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Friday, October 15, 2004

Outsourcing, SOA, and the Industrialization of IT ZapFlash

Zapthink sees interesting interlinkages between industrialization, outsourcing and SOA. The greatest benefit of Service-Oriented Architecture (SOA) is the business value it offers via increased business agility.SOA helps companies outsource, because SOA provides an abstraction layer on top of existing technology resources, allowing third parties to provide those resources more easily, with business users ideally being none the wiser. SOA and outsourcing are actually both key aspects of the movement of IT towards an industrialized model. Industrialization embodies a number of major concepts: the mechanization of production so that the mass assembly of components provide significant improvements in efficiency and cost, the improvement of the infrastructure around such products to simplify how people build and sell them, and a fundamental change in the way that people buy and consume them.As companies grow and specialize, they no longer wish to maintain staff for many parts of their organization, such as accounting, product assembly and fulfillment, logistics, and sometimes even product design and development. Now there is also increased pressure to outsource various parts of the IT department as well, ranging from the data center to the application developer. At the same time, companies are also looking to gain the benefits of SOA. Companies desire the business agility that SOAs provide, especially in the face of IT heterogeneity. Specifically, the movement to SOA is actually a movement to create IT business process components that people can efficiently assemble to meet the specific requirements of a business. What gives SOA those capabilities are its loose coupling, coarse granularity, and a high degree of reusability in an environment of heterogeneity. Increasingly, companies desire the ability to source components from third-party suppliers that they can readily assemble into business processes themselves, or have third-parties assemble and deliver to them on a custom basis. So, while SOA provides the technological underpinnings to make the IT industrialization a possibility, it’s the economic movement to outsourcing that makes IT industrialization a reality. The combination of the SOA and outsourcing trends reflects the maturation of the IT industry. Before the industrial age, companies built products and tools on a one-off, customized basis, but with the emergence of powered machinery, improved technologies, and new methodologies, companies were now able to mass produce all manner of goods for the first time. The convergence of the outsourcing and SOA movements illustrate that IT is becoming industrialized as well. The combination of SOA and outsourcing will only get more established as the value proposition and technologies required to make SOA implementable continue to mature. As companies seek to gain the benefits of business agility, they will realize that the SOA/outsourcing combination provides options they may never have had before. For example, outsourcing business processes today means cutting off big, inflexible chunks of the business and simply handing them to third parties, but with SOA, businesses take a much more agile approach, outsourcing the components of greatest strategic value and slowly migrating over time to meet their ongoing business needs.

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