Nishit RaoGroup Product Manager FMW

Markus ZirnSr Director, FMW Product Management

Savings Calculator for SOAA tool to compute savings in SOA based Integration projects

SOA Savings Calculator computes IT cost savings for integration projects by comparing costs between a SOA/BPEL implementation and a Proprietary Integration Broker implementation over life of solution using TCO.

Features and Benefits• Simple tool to highlight key SOA concept – Agility.

• Connect the dots between Marketing - “Reduce costs” and Customer – “IT Agility”

• TCO over 5-7 years is a common industry justification.

• Allows for strategic discussion with customer.

• Positions Oracle as a thought leader.

• White Paper & Customer Case Study backs it up.

• Analysts, Industry and even major Competitors agree on savings.

• Levels or differentiates from Competition.

• Arms IT with concrete number to make case with CFO

Integration is top SOA priority

What is value of SOA?

• SOA Business Value = • Bottom line benefits + Top Line benefits.

• Top line / Revenue is difficult to measure and pin the benefits to SOA. • Higher sales, Risk reduction, Time to market etc.

• Among Cost Savings, IT saving is tangible, can be benchmarked *and* pinned to SOA.• Software services, Hardware and software licenses

Integration Cost Study : Zapthink

Compare TCO over Traditional

• Custom data, adapters and flows.

• Expensive coding, vendor lock in,

limited re-use and limited tooling

• Low ROI data integration.

•Standards Based: BPEL & Schemas.

• Align to business – high ROI, low risk.

• Reusable services.

BPEL

Services

ERP

Custom

CRM

Custom

Tightly coupled, zero

re-use, function calls

Custom Flows

ERP

WSDL

CRM

WSDL

Reusable decoupled

Services

Broker based Integration : Data Driven SOA based Integration : Business Driven

Business User

Services

Underlying Model n

TCO = A + P.V. ( Si + Hi + Gi + Ci – Ri ) i = 1

A = SOA CapEx acquisition costP.V. = net present value Si = Software License costs in year i Hi = Hardware costs in year i Gi = Governance Costs in year i Ci = Services (consultants) costs in year i Ri = Savings from Reuse in year i

where SOA CapEx acquisition cost includes one time capital expenditure on Software licenses, and Governance Costs includes recurring Architecture, Training and Governance expenditure.

SOA Savings = TCOTRADITIONAL - TCOSOA

Inside an Integration Process

Bind Bind

Endpoint

Endpoint

ERP CRM

Multi Step

Process

Interfaces exposed by

endpoints

Custom

Component

Built by in-

house

Developers

Bind

Services Effort DefaultsServices Effort SOA-BPEL in

daysProprietary Broker in days

Justification

Create new Multi-step process

5 6 • Input and output to each step is standardized WSDL and XML.• Endpoint interface WSDL is self descriptive reducing communication errors. • Less training for new hires knowing XML.• Interoperability with diverse systems such as .NET, Mainframe, Databases, Files is made easier by common look and feel and invoking mechanism of WSDL interfaces..• Abstraction of binding type provides flexibility.• XML Schema enforces type and reduces errors• Creating WS interface above component take additional effort

• SOA enhances reuse with std interfaces, lookup facilities and governance policies. The reuse rate is with good governance.

Create interface (bind) to endpoint

2 3

Change multi-step process 1 3

Change interface (binding) when endpoint changes

1 3

New Component Development

75 60

Max Reuse Rate 30% 10%

Oracle Customer Validation• Helio:

• Saved weeks when endpoint change did not impact process. • 45% reuse.

• Hartford: • .NET to Java integration took hours compared to weeks earlier. • Each service re-used saved 4-6 weeks in development costs.• QA/Regression efforts reduced from weeks to days.• Bug fixing reduced from weeks to days

• US Navy : • $1M savings in maintenance.• 40% savings in development effort.

