The ROI of Acronyms

One of business's favorite acronyms is ROI; one of the technology industry's is SOA. Put them together and what do you get?Have you seen a series of videos called "Greg the Architect"? They're a hilarious spoof of the IT profession, using Barbie- and Ken-type dolls (trust me -- it's funny), depicting the struggles of a hard-working IT architect trying to convince his colleagues of the efficacy of his service oriented architecture. (Check the characterization of the shaved-head, muscle-bound CIO.)

What's funny about the "Greg The Architect" series is not only the Adult Swim mentality of the people who wrote it, but also how true it is. Service oriented architecture is a way of putting together applications from re-usable software components. SOA has been around for several years, and is a staple on companies' "Top Strategic Initiatives" lists year after year.

Yet, the lack of clear cut return on investment for the effort involved in SOA has been dogging it for a while, now. Nucleus Research published a report earlier this year, based on interviews with 106 organizations, that said the ROI of SOA is, for all intents and purposes, non-existent. This is not a startling revelation -- it's not easy to quantify the return on investment of an architecture play like SOA, which is basically meant to make things easier to build.

"Greg the Architect" is produced by Tibco, a software company that specializes in SOA technology and services. One of Tibco's reference accounts is Con-Way Inc., the San Mateo, Calif., trucking company. Con-Way is also the number one company on the 2007 InformationWeek 500 list of most innovative users of information technology.

At the InformationWeek 500 conference in Tucson, Arizona, this week, Jackie Barretta, CIO of Con-Way, talked about the company's SOA strategy. Con-Way is expanding its use of SOA, moving it into the company's logistics business, where it's assembling supply chain systems for its customers. That requires a good deal of integration with third-party systems, and Barretta said in the past the company had to build on those systems from scratch; now, exploiting its success with SOA in other areas of the company, Con-Way can "re-use what we've already built."

No mention of specific ROI figures, but Barretta said the SOA strategy will help Con-Way in its effort to cut 50% off its application support overhead, which represents a third of its total application development budget.

Another vendor of SOA software and services is iWay Software, which is a division of Information Builders. A reference account for iWay is Coty Inc, the New York marketer of perfume and cosmetics.

David Berry, CIO of Coty, says he has a specific ROI figure for his company's SOA strategy: 415%. Actually, Berry didn't arrive at that figure himself; a research firm by the name of the Case Study Forum did, based on metrics provided by Berry concerning Coty's acquisition of various business lines from Unilever in late 2005.

When Coty moved to acquire Unilever's fragrance lines, which included Calvin Klein, Vera Wang, and others, Berry was already contemplating the iWay technology to facilitate a global implementation of SAP. The Unilever groups used JD Edwards ERP software, and Coty's U.S. facilities were on Oracle. Berry needed to "interconnect all of these various systems with minimal disruption," he says. The SOA strategy helped him get the systems working together quickly, which was the most important factor for him. "The net of it was the speed of integration of the acquisition, the fact that we could integrate this thing in five months," he says. "It paid for itself before we'd even paid for it."

Coty is a company built on acquisitions, Berry says, and SOA technology will help him support that strategy as it evolves over the next several years. Call it, projected ROI.

Have you had a hard time with the ROI of SOA? Is there anyone out there who can offer advice in how to quantify the tactical improvements and competitive advantages that SOA affords? Please let us know.