How IM&C Customers Can Benefit from Enterprise SOA
As an increasing number of IM&C companies prepare to adopt enterprise service-oriented architecture (enterprise SOA), I thought it highly useful to write this two-part blog to assist you in the adoption process. Part 1 explains the key challenges – the business drivers that support the creation of an enterprise SOA in the industrial machinery and components industry. It also explains how to evolve to an enterprise SOA using aftermarket sales and service excellence as an example. Part II discusses the steps you need to follow in building the business case for an enterprise SOA, including the implementation of the applications and solutions you’ll need, such as SAP Business Suite, SAP xApps, and the SAP NetWeaver platform. You cannot build an enterprise SOA in a day. It’s a carefully considered process, so let’s begin.
The Business Challenges Answered by Enterprise SOA
From customer demand to the need for innovation to aftermarket sales and service excellence, every CEO must deal with a variety of business challenges from both internal and external forces that impact the quest for growth. However, to achieve real growth, you must target differentiation from your competitors – looking at how you can achieve growth by innovation, and then being more innovative than the competition. The enterprise can achieve more top line growth by focusing on those areas that bring growth and profit to a company – not because they are more productive or because they are attacking costs, but because they are truly doing something different and innovative compared to the competition. Other challenges, including market forces and margin pressures, globalization, and operational efficiency, are the areas where a CEO would focus on getting processes as productive and efficient as possible to reduce costs. In these areas, you can no longer achieve growth by being innovative. Instead, it’s a question of being better than the competition by decreasing your costs, which will increase your profit margin.
Example: Developing Aftermarket Sales & Service Excellence
The challenges facing IM&C companies in aftermarket sales and service begin with lost revenue potential. Many IM&C companies do not realize 50% to 70% of potential revenue. One answer to developing aftermarket sales and service excellence is to pursue multiple service opportunities driven by brand loyalty and repeat sales. This results in more sales profitability and a sustainable revenue stream. In fact, for IM&C companies as a whole, service business represents 24% of revenue and 55% of profit, and both are growing. Therefore, since service is profitable, the trend in IM&C is to treat service as a strategic line of business. Another challenge is underinvestment in IT, which is why most IT environments in the IM&C industry are in need of fresh technology today. In this regard, a word of caution: Many small, undercapitalized, niche vendors are supporting this industry. Nevertheless, key areas for savings from IT investment include a 50% to 55% reduction in inventory expense, a 15% to 20% increase in revenue from improved service, and a 20% to 30% increase in customer service and call center capacity.
Aftermarket Sales and Service without Enterprise SOA
The duality of business and IT becomes obvious when comparing aftermarket sales and service supported by enterprise SOA, and conversely, not supported by enterprise SOA. Today, IT environments not supported by enterprise SOA look like this: Business support from IT means deploying IT capabilities to fulfill only individual needs and cases. This results in solving every business problem and challenge, such as gaining simplicity to evolve service business or harmonizing transparent processes, via an isolated, disconnected point of view and capability. To provide functionality, stand-alone applications focus on stand-alone business problems. Cost-intensive interfaces require extensive maintenance and support effort. And every change in the process leads to a change in the fixed, hard-coded, hard-wired interfaces, resulting in high effort and expense.
Aftermarket Sales and Service Excellence with Enterprise SOA
The duality of business and IT works much differently in an enterprise SOA-supported IT environment. Here’s what that looks like: IT has evolved to become a strategic business enabler that drives new business innovations and capabilities. Instead of isolated business challenges and problems, a holistic process makes interdependencies between the business challenges visible. With enterprise SOA, stand-alone applications no longer provide functionality; instead, functionality is on a common platform, making reusability easier. Interfaces and connections between underlying applications and business challenges are decoupled. Moreover, the solution to business challenges occurs on top of the platform, using functionality from various underlying systems. Finally, a change in a process does not imply a change in the interfaces between applications; the only rearrangement is in the sequence of using functionality along the process, with new functionality added only if required. To create such a flexible and efficient IT environment requires a new business process platform (BPP). The questions are how does SAP deliver it, and what process will you follow to adopt it?
The Incremental Platform Adoption of Enterprise SOA
Enterprise SOA is the SAP SOA blueprint to help you build a strategic IT or business process platform using SAP NetWeaver to deploy business requirements in the most synergistic and economical way. The BPP combines infrastructure technology with fundamental, highly reusable application functionality using enterprise SOA. SAP NetWeaver has the tools for composition, enterprise services, and integration that allow your organization to support new and changing business processes by composing custom applications for extending existing SAP applications. Adopting enterprise SOA is an evolutionary process that allows you to utilize existing resources as you make IT more flexible and strategic through standards-based enterprise services. This is the path, for example, to automated and integrated aftermarket sales and service excellence for your company. During the adoption process, you receive the full benefit of enterprise SOA as SAP continues to deliver productized enterprise services across all product lines and solution life cycles. You use the same platform for custom development as the one that runs your business apps and into which you will consolidate. You use solutions built along a service-oriented architecture so you can innovate your business as you compose new processes. And you use solutions that offer deployment flexibility so you can out-task and “re-in source” at will.
Building a Platform for Enterprise SOA: A Stepwise Approach
Enterprise services need a platform in place to run them. Building this platform requires a systematic approach, starting from the existing IT infrastructure. The order of the steps can vary from company to company. Each step has a business challenge and return on investment (ROI) for the IT solution on its own. It is important to note that spending on change decreases by reusing components and functionality from a previous step. As this continues, the payback of a cumulated platform business case reaches a tipping point. At this tipping point, the payoff of all previous steps accelerates the way that it generates a more than linear – maybe even exponential – growth based on reusing existing components and starting to compose processes. The slide below gives you an example of one of the steps in building an enterprise SOA platform – synergizing your business processes. I discuss all of the steps for you in Part II of this serial blog – The Steps to Building an Enterprise SOA– that you can access on the iCOD home page.