A few weeks back I referred Jeff to this article
describing IBM’s move to develop a “service development hub" in India thanks to a new $200 million investment. The general idea seems to be that IBM Global Services teams will identify enterprise services that customers need during an engagement, spec the services, create them in India, and reserve the right to reuse them for future client engagements.
I find this move to be intensely smart which is typical of IBM when they choose to break out the big checkbook. I also think this investment is a harbinger of several larger trends in enterprise technology, many of which can be traced back to the onset of SOA.1) A new way to build a business in IT services
IT services has never had a particularly good business model. It has high fixed costs, low barriers to entry and relatively low operating margins.
The advent of the Indian players (Wipro, Tata, Infosys, etc) have made this an even worse business for the incumbents, challenging the classical model of large, on-site engagements with high daily rates.
IBM’s investment in a SOA development center shows us that reusable intellectual property is the only thing that will separate many an IT consulting business from a glorified temp agency.
If IBM builds up a repository of reusable enterprise services created during various client engagements, they’ll be able to bid for new customer projects at the same prices as an Accenture or Wipro but execute them with fewer resources thanks to the reuse. This has been made possible because of SOA: IT assets created in one project can be reused only because their documentation is inherent in their functionality (i.e. they’re self-describing).2) The beginning of the end of enterprise software’s own “Bretton Woods system”
In the mid-1990’s, life was pretty straightforward in enterprise software. You lived in 1 (and only 1) of the following 3 camps:
- You could be in the applications camp, which at the time was JBOPS, plus a growing number of e-business application vendors.
- You could be in the technology platform camp, which at the time was Sun, IBM, Oracle, BEA, and Microsoft. Every application vendor would pick one or more of these platforms to build on.
- You could be in the systems integration camp (Accenture, EY, and the rest of the big 5) and implement the technologies of the aforementioned two camps.
Each camp played a unique role in the ecosystem. The apps vendors understood customer processes, the systems integrators were the honest brokers & client confidants, and the technology platform vendors tried to create a common denominator of skills and technology for everyone to build on.
In today’s emerging SOA world, enterprise services are nether application nor infrastructure, and SOA applications are neither custom nor packaged. As these old product and service distinctions start to blur everyone is getting back into everyone else’s business. IBM has been in the systems integration business for some time, and thanks to NetWeaver, many of the major application vendors are now in the technology platform business.
Because of this SOA hub announcement, IBM isn’t back in the applications business per se, but it is in the repeatable business logic business which isn’t so far away. I’d be surprised if we didn’t see Accenture, CGEY and the rest follow suit with pre-packaged enterprise services or process patterns becoming a differentiator for client engagements.3) A new take on the offshoring model
I’m always been something of an offshoring skeptic. I think the benefits that come from low labor costs and 24x7 development are usually offset by added coordination costs and the number of extra links in communication path between the developer and the end user.
With a SOA approach, one can keep the process and user interface creation work close to the users in their respective markets. But since the enterprise service creation is so tightly specified (via WSDL’s), it can be offshored with a minimum of coordination costs. Hence IBM’s ability to centralize service creation in one site versus the 17 they have today.
In this way, organization can follow architecture
, versus today’s offshoring model which tends to segregate work along steps in the development process (e.g. someone codes, someone else tests or maintains).
Whether you believe SOA is revolutionary, evolutionary or neither, it does seem to be changing the economics of the enterprise technology business and the roles of the different players in the ecosystem.