Enterprise application integration tools can cost half a million dollars, but the payback is there - for big companies and big projects.
- Learn how to find hidden costs in EAI implementations- See real-world examples of EAI payback- Determine if EAI is right for your organisationIf you order speakers from Bose, your order goes into a system CIO Robert Ramrath calls the Common Order Interface. Ramrath's group knit this custom framework together about three years ago. Two legacy call centre applications, plus a Web commerce app built mostly with Microsoft tools, are all linked to an underlying database and connected to the corporate back-office ERP system - so your order winds up in SAP regardless of how it was placed.
That's the kind of set-up for which enterprise application integration (EAI) tools were born. EAI software connects applications through a central message-routing hub, similar to middleware tools like IBM's MQSeries. However, EAI tools are also equipped to parse and translate data, and automatically route information according to business processes.
Bose passed over EAI and built its ordering framework using custom code and SAP's proprietary BAPI integration language. Ramrath describes the experience as painful; so why didn't he choose EAI instead? EAI tools were less mature back when Ramrath started his project. The big kicker was that a robust EAI implementation can easily cost half a million dollars. That's too much expense for a single integration project to bear.
The idea with EAI, of course, is to spread the costs over all your integration projects - CRM, e-commerce, legacy extractions and everything else. That's a nice idea in theory, but cost-justification spreadsheets are notoriously resistant to theory. "We're always keeping an eye on EAI tools. They're expensive, and the only way you can justify that expense is if you look way out" into the future, Ramrath says. "We can see it if we compare the loaded cost of doing [multiple integration projects] ourselves . . . But there are a lot of 'what-ifs' in that cost analysis."
EAI is infrastructure, and cost justification is always a tough sell for infrastructure projects. Taking a long-term view, however, the only thing more expensive is not using these tools or another consistent enterprisewide integration method like .Net or Web services. Yes, EAI's real payoff is in business agility - the ability to change business processes quickly - but in today's economy that's not likely to squeeze a cheque out of the CFO.
However, big companies such as General Motors report concrete savings of as much as 80 per cent on certain integration projects once the messaging hub is in place and reuse of interfaces starts to kick in. Smaller companies have a tougher decision to make, but those with multiple or business-critical integration needs can also experience benefits from EAI. As long as CIOs have a clear-eyed understanding of the up-front costs (including consulting and maintenance tabs), pursuing a coherent integration strategy such as EAI should pay off in the long run.
Poised for Payback
Detroit-based General Motors is the poster child for EAI because of the sheer size of its application portfolio. Cherri Musser, CIO of eGM and process information officer of supply chain for the information systems and services organisation, was seeking "a higher level of reusability" in her interface code. She also wanted to simplify eGM's tangled web of applications. Both efforts would save the company money.
The vast array of applications under Musser's care includes all of GM's consumer-facing Web activity, a Siebel CRM system, dealer support systems and portal software from iPlanet. GM's supply chain application infrastructure includes connections to Covisint, a custom vehicle order management system, planning and logistics applications, and inventory management. Some GM units (those in smaller geographical regions) use SAP as their foundation. Others don't. Also, there is an i2 Technologies supply chain management package rollout under way. That package will replace older planning applications as part of an ambitious re-engineering of GM's entire order-to-delivery process. So Musser's integration efforts are aimed at a moving target, which includes thousands of legacy systems, she says.
All of GM standardised on SeeBeyond's EAI toolset. Musser says her group solicited bids for a set of integration tasks, and identified significant savings with the SeeBeyond software, though GM won't divulge the exact dollar figures involved.
Musser's team took several approaches to selling business-side executives on the SeeBeyond purchase. For starters, she demonstrated the concept of EAI through simple diagrams. The simplicity of having a single connector to each application, instead of many interconnected legs for every system, made the potential payoff conceptually strong. Her group then presented the actual bids to her business counterparts for their evaluation. Among the bids was an approach that involved cobbling together EAI-like functionality from various other middleware tools. GM had already experienced the difficulty of such a piecemeal approach. "We had previously made a couple of starts at trying to get an integration hub set up, with linkages into that hub," Musser says, but the effort and cost required to connect various pieces proved overwhelming.
