Overstock.Com OSTK

Some excerpts from a paper on Overstock.com written in 2007.

Executive Summary

Business Description

Overstock.com is an on-line retailer that sells merchandise that is either produced for Overstock.com or bought by them or merchandise sold for other parties (wholesalers, manufacturers and retailers) with Overstock.com being the intermediary. The company thus acts as an on-line retailer making goods available to customer at wholesale or below wholesale prices. The merchandise offered include bed-and-bath goods, home décor, kitchenware, watches, jewelry, electronics and computers, sporting goods, apparel and designer accessories.

Value Proposition

Overstock.com partners with leading brand-name companies that enable them to buy products at discounted prices. These savings are passed on to the consumer via its on-line marketplace.

Market Opportunity

Overstock.com has identified a segment of customers that would like to purchase leading brands at below retail prices. They would like to wear leading brands , even though a bit out of date and at the same time retain a bit of exclusivity. These customers are discerning bargain hunters and have high disposable income. They also prefer the convenience of shopping on-line rather than traveling to outlet malls or to sales.

Business Overview

Sourcing

The merchandise made available to on-line buyers is sourced in 3 different ways:

  • Surplus: The surplus left over for each season’s or year’s expected target sales is usually disposed off by the manufacturer. This surplus is purchased by Overstock.com at below whole-sale costs and sold to its customers.

  • Canceled Orders: Retailers may cancel orders with wholesalers or manufacturers when they discover that sales have tapered. This is another source of surplus stock with manufacturers.

  • Downsizing: A company may wish to downsize, or move facilities or reduce its inventory for various reasons. This is another source of goods available at highly discounted rates.

Distribution

Purchased goods are delivered to customers via mail carriers such as UPS, FedEx and USPS. The modes of shipping are Standard Shipping (ground shipping), Expedited Shipping such as Next Day , Two Day and Three Day Shipping. Most orders are shipped within 1 – 4 business days. Since Overstock.com only sells what it has available in its inventory , it does not have any back orders to handle.

Strategy

Business Strategy

Overstock.com’s initial strategy was to buy excess & closing down inventory from retailers, e-tailers and defunct companies. The merchandise was purchased at below whole-sale prices and sold to its online customers below the original retailer’s cost price. This allows it to preempt any cost cutting by other retailers for simliar or same items. This is still the heartbeat of its business strategy. It has also carved out alliances with other e-tailers, retailers and handles the online marketing and selling of their goods. Orders are generated from its web-site and forwarded to the partner retailers. It also hosts online auctions where users can bid for goods. Besides these , it has also partnered with AutoNation to allow its users to locate dealers for new and used cars online. It has recently partnered with Enterprise Rent-a-Car to make their inventory of cars available to its users. Another diversification is its travel web-site that allows users to book flights, hotels, cars, lodging, cruises and vacations at lower than usual prices.

WorldStock

Overstock.com also has Worldstock, a store within Overstock devoted solely to carrying the works of artisans, especially disadvantaged artisans, and selling them as inexpensively as possible so as to maximize the amount of return for them. The company asserts that it follows ethical guidelines, is sustainable and is socially responsible while reselling goods sourced from these artisans in South-East Asia. Worldstock emphasizes sustainabliity, fairness and transparency.

IT Strategy

The IT strategy includes a CRM, Data Warehousing and Data Analytics that are sourced from existing customer data, current and past transactions and click stream data. Data analysis is real-time and does not rely on batch processing. The data flow into this back-end processing IT infrastructure is via the on-line store and customer interaction with the Overstock.com and affiliated partner web-sites. This allows the various departments to query for up-to-date information across different dimensions and different departmental views.

Logistics & Distribution Strategy

Overstock.com works very closely with UPS during peak season , when most of their orders are received. Overstock.com leverages UPS’ capacity and technology to have quick and correct order fulfilment during this Peak period between Thanksgiving & Christmas. The UPS services used by Overstock.com include Forecasting, UPS Ready, Dockside Visibility, Tracking, Exchanges & Returns and Billing & Analysis. Overstock.com also works with a reverse logistics company called Newgistics that handles all its returns starting from its SmartLabel printed labels for returning customers to print-out.

Besides UPS, Overstock.com also dispatches packages via FedEx and USPS.

