Enterprise Application Integration 101

EAI. It's not just another Internet-economy acronym-turned-anachronism. It's the grease you'll need to shift your supply chain into overdrive. Five tech experts explain what enterprise application integration is, why you should care about it and how you can get started on EAI today.

[From iSource Business, August/September 2002] What Is EAI, Really?

The first problem with EAI, says Kimberly Knickle, a research director at technology consultancy AMR Research, is defining what it is. "Enterprise application integration means different things to different people - and to different suppliers, of course."

At the most basic level, EAI refers to the process of connecting different applications to allow information to flow (by Knickle's definition) between functions within an enterprise or (by a more expansive definition) between trading partners. Bear in mind: EAI is different from middleware, the actual software that connects applications. "It's not just moving data from one place to another," Knickle explains.

Rather, it's the process of taking data that has been taken from databases, applications and portal sites, transforming the data so that a target application can understand it, routing the data based on the content if necessary and perhaps ensuring that the data conform to a particular business process. For example, EAI in support of an order-to-cash process might involve the requisite connections to let a sales rep take the order, verify that the stock is in inventory, check the customer's credit, and verify that the customer is authorized for the amount of the purchase or route the order for approvals if necessary.

Knickle talks about an "EAI framework" that includes components to handle the data movement, data transformation and business process aspects; the specific adapters that provide access to the information residing in particular applications or other data sources; and perhaps an overlying application that allows a company to manage integration as one system rather than trying to administer bits and pieces of middleware scattered about the enterprise's IT infrastructure.

Why Is EAI Important?

Reflecting on this question, Glenn MacKenzie, director of the manufacturing business unit at integration solution specialist webMethods, points to the evolution that he has seen over the past four or five years in who within the enterprise thinks EAI is important. "It went from the techies in the backroom who wanted to learn Java," MacKenzie says, "to IT department heads who were forced to slash budgets and needed to find ways to automate things that were done manually; to chief information officers who were again looking to cut costs and automate business processes; to now, with corporate executives on a functional level looking at how integration is a critical component in improving their key performance indicators (KPIs)."

CIOs certainly do have integration on their minds, according to regular surveys of the top information executives by Morgan Stanley. EAI has consistently ranked as a priority spending area for IT organizations in the survey over the past year. Jon Derome, program manager for business applications and commerce at technology research firm Yankee Group, says the slow economy has been at least partly behind this trend. "Companies have invested in lots of different applications, either packaged or developed in-house," he explains. "Now that the market has tightened, companies are not as willing to make capital outlays for new applications. Instead, companies are investing in integration technologies to tie together the various application assets they've accumulated over time."

Such internally-focused projects have the benefit of keeping IT staff employed at a time when new technology projects have been put on hold, but EAI inside the enterprise can also produce real efficiency gains, according to Derome. EAI's efficiency-related benefits derive from its role in process automation, the ability to link otherwise isolated applications in such a way that routine processes previously conducted by humans through phone, fax, e-mail or "sneaker-ware" - such as checking inventories or sending advance shipping notices - can be performed instantaneously and automatically by computers. In theory, then, EAI promises the same benefits that have become the boilerplate of e-business press releases, such as reduced errors, faster response times to queries and alerts to supply chain bottlenecks.

Similarly, externally-focused integration - also referred to as business-to-business integration, or B2Bi - can produce efficiencies in inter-enterprise processes, although Derome argues that the gains to be had from this type of EAI will vary substantially from industry to industry. For example, companies could benefit from using B2Bi technology to automate high volumes of orders - thousands or potentially millions of transactions a day - with trading partners. In such a scenario, EAI could improve efficiency, reduce costs and improve accuracy by removing the human element from routine transactions. Alternatively, when a company outsources the manufacture of key products or components, creating a highly co-dependent relationship with its supplier, EAI can help the company manage the details of that relationship or the flow of information that moves between the partners in the context of that relationship.

Beyond the potential efficiency gains, Mackenzie says he has recently seen functional executives looking to EAI as a way to increase their own KPIs. For example, a company might have the goal of bolstering customer satisfaction by making its shipping process more efficient to reduce missed-promise dates. Trouble is, the shipping process likely involves multiple functions and, therefore, multiple systems within the organization: shipments typically reference a sales order, for instance, so for optimal efficiency the company's logistics system needs to connect to its customer-facing system. Further, if the company has disparate business units attempting to work in concert on a single customer's order, those units may have entirely different logistics and customer-facing systems that need to work together as well. EAI could provide the linkages between those systems to allow for the sought-after process improvements.

