Monday, October 20, 2008

Credit Crunch SOA - Restructuring

One of a series of posts exploring how the current economic conditions are affecting the SOA world. What are the implications for organizations and individuals?


A recent Gartner survey identifies restructuring as the top concern for CEOs in 2009 (, 15 October 2008).
  • organizational restructuring - layoffs
  • financial restructuring - de-leveraging to operate more on a cash basis
  • corporate restructurings - spinning off units, preparing to acquire troubled companies or preparing to be acquired
  • industry restructuring - who will survive the current economic shakedown

Restructuring has always been a major theme of the SOA world. In his article on the Business Case for Service-Oriented Architecture (November 2004, CBDI subscribers only), David Sprott wrote

"SOA is a structural approach in which business level services are published as atomic units of capability separating and formalizing the concerns of provision and use. ... The restructuring of systems capabilities into services presents a much broader opportunity for restructuring of business responsibilities and processes around the service concept."

But if the credit crunch is putting a new emphasis on structure and restructuring, this creates new opportunities for SOA - provided SOA can be positioned as a more cost-effective way of achieving the necessary restructuring. So let's look at the types of restructuring identified by Gartner.

Organization Restructuring

Organizational restructuring often targets areas that are considered of marginal short-term value to the firm. Vulnerable areas may include marketing, R&D, and (dare I say) enterprise architecture. I worked for a company once that sacked the entire marketing department during an economic downturn.

Let us assume that these areas are all needed for the longer-term survival and viability of the firm. So the challenge here is to keep going with significantly reduced resources, to maintain a minimum level of capability and visible contribution, and to be ready to scale up when conditions improve.

One of the key survival factors is closed-loop management - the ability to link specific activities (such as a given marketing campaign or architectural policy) with specific outcomes (such as sales growth or increased system quality). This allows the individuals working in this area not only to justify their continued presence but also to select those activities where they can make the greatest difference, and it allows senior management to see the wider consequences of a given level of resourcing. The faster and more finely grained the feedback loop, the more useful it is for management.

SOA may be able to help here. Depending on the current state of information systems, you may be able to create quick and dirty management tools, via mashups and other ultra-cheap technologies, to provide a detailed view of the effectiveness of your organization unit. You may also be able to devolve some of the less critical responsibilities to automated procedures and checks, in order to concentrate resources on the most critical responsibilities.

Financial Restructuring

As recently as June 2008, Richard Watson of the Burton Group was worrying about the paradox of too much SOA funding, and the need for financial restructuring. (2 Paradoxes of SOA Funding See also Joe McKendrick SOA funding paradox: pay today, restructure tomorrow?)

"At the peak of the cycle CIOs and CTOs can add some value implementing portfolio management and enterprise architecture. At the trough, CIOs look like mere demand aggregators with little influence to mediate the demand and supply of IT funding. ... An organization’s incentives need to be shaped to promote service provision, service reuse and support for shared infrastructure. Often achieving this means fundamentally restructuring a business into horizontal capabilities."

I don't know of any organizations today that have "too much" SOA funding. As Richard himself says: The paradox of too much funding for SOA has resolved itself. But this exposes a new paradox: it is precisely at the bottom of the trough, when the demands for restructuring are greatest, that CIOs have the least capability to respond to these restructuring demands.

But when Gartner talks about "de-leveraging", I guess this is just a fancy word for "thrift". Not doling out money up-front, not acquiring parcels of dodgy assets, but shifting to a cash economy - in other words, pay-as-you-go. So there is a strong case for SOA here.

Corporate / Industry Restructuring

In good times there were lots of leveraged buy-outs - in other words, mergers and acquisitions whose justification was often more financial juggling than genuine synergy. In bad times there is no leverage, so the emphasis has shifted towards mergers only where this makes operational sense, and a renewed interest in demerger and spin-off.

SOA has a role here - not just in unbundling and in reintegrating the business - but also in finding new ways to connect the organization with its ecosystem, through service-based collaboration.

Overall, the challenge for SOA is to communicate its relevance to business by addressing real business concerns. I'm not saying IT is history, but that's not where business people are going to be investing their attention or their spare cash right now.

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