Executives Guide to Web Services (SOA, Service-Oriented Architecture)

Phase two is the collaboration phase, in which Web services standards are used to enable closer real-time collaboration with partners, customers, and suppliers. Early collaboration will leverage the same standards (specifically, XML, SOAP, and WSDL) and techniques used during the integration phase, but as experience and confidence in Web services increase, organizations will begin to implement extended business processes that go beyond the limits of the organizational boundaries. These extended business processes will leverage both internally developed Web services, as well as exposing services to trusted partners and suppliers over the Web. These extended business processes will necessitate the use of standards that are currently on the outer fringes of the evolving tier and in the emerging tier of the Web services stack (for example, UDDI and BPEL4WS). Figure 3.5 builds on our example of the virtual order entry service discussed in the previous section, and leverages the Provider, Broker, and Consumer model introduced in Chapter 2.

Figure 3.5: Leverage the provider, broker, and consumer model.

In this example, the model has been extended to incorporate additional aspects of Web services that support collaboration activities. Here the virtual order entry service has been described using WSDL and published in a private UDDI services registry. From the services registry it is possible to search and find the order entry service. Once the service has been found, it is then possible to bind with it for communication and execution. In this example the service registry might purely be leveraged as an internal services repository, but it may also be extended to allow access by authorized partners, suppliers, and customers. A customer may choose to integrate access to the order entry service into their own systems, allowing automation of the order entry process and giving them real-time visibility of the order status. The ability to deliver this type of functionality will likely reduce costs, as well as improve customer satisfaction and retention. Providing this level of service may also differentiate a firm from its competitors.

Collaboration is defined as the act or process of working with others. Collaboration in the business sense is the active partnering with allies, and even competitors, for the mutual benefit of all participants. Collaboration was viewed as one of the Holy Grails of the Internet boom as more and more organizations adopted B2B models by joining trade exchanges or creating their own private B2B exchanges. However, as many B2B exchanges and other collaboration efforts failed, the reasons for their demise became clear: The challenges and cost of integration for collaboration were too high for most organizations to bear.

We anticipate that a few early adopters will have entered the collaboration phase by early 2003, while others will wait for greater stability with emerging standards in the business process management and execution layer, which will likely occur in mid to late 2003.

Business Landscape

The collaboration phase of Web services adoption is characterized by the following traits:

• The opportunity to achieve significantly reduced per transaction costs with business partners, suppliers, and customers by using Web services to reduce the level of human intervention in collaborative business processes.

• Building on reduced transaction costs, it may be possible to offer new products or services targeted toward a lower price point, allowing entry into new markets and creating new revenue streams.

• Attain closer collaboration with external trading partners, where realtime information enabled through the use of Web services will help identify and achieve new sources of business benefits.

• Larger organizations will reduce their operating risks through better information management and by pushing risk out along the extended value chain to their vendors, suppliers, and partners.

Collaboration using extended business processes can be applied to many aspects of a business value chain, including:

• Product Development —New product development collaboration can dramatically shorten the time to market for new products as organizations share design and simulation data with critical suppliers for key components and modules of manufactured products. Faster time to market, combined with a reduction in industry R&D through shared design processes, will drive dramatic gains in efficiency and productivity for the manufacturing industries.

• Procurement and Strategic Sourcing —The use of Web services to share production schedules and projected purchasing needs in near real-time with suppliers can drive tremendous savings in an organization’s procurement spend. Forecasts for long and short lead-time commodities will become more accurate through increased sharing of information and real-time analysis. This use of Web services is already visible in the computer manufacturing industry, where the shelf-life and obsolescence of components is a constant challenge.

• Inventory Management —Inventory levels can be reduced within an organization as well as across an industry supply chain as organizations work together to share customer information and aggregate market demand. This is especially important in industries where rapid product obsolescence erodes the value of inventory, and therefore minimizing inventory levels is critical for maintaining razor-thin profit margins. Collaborating on demand signals from the sell side of the supply chain (such as, end-customers, retailers, distributors, contract manufacturers) as well as the buy side of the supply chain (such as contract manufacturers and suppliers, manufacturers) can dramatically shorten lead times and reduce the amount of inventory required to keep up with market demand.

• Supply Chain Management (SCM) —Supply chain management can be improved with collaborative processes within a manufacturing organization as well as in services industries. Managing order fulfillment, order to cash processes, logistics processes, inbound and outbound inventory processes, customer service processes—all of which can be considered part of the macro-level view of a supply chain for an organization. And these are not just manufacturing issues. Insurance companies also have supply chains in the form of quoting insurance policies, sending paper or electronic quotes, integrating agents and brokers in the distribution channel, mailing actual paper policies and invoices to customers, and more. These are inbound and outbound shipping and order fulfilment issues that are common to almost any industry, and therefore collaboration techniques can be used to improve the management of information as well as physical objects to and from customers and suppliers. All industries have procurement processes for direct and indirect materials. All industries have outbound processes that service customers and trading partners.

• Logistics Collaboration —Collaboration can provide great benefits in inbound, outbound, and reverse logistics processes. Original Equipment Manufacturers (OEMs) can use collaboration processes to manage outsourced shipping and receiving processes, and to provide visibility to third-party logistics providers (3PLs).