The Economics of SOA

John McDowall, CTO of Grand Central Communications, is writing about the economics of service oriented architectures:

Service Oriented Architecture (SOA) is changing how enterprise software is being designed and deployed. Part of the success of SOA is in the technology and is due to the convergence of web services standards creating a common interoperable set of technologies to build SOAs on. The other part of the success of SOA arises from its superior economic model for enterprises. SOA is evolving to the point where new applications will not be deployed as monolithic instances but will become a collection of services woven together in a loosely coupled framework.
From Fast Takes
Referenced Tue Dec 30 2003 13:29:32 GMT-0700

The heart of John's argument, I think is a very telling phrase in the center of his document: "a significant part of the cost of enterprise software provides no significant business value to the enterprise." That's true of many products. We all pay for things when we only need part of their functionality. We do this because the convenience of having things pre-integrated is worth the cost of the parts we don't need. The promise of SOAs is that the integration cost will go down and consequently we'll be more likely to demand unbundled functionality that we can put back together in a custom implementation.

There are nay-sayers out there who don't believe this is possible. I think its a trend that already has significant legs outside of software. John's argument is essentially the argument for the modern corporate organization over the organizations that existed 20 years ago. We're much more likely to see corporations that outsource much of the manufacturing and provide the initial engineering, the final integration and the sales and marketing. Where GM used to do everything, they now manage a supply chain. John's making the argument that this same trend will extend to IT and that SOA is a significant enabling technology. I think he's right.