Unravelling that spaghetti junction

Integrating diverse applications, both internally with ‘back office’ ERP and departmental legacy systems, and externally between sites and organisations, is still one of the biggest and most costly IT headaches today. It can also be one of the most lucrative for companies involved in e-business, or for that matter, any business in what are increasingly becoming ‘extended enterprises’ – factories, customers and suppliers to you and I. Why? According to a study by consultancy Accenture, successful organisations concentrating on integration of processes involving sourcing, procurement, supply chain planning and fulfilment get the benefits of singing from the same figurative hymn sheet. And that’s more valuable than it perhaps sounds. Accenture’s data suggests, for example, that bringing together data from demand forecasting, product planning and manufacturing execution systems can boost forecasting accuracy by 30—45%, improve inventory management by 30—60% and increase planner productivity by 25% because of visibility. Similarly, integration of warehouse management and transportation systems can offer 10% inventory reduction and 5—15% cut in administration costs. Pirelli’s tyre business put in a ‘collaborative replenishment’ system, based on EAI (enterprise application integration) software vendor Tibco’s systems, that now provides dealers in 120 countries with visibility across its supply chain. Pirelli’s e-business director Andrea Pirondini says distributors have access to consolidated real time inventory data and the rest, and have become part of the forecasting and production planning systems, which has resulted in inventory and dealer purchasing costs down 20% and order processing costs cut by 8%. Its marketing budget has also been cut by 10% as promotions are now relayed to distributors via the system. All undeniably impressive results, but EAI ain’t cheap – although it’s getting cheaper – and there are different ways of going about it, both in terms of technologies and business strategy. So what’s what? One thing’s for sure, ‘traditional’ point-to-point integration solutions can’t hack it any more: the old hard coupled approach requires complex coding and major expense not least because it’s customised and inflexible, so a pain in terms of updating. Newer packaged EAI platforms promise less expensive, more scaleable and flexible integration, but there’s still no all-encompassing solution and prices can be daunting even to some of the big boys. So you need to be sure of the scale of return on investment (ROI). “Integration often accounts for 40% or more of the cost of enterprise projects,” says Peter Truman of integration IT firm Glue. EAI middleware starts at around $100,000 plus implementation, hardware and ongoing maintenance costs which, although 30—50% less than the old point-to-point solutions, isn’t trivial. EAI more routine? However, it is getting better. Companies like ERP giant SAP are addressing the issue working with EAI vendors and now offering some 1,500 ready made application interfaces to R/3 as well as portal-type ‘connection’. “Today, we tell our 8,000 developers to put interface information into an overall meta-depository, so integration is less of a challenge,” says SAP technology marketing head Matthias Haendly. Then again, JD Edwards, as part of its ERP system, offers XPI (extended process integration) software, providing ‘standard’ business process connection for, for example, financial management, inventory management and procurement. Semiconductor supplier Memec is using XPI to integrate applications within the company and externally via RosettaNet with customers’ and suppliers’ systems. “Pre-defined business rules support standards-based platforms like RosettaNet, and offer faster time to market when joining together different applications,” says Stuart Plain, pre-sales manager at JD Edwards. And companies like IBM are intent on driving the notion of integrating application servers and integration servers, where hitherto they have been separate platforms. Since acquiring EAI software firm Crossworlds, all IBM’s EAI offerings run on the Websphere Business Integration platform, which has pre-built components for application connectivity and some 180 disparate business processes. Beyond all that, moves towards a more ‘open’ standards-based architecture should lead to different software components being ‘glued’ together even more quickly and cheaply. To some extent this is already happening too: XML-based technology and new Web services promise what’s being termed ‘loose integration’ of applications, whether that’s for internal inter-departmental ‘collaboration’ or bringing together networks of ERP systems in multiple businesses via data warehousing hubs, portals and so on. Key standards include Java Messaging Service (JMS) and Java Connector Architecture (JCA) in the J2EE (Java Enterprise Edition) environment, and increasingly Microsoft’s .Net architecture. Microsoft’s Biztalk Server, for example, promises to bring the cost of EAI down to about 20% of current major vendor offerings – and that’s likely to prove a lot more popular with SMEs! As for the Web services standards, although the ‘applications as services’ goal is still some years away, the foundation interconnection standards are already in use, mostly for internal projects where security and scaleability need not be major issues. But braver companies are also already using Web services for levels of integration that are robust enough to go external. Modular and iterative Time to implement is also getting faster. Truman claims integration time can be six weeks, “if the right processes, governance and architecture are in place,” and certainly you can think of modern middleware and integration server systems cutting typical project times in half. Web services and the rest will take this much further. Best advice: look for solutions that can be deployed in a modular, iterative fashion. So far so good. Most important though, software vendors and integration experts alike stress the value of taking a ‘business process-centric’ approach to integration rather than ‘IT-centric’. What they mean is think about the business processes you need to drive benefits that translate to efficiency and financial gains from the top down, and structure your projects specifically to enable them from the start. No one can afford IT that doesn’t show speedy ROI. As Ian Charlesworth of analyst Butler Group points out, “Businesses [need to] look to get more out of what they already have by aligning and integrating applications and infrastructure.” And Dr Ian Howells, who looks after marketing at EAI big boy SeeBeyond agrees: “The main driving forces for EAI in the current economic downturn are the need for cost and risk reduction – by reducing the number of systems in play and getting better inventory control.” BMW, for example, is using its systems to construct a global strategic infrastructure, spanning applications like CRM (customer relationship management), HR and supply chain management, pulling together its existing Java-based applications, mainframe-based legacy systems and SAP R/3 ERP. So what to do? There are bound to be a few ‘quick wins’ and it would be daft to ignore them. Indeed, it can make a whole lot of sense to start using some of the newer approaches to solve specific business problems. The other way is to do what Chris Phillips, marketing director for business integration specialist Vitria, suggests – look first at what’s wrong with your big picture ‘order-to-cash’ cycles. He makes the point that current lack of system integration means most big manufacturers only achieve, for example, accuracy of 50—70% from order entry, verification, fulfilment, all the way through to invoicing and billing, even though order entry might have been 99%. Goodyear Tyres used Vitria’s Businessware EAI to raise its accuracy ratio from 60 to 80% within just 90 days. Either way, as Peter Prestele, director of business integration for IBM, puts it, the EAI rationale is simple. “You have to look at total cost of ownership over a two to three year period. The only justifications for using EAI technology are cost reduction, time reduction and a drive towards improved transparency with real ROI.” As for the question of future-proofing, integration technology is still a moving target. Vendors and users agree an answer lies in open standards. Web services sound appealing, but the vision of easy plug-in applications still seems some way off from the reality.