Impacts of Service-oriented Architecture Transformation on Organizational Structures

INTRODUCTION

Many modern enterprises heavily rely on their Information Technology (IT) systems. Because of this dependence, IT is driven by the dynamics of the enterprise itself. Enterprises have high expectations from enterprise IT such as having high level of flexibility and agility (Janssen and Joha, 2008).

When it was first introduced in the enterprises, IT was mostly responsible for storage and processing capacity without having business logic. By time, more and more business logic have been added to IT applications in the previous 20 years that made it a part of the business itself. As IT is a part of business today, changes in the requirements of business and the need to develop new functionalities also requires changes in the IT applications which forces enterprises to reuse existing components efficiently to be able to reduce the costs (Krafzig et al., 2004).

Now imagine a car manufacturer designing all the parts of the car in a way not to let it be possible to replace a single part without replacing the car wholly. After trying to adapt IT to business processes during previous 20 years in many different ways, the state of the business processes of many organizations are like the cars of this fictional manufacturer. These organizations have applications to support the operations of these monolithic systems that are very difficult to replace piece by piece. Fortunately, it is becoming possible to design many business activities as Lego-like software components that can be easily put together and taken apart. This is achieved by using SOA, a new way of designing and implementing the software components (Merrifield et al., 2008).

SOA is a remarkable evolutionary step for technology world especially to help it to complete one of its greatest unfulfilled goals. This goal is to have the ability to connect a wide variety of systems without proprietary software (Pulier and Taylor, 2006).

SOA intends to create a services platform consisting of many services that are elements of business processes that can be combined and recombined into different solutions and scenarios, as determined by business needs. This capability of SOA to integrate and recombine services helps the organizations to have a closer relationship between business and IT. Moreover, it provides to organizations the flexibility to address new situations (Bieberstein et al., 2006).

It is clear that aligning IT systems by the help of service-oriented architecture is a very critical step to enable end to-end enterprise integration and virtualized IT services. On the other hand, to be really effective, SOA should be overarching technology and needs to be extended to transform organizational structure and the behavioral practices of the organization (Bieberstein et al., 2005).

However, most companies that have started SOA adoption have applied it without considering the option of re-designing of their businesses as a first step. Having omitted this option, they have disregarded SOA’s greatest value which is the opportunity to re-design the organizational structure to make it much more focused, efficient and flexible.

SERVICE-ORIENTED ARCHITECTURE

The term SOA is an acronym for Service-oriented Architecture (Moore, 2007). It is the newest approach for designing, implementing and integrating reusable software components which is offered to organizations as a new technological framework (Saran, 2006).

A SOA has many different elements which are needed to be considered in order to build it. The essential ingredients of a successful SOA involves a conceptual SOA vision, various services, SOA governance and policies, SOA metrics and enabling behavior (Marks and Bell, 2006).

For the sake of the organization’s processes, it is required to have enterprise architecture and a SOA vision. The organizations should set their goals in terms of the way they want their processes to function and where they want to see their organizations at a certain point in time (Moore, 2005). SOA’s offer is a new way to system design that makes it possible to expose resources on a network as standalone components called services (Joseph, 2006). Services are considered as the central artifact of SOA. Services can be accessed regardless of the programming language used for development or the platform on which the service runs. SOA governance is important and needed to be able to make sure that different development teams will focus on fulfilling the single SOA vision (Marks, 2005). SOA metrics are necessary to let the organization know the current position and the direction of SOA initiatives. Organizations have to spend some time for planning a behavioral model to make sure that SOA initiative will be successful. The planning process should start with the behavior of SOA which will enable the organizations to reach SOA business goals. These behaviors are the ones to lead the organization to service reuse, SOA conformance, governance and metrics.

Apart from the elements mentioned, there are other concepts that business executives should take into account while assessing the potential value of SOA. These concepts include ease of integration (Keller, 2006), software (service) reuse and business agility (Holtschke, 2006).

With SOA, it is possible to create solutions that are portable and interoperable using the existing systems which are actually isolated systems by the help of open standards. Starting point of open standards supporting interoperability is web services. SOA enables the creation of applications built as a combination of loosely coupled and interoperable services (Carter, 2007).

Reusability of the services can be best explained by using mass customization concept from manufacturing which is using combinations of standard modules to form an individualized product. SOA is used to apply this approach to the business processes of the organization. Basically following this concept, the services introduced by SOA can easily be reused to create new business processes. As services created using existing back-end infrastructure, this approach will provide the ability customize products in a mass scale.

The fact that nowadays the market and customers are becoming increasingly demanding requires more flexible IT capabilities to respond in time to changing business processes and business rules. IT systems serving for customer relations focus on the benefit of enterprises while customers receive insufficient information from enterprises. Achieving information symmetry in customer relationships, providing bi-directional information flow between customers and enterprises is one of the various ways of keeping competitive advantage. Customer knowledge management and customer support systems can run with a technology infrastructure based on SOA (Lin, 2010). Opportunity to increase growth and revenue, reduction in time-to-market values and cost reductions are some of the motivations of business agility. SOA fosters the ease of integration in the applications of the enterprise through interoperability and enables the usage of existing applications of the enterprise by wrapping them as services. For this reason SOA is expected to increase the agility of the enterprise in the long-term (Tews, 2007).

