Transcript of BriefingsDirect Podcast on the Emergence of 'Integration-as-a-Service' for SOA

Edited transcript of BriefingsDirect[tm/sm] podcast with Dana Gardner, recorded June 20, 2007.

Listen to the podcast here. Podcast sponsor: Cape Clear Software.

Dana Gardner: Hi, this is Dana Gardner, principal analyst at Interarbor Solutions, and you're listening to a sponsored BriefingsDirect podcast. Today’s discussion is about an intriguing concept, that of hosted Services Oriented Architecture (SOA), looking at integration as functionality and process that can be accessed on demand, moved off of your enterprise infrastructure, and onto someone else’s. This, I suppose, looks at services and compositing-as-a-service as well.

Here to explain these concepts and how they’re being used practically today -- and the implications for the future -- is Annrai O'Toole, CEO of Cape Clear Software. Welcome back to the show, Annrai.

Annrai O'Toole: Thanks, Dana.

Gardner: The notions of integration and hosting have been bounced around for a while. I recall a company named Grand Central that got quite a bit of funding and had a 1,001 different ways of mixing together services, components, and objects. Maybe it was a little ahead of its time. Why you think that the time is right for something like hosted integration?

O'Toole: You’re right. It is a somewhat back-to-the-future position, and clearly a lot of the ideas we’re talking about are things that Grand Central spoke about -- it must be six years ago. A couple of factors are driving this. First, it’s the whole technology maturity thing. Six or seven years ago, the standards around Web services were in their infancy, and people didn’t have a lot of experience with them. Because they were young, unproven, untested, and lacking in key bits of functionality, people didn’t really want to go there. Technology is one element of it, but there are a few more important elements driving it as well.

One is a secular trend toward simplicity and flexibility. At some levels, this has been driven by teams through virtualization. Storage and processing power are being very quickly virtualized. Applications are being virtualized, with software-as-a-service on demand. There is a long-term shift by customers, who are saying, “We don’t want to own complex infrastructure anymore. We’ve been there, and done that. We want something else.”

Gardner: So, you’re saying that enterprises have gotten a whiff of the notion that they can have complexity removed? They can have consolidation and cost reduction at the same time, and they kind of like that?

O'Toole: They do like that, and they’re willing to pay for it. They’re paying on a subscription basis, but we see many people not wanting to own, or get involved in, large initiatives, rolling out complexity. Before I got on this call, I did a quick refresh of some of the Websites. If you look at the SOA offerings from Oracle, IBM and BEA, they range from a minimum of 13 products to the top of the range, with IBM at 31 products. These are 31 simple products with easy to remember names like “IBM Tivoli Composite Application Manager for WebSphere.” People don’t want to own this stuff anymore.

I’ll give you another data point on the complexity that’s involved here. Recently, we looked at some RFPs. We had an RFP come in – and this isn’t all that unusual – from someone looking to do a big SOA initiative. It was – and I’m not joking -- a 111-page RFP.

Gardner: RFP is a request for proposal. That’s how companies go out and say, “We would like to start a bidding process around that acquisition of a large IT capability of some kind.”

O'Toole: Customers look at the choices available to them, and say, “Do we want to do all this big SOA integration on our own by buying these complex things, or are we prepared to look at alternatives? And, do those alternatives have any reality?” They do, and many companies are shying away from these big, complex initiatives.

Gardner: We’re certainly seeing that. Companies readily grok the notion that SOA is designed to make heterogeneity an asset rather than a liability. If that’s the case, then they certainly seem less interested in going to a single large stack, single portfolio, or even platform approach to that. So, that’s clearly in the market. On the other hand, they want this stuff to work, and they don’t want to be caught with their pants down in six months or a year, due to reliability or performance issues. Perhaps you could help take us to the notion of hosted integration from the perspective of “Does it work?”

O'Toole: This is a critical point. You can sit in a room with a bunch of executives, both from the business and IT segments and, say, “Hosted integration is a good idea,” and they’ll know that. We’ve got some proof points around it. Most notably, one of our marquee customers in the software-as-a-service base is Workday. The PeopleSoft founders got together to rebuild an ERP application, but this time on a hosted basis.

Gardner: Dave Duffield was the founder. Right?

O'Toole: Yes. Today they’re doing hosted integration, and, if you go to the Workday site, you can navigate into what they call the Web services networks. You can see the type of services that they are hosting on behalf of their customers. The whole idea is that they’re taking the integration burden off the customers, so that the customers can integrate their applications with Workday, without having to do any work on the customer end of the connection.

This is a huge portion of the unfolding software-as-a-service story. All application trends, be they 10 years ago when it was big ERP or now with software-as-a-service, have to address the integration problem, because none of these large applications live in isolation.

Workday has taken a novel approach to that around a hosted integration solution, and that works. They have large customers today. They’re handling integrations for their customers and hosting integration into things like ADP. Workday handles the integration between the customer’s data and ADP, which is actually doing the payroll and running checks, making sure that check runs get done at the end of the month and that people get paid. So, that’s a pretty important integration service to be hosting, because if it doesn’t work, and if it’s not reliable, then people don’t get paid.

Gardner: That tends to be top-of-mind for many people.

O'Toole: These aren’t trivial integrations. So, hosting is a big thing.

Gardner: If I could just pause you for a moment. As I understand it, Workday wanted to create some on-demand business applications, but in order for them to create a subscription business model around business applications, they had to conquer this integration issue in order for their application to be accepted. Is that correct?

O'Toole: That’s correct. If you think about it, the work they’re doing is all around handling human resources, the human resources (HR) application. That’s somewhat different from the type of application that SalesForce offers. SalesForce is a stand-alone box. You can use Salesforce.com to do customer relationship management, and it’s not essential that it integrate with other aspects of your business.

HR is very different. It must be integrated with your existing payroll systems, and must be integrated with third parties, such as people who manage benefits or people like ADP, which actually does payroll processing. So, it’s not possible to roll out an HR solution with Workday, unless you’ve got the integration problem solved.

Gardner: Sure, companies use an ecology of providers to help them support their employees in a variety of ways, whether it’s benefits, insurance, or future earnings and stock trading, and a whole bevy of different services.

O'Toole: Exactly. It’s a very complex ecosystem, and integration is one of the things that’s a sine qua non. They don’t have a business, unless they have the integration problem licked. So, it’s very different from CRM. And, as Salesforce.com expands its footprint, it too is running into this integration problem. They have now realized that they’ve got to offer better integration solutions for their customers as well, and they are working their way through those issues too.

As we wind the clock forward, we’re going to see more customers wanting to use on-demand style applications, and wanting integration to be solved in an on-demand way. They don’t want to build all these integrations again. You can also take this one step further. We’ve seen a lot of our enterprise customers, as they think about rolling out big SOA initiatives, are saying, “Maybe, we should really model ourselves as a mini software-as-a-service to our own internal organizations.”

Large enterprise IT departments are essentially rolling out hosted solutions and integrations. We’ve got many examples. We cite JP Morgan pretty frequently as a large enterprise customer that is hosting integrations centrally inside JP Morgan, so that it’s easy for different divisions and some external customers to access application functionality. The point we would make about our vision of how this hosted integration goes forward is that it’s not just for software-as-a-service companies like Workday or SalesForce. This is actually a model that’s good for internal IT as well.

Gardner: So, if we are an internal IT department moving towards SOA, and we access various services, assets and resources -- some internal, some external, some to partnerships -- we’re going to find ourselves in the role of doing integrations as a service anyway. That’s their point. If that’s going to be the case, then why not look for various other organizations that can follow that same beat of logic, and therefore you’ll have a federation approach toward integration as a service.

O'Toole: Another way to think about it is that if we are going to virtualize storage and processing power, we want to virtualize integration. It’s not something that is being rebuilt again and again and again by different companies or different departments within different companies. Let’s really start to move to a hosted model for us, and, as you say, these can be federated in a very coherent way. What’s new now is that the underlying technologies and standards can actually support that model. So, while this model might have been a pipe dream five or six years ago, today it’s reality, and the technologies and capabilities are there to do it.

Gardner: It seems to me that you are offering these enterprises the opportunity to get out of being in the middleware business, or to at least reduce the role that middleware plays for them as a provider and a host themselves. They can offload more of the function that middleware plays.

O'Toole: One of the things that we discovered in our interaction with Workday was that there is a neat concept that we can borrow from the software-as-a-service companies, and that’s a notion of multi-tenanting. You’ll hear us talk about more multi-tenanted integration, where I can take standard integrations -- such as to Workday, ADP, SAP, or SalesForce – and host those core integrations in a central spot. Once I’ve got that core integration built, I can make small changes to make it unique for all the different people who want it.

Everybody will have exactly the same data formats, but I take that core thing and then allow many slight variations that co-exist, and you get this notion of multi-tenanted integration. As I said, you’ll hear us talk about it more, and this is another piece of the puzzle that starts to make this a better, different way for companies to get out of the middleware business, or at least radically reduce and centralize all that’s happening in one virtual spot, and not scattered everywhere.

Gardner: Just to step back a moment. We’re not just talking about loosely coupled interoperability here, right? We’re talking about integration across a variety of different needs that organizations would have, depending on their unique legacy, applications, and platform environments. So, when we talk about integration and hosting, we are going to give them a quite a long check list. Is this is going to be the binary, object, and component level, or we are just talking loosely coupled XML and mashup types of activities, or all of the above? How do we make this into a list that could be managed from the provider perspective as well as from the customer’s perspective?

O'Toole: We’ve seen two fundamental preferences here, and there are two options for what you want to host. The first option we would broadly categorize as very loosely coupled data transformation. A lot of the things that people need to solve in terms of integration problems are really data transformation. How do I take payroll information from one provider, transform it, and send it down to another provider? Most people can deal with that. Most people can wrap their head around how that can be done in a hosted manner. What’s involved there is that it’s loosely coupled and it’s data. It’s ultimately some kind of XML or it gets converted into XML somewhere along the line.