• Cattles Bank: • 195% increase in revenue deploying BAM and BPEL. • SQL is automatically wrapped as Web Services savings weeks.

• ING Lease: • Project completed in 6 months compared to average 2 years.

• PSI: • $500K in development savings.• 30% reuse.

Public Sources Validation

• AXA Financial: • Saved $55 Million using SOA - CIO Bill Lavine, Computer World

Feb 2004

• Providence Health: • Can save $1M / yr - Mike Reagin Dir R&D, Network World Mar

2004

• Fedex: • Cost of inquiry down to 4c from over $2

• Dollar Rent A Car: • Integrating to South West Airlines yielded millions in revenue.

• Mark & Spencer: • Lowered dev costs by 66% and yielded first year ROI of 415%

Analyst Validation• Ken Vollmer & Mike Galpin, Forrester.

• SOA reduces Integration Project Development and Maintenance by 30% or more from reuse.

• Zapthink• Reduced time to get data from mainframe from 3-4 months to

minutes by exposing CICS transactions as web services.

• Gartner• Strategic Planning Assumption: Organizations that employ a

services-driven approach will achieve a 6-1 return on investment over a five-year period (0.7 probability).

• Web services standards will lower the cost of developing basic connections into new application systems.

• Low-cost assembly of new business processes.

Why SOA integration costs less• Maintenance costs are lower (decoupling of process and end point)

• Standardization reduces product cost and services cost

• Standardization delivers Rich interoperable tools

• Integration outside the firewall ($ B2B) is simplified with std interfaces.

• Reuse reduces cost by approximately 30%

• Architecture changes do not ripple across systems.

• Increased visibility – monitor, manage, escalate, comply and audit

3 Steps to TCO

SOA Questionnaire - Step 1 - Customer Inputs

What is the number of Integration Processes in Year 1 ? 8Want is the average growth rate of processes each year ? 45%

How many end-points will each process integrate with? 7What is the average growth rate of end-points each year? 20%

How many new business components will be developed each year? 5What is the average growth rate of components each year? 50%

Step 2 - Benchmarks

SOA Questionnaire - Step 2 - Defaults

Software - Services Effort Time in days with SOATime in days with Traditional brokers

Create a new multi-step Process 5 6

Create interface(bind) to end-point 2 3

Change multi-step process 1 3

Change interface (binding) when end-point changes. 1 3

New component development (EJB, .NET Servlet, or other). 75 60

Step 3 : Your Savings

SOA Approach saved 28% over traditional methods

Comparitive 5 Year Costs

0.00

0.20

0.40

0.60

0.80

1.00

1.20

1.40

1.60

1.80

2.00

Year 1 Year 2 Year 3 Year 4 Year 5

Traditional

SOA

Change & Maintenance lead in savings

• Maintenance accounts for 39% of savings.

SOA Savings Breakup

Create interface

25%

Create Process

8%

Change process

29%

Change interface

10%

Re-use28%

Create interface

Create Process

Change process

Change interface

Re-use

Small Company / Departmental Scenario

• Small Company, a small financial services F2000 company has legacy applications and needs to focus on fast response to Customer while leveraging partners to reduce costs.

• Departmental Enterprise wide SOA effort, integrating back office, partners and automating 10s of processes across 10s of end systems (approx 15-20).

• Projects include• CRM to mainframe integration for a 360 degree view of customer• Claims process automation (includes mainframe access).• Documentum integration to claims process to access lease documents.• Outsource imaging function and automate process (imaged document from

partner to Documentum).• Link to partner web-sites for authorization / validation.

