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Article: The Economics of Service Orientation

by Dave West on May 18, 2009 |

The primary focus of this article from Intel is the structural economic changes brought about by service orientation. First the article notes the rising proportion of the IT budget devoted to KTBR (keep the business running), what we used to call maintenance of legacy systems. Next it shows three approaches to managing KTBR costs: outsourcing, introducing new technology, and structural cost reduction from adoption of service orientation. The second half of the article deals with scalability and SOA adoption patterns.

The claim is made, and supported with evidence, that service orientation is the only approach that ultimately leads to sustainable reduction in KTBR costs. Outsourcing (and off-shoring) initially increase costs, followed (maybe) by a slight cost reduction before returning to the upward costing trend. Technology innovation reduces costs in the short term, but requires a commitment to constant technological innovation that few companies are prepared for, so once again costs resume their upward trend. Service orientation:

... eventually leads to a structural and sustainable cost reduction due to the synergies of reuse. As in the outsourcing case, there is an initial bump in cost due to the upfront investment needed.

Despite the promise in terms of costs savings from service orientation, the authors note, "that this transformation may take years to accomplish and will require difficult cultural and organizational adjustments."

 

ReadThe Economics of Service Orientation for details and for a thought provoking discussion of scalability and SOA adoption patterns.

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