FRAMINGHAM, Mass.– Just two weeks after Mohawk Fine Papers made the decision to sell its products on Amazon.com, things were looking good for the company: Integration work was complete, connections to its ERP system had lit up and sales were rolling in. “Amazon generated tens of thousands of dollars in revenue immediately,” says Paul Stamas, vice president of IT at the $300 million, 725-employee manufacturer of premium papers.
Best of all, the data integration project, which cost less than $1,000 to get off the ground, required no in-house investment in integration tools or staff resources.
Instead, cloud-services provider Liaison Technologies performed the integration work and then set up — and currently manages — the connections through its cloud-based service.
Two years ago, a project like this would have been handled as just another point-to-point EDI integration. But the Amazon deal and the 100-plus other business-to-business connections that Mohawk has set up through Liaison over the past 18 months represent the culmination of Stamas’ vision to create what he calls a “service-oriented architecture in the cloud.”
The model has allowed Mohawk to quickly and inexpensively set up new business relationships without worrying about the technical details, thereby producing new revenue opportunities and millions of dollars in cost savings.
“SOA was the answer because it works based on the concept of loosely coupled services, and geography doesn’t matter,” Stamas says. He briefly considered building an SOA in house, but “my head was spinning at the costs and complexity,” he says.
So, early in 2010, he began working with Liaison on his idea. Since then, the services that Liaison provides have moved beyond straightforward provisioning and management of B2B data mapping and EDI connections. Liaison now handles all connections, whether they’re between on-premises applications, from on-site systems to the cloud or cloud-to-cloud.
Recent projects include a process by which another cloud service provider, StrikeIron, provides up-to-date currency exchange rates to Mohawk’s on-premises ERP system at the time of invoice for international orders. Another inserts freight costs into each customer order on Mohawk’s website by way of cloud-based transportation logistics service broker Mercurygate. And a Web service created by Liaison checks Mohawk’s websites and its ERP system to ensure that items are in stock and relays availability information to customers before they place their orders.
“We have over 30,000 of these checks a month and they happen in real time, synchronously, in two to three seconds,” Stamas says.
Liaison serves as the intermediary for every type of transaction, performing the necessary integration and data management work with Mohawk’s customers, suppliers and other business partners. The vendor also presents the connections as services for Mohawk to use as it wants, and offers a business activity-monitoring tool that keeps tabs on service levels from end to end.
The Truth About CSBs
Is a CSB really a cloud-based service provider?
Is a cloud service broker really a cloud-based service provider? A cloud’s architecture is optimized to respond quickly to sudden, large changes in workload demands.
A cloud typically consists of a highly standardized distributed computing architecture, uses virtualization to create an elastic infrastructure that can automatically provision and deprovision resources in response to changes in workload demands, and includes usage-based metering for chargeback or pay-as-you-go billing.
In the case of Liaison, the bulk of its revenue comes from people-intensive integration and data management services, which it lumps into two groups: professional services for initial integrations, and managed services for ongoing support. Only the subscription piece, which maintains all of the connections for Mohawk and provides a tool for monitoring those, leverages the benefits of a cloud architecture.
What a CSB does is not elastic, “but the reality is that not all workloads and cloud deployments require it,” says Gartner analyst Benoit Lheureux. A strong increase in transaction volume for a CSB is more likely to be in the range of 10% a year overall, he says, and CSBs can scale to meet that demand.
The bigger challenge lies in scaling up the staff. “Liaison’s biggest problem is hiring the right skills to add to the fulfillment group for things like mapping, EDI, XML and RosettaNet,” says Lheureux.
From Mohawk’s standpoint, to focus on the technology is to miss the point. Stamas doesn’t care about technical details such as virtualization, economies of computing, elasticity of demand or pay-for-use models. Those are Liaison’s problems. Mohawk pays Liaison a flat annual fee plus an hourly rate to set up each integration, most of which come in around $1,000 or less.
“It’s not about technology,” Stamas says. “It’s about building business processes in the cloud . That’s what we’re focusing on.”
“With Liaison, all types of data integration flow through the same service-oriented infrastructure, all [data] payloads are defined as services, all interactions are managed via Web services, and all integrations use a publish-or-subscribe model” in which services are either provided or consumed, Stamas explains. “They have the tools and platforms, the enterprise service bus, messaging bus and service registry — all of the components of a service-oriented infrastructure. It’s a foundation on which we build our own unique integrations.”
The Rise of the Cloud Broker
Liaison is on the leading edge of an industrywide trend in which traditional providers of managed B2B services are becoming what Gartner analyst Benoit Lheureux calls a cloud services brokers, or CSBs. In addition to offering data integration and customization services, CSBs provide an aggregation point for all types of business partner interactions.
The differentiator for Liaison is that it has the in-house expertise necessary to perform integrations quickly, and it can draw upon thousands of integrations it has already built, Lheureux says. Competing vendors are starting to move in that direction as well.
Gartner estimates that by outsourcing to a CSB, small and midsize businesses can save 20% to 30% over what it would cost to do the integration work internally. But there’s more to it than saving money, says Lheureux, explaining that such spending is now an operational expense rather than a capital expense.
This setup could work for large companies, too. “If you’re good at B2B and have the economies of scale, it’s not about savings. It’s about what are your required internal core competencies?” he says.
