Connecting SOA to Business Outcomes Sandy CarterVP, SOA & WebSphere Marketing, Strategy, and Channels

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Aligning Business and IT Drives Greater AgilitySuccess requires the alignment of business & ITBusiness ArchitectureBusiness ProcessesSOA Foundation & Infrastructure

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Agility Leads to Greater Growth and InnovationGrowthOrganicAcquisitionsAgilityInnovationAGILITY: ability to quickly and effectively respond to changes, opportunities and threats

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Agility Boosts Financial Performance Net MarginReturn on AssetsRevenue GrowthEarnings Per Share20% higher30% higher8% higher29% higherIndustry AverageAgile CompaniesSource: MIT Sloan School of Management, 2007

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Benchmark Agility with Key Agility Indicators270 KAIs in the Benchmark Wizard

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IBM Increased Agility through Service Orientation 18% growth in BRIC countries53 acquisitions in software since 200263% of revenue came from non-US operations8% yr/yr revenue growth

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What isA way of integrating your business as linked services and the outcomes that they bringService OrientationA repeatable business task e.g., check customer credit; open new accountA ServiceAn IT architectural style that supports service orientationService Oriented Architecture (SOA)Service Managers:Business Managers:Architect:

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Gartner: "Dont postpone SOA; Reprioritize Your Road Map""address lower-cost projects sooner""[prioritize] projects that will turn an ROI faster""Choose SOA projects where reuse of established systems is prevalent"Gartner: Cost Cutting Strategies for SOA; May 6 2008 Roy W. Schulte, Anthony Bradley, Yefim V. Natis" SOA enables businesses to brace themselves for any economic cycle, positioning them for success, not just survival." *ZapThink, SOA in any economic climate, 2008

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The Smart SOA Approach: Based on 6550 CustomersA set of guiding principles to extend business value of deploymentITBusinessFoundationalExtendEnd-to-EndTransformAdaptDynamically

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Adoption of SOA is Evolving Across the Continuum% of SOA Customers by ApproachLarge EnterprisesSource: IBM 2008 SurveyMedium BusinessesSmallGreater than 4,999Less than 999Between 1,000 and 4,999Employee Size

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Adoption of SOA Varies by IndustryFoundationalExtendEnd-to-EndTransformAdaptDynamicallySOA Adoption by IndustryDistributionFinancial ServicesIndustrialCommunicationsPublic

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Process Focus Varies by Maturity and IndustryBankingAdapt Products Dynamically for Local Markets

Enterprise Risk MgmtCustomized Offers Value-Add ServicesMulti-Channel Banking Payments OpsFraud Detection/ NotificationAccount Open Call Center Loan OriginationInsuranceAgency MgmtEnterprise Risk MgmtMulti Line, Multi Channel Self-ServiceMulti-Line QuotePolicy AdministrationClaims LifecyclePolicy Status Billing InquiryClaims StatusAdapt Products Dynamically for Local Markets

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What Are The Costs of Inflexible Processes?In 2007, a Major U.S. Discount Airline facing inclement weather, but not severe storm Stranded customers on planes for 10+ hours without food, water, and heat

Cancelled >25% of flights days after initial incident

30M USD in customer refunds

14% drop in stock price; 400M USD in shareholer value destroyed

CEO relieved of duty

We had a weakness in our system. We were overwhelmed. David Neeleman, Former CEO JetBlue Airways

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Boost Flexibility & Agility with BPM Enabled by SOA Business Process Modeling & DesignProcess ExecutionBusiness Activity Monitoring & AnalysisHuman Interaction & Collaboration

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BPM Enabled by SOA in ActionStreamlined processes for 15,000+ customers

50% increased in customer satisfaction

Increased collaboration between suppliers and partnersAchieve greater flexibility by streamlining new and existing business processes

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IBM BPM Suite Starter Sets Accelerate Time-to-ValueFoundational Starter SetsDynamic Business ProcessesContent-Aware ProcessesExtended Value OfferingsIBM BPM SuiteBusiness Event ProcessingAsset repository for BPMCollaboration ToolsAdvanced AnalyticsProcess AcceleratorsBPM Methodology BPM Professional Services BPM Mentoring

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Advanced BPM Capabilities for Agility WebSphere Business Services FabricWhen do you act?What do you do?Business PolicyBusiness Events ProcessingWebSphere Business Events

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Business Events Processing Demo

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46% YTY customer growth

440+ public customer referencesPartner with a Market Leader2007 Total: $2.0BSource: WinterGreen Research, Inc.SOA Leadership according to WinterGreen Research76% in India!