Fund-raising History & Investors

Overstock.com was founded as D2–Discounts Direct in 1997 and changed its name to Overstock.com, Inc. in 1999. Overstock.com Inc. was incorporated in Delaware on February 27, 2002. Overstock.com went public May 30, 2002 at an offering price of $13 per share. The IPO format used by Overstock.com was the Open IPO. This raises capital via a public auction, thus theoretically allowing the public to determine the fair market value of the company stock.

IPO Information
Date Went Public:   May 30, 2002
Filing Date:   Mar 5, 2002
Proposed Offer Price:   $12.00 to $16.00
Actual Offer Price:   $13.00
First Day Open:   $13.50
First Day Close:   $13.03
Shares Offered (mil.):   3.00
Offering Amount (mil.):   $39.00
Post-Offering Shares (mil.):   14.30
Underwriters:  
W.R. Hambrecht & Company, LLC

Early Growth

Overstock.com’s strategy was to work with traditional, powerful retailers by giving them an efficient way to liquidate excess inventory and leveraging that to offer consumers low prices consistently, visit after visit, on brand-name merchandise. Launched only in the second half of 1999, Overstock.com
that year realized gross bookings of $1.8 million; by 2004, that figure had soared to $541
million. In its first six years,
Overstock.com has witnessed approximately 100 percent
growth, year after year.

Market Position

SWOT Analysis

Strengths

The experienced executive team and the large war-chest raised by Overstock.com are the source of it powering ahead with its expansion plans. Also, the B2B online store where small retailers can sign up and purchase merchandise to be sold at their premises is an innovation that has been copied by other online retailers.

Weaknesses

Overstock.com has not yet broken even and its marketing costs per customer have risen in the past year. Unless one of its diversifications start returning more than industry average profits, further diversification is going to be harder because of increasing costs.

Opportunities

Overstock.com has a great business model. Taking it overseas, perhaps, into Europe and perhaps Japan either by brand franchising or entry into those markets would be a great opportunity.

Threats

Amazon.com. Ebay.com and other online retailers are the biggest threats faced by Overstock.com. This coupled with the fact that relentless expansion could cause an implosion especially if the numbers don’t add up to a break-even in the near future is a strong possibility.

Overstock.com Perceptual Mapping

Overstock.com Perceptual Mapping2

Future Challenges

Logistics & SCM Challenges

One of the many challenges facing Overstock.com (and other retailers) is the fact that items arrive at the warehouse without any bar-codes. Customer orders for distinct items make locating the different items an onerous task. Also partner manufacturers or retailers do not have an easy way of tracking source of orders whether from Overstock.com or other e-tailers. A solution to this would be the tagging of items at the item level which would allow the needed information to be embedded in the RFID identification codes. This would reduce order lead time and deliver to customers much quicker. An early implementation of this can be a source of competitive advantage. A complete integration into the existing information systems can make information transfer across the organization and to suppliers much more seamless and automated.

Growth Challenges

The challenge Overstock.com faces is how to continue its phenomenal growth and be profitable in the face of stiff competition from other e-tailers and e-auctioneers notably Amazon.com, eBay and Yahoo! Auctions. Overstock.com’s core business model of selling excess inventory is unassailable and it is the category leader in that segmentation. However, it’s diversification such as partnering with other retailers, selling cars and travel are an indication that it recognizes the growth limitations. WorldStock is a good idea but the Overstock.com web-site does not hype it suggesting that there is a limited market for such items. The strategy of selling stock to small-scale retailers at below wholesale prices is however worth pursuing especially with an aim of turning around inventory quickly.

Criticisms

Sales revenues have declined over the past year, and overall net income is still -ve , since a major chunk of spending is on IT infrastructure and upgrades to handle their growth. Gross bookings are sought to explain away the declining income. Internet traffic to Overstock.com might have increased but these are not translating into equivalent sales and their marketing costs have increased in the past year per customer. This indicates a plateau being reached. Will the core model now face stagnation?

On the bright side, the expenditure on IT infrastructure and close partnerships, have poised them for partnerships , acquisitions that can be handled and have given them a cost advantage with among the lowest shipping costs coupled with quick delivery. Amazon.com does provide free shipping but order fulfillment takes much longer.

