Savings Calculator
for SOA
A tool to compute savings in SOA
based Integration projects
Nishit Rao
Group Product Manager FMW
Markus Zirn
Sr Director, FMW Product Management
SOA Savings Calculator
computes IT cost savings for
integration projects by
comparing costs between a
SOA/BPEL implementation and
a Proprietary Integration Broker
implementation over life of
solution using TCO.
Features and Benefits
•
Simple tool to highlight key SOA concept – Agility.
•
Connect the dots between Marketing - “Reduce costs” and Customer – “IT
Agility”
•
TCO over 5-7 years is a common industry justification.
•
Allows for strategic discussion with customer.
•
Positions Oracle as a thought leader.
•
White Paper & Customer Case Study backs it up.
•
Analysts, Industry and even major Competitors agree on savings.
•
Levels or differentiates from Competition.
•
Arms IT with concrete number to make case with CFO
Integration is top SOA priority
What is value of SOA?
• SOA Business Value =
• Bottom line benefits + Top Line benefits.
• Top line / Revenue is difficult to measure and
pin the benefits to SOA.
• Higher sales, Risk reduction, Time to market etc.
• Among Cost Savings, IT saving is tangible,
can be benchmarked *and* pinned to SOA.
• Software services, Hardware and software licenses
Integration Cost Study : Zapthink
Compare TCO over Traditional
Broker based Integration : Data Driven
SOA based Integration : Business Driven
Custom Flows
BPEL
Business User
Services
Services
Tightly coupled,
zero re-use,
function calls
Custom
Custom
ERP
CRM
• Custom data, adapters and flows.
• Expensive coding, vendor lock in,
limited re-use and limited tooling
• Low ROI data integration.
Reusable decoupled
Services
WSDL
WSDL
ERP
CRM
•Standards Based: BPEL & Schemas.
• Align to business – high ROI, low
risk.
• Reusable services.
Underlying Model
n
TCO = A + P.V.  ( Si + Hi + Gi + Ci – Ri )
i=1
A = SOA CapEx acquisition cost
P.V. = net present value
Si = Software License costs in year i
Hi = Hardware costs in year i
Gi = Governance Costs in year i
Ci = Services (consultants) costs in year i
Ri = Savings from Reuse in year i
where SOA CapEx acquisition cost includes one time capital expenditure on
Software licenses, and Governance Costs includes recurring Architecture,
Training and Governance expenditure.
SOA Savings = TCOTRADITIONAL - TCOSOA
Inside an Integration Process
Multi Step
Process
Bind
Bind
Bind
Interfaces exposed
by endpoints
Endpoint
ERP
Custom
Component
CRM
Endpoint
Built by inhouse
Developers
Services Effort Defaults
Services Effort
SOA-BPEL in
days
Proprietary
Broker in days
Justification
Create new Multi-step
process
5
6
Create interface (bind) to
endpoint
2
3
Change multi-step process
1
3
Change interface (binding)
when endpoint changes
1
3
New Component
Development
75
60
• Input and output to each step is
standardized WSDL and XML.
• Endpoint interface WSDL is self
descriptive reducing communication
errors.
• Less training for new hires knowing
XML.
• Interoperability with diverse systems
such as .NET, Mainframe, Databases,
Files is made easier by common look and
feel and invoking mechanism of WSDL
interfaces..
• Abstraction of binding type provides
flexibility.
• XML Schema enforces type and
reduces errors
• Creating WS interface above
component take additional effort
Max Reuse Rate
30%
10%
• SOA enhances reuse with std
interfaces, lookup facilities and
governance policies. The reuse rate is
with good governance.
Oracle Customer Validation
•
Helio:
•
•
•
Hartford:
•
•
•
•
•
195% increase in revenue deploying BAM and BPEL.
SQL is automatically wrapped as Web Services savings weeks.
ING Lease:
•
•
$1M savings in maintenance.
40% savings in development effort.
Cattles Bank:
•
•
•
.NET to Java integration took hours compared to weeks earlier.