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SOA Helps in ANY Economic ClimateBusinesses Need:SOA Enables:Source: ZapThink, SOA in any economic climate, 2008

Business AgilityFlexible ProcessesReduced ExpenseLow-Maintenance, Standards-based IntegrationGreater ReuseReusable Services

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Today's Business Landscape is Undergoing Rapid and Transformative Change

Are you prepared?

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Thank you!More information: www.ibm.com/soa

Main Point: What questions should I be asking myself to become a globally integrated organization, become more agile and service oriented? Key questions to deal with change around my strategy, my business and my people? What steps should I be thinking about? Business Transformation involves: Business Model Innovation expand pointTalent Management & Workforce Analytics expand pointProcess & Application TransformationGlobal Integration expand pointInfrastructure OptimizationInformation management across the Enterprise expand point

Key entry points for a client driven approach

IBM competencies deliver specific value

Business TransformationSolutions Transformation (Process and Application)Infrastructure Modernization and OptimizationMain Point: Companies today need both Agility and Innovation for growth in todays dynamic economy. Traditional sources of growth through organic growth and acquisitions will create growth unquestionably, but for the greatest amounts of growth against the competition, the greatest amount of growth will come from being agile and innovative.

Business Value firms with above average IT spending & IT Savvy had net margin 20% above industry medianProfitability via Sharing firms with above average percentage of shared applications and IT Savvy have Return on Assets 30% above industry medianAnnual Revenue Growth 12% growth vs. 4% for their industry groupsAverage Annual Earnings per Share 36% growth vs. 7% for their industry groups

Source: IT Portfolio Management and IT Savvy Rethinking IT Investments as a Portfolio, MIT Sloan School of Management CISR Summer Session, Peter Weill, June 14, 2007. Research was conducted by MIT via the SeeIT/CISR survey of 629 firms 329 of these firms are listed on US stock exchanges. The work was financed by the National Science Foundation grant number IIS- 0085725.

Main Point: The standard key performance indicators are not enough to really measure how agile our companies are. We have to move beyond the ones weve been using and slice through our organizations to look at our human capital practices, financial managment practices and our supply chain operations and target areas to increase agility to meet the challenges ahead. This is someone no one else is doing with our IBM Benchmark Wizard.

The IBM Benchmark Wizard provides agile new industry process models and advanced search/filtering capabilities for benchmarks, the Benchmark Wizard also gives us (IBM consultants) the ability to download new industry process classification frameworks, which were developed in conjunction with APQC. These benchmarks provide best-in-class metrics including key agility indicators for the areas I mentioned to help customers determine a path towards business transformation. The Process Classification Frameworks (PCFs) are the organizing construct for business processes which IBM supports as an Open Standard. Were embedding the industry PCFs within core Business Process Management (BPM) assets and tools such as WebSphere Business Modeler and our Component Business Models.

Get started with a X week engagement for an assessment of how you are doing and areas of opportunities.

Additional Details:Industry KPIs that we need to move beyond for greater agilityBankingProfitability of products, services, and channelsCustomer satisfaction and churn rateCall center performanceLoan and mortgage metrics

Retail1) Same store (comp) sales2) Sales per sq. foot3) Inventory turnover4) Gross margin return on inventory5) Sales per labor hou

InsuranceTraditional Insurance Indicators:Combined ratioInvestment returnsLoss ratioExpense ratio

New Agility Indicators (potential examples):Quote conversion rate by agent/geography/LOBClaims overflow by LOB/geographyDynamic risk exposure and reinsurance by LOB/geography

ManufacturingStandard customer lead time (order entry to shipment) in days (order to delivery)Scrap & rework costs as a percent of sales. -- QualityTime to market in days for all new product/services -- Innovation% change (New Product Revenue to Total Revenue)

