Delivering Flexible Business Value with Service-Oriented Architecture Healthcare SOA Executive Briefing September 2005

1. Delivering Flexible Business Value with Service-Oriented ArchitectureHealthcare SOA Executive BriefingSeptember 2005 IBM

2. A New Agenda for Business An On Demand Business is an enterprise whose business processes—integrated end-to-endacross the companyand with key partners, suppliers and customers — canrespond with speedto any customer demand, market opportunity or external threat.

3. Be prepared forchange. It’s the only thing you can count on.

4. Market forces are changing industry Darwinistic competition: requiring rapid response to market, customer and competitor changes Pervasive globalization: driving the need for new business models to address the collisions of regions and industries Widespread digitization: placing a major emphasis on integrated applications to enable key business processes Shifting regulations: requiring greater scrutiny of governance models and expanding free market activity Source: IBM Institute for Business Value’s “The Specialized Enterprise”

5. Survival may depend on how fast you adapt “We are being told that flexibility in business will be more important than operational efficiency… We might be arriving at another age where we see the demise of some forms of business because they could not adapt fast enough.” Bryan Glick, Global Future Forum An Industry Think Tank

6. The barrier to business flexibility Actual application architecture for consumer electronics company

7. Business flexibility depends on IT flexibility “Today’s IT architectures, arcane as they may be, are the biggest roadblocks most companies face when making strategic moves.” –McKinsey “Flexible IT, Better Strategy”

8. 1 2 3 4 5 6 7 Service Integration Maturity Model Dynamically Configurable Services Siloed Integrated Component Service Integration Composite Services Virtualized Services Function Oriented Function Oriented Function Oriented Service Oriented Service Oriented Service Oriented Service Oriented Business View of IT Structured Object-Oriented Component Based Development Service Modeling Service Modeling Service Modeling Grammar Modeling Methods Modules Modules Components Services Process Integration via Services Process Integration via Services Dynamic Application Assembly Applications Monolithic Architecture Layered Architecture Component Architecture Emerging SOA SOA Grid Enabled SOA Dynamically Re-Configurable Architecture Architecture Platform Specific Platform Specific Platform Specific Platform Specific Platform Specific Technology Neutral Dynamic Sense & Respond Infrastructure Service integration maturity drives business flexibility

9. What you’ve been hearing about: SOA A service-oriented architecture (SOA) is an application framework that takes everyday business applications and breaks them down into individual business functions and processes, called services. An SOA lets you build, deploy and integrate these services independent of applications and the computing platforms on which they run.

10. Check inventory Process invoice Approve/reject credit CollectA/R Shipgoods Before: a typical application architectureApplications are platform-dependent; hardwired connections between services inhibit change; services are protocol-dependent Receive PO Check order status Hardwiredconnections SAP Order to Cash Oracle Financials Red Prairie Logistics Custom interface Businesspartners Customers Suppliers

11. Better: SOAAn SOA frees service components from applications, so you can expose them to customers and partners Check inventory Process invoice Approve/reject credit Receive PO Check order status CollectA/R Shipgoods Hardwiredconnections SAP Order to Cash Oracle Financials Red Prairie Logistics Businesspartners Customers Suppliers

12. The importance of open standards Baltimore fire(1904) • Major fire erupts in downtown Baltimore • More than 1,200 firefighters, 57 engines and 9 trucks race to the scene from 5 states and the District of Columbia • Fire crews unable to assist, because out-of-town hose couplings would not fit Baltimore fire hydrants • Within 30 hours: • 70 city blocks were devastated • 1,526 buildings were destroyed • 35,000 people were left unemployed

13. What you’ve been hearing about: Web services Web services are self-contained, modular applications that are able to work together without relying on custom-coded connections, because they are built on open standards. Web services share a common protocol so they can communicate with each other despite the fact that they “speak” different languages. This makes it easy to combine and recombine them to meet the needs of customers, suppliers and business partners.