The next thing is a step up from that. Now that I can get information between these things, do I want to have some orchestrations or some kind of inter-company business processes? It’s not just getting data from A to B, but it’s, “I want to get data from A to B, and then I want to call C, and when C has completed its job, then I want to call D, and when that’s complete, the whole thing is done.”

That’s next level of complexity, and it involves a more sophisticated approach. But, both of them are possible and both are in operation today. As far as what customers are going to go for, I think they’ll be happy to do data transformation initially, and when that’s really working for them, they might be prepared to take the next step and host business processes in the cloud.

Gardner: I suppose another trend in the field these days, Annrai, is that the very notion of an application is up for grabs. We used to have applications as packaged applications of functionality, and they had logic, data, and presentation, but we are moving away from that.

It’s coming down more to who understands vertical business issues and can assemble components and assets and services to create advantage, efficiency, and productivity benefit by combining human knowledge, understanding, and relationships. That’s different than just plopping down an application and then rallying everyone around it to work within its requirements and definitions of productivity. It seems to me that what you are doing, even if it’s on the loosely coupled basis alone, is allowing for that redefinition of business applications and processes to accelerate as a catalyst to that. Do you agree?

O'Toole: Absolutely. We’re already well past the definition of applications as monolithic, stand-alone entities, and we are already into a more federated, loosely coupled environment. Look at the things that SalesForce is trying to do, for example, with AppExchange, and their desire to host more and different applications, but all in the same SalesForce portal.

You’re going to see that model applied in a very generic way across a whole range of different applications, and it’s really going to break down the barriers between applications. In some sense, it’s taking mashups to the next logical conclusion. That process has already started. We’ve already seen the first inklings that it’s coming to every large enterprise on the planet over the next several years. The alternatives to it just don’t make economic sense anymore.

Gardner: It could happen to these enterprises, whether they want it to or not. The line-of-business people and those who are aggressive about seeking out productivity on their own are going to do that.

O'Toole: A good analogy is what really drove client-server or the Internet as big computing waves. The line-of-business people could sit at a desktop and see something in action. You had color, and it wasn’t a green-screen mainframe application, and you could get them tailored really quickly. Business people got that very readily.

Gardner: They really increased the universe of participants in computing.

O'Toole: Correct. With the Internet, you could show people a browser and they got it really quickly. For the longest time, a lot of concepts around SOA have been inexplicable. You can’t explain them to a business person. You think you might get there, but then you start talking about governance and you are just down the weeds. You can’t sit them at a laptop and show them SOA, but you can sit down and show them mashups. You can show them hosted applications. I believe that you can even show them hosted integrations.

We can show our customers ADP runs, on which they’d have to do nothing in terms of getting them to work. You can show those to business people, and they get it. That’s what’s changing the definition of what an application is, because business people can actually see these mashups and all the stuff running for themselves, and they say, “This is really interesting. Now, I know what this stuff is all about.”

Gardner: You’ve mentioned SalesForce several times, and you’ve mentioned Workday. Is there going to be an opportunity for other types of organizations? I’m thinking about Amazon, Google, and Microsoft recognizing that there’s an opportunity for them to come in and provide more subscription-based services, these loosely coupled integration points and mashup points.

Is that how you see this evolving, that there will be a handful of large generic players? Or, will this be something that needs to be done on a more specific basis closer to the individual organizations, closer to individual departments, or perhaps both. Will we have a grassroots ecology of small providers as well as some large mega providers?

O'Toole: Yeah, that’s a very interesting question. I don’t have the answer, but there are a few trends that you can see. Undeniably, a lot of the bigger players are actively trying to muscle into this space already, Amazon, in particular, with their accessories stuff. They’re great. So, you’re going to see more of that. However, the other people who are going to make a huge contribution are the whole open-source community.

Over the next several years we’re going see a different set of development tools emerge around wikis. I was looking at some of this QEDWiki stuff from IBM and some from Oracle, and I think you are going to start to see a different way for people to build enterprise applications along enterprise mashup sever concepts. That hasn’t really begun yet.

There are leaves blowing in the wind, but there’s nothing concrete there just yet. If we conquer that one, then that’s going to put really flexible composite application construction into the hand of every size organization. That means we wouldn’t end up with this thing owned by just the big players, such as, “You are just going to get what Amazon wants to give you and nothing else.” It will create a new world for organizations of different shapes and sizes to have easy-to-use tools to build their own stuff.

Gardner: So, perhaps it will be a very fertile period, in which the number of people that can participate in development – who have a role in how to exploit information technology for their business purposes – expands. They don’t have to go through a keyhole, pushing requirements in and waiting for something come back through the door six months later. We will increase the number of people that can directly participate in shaping how IT helps them.

At the same time, we’re also compressing the time it takes for them to recognize some value from this. That is to say, if they can start doing mashups, if they can relate their knowledge of business issues and problems directly into a hosted environment or mashup interface of some kind, then we increase the number of people, but we compress the time before those people can enjoy the benefits of their labor.

That sounds like a very powerful combination that will -- perhaps even more than what we saw in client-server and Web browsing -- accelerate adoption and drive people to want to have a role in this. This goes especially for the younger people today who are used to driving their own destiny online.

O'Toole: As the Web 2.0 generation gets into the enterprise, they’re going to have a very different view of how things should be done. They want it done the way that they have experienced this medium as teenagers. They’ll say, “What do you mean you can’t do it the way I want to do it?” I certainly hope that that’s the way it turns out, because we are just about due for another major innovation in the app development life-cycle.

Gardner: For some of these interesting possibilities to occur, we also have to get back to the pragmatic notion that it needs to make business sense. For an organization like Workday, SalesForce, or Amazon, given the resources that they are going to need to pull this off, there’s going to be a lot of translation and semantic traffic, as you get close to the orchestration that you described. A series of events has to happen in a certain of pattern and be published and subscribed.

A complexity comes up about different requirements being fired off before the other set can be attempted. They’re going to have to have quite a bit of infrastructure and resources. Is there a business model that makes sense for them be able to fund their needs, provide the reliability and speed that people are accustomed to, and still make a profit? How does this work in dollars and cents terms?

O'Toole: There are two aspects to this. As we practice this multi-tenanted integration, what that’s going to enable us to do is dramatically driving down the cost of integration. If I am a customer in a large enterprise, on Amazon, or whatever, and I go and build an integration, I’ve got to build it uniquely for every single app and version of the app that it touches. So, I’ve got to kit out this huge infrastructure and code this unique piece of integration. That’s really expensive.

If we can move away from that to a different infrastructure, even though it’s still a pretty complex infrastructure, what it supports is the notion of building the integration once, and then making minor modifications to customize it for lots of different users. That can amortize that infrastructure cost over many different customers. If I can move to that model, that changes the economics for the provider. It enables them to offer more flexible pricing models to their customers.

The obvious ones are in the subscription-based models for the integrations that they host for you. That’s how I see the economics of it working. I really believe that because of the innovations that have been taking place in both the standards and in the underlying infrastructure for SOA around the ESBs, this multi-tenanted integration is here and is going to be a big driver in the current equation.

Gardner: So, at a basic level, we’re talking the 80-20 rule again, where 80 percent of the functionality is recurring and common. Its reuse can be paid for over a period of time, and then the 20 percent is dealt with case by case, and that can be managed as a cost, because of the efficiencies of the other 80 percent.

O'Toole: Correct.

Gardner: What is it about the technologies today that’s going to make that possible? Obviously, infrastructure, virtualization, and the storage prices have come down significantly. I suppose there’s another issue we haven’t talked about, and that’s the ability to get the highly specialized people to do these things. Each company, if they try to hire them individually to build this, might find, despite their great intentions and ability to invest, that they just can’t find the people.

Therefore, they might be forced to recognize that, given the scarcity of resources, there has to be a more cooperative approach. Let’s let those skilled people who are fundamentally ready to attempt these things do it, but more in a more centralized way. Then, we can all enjoy that common 80 percent benefit. Two questions. One, does it make sense, given the human resources issues, that we centralize? And is that another factor in the cost equation?

O'Toole: One business that’s there waiting to be created is a universal hosting business for integration, pretty much along the lines of what Grand Central had in mind.

Gardner: And what Google has done when it comes to search. No one can touch them, because of their expertise in that.

O'Toole: It’s absolutely possible for someone to own the data centers, and the expertise to offer this virtualized integration. Someone – in fact several people -- are going to try to own that over time. For a lot of small- to medium-sized businesses, that’s going to be hugely attractive. I can well imagine this small- to medium-sized business coming along and seeing a palette of available hosted integration – from SalesForce to all the different desktop CRM applications and SAP integration -- sitting out there, ready for them. If it doesn’t exactly support what they need, there’s a simple model, where they can send in the data format, state the business processes they need to support, and they’ll get a quote back saying, “This is what it’s going to cost you on a monthly basis.” I see that as a very viable option.

Gardner: Okay. If I’m an enterprise, and I’m intrigued by some of these notions and believe that this is the future, although I can’t readily predict at what pace and where things will happen, how do I get started? How should I rationalize this to my CFO? Is there a formula in terms of, “We can reduce our capital expenditures by blank percent, but we’re going to have to increase our subscription payments or recurring predictable expenditures by another?” How do we help companies understand how to get started, and then how to explain why this would make sense financially? Are they going to be paying by transaction, by user, by application, by service? It’s pretty hard to put a meter on this. Where do you attach the meter on how to build for these things?

O'Toole: They’re all good questions, so let me break them off one by one. For a lot of our enterprise customers, what we say to get them started is that as they think about their SOA initiatives and building internal SOA applications, they should be planning, building, and hosting the integration to those services at the same time. What we say to them is, “Okay, this great hosted integration vision doesn’t quite exist today, but you can create a mini version of it for yourself inside your own organization. So, when you build a service that you’re going to offer to either internal customers or to external ones, don’t only build up service, but find out who’s going to need to use that service, and build the integrations for them.