Government: (depends on if state, local, central, regional, Federal)Citizen satisfaction and number of claims processedTaxes (corporate, sales, etc); Job creation, GDPbudgets and deficits as well as trade gaps

Telecom Technical side: Service Quality [up-time]; Reliability ; Congestion Business Side: Revenue per user (ARPU); Churn (% of base); Acquisition Cost per Subscriber (reflects phone subsidies, cost to win back lost customers). Reflects higher levels of competition

Healthcare:Providers and Payers are often on different sides of the same issue. For example, consumers are demanding reliable cost and quality information, in order to make personal healthcare decisions. Healthcare transparency can provide them with the information necessary, and the incentive, to choose Providers based on value. It motivates the entire system to provide better care for less money - - and Payers and Providers, through better integration and partnering, can deliver this value.

Technical (ability to access information in real-time - anywhere, anytime)Healthier consumers: using technology and its integration to enable Providers and Payers to focus on keeping consumers healthier (wellness), moving toward a pay-for-performance environmentPatient/consumer satisfaction: improved with online scheduling of appointments, ability to verify benefits (at personal convenience)Physician satisfaction/loyalty: improved quality of life, as physicians can review lab results, images, etc. from their homes, to keep up with their patientsFingertips access to an integrated view of the total patient record and experience in real-time, to guide care decisions

Percent of claims paid the first time they are submittedBased on the hospital knowing how to submit the claim, contract status, etc.If claims aren't adjudicated in the first cycle, Payers keep the money longer, creating more work for ProvidersReal-time decisions - - based on partnership (information sharing) among Providers and Payers - can reduce rework

Capacity management: number of beds and when they'll become availableReal-time bed capacity management will benefit Providers (efficiency) and Payers (affecting costs)

All Industies: Key Agility Indicators -- needing to track how agile you are... whether IBM helps you or not Main point: IBM has transformed to become a Globally Integrated Enterprise we are well positioned for 2008 and the long term. 1) Global Reach and Scale 2) Proven Infrastructure 3) Technology Leadership 4) Delivering Unique Client Value 5) Financial Strength and Flexibility.

IBMs story: Weve made major investments in emerging markets, building up our teams in nations all over the world. At the same time, we have been globally integrating IBMs operations rapidly, locating our work and functions wherever it makes the most sense, based on the right cost, the right skills and the right business environment.Today we have a truly global supply chain; we develop software globally; our network of research laboratories is worldwide; and we deliver services on an unmatched global scale. We are continuing to transform our processes and functions to move IBM to this profoundly new model of the corporation, which we call the Globally Integrated Enterprise. ~ Sam Palmisano

We have acquired 53 software companies since 2002.

IBM is positioned well in 2008 Main Point: Service Oriented Architecture is the approach of choice for aligning business and IT in order to become a globally integrated enterprise

So let's talk about just what we mean by Service Oriented Architecture in the first place. The main point is that it's the best way to business and IT in order to experience the success of being a globally integrated enterprise. But that can mean different things to different roles.It all starts with repeatable business tasks like check customer credit or open a new account. These are the things your company does every day and strings together into business processes. We call this a Service. From an IT perspective, the service and its linkage to the underlying IT systems that deliver its task are best overseen by an emerging role that doesn't yet exist in a lot of organizations called a Service ManagerLooking at how this manifests itself for Business Managers, Service Orientation is a way of integrating your business as linked services and the outcomes that they bringAnd finally, looking at this from an Architect's perspective, Service Oriented Architecture or SOA is an IT architectural style that supports service orientation

Main Point: Define Smart SOA: Basic to advanced with alignment of business and IT objectives.

In the same way that you take different modes of transportation depending on your goals, we take different SOA paths depending on our business objectives. So rather than taking a haphazard approach to SOA, we can learn from the experiences of those around us and take a SMART approach to SOA. Smart SOA is a set of guiding principles to extend business value of deployment

A major tenet of Smart SOA is to recognize that your needs are evolving and that an answer that is good for today may not be good for tomorrow. That project that you deployed that was being used ten times per day may some day be used ten thousand times per day. That project that that met a hidden back office task is now being used as part of a mission-critical customer-facing business process. Small projects grow up. Sometimes they grow up fast! That is why Smart SOA is about solving basic challenges in a basic way but doing so in a way that can grow as your needs evolve. Smart SOA allows you to meet the requirements of tomorrows advanced deployments without un-doing the basic projects that you do today.

