Tuesday, September 14, 2004

Business Geometry

A business or value chain is composed in a geometric structure. (In the past we have often called this structure an architecture, but this word has lots of different and tangential associations for different people.)

In SOA, we design a business or value chain as a network of services. This is a powerful geometrical pattern. But there may be many possible network geometries satisfying a given business requirement, all of which count as satisfying the principles of SOA. For example: hub/spoke or peer/peer.

Business Stack

Another common geometric pattern for SOA is stratification. A business process is composed of services from a set of lower-level services, presented as a platform. A good example of a business platform is the set of retail services offered by Amazon and eBay. Other service providers have built further retail/logistical services on top of the Amazon/eBay platforms.

Each platform is in turn built upon even lower services. At the lower levels, there may be collections of IT-based services, known as ESB. There may also be sociotechnical service platforms, such as call centres.

Thus we have a stratified geometry, in which a person tackling a problem at a given level is presented with a collection of available services, formed into a virtual platform. This can be thought of as a business stack, with one plaform stacked on top of another. Some of the lower layers of the stack may appear to be purely technical services; however a more complete picture should reveal the existence of an IT organization maintaining the platform, in other words a human platform of administrators and programmers supporting the technical platform.

Variable Geometry, Variable Granularity

While the SOA principles may provide some geometrical guidance, and mandate certain geometrical patterns, there is still a design job to determine the geometry. This design job may be easy when the requirement is trivial, but gets harder as the complexity increases.
In many situations, the demand side has more variation than a human designer (or design team) can accommodate. (We characterize this as an asymmetry of demand, which calls for a process of asymmetric design.) We need to start thinking about variable geometry solutions, where the geometry itself can be adapted on-demand.

For example, in the past we have assumed that granularity has to be fixed at design time. But we can conceive of a web service platform that detects patterns of demand-side composition, defines new composite services automatically, describes and publishes these new services in real time, and notifies likely users of the new service, complete with an incentive to switch. We can conceive of a web service platform that analyses the message content of a certain service, and produces a substitute service with a smaller footprint that would satisfy most of the uses in a more elegant way.

Value Landscape

I use the term value landscape to refer to the distribution of cost, benefit and risk across a complex market ecosystem, such as the insurance industry. Technology (including SOA) influences business geometry, not least because it affects transaction costs. The shape of the value landscape changes (has already started to change) as the result of B2B and B2C and BPO. Companies that once occupied safe market positions (the high ground) may find their commercial advantage slipping into the sea, or they may find themselves cut off from their natural markets or supply chains.
See Microsoft Blog Insurance Value Chain

Let's suppose an insurance company has the following strategic aims:
  1. Profitability, short-term viability. To deliver the maximum service value as cost-effectively as possible, using available input services and technologies as efficiently as possible, with minimum costs/risks of change.
  2. Adaptability, medium-term viability. To understand and respond to changing demand for insurance services, and to trends in cost and risk, both internally and across the industry. To develop and deploy new services to exploit new business opportunities and avoid emerging business threats.
  3. Survival, long-term viability. Making sure the core business proposition remains valid, and doesn't get eroded by more agile players. Taking strategic action in relation to structural changes in the insurance industry.
If we are doing business geometry for an insurance company, we need to think about the insurance industry as an ecosystem. We need an AS-IS model of the present ecosystem (largely based on pre-SOA technologies) and a TO-BE model of an idealized ecosystem (based on SOA). We can expect the pre-SOA ecosystem to evolve into some form of SOA ecosystem, although we may not have much idea which of the possible changes is going to happen first. To satisfy all three strategic aims, an insurance company needs to exploit the pre-SOA ecosystem, and prepare for the SOA ecosystem.

Note that this situation may force the insurance company to implement a variable geometry, both in the organizational platform and in the IT platform. Otherwise, it will either have to operate suboptimally for an extended period, or incur significant organization costs and IT costs every time the industry takes another step towards SOA.

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