Glossary

OpenIPO : WR Hambrecht + Co’s OpenIPO® auction is a new way to take companies public that increases access to IPOs. Based on an auction system designed by Nobel Prize-winning economist William Vickrey, the OpenIPO auction uses a mathematical model to treat all qualifying bids in an even-handed and impartial way. It is similar to the model used to auction U.S. Treasury bills, notes and bonds.( a dutch auction). Just like a typical auction, the highest bidders win in an OpenIPO auction. But there are important differences. In the OpenIPO auction, the entire auction is private, and winning bidders all pay the same price per share – the public offering price.

References

1> OpenIPO : http://www.wrhambrecht.com/inst/openipo/index.html

2> Overstock.com web-site: http://www.overstock.com

3> Yahoo! Finance Web-site: http://finance.yahoo.com

4> Wasserman, Elizabeth. "Making RFID click on line: technology offers challenges, but also potential for e-retailers.(RETAIL TECHNOLOGY: RFID)." Chain Store Age 82.3 (March 2006): 66(2). InfoTrac OneFile. Thomson Gale. Cyprus International Inst of Management. 4 Apr. 2007 <http://find.galegroup.com/itx/infomark.do?&contentSet=IAC-Documents&type=retrieve&tabID=T003&prodId=ITOF&docId=A143240447&source=gale&srcprod=ITOF&userGroupName=cypiim&version=1.0>.

5> http://www.pressroom.ups.com/staticfiles/case_studies/113.pdf

6> Overstock.com Success Story: http://www.newgistics.com/assets/docs/Overstock_Case_Study.pdf

7> http://moneycentral.hoovers.com/global/msn/factsheet.xhtml?COID=105874

8> Wikipedia http://www.wikipedia.org

9> Shopping Online with eBay Express, Amazon, Overstock and Google Checkout By David Steiner AuctionBytes.com September 21, 2006 http://www.auctionbytes.com/cab/abn/y06/m09/i21/s01

10> Case Study: http://www.foundrynet.com/pdf/cs-overstock.pdf

11> Viveiros, Beth Negus. "Take That, Goliath.(Overstock.com gives small businesses lower wholesale prices)(Brief Article)." Direct 13.9 (July 2001): 5. InfoTrac OneFile. Thomson Gale. Cyprus International Inst of Management. 4 Apr. 2007 
<http://find.galegroup.com/itx/infomark.do?&contentSet=IAC-Documents&type=retrieve&tabID=T003&prodId=ITOF&docId=A76882652&source=gale&srcprod=ITOF&userGroupName=cypiim&version=1.0&gt;.

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Innovation & IBM

Innovation occurs at the intersection of invention and insight. It’s about the application of invention –the fusion of new developments and new approaches to solve problems.

–Sam Palmisano, Council on Competitiveness, October 2003

Executive summary

Innovation in IBM and its impact on its business practices is the subject matter of this case study. It attempts to explain why innovation is now an integral part of most firms with an emphasis on the innovation practices now in place in IBM and the trend towards open source development and how it’s changing the face of the software industry. IBM’s attempt to bring researchers in touch with client needs via their On Demand Innovation Services (ODIS) division is also explored.

Profile of firm (s) in terms product/markets, structures, growth drivers

 

IBM is a information technology company that focuses on four broad market segments technology, software, services and hardware. It is among the Fortune 100 companies and its dominance in the IT industry is rivaled perhaps only by Microsoft. Unlike Microsoft, IBM has a rich tradition and attracts the best talent in the industry without parallel. IBM over the past 2 decades has evolved from being mostly a mainframe and mini-frame based company and has moved towards providing services to their clients. Mainframe and minis still form a core part of their business but the services sector has grown exponentially. Lou Gerstner. Jr. is credited with this dramatic turnaround of a slothful giant that is now nimble enough to prance with the hares. The elephant now roller-blades!

A more recent phenomenon in the IT industry is the trend towards use of open source software for commercial applications. The use of open source has driven down costs, led to much quicker implementations and improved productivity. IBM has been at the forefront of this revolution by providing maintenance and support to LINUX deployments and its adaptation of the Eclipse platform as the de facto base for its Integrated Development Environments especially its core server side development product WebSphere Studio Application Developer (WSAD).

