ADDITIONAL BUSINESS SCENARIOS

There are a number of generic business processes that are represented in all organizations regardless of the industry or vertical. These range from simple portal integration initiatives to the use of Web services to support the business integration requirements of an M&A strategy. From the Web services adoption model developed in Chapter 3, we showed how initial forays into Web services will be focused on internal integration, solving integration issues between backoffice, enterprise applications and front-office systems such as portals, Webbased front-ends for CRM, and other related customer-facing systems.

Mergers and Acquisitions

Of all the possible business issues faced by executives, one of the most common is the need to integrate an acquired firm into the acquiring organization. This task can be challenging on many levels, including business strategy, organizational structure, business process, and technology infrastructure. All of these forces of change must be considered and explicitly addressed in order to achieve the synergies of an acquisition that most executives point to as justification for the decision. Of course, recent accounting insights have shown that M&A activities have not generated the value that was promised, and more often than not have resulted in the destruction, rather than the creation, of shareholder value. One key issue with M&A strategies has been the speed with which an acquisition can be absorbed in order to achieve the intended synergies of the merger.

A typical first step in M&A absorption is financial integration, followed by the strategic integration of business operations to eliminate redundant operations, trim excess costs, and eliminate duplicate functions. Ultimately, back-end integration of all business systems may be required depending on how integrated the organizations must be to support the M&A objectives. Strategic mergers, where the entire operations of the acquired firm are integrated, require the rationalization of duplicate staff, of duplicate processes and IT systems, and duplicate capacity.

Web services can be leveraged to very quickly integrate the financial and operational systems of the acquired firm. The use of Web services significantly reduces the time and cost of integration and provides executives with an integrated view of the combined organization’s operating metrics—typically a significant post-merger challenge. This allows executives to more effectively ensure that the merger can achieve its targeted objectives. However, from a medium- to long-term perspective, it is still critical for a post-merger organization to develop a consolidated enterprise architecture and retire duplicate and legacy systems. Consolidation of systems will enable the full benefits of an M&A strategy to be realized. As will be discussed in Chapter 7, “Architecting for Competitive Advantage,” Web services should be a key consideration when creating a consolidated enterprise architecture.

Public Trade Exchanges

Participating in public trading exchanges is another area where Web services hold great promise for organizations in multiple verticals, regardless of whether their core focus is manufacturing products or providing services. Previously we have discussed participation in trade exchanges for procurement of components and raw materials, as well as using trade exchanges to sell finished goods. These exchanges require access to ERP data, the ability to process purchase orders on the procurement side, and also to expose production data and order status on the sell side.

Web services are compelling for exchanges because they offer a lowcost, standards-based approach for integration of the systems necessary to exchange commerce transactions electronically in an exchange or online market. Previously, integration with exchanges, whether private or public, demanded expensive interfaces via EDI, EAI, or other means. The cost of integration to exchanges was often beyond the budget of smaller vendors, who often still rely on fax and phone channels of communication for orders, forecast sharing, and other related information.

Web services will drive down the integration costs for suppliers, tradingpartners, and customers, such that partnering and participating in online trade exchanges will become not only easier, but more economically viable for small- and medium-sized firms. This development will change the structure and cost basis for many industries as efficiencies are gained in the exchange of information, products, and services.