Innovation: An Overview
There used to be Gramophones, and then came desktop sized cassette players, followed by walkmans. Of course there were many more variations of cassette players that came in between. But the fact is that all of these innovations lead to what we call today an “iPod”. And this cycle of innovation continues to evolve. Similarly, there are many such innovations. Another good example would be telephones that we use in our everyday life. There used to be the old wall mounted telephones, from it came the standard telephones that we used to see in the 80’s and early 90’s. Then came the cordless phones followed by Mobile Phones. What do these innovations have in common? If you take a close look at it you’ll realize that as the technology evolved it helped people go “Mobile”. In the case of audio/video based mobile devices like iPod, it helped people carry their choice of documentaries, daily news, lectures, music and so on and so forth along with them. But in the case of telephone, mobile technology has enabled freedom and flexibility beyond the four walls of home and/or office. But in both the above-mentioned cases, the objective remained the same – more flexibility to keep up with the changing way of life. In the case of former, it has helped information/music go mobile were as in the case of later it helped communication go mobile. What was possible let’s say 100 years ago, we are able to do it in a totally different manner today. I guess that’s what we call as innovation. One of the major differences between “then” and “now” is that, the cycle of innovations started becoming faster and shorter. Innovations can be generally termed as Horizontal Innovations and Vertical Innovations. Horizontal innovations are the ones that take place in a sequence. At every previously unknown point a new innovation is born. The birth of a new horizontal innovation always comes with a potential to trigger a vertical innovation. With every horizontal innovation, which occurs over an interval of unpredictable quantum of years, there is a vertical process innovation that is taking place to exploit the horizontal innovation that has already come in to effect. For example, walkmans have transformed into iPods, this could be termed as a horizontal innovation. Once iPods hit the market, Podcasts were born. This has opened up a plethora of opportunities for vertical innovation. Similar innovations happened with mobile phones as well, a lot of value additions that was not possible with our traditional telephones are available now and this could also be termed as a vertical process innovation.
Innovation in the field of Information Technology:
Let’s take this concept of Horizontal Innovation and Vertical Innovation and apply it to IT industry. It all began with the concept of Mainframes. Innovations in networking triggered the next major leap in Horizontal innovation giving birth to Client-Server Architecture. These technological innovations lead to numerous vertical innovations. Organizations started developing application around this network architecture until it reached a similar point where traditional telephone gave birth to Mobile phones. Like the features and flexibilities that came along with mobile phones, IT also started demanding for such features and flexibilities that are of critical in nature, because the businesses started demanding for it. That demand gave birth to the next and the current technology, which is, Service Oriented Architecture. Vertical Innovations has already started taking place around this technology and this is where organizations like SAP, IBM and Microsoft are already playing a lead role. But there is a marked difference between the innovations that came with the examples (Phones/iPods) that was mentioned before as opposed to SOA based innovations. The bottlenecks that came with past innovations were quiet challenging because any further innovation to the core itself demanded a total abandonment of previous innovations. Where as the SOA approach deviated from the path. SOA was flexible enough to adapt to the changing business needs. Let’s take the example of mobile phone; if someone wants to have more features built into their existing phone, then they’ll be forced to abandon their existing phone and go for the latest model that is available in the market. Where as in the case of SOA world if an organization decides to change the way they do business they can incorporate that change into the existing web services (A web service is nothing but a program that can talk to another program). Web service enabled a huge step towards flexibility across heterogeneous landscape. However this approach was not sufficient enough to unlock the true potential of Web Services. Most of the WebServices exposed the functionality of individual applications and are too fine-grained to be efficient building blocks for an enterprise-wide business process. So to sum up SOA brings in a great degree of reusability that is generally not available with other innovations and lowers the TCO to the end user. In Client Server world, technologies behaved more or less like wired/cordless phones. Businesses did not have the flexibility to stretch it outside the four walls of organization. And if they were able to do so, then it came with a huge implementation cost and limited flexibility. Security and reliability became a burning issue. Above and beyond, the biggest challenge for IT came from rapidly changing business process, which forced IT to deliver something that is malleable and ductile. That is exactly what SOA intend to deliver. Breaking the four walls was of top priority, when that was achieved using web servers / intranet / internet combination, the next objective was set at breaking down the business process into discrete logical units. It is these smaller units of process that was later on used to build a complete process. Having arrived at smaller units of business processes and the kind of flexibility that has come along with it, let’s take a look into how SAP took benefit from it by brining in another example. Let’s take a look at how people used to make their travel arrangements in the past and analyze how they do it today. In the past, when someone decides to travel they end up carrying out different aspects of travel related activities at different locations at different time and different sequence. For example, a particular individual might go to a travel agent to get his tickets and visa arranged. Then he might proceed to a totally different vendor to get the best deal on hotel. From there he’ll go to another vendor to get his foreign exchange done. He may even rely on a different agent to get his ground transportation arranged. The list can go on and on. But today all they have to do is just log on to a web