That gets them going down a path, where they’re at least containing all their own internal integrations in one spot. Maybe some time in the future, they’ll be able to hand that off to someone else, but that’s another day’s work. So we say to them, “That’s a good starting point.”

Alternatively, if they’re a smaller businesses, and they’re not interested in doing SOA things, we then encourage them to look at companies like SalesForce and Workday and see how they are approaching these integration problems.

Gardner: Go at it through the software-as-a-service applications approach.

O'Toole: Exactly. Go down that road. So, there are two starting paths, depending on whether you’re going to build stuff yourself or you don’t want to be in the development business at all.

In terms of cost justification and how you price for this, right now I don’t think you can charge on a per transaction basis. Our thinking is that you’re still going to charge for this just in terms of the overall volume that you need for CPU-based pricing, because we don’t think that pricing them on an individual transaction basis or an individual integration point basis make sense. People don’t really want to go there yet. We just say, “Okay, the services you’re going to need to create are going to need two or four CPUs, so that bounds your price and you can either pay on a subscription base or you can do it a one-off payment.”

Gardner: Does the per-employee model work in this respect?

O'Toole: No. Certainly, we haven’t seen them working well, because for most organizations, they start off doing something pretty simple that isn’t critical to the business. So, you can’t turn around and say, “You are JP Morgan. You’ve got 150,000 employees, so this simple thing is going to cost you ... blah.” This is still an evolving area, but I think the point that we’d make is: this is being done now, so whether you’re doing it on an internal basis or you’re someone like Workday and you are doing this on a pure hosted basis, this is the model.

People are already going with this model now, and they’re increasingly not going with the model of buying complex SOA suites and three years worth consulting. They’re adopting approaches that are much more on-demand and hosted from the get go. So, the future is now. This stuff is happening at the moment as we speak.

Gardner: It’s very exciting. As people process the notion of SOA and recognize the benefits, particularly the small- and medium-sized businesses, these light bulbs start to go off, and things fall into place.

I’m glad we’ve had a chance to explore this a little more deeply. It’s a very interesting adjunct to the SOA discussion, as well as that discussion around how applications, by definition, are changing. We might soon have some examples of how the cost benefits are real and compelling.

So, thank you, Annrai, for joining us in this discussion about hosted SOA, hosted integration and interoperability, and eventually getting to the notion of services compositing as a service.

This is Dana Gardner, principal analyst at Interarbor Solutions. We’ve been joined by Annrai O'Toole, CEO of Cape Clear Software. Any parting thoughts, Annrai?

O'Toole: No, I think I’ve said all that I needed to say on this one. So, as usual, it’s a pleasure, thanks for having me on the show.

Gardner: Sure. I think it’s a subject we should probably revisit every six months or so, because it’s bound to have some twists and turns in the journey, no doubt. Thanks for listening.

Listen to the podcast here. Podcast sponsor: Cape Clear Software.

Transcript of Dana Gardner’s BriefingsDirect podcast on the emergence of integration as a service for SOA. Copyright Interarbor Solutions, LLC, 2005-2007. All rights reserved.

BriefingsDirect SOA Insights Analysts on Software AG's Acquisition of webMethods, Web 2.0 and SOA, and SOA Hype Curves

Edited transcript of weekly BriefingsDirect[TM] SOA Insights Edition podcast, recorded April 6, 2007.

Listen to the podcast here. If you'd like to learn more about BriefingsDirect B2B informational podcasts, or to become a sponsor of this or other B2B podcasts, contact Interarbor Solutions at 603-528-2435.

Dana Gardner: Hello, and welcome to the latest BriefingsDirect SOA Insights Edition, Volume 16, a weekly discussion and dissection of Services Oriented Architecture (SOA)-related news and events with a panel of industry analysts and guests. I'm your host and moderator Dana Gardner, principal analyst at Interarbor Solutions, ZDNet blogger and Redmond Development News Magazine columnist.

Our panel this week, and it is the week of April 2, 2007, consists of Steve Garone, a former IDC group vice president, founder of the AlignIT Group, and an independent IT industry analyst. Welcome, Steve.

Steve Garone: Hi Dana. Great to be here.

Gardner: Also joining us is Joe McKendrick. He is a research consultant, columnist at Database Trends and a blogger at ZDNet and ebizQ. Welcome back, Joe.

Joe McKendrick: Good morning, Dana.

Gardner: Also joining us is Jim Kobielus. Jim is a principal analyst at Current Analysis. Welcome back Jim.

Jim Kobielus: Hey, Dana. Hey, everybody.

Gardner: And, Tony Baer, Tony is a principal at OnStrategies. Hey, Tony!

Tony Baer: Hey, Dana, how are you doing?

Gardner: Great, and joining us as a first-time guest is Todd Biske. Todd is enterprise architect with MomentumSI, an Austin, Texas-based consultancy. Welcome to the show, Todd.

Todd Biske: Thanks, Dana, thanks for letting me join.

Gardner: My pleasure. Because of the big news this week with mergers and acquisitions in the SOA space, we’re going to take that as our top topic. We’re going to look at the announced acquisition of webMethods by Germany’s Software AG. We’re also going to talk about the role of Web 2.0 and SOA and perhaps delve into the notion of using wikis for governance, control, and management of assets and process.

If we have time, we’re going to jump into a discussion about SOA hype. Is SOA over-hyped or under-hyped, and that might take an hour in itself just to get started.

The news this week came as a surprise to me, and I think to many. Germany’s Software AG, a company with database and tools assets, best known for legacy implementations, legacy support -- and perhaps moving more toward modernization and, therefore, SOA -- for about $550 million in cash has announced an agreement to purchase webMethods based in the U.S., in Virginia.

WebMethods itself has recently gone through a series of acquisitions, including, most recently, Infravio. Our regular listeners may recall that we had a vice president from webMethods, Miko Matsumura, on the show just recently. So, let’s go around the table a little bit and get the take. I suppose the big questions are: Is this a big deal or a little deal, and is it a good deal or a bad deal? Let’s start with you, Steve Garone?

Garone: Well, that’s interesting question you just asked. I think it’s a good deal. I'm sure it’s a good deal for webMethods from a financial standpoint and for the folks who are going to profit individually from the acquisition. It’s also a good deal from Software AG's standpoint, given its direction to move more strongly into SOA, which I don’t think -- based on what I’ve seen -- it’s been extremely successful at doing over the last three or four years.

Software AG, if we go back maybe three, four, or five years, went through a series of fairly significant announcements with integration products and database enhancements focused on XML, leading it more toward modernizing into the web services, and eventually SOA, world. My perception is that from a business standpoint it has not been extremely successful at that, particularly in the United States.

So, this move really amounts to an effort to get a lot of customers onboard, customers who are using the webMethods products and suites. As you mentioned, we’ve talked about it on this show before. The governance aspects that resulted from the Infravio acquisition are particularly important for Software AG in terms of acquiring a customer base in the United States.

Gardner: You mentioned the price paid. We should point out the 25 percent premium that is apparently going to be paid by Software AG for webMethods that would be over its publicly traded price before the announcement.

Tony Baer, you had an interesting point in your blog. You’ve mentioned that this price, of roughly $550 million is a third, or significantly less, than the $1.3 billion that webMethods had paid back in 1999 for Active. What’s your take on this? Was this something that was of economic expediency? It seems like it happened fairly quickly after the Infravio acquisition?

Baer: Well, I think that webMethods has been looking for an exit strategy for some time, because basically they're trying to build up their SOA platform story. The fact is that large corporate customers are going to be nervous with a $200 million company. They’re probably a lot more comfortable with a company that’s closer to one billion, if they're looking for a platform play.

In terms of the pricing discrepancies, that just reflects the absurd valuations we had during the dot-com period. That was a very interesting irony. I actually liked the point you raised in your blog, Dana, which is the challenge of integrating German companies with companies of some other regions, especially the U.S. German companies tend to be very deliberate. Take a look at Shai Agassi’s recent departure from SAP. He just didn’t want to wait another couple of years to become CEO or whatever the title is over there.

Gardner: "If" he was going to become CEO.

Baer: Very good point. German companies are very deliberate. I don’t think he had the patience for that. One thing I want to point out is more of a key performance indicator. Software AG had, up until now, a very heavily promoted alliance with Fujitsu. In the area of BPM, Fujitsu would resell Software AG’s service bus and Software AG would resell Fujitsu’s BPM. BPM also happens to be one of the highlights of the webMethods acquisition.

One of the challenges that will be before Software AG, and I think an indicator as to whether they are successfully getting the message out to their customers, is how they handle this transition with BPM. Obviously, having an internal product is going to be a lot more attractive than having to partner for it. In fact, Software AG’s CEO told me that in a quote. So, it will be interesting to see how they handle that.

Gardner: How about you, Jim Kobielus? Do you think that this is a sales and channel opportunity to reach the Asia-Pacific region through the Fujitsu alliance and take what was a complementary fit in terms of North America and European Union presence for these two companies? Is this a technology play for all of the above?

Kobielus: I am not really up on the Fujitsu alliance with Software AG. So, I won’t comment on that. It’s very much a geographic jigsaw puzzle coming together here. Clearly, Software AG is very big in Europe, and not so much in the U.S., in terms of integration in BPM.

It’s pretty clear that from a geographic standpoint it’s very complementary. Actually, it’s more complementary from a product standpoint than many have been there willing to give it credit for. Software AG, as you’ve indicated, Dana, is very strong on legacy modernization of the whole mainframe-based setup products for development, databases, and so forth.

WebMethods is very strong on integration, BPM, and the whole SOA stack registries. There is some redundancy with Software AG’s products, such as the whole Crossvision Suite, but I think that from a technological standpoint webMethods is stronger on BPM, the repository, and all of those SOA components than the company that’s acquiring it.

There definitely are a lot of synergies there. Also, webMethods is a bit more visionary than Software AG on the SOA front and has been for quite a while. In fact, webMethods almost coined the term "Web services" back in the late 1990s, and they had a pre-SOAP implementation or a protocol that presaged or foreshadowed SOAP and the whole WS suite that came along. I think webMethods is still a more dynamic company than Software AG in a variety of ways.

