Enterprise application integration

Information Management Journal, Mar/Apr 2002 by Gable, Julie

TechTrends

EAI is the soluble glue needed for modular relationships that allow organizations to be flexible and responsive to market demands.

In the December 2000 issue of InfoPro, Bob Tillman, director of public relations and government advocacy for ARMA International, wrote of a visible future where new business models include modular corporations, outsourcing, and network relationships: "Modular relationships provide firms with greater flexibility, a more rapid response to market changes, a greater competitiveness in the short run, and less risky innovations. It is a future in which systems built to change are more valuable than systems built to last."

Enterprise application integration (EAI) is a kind of technological Velcro, enabling computer systems to accommodate such change. EAI allows diverse systems to connect with one another quickly to share data, communications, and processes, alleviating the information silos that plague many businesses. The benefits of assimilating new systems without prolonged programming efforts are apparent following merger and acquisition activity. EAI solutions provide a way to connect the systems of collaborators, partners, and others for as long as necessary, decoupling when the relationship ends. EAI is, in essence, the soluble glue for the modular corporation.

In its April 2001 report for AIIM International, "Enterprise Applications: Adoption of E-Business and Document Technologies, 2000-2001: Worldwide Industry Study," Gartner defines EAI as 11 the unrestricted sharing of data and business processes among any connected applications and data sources in the enterprise." Gregg Wright, senior vice president for e-solutions services at McLean, Virginia-based Information Management Consultants Inc., defines EAI as "a strategy for making business processes more valuable... in its simplest form [it] involves passing data between application systems, and at its most complex, [it] involves rationalizing overlapping business processes, disparate data structures and diverse technologies." Market forecasts for EAI predict it will be in the $11 billion to $12.5 billion range by 2005 with 22 percent annual growth, according to Meridien Research.

Industry-Specific Implementations

EAI is considered strategic because its potential contribution is measured in terms of attaining or exceeding key performance and competitive benchmarks for entire industries, as noted in the following examples.

Banking. The basis of competition in banking and financial services is customer retention. Customers with multiple accounts are less likely to change, but most financial institutions have stovepipe systems for credit cards, checking, savings, mortgage, brokerage, and other services. An EAI implementation would integrate the systems so that a data warehouse can aggregate account data, provide a single view to the customer, and recommend what additional products the customer should be offered. In EAI systems instituted at Bank of America and Royal Bank of Canada, a transaction in one account triggers an event in another process for a marketing contact.

Manufacturing. Manufacturing's key competitive measure is cost reduction through inventory control and justin-time processes. Allowing outside suppliers to view inventory data is possible with enterprise resource planning (ERP) applications (see sidebar), but EAI provides a way for the manufacturer's systems to communicate with external systems to track sales, forecast demand, and maintain a detailed view of pricing and availability among many suppliers. General Motors' Covisint is a custom vehicle order management system that interfaces with inventory, planning, and logistics applications in the supply chain.

Life Sciences. In the life sciences industries, being first to market is critical since patents on new compounds expire within 17 years from the time the first documents are submitted to the Food and Drug Administration. EAI applications in pharmaceuticals, biotechnology companies, and research institutions integrate data from diverse laboratory systems with clinical data and other core systems so that it can be available to analytical applications. Several such projects are quietly underway within U.S. companies working on human and animal genome projects.

Reaping the Benefits

Christy Bass of Accenture, writing in the April 2001 issue of eAI Journa4 estimates that integrating enterprise application software with customer relationship management (CRM) functions can deliver as much as $17 million in profit to the average $1 billion business unit. Major savings include lower costs per transaction, decreased error correction costs, and order-processing speed. Whether such estimates are realistic or not, return on investment is crucial to project funding. EAI is a long-term investment, one in which software costs alone range from $400,000 to $700,000, with large implementations costing $1 million or more.

The strategic advantage of EAI is not just the exchange of data but how it is achieved as well. Prior efforts to integrate computer systems involved writing code that allowed one computer to speak to another, as shown in the integration approaches listed on page 52. Each source application (the one sending data) needed a custom written connection to the target (the computer receiving the data). Custom connections are expensive because they take time to write and maintain. Whenever there is any change to either system (e.g., an upgrade), new connections have to be written.