By Jon Hill, David E. Plesko and Anthony Roby
Outlook Special Edition, May 2004
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Imagine beginning your day by looking at an economic weather report—an online graphic representation of the global business environment, organized by region and based on continuously updated external information, including stock and commodity market reports, foreign exchange and interest rate fluctuations, trade and employment data, even geopolitical threat levels. Further imagine that your company or division could overlay onto the screen all information from your internal and external systems that was relevant to your daily decision making—including, depending on your business, information such as the location of the fleets that distribute your products, or the current status of business assets like hotel occupancy or daily oil production.
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In other words, imagine basing your decisions on a visual representation of real-time, global reality.
New Business Possibilities
For many companies, that fictional online report would be a gold standard for information integration— the seamless merger of data from diverse streams, which include not only an enterprise’s internal systems but also external feeds such as marketplace information and visual and numeric data from sources such as RFID tags, sensors and web cams.
Today, this level of information integration exists only in pockets within organizations, or in laboratory prototypes. But it is coming. And companies that master integration will achieve a higher level of process performance and operate on the basis of better insight and intelligence.
These companies will be able to do much more than share data efficiently. They will be able to measure business performance in real time through a fully transparent view—down to the slightest detail—of their business processes and customer data. With this information in hand, decision makers will not only be able to run the current business better, they will also be well equipped to envision new business possibilities.
Some companies are already well along the road to successfully integrating streams of business data. Delta Air Lines, for example, understands that every flight delay causes a ripple effect that has an impact on flights and customers around the world. The company created its “Delta Nervous System” to focus not on which systems had to be connected but on what could be done to solve the ripple-effect problem. As a result, the airline, using 70 applications, has integrated data across 13 business units, 30 customer databases and 40 flight databases.
Now, when a flight is delayed, information on its status cascades through the system. Departure times for connecting flights are readjusted, or passengers are booked on other flights. Baggage handlers learn which bags need priority treatment. Customers can learn their flight’s status in real time at self-service kiosks or via messages transmitted to their wireless PDA or mobile phone. Soon the Delta Nervous System may be accessible through the Internet to customers, employees and business partners.
Reality Check
Although most executives have heard exciting stories like these, their concerns are more basic. Haven’t they already made major investments to integrate their systems? Why aren’t they getting more benefits now?
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To understand the difficulty in achieving more complete information integration, it helps to lay out what that would mean for today’s complex organizations.
Integration within organizational boundaries means linking all business unit data and enterprise application data to better leverage that information. Many companies still have islands of applications, stranded after a merger or reorganization, that need to be incorporated
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Because almost no organization today is self-contained, operating in today’s business environment also requires business-to-business integration of information and collaborative business process. This, in turn, requires not only the integration of applications, systems and processes but also the development of a standard platform on which all can be built to enable interoperability. This allows information from various sources in various formats to fit together easily.
Finally, there is real value in integrating the strategic design and business processes used for building and testing applications. Without this level of integration, any future changes to applications would take considerable time and effort, because of the difficulty of modifying the underlying codes and processes.
Given this level of complexity and difficulty, it is not surprising that only 58 percent of respondents to an Accenture survey report that their companies have integrated all or most of their own enterprise solutions; 19 percent report they have barely started the process. Integration outside the firewall is even rarer. Substantial numbers of organizations report that they do little or no data sharing with customers (71 percent) or with suppliers (75 percent).
Even as many organizations work on basic integration within their own enterprise systems, the bar is being raised. Systemwide integration—including the company’s suppliers and trading partners—will soon be a competitive requirement, and it already is an essential component of innovative solutions that ultimately contribute to high performance.
The good news? Most organizations, despite their discouraging self-assessments, have made a meaningful start. And new technology advances are making integration more achievable. Significant benefits from integration are now within reach.
Interchangeable Data
So what has happened to make integration more achievable now? Primarily the adoption of web services, which allow organizations to assemble isolated application functions into more complete business solutions.
Despite the name, web services aren’t services but an evolving set of industry-determined technical standards that enable applications to be integrated and systems to communicate. With the addition of certain software components, it is already possible to integrate diverse data streams. Web services enable faster and less expensive enterprise application integration, the wrapping of existing systems for reuse and application restructuring, and distributed computing. (For a related article, see “How Web Services Will Redefine the Service Economy,” Outlook, July 2002.)
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Web services enable data to be interchanged among all players in an industry, and several efforts are under way to develop such standards for the IT, electronics, semiconductor, telecommunications and chemicals industries. The Web Services-Interoperability Organization, for example, is an open industry group chartered to promote web services interoperability across platforms, applications and programming languages, and it is making good progress on this front.
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Even more important, web services make it possible to fundamentally change the way work is defined and carried out within applications. IT specialists have known for years that linking one piece of data to another through lines of code is cumbersome, and that changes are difficult to make without extensive reworking.