Just as important, Smart SOA demands that business and IT objectives are aligned to maximize the business value of deployment.*Analyzed Data from a sampling of IBM customers across 2006, 2007 & 2008 for trends. This is a quick snapshot overview of where along the continuum SOA customers are approaching.

IBMs analysis of a sampling of customers indicated about 61% in Foundational, 29% in Extend End-to-End, 8% in Transform and 3% in adapt dynamically. We are beginning to notice movement across the continuum with an increase in SOA deployments. For example, there has been an increase of 2% (up to 29% from 27%) from fall 2007 launch with customers entering SOA deployments from an Extend end-to-end approach.

Higher percentage of Large and medium business Beginning to see adoption from smaller companies Cross geo growth (AG, EMEA, and AP)

All industries are doing foundational SOA workThe financial and industrial sector industries are moving into the extend end to end spaceWe are really only seeing the financial sector doing transformational work

*Analyzed Data from a sampling of IBM customers across 2006, 2007 & 2008 for trends. This is a quick snapshot overview of where along the continuum SOA customers are approaching.

IBMs analysis of a sampling of customers indicated about 61% in Foundational, 29% in Extend End-to-End, 8% in Transform and 3% in adapt dynamically. We are beginning to notice movement across the continuum with an increase in SOA deployments. For example, there has been an increase of 2% (up to 29% from 27%) from fall 2007 launch with customers entering SOA deployments from an Extend end-to-end approach.

All industries are doing foundational SOA workThe financial and industrial sector industries are moving into the extend end to end spaceWe are really only seeing the financial sector doing transformational work

*Banking and Insurance increasingly apply Smart SOA approaches for complex cross enterprise processes. Main Point: Business Process Management enabled by SOA allows your business to respond and adapt to change

http://money.cnn.com/2007/02/19/news/companies/jetblue/index.htm?cnn=yesMain Point: Business Process Management enabled by SOA allows your business to respond and adapt to change

Business processes are what makes an organization tick. To keep these end-to-end business processes in line with the ever-changing demands of the market, you need a deliberate, thorough approach to managing them. Business Process Management enabled by Smart SOA TM is a discipline that combines software capabilities and business expertise to accelerate innovation and optimization of these critical end-to-end business process.

BPM starts with taking the business process that might exist on paper or even in the minds of some subject matter experts and documenting it with business modeling. But the real value of process modeling comes with running simulations and what-if scenarios to forecast what would happen if you altered the process. You can take an iterative approach to these simulations, quantify the results and arrive at an optimal process design.before putting a single change into production! After you've optimized the process on paper, it's time to make it a reality in a robust, scaleable, hot-swappable deployment environmentOnce you have your optimized end-to-end business process in production, you'll want to monitor and measure the results. You'll want to evaluate how the business is doing today but also how well you are poised to react to additional changes tomorrow.The business world does not stand still and neither should your end to end business processes. You need to continuously look for ways to innovate and re-optimize the process as conditions change.

Our vision of business process management is one where its connected to your IT environment. At the end of last year we delivered major updates to our BPM product-line - but we've been busy since then - we acquired Cognos for example. And now this week we are taking another major step to make it easier for you to get started with BPM with the announcement of the IBM BPM suite. Tomorrow Craig Hayman will tell you more about this.

Additional Suite detail (not to be presented). The first is the Dynamic Business Processes set and is comprised of WebSphere Modeler, Business Service Fabric, and Monitor. We also have a starter set for Content Aware Processes which includes FileNet Process designer, P8 BAM and P8 BPM.. The suites are valuable to customers because they provide a defined starter set of technology to solve common use cases for BPM and are available starting today at a special price.

