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Business Transformation in Action

Joe McKendrick

SOA + Cloud + Open Source = Large-Scale Disruption

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Disruption is the watchword for SOA 2009.

The high-margin SOA engagements that we've known -- involving armies of consultants, integrators and expensive proprietary solutions -- keep getting pushed upstream, into a smaller market space.

What's happening is low-cost and no-cost solutions are swooping in to serve what has been a largely underserved or unserved market -- those companies or business units without the big budgets for SOA.

It's all happened before, and is a natural part of the business cycle. Clayton Christensen, Harvard professor and author of The Innovator's Dilemma and The Innovator's Solution, talked about the paradox that emerges when new technologies commoditize the marketplace. Namely, that when established companies face a disruptive technology that usurps their market, management tends to get blamed for making the "wrong decisions."

However, Christensen points out, more often than not, the besieged executives actually make the right decisions -- going after high-end, high-margin opportunities and leaving the low-margin commodity space for newer, disruptive companies. Thus begins a gradual death spiral as they are continually forced upstream.

In essence, once companies are locked into their business models, it's difficult to move to new paradigms. And the better the management, the greater the lock-in.

Across all product categories, the high-end brands, typically offered as part of well-crafted and expensive interdependent architectures, inevitably will lose out to more modular approaches offered by commoditizers. Ironically, disruptors don't start off going after the customers of the big established companies -- rather, they serve customers who may have never had access to such products.

Think of Salesforce.com -- their market consists of small to mid-sized companies that never could afford full-fledged ERP/CRM solutions. Now, thanks to cloud computing, companies can access these types of services. Or JBoss and Progress Fuse -- with open source software, serving smaller businesses that could never afford Big SOA middleware solutions.

In fact, Christensen's analysis of commoditized, modular disruptor gradually creating new markets at the low end and creeping upward provides plenty to ponder within the software market.

As discussed previously in this blog, the combined SOA, Software as a Service, and open source movements will drive the software and application industry to highly modular , building-block, assemble-to-order approach. Monolithic applications will go away, and replaced with modular, loosely coupled components.

Will there be application "Dells" that will begin to eat the lunch of the SAPs and Oracles of the world? Stay tuned. The SOA/Cloud/open-source combination is a highly potent disruption force, and we ain't seen nothing yet. Sounds like the disruptors are already lining up, and the standardization and interoperability of today's software is about to create a new class of disruptors.

2 Comments

Thanks for your comment. I added a clarification to the text -- Salesforce.com is disruptive because it is a cloud offering, versus Fuse or JBoss, which are disruptive because they are open source.

I agree with the old, monolithic approach to applications will continue to fade.

Modular applications built with open APIs (even if they're not open source) allow for much faster integration and modification.

Customers recognize the importance of applications working well together, and they're demanding interoperability from vendors. After all, it hurts the customer if the trouble-ticket system can't talk to the troubleshooting system, and data has to be manually re-entered. Connecting systems creates a workflow whole that can be greater than the sum of its parts.

Further disruption: once a product has open APIs, the application vendor can start going after vendors in neighboring spaces. E.g., a network troubleshooting product can expand through optional modules to displace trouble-ticket and call center workflow apps.

So we'll disruption not just from the low-end to the high-end, but also across product categories.

In this blog (formerly known as "SOA in Action"), Joe McKendrick examines how BPM and related business and IT approaches can promote business transformation.

Joe McKendrick

Joe McKendrick is an author and independent analyst who tracks the impact of information technology on management and markets. View more

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