Gardner: Let me just pause you there for a second. So, you’re saying that webMethods is ahead of its time, and Software AG might be behind the times, and so together they are going to be on time?

Kobielus: That's right. Software AG is a little bit stodgy and maybe that has to do with its national background. The whole German-versus-American alliance thing is kind of interesting. So, it’s ironic that a big German and a smaller American company are hooking up right now and trying to make a real go of it on SOA.

Another big German and another American company are divorcing -- DaimlerChrysler, of course. They want to get rid of the German stockholders of DaimlerChrysler, who want to jettison the Chrysler side of it and send it packing its bags back to Detroit. They cited the cultural difference, the Germans did. It didn’t work out.

Gardner: Just as a quick aside, it seems that you can pick up Chrysler for $4.5 billion. That seems like a small change for such a big company. If I had a few more bucks, I might consider it.

Garone: Based on the last Chrysler car I owned, I don’t think it’s a cultural issue.

Gardner: You could sell the bricks in the factory and Chrysler would make that money back.

Kobielus: I was reading in one of the articles in the press that Software AG and webMethods cited a cultural match, and that's why it’s a good synergistic deal for those guys. We’ll wait and see.

Gardner: Just the fact that you bring it up means it’s probably somewhat different, right? Let’s go to Todd Biske. Todd, I really enjoy your blog. I think you have a view of SOA that’s much more pragmatic and practical than some of us tea-leaf readers. You tend to eschew the products and look more to the process and the issue of changing the way people behave. Does this merger and acquisition mean anything to you?

Biske: I always like to follow what's going on. The interesting thing that only time will tell is what you’ve got filling the technology gap. We’ve seen a lot of the recent mergers, even just webMethod acquiring and Infravio for the registry/repository and governance solutions, fill the gap.

Clearly, this isn’t a case of filling a technology gap. It's more about geographic issues. But the question from an end user point of view is, when you combine two medium-sized companies, will you get a new big player or will you just get another medium-sized company, maybe like DaimlerChrysler, and the message just gets kind of watered down for both?

I don’t know whether this acquisition will really make a lot of large enterprises see them in a different light or not, when they’re comparing them against the likes of IBM or Oracle. It certainly creates a potential to do so, and that increased customer base can go a long, long way. We’ll see where we windup with it.

Gardner: Your point is well taken. I see this as kind of a risky activity and I agree that this is one-plus-one-equals-two, or one-plus-one-equals-three. And hopefully now, one plus one plus equals 1.3 or 1.5.

In a sense, the whole SOA notion might be affected by this, because if these companies don’t succeed, and they can’t make a multiplier effect, they can’t show that the whole is greater than sum of the parts. You'd have to ask yourself why two companies that are focusing more and more of their products and processes and approaches on SOA couldn’t pull their companies together.

A failure could happen for a number of reasons. It could be culture, but gee ... SOA has to do with culture. Or it could be geography, and gee ... SOA is supposed to be appealing to multinational companies. And, it could be technology, but gosh ... I hope not, because the SOA technology is suppose to allow for mixing, matching, and elevating to a services level of assets, and data resources, and then to bring the people and process together around that.

Does anyone else share my view that this has a somewhat high level of risk, in that, if doesn’t succeed, it could besmirch SOA in general?

McKendrick: I don’t think it’s going to have a huge impact, at least initially, on either besmirching SOA or advancing SOA. It’s a great metaphor. Have you folks seen the movie, "The Pursuit of Happyness," with Will Smith? I’ve spoken with Software AG on a number of occasions over the past three years. When I look at them, I think of the young Chris Gardner out there trying to sell these bone density scanners to hospitals and doctors. He said in the movie that these scanners are slightly better than X-Rays, but cost three times as much.

That kind of reminds me of Software AG. Software AG has been working very hard over the years to try to sell their products. They had Adabas, EntireX, Tamino, and Bolero. They've been really working hard trying to push these products, which maybe are slightly better than other products in the market out there. I’m not sure if they’re priced three times as high, but they have to work hard, and they just haven't quite risen to that level.

Maybe buying webMethods will give them that final break -- the internship at Dean Witter that Chris Gardner had in the movie. This is their breakthrough into the market.

Also Software AG's focus has always been the legacy market. That's what they have been good at. They bought Sabratec a couple of years ago, which provided very good legacy integration tools for iSeries, AS400 mainframes and that’s always been their focus.

webMethods has played in this integration and legacy market as well. This is a huge, untapped frontier -- the legacy integration side of SOA. There are hundreds of thousands of legacy systems that have yet to be leveraged and exposed. In the long run, there is a lot of potential for Software AG to be well positioned.

Gardner: Well, there are a number of companies that are focusing on legacy. IBM is trying to cover its flank in terms of, "If anybody is going to put the mainframe out of business, it’s going to be us." So, there is certainly a lot of business, and perhaps even more so in Europe and in the type of customers that Software AG has.

I want to throw the question out again. Does anyone want to share my perception that this is a risky merger, given the geography, the culture, and the fact that the SOA is in a sense on trial?

Baer: One thing struck me about both companies, which I think also sort of ups the level of risk. Both companies have been going to their own form of legacy migration. Software AG is obvious, but webMethods is another clear case in point. WebMethods initially was a B2B company, and then it bought Active Software for $1.3 billion, and that was suppose to be webMethods’ future. Unfortunately, they bought an EAI company, just as the EAI market peaked. So, in that post-2000 era, or post-Y2K, where SOA started to emerge, they start to seem a bit of a legacy player.

Over the last five years, they’ve been essentially reinventing themselves from EAI to SOA. If there's any risk here, it’s that maybe webMethods is a company that's a lot more open to change, because it had no choice. It doesn't have the cash cushion of Software AG, but you’re talking about two companies that are trying to undergo transition. That ups the risk factor. On the other hand, it might also up the motivation, as long as Software AG’s cash cushion doesn’t make them both too complacent and, as you say, Dana, the cultural differences don’t get in the way. Those are some very big "ifs."

Garone: I tend to agree with Tony, although I think it has to be put into context of what webMethods has gone through and continues to go through. I don’t think it’s unusual amongst vendors in the EAI space. If you look at the collection of those vendors, webMethods has done a really good job, relatively speaking, and they have a ways to go as they all do.

The platform vendors have had that issue, too. IBM had to move each product toward a more SOA-centric model and has also done a very good job. The point is, I don’t think that’s particularly unusual. There is risk here, culturally and technologically, but I really don’t see this risk as being major enough to influence the adoption of SOA or the SOA space in general.

Gardner: Okay, fair enough.

Kobielus: I find it risky from Software AG’s standpoint. They’re acquiring another vendor whose own customers are not avidly acquiring their new product. What I mean by that is, back in 2002, webMethods had license revenues of about $120 million, and it’s dropped. Last year, it was $84 or $85 million in software license revenues. This doesn’t sound like a healthy software vendor, and, to some degree, it sounds like webMethods' own customers regard them as being a legacy vendor, away from which they’re trying to migrate. That’s just the surface impression I get.

Biske: I don’t think it’s going to impact adoption of SOA or cast that all in a negative light. Interestingly, looking at the other risk to webMethods and to Software AG, how would we’d be perceiving this, if it was in the reverse direction with webMethods acquiring Software AG or even if it was presented as a merger of equals, rather than an acquisition? The fact that you’ve got the German company acquiring the U.S. company, what does that mean for the existing U.S. customers of webMethods, and how are they going to perceive this, because there are some cultural issues that have made it difficult for Software AG to gain ground in the U.S. market.

Garone: That’s an interesting point. I really can’t address the issue of whether this is financially feasible or not, but my first reaction was, "Why isn't this in the other direction?" I perceive webMethods as being better positioned and in a better business position generally than Software AG is.

Gardner: Well, they have certainly shown their interest in expansion, but I don’t think their cash position would have allowed this.

Garone: Right, that’s probably true.

Gardner: So, the desire might have been there, but not the means, right? Now, what about the point about Infravio and the registry/repository? We heard quite a bit from Miko about governance and policy, running an IT organization, and perhaps even a larger take on the whole management of business in general. It was a very visionary discussion we had, and yet Software AG has its own repository.

I frankly don’t know enough about them to put them side by side and pick a winner, but it seems that if Infravio and governance was going to be the tail that wagged the webMethods’ dog, and that this acquisition may show you a little different future for the role of registry and repository. Any thoughts on that issue?

Baer: It depends on who is going to be driving the agenda there. An early indicator is that Software AG has said that they want to keep webMethods’ management in place. That’s kind of interesting, because usually a CEO of an acquired company exits fairly tactfully, if it’s a friendly takeover. We’ll approach the interesting inflection point about 8 to 12 months down the pike, when we see who's really driving the SOA strategy at the combined company. That’s basically going to be the telling point.

Gardner: Okay, thanks, Tony.

Garone: I think that’s correct. The real pessimists out there -- I’m not sure I’m one of them -- would look at this and say there’s no doubt that webMethods is going to drive the SOA strategy. Software AG, in terms of revenue, is highly reliant on Adabas maintenance at this point and it's going to continue that way until it figures out how to leverage what it got via the acquisition of webMethods in the SOA space. I’m not quite sure I’m there, but there are some elements to that that may ring true.

Gardner: Yeah, this smacks of a good sales and channel match-up, and they might run webMethods as a subsidiary for some time. Then there's also this balance-sheet issue, where Software AG has recurring revenue. It’s got an old cash cow to continue to milk, and that gives webMethods an opportunity to be funded and financed -- without the vagaries of a quarterly report to Wall Street -- to pursue the larger brass ring here, which is SOA.

