Cost Saving

The two main financial returns on an organization’s investment in SOA are:

• Speed of implementation.  Because SOA allows developers to make extensive use of existing resources, the enterprise can build new applications very quickly.  This speed of implementation both saves money by reducing the amount of expensive engineering resources expended and reduces time to market thus increasing revenue opportunity.
• Reduced expenditure on integration technologies.  The fast growing use of Web services to expose core functions from enterprise applications will change the way we think of Enterprise Application Integration tools.  Within the next 5 years the concept of the EAI adapter will be dead, and business process management execution engines that build composite applications from existing Web services will replace EAI tools.

The diagram below shows an advanced SOA used to integrate existing applications and provide many of the fundamental building blocks of new applications.  The SOA provides a registry (library) of available services that application developers can leverage to integrate applications and build new ones.

It is easy to see how SOA drives hard cost savings.  Imagine if the estimate to build the new application above was $5M.  As you can see 12 of the 24 functional “blocks” that make up this application are reused from existing enterprise applications.  This equates to a theoretical cost saving of $2.5M.  Of course there are some integration costs involved in tying in the services, so not all of this potential saving will be realized.  The actual cost saving is likely to be in the order of 40%, or $2M in this case.

This back of the envelope calculation is backed up by industry analysts like Gartner and Forrester who estimate that between 50% and 75% of the cost of building new enterprise applications is integrating them with existing platforms.