COM J. Thompson, B. Lheureux

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1 J. Thompson, B. Lheureux Research Note 27 September 2002 Commentary Use ZLE and STP Strategies to Build a Real-Time Enterprise The zero-latency enterprise and straight-through processing and the related benefit they provide by enabling business activity monitoring are important when enterprises implement a real-time enterprise. An important attribute of the "real-time enterprise" (RTE) is business process improvement to gain competitive advantage by reducing lead times and improving efficiency and responsiveness to customer demands. Application integration projects help enable the RTE because they automate business process activity links and the movement of data between application systems. Two key principles that guide application integration projects and improve business process efficiency are the zero-latency enterprise (ZLE) and straight-through processing (STP). These concepts have previously been associated with the "enterprise nervous system" (ENS; see "The Enterprise Nervous System Arrives") but have even more relevance as the ENS is increasingly often extended to the grid (see "The RTE: Service-Oriented Architecture in Action"). The ZLE The ZLE views the modern enterprise as a complex system. The various divisions, departments, applications and even external business partners are treated as cooperating "subsystems," regardless of where they are located. The ZLE takes the concept of a "system" and the goal of timeliness to their respective logical extremes. The goal for the ZLE is instantaneous awareness and appropriate responses to events across the entire enterprise. As soon as new information is captured by any application, that event is made available to all other interested parties, whether they be people, applications or external entities. Is "zero latency" always required? Actually, "right time" is a more appropriate goal than "real time." For example, in supply chains, the ZLE makes the goods pipeline more visible, answering questions such as: "Where are the goods?" and "When will they arrive?" The right time to propagate supply chain event information is when it is known that it will have an impact on the business process. This means, for example, that manufacturing should know in real time when raw materials will arrive late for instance, because a truck broke down. The ZLE helps address these issues by making information about events that affect orders and shipments available, as they occur, to those who need it along the supply chain. In practice, the consumer of information determines how immediate it must be batch processing or extra capacity along the supply chain, for example, can temper zero-latency requirements. Gartner Entire contents 2002 Gartner, Inc. All rights reserved. Reproduction of this publication in any form without prior written permission is forbidden. The information contained herein has been obtained from sources believed to be reliable. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of such information. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof. The reader assumes sole responsibility for the selection of these materials to achieve its intended results. The opinions expressed herein are subject to change without notice.

2 ZLE can affect the competitive balance within an industry. Leading European low-cost airlines, such as easyjet, have maintained an edge over their rivals by using sophisticated demand-based dynamic pricing systems to adjust ticket prices in real time and maximize yields, as well as selling in real time over the Web. In the United States, Dell Computer also uses real-time dynamic pricing, and other computer companies too are making savings by introducing real-time customer services. Action Item: Enterprises should consider applying ZLE principles when: 1) conditions change quickly; 2) fresh information is more valuable than stale information; 3) the business problem involves the participation of multiple interdependent business units and multiple application systems; and 4) a realtime response is required by external partners. STP STP takes a different point of view, focusing not on timeliness, per se (although that is often a benefit), but on the quality and nature of data "handoffs" between applications. STP defines business processes in such a way that transactional data is entered only once. Its goal is to eliminate inefficiencies in business processes, such as manual re-keying of data (for example, re-keying a purchase order into a credit verification system) or unnecessary batching of data (such as batching of transactions for periodic processing). More than 80 percent of business-to-business (B2B) and business-to-consumer purchasing is integrated with enterprise applications only through batch file transfer or is not integrated at all for example, orders that are received electronically are printed out and re-keyed into applications that are downstream in the order management process. By eliminating input errors via electronic handoffs, you eliminate many mistakes (error rates are typically 7 percent in a commercial application), which is important, because the cost of catching and correcting mistakes in a business process is quite high (angry customers, cost of returns and so on). STP processes are also easier to monitor and manage because key information is not "hidden" within stacks of paper or in large batch files. STP is popular in finance, telecommunications, utilities and other industries, where it is referred to as "flow-through provisioning," "paperless acquisition," and "lights-out" or "hands-free" processing. Transactional data is entered only once, and it proceeds in an automated fashion through the rest of the process life cycle, potentially involving dozens of process activities in various locations. When the rekeying of data is eliminated, input errors are reduced, service delivery is improved, and the time to complete the business process is usually shortened. Enterprises may still use batch transfers, although these will gradually be changed to transaction-at-a-time messaging and processing during the next several years. For better management and customer service, STP is increasingly implemented with the help of a workflow system to manage the progress of each process instance, especially those containing human-based activities. Action Item: Enterprises should look for opportunities to improve the speed and quality of selected business processes via STP by 1) automating handoffs, 2) switching processes from batch file transfer to discrete and near-real-time messages, and 3) implementing business process management (BPM) software to better manage manual activities. Software Used to Implement ZLE and STP Principles Early ZLE and STP implementations in financial services, airlines and other industries were implemented with primitive tools and heroic efforts such as via a combination of traditional third-generation languages and basic middleware (for example, message-oriented middleware, such as IBM's MQSeries). Advances in integration middleware, particularly in the comprehensive integration broker suites (examples are from vendors such as IBM, Mercator Software, SeeBeyond Technology, Tibco Software, 27 September