Musser strengthened the business case for EAI by collaborating with her counterpart, GM's process information officer for the manufacturing area. The more projects that go under an EAI umbrella, the better the potential payoff will be because interface reuse goes up. When manufacturing agreed to use SeeBeyond for integration projects as well, that offered additional savings for GM. That's why big enterprises with multiple projects can achieve a demonstrable EAI ROI more readily than smaller companies.
Now Musser is in the thick of a phased rollout of the SeeBeyond software. The first project on her docket was establishing a connection to Vector, a logistics service provider (and joint venture between GM and CNF Transportation), writing scripts that dig data out of legacy systems. Having a key project to get the payback meter ticking is an important part of achieving and demonstrating EAI ROI. Thus far GM's savings are meeting expectations and will rise as the company begins to reuse its interface code for additional applications.
That's a simple strategy echoed by TransUnion Executive Vice President and CIO Len Lombardo. TransUnion, a Chicago-based consumer credit reporting agency, has begun to implement Vitria's EAI tool. TransUnion's first EAI project was a pass-through to an insurance underwriting system that draws data from a third party, combines it with data from TransUnion and delivers it to insurance companies evaluating policy decisions. Based on the company's work so far, Lombardo says Vitria will provide cost reductions ranging from 40 per cent to 80 per cent on future integration efforts. However, he is more enthused about the speed with which these interfaces can be put in place. Data is the corporate product, and creating a new product like the underwriting package "goes straight to the bottom line", he says. "Credit reporting is our core business, but as we grow into other areas, we need to have an engine to help bundle products together from different partnerships and different data sources." Without EAI, Lombardo says new TransUnion products would require twice as much time, or longer.
Lombardo's statements hint at what Beth Gold-Bernstein, vice president of strategic products and services at New York-based consultancy EbizQ, points out as the greater benefits of EAI - providing management of and real-time visibility into business processes across the company and across interactions with business partners. With EAI in place, companies can use a graphical tool to model work processes such as order fulfilment. Change those processes by pointing and clicking, and the EAI software will reflect those updates correctly in its code for routing or transforming data. "You can continue to use the existing investment [in applications] underneath this EAI layer, [since it is] already working and managing the transactions - but use EAI to change processes and reduce cycle times," says Gold-Bernstein.
Costly at Many Levels
Make no mistake: EAI systems are expensive. Top-end EAI covers a lot of turf - a stack of functions from basic messaging up through business process management. On top of this central engine, EAI customers buy "adapters" to connect to their applications (such as an SAP or Siebel adapter) and custom adapters for idiosyncratic legacy applications.
There's more to the total cost than just the software. EAI projects carry three red flags: consulting costs, maintenance costs and data definition problems that can drive up the first two costs. Those are classic IT project expenditures, but they're worth flagging with EAI because early vendor marketing efforts suggested the idea that EAI stuff is off-the-shelf, once-and-done, plug-and-play. Not so, say practitioners.
First of all, doing a high-end EAI implementation without consultants is inadvisable if not impossible. "It's terribly expensive to use [Big Five consultants], but the only thing more expensive is not using them," says Dennis Benner, executive vice president of AutoByTel.com. Benner began digging into EAI three or four years ago as CIO of construction and energy company Fluor Corporation, where he had nearly 80 systems he needed to connect to the central ERP software. ("To say that was a challenge is to suggest that WWII was 'inconvenient'," he says.) The complexity of the software and the high-end integration projects for which it's used mean consultants are a necessity.
In fact, big companies often bring in not only third-party consultants but the EAI vendors themselves. For General Motors' SeeBeyond implementation, for example, the company called in PricewaterhouseCoopers and Cap Gemini Ernst & Young, as well as personnel from the software vendor, for deep technical expertise. Since GM is heavily outsourced, Musser says the company will continue to depend on outside help to maintain and update its links because, like all other software, EAI does require maintenance.
TransUnion's Lombardo expects to keep the software in order with one or two full-time employees. "There can be decreased cost based on personnel, but more commonly those costs are displaced rather than decreased," says Gold-Bernstein. In other words, the folks who were hand-coding interfaces frequently get reassigned to maintain the EAI links. Same head count, different tasks.