The potential gains from application integration are not wishful thinking, either, according to Ken Vollmer, a research director focusing on integration strategies at consultancy Giga Information Group. Vollmer cites a recent survey by systems integrator NerveWire of 162 IT executives at companies in North America. The executives reported that their integration projects, on average, had produced 40 percent increases in revenue, 30 percent reductions in costs and 35 percent increases in customer retention. What is the connection between integration and customer retention? "Integration lets you put 'golden handcuffs' on your customers," Vollmer says. "You make them so satisfied [because] you're delivering to them what they wanted, you're getting it to them quickly, the quality is better and you can provide them better service. Why would they go anywhere else?"

How Much Is EAI Going to Cost, and How Hard Is It?

The amount of money that companies are investing in application integration provides one clue to the complexity of EAI. AMR's Knickle says she has seen studies estimating that enterprises are spending as much as one-third, or even one-half, of their IT budgets on EAI. In terms of hard dollars, a 2001 AMR survey of 150 companies found the average cost of internal integration projects underway at that time in those enterprises was $2.1 million, with 73 percent of the companies using in-house resources and the remainder using systems integrators or an EAI application.

Part of the problem with, and expense of, EAI is the sheer number of applications that could potentially be connected within any given enterprise, which gives rise to what Jason Bloomberg, senior analyst at technology consultancy ZapThink, calls "the point-to-point connection problem." It's one thing, the analyst says, to connect one system to one other system, creating one link in each direction, but if you have 10 systems to connect, that can create up to 90 point-to-point connections.

Additionally, Bloomberg suggests that companies often find EAI implementations to be particularly difficult because of the pace at which the business environment and a company's IT landscape change. Says Bloomberg: "It's hard to sit down and write all the requirements for what you want [in EAI], go out and buy it and then install it. By the time you do that, your requirements are all different because business just moves too fast." Unfortunately, IT departments and EAI solution providers have little choice but to develop solutions that have the flexibility to change as business conditions evolve since, as Bloomberg notes, "No big company can just say, well, let's put our company on hold for nine months while we do this [EAI implementation], and then we'll start it again. You can't turn the power off while you're working on the wiring at a big enterprise." That flexibility is even more critical in the world of B2B integration, where a trading partner may unexpectedly switch systems, install new applications or undergo a merger.

And, of course, change management looms large wherever processes are involved. All the EAI technology in the world won't help a company streamline its processes unless end users accept the new way of doing things. Derome cites the example of a large retailer that was communicating electronically with 20 percent of its 5,000 suppliers and was looking to establish linkages with the remainder of its supply base. Interestingly, of the 80 percent that weren't communicating electronically, a large portion of those companies had technologies in place already that they could have used to communicate with that retailer. "They just hadn't flipped the switch or gone through the effort of making that system active," Derome says, because both parties were simply accustomed to communicating by phone, fax and e-mail.

Where Is the EAI Market Headed, and Where Do I Start?

"The EAI market is in flux," says Bloomberg, with two new entrants, IBM and BEA promoting a Web services-based EAI strategy and honing in on established players like Fuego, SeeBeyond, TIBCO, Vitria and webMethods. As discussed above, EAI has, to date, been a pricey - if ultimately justifiable - proposition, due less to the cost of integration solutions than to the cost of the IT staff and consultants required to make the solutions work. Web services, which all the integration suppliers have embraced to one extent or another, offer the promise of a less expensive alternative to traditional EAI through the use of open-standard technologies. Bloomberg believes that a host of standards, security, business process, transactional, billing and metering issues remain to be solved before Web services can offer a full-fledged alternative to current EAI solutions, although he sees those issues disappearing within a seven- to 10-year timeframe.

In the meantime, what should you be doing today to prepare yourself for the integrated supply chain of the future? For Vollmer, the answer is simple: "The issue is process from this point forward," he says. And since the supply chain touches many processes within a company - from demand capture, sourcing and procurement, through fulfillment and logistics, onto payment and customer service - supply chain practitioners ought to be examining how they could streamline their operations by automating process touchpoints with other functions in their organizations.

Ideally, all the different functions within a company should be working together to create a holistic integration strategy that addresses the particular opportunities or bottlenecks that the company as a whole is experiencing in its supply chain. By the same token, trading partners in a supply chain - or entire industries - could be working together to formulate a common integration strategy, although the extent to which that is realistic will depend on such factors as the complexity of the partners' relationships, the degree to which partners are willing to automate their shared processes and the cost-effectiveness of integration.

With companies still trying to figure out how to tie together their own various stovepipes and B2B integration still in its infancy (Knickle cites a recent AMR study that found only 19 percent of companies doing B2B integration), clearly integration has a long way to go both within and between enterprises. Given the rate of change in technologies and corporate processes, EAI may never reach an end-state. "We'll never reach the Nirvana of all systems communicating effectively," Derome predicts, but the benefits of greater integration will continue to drive functional departments, companies and entire supply chains further down the EAI path.