January 2003

Aaron Kumove -- Managing Director, Horizon Consulting

Over the last four issues we have discussed the need for, and the mechanics of a consistent integration model for electronic trade within and between organisations.  Having the mechanics in place, what remains is a means to monitor the underlying performance of the business processes that are enabled through this integration model.  This is what the top layer in the model is about.  The Reporting Layer functions are typically going to be delivered via a web portal that presents customised graphical information to users on the underlying processes that are of interest to them. 
These reporting functions are moving more and more to real-time delivery, (but for some processes nightly batch updates may still suffice.)

The key here is that we have a consistent unified mechanism to present business process information from a myriad of underlying systems, and that we have the ability to see and aggregate information from a variety of systems and process in a single place.  As new processes and systems are introduced we do not need to "reinvent the reporting wheel" to get useful information from them. 

You may have come across the terms "business dashboard" or "BAM" (Business Activity Monitoring") recently.  What both of these terms essentially refer to is the real-time provision of aggregate business process information from a variety of sources (applications).  Another way of looking at these terms is to think of them as the marriage of application integration and business intelligence.
BAM is one of the hot new buzzwords at the moment which you will be hearing more of in coming months as vendors start to push these kinds of products. 

I mentioned a couple of columns ago that vendors are moving their focus away from the bottom layers of this five layer model as margins get squeezed at the bottom end due to commoditisation and standardisation.  At the top end of the model (Process and Reporting layers), we have neither standardisation nor commoditisation today, and hence vendors can still justify (get away with?) margins that are more attractive to them.  At the bottom end of the model we have a high degree of maturity today in terms of products and their capabilities.  The top two layers of the model are relatively new, and hence less mature, but are evolving very rapidly. 

With any discussion of maturity and margins one must also examine the proprietary vs. non-proprietary characteristics of elements in the model.  The typical product lifecycle involves a new (and usually proprietary) innovative product introduction, followed by similar proprietary products from other vendors.  The market then usually shakes out and standards are developed to bridge these proprietary offerings.  Commoditisation follows standardisation, and at that point high margins which made entry into that market attractive typically disappear as organisations adopt "sunset strategies" for their "cash cows". 

So where are we in this lifecycle with regard to integration products today?

The bottom  layers of the model are rapidly being commoditised due to the standardisation imposed by Web Services.  Like any species whose habitat gets depleted, vendors of integration products are moving their focus to more "fertile lands" at the top end of the model.

This means that prices for products at the bottom end of the model (e.g. messaging and transformation products) are going to fall while vendors "scramble" to position themselves with new proprietary offerings at the top end of the model.  It may take years for standardisation to occur at the upper layers of the model.  As we saw a couple of issues ago, a variety of standards are being floated at the process level of the model, but which will be the winner is frankly an open question.

In a number of surveys conducted over the last few months integration has emerged as the number one concern for many CIO's.  The reasons for this are quite easy to understand.
The problem of internal systems that can't easily talk to each other has been  exacerbated by the advent of the Web as a standard communications carrier for the enablement of inter-organisational trade.  To participate in this new electronic trading environment organisations must confront the integration problem and will be forced to adopt the model I have proposed in this series of articles.

Aaron Kumove -- Managing Director, Horizon Consulting

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