Also, we acquired Cognos on January 31st of this year to enhance our Business Intelligence and analytics capabilities. Cognos uses search algorithms to identify patterns in data. You can identify trends and track developments that would have been difficult for a human to find by simply examining the raw data. Cognos delivers data about how processes are working. The raw data can be useful to an immediate supervisor who actually wants to know how many units each employee processes in a given period of time. But the same data would be overwhelming to a manager a couple of layers removed from the process. That executive needs to monitor dozens of processes and needs an overview rather than details. Thus, for example, a hospital administrator doesn't need to know the number of admissions during each of the past few hours, or the schedules of doctors, but he or she does need to know that if the increased rate of admissions continues for 8 hours the next shift will be seriously understaffed. Cognos as part of a BPM environment, can provide the kinds of trends and summaries that senior managers need. Main Point: Real customers are getting real benefits from SOA Entry points. For example, Bharat used the people, process, and information entry points and has achieved great benefits from doing so.

BUSINESS CHALLENGE:As a petroleum producer in India, Bharat Petroleum Corporation Limited (BPCL) serves many large customers, from consumer gas stations to major airlines. Because BPCLs products are crucial to its customers, the company must keep tabs on account details, product availability and order statuses.

For example, BPCLs customer loyalty card application generates a body of data that has to be integrated with billing and customer account information. BPCL was transferring data manually -- in batches -- which caused delays in tracking and awarding points to customers. Slow and prone to error, the processes supporting the loyalty card threatened to drive customers away. Similar problems plagued applications throughout the supply chain, preventing BPCL from communicating swiftly and efficiently with customers and partners. Building non-standardized interfaces between applications meant that BPCL had to start from the ground up each time, resulting in a tangle of point-to-point integration that was difficult and time-consuming to modify. The inflexibility delayed the launch of new ventures. To continue extending its reach into untapped markets, BPCL needed a flexible infrastructure that could adapt responsively to a changing business environment without driving up costs.

SOLUTION:Bharat Petroleum implemented a standardized integration platform that speeds integration efforts and streamlines business processes. The standardized integration platform enabled the company to establish interfaces between business-critical applications, thus streamlining the processes they support. With standard, reusable tools in a service-oriented architecture, BPCL has made enterprisewide integration efforts simpler, so it can accommodate changing business needs by implementing new processes and services faster and more efficiently. The open-standards-based technology enables BPCL to keep pace with a diverse set of new projects, connecting its systems not only internally but with those of its partners and customers, as well -- no matter what the platform.

By leveraging IBM WebSphere software, BPCL has transformed customer interactions and become the first petroleum producer in India to offer critical business information in real time via the Web. Integrated with the companys back-end enterprise resource planning (ERP) system, secure Web-based applications allow customers to monitor account activity, shipment statuses and product availability. The new solution has also enabled an online billing functionality which reduces phone calls from customers and improves the efficiency of the payment process. The company plans to further capitalize on the unique solution with an online store.

BENEFITS:The solution allows BPCL to leverage its existing applications more fully by enabling realtime data flow among the previously siloed business areas. It routes information intelligently and drives what used to be manual processes, both inside the enterprise and out. The improvements have helped BPCL respond to customers and partners more effectively, speeding business processes and reducing error. Just as significant is the flexibility and adaptability of the solution. The standards-based, business-focused platform helps BPCL cope with organizational change, worldwide growth and a changing network of partners, suppliers and customers. The company no longer maintains costly, time-consuming point-to-point interfaces through multiple organizations. It now manages integration efforts centrally, finding economy in the ability to reuse pieces and build on past structures. The IT efficiencies mean that BPCL can realize integration benefits faster and more effectively pursue its strategy of growth.

Customer satisfaction survey improves by 50% after implementationWeb-based system provides critical information to customers 24x7Online billing functionality reduces instances of late customer paymentsElimination of costly, time-consuming point-to-point interfacesFaster integration with suppliers and partners, quicker ROIIntelligent routing automates and streamlines processes

With the IBM system, our customers can view invoices and monitor product availability whenever they need to. Conversely, our employees spend less time on the phone and can better focus on the task at hand. A.K. Kaushik, deputy general manager IT, BPCL

COMPONENTS:IBM WebSphere Application Server - Network Deployment 6.0WebSphere MQWebSphere Business Integration ServerWebSphere Business ModelerWebSphere Business MonitorWebSphere Process ServerWere making customer decisions on how to get started with the BIM BPM Suite easier by creating Starter Sets. The IBM BPM Suite includes a choice of two starter sets Dynamic Business Processes Set and Content-Aware Processes Set. Starter sets are packaged offerings that make it easier for customers to get started with IBMs BPM Suite, and are designed to address key customer scenarios.

