Chargebacks or Skunkworks: Who's Going to Pay for This SOA?

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November 29, 2006

Chargebacks or Skunkworks: Who's Going to Pay for This SOA?

Who pays for SOA, at least initially? Should IT pay? Should the business unit that originally commissioned the service bear the initial development costs? What motivation is there for a business unit that spent $500,000 to build a set of services to share it freely across the rest of the enterprise? How do you prod managers that already have budgets for new development to start reusing someone else's services -- and thus put them in a position of having unspent finds? (Human nature -- no one likes to have future budgets slashed.)

I have put these questions to industry experts, and have received many different answers. Some say SOA is a special case that needs to be nutured off to the side, at least initially. Others say SOA should be funded and supported in the same manner as any other IT project.

Forrester analyst Ken Vollmer advocates introducing SOA to the organization through an unofficial "skunkworks" effort, with some seed funding from the CIO's office. As the skunkworks achieves some successes and cost savings with reusable services, word will get out across the enterprise.

Belinda Hayes, vice president with Systinet-Mercury-HP, says she has seen SOA funding models work best when they are structured along the same lines as existing IT projects. For, example, if a company has a standard IT chargeback mechanism, this should be applied to SOA-based services as well.

Dan Foody, vice president with Progress Software, says not to worry too much about the funding issue. He is inclined to believe that funding issues will diminish as the SOA grows and its value becomes apparent. "Yes, your first projects will be more expensive as people get up that learning curve. But there's nothing fundamental about SOA that makes it more expensive."

A new survey commissioned by BEA Systems sheds some light on SOA funding, at least among large enterprises. The survey of 150 corporations found that close to six out of ten SOA projects were funded by the business unit itself. Only in 19% of the cases did the funding come out of IT's hide. (A copy of the survey is available from BEA here.)

Even more intriguing is the fact that 22% of these corporations reported having dedicated SOA budgets to fund their projects.

Not that there isn't plent of money being poured into SOA. The survey found that almost half of the organizations had spent $1 million or more already on their current SOA projects -- even though most only have two to three projects underway. In addition, at least 40% expect to spend another million on SOA over the next 12 months. In most cases, SOA represents less than 20% of the IT budgets of these organizations.

Where is all the money going? A majority of SOA funding, 54%, is going to training and skills acquisition. Another 40% of SOA spending is spent on infrastructure, mainly enterprise service buses, security, and data services.

If these large organizations set an example -- as they typically do -- then there seems to be recognition coming from on high that SOA is critical to business success going forward, and that there are ways to tie funding to the business units that stand to gain the most, at least initially. Of course, these organizations always have the budgets to throw a few mill at new projects. But small to medium-size businesses also need to seek ways to tie SOA funding to line of business benefits.

Posted by joemckendrick in SOA | Digg This | Add to del.icio.us