14. Hardwiredconnections WSDL XML SOAP UDDI BPEL SAP Order to Cash Oracle Financials Red Prairie Logistics Breakthrough: SOA based on open standards Web services technologies apply a common interface across the entire environment . . . Apply for credit Check for outstanding A/R Check inventory Process invoice Approve/reject credit Receive PO Check order status CollectA/R Check print history Shipgoods Open standards Business partners Customers Suppliers

15. WSDL XML SOAP UDDI BPEL Breakthrough: SOA based on open standards . . . so you can move service functions, recombine them and enhance their functionality Apply for credit Check for outstanding A/R Check inventory Process invoice Process invoice Approve/reject credit Receive PO Check order status CollectA/R Check print history Shipgoods Open standards Fulfill order Business partners Customers Suppliers

16. Standard Life Becomes More Flexible • 250 business services in production for things like pension quotation, direct debit authorization, money laundering check for compliance purposes, or customer search • Achieved a services re-use of over 50%; 123 are used by more than one application, some by three or more applications • 70 applications consume those 250 services • Sustained a 900% increase in workload with no increase in operational staff • Saved company £millions in application development costs to date

17. Things are getting interesting according to Gartner “Web services… make it possible to render business elements of increasing complexity—initially calculations, but ultimately, relationships and materials—as software.By 2007, they will have totally flooded the canals of interenterprise communication.” “By 2008, if you have not deployed composite applications on a SOA and have built competence-extending application functionality through SOA principles, you will be a "dinosaur," and you will lose overall competitive advantage.”

18. SOA poised to enable significant change thru ‘08 • Client’s plan for replacement of monolithic apps by component-based processes • Client’s grow use of SOA-driven application development to cure information bottlenecks. • Use of SOA drives Composite Apps and B2B hubs; Adds to LT value proposition • Strategic Vendor Selection Made for SOA Framework • Clients consider migration paths to specific vendor. Today mid-2005 2006 2007 2008 Source: Gartner, IBM Analysis

19. IBM is the leading provider of Web Services/SOA Platform “IBM’s strength in business issues, middleware and professional services gives IBM the ability to execute around Web services/SOA through its major strategic offerings in software and services.” • Gartner Source: Gartner Research Note: “Magic Quadrant for Web Services Platforms, 2005”, July 12, 2005, D. Smith, C. Abrams, D. Sholler D. Plummer, M. Cantara

20. Choose one of four paths to get started Enterprise Adoption A client that views SOA as a strategic initiative, both for application and integration development and deployment, at an enterprise level. Innovators within their industry, looking for business transformation Line of Business / Solution A client that is evaluating or utilizing SOA at a line of business level, or across a set of related projects. This is a gradual approach of SOA at a business level, and verges on “big bang” adoption at an IT level. IT/Single Project A client is evaluating or utilizing SOA as part of a single project implementation, typically at the IT / development group level. The project may be for a department or for an enterprise-wide element such as a new middleware component to support SOA. Often the initial project is about “testing the waters”. SOA –Related Products Client is not necessarily working on an SOA project, but is evaluating product acquisitions anticipating their use in, and support of, future projects. This is often a first step in planning for SOA. Gradual Adoption

21. Component Business Modeling (CBM) IBM ’ s Service - Oriented Architecture Services [new] Business Enablement Services for SOA Design Services for SOA Implementation Services for SOA Management Services for SOA • Assessment for SOA • Strategy & Planning for SOA • Service-Oriented Modeling & Architecture (SOMA) • COE & Governance • Web Services Assessment • Architecture & Planning for Web Services • Service-Oriented Modeling & Architecture (SOMA) • Service- Oriented Development • Service-Oriented Integration • Service Monitor • Service Security • Service Performance • Business Requirements Verification Application Value Optimization Services [new] Integrated Technology Services Infrastructure Service Readiness Engagements Infrastructure Services Architecture & Design SOA Transformation Roadmap “IBM should be congratulated for providing a comprehensive set of SOA Service offerings that recognises the full Service lifecycle from business planning to IT operations. With much of the technology and infrastructure required for SOA available, it really is necessary for vendors to now guide customers how they will actually extract business value from delivering an SOA.” -CBDI Forum, April 6, 2005