Each starter sets contain tools to model, deploy and monitor core business processes. The suite also contains a number of optional extended-value offerings to enhance and advance overall capabilities.

Extended value offerings are capabilities that extend the foundational starter sets in areas such as business event processing, asset repositories, collaboration, and advanced analytics. In addition, pre-built industry-specific solution accelerators and assets based on industry best practices are available.

Details on Suite and Starter Set packaging, pricing and support available in Q2 2008

Main Point: While BPM enabled by SOA is a broad topic, I want to focus in on a couple of very important attributes: Business Events Processing to alert you to when you need to act and Business Policy to inform and define what you need to do.

What's going on out there? It's the age old question. How do you know when something happens of consequence that you need to take action upon? And these happeningswell call them business eventsoccur literally every second of every day across your enterprise. If we could somehow filter the significant, correlated eventsthe events that merit actionwed save countless time and money. As an example: a customer making a credit card purchase is commonplace. That same credit card being used within the same hour in two places that are 3 time zones apart.that is a pattern that merits action. And thats what Business Event Processing (BEP) is all about: capturing and correlating different types of business events that represent actionable patterns.

IBM has a long history and deep expertise in event processing. BUSINESS events processing is the next evolution as we begin to put this power of event processing into the hands of the business user. WebSphere Business Events is at the heart of this evolution. WBE is based on the AptSoft acquisition IBM did in January which we've taken and significantly enhanced. We're GA'ing it just 5 months after closing the deal. (closed Jan 23 and GA is June 30th) A software system designed specifically for managing the business events flowing across systems and people with the goal of providing actionable insight, WebSphere Business Events allows business users to describe, in business terms, the business events and patterns to detect, evaluate, and react in time in order to meet business objectives. WebSphere Business Events delivers this capability through intuitive user tools used to define, implement, and manage business events.

Depending on your needs and scenarios, you can also use WebSphere Business Events in combination with WebSphere Extreme Scale and/or IBM solidDB which are both new releases. WebSphere Extreme Scale enables you to efficiently scale out your processing capabilities to handle massive volumes of transactions such as processing events with linear scalability. solidDB, because of its speed for storage and retrieval, can process large volumes of data due to it being deployed in memory.

To further enhance our BEP capabilities, we are also introducing solidDB which is a relational in-memory database that delivers extreme speed using the familiar SQL language. Solid Technologies was purchased by IBM in January, 2008 and will GA as an IBM product during the second quarter. solidDB, because of its speed for storage and retrieval, can process large volumes of data due to it being deployed in memory. Why is that important for events? The reason is that for many high transaction companies (Financial Institutions) events represent a source for large volumes of data, which are important due to the critical nature of their transactions. Therefore, solidDB provides an alternative to capturing, storing and retrieving event data that is critical to high volume transaction systems - thereby supporting the event processing initiatives for our customers.

But what action do you take? Now you have entered the realm of Business Policy. Occasionally you have the luxury of making a thoughtful manual one-off decision about what to do in response to an event. But far more often, you need to establish what to do in a variety of circumstances ahead of time and lay out the mechanisms for those policies to be followed on a far more automated basis. Business Rules are combinations of declarative statements: like "Repeat customers receive preferred status". They are written in an understandable business context and consolidated into one place for easy change. Furthermore, they are different from business rules in that they are not limited to strict procedural flow like if Athen B then Cuntil Z.IBM has enhanced its WebSphere Business Services Fabric ( v6.1.2 GA'ed 2/1) to deliver greater business policy capabilities. To further arm organizations with the power of business-led change, WebSphere Business Services Fabric is adding new tooling so business users can more easily configure business service policies. These policies have always been very powerful in terms of the scope of change they can enact, and the breadth of business context contained within them. Now, WebSphere Business Services Fabric makes it easier for business users to access and harness the power of change through policies with enhanced tools and interfaces that are elevating closer to the business user levelMain Point: Walk-off slide to leave on screen when transitioning to Harley Davidson