In 1998, when the IT department at Shell Expro, Royal Dutch/Shell’s UK oil exploration and production unit, put the finishing touches on a two-year software application-integration project, financial controller Darayus Wadia was overjoyed. The project allowed Shell Expro to replace 15 legacy applications with SAP software for finance, procurement, and logistics, and was a dream come true for Shell Expro’s finance team. After all, fewer applications meant fewer hassles whenever they needed to collect information from various parts of the business.

But by the end of the year, Wadia’s enthusiasm began to wane. “We had overestimated what SAP would enable in terms of reporting,” he recalls. “All the data was there, it had integrity and was robust, but extracting it and presenting it in all the ways we wanted, quickly, was quite difficult.” Nowhere was this more apparent than during monthly reporting, he explains. “We couldn’t, hand on heart, say that we had the financial management information being prepared and used in a consistent manner across all the business areas — even though it was coming from the same source.”

It’s a lament that is all too familiar. Combining and synchronizing data and content between all sorts of applications has been a huge headache for many companies. At best, the consequences of getting it wrong can mean hours of rekeying in data; at worst, poor integration can cause companies to spiral out of control as crucial information — such as purchase orders — fails to travel across a firm. The stakes are indeed high and getting higher as IT budgets shrink and the quest to get more mileage out of existing IT investments grows more urgent.

Getting to the Point

According to Taviz Technology, an integration software provider, each application on average needs to communicate with 30 percent of other applications in a company. That translates into a lot of work for corporate IT departments. Building interfaces for all those applications is a big job, which gets bigger and bigger every time a company decides to tweak an old application, purchase a new one or — even more daunting — bring in a whole different set of software after merging with or buying another company. One way that companies face this challenge is by hiring an army of in-house programmers to build individual, customized interfaces between each pair of applications. But that model, known as point-to-point integration, is slow and tedious at the best of times.

Another way is to buy a suite of tools from enterprise application integration (EAI) vendors. Introduced in the mid-1990s, EAI provides an orderly way for companies to update, co-ordinate and consolidate interfaces from a single hub, or “bus” in EAI jargon. Because all the applications feed into the hub, a lot of the integration work is streamlined and automated, dramatically reducing the number of interfaces.

IT experts are betting that the EAI market is set to heat up soon. Meta Group, for example, predicts that worldwide sales for EAI software will grow 103 percent annually, to nearly $9.4 billion, between 1999 and 2004. Likewise, demand for EAI services will increase 38 percent a year to $20.8 billion over the same period.

Driving that growth is E-commerce. Whether for business-to-consumer or business-to-business services, anyone visiting a corporate Web site wants a unified interface to a wide variety of information and business processes with just a few clicks of a mouse. That means a company’s front-office applications, such as customer relationship management tools, should interoperate with its back-office applications, such as ERP systems. Beyond that, E-commerce also aims to connect a company’s applications with those of suppliers and business partners.

The good news is that EAI is getting better and better. “Four or five years ago, integration for the EAI vendors was more about delivering the services to do the integrating than providing all the technology itself,” says Henry Peyret, an IT analyst at Giga Information Group in Paris. For the most part, EAI software has been relatively rudimentary, requiring plenty of configuration and tinkering well after a package is purchased. That, of course, drives up the final bill and makes an EAI rollout painfully slow. Today, however, vendors are developing much more robust products that automate all that coding.

Integration Inertia

The bad news — at least from the vendors’ point of view — is that EAI take-up in Europe has been disappointing thus far. A recent survey of 128 companies in Europe that rely heavily on technology — such as leading telcos and banks — by consultants at AMS found that only a third of the respondents were using high-end EAI tools. Another third were using low-end integration tools, or middleware, while the rest still chose point-to-point integration.

There are several reasons for this trend. Lack of awareness is one, asserts Anita Liess, a Munich-based consultant with Meta Group Deutschland. She points to Germany, where “only around 5 percent of companies fully understand what EAI is and what it’s capable of doing.” Another reason is that the sector is still relatively immature. As a result, says Massimo Pezzini, a vice-president at Gartner, another IT research and consulting firm, none of the vendors offer a single, uniform set of features, making it difficult for companies to assess and compare products.

Currently, Tibco, SeeBeyond, and IBM are the largest worldwide players in terms of both license sales and number of customers. “But even so, none of those three has more than 15 percent of the market,” says Pezzini. They’re followed by webMethods, Vitria, Mercator and a newcomer in this niche area, BEA Systems. Strong regional players include Software AG in Germany and Axway in France, a firm recently acquired by Viewlocity of the US.

Meanwhile, adds Pezzini, there’s an emerging market of low-end tools, such as Microsoft’s BizTalk, which are attracting a lot of attention. The reason is price. Companies can easily spend $470,000 for full-blown EAI tools. The low-end range costs between $47,000 and $94,000. “BizTalk and similar tools might not be as good as, say, SeeBeyond from a functionality perspective, but they can get the job done in small, simple scenarios.”