22. LoB Solution for MCI leads to broader adoption • ROI is nearly immediate: with line cost and circuit ID program, MCI could recover nearly $500 million in the first year • ROI cuts across most all business units: order management, partnering management; order provisioning and account management; all share many common services; business process are standardized through execution • Provides for future change: M&A activity rapidly, new process requirements

23. Tops down, the Enterprise Approach Step 1: Break down your business into components • Decide what is strategically important, and what is just operations in the value chain domains • Analyze the different KPIs attached to these components • Prioritize and scope your transformation projects Business Components (CBM) Step 2: Define a Service Model • Identify your services based on your business components • Specify the services and components accordingly • Make SOA realization decisions based on architecturaldecisions Service Modeling (SOMA) Step 3: Implement a Service Model • Develop a service-oriented architecture to support the Componentized Business • Implement service based scoping policy for projects • Implement appropriate governance mechanism SOA Realization Business-Aligned IT Architecture

24. << Input from: Business Componentization/Analysis >> Identification of candidate Services, Components, Flows Specification of Services, Components, Flows Realization Decisions << Output to: SOA Implementation >> IBM Service-Oriented Modeling & Architecture™ [SOMA] Method "With SOMA,IBM has nailed this one. We're quite impressed with the clarity and detail of SOMA... Customers should find IBM's SOA leadership to be relatively straightforward and understandable.“ -Jason Bloomberg Zapthink • Identifies candidate services and enterprise components. • Selects and specifies the services that will be exposed and what enterprise components are needed • Captures services realization decisions

25. service modeling At the heart of SOA is the Service Model that defines services and components that realize them Service Consumer Presentation Layer 5 Integration Architecture (Enterprise Service Bus) QoS, Security, Management & Monitoring (Infrastructure Service) Data Architecture & Business Intelligence 6 7 8 4 Business Process Process Choreography Services 3 Atomic and Composite Services Service Provider Components 2 Enterprise Components Existing Application Resources and Assets 1 Package Custom Application Industry Models Custom Application Package Composite service Atomic service

26. REVENUE • Create new routes to market, new value from existing systems FLEXIBILITY • Develop flexible business models enabled by increased granularity of processes (“services”) SPEED • Combine and reuse pre-built service components for rapid application development and deployment in response to market change • Integrate historically separate systems, facilitate mergers and acquisitions of enterprises • Reduce cycle times and costs for external business partners by moving from manual to automated transactions EFFICIENCY SERVICE • Offer new services to customers without having to worry about the underlying IT infrastructure COST • Eliminate duplicate systems, build once and leverage RISK • Improve visibility into business operations Value drivers of a service-oriented architecture

27. Visa achieves significant operating savings and becomes more open • Quick, integrated access to transactions and information from multiple disparate systems to automate the resolution of disputes • Reduced the number of issues that come to dispute because of new inquiry capabilities and resolution time has been cut by one-third • Saved issuers $52 million in operating costs, while member bank savings from the reduction in volume exceeded $300 million last year • To date, 10% of internal applications have Web services components • Represents an extension of Visa's open systems goal of ensuring that code can be componentized, encapsulated, compartmentalized, replaced and reused easily "If you take all the transactions across all the stock markets and exchanges in the world, and you aggregated them over a 24-hour period, we do that volume over a coffee break." Sara Garrison, SVP of Network and Open Systems Development Source: Network World, April 2005

28. In Summary … What you have What you want

29. The end game • The capability to respond more rapidly to shifts in market conditions • Alignment of IT assets with business objectives that can tie IT costs to real business outcomes • A self-funding investment with the potential to consistently increase in value over time • A trusted partner with virtually unparalleled industry experience

30. Break new ground Thank you for your time.