BUSINESS VALUE OF SOA

In order to stay up-to-date and survive in this highly competitive business world, businesses can not ignore leveraging diverse technologies in their day-to-day operations and long-term strategy. Organizations are seeking for the opportunities to broaden their connectivity and increase their revenues; however they do not forget the need for innovation which is possible by restructuring the applications for more flexibility and lower costs (Mahdavi and Shirazi, 2010).

It is clear that SOA has a significant potential business impact to an enterprise; however this is possible only if the proper business modeling and context are considered during the planning and implementation of SOA. If a company is not responsive enough to changing business and market conditions, SOA may provide the baseline for the needs of this agile and rolling enterprise vision. This is achieved by delivering a strong business value proposition.

It is also important to decide whether a specific activity is valuable from business perspective. If an activity or the capability delivered by the activity differentiates the company from the competitors, or has a great influence to keep the customer loyal or drives a key performance measure (like manufacturing cost, quality or time to market), then this activity is considered as an activity providing business value. Moreover, anticipating the changes in the market and developing new customer, partner and supplier Merrifieldrelationships can be considered as additional business drivers for SOA.

Business benefits of SOA include not only tangible benefits but also less tangible but more compelling benefits. It is also important to understand how soft issues are relevant to achieve service-oriented architectures (Marks and Corp, 2004). These soft issues are the most difficult aspects of achieving SOA and they are also the key to ultimate success of SOA.

ORGANIZATIONAL CHANGES FOR SOA ADOPTION

Currently, in most organizations corporate governance and IT governance continues separately only with an intersection for SOA governance. The organization does not have a complete alignment of governance practices, so the CEO is not able to find out the responsible person when a customer service request arises. On the other hand, the recommended future structure allows corporate governance to overarch the IT and SOA governance which ensures that everything is driven by business so that IT and SOA goals and directions line up under the business goals.

To be able to achieve a successful SOA adoption with corporate governance overarching SOA governance for business and IT alignment, several changes are recommended by different SOA experts and practitioners: As SOA is a concept for distributed systems and distributed processes have become reality recently, many of the existing organizational structures do not either support or provide sufficient functionality (Josuttis, 2007). In functional structures, as a result of centralized control, multilayered bureaucracies occur resulting in less responsiveness to changing business conditions. In geographic divisions, there are problems like duplication, extra costs and inconsistent messages to different markets. Other divisional structures might cause silo effect. Finally in matrix structures it is difficult to balance the activities within different subsets as the organization is very complex. Even though many people agree that SOA requires change in the organizational structure, most companies that have started SOA adoption have applied it without considering the option of re-designing of their businesses as a first step. Having omitted this option, they have disregarded SOA’s greatest value which is the opportunity to redesign the organizational structure to make it much more focused, efficient and flexible.

As opposed to requirements of SOA which requires sharing capabilities as services and reusing existing assets, in traditional architectures budgets were allocated in silos at the project, group, or department level. For this reason, SOA also requires new procedures for funding new services and architecture. The real benefit of SOA will be realized when organizations stop investing locally to departments and start investing on enterprise-wide assets. If the organization can not address the financial issues, especially the central funding of reusable services, it might result in duplicated services and infrastructure where each of them will address the needs of individual projects and will not be used across departments (Afshar, 2007).

Not only the organizational structure and the funding model but also the people and the roles are expected to be influenced by SOA transformation. Some of the changes required include creating a group of employees called process officers for improving business processes, developing SOA specific skills, encouraging sharable and reusable services and creating a group responsible from SOA governance. As a best practice, foundation of an Integration Competence Center (ICC) to be able to facilitate trainings for managers, stakeholders, project managers, business analysts and quality assurance team is recommended since usually SOA adoption starts with a group of architects and developers and explaining SOA philosophy to employees enterprise-wide is essential.

By the help of service management capabilities of SOA, it is much easier to maintain a SOA enabled system than a system with monolithic applications. As the cost of maintenance is between 60 and 80% of total cost of an application, even 10% reduction will return a lot to the enterprise. SOA adoption requires departments to share operations and application code, companies to outsource more than before and business units to move part of operations to customers and suppliers. SOA transformation definitely requires collaboration from the initial ideas at the start, to operations and maintenance at the end. Collaboration may not be so easy in organizations in which there are isolated departments acting on their own. Changing the culture of the organization will be the only way in such cases to ensure successful SOA adoption and any model within the enterprise which undermines the value of collaboration can jeopardize success.

One of the key success factors of SOA transformation is the management support. SOA is a new strategy which will require transformation not only in technology but also in culture and the structure of the organization and therefore top managers have to understand these impacts SOA will have in the enterprise. Moreover, they have to provide enough time to SOA team to be able to put in place the new processes and should not expect to get the benefits of SOA in one year. SOA is a strategy which requires long term commitment and will take several years to be established properly.