Fundamentally, SOA is a development methodology that encourages sharing of remotely invocable application functions throughout networks. It's a way of doing more with less, where applications can be built more quickly and incrementally, with fewer lines of original code.

The upside of SOA is that the marginal cost of building new applications will continue to drop as the service-reuse rate climbs. The catch is that there's a significant ramp-up cost, because adopting an SOA means you're going to need to rethink many of your traditional approaches to application modeling, development, integration, deployment and management.

"I can guarantee there's a cheaper way to build your next product, but there's no cheaper way to build your next 20 products," says Christopher Crowhurst, vice president and principal architect at Thomson Learning.

Forrester Research analysts Ken Vollmer and Mike Gilpin report that SOA-based development can be twice as much as traditional approaches when viewed solely with respect of building a particular application component.

But when that application component is reused over and over, SOA becomes more than 30 percent more cost effective than traditional development approaches.

Cost savings

Many of the savings from SOA stem from its ability to consolidate silos of redundant application functionality and data throughout organizations.

Fewer software licenses and servers translate into cost savings in capital and operating budgets. Fewer redundant software components translate into less need for redundant programming groups. Application consolidation onto fewer platforms reduces software life-cycle costs, which Gartner says can be six times greater than license costs.

However, SOA requires a significant upfront investment. Standard Life Group, an Edinburgh, Scotland, insurance company, maintains three SOA-implementing development groups with about 500 people, about half of whom are delivering SOA services and applications. A staff of seven manages their SOA-enabling distributed-application infrastructure.

On the plus side, "we've saved over £2.8 million in development costs over the past three years based on reuse of existing functionality within the service catalog," says Derek Ireland, group tech solutions manager.

The company currently has around 300 reusable services in its catalog. More than half of those services have been reused at least once and there have been a total of 361 instances of reuse. In addition, more than 40 percent of the company's back-end transactions are initiated through its SOA-based environment.

Other companies report hard and soft monetary paybacks from SOA. "We've seen huge savings in Oracle [database] licenses," says Jayson Minard, CIO of Abebooks in Victoria, British Columbia, because of the server consolidation that has accompanied their SOA push. At the same time, he says, "we've also seen savings on the team side, due to having more development staff bandwidth for new projects. Development group efficiency is going up."

Another cost advantage of SOA is that by stressing platform-agnostic service virtualization companies can choose the most cost-effective, best-of-breed application components for particular functions.

"With SOA, you can go the vendor's SOA route," Minard says.

"Or you can take the approach that we did. First, we identified the features and benefits we were looking for, such as flexibility, decoupling, asynchronous communications and service boundary partitioning. Then we identified best-of-breed products that addressed those requirements. We evaluated 14 products, including commercial offerings and open source packages. We tested interoperability among those products, and eliminated the ones where the vendors differed from us in their philosophical approach to SOA. In that way, we've steered clear of vendor lock-in," he adds.

Speed daemons

Speedier SOA-based application development can also contribute to a company's financial well being and competitive agility. "Applications that used to take two weeks to develop now take two days," Minard says.

Faster development allows companies to respond more flexibly to new competitive challenges. TSYS Prepaid is a hosted service provider that processes prepaid debit cards on behalf of financial institutions. Its SOA-based applications are the basis for revenue-producing services. "Accelerated development allows us to recognize revenue more quickly," says Carl Ansley, the company's CTO.

Soft savings

Then there are the savings that are difficult to quantify. How can you put a number on improved business adaptability and agility? Or on improvements in application consistency?

Or on reductions in the risk to interoperability when you make changes to application code that's been virtualized, abstracted and loosely coupled in keeping with SOA principles? Or enhancements to application usability, scalability and performance that come from reliance on shared services that have been built and optimized by development centers of competence within your organization?