IBM Research has always been at the forefront of inventive technologies and has the most no. of patents credited to any company in the US. This is also a major revenue earner for IBM by the licensing of these patents to other firms.

IBM also works closely with its partners and clients to drive innovation. GILFAM (French government) [automated land transaction process] and Boston Coach [Fleet Optimization System] are 2 prime examples of innovation at work with partner interaction. IBM’s On Demand Innovation Services (ODIS) , a collaboration between IBM Research and Business Consulting Services (BCS) helps IBM clients innovate faster, thus providing innovation for money.

Use of innovation models, metrics within IBM divisions

ODIS Innovation Model

ODIS Researchers first study a client’s problem and then work with BCS consultants to devise a tailored solution. First, existing research skills , assets and patents are examined to see whether those can be retrofitted to the client problem, rather than reinvent the wheel. If an answer is found, then the existing process, technology is applied to the client problem and licensed to them. If not, then resources are allocated to develop a new technology/solution and the solution is built from scratch. ODIS thus transforms IBM into an Innovation Network Service Provider. ODIS gets scientists out of the labs to help IBM’s clients solve their toughest problems.

The Open Source Business Model

IBM’s move towards to the Open Source Business Model was a natural culmination of their enterprise move towards Open Innovation. Besides their LINUX service support offered, it also threw open their Eclipse project in November 2001. Eclipse is now a phenomenon, with over 800 tools built on this Integrated Development Environment (IDE) framework. Other open source initiatives include the Apache HTTP Server as an integral part of its Web Application Server (WAS) product line. The Open Source process allows IBM to work with a dedicated community of developers across the word, allow them to concentrate on adding value and providing integration services to firms that intend to incorporate open source products in their IT processes. This has also aided them to lower costs and allow their R&D divisions to concentrate their funds and resources more efficiently in a few concentrated areas. This mirrors the model followed by the ODIS division, an essential part of the Open Innovation process at work.

Of the 4 business models available to firms using Open Source, IBM has used a mix of loss leader initiative (the Eclipse project), cannibalization of an existing product by selling maintenance and support (LINUX initiative) and adding value to the open source products (products like WSAD).

Evaluation of LINUX Support and Maintenance as a Service provided by IBM

The provision of LINUX support and maintenance as a service provided by IBM professionals, was a major breakthrough for the proponents of LINUX as the operating system of choice for server side deployment over the other UNIX variants and Windows NT and Windows Server 2000. Though this would eat into IBM’s own Unix variant AIX’s market share, it made profound commercial sense for IBM to go down this route as server side deployment on LINUX had started acquiring critical mass. This also fit into IBM’s move towards services as a way of adding value to their product offerings and an increasing demand from customers for this service, in addition to the support services provided for their products.

The diagram listed below describes the process that would be followed as part of an idea screening before the decision to provide LINUX support & maintenance as a service offering was launched.

Does it fit the organization?

Yes, IBM is an IT services provider. This is an extension to current service offerings

Does it provide strategic advantage?

Yes, our server side products have LINUX code-bases. Providing LINUX support allows us to capture a major market, with no real competition except from pure LINUX packagers such as RedHat and Mandrake.

Is there a demand for it?

Yes, our current and prospective customers have expressed a desire for this offering.

How might we pursue it?

Build LINUX competence internally and by recruiting LINUX professionals.

Is there a clear definition of success?

Increased sales on the LINUX platform for our software products.

Will management support it?

Yes, since this fits into the move towards services as a major revenue earner.

LINUX Support at IBM

 

Does it fit
the organization?

Yes

Possibly

No

Does it provide
strategic advantage?

Yes

Possibly

No

Is there a
demand for it?

Yes

Possibly

No

How might
we pursue it?

Yes

Possibly

No

Is there a clear
definition of success

Yes

Possibly

No

Will management
support it?

Yes

Possibly

No

 

Evaluation of LINUX Service Offering
EvaluateLINUX

Evaluation of Eclipse

Criteria

Rating

Reasons

Leadership Support

4

Support from leadership to move towards standards and open source

Strategic Organizational Fit

4

Fits with IBM’s move towards more service orientation and Open Innovation.

