A sea change is reshaping the information services/information technology (IS/IT) industry. Managers accustomed to creating value and solving problems for their companies by writing code or purchasing and implementing software packages are now focused on managing services in a dynamic Web environment. A research team at the W. P. Carey School of Business is proposing a new orientation for IS/IT managers, one that applies the principles of supply chain management.
A sea change is reshaping the information services/information technology (IS/IT) industry. Managers accustomed to creating value and solving problems for their companies by writing code or purchasing and implementing software packages are now focused on managing services in a dynamic Web environment. A research team at the W. P. Carey School of Business is proposing a new orientation for IS/IT managers -- one that applies the principles of supply chain management.
The story starts at the most basic level: plumbing.
Existing computer networks are like plumbing pipes, says
Michael Goul, an information systems professor at the W. P. Carey School of Business and member of the research team. When these pipes are connected by the Web, they can carry data from outside the organization as well as within. The adoption of Web services standards in software applications over the past couple of years, including the use of universal languages such as XML, UDDI, WSDL and SOAP, makes it possible for networks to share data over the Web, no matter what language or operating system may be running inside individual organizations.
And, some basic technical standards, such as simple object access protocol (SOAP), have made it possible for one application to communicate with another. The standardization of how messages will be passed and received allows an information services conversation to take place between different systems, whether they are across the room or around the world. It doesn't matter if they're in the same department or in completely different companies. Other tools from such vendors as Microsoft Corp. of Redmond, Wash., and Germany's SAP allow for the bolting together of the component parts of several software programs to create a customized solution. Together, tools and standards provide the basis for the emerging software-as-a-service model.
As a result, the Web can link the existing network at company A to company B, which can then complete a task for company A. One example is the credit card validation step in an Internet retailer's shopping cart. With Web services, a customer's credit information can be processed by any one of an array of credit-checking services instantaneously. Software can route the data to lowest-priced credit check agency available at that moment, choosing from the retailer's list of contracted providers to select the service that is the best available, at the lowest price. The charge for this transaction is then tracked automatically by another program, or Web script.
This capability means that a company does not have to own every technology tool it needs –- an efficiency improvement that cannot be overestimated, according to
Haluk Demirkan, an information systems professor at the W. P. Carey School and the second member of the research team. "There's a paradigm shift underway basically from the old way of doing IT that was getting too complex and costing too much," he says.
The rise of a software-as-a-service model in place of the old software-as-a-product approach demands that IS/IT managers analyze the business processes and goals of their organizations and make decisions on how to build an automated environment -– often by cobbling together the technology capability from a range of sources.
New responsibilities if IS/IT managers include:
- Utilizing software programs that can be programmed to automatically negotiate for services such as credit card checking from Web-based providers;
- Maximizing the benefits of an Internet that can integrate service providers into a firm's business process at a pace close to the speed of light;
- Managing in a market where pricing is tracked to nearly instantaneous changes in service computing capacity;
- Realigning organizational infrastructures to manage the new logistics of software-as-service.
Because best-of-breed software providers will be able to offer on-demand software services in streamlined applications that deliver only needed functionality, the change will also have a major impact on the way business-process owners source their computing needs. In fact, the technology market research firm Gartner estimates that by the end of this decade a sizable percentage of all new software will be delivered as a service. Semiconductor manufacturers are beginning to add capabilities to chips to facilitate the management of this service-oriented infrastructure. Behind the change in circuitry and software is an industry consensus that the old way of producing applications was too complex, too costly, and too slow. Going to a mix-and-match approach, assembling solutions from smaller and reusable parts should solve these problems. But in addition to the hardware and software adjustments, this also requires a change in philosophy.
"There is a shift towards a business process focus," says George Brown, an IT researcher at the Santa Clara, Calif.-based Intel Corp. "IT managers have to be more attuned to the business perspective and not just deliver technology, even though their fundamental role and responsibility is to provide the infrastructure.
