09/23/07 :: [SOA] Service Funding: the better model [permalink]
When it comes to Service Funding, people generally have no clue. Latest example comes from Nick. He takes issue with the statement "When IT is bought like other services, IT can become a business within the business". Ok, I don't like the word "charge back", it really does not sound appealing to be "charged back".
The thing I find funny is that a business unit finds it perfectly OK to pay monthly fees to SalesForce.com or SAP byDesign. Actually, they love SaaS's business model so much that SAP's CEO, Henning Kagermann, calls it the better model (as compared to a costly, complex and risky ERP implementation). But when it comes to SOA, all the sudden this would be a stupid model.
There are also many industries where competitors often share services they provide to their customers (you often have no idea that this is happening), and again the business thinks it is just fine to "pay as you use" while they rebrand and market the "service".
Let's bring back sanity to this debate (and avoid long billable consulting hours of discussion on the topic). "Pay as you use" does not necessarily mean that you are "charged back" for every transaction you make. But at the end of the day SalesForce.com's business model is about charging more the customers that use more resources, whether the formula is linear or not does not matter.
Nick is funny, he says charge back is bad on the other hand he suggests to use a "Transaction Funding Ratio". TRF works as follows:
For example, if team 1 hosts 20,000 transactions against their shared services, and team 2 hosts 30,000 transactions, then team 1 would get 20000/50000 or 40% of the operating budget, while team 2 gets the other 60%.
Hum... let me thing that again, ok, his point is that if you make 22,000 transaction and 51,000 the ratio don't change that much. So this is not "charge back", well it sure has the feel of it. I bet that next year around, they will adjust the ratio. I would argue that TRF is nothing more than "delayed charge back" (DCB).
At the end of the day, whichever model you choose (or not choose any model), there is only one thing that counts, the business must see it as a bargain (because sharing services is indeed a bargain). Things like "change once, everybody benefits instantly" has tremendous benefit both psychologically and financially. SalesForce.com understood that better than anybody else, so why re-invent the wheel?
So indeed, SOA will facilitate the notion of "When IT is bought like other services, IT can become a business within the business". By a better factoring of solutions it is easier to identify what is line of business specific from what it is not.
Nick's post is not just plain stupid, it is misleading because it fails to relate the funding mechanism to the level of maturity of your organization with respect to SOA. I would advise you to think about the funding model when you have effectively proven that services can be reused and showed the benefits of it to the business. Any time spent on this question before you reach that point is simply wasted, not to mention that it brings confusion to the business. Revisit the question when you have a "delivery" team and a SOA infrastructure that makes developing, operating, monitoring and changing services a breeze.