Strategic Edge

4

IBM can position itself as an Eclipse expert and provide customers with Eclipse expertise. IDE products built within IBM would use the same source code base also increasing productivity. Products contributed to the Eclipse Foundation can be accessed thus allowing access to industry R & D.

Demand

3

Demand for this did not exist. But demand was created. More of an instance of push rather than pull.

Switch Adoption

3

IBM had a very good IDE product series, the Visual Age series, that had won industry awards.

Clear Success Defn ROI

4

 

Increased productivity,less time to add more value to products.

     

InnovationMetrics

Taxonomy of innovation types

At the enterprise level, IBM describes 3 types of innovation:

Business Model

Operational

Products/Services/Markets

Products/Services/Markets are sources of revenue and thus a direct metric measurement is profit.

Operational innovation also can be measured by profit but this attacks the cost side of the profit equation. This allows the firm to capture market share via lower costs.

Business Model innovation changes the game by using creativity to lower costs, target new markets, lower prices or all of the above.

IBM has focused on business model innovation in the recent past by remixing their product portfolio. Movement to the high-value innovator spaces in technology and services has resulted in a more balanced profit sources, one third from services, another from software and the third from systems and technology. IBM’s next move is towards increasing globalization producing innovation collaboration across the globe by setting up research centers in different countries.

Audit of Innovation drivers, barriers

Drivers

Innovation drivers can be classified as follows:

Financial pressures to decrease costs, increase efficiency, do more with less.

Increased competition

Shorter product life cycles

Value migration

Stricter regulations

Industry and community needs for sustainable development

Increased demand for accountability

Community

Demographic, social and market changes

Rising customer expectations

New technology

Changing economy

IBM CEO Sam Palsimano believes that increasing competitiveness and the increasing commoditization of things, makes it a challenge for firms to retain their existing business models. The dynamic changes coupled with changing technology and the increasing globalization of competitors pose a threat to the existing market leaders. At the same time, these changes also throw up opportunities to be exploited.

Barriers

Peter Andrews,Consulting Faculty Member at the IBM Executive Business Institute in Palisades,New York identifies the following five barriers to innovation:

Inadequate funding, risk avoidance, “siloing”, time commitments and incorrect measures.

Inadequate funding

Funding a new innovation could lead to reduced funding for an existing program or product.

The problems encountered include how much can be accomplished w/o money? Is money needed? What are the avenues? When and how much? Can we identify partners? What’s the ownership break-up?

Some solutions include calling in favors owed, use milestones, list out possible money sources, use good enough substitutes , assess the innovation for potential interested partners to be contacted.

Risk avoidance

A clear-eyed view of risks balanced against benefits can create an environment where innovation is nurtured rather than killed. How do we measure risks and benefits? What are the appropriate measures for innovations? What are the risks of not innovating? Can we measure the benefits?

Some solutions are to learn about and promote effective risk assessment methods, identify the right person/organization for risk assumption, find and develop supporters, anticipate objections and clarify, use prototypes, use a portfolio approach, reassure people with reasons, take the safety of sponsors, participants and other stakeholders seriously.

Siloing”

Innovations tend to cross boundaries and create new categories. Hence innovations might get killed by organizations if stakeholders feel threatened. Solutions include taking concerned stakeholders into confidence, emphasizing the benefits, and sometimes avoiding losing stakeholders until the innovation gains enough winning leverage within the company.

Time commitments

Time is scarce. If the value of an innovation can be increased, then time can be freed up to meet its demands. Questions to be asked are is the innovation worth our time? How much time? What time horizons do we have? Are our competitors ahead? Do we have flexibility? Some answers include delegating work or outsourcing, have small success milestones to encourage participants to invest more time.

Incorrect measures

Most innovations cannot be measured by the usual ROI measure. Some innovations can lead to increased sales in a hitherto untapped segment e.g. LINUX support has helped IBM to capture a major chunk of the UNIX server product market. Are there other measures of success? Is this innovation a long-term revenue earner?

The winning innovation formulae

What is IBM’s winning innovation formula?

IBM follows a mix of practices, using both Open Innovation as in the case of Eclipse and LINUX, as well as leveraging its existing patents which is a product of traditional R & D (ODIS). These may be based on standards and/or outside research.