Many companies like TransUnion are banking on connections to other businesses to make EAI worthwhile. While the potential for intercompany payoff may be great, it takes extra efforts to make those connections work. As Benner points out, data definitions usually vary from company to company - or even within a single company. Drawing on his days at Fluor for an example, Benner says, "I may sell a pipe that's certified for $10 and a noncertified version for $7. They have different part numbers, but under the covers it's the same pipe. The part-number issue can drive people nuts. That's the bigger problem than being technically able to pass data from one system to the other."
If a company has trouble defining a "part" or "customer" (and almost all do), imagine the disparity across company borders. EAI tools have the capacity to address those problems through their ability to transform data as it moves from point to point. However, the legwork of describing the differences and training the EAI tool to map data correctly from one system to another is something that won't be automated.
TransUnion is fortunate in this regard, so far. Lombardo didn't face data mismatch problems to that extent in his first Vitria project because the data from Axciom is simply packaged with TransUnion data. The two data sets are different, so there are no overlap or mismatch issues. However, data still requires extensive testing to ensure its adherence to TransUnion's standards. Other companies probably won't be so fortunate and will have to carefully examine all data definitions involved in EAI integration projects.
On Sale Now
EAI vendors may follow the same pricing strategy as ERP makers: sell high to the Fortune 500 first, then lower the price in search of midmarket buyers later. Smaller companies in particular may baulk at today's EAI sticker price and choose to wait, or they may look at lower-end EAI tools.
Which brings us back to the conundrum faced by Robert Ramrath at Bose when he built his company's Custom Order Interface - pay more up front for EAI, or pay more later when it's time to change systems and processes.
Now that the tools have grown up, Ramrath finds himself pondering EAI again. Bose just completed a high-level study of EAI tools that includes five distinct possible business-planning scenarios. In other words, the payback will change depending on how Bose's business plays out during the next several years and the additional integration projects it might - or might not - undertake. Will Bose take the plunge? Will you?
The Economics of EAI
COST SAVINGS The key factors are simplification and reusability of interface code. Once you have basic connectors, you can often reuse much of the same code.
TIME SAVINGS In some integration projects, faster linking means faster time-to-market. When using EAI with these projects, the benefits go straight to the bottom line.
FLEXIBILITY Business process management tools built into EAI let users record changes through a graphical user interface.
OUTSIDE HELP Consultants, and frequently vendor personnel, are de rigueur for implementing EAI.
UPKEEP EAI links do require maintenance.
EXTRA CARE Using EAI to connect to outside business partners requires extra attention because of data definition mismatches.
OVERKILL High-end EAI tools are overkill for companies with few integration projects.
Before You Leap
Planning to adopt an integration tool for your large organisation? Toronto-based DataMirror, an enterprise application integration platform provider, suggests considering these points first.
Scalability Replacing point-to-point interfaces with a tool becomes senseless if the tool can only easily manage a small percentage of those interfaces.
Performance The tool must have a high throughput of data.
Ease of Deployment The ability to change certain parameters (source name, target name and so on) is essential.
Centralised Administration Interfaces must be able to be administered automatically and from a central place.
Straight Through Processing/Zero Latency The ability to deliver target data as soon as possible after reading the source data is important for many applications.
Heterogeneous Sources To turn data into information, you must be able to join data from heterogeneous sources.
Security Support for various security standards is required.
Partners For large enterprisewide projects, a company must have good partnerships with respectable systems integrators, with a base staff already trained in the product.
Training The better the training program the quicker the enterprise will realise its return on investment.
Support A good, tiered support function (offering up to 24/7 telephone support and a knowledge base) will help alleviate inevitable problems.
User GroupAn organised user base - to share experiences, good practices, tips and tricks - is invaluable in heightening the ROI of the project.
References Before investing in a tool, always check references from well-respected companies that have that tool in production.
Join the CIO Australia group on LinkedIn. The group is open to CIOs, IT Directors, COOs, CTOs and senior IT managers.