Traditional Cost – Small Company

Traditional Deployment Cost

Software Services Costs Year 1 Year 2 Year 3 Year 4 Year 5 Total 5 Yr CostCreate interface (bind) to end-point $113,076.92 $196,753.85 $342,351.69 $595,691.94 $1,036,503.98 $2,284,378.39 Create a new multi-step Process $32,307.69 $46,846.15 $67,926.92 $98,494.04 $142,816.36 $388,391.16 Change multi-step process $48,461.54 $70,269.23 $101,890.38 $147,741.06 $214,224.53 $582,586.75 Change interface w hen end-point changes. $49,753.85 $86,571.69 $150,634.74 $262,104.46 $456,061.75 $1,005,126.49 Savings from reuse $0.00 $11,250.00 $29,250.00 $38,025.00 $49,432.50 $127,957.50

Traditional Softw are Services Costs $243,600.00 $400,440.92 $662,803.74 $1,104,031.50 $1,849,606.63 $4,260,482.79

SOA Costs – Small Company

SOA Deployment

Software Services Costs Year 1 Year 2 Year 3 Year 4 Year 5 Total 5 Yr Cost

Create interface (bind) to end-point $64,615.38 $168,646.15 $293,444.31 $510,593.10 $888,431.99 $1,925,730.93 Create a new multi-step Process $23,076.92 $33,461.54 $48,519.23 $70,352.88 $102,011.68 $277,422.26 Change multi-step process $13,846.15 $20,076.92 $29,111.54 $42,211.73 $61,207.01 $166,453.36 Change interface when end-point changes. $42,646.15 $74,204.31 $129,115.50 $224,660.96 $390,910.07 $861,536.99 Cost from SOA $114,423.08

Total SOA Costs $258,607.69 $296,388.92 $500,190.57 $847,818.67 $1,442,560.75 $3,345,566.61

Big Company /Enterprise Scenario

• Global manufacturing F100 company has numerous silo-ed applications and plans to harmonize broken processes to ensure consistent delivery of services to customer.

• Enterprise wide SOA effort, integrating back office, partners and automating 100s of processes across 10s of end systems (30-60).

• Projects include• CRM to ERP to Supply Chain integration to optimize value chain.• Six Sigma processes to ensure consistent processes across

business units.• Enhance self service for customers, partners and suppliers.

Comparison to SOA Benefits Kit

SOA Benefits Kit SOA Savings Calculator

Audience CEO, CFO, LOB managers CIO, architect, IT manager

Goal Build a financial business case

Demonstrate value of SOA, lay competitive traps & establish Oracle as a thought leader.

Model Generic business model applied to SOA

Custom model based on SOA benefits (reuse, agility)

Benefits Business + IT Savings IT Savings

Complexity High (many inputs) Low (4 inputs, 6 defaults)

Delivery Facilitated discussion Online, Face2Face, White Paper

When to use? End of the sales cycle, only when a business case is required

Early in the sales cycle after identifying an integration opportunity

Risks

• Benchmarks may not match customer scenario• SOA Case Study shows commonalities across 100s of

customers.

• Real measurement takes time.• Most customers need ballpark measurements.

• Gartner / Analysts suggest “Beware of ROI”• But, there are ROI studies from Forrester, Burton, etc

• Biased to Oracle Products• Not really – biased (if at all) to Standards based products

Next Steps

• Roll out to field as appropriate• Place it Online (Flash)• White Paper• Create a detailed customer case study (ROI).

• Additional Features• Add savings from SOA manageability.• Go beyond SOA Integration (Composite Apps)• Benchmarks on Product Value (BAM + BPEL).• Capture business benefit.

AQ&Q U E S T I O N SQ U E S T I O N S

A N S W E R SA N S W E R S

Feedback: nishit.rao@oracle.com

Where Calculator can help

• IT needs to show business value to CFO

• Customer buying more integration broker licenses or building pt-pt solutions.

• Competitor showing ROI numbers.• Avoid ROI spreadsheet competition

• Get Customer aware of long term costs.

• Connect the dots between Marketing - “Oracle SOA Suite helps reduce IT costs” and Customer – “my silo-ed apps unable to deliver business needs”

Applied SOA: Measuring Business Value, Michael Barnes Gartner

Compares pt-pt with traditional integration brokers