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Special Report: How much is that SOA in the window?, part 3

With the advent of service-oriented architecture, the ability to orchestrate software may supplant the value of the software itself, opening up a massive consulting opportunity into which vendors are plunging.

This is the third and final part of a series focused on how service-oriented architecture is changing the financial landscape of the software industry. The change in how software is being adopted and packaged was the topic in Part 1 of the series. How vendors are experimenting with different pricing and packaging models to better fit the SOA world was the topic in Part 2 of the series.
Due to the fact that most companies are already strained on resources, if they're serious about expanding across the enterprise I don't see how they can do it without a service provider.
Sophie Mayo
Director for Worldwide ServicesInternational Data Corp. (IDC)

Do the math.

IBM has 500 consultants available for its recently announced SOA governance practice and is training nearly 90,000 IBM Business Consulting Services employees to help customers with SOA.

Hewlett-Packard added more than 2,000 new consulting and integration customers over the past year, according to Terri Schoenrock, director and global managing principal of the Enterprise Application Services Program Office for HP Services Consulting & Integration.

In 2005, SOA consulting and systems integration made up just 3% of the total worldwide consulting and systems integration market, but is projected to grow to just under 20% in 2010, according to International Data Corp. (IDC).

And for every dollar of SOA-related software product sold, services companies are generating $6 to $8 dollars of services work around those products, according to IDC's Sophie Mayo, a director for worldwide services, SOA and emerging markets.

"You can't build an SOA based on a product you buy. It's a different architectural approach," Mayo said. "Due to the fact that most companies are already strained on resources, if they're serious about expanding across the enterprise I don't see how they can do it without a service provider."

That's what the likes of IBM, HP and other services providers are banking on as they aggressively ramp up their SOA practices.

Mayo, in fact, believes SOA projects are going to require more services than other types of projects. The reason? Modernization is people intensive, she said, and standardization is not quite "standard" yet.

"The two main software players after this market, Oracle and SAP, they're going to have different types of standards and their components not going to work together. A lot of companies will work with both and will need SIs [systems integrators] to integrate those components," Mayo said. "IBM is internally building tons and tons of application components they'll string together in composite applications. Accenture is also building a lot of composite applications based on SAP, Oracle and others. Unfortunately, these things won't work together; you're still going to need [help] unless you have the capability internally or some company comes up with a tool that makes it easy for internal people to do."

Initially, SOA is "not going to make people's lives much easier," Mayo said. "We're striving toward standardization, but it will take many years for the nirvana of plug-and-play. And there is so much legacy, and every year we create more legacy."

Cloudy horizon

HP's Schoenrock doesn't think that SOA projects will require more or less services work than other types of projects, but she does agree that all the different vendors' definitions and approaches to SOA make the work "more cloudy" for organizations.

"SOA brings about business and IT alignment in a way I've never seen before, so one place where customers may seek help is in bringing the IT/business alignment around the design of services," she said. "Second, each vendor in the SOA space defines SOA their own way. When we [HP] talk about that definition it has to do with the way business services are defined -- and with management and governance and security -- and with enabling technology -- and with design and architecture -- and with the implementation, management and support of that. These are not new things, so it's not more or less work, but the work is more cloudy because vendors have different definitions."

HP's new SOA vertical frameworks, announced this week, are designed to help customers transform legacy into SOA, and build a business case to do so, Schoenrock said. The financial services, manufacturing and distribution, network service provider and public sector frameworks include both an approach to SOA as well as the integration of HP's management platform and partner products.

"HP sees SOA as a huge opportunity for its consulting arm," said Jason Bloomberg, a senior analyst at ZapThink LLC. "They're turning that whole ship toward SOA. And HP has intentionally stayed out of the middleware business, which allows them to partner with all the players. They have strong Microsoft and Java practices."

IBM also sees "SOA as a huge effort for them," Bloomberg said. But unlike HP, IBM is clearly entrenched in the middleware business. According to Michael Liebow, vice president of SOA and Web services for IBM Business Consulting Services, "Most of the announcements for the better part of a year have the services and software aspect fairly well integrated."

Like HP, IBM is also reaping the benefits of a SOA practice. "We are seeing tremendous growth in our SOA services business," Liebow said.

Software vendors are also making hay with SOA services, but "their expertise is specific to their products and technical focus," Mayo said. Added Bloomberg, "Some vendors are making money with professional services, but it's a challenge because it's a different model from the product model. They're selling and marketing and providing value in a different way. Look at SOA Software. For long time they didn't want to talk about [the fact] they were making most of their money with professional services. So the best way for them to deliver SOA is a combination of services and their product offering."

Parallel worlds converge

Service providers are not only eyeing SOA as a good revenue opportunity, but they are also looking to capitalize on the growing adoption of open source software (OSS).

"As open source is more integrated with the infrastructure, [organizations are] requesting services players support the infrastructure to support open source," Mayo said. "Open source is becoming part of the mix the services players are not only supporting, but optimizing."

Open source "will drive services," HP's Schoenrock said. HP's services practice includes a Linux Reference Architecture and HP has rolled out SOA deployments around the JBoss Inc. open source middleware stack in addition to commercial middleware stacks from its other partners.

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SOA and OSS are "two movements going in parallel, with some elements of convergence," Mayo said. "JBoss [which Red Hat Inc. agreed to purchase this week] is addressing SOA needs in the middle. Optaros [a Boston-based open source software consulting and integration firm] plays in that intersection of open source and SOA. Their model is purely services, providing value added services, consulting, integration and configuration. They've been very successful. The larger companies are waking up to that."

Clearly, change is afoot. Not only are providers ramping up SOA and OSS services, but they're also trying to anticipate how changes under way in software licensing models (see part 2 of this series) will affect future revenue streams.

"The industry is focused on the initial wave of SOA enablement," Liebow said. "Once you've SOA-enabled the enterprise, what's next? That impacts how software is bought and sold and it impacts how services are acquired. The business will definitely shift. Clearly IBM is preparing itself for this shift."

With both software and services providers in flux, figuring out how to morph the business "is on the top of the minds of most people in the industry," Liebow said. "Everyone sees the disruptive nature and they're jockeying for position and working to figure out how to gain strategic advantage."

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