2.1 Business Drivers Motivating Integration

   

2.1.1 IT Spending Trends

Economic trends have caused IT departments to focus on making things work with applications they have available to them today. In the year leading up to Y2K, the majority of IT spending was focused on Y2K preparation, which included buying packaged applications that were Y2K-ready.

The subsequent economic downturn, whether attributed to post-Y2K, post-Internet-bubble, 9/11, or wartime uncertainty, has led to dramatic changes in IT spending. This has had a particular impact on integration, both positively and negatively. IT budgets are not what they were in pre-Y2K years. No longer do IT managers have the luxury of multimillion-dollar budgets to spend on integration broker software and services, with projects that could take 18-24 months to show results. IT spending has now become highly visible at the executive level, and individual projects are being highly scrutinized. Only the projects that are critical to business viability are getting funded. Corporations are demanding tangible results and ROI within the 3-6 month timeframe on a per-project basis, though they still maintain the strategic goal of improving overall operational efficiency.

2.1.2 Integration as a High-Ranking Priority

A new era of frugality does not decrease the need for improvement in business processes or the need for integration. The business drivers are still there: the need for improved process cycle times, the need to reduce inventory levels, and the need to eliminate duplicate IT services, to name a few.

An IDC report[1] surveyed 557 CIOs about their high-level priorities for 2004. The report said this about integration:

[1] IDC, Integration Standards Trends in Program Development: It All Depends on What the Meaning of "Open" Is, November 2003 (document #30365), http://www.idc.com.

Of what might be called "market driver" trends, integration has replaced security as the highest priority in IT planning for 2004 in North America among IT and executives interviewed in June 2003.

The report also notes that integration and security rank third and fourth, respectively, among the highest priorities of CIOs, just behind "Infrastructure replacement/upgrade" and "IT cost-cutting."

That total percentage was influenced by the fact that 21% of "midmarket" companies ranked integration important, even above infrastructure replacement/upgrade and IT cost-cutting. Table 2-1 shows the answers to the question: "Which of the following issues do you expect to have single-highest priority in 2004? Select one."

Table 2-1. Importance of integration by industry (% of respondents)
 

Total

Financial Services

Manufacturing

Government/ Education/ Healthcare Delivery

Services

Telecom/ Broadcast

Transportation/ Utilities

Retail/ Wholesale Distribution

Other

Infrastructure replacement/ upgrade

21.0

17.0

24.0

26.0

17.0

15.0

26.0

29.0

8.0

IT cost cutting

20.0

23.0

24.0

18.0

16.0

31.0

22.0

14.0

8.0

Integration

16.0

16.0

17.0

9.0

20.0

15.0

30.0

4.0

15.0

Security

12.0

18.0

9.0

16.0

12.0

8.0

-

14.0

12.0

Internet-related projects

9.0

11.0

6.0

10.0

9.0

4.0

11.0

7.0

8.0

Linux

4.0

1.0

4.0

3.0

8.0

8.0

-

-

-

Optimization Software (e.g., storage management)

4.0

4.0

6.0

4.0

1.0

8.0

-

11.0

4.0

Mobile devices

2.0

-

1.0

3.0

4.0

-

-

-

8.0

Wireless networking

2.0

1.0

2.0

3.0

2.0

4.0

-

-

4.0

Other/don't know

10.0

9.0

8.0

8.0

11.0

8.0

11.0

22.0

35.0

N=

557

82

109

116

143

26

27

28

26


2.1.3 Regulatory Compliance

Sometimes the need for integration is forced upon you, whether you like it or not. Even in hard times, when IT budgets are tight, infrastructure revamping for the purposes of integration still must be done to comply with government regulations. As most IT folks would attest, there's plenty going on just trying to maintain the status quo without having to worry about new integration strategies. However, there's nothing like the prospect of jail time and stiff fines to get the attention of senior management.

Due to regulatory compliance issues, companies in some industries must make information available to competitors and must audit information access. For example, in the telecom industry, the Incumbent Local Exchange Carriers (ILECs) need to provide information to competitive LECs. Energy utilities need to provide billing information to competitors. Healthcare agencies and privacy laws require tracking customer record access for audit purposes. This requires making your disparate data readily available in a standard format using a standard protocol.

Here are some areas in which regulatory compliance is a driver.

2.1.3.1 Telecom

An FCC regulation requires that all telecom providers expose certain aspects of their customer data with the local phone carriers. One major telecom provider was having stiff fines imposed upon it for not complying with this requirement. Obviously, even a major company cannot afford to pay that amount of money on an ongoing basis. Many issues and high costs are associated with sharing information that is required by law, and filtering out what is not required by law. Therefore, a simplistic approach cannot meet the needs of compliance while still protecting sensitive corporate data. You need fine-grained filtering and selective data transformation to provide only the necessary data (and perhaps only at the last possible minute) to minimize the potential leverage your competitors can get as a result of this access. All of this requires fine-grained access and control over process flow.

