Pulling It All Together

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Call it the principle of unintended consequences. The Internet boom wasnt just a party of paper profits, after all; it was also a period of intense programming productivity. After bingeing on technology in the 1990s, companies are now laden with bloated application portfolios—growing 50 percent in the last year alone. This has led to a big headache for enterprises, because the applications they bought dont necessarily speak to one another.

Take Cable & Wireless. The London-based telecom giant has $11 billion in annual revenues, customers in 70 countries, and a sprawling collection of Internet-based applications, which were absorbed during the companys aggressive acquisition campaign throughout the U.K., the U.S., and Asia. After buying 11 ISPs in Europe alone, Cable & Wireless was saddled with tying together all of their internal systems and applications, so it could offer business customers around the globe consistent service.

Cable & Wireless also needed to pull together 11 of its own internal applications, which were initially built as islands, unable to share or to exchange information easily. Its customer Web site runs on BroadVision, Siebel Systems takes care of CRM, a custom Oracle database handles order information, Kenan Arbor/BP 9.1 shepherds billing, Clarify (now Amdocs) manages trouble tickets, and a custom Java application does order provisioning. Headache city.

The most pressing problem, though, was the integration of the companys order and billing systems. It could take as long as six months to reflect billing and account changes throughout the IT nervous system, and employees often made changes manually.

Cable & Wirelesss global CTO, Trey Smith, also wanted to build an infrastructure to connect outside vendors, suppliers, and customers with minimal development struggle. Only four months after the start of the integration project, spearheaded by webMethods and Deloitte & Touche, the sales staff in New York could access the same customer and business data as their colleagues in the U.K.; order information flows automatically through the unified system, and costly mistakes are history.

Optimize What Youve Already

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Optimize What Youve Already Got

Cable & Wirelesss experience reflects a growing trend in corporate America of application integration—getting independently designed applications to work together—as a strategic goal. Even in the midst of a declining economy, companies are increasing their budgets for Internet projects, albeit at a slower rate than last year.

In a recent large-scale study of global IT trends, META Group executive vice president and research fellow Howard Rubin found that chief Internet officers were cautious in their spending but still had aggressive plans for Web-based technologies and e-commerce projects. “IT professionals continue to feel the excitement and promise of the Internet, despite the economic conditions. Things had to become unbalanced for a time to find an ultimate equilibrium,” he says.

Hefty portions of technology budgets are earmarked for connecting existing systems for electronic resource planning, customer relationship management, inventory, and other e-business components. “Integration is a large part of the IT job,” says Roy Schulte, an analyst at research firm Gartner.

Schulte estimates that 35 percent of IT activity in a typical enterprise is dedicated to application integration (thats 35 percent of development, 35 percent of maintenance, and 35 percent of operations). Overall, 80 percent of IT budgets are spent on operations and maintenance, with the remaining 20 percent on new applications.

In fact, CIOs surveyed by Morgan Stanley last year expected that application integration and security would see the largest increases in IT spending in the second half of 2001.

“It used to be that people had just an ERP application. Now they have ERP and supply chain and CRM,” says Kimberly Knickle, research director at AMR Research.

The care and feeding of this expanding family of applications is driving businesses of all kinds to reallocate their e-business budgets from sales, customer, and supplier management initiatives to internal improvements, according to AMR Research. Application integration falls into two buckets: data synchronization, which ensures that all the bits and pieces of customer records in multiple locations are consistent across the company, and business process automation, which automates existing systems for everything from processing customer orders and approving credit to checking inventory and sending bills.

On the front lines of this movement is Scott Optiz, vice president of strategic planning at webMethods, an application integration company with a client list including Citibank, Hewlett-Packard, and Verizon. Over the last 12 months, hes seen a major shift in how companies view application integration. “Its become much more strategic than tactical,” he says. He also refers to the $7.2 trillion that research firm IDC says businesses worldwide spent on IT in the 1990s. “The worlds economy would be a little different if you got a really good rate of return on that investment,” he says. “It probably wouldnt be where it is today.”

Well, maybe. But application integration is certainly unlocking the efficiencies of Internet-based applications. A business may be able to take orders over the Web, but the rest of the process may surprise you: After an order is placed, someone prints the order, marches over to a terminal, and reenters the data into another system. Its time-consuming, costly, and prone to errors. “Thats still a big problem that companies are trying to solve,” says Optiz.

