The utilities sector has undergone unprecedented change within the last ten years. With full market competition well established utility companies find it almost impossible to respond quickly enough to the demands of customers, regulators and investors. The provision of new energy products is too slow; streamlining processes to improve the cost to serve is hampered by poor access to data; integration of newly acquired operations is complex; and reducing the commercial impact of regulation is thwarted by poor information management.
To overcome these problems significant new demands are being placed on IT systems. Massive investment in IT is out of the question due to financial constraints, and regulatory price reviews are unlikely to sanction such an allowance. Service Oriented Architecture (SOA) is increasingly being seen within the sector as the way to radically improve processes and supporting technology in a cost-effective manner.
Why is SOA important?
Companies have an urgent need to increase their agility
IT is embracing a SOA approach to provide a new level of IT agility to support fast moving utilities. A Service Oriented Architecture is primarily a way of creating software systems based on Services – small independent units of software and data – that communicate with each other via explicit interfaces, using industry-wide standards known as XML Web Services. SOA provides software with the qualities that CIOs have been seeking for decades: flexibility, loose coupling, scalability, manageability, vendor/technology independence, reduced costs in development, deployment and maintenance.
An SOA approach is also about reconnecting business and IT. The business process framework is the basis for the SOA enterprise architecture. The business plan drives the SOA programme; the business itself defines the rationale for the web services; IT determines how they will be deployed; and business and IT together collaborate on what will be achieved. [See this article from www.cio.com]
Model for Success
How does an existing business make the transition to an SOA?There are three key elements required to successfully transition a business to an SOA: Governance Framework, Rapid Process Change and Business Process Management.
Governance Framework: Organisations require a governance framework, through which the programme of change will be led and the resulting assets are managed. The framework will consist of rules, policies and ownership guidance to ensure that risks are managed, conflicts are resolved, duplication is avoided, processes are discoverable and available, changes are controlled and compliance and service levels are monitored. Process, SOA Services and people structures are created in harmony, guided by the senior business leaders working through the governance framework.
Rapid Process Change: Organisations need process change mechanisms that will align business processes and the people that operate them in ways that are much more explicitly defined than they traditionally were, and join them with their IT Services to create an environment where information and data are created and used efficiently and can adapt to rapidly changing conditions while ensuring security and risk are managed appropriately.
Business Process Management (BPM): Also known as Orchestration, BPM makes Services become visible in business processes, where business transactions and data flows and their interactions with people and external organisations are monitored and controlled. Here the organisation can leverage the power of SOA to manage business processes in real time, avoiding errors, waste and redundancy. New processes can be constructed from existing Services to deliver new initiatives to market in less time.
Benefits of the Service Oriented Business
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The company will have the flexibility to organise the flow of work in the organisation as conditions alter
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Switch resources to high-demand areas
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Shorten start-up and cutover times – lower setup costs
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Flexibility to outsource services, or link to external services
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The company can address opportunities that were previously uneconomic
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Develop and deploy new sales channels and services
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Improve current services to increase satisfaction and consistency
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Improve productivity and efficiency to reduce costs
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Improve accountability through greater transparency
Some quantified benefits:
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SOA eliminates duplication of software and hardware
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The number of interfaces decreases exponentially, and interfaces all comply with industry standards, hence interface management costs can be expected to reduce by up to 50%
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SOA improves manageability – real-time information prevents capacity-related outages – availability can improve by 10%
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Fewer components simplifies change management
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The standards-compliant nature of SOA interfaces means that process metrics can be derived almost automatically – the cost of process metrics may be reduced by as much as 95%
SOA Case Study – proof of capability
Client: a major UK energy utility, referred to here as “XYZ plc”
Context: XYZ has launched a major business change programme, aimed at significant cost reductions. The business was looking for operational savings of 10%, and creating a more flexible environment capable of absorbing change rapidly. As a critical enabler, IT was required to provide a more responsive and agile platform and has chosen to move to an SOA approach.
Contribution: WCI is engaged to support the business change programme by:
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Designing and implementing the programme management structure and related addressing the significant organisational and change management issues that arise
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Building a SOA governance infrastructure and implementing relevant methodologies, policies and processes
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Managing the SOA governance infrastructure to ensure ongoing compliance of Services in the way they support and facilitate business change
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Training and developing the capabilities of the team: in particular the many business architects neededSuccess is ensured through creating and embedding a governance and project management structure.
Timescale: An initial 6-month engagement builds governance, processes and skill levels to the point where XYZ becomes self-sufficient
Programme benefits and costs: The programme business case is built on a rolling 3-year horizon. In the first three years the mid-point of projections shows IT savings of around 20%, against outlays of around 4% of XYZ’s annual IT budget.
Prior to WCI’s involvement, the programme faced obstacles to acceptance:
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The original programme was too long at 5 years
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Programme was too expensive and did not deliver benefits early enough
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The cross-charge structure of the matrix organisation made it hard to get any user department to accept the costs of the initial investment needed in SOA
Process prioritisation is focussed on three goals:
Goal 1: Quick financial wins – business value, drive out redundancies
Goal 2: Focus on Core competencies – strategic values, differentiating activities
Goal 3: Strategic Flexibility – external relationships, impact on time-to-market