Services-oriented architecture is re-defining the entire enterprise software business. From products to sales strategies to vendor positioning, no stone will be left unturned as SOAs take hold across the corporate world. Surprisingly, most of today's software vendors have not taken the necessary steps to remain relevant in the coming era of SOA-driven enterprise computing.

On the Path to Meta-Spaghetti?
In 2002, my book Out of the Box was the first to make a compelling business case for the adoption of Web services technology and related service-oriented architectures. The early adoption of Web services technology at companies like General Motors, Dell and Merrill Lynch showed that business executives were able to generate tangible business benefits in a relatively short period of time with relatively modest investment in this new technology.

The most striking element of the Web services technology adoption process is the extent to which it is being driven by non-technology line business executives, thanks in large part to this powerful economic value proposition. The business benefits have led to widespread adoption of the technology across a broad range of industries, geographies and sizes of enterprises.

But the extent to which SOAs have been deployed within the enterprises leaves something to be desired. We are seeing a much more fragmented adoption of Web service technology due to the absence of strong architectural leadership. I.T. departments have, by and large, embraced a service-oriented architectural vision, but they have had a hard time linking this vision to a pragmatic migration path that builds upon the near-term deployment of Web services technology. In many cases, I.T. shops are drawing up detailed architectural blueprints but failing to link these efforts to the near-term deployments of the technology.

The risk is that companies will reap near-term benefits from rapid deployment of Web services technology, but fail to harness the longer-term opportunities created by migration to a much more flexible enterprise-wide (or even inter-enterprise) service-oriented architectures. If we're not careful, we will see meta-spaghetti piled on top of the spaghetti code we see in so many enterprises today.

There's another risk: most CIOs are designing SOAs with an enterprise-centric mindset. That is, they are designing SOAs that begin and end with the boundaries of the enterprise. In many respects, this is understandable - the natural evolution of IT architectures has been from the inside-out, starting with the centralized glass house, moving out to departments and eventually integrating the desktop and, somewhat awkwardly, reaching out to key business partners. But this approach also misses the real potential of SOAs. SOAs are uniquely equipped to deal with distributed, heterogeneous computing environments without a centralized point of control, so they have a unique value in addressing the challenges of coordinating activity across enterprise boundaries.

Yet, to harness this potential, CIOs (and enterprise software companies) will need to approach architecture from the outside-in - starting with the challenging issues of orchestrating IT resources across enterprise boundaries and then addressing the easier issues of orchestrating IT resources within enterprises boundaries. In fact, this outside-in approach is more consistent with the adoption pattern of Web services technology that, in contrast to the expectations of the technology's evangelists, has actually been used most widely at the edges of enterprises to connect with business partners rather than inside the firewall. Unfortunately, enterprise software companies have generally developed enterprise-centric mindsets of their own, so they have generally not been effective catalysts for shifting the mindsets of their customers and helping them to harness the real potential of SOAs.

How to Capitalize on SOA
Part of the problem is that enterprise software vendors have fallen far short in terms of exploiting the business opportunities created by SOAs. Enterprise software vendors have embraced the language of SOAs and many have made significant progress in service enabling their software. Executives recognize the technology's impact: The CEO Outlook study found that SOA will be the technology that impacts the software industry most in 2005. Yet software vendors have generally not adapted their selling and marketing processes to effectively help their customers migrate to SOAs.

The real challenge - and opportunity - is to help bridge the gap that currently exists between the I.T. departments struggling to define a pragmatic migration path for SOA deployments and business executives seeking to harness the near-term business value of Web services technology. Most enterprise software vendors are still too focused on large-scale, long-term implementations of software platforms and have not made the difficult organizational changes required to effectively commercialize much more targeted and pragmatic, implementations of technology. This will be a very painful transition process for most enterprise software companies.

Software vendors can take relatively simple marketing steps to begin the process of leveraging the SOA opportunity.

1. Develop cost-effective "pull-oriented" marketing programs designed to reach non-technology business decision-makers and to get the executives who have the most pressing business needs that could be addressed with Web services technology to identify themselves.