Service-oriented architectures (SOAs) help address this problem by allowing specific tasks or services (generating an invoice, for example) to be handled as independent units and assembled and disassembled at will. Web services make it easier to implement SOAs by providing a standardized, easy interface between legacy systems and new systems, and between existing systems such as SAP, Siebel and Oracle.
SOAs have changed the way systems are developed. Since they are focused on business processes, they foster a closer working relationship between the technical and business sides of an organization and force both to think clearly about how best to carry out business operations. They also allow applications to function as modules, to be mixed and matched, recombined and reused as needed, which reduces development costs. The growth of web services will continue and even accelerate this trend.
One-two Punch
The one-two technology punch of web services and SOAs, combined with an integrated framework that rationalizes processes and centralizes applications, enable powerful business possibilities.
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For example, Generalitat de Catalunya, the governing body for Catalonia, an autonomous region of Spain, implemented an SOA and used web services to establish an innovative, intentions-based portal that allows citizens and businesses to access government services. This approach made the services supported by 50 back-office applications interoperable, connecting standard enterprise systems, custom systems, legacy systems and niche technologies.
One service, for example, makes it possible to record a citizen’s change of address through a single procedure that automatically ripples through to all relevant regional and municipal government
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entities. SOAs and web services also enable a log-in service by which any portal can authenticate any one of more than 6 million potential users, giving them easy access to existing services as well as new features.
A Human Solution
Service-oriented architectures, web services and standards can help provide technical solutions to integration challenges. The remaining challenges have a human face: They involve how people work with one another.
Too often, the way an IT organization is structured has contributed to the formation of silos, with different individuals responsible for providing different applications, such as SAP or Siebel. Pockets of expertise and repositories of knowledge have developed in isolation from one another.
Furthermore, the IT organization does not often work closely with the business side. As a result, IT experts are not challenged to think broadly about larger business goals or solutions to companywide needs, and integration efforts are driven by technology experts who may not understand the business processes and their limitations as well as the actual business users do.
Striving for integration mastery requires a human solution as well as a technology solution. This starts with a basic rethinking of the way information technology supports the underlying business processes. Business objectives must drive the definition of business processes, technology architecture and staff capabilities. Bolting technology onto “the way we do things now” is a huge mistake. The first and fundamental question is, “What needs to be done—and how?”
Then solutions need to be developed across those traditional boundaries that create silos. The technical experts responsible for business intelligence, analytical data, integration and portals need to work in tandem with those from the business side, who should be project champions.
The attitudes that sustain silos are not easy to break down. But they can be overcome through a comprehensive integration process that brings people together as work processes are defined and solutions developed, and that holds individuals responsible for the overall success of integration efforts.
One example is a large utility company in the United States. It is embarking on a wide-ranging, four-year integration project to enhance customer service and field force management capabilities. As part of this project, the company reorganized its teams according to business processes instead of by application, as it had done traditionally. The effect was greater awareness of cross-team dependencies early in the project, which resulted in better resolution of integration challenges at the business process level.
Changing the way people work and think is often harder than changing systems or bringing in new technology. But organizations that are mature enough to strive for mastery are ready to accept the necessity of that change.
Integration in Action
While no company yet has achieved a gold standard level of integration and interoperability, leading companies are overcoming the obstacles to integration. And for their efforts, they are realizing real economic value and business benefits.
When Paris-based Carrefour, the world’s second largest retailer, adopted a vision that included building a global company and optimizing resources and technology across geography, it needed to ensure its systems were consistent across the entire organization. The company designed, built, deployed and installed a fully integrated financial system to support effective accounting and financial activities.
Local teams were involved in each step of the design and implementation process. This made sure that the solution addressed local needs and was being used in a consistent manner throughout the organization. The infrastructure can support rapid expansion, making it possible for Carrefour to add new stores with the flip of a switch.
For computer maker Dell, supplier-management processes had typically relied on manual mechanisms, which limited the company’s ability to scale its global business, maintain an optimal balance between supply and demand, and react quickly to marketplace changes. So Dell customized, integrated and implemented a supply chain management solution that gave the company visibility across its business system. It was now able to move closer to real-time order fulfillment by simultaneously evaluating supply concerns, factory capacity, shipping constraints and the specific requirements of each customer order.
Pirelli, a leading global manufacturer of automobile tires, cables and systems, was able to drive down costs and increase market share through integration. The company implemented more strategic processes that enabled business-to-business capabilities and integrated its systems with those of its global customers and dealers. It also was able to extend information and services to its customers and trading partners and reduce administrative activities.
Fully integrated and interoperable systems, along with a robust infrastructure, form the backbone that enables IT to deliver value. Most organizations already have much of this backbone in place. Stretching a bit more to take full advantage of IT’s potential will have real payback.
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