Each service re-used saved 4-6 weeks in development costs.
QA/Regression efforts reduced from weeks to days.
Bug fixing reduced from weeks to days
US Navy :
•
•
•
Saved weeks when endpoint change did not impact process.
45% reuse.
Project completed in 6 months compared to average 2 years.
PSI:
•
•
$500K in development savings.
30% reuse.
Public Sources Validation
• AXA Financial:
• Saved $55 Million using SOA - CIO Bill Lavine, Computer World
Feb 2004
• Providence Health:
• Can save $1M / yr - Mike Reagin Dir R&D, Network World Mar
2004
• Fedex:
• Cost of inquiry down to 4c from over $2
• Dollar Rent A Car:
• Integrating to South West Airlines yielded millions in revenue.
• Mark & Spencer:
• Lowered dev costs by 66% and yielded first year ROI of 415%
Analyst Validation
• Ken Vollmer & Mike Galpin, Forrester.
• SOA reduces Integration Project Development and Maintenance by
30% or more from reuse.
• Zapthink
• Reduced time to get data from mainframe from 3-4 months to
minutes by exposing CICS transactions as web services.
• Gartner
• Strategic Planning Assumption: Organizations that employ a
services-driven approach will achieve a 6-1 return on investment
over a five-year period (0.7 probability).
• Web services standards will lower the cost of developing basic
connections into new application systems.
• Low-cost assembly of new business processes.
Why SOA integration costs less
•
Maintenance costs are lower (decoupling of process and end point)
•
Standardization reduces product cost and services cost
•
Standardization delivers Rich interoperable tools
•
Integration outside the firewall ($ B2B) is simplified with std interfaces.
•
Reuse reduces cost by approximately 30%
•
Architecture changes do not ripple across systems.
•
Increased visibility – monitor, manage, escalate, comply and audit
3 Steps to TCO
SOA Questionnaire - Step 1 - Customer Inputs
What is the number of Integration Processes in Year 1 ?
Want is the average growth rate of processes each year ?
8
45%
How many end-points will each process integrate with?
What is the average growth rate of end-points each year?
7
20%
How many new business components will be developed each year?
What is the average growth rate of components each year?
5
50%
Step 2 - Benchmarks
SOA Questionnaire - Step 2 - Defaults
Software - Services Effort
Time in days with
Traditional brokers
Time in days with SOA
Create a new multi-step Process
5
6
Create interface(bind) to endpoint
2
3
Change multi-step process
1
3
Change interface (binding) when
end-point changes.
1
3
75
60
New component development
(EJB, .NET Servlet, or other).
Step 3 : Your Savings
SOA Approach saved 28% over traditional methods
Change & Maintenance lead in
savings
SOA Savings Breakup
• Maintenance
accounts for
39% of
savings.
Re-use
28%
Change
interface
10%
Create
interface
25%
Create interface
Create Process
Create
Process
8%
Change
process
29%
Change process
Change interface
Re-use
Small Company / Departmental Scenario
• Small Company, a small financial services F2000 company has
legacy applications and needs to focus on fast response to
Customer while leveraging partners to reduce costs.
• Departmental Enterprise wide SOA effort, integrating back office,
partners and automating 10s of processes across 10s of end
systems (approx 15-20).
•
Projects include
•
•
•
•
•
CRM to mainframe integration for a 360 degree view of customer
Claims process automation (includes mainframe access).
Documentum integration to claims process to access lease documents.
Outsource imaging function and automate process (imaged document from
partner to Documentum).
Link to partner web-sites for authorization / validation.
Traditional Cost – Small Company
Traditional Deployment Cost
Software Services Costs
Create interface (bind) to end-point
Create a new multi-step Process
Change multi-step process
Change interface when end-point
changes.