IBM believes that it can achieve more productivity and growth and move up the value chain by collaborating with companies, governments and educational institutes. Diversity is an integral part of IBM culture and thus different views of opportunity and technology are constantly evaluated for value addition to existing businesses.

For example, the breakthrough that IBM got done in the Cell processor, which is based on their Power architecture, would not have happened if IBM hadn’t designed chips for Sony (SNE ), Toshiba (TOSBF ), Microsoft (MSFT ), and Nintendo (NTDOY ). Now Toshiba and Microsoft are competitors of IBM but this collaboration drove a great breakthrough. In the software segment, collaboration with the open source community such as Linux and Eclipse has driven software development to standardization , increasing ease of use.

Clear lessons – implications

IBM is one of the rarities in the business world, that has fallen from the pinnacle of the industry, hit near rock-bottom and then dramatically turned itself around to climb the summit again. The targeting of the internet as a new revenue model, the open source business model, licensing patents to smaller start-ups are some of the innovative business methods used by IBM to achieve this turnaround. Innovation was thus an integral part of the strategy employed by IBM to regain its pole position in the IT industry.

The IBM Research paper states the following about the lessons gleaned about how to retain innovation:

Hire smart people

Set milestones.

Ensure a variety of thinking within a critical mass.

Maintain flexibility.

Create a fluid community.

Embrace risk.

References

1> IBM Research : Innovation @ IBM : Our long-standing commitment. 2004 IBM Corporation.

2> Who Says Elephants Can’t Dance? Inside IBM’s Historic Turnaround – Louis V. Gerstner, Jr.

Harper Collins Publishers

3> IBM Delivers Innovation – On Demand. ODIS Transforms IBM Inventions Into Client-Valued Innovation Network Services by Navi Radjou with Christine Ferrusi Ross and Ian Schuler published June 22, 2005. Forrester Research Inc.

4> Innovation: The View From The Top – IBM’s honcho on what CEOs can do to lay the groundwork for real breakthroughs – Business Week April 3, 2006

5> Past, Present and Future by Jim Utsler – Linux Executive Report (LER) – August 2006

http://www.ibm.com/linux

6> Conquering Open-Source Fears by Shirley S. Savage – Linux Executive Report (LER) – August 2006

http://www.ibm.com/linux

7> Five barriers to innovation: Key questions and answers – November 2006 Executive Technology Report (ETR)

http://ibm.com/bcs

8> Open Innovation – The New Imperative for Creating and Profiting from Technology by Henry Chesbrough

Harvard Business School Press

9> http://www.eclipse.org

10> http://www.opensource.org/advocacy/case_for_business.php

This is the text of an assignment on Entrepreneurship & Innovation for my MBA at CIIM.

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Web Services, SOA, BPM, and Cloud Computing – IV

Before we continue with web services and go into the gory details, let’s first identify WHY would we need web services.

Without the WHY, the HOWs, WHENs, WHEREs, HOW MUCHs, WHATs, BY WHOM, WHOs is pretty much redundant as a good project manager or better still a project sponsor will tell you. The WHY gives direction.. .

The answers to the other questions, pave the way.

Let’s just consider me and a hypothetical situation. It is the 14th of February, Valentine’s day next week. And though I want to give my girlfriend and me, an extra special time, it will be difficult to make arrangements for making that day a memorable one. Travelling will be difficult ; I do not have my own transport. Making dinner reservations and buying show tickets to the latest hit film or the hit musical that’s just come into town in person is almost impossible. How wonderful would it be if I could have a concierge or better still a personal assistant who would do all that for me! And either for a minute transaction fee or for nothing!

Now, I could log on to the car-rental site like Hertz and or the taxi hire ( say Meru) web-site and arrange for transport. Or call them up! And then log on to a web-site like BookMyShow.com and book the tickets for the film I would like to see. But these would have to be done individually and co-ordinating the bookings is a hassle and its my hassle!

But what if there was web-site that would do this, an aggregator of services? A mash-up , if you like. It would offer me a bouquet of services, I enter my requirements and let the service provider do the work.

The web-site does the job of orchestrating and choreographing my requests, and comes up with my dream date! For a small fee!