Kobielus: Dana, I’ll make a one last point there. I agree with that with what you just said. Software AG is a cash cow in the same way, for example, SAP is living off the substantial legacy of a very well-entrenched set of products. My first reaction to the webMethods acquisition was how they finally put webMethods out of its misery. When I say misery, how long has it been? WebMethods is about 11 or 12 years old now, and it seems that for most of their history they have been in some financial trouble or shakiness. It’s just been one thing after another, and it’s like they don’t get a break.

Now, they seem to have a corporate parent that has a comfort pillow for them, some money to fund ongoing development, diversification, and so forth. Software AG pulled webMethods out of their misery and has given them a new lease on life.

Gardner: Thanks, Jim. Yeah, maybe then make them the R&D department in a sense, right? Okay, a final word on this issue to Joe McKendrick. Joe, this relates somewhat to our discussions from the past about best-of-breed versus integrated-stack-and-suite. Clearly, these companies think that bigger is better and more is better. Does this change your thinking on the best-of-breed versus integrated-suite issue at all?

McKendrick: Well, as we discussed in a previous podcast, the whole notion of an SOA suite runs counter to the SOA philosophy. SOA is especially about loosely coupling, and it doesn’t matter where the applications or the system resides. SOA should be independent of all that, and the idea of an SOA suite runs counter to that thinking. Nevertheless, we see lot of companies glomming onto each other, a lot of gelling taking place. This Software AG-webMethods merger is an example. Progress Software has been very astute in assembling a collection of companies that deal with different aspects of SOA. They want to compete with Oracles, and we saw that just recently with JBoss.

Gardner: SOA Software?

McKendrick: Yeah, right. SOA Software and JBoss. Their goal, their intention is to compete against these bigger guys, while servicing the smaller business market, of course.

Gardner: More of an ecology approach to how to bulk up.

McKendrick: Yeah, we’re going to see more of these alliances, more of these acquisitions and mergers.

On Web 2.0 and SOA ...

Gardner: Let’s move on to our second topic, which is this notion of Web 2.0 and SOA. Now, Web 2.0, of course, can be defined many ways in the market. Some people look at it as simply a rich Internet application interface approach. Others focus on the collaborative social networking aspects of it. Yet others look at Web 2.0 as simply going from an HTML and text page-driven Web to more of a process and semantic Web.

So, let’s just leave the Web 2.0 definition off the table and look at the issue of any of these new activities, whether it’s social networking or rich Internet application interfaces or whether it’s taking advantage of more semantics and BPEL as a process relating to Web activities instead of just as a publishing medium.

Let’s just say, "All of the above" for defining Web 2.0 and how this relates to SOA. I want to go first to Jim Kobielus, because in some emails this week you had some interesting thoughts. We’ve seen a few companies say, "Let’s leverage Web 2.0." We’ve seen Intel come out and say, "We’re going to corral a number of 'open-source' Web 2.0 functions." We’ve seen Cisco get involved with Web 2.0. We’ve seen BEA just announce an embrace of Web 2.0. Even IBM is tinkering with this, I’m sure.

So, there is something there, but let’s focus on this collaborative aspect and particularly in terms of governance. Annrai O’Toole at Cape Clear mentioned this to me probably about nine months ago that he looked at governance and at Web 2.0 and thought, "Gee, maybe wikis would be a good concept for how people manage their services." They could say, "I think the policy should be this, and I’m going to use it in this way, and you can pick and choose."

It's sort of an open source, open collaboration approach to policy and use of services and their agreements. I suppose provisioning rules would come about. You said, Jim, this is kind of a scary concept, that wikis seem to be anti-governance and that it could be a collaboration with no structure. Tell us a little bit about why you’re concerned?

Kobielus: Well, when I think of governance, like everybody I think of the capital "G," like Government, but governance has a broader concern. You often think about crack-the-whip, controls, and setting controls on how people interact and how policies are created? When I think about wikis, I think of the exact opposite. There are no controls. It’s basically a shared space to which everybody can post, everybody can overwrite, and everybody can erase everybody else’s comments.

Gardner: The wisdom of the crowd, right?

Kobielus: Well, okay, that’s a religious faith. Wiki seems like the wild, wild West. It’s a free-for-all as collaboration. That’s great. It’s definitely got a very valid role in many environments, like open-source initiatives where they are very peer oriented. Everybody is an equal, even-steven, participant. There is a high emphasis on collaboration, design, reciprocity, and all of that. So, when I think about the whole SOA governance space, both design-time governance and run-time governance, I think of wiki as in the design-time governance side, where you have teams of designers or business analysts and IT people sitting around the virtual table, trying to hash out policies.

Gardner: Requirements?

Kobielus: Requirements, policies, data designs, data hierarchies like with their master data management environment. Quite often these are creative processes involving teams of smart people who sit around a virtual table and hash out the overall design approach. Wikis and the whole Web 2.0 repertoire of collaborative tools can be very valuable in this upfront design, modeling, simulation, and shoot-the-breeze aspects that are critically necessary for design time. But runtime SOA governance really depends on clear-cut policies, designs, data definitions, and so forth that have been handed down by the policy gurus, and now are governing ongoing operations without ambiguity.

In that case, you don’t necessarily want any Joe Blow to be able to overwrite the policies and the business rules that are guiding the ongoing monitoring, management control, or security of your SOA.

Gardner: Yes. You said that they needed adult supervision, but I didn’t think that this would be open to anybody. I thought this would be open to the people who have impact, the architects and the line-of-business people perhaps. You're not going to open this up to anybody. There would be a directory and an provisioning, so that only those most close would have access.

Let’s go to the real world. Todd Biske, does it make sense to you? Should we be collaborating among the right people with the right access and privileges in how SOA governance is improved over time?

Biske: I don’t know that you really want a wiki-style collaboration for governance. I tend to agree with Jim that you can’t just open it up to the masses, and even if you look at collaborative environments, whether it’s the large open-source projects, or something like Wikipedia, there's some hierarchy that eventually was put in place, where certain people were allowed to do commits or were designated as senior editors.

So, you always wind up with some form of governance structure around that. The area where I think wikis are going to be important in the SOA space is in the service management lifecycle or service development lifecycle. You got companies that have to move to a service-provider model, whether it’s internally to internal consumers or externally. I have talked a lot about this in my blog.

If we compare that to traditional product management, for a long time it was really just one-way communication. The product marketers went out and said, "Here’s our product. Here are its features. Go and use it." They pushed it out to the market place, and the only response they got back was did people buy the product or not.

Over time, they recognized the need for much more collaboration with their end consumers on how to evolve that product, whether it was the formation of customer advisory boards or even leveraging the Internet and some of the technologies to establish a community around those products. The same thing can apply when adopting SOA.

If I am providing a service out to the rest of the enterprise, I am going to be interested in what the consumers of that have to say. If I am not listening to them, not establishing that bi-directional communication, eventually they are going to go somewhere else or they are going to build it on their own and put that redundancy back into the organization, which is the opposite of what we are trying to achieve.

Gardner: Okay. So social networking has a value here, but you wouldn’t want it necessarily hardwired into the way in which the technology actually operates?

Biske: Exactly.

Gardner: Okay, I can buy that. Does anyone else have any thoughts on this notion of wikis and collaboration as applied to SOA governance?

Garone: I don’t really have a lot to add. The two guys who just talked gave a great view of this particular question, and I agree with virtually all of it. After a while, it becomes something that a few key contributors, people who actually have the power, control, and knowledge, would be part of. I waxed philosophical in my head and asked, "Well, is it then still a wiki or is it in fact a collaborative tool among a set of decision-makers who, through policies themselves, are able to make changes or not?"

Gardner: I think you're right. The key word here is collaboration. I believe that IBM is going to be coming out soon with something called Jazz, which is a collaborative application lifecycle management approach. We are seeing more collaboration across different aspects of the whole development-to-deployment environment and we are looking for the tools to do that. Web 2.0 is perhaps stepping up and saying, "We have some tools that can be used in that way." Perhaps, it's not just a matter of dropping a wiki into the process, but something a bit more tailored to an aspect, but somehow availing all the participants of each others' wisdom in the process.

Kobielus: It’s like an open source project. You have a broad range of contributors, but only a handful of committers who can actually commit changes to the underlying code base. So, you might have a wiki that has potentially 3,000 different contributors, but ultimately there might be a moderator or two whose job it is to periodically weed out the nonsense, and crack the wiki whip to make sure that what’s actually been posted reflects the wisdom of the crowd of 3,000 people and not necessarily the vandalism of the few who decide to just disrupt the process.

Garone: And that’s a governance model in itself.

Gardner: Yeah, that’s right. It’s governance, and it relates back to what we’ve discussed in trying to find analogies in geo-politics for technology governance. You want the best of both. You want a federated approach, where they get grassroots input, but you also need command and control. So, it’s Jefferson and it’s Hamilton, right?

Kobielus: It’s Aaron Burr occasionally too. You’re going to follow the pistols.

Gardner: I heard an interesting analogy the other day. We talked about the chicken and the egg, and somebody said, "What about the rooster?"

Alright, let’s move on. Before we leave with Web 2.0, does anyone else have any inputs about the role of Web 2.0? As I said, it’s a very large subject, and then it evolves into Enterprise 2.0 issues, which have lot to do with software as a service and delivery of service. There is the mash-up notion of creating services and then compositing them, even if not with an application purpose or a process, which is letting people change their interfaces and drag and drop things.

We have seen some information from Google Maps this week that have lent more credence to this. I’ll just throw it out to the crowd, any other beauty tips or predictions for the future about where Web 2.0 and SOA come together or not?

Kobielus: Web 2.0 is really HOA, Human Oriented Architecture. It is pretty much giving human beings the tools to share what’s in their minds, to share their creativity with the big wide world. SOA, Service Oriented Architecture, is about sharing and reusing all matter of resources in a standardized way. HOA, the Web 2.0, is the most critical resource, and the most inexhaustible energy supply is human ingenuity and creativity.

Gardner: That’s like Cosmic 2.0. Woah!

Kobielus: Yeah, I have been known to get cosmic. People who have read my blog realize that I am a total space cadet.