site and get everything done in one go. One may book his tickets, make his hotel reservation, and get his foreign exchanged arranged, and also get his choice of ground transportation arranged in single location in a more organized and in a well sequenced manner. How is this all possible? Let’s drill down a little bit further. In the past when someone decides to travel abroad, they’ll try and make most of their travel arrangements while they are in their home town. Once they reach their destination, they’ll try and take care of their ground transportation, get best hotel deals and gather weather related information etc. This is primarily due to issues like language barrier and inability to get proper information while they are at their hometown. If, lets say, someone from Germany decides to travel to India; and decides to make a phone call to a hotel in India, one cannot expect to have a German speaking customer service representative attending telephone calls from hotels in India. This makes booking a room a cumbersome process. The same can be applied to car rental, weather forecasting, and getting other important information pertaining to their travel needs. Times have changed drastically; there is no language barrier anymore. Any person from any country can communicate to anyone in the world using the latest of technologies. That is exactly what web services do. Previously every industry worked as silos. When I say silos, I meant to say a travel agent only dealt with issuing airplane tickets, a foreign exchange dealer only dealt with converting currencies, car Rental Company only dealt with cars. These silos never interacted with each other even though they are closely related to each other from a modern day traveler’s perspective. In their quest to deliver the best to their customers, the travel agents tried to integrate these different silos together and they started seeing it as a great value addition to their customers. Once again, that’s exactly what web services do. Telephones and faxes (later on emails) dawn the role of integrating silos. This approach was working well for sometime, and then came the demand for more transparency of process that is going on between the two silos. Even more challenging was the effort to maintain an already existing relationship between the two business entities and then add/delete/modify a business entity from another (e.g., between a travel agent and a new car rental company). Meeting such challenges was never an easy task. As business needs changes more frequently, there was always a need for the technology to adapt to that change with out becoming a bottleneck to the businesses. SOA became a “flexible” solution for most of the above-mentioned constraints.
So how did Web Service managed to overcome this crisis?
Today more and more businesses are moving towards SOA. In the SOA world discussions were mostly based around web services. Web Services became the fundamental building blocks of SOA. A Web Services could belong to any domain. A group of related web service helps to meet certain business objectives. Let’s take this understanding and apply it to the travel scenario we have been discussing so far. A travel agent will expose an external facing portal to its customers which will also have the ability to interact with a car rental company, a foreign exchange vendor, a weather reporting agency and so on and so forth. This will make the customer feel extremely satisfied because it help them plan and execute the entire trip from one single portal. They are not aware of behind the screen integration. Businesses started offering their services in the form of web services. If any other business needs those services to add value to their businesses, all they have to do is just integrate it with their portal/application. This will also bring in the much-needed transparency to business. What was not possible previously suddenly becomes possible and extremely simple to deal with. For example, if there is a need to track the car booking that he/she has made, one can do it from travel agents portal itself. SOA gives the flexibility to access this critical piece of information from each other’s database without compromising each other’s security. The biggest advantage comes from the fact that based on changing business scenario’s business can enhance their web services with in a very short span of time with out disturbing their existing applications.
What has this to do with SAP?
SAP also started off in a similar manner. SAP built their applications as silos. They have a range of applications like ERP, CRM, and PLM etc (to name a few). Today’s complex business process demands flexible and efficient communication between these silos so that the end users are able to make informed decisions. Existing communication were not flexible enough and managing data between the two Silos became extremely cumbersome, lacked security and transparency. In their attempt to overcome these shortcomings, SAP decided to go Enterprise SOA way and made web application server as their underlying platform. SAP started converting all their time tested business processes into enterprise services. Once an enterprise service any silo’s can start accessing each other’s enterprise services seamlessly. SAP uses Netweaver Technology to make this Client Server to Enterprise SOA transition a comfortable one. In other words SAP’s answer to the complex world of silos stitched together using enterprise application integration (EAI) was to go for the Enterprise Service Oriented Architecture (Enterprise SOA). Which is nothing but an open architecture for adaptive business solutions, enabled by SAP NetWeaver. Enterprise SOA complies with the Service Oriented Architecture standards, enabling both flexibility and business efficiency by lowering the TCO. With Enterprise SOA businesses can innovate new applications by extending their existing applications. With this in mind lets take a look at how SAP’s Order-to-Cash scenario can be achieved using Enterprise Service Oriented Architecture. In an Enterprise SOA world a composite application will consume relevant enterprise services to automate the flow of information from application to application that are otherwise sitting in different silos. A role-based interface will ensure that every user from a business context gets access only to those information and functionality that are required to carry out their objectives. SAP NetWeaver that is sandwiched between composites application and enterprise systems such as (ERP, CRM, SRM, etc.) will contain all the process. These processes are defined, implemented and controlled at a business level with SAP NetWeaver providing the environment to build enterprise services to control the flow of information from one application to the other.