Would this make for a good bizness model? If you could extend this as a service to firms, that would include booking train, bus and plane tickets, yes, the volumes add up and revenue can be significant.

Though the earlier scenario is so much more interesting and romantic!

And though the WHY is short and pithy, it is so much more potent!

Have a good day!

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Web Services, SOA, BPM, and Cloud Computing – III

Still with web services , and now let’s talk about Discovery of services.

Discovery, as in the 2nd D in UDDI (Universal Description, Discovery and Integration) and not the Discovery channel, though the latter is probably so much more entertaining.

1> UDDI is the abbreviated form of Universal Description, Discovery and Integration though a lot of people also refer to it as Universal Dynamic Discovery and Invocation , which to my mind , seems a better disambiguation of the abbreviation.

UDDI is basically a directory of services offered by various service providers or organizations. UDDI can be of 2 kinds, public and private. The public UDDI directories list services by organizations, and there are various classifications of the organizations, that could be used to identify an appropriate service based on business type.

The private UDDI registries are usually internal to a large organization, or could be B2B or industry registries. These are usually private and are not accessible to all.

The idea behind having UDDI registries is that systems that use these registries could be self-organizing i.e they discover services as they are added and can thus add to their capabilities. This is kind of a precursor to a Semantic Web, though it is not quite the same.That is, if a new business entity added a similar service to the one you were currently using , your system would discover this service and add it to its list of alternate services that it could use. It could thus create B2B partnerships on the fly. Now this could still happen based on some criteria but in actuality, when other organizations use services provided by service providers, a contract and a SLA (Service Level Agreement) is to be first agreed upon before the services are used. You would not trust your critical system with a service that could be proved unreliable.

Also, your system rather than create dynamic relationships with all services that provide the functionality needed would rather have 2 or 3 preferred providers which would be used either in a round-robin manner or in some priority order. These would be based either on metered usage or an agreement as to the no. of transactions to be used per month.

Also, there are issues of tracking usage , which needs the service user to first be authenticated and then authorised to use the service.

Though these could be automated , there are practical considerations that still require human judgment to be exercised.

One of the major criteria for choosing a service provider would be cost, but it is not the sole criteria. Quality of service (QOS) is another major criteria.

UDDI is a centralised way of accessing web services; your system accesses the registry , looks up the required organization/industry and chooses the service it requires. This is a one-time process; the WSDL document for the service is located; the service is bound to and cached by your system so that the computational and network cost of accessing the registry is not incurred again. In most cases, you might even bypass the UDDI as you might already be provided the WSDL location by the service provider.

Though UDDI is supported by IBM, IBM also supports  an alternate standard for discovering web services, which seems much simpler and is , in the bargain, a distributed system.

2> WSIL (Web Services Inspection Language)

Web Services Inspection Language (WSIL) is a service discovery mechanism that is an alternative to UDDI as well as complementary to UDDI. With WSIL, you go directly to the source of the service i.e. the service provider itself , a sort of , getting it directly from the horse’s mouth.

Let me draw an analogy here. How many of you are familiar with RSS (Really Simple Syndication)? If you are a blog writer or reader, you will be familiar with the RSS button on the index page. You just point an RSS reader to it and voila!, you are now subscribed to any new articles or posts on the blog or web-site.

WSIL operates in a similar manner. It requires that the root of the web-site have a meta-tag that has a pointer or link to a WSIL document that describes a list of services provided by the service provider , in this case, the web-site.

Why is it complementary? It is much easier to update a document provided on your web-site with the list of all the service available for consumption than to update an UDDI registry. The UDDI registry can then be populated automatically using a search and identify WSIL documents program. There would be some lag in synchronicity but life gets much simpler. Simplicity is key.

In both of the above discovery mechanisms, the WSDL documents are not stored ; just a reference to them.

References: Wikipedia, http://publib.boulder.ibm.com/infocenter/radhelp/ (search for WSIL)

J2EE™ Web Services

By Richard Monson-Haefel

Note: WSIL is a standard proposed by Microsoft and IBM.

