The cost of integration
- Article 32 of 77
- Information Age, March 2002
With application integration high on the CIO agenda in 2002, what are the cost benefits, if any, of the process?
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Alva-Jorgensen says that many of the questions he gets asked are about re-engineering business processes and how to quantify them. “We ask what the business metrics for that process are, model that, then suggest common metrics to use. Then we work to agree on those.”
At analyst group IDC, senior project manager Andrew Walton and project manager Niccola Urbani have been working on EAI ROI analyses within the company's consultancy division. They determined some strict parameters for examining ROI. “We looked at networks prior to application integration done by clients and the number of interfaces that existed in the legacy systems. Then we compared that to the number of connections after EAI,” explains Walton.
Urbani compares the two situations to people sitting round a table. Either they can all try to hold hands with each other to link up or they can grab a pole in the centre. The former situation is analogous to a legacy system that interfaces with several other applications; the latter is after the EAI process, when the applications all have interfaces to a single, central information conduit.
Not only does the number of interfaces increase less quickly as new applications are added to the system (one new interface for each new application compared with one fewer than the number of applications in the legacy systems), says Urbani, but information propagates far more quickly through the enterprise. Systems maintenance costs, development costs and information bottlenecks are all reduced.
Walton and Urbani claim their calculations show that the ROI over three years for a typical company implementing an EAI product is 130%, and projects typically pay for themselves after an average of 8.7 months. Alva-Jorgensen tells his clients that they can expect to make their investment back and achieve savings of a further 20% using EAI. “We do try to be conservative, and clients have been pleased by the results,” he says.
Hit or miss?
But is ROI the only measure of a successful EAI implementation? Martin Anderson, a director of systems integration specialist Rubus, thinks not. “Trying to establish good metrics for cost-benefit analysis can be very hard in infrastructure projects, since almost by definition, once you have started doing things the new way, there is no old way against which to compare it. The real benefit is not in the quantifiable cost savings alone. It is much more in the less quantifiable increase in flexibility and responsiveness, which can have dramatic effects on business competitiveness.”
And unexpected 'hiccups' have a habit of de-railing integration projects. Louis Vintro, director of Vitria, argues that the problems involved in EAI mean that companies frequently fail to achieve predicted savings: “It can be difficult integrating, automating and managing cross-application and cross-functional work processes and there is a general lack of clear data exchange standards. While a company that uses off-the-shelf software and does not want or need to integrate with the application infrastructures of their trading partners will be able to achieve the predicted savings, companies that mix-and-match EAI suppliers, have bespoke software, or who want to collaborate with other companies across the web using XML or via EDI, will find achieving those levels of return hard.”
By contrast, IDC analyst Walton admits that integration adapters for legacy applications “tend to be a little more expensive”, but says that even where companies have many legacy applications, the company still saves money.
“Integration is still a complex and largely a bespoke activity,” maintains Tony Christian, president of systems integration company Aveva Consulting. “The ebusiness industry has been mixed in terms of its integration experience. On the downside, it has been hindered by the requirement to integrate immature, even prototype systems, because of the importance of time-to-market. However, on the upside, it has produced technology and standards like XML that have enabled integration scenarios that were simply too difficult to achieve before.”
Christian says that a company considering an integration project needs to establish the purpose of linking applications together, and determine what business benefits it expects to gain. “Organisations should set goals to achieve and those goals should not be technology-focused, but business-related.”
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