Overkill

That’s music to the ears of some IT managers. To understand why, it’s worth looking across the Atlantic at a small community of around 500,000 residents just west of Denver, Colorado, called Jefferson County. There, Jim Lindauer, the county’s technology manager, began looking at application integration tools a year ago and was surprised by what he found. “We were blown away by the pricing,” he says. “We looked at IBM and webMethods, and they wanted to sell us a whole package. It was pretty clear that their products were addressing bigger integration needs than ours.”

At the time, Lindauer’s annual budget was $4 million, 25 percent of which was going towards maintaining 160 applications. He reckoned new integration software could help him in two ways. First, the software would reduce that maintenance cost by automating all the point-to-point integration they had been doing. Second, it would speed up the development of new, online information services.

As it was, the IT department was able to purchase part of the WebLogic Enterprise Platform suite of tools called WebLogic Integration. According to Lindauer, less than a year after implementation, the benefits are already apparent. “We reduced the cost of integrating our ERP system with our Oracle database by 65 percent,” he says. “And the residents of Jefferson County can now go online for high-quality data.”

Though a much larger project than Jefferson County’s, Shell Expro’s IT team also reckoned that a full-blown EAI package would be overkill in terms of their integration needs. After rolling out SAP in 1998, it was clear that they needed a single repository for financials and production-related data to improve analysis and reporting. Creating that repository meant they’d have to build a series of interfaces to connect SAP both to a data warehouse, and to analysis and reporting software.

“We looked at off-the-shelf integration products, but most would have been like taking a sledgehammer to crack a nut,” quips Steve Mutch, Shell Expro’s data warehouse team leader. That’s why he and his team decided to build their own integration kit from scratch, largely relying on in-house staff who had experience integrating SAP in other parts of Shell. All told, it took a team of six experts eight months to build the new interfaces.

Thanks to their work, Wadia and his colleagues in finance can now deliver monthly downloads of financial information quickly and easily from SAP to the warehouse, which are then turned into HTML reports and are posted on an intranet for the rest of the company to access. “Being able to deliver Web-based financial and related reports from [the data warehouse] was well received by our business colleagues and resulted in a fantastic improvement in the credibility of finance,” concludes Wadia.

Anatomy of an EAI System

Yet companies opting for all-singing, all-dancing EAI packages have their share of success stories too. Consider Telia, the SKr44 billion ($4.5 billion) Swedish internet and telecom company. By the late 1990s, 30 years of building state-of-the-art technology for Scandinavia and the Baltic region left the company with a mish-mash of more than 1,000 applications. “It’s always easier to add on an application than to take one away,” sighs Julia Dahl, the company’s chief consultant for IT strategy and architecture.

Customer service was starting to suffer as a result. With little or no co-ordination between Telia’s IT systems, requests for even basic services, such as installing phone lines, often had to be handled via fax or E-mails, leaving plenty of room for error. Automation held the key to more efficiency.

Enter Dahl and her team of integration experts at Telia headquarters in Farsta, Sweden. Since September 2000, they’ve been running what she refers to as the Enterprise Nervous System. Central to her system is EAI software from Tibco, which is replacing all the old point-to-point interfaces with standardized integration software components provided by Tibco. She claims a return on investment of 149 percent — thanks largely to the reduction in the number of interfaces that have to be built and maintained — with a payback period of 9.1 months.

Success stories like Telia’s give companies across Europe plenty of food for thought. As Gartner’s Pezzini puts it: “Companies are finding out via word of mouth that [EAI] is a technology that does the job.” And as corporate IT infrastructure gets more and more complex, many companies are also finding out that EAI is a technology that they can’t afford to ignore.

Adam Lincoln is the technology editor of CFO Europe.

Adapting to Change

When companies go shopping for an EAI package, more often than not, they’ll have a checklist of what they’re looking for. Most, for example, want open architecture, nice graphics, and a vendor that’s likely to be around in a year or two. But there’s one item that often gets left off checklists — adapters.

Adapters are the software components included in an EAI package, which provide formatting, data transformation and validation, and the like. Their number, quality and functionality essentially are what EAI vendors use to differentiate themselves. Some vendors have adapters that provide only basic connectivity. That leaves their customers to do all the hard work of programming each adapter. At the other end of the spectrum, however, are vendors that provide “intelligent adapters.” According to Aberdeen Group, an IT research and consulting firm, intelligent adapters automate a lot of the programming, and can, for example, insert data in real time into the correct accounts payable field or invoice line item of a target application.

Whatever the type of adapter, Aberdeen says that a good way for companies to assess EAI packages is to find out how many adapters are included in their “adapter libraries” — basically, the more there are, the merrier.

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