3 Vitria Technology and webmethods), have resulted in the widespread availability of critical technology components of the ENS. These products support a wide range of functionality, including: Communications/Message Bus The mechanism that is used to deliver data and messages between systems. Simple connections, such as direct IP connections, can solve many integration tasks; however, a more general-purpose communications infrastructure, such as message-oriented middleware, is more scalable and reliable. Adapters Software components (modules) that support interoperability with technical protocols (for example, via FTP or SMTP), packaged applications (such as SAP's or PeopleSoft's) or industry protocols (for example, RosettaNet or Society for Worldwide Interbank Financial Telecommunication SWIFT). Data Transformation Functionality to translate between different (often proprietary) data formats. Transformation also manages changes in semantics (for example, "PO approved" may have different meanings or granularity in different systems, and thus additional processing may be required to map a purchase order between systems). Intelligent Routing/Business Rules The ability to express the microflow that defines how messages and data are to be routed through the integration infrastructure and its associated business rules, typically a third- or fourth-generation programming language with built-in business functions. BPM A way of defining (usually graphically) and then managing (that is, controlling the execution of) a business process from start to finish including the handoff from one step to the next and keeping track of the process of execution. Business Activity Monitoring (BAM) Providing real-time access to critical business performance indicators. BAM is designed to improve the speed and effectiveness of business operations. In addition to integration broker suites, "composite applications" can also be used to apply ZLE and STP principles to integration projects. A composite application is one that appears to the user to be a single application but whose architectural components contain functionality belonging to other, stand-alone applications. Composite applications are deployed using application servers (such as those from BEA Systems, Microsoft and IBM), adapters to access functionality in back-end systems (such as IBM CICS or SAP) or industry protocols (for example, ebxml or RosettaNet), and custom integration ("composing") logic (see "2002: Composite Applications Come of Age"). Although integration broker suites and composite applications can be used for internal and B2B integration scenarios, when doing integration with trading partners there are some issues for interoperability and managing your trading-partner relationships that are particularly acute, including trading-partner provisioning, standards such as electronic data interchange (EDI) and RosettaNet and security (see "Enterprise-to-Enterprise Architecture for Virtual Enterprises"). The RTE: ZLE, STP and BAM ZLE and STP strategies increase the acceleration and propagation of business events. These events (for example, an account deposit or a purchase order approval) trigger state changes within business processes. BAM is an emerging capability whereby specialized software taps into the flow of events collecting, processing and filtering the events, then delivering and displaying key performance indicators (see "Business Activity Monitoring: Calm Before the Storm"). The link between the RTE and BAM is discussed at greater length in a separate article ("Managers Need Real-Time Initiatives for Strategic Decisions"). 27 September

4 In contrast to business intelligence tools which typically analyze a history of transactional data BAM focuses on operational data monitoring events and reporting on the health of affected business processes in real time. Whereas ZLE and STP improve the efficiency of underlying business processes, BAM improves an enterprise's ability to track and manage those processes. BAM relies heavily on ZLE and STP, because its collectors cannot monitor manual processes, nor can its processing algorithms provide real-time performance monitoring if fed obsolete data. Although BAM is still in its infancy, precursors to BAM have been used for decades, such as in logistics tracing and tracking, manufacturing process control, and call center management (see "How BAM Can Turn a Business Into a Real-Time Enterprise"). Action Item: Build a BAM awareness team now an investigative team that is supported by senior management and business heads. Then, identify several key activities that affect the enterprise's revenue and profit and explore the possibility that BAM can improve any of the business processes. Implement and learn. Backing Into the RTE An Example As large organizations struggle to gain efficiencies within their supply chains and to improve their relationships with their customers, they often start by mandating that all business transactions be conducted electronically. One vertical industry where supply chain improvement activities are acute is high-technology manufacturing. "RosettaNet: A C-Commerce Language Rosetta Stone" presents a case study conveying the experience of a large high-tech manufacturer in implementing RosettaNet Partner Interface Processes (PIPs) application-level protocols for exchanging business documents between trading partners. Initially, this organization implemented PIPs to improve the flow of data through its manufacturing, distribution and customer service functions, a combination of automation (STP) and acceleration (ZLE) improvements. On implementing PIPs, the organization discovered that the events generated by the PIP transactions offered a starting point for improving its internal business processes. The realization that new, real-time processes and their associated events would help it improve customer relationships and supply chain management has motivated it to optimize these processes to take advantage of the B2B information flow initiated by the PIPs. By optimizing high-value customer relationship and supply chain management processes that connect to trading partners using PIPs, this organization is evolving, one process at a time, into an RTE. Recommendations The ZLE and STP help expose opportunities for integration projects to automate, accelerate and better manage business processes, and thus to begin implementing the RTE. Implementing the RTE affects the way an enterprise conducts business and requires investment not only in the IS organization, but also in the business units and their products, policies and procedures. Therefore, enterprises should only employ ZLE or STP strategies when doing so will lead to business process improvements that achieve real business benefits. Such strategies can only be initiated and supported by business decision makers who 1) are aware that immediate, far-flung information exchange is technically possible, and 2) can identify where this can help the enterprise. Enlist the support of a business decision maker who understands the link between integration, the ZLE and STP, and business process improvement. Proceed one business process at a time (see "BAM Can Benefit SCM, but Is Your Supply Chain Ready?" and "Call Centers Provide a Natural Entry Point for BAM"). 27 September

5 Bottom Line: A key objective of the RTE is the real-time monitoring of and reaction to changes and events associated with critical business processes that is, BAM. Enterprises can methodically build such an RTE via their integration projects, using the principles of the ZLE and STP to drive business process improvements as well as to generate real-time events to feed BAM. 27 September