Baer: Jim, I'll give you the award this morning for coining the best buzz words, like "Cracking the wiki whip" and "Human Oriented Architecture."

Gardner: Now, any other thoughts before we leave the Web 2.0 subject area?

McKendrick: This may be just a rumor, but I once heard that there was a company, an enterprise with several architectural teams, and these teams actually met face to face once a year to discuss things. That's just a rumor. I am not sure if it’s true.

Gardner: They had to leave their guns and knives at the door.

McKendrick: Exactly. So, Web 2.0 can only help the situation, help break down some of these walls.

On SOA and the Hype Curve ...

Gardner: Okay, let’s move on to our last subject of the day -- we only have a few more minutes -- but it’s the notion of hype. I just noticed, looking around some of the SOA information that was floating around the Web, we seem to be now in the, past-the-peak of the hype curve on SOA and are apparently, from what they say, approaching the "trough of disillusionment."

I took exception with that. I am not sure we’ve even hyped SOA sufficiently and that we are still ramping up on this one. Does anybody else agree with me that SOA is so large, so long-term, and crosses not into just technology but business in organizing behaviors and even redefining the corporation itself? My point is that we are not hyping SOA enough. Anybody agree or disagree?

Biske: I tend to agree with you that the communication isn’t hitting home and it’s not sinking in. I had a blog I know Joe picked up on at one point that talked about companies that are claiming success with SOA. I pointed out that a lot of these companies are the same ones that claim success with virtually every new technology adoption or business adoption, because their culture is well suited to that. There is still a lot of of companies that just don’t know how to do cultural change. It’s not an easy thing to do.

We hyped SOA a lot from the IT perspective, and a lot of the IT managers certainly may be growing tried of hearing about it, but haven't done anything to actually start that process of cultural change. Is it really adopted by the business side and do they understand what it means and how it can impact our business? If they aren't having those communications, we haven’t really changed anything, and that means they’re still open for that message to continue, and to increase.

Gardner: You are saying that managing change well is a core competency, will be an important aspect of any SOA activity, and perhaps SOA adoption could help companies improve the way that they manage change?

Biske: Absolutely. Back when I was working at an enterprise, I had somebody ask me, "How do I build this service so that it meets the enterprise needs?" And I said, "You don’t. You build it to what you know now, and you understand what your processes are going to need to be to change it in the future? Because it is going to change. Think from a change-first perspective, and how you want to manage that process, rather than stick it out there, not want to have it touch it for 10 years, and have it last forever."

Gardner: Well, not to change this subject, but who else agrees with Todd and me?

Garone: You used an expression earlier, "trough of disillusionment." Those words come easily, because they have been used before. That’s because we go through this cycle every time some disruptive technology comes along. The hype gets really high, and the adoption and the use of the technology lags behind, depending on a variety of factors.

I think the SOA hype is pretty high, but I think that it's difficult to sell to decision-makers due to two factors: 1) the degree to which cultural change needs to take place, and 2) as time has progressed through this decade so far we’ve seen greater caution in IT departments because of shrinking budgets. So, the hype is high, but it needs to be sustained longer with messaging that’s going to be more aligned with business goals, rather than technology.

Gardner: We seem to be in a cheap era when it comes to IT, and ironically it’s coming at a time when the Dow is flirting with a record high, even though it has been a bumpy road in the market for the past couple of months. We are still within a Curt Shilling breaking ball of the record, and companies are enjoying record levels of profit, record growth.

Many of them are sitting on record piles of cash. Capital around the world is still at very cheap level, taxes are at a record low in real terms and are dropping in many countries. If there’s any time to invest in IT for the future, this should be it? And yet we’re not seeing it.

Kobielus: Oh, it’s not inconsistent, Dana, with SOA not succeeding. In fact SOA, the model of SOA practically could be: Do more with less.

Gardner: Yeah, but you've got to spend something to allow for your older systems to be freed up and excise the services. That doesn’t come free.

Biske: One thing you have to be cautious with ... Just as we talked about that things change quickly, a number of businesses got burned in the dot-com boom when stock markets were also very high and revenues were increasing. They increased their IT spending, and then the bottom dropped out of it.

Gardner: But, here it’s 2007. It’s been seven years since this crash.

Baer: But, Dana, probably the major reasons -- and the big difference this time -- is that on the IT side there isn't the same sense of urgency. We don't have this Y2K thing staring us at the face, telling us that we must renovate all those legacy systems that are out there -- either renovate or replace. You don’t have the same drama in the headlines all the time. That’s dropped the sense of urgency.

Combine that with the fact that a lot of organizations felt that they got burned the last time they opened up the purse strings.

That’s probably a large part of the reason why you’re seeing much more deliberate spending. To that extent, it can be a positive force in terms of enforcing some discipline. On the other hand, if you want to do SOA right, do you need to invest upfront to do that planning and architecture? I'm not sure that IT organizations have gotten that message.

Gardner: Perhaps there’s more. We keep going back to the crash, but after the crash, we had a series of corporate scandals and meltdowns that really couldn’t be blamed on hyping IT. They had to do a lot more with malfeasance and neglect. We also had a period where we saw new laws and a different compliance atmosphere.

So it could be that companies are being run more by the accountants -- of, for, and by the accountants -- and therefore the vision around IT is not getting through to them, and the purse strings are not opening up. Is that possible?

Koblielus: You’re pretty much on the mark there. I was talking with one CIO about a year or so ago, after about the first year of Sarbanes-Oxley, and she said that the impact of SOX translates to shutting down IT for about 90 days out of the year, just so that they could just account for their tracks over the previous three quarters.

Gardner: Does anyone else concur that the accountants have run amok, and that the IT guys have very good rationales for spending, but they just can’t get the money?

McKendrick: One effect of the whole compliance scenario was that it gave vendors another hype factor. I'm going to try another buzz word. How about Hype-Oriented Architecture? HOA. Using Jim’s HOA for another purpose.

Kobielus: It’s better to have hype-oriented accounting.

McKendrick: Hype-oriented accounting? I think the whole compliance thing gave a boost to the IT industry in the early 2000s. What do we call this decade anyway, the 2000s?

Gardner: The oughts.

McKendrick: It gave the whole industry a boost at a time when things were kind of down with the IT recession. The whole compliance scenario helped business intelligence and the data-environment vendors who directly addressed the flow of financial information.

Gardner: I’d like to conduct an experiment. I think we should take an accountant out to lunch. Anyone who knows an accountant, take them out to lunch and tell them how great IT is and what SOA can do in terms of long-term efficiency and lower total costs. Bring in some of the other mega trends, such as software as a service, virtualization, and data master management. It behooves us all to educate the accounts on why IT is important, because I think they are suffering from a lack of understanding.

Better yet, take a chief financial officer out to lunch and then take the accountants out to lunch. This is the crowd we need to work on. We keep talking about trying to convince the CEO and the CIO, and I think we need to get right down into the bean counters' frontal lobes on SOA.

Biske: Not to move away from the accountants, but one group I hope will keep the hype going is this newly formed SOA Consortium that OMG is sponsoring. It's an advocacy group, not another standards body coming, into the mix. It would be great to start to see a message come from a collection of end-users that are seeing some success with this, rather than being pushed so strongly by the vendor community.

I think it’s a different type of hype. It is one that will be a bit more pragmatic. Hopefully it will continue the pace, and they’ll achieve the goals that they have set out for themselves. I don’t know if they have any accountants in the consortium, but maybe this will help them bring some in.

Gardner: Well, we'll invite them and try to give them a free membership. They should cotton to that, right?

McKendrick: Often, it’s the stuff going on in the consumer space that begins to leach into the enterprise. Any excitement going on in the consumer space, eventually translates into excitement within the walls of the corporation about a certain technology. We saw that with the PCs and we saw that with the Internet. If anything is going on out there in the consumer space right now, it is Web 2.0, going back to the Web 2.0 discussion.

Gardner: Oh, we know how profitable that is.

McKendrick: It's where the excitement is in the corporation that begins to drive the investment. To paraphrase Wall Street's Gordon Gecko, hype is good.

Gardner: Greed was good in the 1980s -- hype is good in "the oughts."

McKendrick: Because it raises that level of excitement, and that’s why you need to get the attention of the bean counters, the CIOs, and the CEOs, most importantly.

Gardner: Well, here’s the message. Take your hype to your accountants and your CFOs and then make them join the SOA Consortium. I am always tempted at the signoff period of our discussion to take a cue from the Car Talk guys and say, "You’ve wasted another completely good hour," but I am not going to do it

Koblielus: And don't drive like my brother

Gardner: And don’t implement your IT like my brother. We have been joined here once again on our SOA Insights Edition by Steve Garone. Thanks, Steve.

Garone: Thank you Dana. It has been a pleasure.

Gardner: Joe McKendrick.

McKendrick: Thanks, Dana. It is good to be here.

Gardner: Jim Kobielus.

Kobielus: Another pleasurable morning.

Gardner: Tony Baer.

Baer: Another hour not wasted.

Gardner: Our guest -- please come back again Todd; we enjoyed having you -- Todd Biske.

Biske: Thanks, this is a lot of fun. I hope to be back.

Gardner: This is Dana Gardner, principal analyst at Interarbor Solutions. You have been listening to Volume 16 of BriefingsDirect, SOA Insights Edition. Thanks, and come back again next time.

Listen to the podcast here. Produced as a courtesy of Interarbor Solutions: analysis, consulting and rich new-media content production. If any of our listeners are interested in learning more about BriefingsDirect B2B informational podcasts or to become a sponsor of this or other B2B podcasts, please fill free to contact Interarbor Solutions at 603-528-2435.

Transcript of Dana Gardner’s BriefingsDirect SOA Insights Edition, Vol. 16. Copyright Interarbor Solutions, LLC, 2005-2007. All rights reserved.

Transcript of BriefingsDirect Podcast on UPS's Wireless Tracking Solutions for Small Businesses

Edited transcript of BriefingsDirect[tm/sm] podcast with Dana Gardner, recorded April 27, 2007.

