SOA arrives in June 2008 issue of the Harvard Business Review!

Businesses have been reengineering their processes for nearly 20 years. For many companies, knitting together numerous fragmented tasks and data into cross-functional business processes has had a substantial impact in terms of cost savings, cycle-time reductions, and service improvements. However, many companies that embraced the reengineering revolution are now hitting a wall. Fortunately, the means to break through that wall are emerging. Thanks to the development of new technologies for using and sharing functions via the internet, the frontier is no longer the process but rather the business activities that make up every process—from pricing a product to issuing an invoice to assessing the risk of individual customers to prioritizing the potential features of a new product in development.

It is becoming possible to design many business activities as Lego-like software components that can be easily put together and taken apart. What’s primarily responsible is service-oriented architecture, a relatively new way of designing and deploying the software that supports a business activity. The beauty of SOA is that it allows activities—or processes built from such activities—to be accessed using the now-ubiquitous internet in a standardized fashion. Whether the capabilities that make up an activity are manual, fully automated, or somewhere in between, the SOA-based design of their underlying software or electronic user interface allows the activity to be turned into a de facto web service. This transformation makes it vastly easier to share discrete activities and entire processes internally, to buy or sell them externally, to delegate their execution to suppliers or customers, and to update and maintain IT systems.

That said, obstacles to using SOA in this way exist. One is the lack of a universal standard: Vendors and industries currently use different versions of SOA. This is not a major issue, though, because systems using those various versions can converse with one another about most activities. Moreover, all signs suggest that SOA will become a standard overseen by a governing body of professionals. “The world is rapidly moving in that direction,” says Mark Baciak, a senior technology architect at Microsoft, who pioneered SOA work at the software giant and several of its large customers.

A bigger obstacle is a familiar one: the gulf between corporate leaders and their IT departments. Chief executives have tended to see SOA as merely the next big thing being pushed by their CIOs and to assume that it, too, will end up costing a fortune without delivering commensurate benefits. Partly because of this fear and partly because CIOs have not understood or have had trouble articulating what SOA makes possible, most CEOs have authorized their IT departments to deploy it in a limited fashion—to improve and lower the cost of maintaining the software supporting existing processes. As a result, most companies that have embraced SOA have applied it without first rethinking the design of their businesses. This omission means they have overlooked SOA’s greatest value: the opportunity to create much more focused, efficient, and flexible organizational structures.