Addendum: Microsoft also offers a proprietary discovery mechanism called DISCO that follows a very similar approach to WSIL. See http://msdn.microsoft.com/en-us/magazine/cc302073.aspx

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Web Services, SOA, BPM, and Cloud Computing – II

Talking about web services again, I would classify web-services as the following 3 types:

1> RPC type : Here the web-services, when their payload is examined, follow an RPC style; i.e they appear to be a pair of method and return calls. For those who are familiar with the RPC coding methods , in existence, before CORBA, XML-RPC would appear to be very similar.

2> Document style: Here the web-services, or rather their payload, follow a document style. That is, the payload is an XML document, and the response is another XML document. The document is defined by the user i.e. either the programmer, the architect or it could also be some standard format.

XML-RPC evolved into SOAP; the SOAP protocol supports the RPC and Document style of web-services.

3> RESTful services: RESTful (Representational State Transfer) web services follow the CRUD methodology.

Create

Retrieve/Read

Update

Delete

These draw inspiration from the database methodology or rather the relational database SQL DML (Data Manipulation Language) statements.

The SQL mappings for CRUD in a relational database are as follows:

Create
INSERT

Read (Retrieve)
SELECT

Update
UPDATE

Delete (Destroy)
DELETE

The key principle behind REST is to look at everything as a resource, which can be uniquely identified.

REST uses the HTTP protocol and hence each resource is uniquely identified by an URI or Uniform Resource Identifier.

Amazon.com’s technical team were one of the pioneers of the RESTful approach towards web-services. And to their credit, it is the simpler approach and more easily understandable. This style of web-service programming was and is the backbone of their shopping site. It is also the architectural style used for their cloud computing offerings.

What the RESTful architecture using the HTTP protocol does is map HTTP methods to the CRUD style.

HTTP GET – retrieves a resource or rather its representation. Very simply a GET call to the URI, returns the resource and its contents.

HTTP PUT – the HTTP PUT method – as the name suggests , this maps to the CREATE i.e either a new resource is created or an existing resource is replaced , if the same identifier is used.

HTTP POST – is used to modify or update an existing resource. This is usually a partial update. It may also be used to create a sub-resource.

HTTP DELETE – the simplest – deletes the resource.

References: Wikipedia. http://xmlrpc.com,http://www.infoq.com/articles/designing-restful-http-apps-roth

PS: CRUD is sometimes also referred to as CRUDS where the S stands for Search. Though you could just classify it as a subset of R – the retrieve.

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Web Services, SOA, BPM, and Cloud Computing – I

The field of IT technology is an ever-changing one. Just when you think that you are on the cusp of grasping the next big thing, you find that its no longer the next big thing. It’s the next big thing , that could have been!

Let’s just talk about a few terms that you might have heard about or read about – the so-called game-changers, the panacea to all IT’s problems.

The most commonly heard terms bandied around are : SOA (Service Oriented Architecture), cloud computing and BPM (Business Process Modeling).

If you are aware of these terms and believe that you can drop them around in casual conversation around the water cooler, you are part of the ‘in-crowd’ i.e. you kind of know it all.

But how do all these technologies fit in? Are they something quite separate? Or are they all inter-linked? What are the linkages that bind them together?

From a technological stand-point , Web Services Definition Language (WSDL), SOAP (Simple Object Access Protocol) and Universal Description, Discovery and Integration or Universal Dynamic Discovery and Invocation (UDDI) are what forms the basic building blocks for web-services. WSDL is. of course, based on XML, so I do not add XML to this mix.

At the least, these are also the building blocks to building an SOA infrastructure, though SOA is more than just web-services.

There are 2 ways to build a web-service:

1> From the top-down i.e. you enable your existing application’s functionality to be used as a web-service. This is the easiest route and enables reuse of existing functionality.

2> From the bottom-up i.e. you write web-services for wanted/required functionality and then invoke these either directly through clients or from other applications and/or services. You could even expose these services to 3rd party applications.

What is so different about web-services?

Web-services besides allowing for reuse across applications, also accounts for interoperability.

What is interoperability? Interoperability is the ability for applications written for different platforms and in different languages to communicate without loss of semantics and functionality.

The genesis of web-services originated from B2B applications i.e the need for business applications across business entities to communicate with each other. Anyone remember WebMethods?

Prior to web-services, B2B communication did exist but was largely proprietary and non-extensible. EDI was once such methodology. It still exists and works, but is not fashionable anymore.

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