Listen to the podcast here. Podcast sponsor: UPS.

Dana Gardner: Hi, this is Dana Gardner, principal analyst at Interarbor Solutions, and you're listening to a sponsored BriefingsDirect podcast. Today, a discussion about wireless tracking, about how a myriad of devices can be used almost anywhere to track packages and delivery -- be it for retail, ecommerce, or business to business.

We are going to be discussing this with an executive from UPS, as well as someone who uses wireless tracking regularly and is finding it has a positive impact on his business. I’d like to welcome to the show Jeff Reid, the Director of Customer Technology Marketing at UPS in Atlanta, Georgia. Welcome to the show, Jeff.

Jeff Reid: Thank you, Dana.

Gardner: We’re also talking with Robert Wolfe, the co-founder of Moosejaw in Madison Heights, Michigan. Welcome, Robert.

Robert Wolfe: Thank you.

Gardner: We want to find out more about the use of wireless tracking, why it’s important with today’s younger generation -- a more mobile technology-oriented generation -- and the benefits it brings from both a business and technological point-of-view. Let’s go first to Jeff. Tell us how long UPS has been offering this wireless tracking capability, and why did you take the plunge into it?

Reid: UPS has actually been in the wireless business since the early 1990s. We developed our first customer-facing technology in 1999 when we introduced wireless tracking. Today we’re up to four wireless services, including tracking. We also offer the ability to get time and transit information about a package that you’re about to ship. We can also rate a package through our wireless technologies.

Then finally if you need a spot to drop-off the package, you can do that with our drop-off locator.

Interestingly enough, wireless capabilities were introduced internally at UPS in the early 1990s, when we were one of first companies to actually cobble together more than 200 cellular phone providers so that we could provide cellular phone capabilities to our package-delivery vehicles. Our drivers could transmit the information about the delivery that they had just made through their hand-held computers.

So we’ve been in the wireless business for quite a while.

Gardner: Interesting. And now we can use a lot more devices than cell phones. When did you make a leap from a cell phone to the digital side of more of these devices?

Reid: Our wireless services began leveraging most digital devices beginning in 2001. In fact, any device that has short message service (SMS) capabilities or uses Wireless Application Protocol (WAP) capabilities can leverage our tracking services.

Gardner: And these same services are accessible through the World Wide Web as well?

Reid: That’s correct.

Gardner: What kind of information do you find that people are using this for mostly? Is it the same kind of information that you expected when you first got into it?

Reid: Our customers have become more mobile as their businesses have grown, and their lives converge with their day-to-day work activities. So we find a lot of customers are using our mobile capabilities to extend their flexibility and productivity outside of work.

Small businesses and individual users are the primary users of our wireless capabilities. So it is meeting our expectations of who would use the wireless capabilities. Yet it’s amazing how wireless services and our tracking information has made it even onto the golf course nowadays, where people are using it in all facets of their life -- to check on that birthday gift to all the way down to managing their global supply chain.

Gardner: I don’t know how it happened, but I think people just have less time these days than in the past. How about email? People seem to find an easy segue from using email for alerts, and then moving to SMS. Do you find that there is a mix being used?

Reid: Well, fortunately at UPS, we have a whole suite of visibility solutions. Primarily, the solution that customers use with email is our Quantum View[sm] capabilities. That’s where you can actually get proactive alerts about your shipment anywhere within the supply chain.

Customers also use email alerts so that when they do ship a package, they can go ahead and send emails to their customers letting them know that the package is on its way. They use Quantum View for that, as well. So between email and wireless, we certainly have a vast array of different services to provide proactive information in our customers’ supply chain.

Gardner: Is there something different about today’s workforce? I suppose more folks are digitally connected, regardless of where they are. We have the road warriors, but even high school kids -- many of who have their own cell phones -- are connected. Are you finding that companies are trying to reach these end-users, or is it more company-to-company? Tell us a little bit about the type of traffic or type of usage you’re finding.

Reid: The majority of the usage for wireless tracking comes from individuals in small businesses. But UPS had the forethought to think about who would be our future customer with wireless capabilities. And as you will learn from Moosejaw in a moment, a lot of the Generation X and Millennium Generation -- those born after 1982 -- have grown up with a cell phone and with the expectation of mobility as being part of your life.

In fact, I have a nephew who was using UPS wireless service just recently. He had a pair of "shades," as he calls them that were being delivered to his home but he was at his grandmother’s house. Yet he was using wireless tracking to figure when he could go home to get his new sunglasses.

That’s an example of where expectations have changed, there is no inhibition to using wireless capabilities with this younger generation. If you look at the U.S. penetration of cell phones, it's above 75 percent. That’s unfathomable considering that cell phones really just caught on in their early 1990s. So lots of different customers are using our capabilities, but mostly it’s focused on individuals and small business uses today.

Gardner: Right, so using wireless tracking certainly makes a great deal of sense for end-users. They can specifically get information on deliveries they’re expecting, and I suppose it is really important to get your shades on time. But what about the supply chain where time isn’t just convenience, time is actually money.

Companies are using this to compress their delivery times, therefore their product lifecycle times, and are therefore seeing cost savings.

Reid: And certainly at UPS we spent a lot of time thinking about customer supply chains and how we can improve capabilities around goods, funds, and information. We look at our wireless capabilities and its efficiency as the name of the game when it comes to mobile professionals, and such examples as service technicians.

Some of our customers have large-scale service engagements where they have delivery vans out making calls. They require that a part be at a house before they can actually fix an item that they are going to service. So these large companies leverage our wireless capabilities to track a package within the van, so that they can determine whether or not that call will be effective -- if the part has arrived or not. That’s an example of where efficiency throughout the supply chain is being introduced, and wireless tracking is certainly a large component of that efficiency equation.

Gardner: I suppose that that same value can be taken to a factory floor, or an agricultural environment -- out to the farm fields and away from any centralized location. You don’t need to be tethered to a desk and a personal computer.

Reid: That’s correct. Anywhere that your feet take you, wireless capabilities are available.

Gardner: Great, let’s go check out the real-world uses of this. Robert, tell us about Moosejaw, what is its mission, and what do you do there?

Wolfe: I describe us providing high-end outdoor equipment and apparel. Basically if you’re going skiing or backpacking, we’ll have what you want -- and it’s the best stuff. And we have sort of by accident ended up skewing to a very young demographic.

I started the company when I was 21, and had absolutely no clue what I was doing. So when customers would come in the store we were playing Nintendo or whiffle ball, and we asked them to join us. And that ended up turning into our marketing theory. So we really try to connect with the customer on a level that’s not just about the product. So last Saturday, in one of our stores, we had break-dancers for absolutely no reason whatsoever.

So far it seems to be working. We definitely have more high school and college students, not only as our customers but also as our staff. And that’s really how we ended up being so proactive about wireless technology. Because when I look around and see everyone at Moosejaw, they don’t even talk to the people three seats away from them -- they text them. And half of them don’t even use their computers anymore; they just use their mobile phones and personal digital assistants (PDAs).

When we began seeing that internally, we knew that we have to be first-to-market with all of that kind of wireless technology -- and UPS has helped a ton, and not only with traditional tracking. I call it "traditional" even though it’s still pretty new. UPS began helping us all the way to getting tracking numbers tested, which we just started very recently. And it’s already been hugely successful. And when I say, "hugely successful," we have had a lot of people sign up -- but more importantly, the people who have signed up have loved it. It is definitely the college students, and it sort of filled over from in the high schools.

Gardner: Explain to us about the testing. What does that all amount to?

Wolfe: So, instead of having to wait to get to your PC -- an extra half hour to find out where your order is -- it will go right to your phone. The sunglasses example was a pretty good one. Who wants to have to wait an extra hour to find out where their package is going to be?

It sounds funny. You really don’t need to find out where your stuff is at that very movement, but it’s just that the whole idea of being able to use your phone for everything -- our customers expect it. If we are not texting information to them, then we are yesterday’s news. We have to be able to embrace that kind of technology.

Gardner: The expectations now are much higher. Immediacy is really important. I suppose for high-end camping and mountaineering equipment, if you are going on a big trip that you have been planning, you might have just forgotten some last-minute thing, so you are going to order it up. And maybe you’ll intercept it halfway to your destination. And you will be able to know right along the way if that’s going to work for you. Is that a typical scenario for you?

Wolfe: You know, it certainly works in that scenario. But for us it’s really not so much about the practical use of the application as it is about being cool.

Gardner: It’s a lifestyle thing.

Wolfe: That’s exactly right. If it so happens that we sell products that our demographic loves -- and it wouldn’t really matter if that product were coffee mugs -- the fact that we are sending tracking information through a mobile phone is what’s important. Our customers are more likely to tell their friends that they just got their tracking number to their phone telling them when their new sunglasses are coming.

Gardner: Interesting. Tell us how about how you started getting involved with UPS in order to be so cool and be so appealing as a lifestyle to your users?

Wolfe: What happened with us is we started off -- and I am not exaggerating -- that when I would take an order from the Internet it would literally be me calling the phone company and saying, “Okay, I am going to be in our Grosse Point shop today, so point the 800-number to this phone. And I bring my laptop with me, and I bring the Visa machine with me. And then when I went home, I would call the phone company and say, “Okay, I am home now, you can point the 800-number back to my house.” When someone called Moosejaw at 2:00 in the morning, that was me in bed answering the phone, taking an order.

As we grew, we needed to be able to tie orders to tracking numbers. We used to literally have to go copy and paste them into our customers order history, so they could see it. And UPS more than any other company -- and UPS is a big company, so it’s still amazing to me that they can pull this off -- they really guided us through the entire system. That means tying our retail systems to their tracking system. And we talk to UPS, I would say, four times a week because they are so super proactive about helping us embrace what’s coming next.

So it actually went beyond the simply tying the systems together. They actually took us to other companies -- in other industries -- to help us set up a warehouse. It’s really amazing -- both the practical application and just the staff to make us look cool -- that UPS has been so engaged with us.