Since the economic collapse in 2008, many IT organizations in large businesses have been asked to scale up their B2B efforts but lack the capital or head count to do it. “A lot of them don’t even know that they have an option to outsource,” Lheureux says.
Mohawk’s SOA Model
B2B integration traditionally has used a messaging approach to synchronize data, but Mohawk uses a services-based model. Integration workloads are managed by two Web services: One at Mohawk and one at Liaison.
Because Mohawk’s IT organization has been abstracted away from the technical aspects of creating and maintaining all the different types of connections, Stamas says his group can focus on working with the business to develop new business models and connections with new business partners.
Tony Hunter’s job is to pursue those business models. As Mohawk’s IT manager and business process architect, he helps to identify opportunities for the business and presents Liaison with the specifications. Right now, for example, he’s working on connecting Mohawk’s e-commerce website to a cloud-based service that provides real-time information on freight costs. Mohawk currently offers UPS and FedEx options on its website, but those aren’t the best-priced services for some customers. For instance, “less than truckload” (LTL) freight tends to be less expensive than UPS or FedEx for orders over 150 lbs.
“We are losing order opportunities because of [not offering] a freight cost,” says Steve Giangiordano, Mohawk’s manager of accounting services. So Hunter created a specification for a Web service that pulls LTL freight charges from Mercurygate’s cloud-based freight brokerage service and presents the data in the customer’s order on Mohawk’s website. “They hit a function key and they know right away what the LTL rate is. It’s amazing,” Hunter says. “Once we have that in place, the problem will go away.”
Mercurygate is a CSB like Liaison, but it provides freight data in the cloud, and on demand, rather than integration services.
Using a CSB has also improved security, Stamas says, because everything flows through a single point by way of a VPN connection. “Inside the cloud, they have all of the data security precautions you’d expect from a PCI standards-compliant data center,” he says, adding that Liaison supports the AS2 communications standard, as required by Mohawk’s bank. “Going through a single point gives you an extraordinary benefit in securing transactions. The alternative is anarchy — people doing this through Web browsers, coming in through Port 80 and poking holes in your firewalls.”
The benefits of hosting a service-oriented architecture in the cloud don’t come without risks, and Stamas does have two concerns. One is vendor lock-in. “If Liaison drops out of site or becomes too big, what happens to our intellectual property and the integrations we count on? It’s a real concern,” he says.
Another is whether the cloud service provider can keep up service levels as Mohawk’s transaction volumes and customer base grow. While Mohawk has service-level agreements, he says, “the technical details of their underlying infrastructure are hidden from me.”
Can Liaison scale effectively? “If we’re twice as big in a year, can they handle the volume? I don’t know,” he admits.
Liaison CTO Bruce Chen says his company has 50% more capacity on hand than its customers need and has a distributed, service-based architecture that scales rapidly. But Gartner’s Lheureux says the technology that keeps data flowing is just one part of the business. Growing the professional services and managed services that make up the bulk of the company’s revenue means scaling up people, methodology and expertise. “The cost is not in the mapping tools or processors in the cloud. It’s in the people,” Lheureux says.
As a hedge, Mohawk retains a copy of all of its translations and mappings. The information is managed using Liaison’s Contivo technology, a tool designed for high-end mapping and best practices.
The intellectual property that Mohawk receives from Liaison is better than what it might receive from other service providers because Contivo makes it easy to redeploy or repurpose data maps in different technology infrastructures, Lheureux says. Nonetheless, porting to a new platform would be painful. “You can’t just pick it up and drop it on another platform,” he says.
But for Mohawk, the benefits outweigh those risks. The low cost per integration and the rapid turnaround have given the company the agility to create new business relationships and build business processes on a trial basis. Mohawk can do all this without worrying about the investment of time, money and other resources required to do the integration work.
And because its costs are lower, Mohawk can tackle smaller projects that it wouldn’t have considered before. Stamas points to the StrikeIron integration as an example. “It is a small little Web service,” he says, noting that in the future there may be hundreds — or thousands — of such initiatives.
End of Big IT Architectures?
Stamas sees this as the beginning of the end for monolithic enterprise applications. “They’re beginning to break apart into pieces. Rather than monolithic systems like SAP and Oracle, an ecosystem of cloud services will be interoperating with other workflows and processes that can be anywhere,” he says.
For example, Stamas explains, “our ERP is the system of record for financials, but much of the functionality resides outside the system.” Orders entered via websites and CRM, expense management and HR systems are handled in the cloud, and advanced capabilities such as planning, scheduling, transportation, supply chain, asset management, manufacturing execution and warehouse management are performed outside the ERP software. Today, 60% of Mohawk’s IT portfolio resides outside the ERP system, up from 10% five years ago. “I see this rate accelerating,” says Stamas.
In such a setup, “your ERP system may call Web services at StrikeIron for a currency conversion, and UPS or FedEx for a freight rate,” he says. “Then it may check inventory for an item at a customer or supplier” or ping other sites to perform credit checks, calculate sales tax, approve a credit card payment and more.
As the financial bar has been lowered and turnaround times shortened for executing on such integrations, the number of projects at Mohawk has increased.
“We can bring in a third-party manufacturer or logistics provider at the drop of a hat. That’s what’s fueling revenue generation,” Stamas says. “If it costs us $1,000 to try something, why not try it? If it doesn’t work, we just throw it away.”