2. Re-configure at least a portion of your sales force to cost-effectively pursue smaller sales opportunities with a "SWAT team" capacity designed to generate near-term business results and rapidly replicate these results with aggressive reference selling within the same enterprise.


3. Develop an architectural services team that can work with I.T. departments to develop a high level architectural vision that can be rapidly translated into early stage deployments delivering tangible business results - avoid the temptation to sell or support massive architectural redesigns that are decoupled from specific near-term business initiatives. This architectural services team should develop an outside-in mindset and approach that focuses on the near-term potential of SOAs to enhance collaboration across business partners.

One major caution: Exploiting the potential of SOAs at this point is not about the technology (although there will certainly be a lot of technology innovation required to harness the full power of SOAs.) The winning vendors will be those who re-think their economic and organizational models from the ground up to become much more effective at commercializing technology in smaller units of functionality with compelling near-term business cases targeted to non-technology line managers. And the really big winners will be those who master this capability while at the same time figuring out how to help I.T. departments pragmatically evolve I.T. enterprise architectures.


Vendors Doing SOA Right
The greatest software vendor success stories have come from a new generation of companies who have embraced SOAs as the foundation for their own software offerings. These generally take two forms. On the one hand, there is a new generation of software service providers like Salesforce.com in the CRM space that is targeting major enterprise applications with a service model built on an SOA platform, in contrast to an earlier generation of Application Solution Providers that were trying to build service businesses with more hard-wired software technologies.

On the other hand, there are some promising new companies like Talaris and E2open that are targeting one of the most promising arenas for SOAs: Inter-enterprise collaboration. Talaris is focused on helping enterprises coordinate third party employee business services - everything from travel services to package shipping. E2open concentrates on helping companies in the high tech arena to coordinate multi-tier supply chain operations on a global scale. All these companies have built service offerings on strong SOA platforms and they are generally not focused on selling to I.T. departments, but instead are seeking out line business executives with powerful business cases based on near-term business benefits.

The Future SOA Vendor Landscape
The software vendor landscape has only shifted modestly to date. There has been a proliferation of software start-ups seeking to commercialize highly specialized elements of Web services technology as building blocks of SOAs, but many of these have encountered difficulties in terms of connecting with the highly fragmented business decision-makers that are spearheading the adoption of the technology.

At the same time, many of the larger players have engaged with I.T. departments around efforts to define longer-term SOA visions, but have had difficulty in turning these efforts into large, near-term sales. In general, enterprises have demonstrated a significant backlash against large-scale software deployments, in part shaped by the expectation that SOAs will make it possible to deploy software in a much more modular fashion. The slowdown in large-scale purchases has certainly contributed to the ongoing consolidation of the enterprise software business as vendors struggle to build and maintain viable businesses.

The growing acquisition binge by large enterprise software vendors is at best a stop-gap action. It buys time for those with deep pocket books who understand, and are committed, to making the more fundamental economic and organizational changes required to survive in an SOA world. But these companies shouldn't get distracted from the real SOA challenge - and opportunity.

Because we are only at the earliest stages of the transition to SOA, it is easy to look at the unchanged vendor landscape and become complacent because so little has changed - yet.

Over time, we will see a few large companies that focus on defining and managing federation frameworks to effectively mobilize a much broader range of specialized service providers. The real sweet spots in the SOA landscape will involve specialized business policy repository and mediation businesses, third party auditing and reputation engines and collaboration hubs focused on supporting process collaboration across extended enterprises.

Many of these businesses offer the potential for significant concentration and scale, so there will still be the possibility to build and operate very large-scale enterprise software businesses, but they will operate with fundamentally different economic and organizational models. Today's vendors need to start their migration strategy now.

John Hagel is a leading business consultant and author. His most recent book, Out of the Box, was published by Harvard Business School Press. His new book, The Only Sustainable Edge, co-authored with John Seely Brown, on the impact of offshoring and outsourcing on business strategy will be published in May. For more information, visit John's web site at www.johnhagel.com