Gardner: Now, Jeff, that sounds like UPS has figured out that if you help small companies get started, and they grow, that they are going to stick with you. And that’s perhaps a very long-term relationship.

Reid: You are right. Certainly for UPS to scale services for a small company that’s working out of its garage -- all the way up to a multinational company -- it’s important for us to offer solutions that provide uniqueness and that allow our customers to develop a competitive advantage ... just as Moosejaw has done. So we are always on the table with solutions that are unique and are scalable, depending on a customer's size.

Gardner: I suppose it’s not just getting them while they are young, but being on the leading edge of what is expected, both in terms of trends and fashion -- as we have heard about with SMS. It’s quite popular. I have just started using SMS myself more and more. It is addictive, and it does make sense in a lot of ways.

For example, if you don’t need to make a full phone call, or you don’t want to go to email and have to fire-up your PC. Maybe you could explain to us a little bit more about what UPS is doing along these lines? Give us sort of tour of the waterfront now in terms of the services, and maybe even some hints of what’s to come?

Reid: Sure. When we think about global visibility, our job as a transportation and logistics provider is to make sure our customers are able to take advantage of flexibilities to manage their supply chain. Information many times is just as important as what is in the package.

So UPS has always been looking to innovate and bring new capabilities to our customers. And an example of that is our latest solution called Delivery Intercept, where our customers can use their wireless device, or go to www.ups.com, and track a package. At that point they can decide that, “Hey, my customer told me yesterday that they are not going to be at this location any longer, so I need to redirect that package." Or, "I sent the wrong thing, and I need to have it returned.”

With Delivery Intercept a customer can go to www.ups.com and reschedule that package to either be returned to them, or sent to an alternate location. That’s an example of innovation that we are first to market with, and we are always seeking to make sure that we provide productivity, capability for our customers, and increase their efficiency. The demand and interest is there for these services, as Moosejaw has indicated. So we will continue to innovate. That’s necessary.

Gardner: Being able to work that quickly in the field -- I guess you could call it exception management as an information technology term -- that requires a lot of heavy lifting on the back-end that people might not be aware of. Isn’t that right?

Reid: Yes, in order for us to engage a customer with Delivery Intercept, there is a lot of infrastructure that UPS has to have in place. And we spent many years integrating our systems so that we know where that package is at every step of the delivery process. Technology is what has allowed us to drive in that direction; so that we can take our internal technology that we have built and make it available for our customers; to develop value-added solutions for them.

Gardner: Interesting. How far can we scale on this? When I say "scale" I mean we can increase from small businesses to large businesses, but also how about in terms of geography. Is this something just in the United States and North America? What’s the global scale on this?

Reid: Well, if I have to focus only on wireless, UPS has global scale with our wireless capabilities. We have wireless capabilities in over nine Asia-Pacific countries. It’s available in 24 European countries. Of course it's here in the United States and Canada. It’s also available in five Middle East countries, and also in South Africa. So as long as you have a connection in any of those areas, UPS certainly has information that you can consume.

Gardner: Back to you, Robert, at Moosejaw. Are you guys doing international business, and if so, is this wireless tracking of interest there?

Wolfe: I haven’t checked yet, but I would be shocked if our international customers weren’t signing up for it.

Gardner: Which markets are you playing in globally?

Wolfe: Well, Canada. We ship a lot to Europe, a lot to the Far East. So I don’t have specific numbers on that, but we do pretty significant international business, it’s important to us.

One of the things that Jeff was talking about earlier, made me think of the following -- I was in a store the other day getting a new cell phone. The woman in line in front of me did not want to get texting because -- this is actually a true story, believe it or not -- she did not want her kid to have texting on the phone. I interrupted the conversation and basically told her that she was wasting her time, because the kid is going to use it anyway. And she would then have to pay some super-huge fee because she was not signed up for SMS. I told her to just get it. It’s not whether people are going to use it or not -- it’s going to happen. So, for us, we have to embrace that.

Gardner: When it comes to finding a business use for SMS text messaging, it seems a tracking number is perfect because it’s not a lot of visual real estate. It’s just a number. It’s all text. It doesn’t require a whole lot of rendering or anything, and it’s something that people can use personally and in business. I am surprised it hasn’t even been taken up as even further into the business supply chain.

Wolfe: Well, the way we talk about it internally is that we are trying to create the least amount of friction with the customer as possible. What can we do to make the shopping experience the best for the customer? If you give us your email address, you get the tracking number, but it can get lost in a spam filter. So to create the most positive experience, we get them that tracking number and in as many ways -- or the best ways -- as possible. That’s what we need to do as a business. We even are now allowing for people who opt-in to just get text messages.

And we've gone beyond just text messaging for tracking numbers. We are using our opt-in list for texting as a community-building activity. For example, last week one of the people on our marketing team went out with a new girl. They met at a coffee shop. And when he got back, he re-sent a text to our list saying something like, "I just went out with a girl, and I like her. When should I text her to see when she wants to go out again?"

So we texted that to our list, and -- I am not exaggerating -- I would say within a minute we had 40 replies, and they were hilarious. So we’re really trying to use the technology as a way to engage the customer -- not just on the product level with a coupon code -- but just to have as much fun as we possibly can.

Reid: I think that it’s important to note too that the wireless providers are doing their part by bringing down the cost of text messaging. Several years ago, every time you send a message it cost you a pretty penny. And today with bundling and the pricing schemes that they have in place it’s affordable for young users to use it, and for anyone to add this as part of your cellular plan. It’s making another channel to market for businesses like Moosejaw and UPS.

Gardner: It seems like you are able take essentially a customer service function and then extend it to create community dialogue and discussion between not only yourself and your customers, but among your customers.

Wolfe: Yeah, it’s really amazing. And you know what? I just thought when I was telling that story that the person at Moosejaw who went out with the girl, he didn’t say, “When should I call the girl next?” He said, “When should I text her?” I mean, calling wasn’t even an option. So, again, that’s just another example of the importance of wireless text technology. You are not even picking up the phone to call people anymore.

Gardner: Okay, so you are building your community, you are getting some social networking benefits. Do you see any other ways that you would like to use this in the future? Are there other aspects of either texting or these wireless-tracking procedures and benefits that you’d like to take to another level?

Wolfe: Yes, but I can't answer that question now because we use the word "experimenting," and that's really what it is for us. We’re tracking to see if things like a coupon code hit better than a text message about a date, and we’ll continue to try and figure that out. Also our website is now available via mobile phones. So, this is all very new to us.

The fact that people are getting personal digital assistants (PDAs) instead of cell phones means you can use more characters and texting makes more sense. So these are things that we’re just playing around with. The short answer is we’re not sure yet, but it is part of our weekly meeting to figure out what do we do next with texting, and what we can do next with mobile commerce. It’s definitely something that we will continue to play around with.

Gardner: Well, that certainly sounds like the buzzword for all of this -- mobile commerce. Let’s take it back to Jeff. Do you see this as a stepping-stone for UPS to get more involved with the mobile commerce?

Reid: Certainly at UPS we think about bringing new solutions and technologies to market. We want to focus on being where our customers are. So if our customers are in the wireless space, we want to make sure that UPS is right there with them. Anything that you can do at www.ups.com -- the ability to set your own workspace, for instance, we see wireless being the next step. So anytime a customer engages us through any channel, we want to make sure that we have similar capabilities across all the channels that we touch.

Gardner: All right, we’ve talked about a small company with Moosejaw -- and I don’t mean that in a bad way, being a small company -- I mean something smaller than a multinational corporation. But how do big companies get started with this? Is this something you can just go to a website for and sign–up? How does someone without a lot of experience in SMS get started?

Reid: All the information you need to get started with text messaging or wireless capabilities with UPS is available at www.ups.com. The easiest way to get there is to go to www.ups.com and use our search engine to type in "wireless services." And there you’ll see a plethora of information that describes exactly how to get started. It’s very easy ... how you do it, set it up to register your phone with us -- it's a 10-minute process -- and you are ready to go.

Gardner: All this really requires is your cell phone number, right?

Reid: That’s right.

Gardner: Very cool. Do you have any sense of how many of your users are involved with this now, or what the growth pattern is? Is this something that’s been taking-off lately -- or ramping up slowly over period of time? What’s the adoption trend like?

Reid: We’ve seen wireless services more adopted in the last two years than previously. In fact, if you just look at the wireless- or cellular-use patterns in the U.S., it’s more than grown by 50 percent this year alone. If you look at Europe, it grew 60 percent last year, and we're seeing similar patterns with our services -- that it’s growing exponentially each year.

Gardner: Very good. Well, we have been discussing the benefits of package tracking using mobile devices -- and I just want to be clear for our audience, this includes BlackBerries, PDAs and, I suppose, the new Apple iPhone when it's out. This isn’t limited to just cell phones, is that right?

Reid: That’s right, it’s any mobile device that you can connect to the Internet, including pagers, anything that you can text with you can use them to reach UPS wireless tracking.

Gardner: We have been talking about how to follow your packages, no matter where you are, without necessarily being involved with the personal computer or strapped down to your desk. We’ve heard from Moosejaw, a retailer of high-end hiking and mountaineering and camping equipment in Michigan, and its use of UPS wireless tracking.

I want to thank both of our participants. We’ve had Jeff Reid, the Director of Customer Technology Marketing at UPS. Thanks, Jeff.

Reid: Thank you.

Gardner: And Robert Wolfe, co-founder of Moosejaw. Thanks, Robert, for joining.

Wolfe: Thanks so much.

Gardner: This is Dana Gardner, principal analyst at Interarbor Solutions. You've been listening to a sponsored BriefingsDirect podcast. Thanks for joining.

Listen to the podcast here. Podcast sponsor: UPS.

Transcript of Dana Gardner’s BriefingsDirect podcast on UPS's wireless tracking capability. Copyright Interarbor Solutions, LLC, 2005-2007. All rights reserved.