Savings from reuse
Traditional Software Services Costs
Year 1
Year 2
Year 3
Year 4
Year 5
Total 5 Yr Cost
$113,076.92
$196,753.85
$342,351.69
$595,691.94 $1,036,503.98
$2,284,378.39
$32,307.69
$46,846.15
$67,926.92
$98,494.04
$142,816.36
$388,391.16
$48,461.54
$70,269.23
$101,890.38
$147,741.06
$214,224.53
$582,586.75
$49,753.85
$0.00
$86,571.69
$11,250.00
$150,634.74
$29,250.00
$262,104.46
$38,025.00
$456,061.75
$49,432.50
$1,005,126.49
$127,957.50
$243,600.00
$400,440.92
$662,803.74
$1,104,031.50
$1,849,606.63
$4,260,482.79
SOA Costs – Small Company
SOA Deployment
Software Services Costs
Year 1
Year 2
Year 3
Year 4
Year 5
Total 5 Yr Cost
Create interface (bind) to end-point
Create a new multi-step Process
Change multi-step process
Change interface when end-point
changes.
Cost from SOA
$64,615.38
$23,076.92
$13,846.15
$168,646.15
$33,461.54
$20,076.92
$293,444.31
$48,519.23
$29,111.54
$510,593.10
$70,352.88
$42,211.73
$888,431.99 $1,925,730.93
$102,011.68 $277,422.26
$61,207.01 $166,453.36
$42,646.15
$114,423.08
$74,204.31
$129,115.50
$224,660.96
$390,910.07
Total SOA Costs
$258,607.69
$296,388.92
$500,190.57
$847,818.67 $1,442,560.75 $3,345,566.61
$861,536.99
Big Company /Enterprise Scenario
• Global manufacturing F100 company has numerous silo-ed
applications and plans to harmonize broken processes to ensure
consistent delivery of services to customer.
• Enterprise wide SOA effort, integrating back office, partners
and automating 100s of processes across 10s of end systems
(30-60).
• Projects include
• CRM to ERP to Supply Chain integration to optimize value chain.
• Six Sigma processes to ensure consistent processes across
business units.
• Enhance self service for customers, partners and suppliers.
Comparison to SOA Benefits Kit
SOA Benefits Kit
SOA Savings Calculator
Audience
CEO, CFO, LOB managers
CIO, architect, IT manager
Goal
Build a financial business
case
Demonstrate value of SOA, lay
competitive traps & establish
Oracle as a thought leader.
Model
Generic business model
applied to SOA
Custom model based on SOA
benefits (reuse, agility)
Benefits
Business + IT Savings
IT Savings
Complexity
High (many inputs)
Low (4 inputs, 6 defaults)
Delivery
Facilitated discussion
Online, Face2Face, White Paper
When to use?
End of the sales cycle, only
when a business case is
required
Early in the sales cycle after
identifying an integration
opportunity
Risks
• Benchmarks may not match customer scenario
• SOA Case Study shows commonalities across 100s of customers.
• Real measurement takes time.
• Most customers need ballpark measurements.
• Gartner / Analysts suggest “Beware of ROI”
• But, there are ROI studies from Forrester, Burton, etc
• Biased to Oracle Products
• Not really – biased (if at all) to Standards based products
Next Steps
•
•
•
•
Roll out to field as appropriate
Place it Online (Flash)
White Paper
Create a detailed customer case study (ROI).
• Additional Features
•
•
•
•
Add savings from SOA manageability.
Go beyond SOA Integration (Composite Apps)
Benchmarks on Product Value (BAM + BPEL).
Capture business benefit.
Feedback: nishit.rao@oracle.com
Q
&A
QUESTIONS
ANSWERS
Where Calculator can help
• IT needs to show business value to CFO
• Customer buying more integration broker licenses or building ptpt solutions.
• Competitor showing ROI numbers.
• Avoid ROI spreadsheet competition
• Get Customer aware of long term costs.
• Connect the dots between Marketing - “Oracle SOA Suite helps
reduce IT costs” and Customer – “my silo-ed apps unable to
deliver business needs”
Applied SOA: Measuring Business Value, Michael Barnes Gartner
Compares pt-pt with traditional integration brokers