New jobs and revenue
The software-as-services revolution means that tasks in a business process can be farmed out anywhere in the world. Companies or even their internal divisions can sell information services to any bidder. Likewise they can buy such services from any source on an ad-hoc, on-demand basis. The business process management issues involved are demanding new solutions -- web services supply chain management -- and creating new jobs.
"A new type of procurement officer will be needed, for example, who can keep track of whether certain things that we're hiring to be done are being executed correctly with the right reliability, and that we're paying the right amount," says Demirkan.
The new supply chain will mean new business revenue streams. Up to now, providing needed IT capability has been an expense for companies, but with the advent of information services that can be procured and used as needed, this could change. Companies may now be able to recover some of those costs by "leasing" their own excess IT capacity. "With the Web services concept, information technology can generate revenue, too, by letting others hire those services," explains Demirkan. This changes the game for managers.
Demirkan and Goul partnered with
Karen Dowling Corral to examine these issues in a paper published in the July 2005 issue of
Information Systems Frontiers that outlines the types of data and the analyses needed to manage a virtual software supply chain.
The paper reports that the challenge for IS/IT managers now lies in discovering, hiring and then dynamically utilizing web services. Often this means that previously unacquainted parties, who may not necessarily trust each other, will come together to conduct business processes over an insecure medium: the Internet. The similarities to a physical supply chain, with Web services as a software version of sub-assemblies, provide a framework for understanding the new environment. In a virtual supply chain, the sub-assemblies are software services that produce a composite application -- one in which some part of the software's function is provided by an outsourced Web service. For example, Internet Web sites that are called "mash-ups" combine content from multiple source suppliers into an integrated experience.
Because of this similarity between old and new supply chains, the researchers looked at how physical supply chains are managed using computers. They realized that the computerized agents (software programs) that handle some common traditional supply chain tasks – such as automated purchasing of raw materials when inventory drops below a certain level -- serve as a model for virtual software supply chains. Just as in a physical supply chain, computerized agents that are empowered to purchase raw materials need to be tracked to ensure that the volume of materials ordered arrived on time, quality standards are adhered to, authorized agents properly interacted in the automated transaction, etc. These interactions are directed through pre-agreed-upon scripts (software code).
Such a scripted approach, the researchers realized, could help manage a Web services supply chain. The modifications advocated by the W. P. Carey team involve specific approaches to automated record keeping and reporting. In order to track the consumption of Web services, these scripts reinforce the logging of information to an organization's internal database. The resulting raw data serves as a lasting record of the nearly instantaneous discovery, negotiation, execution, and billing of vast numbers of Web services transactions. This information can then be combined into detailed activity reports.
Armed with this data, IT and IS departments would be able to track service execution performance. Just as is the case with a physical supply chain, the information can be used to rate vendors, as a basis for negotiation, and for such things as purchase contract enforcement.
SODA for business students
There's another important element of a service orientation in the way new software is designed and developed, notes Goul.
"You have to now consider what you believe is most appropriate to develop in-house and what you might be able to secure from third-party service vendors," Goul says. Demirkan adds, "This means that when you develop applications today, you need to be able to dissect them in a way that assembled services can be interwoven in an application that can serve the enterprise. But in addition, you have to think about the potential marketability and strategic value that the service provided by your application might represent if it were to be made available in an external services marketplace." Some have referred to this as "service-oriented development of applications," or SODA for short.
The W. P. Carey researchers report supply chain management ideas are beginning to show up in the software for and deployment of Web services. Companies as diverse as financial services firms and hardware suppliers are implementing some of the ideas behind this service orientation for IT.
For the W.P. Carey research team, this shift moves many of the software-as-service research problems out of pure computer science and into a realm more appropriately addressed in business schools and in course topics like business process management. That makes things more interesting for them and their students. "These new orchestration skills of weaving things together, putting together solutions fast and prototyping them for potential clients as in SODA, that's an exciting thing," Goul says.