The telecom provider mentioned previously needed a standards-based integration solution capable of scaling out to the small providers, using a variety of protocols that would allow the smaller providers to adopt the integration strategy. To fill this need, the company ended up adopting an ESB.

2.1.3.2 Sarbanes-Oxley

The Sarbanes-Oxley Act of 2002, designed to protect investors by improving the accuracy and reliability of corporate disclosures, imposes new reporting requirements and introduces higher accountability on the part of corporate decision-makers and their enterprises. Sarbanes-Oxley compliance requirements pose some real challenges. They include cost considerations, logistical complexities, data collection and management issues, and the timely reporting of accurate data, regardless of where the data exists across an enterprise.

2.1.3.3 Government

The U.S. federal government had set a goal to become paperless by 2003. At a U.S. government CIO council summit in January of 2003, Brand Niemann, chair of the CIO Council XML Web Services Working Group, said this about the driving force behind XML adoption for integration in the U.S. government:

The Government Paperwork Elimination Act of 1998 requires federal agencies, by October 2003, to allow individuals or entities that deal with the agencies the option to submit information or transact with the agency electronically, when practicable, and to maintain records electronically, when practicable.

Regulatory compliance has driven a tremendous amount of energy and focus on integrating backend systems and data sources across government agencies. As we will see when we examine the ESB in a portal environment in Chapter 11, an ESB integration network can provide significant value when acting as the intermediate integration technology between the portal and the multitude of backend sources.

2.1.4 Straight-Through Processing (STP)

Straight-Through Processing (STP) refers to the ability to enter transactional data only once for a business process that spans systems and organizations. In other industries, STP may be known as "flow-through provisioning," "paperless acquisition," or "lights-out" or "hands-free" processing.

The goal of achieving STP is to eliminate inefficiencies in business processes, such as manual rekeying of data, faxing, paper mail, or unnecessary batching of data. Examples of things that hinder STP today include rekeying a purchase order into a credit verification system, or the batching of transactions for periodic processing.

STP is an important driver within financial services, telecommunications, and utilities. In financial services, the goal of "T+1" refers to settlement of trades within one day of execution. Automating routine operations helps companies to reduce costs throughout the order or trade lifecycle, to service customers more quickly, and to effectively manage business risks.

2.1.5 Radio Frequency Identification (RFID)

Radio Frequency Identification (RFID) tags are changing the way businesses track goods and supplies throughout their supply chains. RFID tags also promise to help automate supply chains by eliminating the need to have a person unpack crates and pallets to scan bar codes to check the contents. The amount of message traffic that will get generated as a result of RFID-tagged goods passing through readers situated in warehouses and loading docks is going to generate large volumes of data that will need to be captured, routed, transformed, and turned into something meaningful for a business.

"Smart shelves" in retail stores that contain RFID readers will be able to track stock in real time and automatically generate replenishment orders when shelves get low. These shelf readers will also know, for example, when a customer picks up a particular item, then puts it back on the shelf in favor of a different item. This type of data can be valuable to the manufacturer of the item that was reshelved.

Leading retailers such as Wal-Mart and Tesco, as well as the U.S. Department of Defense, have already mandated RFID tagging at the carton level from their large suppliers. The ultimate goal is to drive down the price of the tags themselves such that it is feasible to tag individual items such as a toothbrush or a can of soda. This will significantly increase the number of messages that get generated as a pallet of goods passes by a reader. This volume of data could not be generated with a person manually scanning a bar code one carton at a time. An ESB can act as a buffer to capture the bursts of messages that occur as a pallet passes by a reader at a loading dock. Applications that were not designed to handle that amount of data can be protected by the messaging layer of an ESB, which can distribute the workload across multiple backend applications or queue up the messages until they can be processed.

The increased granularity in messages due to item-level RFID tags can also be a problem for applications that were not designed to handle data at a granularity beyond the carton level. An ESB can provide special caching, aggregation, and transformation services that can collect the fine-grained data and aggregate it into the carton-level summaries that an application may be looking for.

The EPCglobal organization is driving the standardization of the RFID tags, the readers, and the software that integrates the readers to applications. To share RFID data widely, integration rules will need to be defined for the network of readers and interested applications across the supply chain. To avoid flooding the entire network with RFID data, filtering and aggregation rules must be distributed as close to the RFID event generating points as possible. The ESB is an ideal integration platform to remotely configure and manage the rules that control the flow of data.



Enterprise Service Bus
Enterprise Service Bus: Theory in Practice
ISBN: 0596006756
EAN: 2147483647
Year: 2006
Pages: 126

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