manage with centralized administration and a single point of access per branch. However, the service technician as well as the necessary parts and materials must be available on location, regardless of where in the world a defect has occurred. KAESER’s compressors supply production and work processes around the globe, based on the power of compressed air as a carrier of energy. Consequently, breakdowns and malfunctions have to be corrected as quickly as possible.

Ambitious objectives in the IT field are nothing new for the air-compression specialists of KAESER. In 1993, the company became one of the first to implement SAP R/3 with IDS Scheer as a project partner. Moreover, the organization, which is still based in Coburg, Germany, is at the forefront in utilizing optimized logistics chains generated with mySAP SCM, which it has used to reorganize its replacement part supply chain and production facility business. Lameter: “We want to be among the frontrunners with new IT developments.

We’ll gladly retain any learning effects the process brings.” To that one must certainly add the competitive advantage.

It was early 2007, and the time had come to again prove its reputation of being at the head of the pack. KAESER decided to implement service-oriented architectures – referred to as “Enterprise SOA (eSOA)” in the SAP vernacular – for business process management in its customer service department. Lameter remains convinced, saying, “eSOA is the right choice as an enabler for innovative business processes for our service management.” This opinion hasn’t yet gained wide acceptance, according to Jürgen Mayer, senior manager at IDS Scheer and head of the KAESER project.

Although many companies in the capital goods industry are taking a very close look at SOA, they tend to focus on technical issues. “Many CIOs are neglecting the business benefits of SOA,” says Mayer, “but the business perspective is the deciding factor for successful implementation at a company.”

KAESER chose IDS Scheer to be its partner in the project. Appropriately, ARIS Value Engineering ensures process-oriented actions and procedures. Lameter explains it thus: From implementation to execution, the strategy is consistently converted into IT-supported processes.” SAP’s business process platform, called NetWeaver, generated the composite applications to meet the system’s technical requirements in an SAP environment.

The eye of a professional is in high demand
The particular strengths of SOA became clear soon after the project was launched. Typical service-department tasks include technician allocation and scheduling, troubleshooting, complaint processing, maintenance, contracting, the delivery of replacement parts and mobile linking with service technicians. SAP NetWeaver’s standard services eliminate complicated transaction exchanges between SAP’s CS (Customer Service) and SD (Sales and Distribution) applications. KAESER expects this to accelerate service handling and processing.

The company has to date completed the implementation of the basic service applications and company-wide rollout with IT infrastructure, IT application architecture and process standardization in all 40 locations. The following SAP service components have been installed:

• Equipment and service parts lists (with maintenance packages, documentation, trace-ability/product recall);
• Service handling and processing;
• Employee allocation and scheduling;
• Service contracts and planning;
• Product labeling;
• Product observation.

Orders processed more quickly
Mayer, the project head, is certain in his assessment: “The user-focused SOA approach reveals enormous potential for optimization. Generally, that applies to the previous solution’s insufficient module integration in a homogeneous SAP environment, as well as its lack of integration with non-SAP systems.” These weak points once led to inefficient processes for service activities. All things considered, IT manager Lameter feels that “by orchestrating standardized services from both SAP and external vendors, such as Adobe Interactive Forms, we can implement innovative business processes more efficiently and quickly adjust to new demands in the market.”

Once the project is fully implemented, service technicians will record all the details of a malfunction during the initial contact with the customer. The process requires an exact description of the defect so that the technician on location can eliminate the entire problem.

KAESER has also simplified handling for service contracts with multiple machines and defect reports, as well as pre-shipment for the necessary replacement parts.

KAESER has reached a milestone on its way toward improving the overall service quality: the throughput times for processing service contracts have been reduced significantly.

“The business benefits are emerging,” says Lameter happily. “That’s why management approved this project.”

KAESER KOMPRESSOREN
The company with more than 3,000 employees worldwide, is a leading supplier of air-system technologies. Founded in Coburg, Germany in 1919, the family-owned company now has a presence in over 70 countries. Its production facilities are located in Coburg, Gera and Lyon.

Six steps to SOA
1. A business-segment matrix provides an overview of the service department.
2. The critical success factors are derived from the following questions: Where do we stand in comparison with our competitors? Where do we want to stand?
3. The business defines a comprehensive service process model.
4. A process portfolio is proposed and evaluated. The deciding questions are: What influence will the process have on fulfilling the defined success factors? How well is this process supported by IT?
5. Goals are set for the processes, particularly for the core process in which “service technicians eliminate defects.”
6. The factors in malfunctions are identified and classified.

Lessons learned

Include the departments:
The road to a composite application is a rocky one. It is essential that each department is included on a permanent basis, and that there is a consistent concentration on the benefits. Employee identification is enhanced through an implementation project that would otherwise be extremely technical.

IT people fail on their own:
IT managers who focus exclusively on SOA and the problem of orchestration will not be convincing, mainly because top management has no interest in SOA and services. Beginning with the initial presentation, the IT organization should focus on the business benefits.

Falko Lameter directs the IT and Organization department at this engineering company, which was founded in 1919 and remains an industry leader in compressed air technology.