At Chevron Corp., redundant data entry was a mounting, labor-intensive problem for its crude oil– and petroleum-trading business, which runs around the clock in every time zone. The company brought in Tibco Software, a leading application integration provider, to coax the independent systems of its e-business infrastructure and the back-office finance and accounting systems into sharing live information. Employees at Chevrons San Francisco headquarters and at the Houston, London, and Singapore offices now have access to the same live information.

Saturn Corp. is also using Tibcos software to glue together its e-business applications and extend them to its 15,000 Saturn retail employees nationwide. The new system will help Saturn customers select purchase options and better enable retailers to know each customers needs after a sale.

The Integration Broker Payoff

The Integration Broker Payoff

The kind of magic that application integration provides doesnt come cheap. A typical project can cost from $500,000 to $1 million, reports Gartner. Companies can certainly go with a do-it-yourself approach, using an assortment of development tools: a Web application server like BEAs WebLogic, an integrated development environment like IBMs VisualAge, messaging middleware such as IBMs MQSeries, and a dollop of Java or C++. But analysts say such solutions are more time-consuming (and buggier) than hiring an integration expert (also called an integration broker) such as IBM, Tibco Software, Vitria Technology, webMethods, or any one of 30 other companies.

Although its entirely possible to implement your own integration solution from these bits and pieces of technology, the probability of matching the impact of an integration broker implementation is quite low, say Gartner analysts. AMRs Knickle agrees. Thats why more companies are turning to the experts to manage their integration projects. “People have hand-coded integration for years, but youre being inefficient if you do that,” she says.

Smart businesses these days arent committing to any IT projects without realistic return-on-investment projections. Thus, deciding whether to hire an integration company or to put your own developers on the job comes down to a return-on-investment calculation that factors in fixed costs—licensing fees, hardware costs, and training—and variable costs, such as labor hours spent on design, development, testing, deployment, and maintenance.

Gartners metrics on actual integration projects point to the benefits of hiring outside help. Analysts found that hiring an integration company reduces the time developers spend on simple integration projects by 25 percent. The time savings rose to 43 percent for complex projects. Unisys might be the exception, however; it estimates that developing an integrated help desk using webMethods solutions took 95 percent less time than a custom job.

The savings in maintenance costs may even exceed the savings in development costs. By contracting integration experts, companies can realize significant cost savings and faster turnaround, according to Gartner. And dont forget opportunity costs: Completing an integration project in six months instead of eight means your business can benefit from the cost savings and efficiency of the integration that much sooner.

An integration project may even be able to free up money thats currently spent on “tactical, point-to-point, hand-coded integration,” says Eric Austvold, research director at AMR Research. He estimates that a $10 billion company could squeeze out about $4 million for other uses. Not bad.

Though ultimately profitable, an integration project is no small undertaking. Austvold explains one scenario: A new CIO comes on board and inherits a tangled mess of an IT infrastructure. (The previous CIO lasted only two years.) He cant start over, because the line-of-business executives are running their own applications, which seriously strain the back-office systems that the CIO manages. When new ventures call for data exchange with trading partners and customers and require documentation of business processes, the CIO is left staring at the spaghetti code of point-to-point interfaces. All hell breaks loose, and he leaves within two years.

One Truth

One Truth

For the most part, though, integration projects are paying off—both in the back office and in dealings with partners, suppliers, and customers over the Internet. For example, Juniper Networks, a manufacturer of Internet routers, needs to commit to a delivery date minutes after a customer places an order. To accomplish this, the company needs to know its own supplier situations instantly.

Application integration is solving many such supply-chain demands. “You cant do supply-chain management unless your ERP systems and your inventory management systems talk to your suppliers ERP and inventory management,” says webMethods Optiz.

Integration is also a prerequisite for businesses that want to capitalize on B2B trading exchanges, says AMRs Austvold, so all players have consistent information about customers, products, parts, and orders. “Its necessary to have a single version of the truth,” he says.

In the end, integrated applications let enterprises take better advantage of the Internet to run their operations. Its all about giving businesses more options to get valuable information into their systems once and share that information without performing major surgery to make applications work together.

Gartners Metrics

Gartners Metrics

Source: Gartner, 2001