Analyst: SOA may have reduced severity of mortgage crisis

Many of the issues arising from the US subprime mortgage crisis could have been averted if mortgage issuers and brokers relied less on error-prone paperwork and more on online, service-oriented systems.

SOA isn't just about cost-cutting; it's a growth engine

That's the view of James Governor, co-founder of RedMonk, the virally virtual analyst firm, speaking at the recent IBM Virtual Global SOA Forum, "Work Smarter, Take Out Costs In a Tough Economy." (I posted a transcript of James' talk here.)

The focus of SOA is to tie disparate systems and data together, and, in the process, reduce risks to the organization.  As James explains it, having better integrated systems may have helped banks and mortgage companies get a better picture of the risks they were undertaking:

"As we have seen in financial services, if you allow your organization to run on independent, isolated, distributed spreadsheets, you can get into a lot of trouble. And quite frankly, if we’d invested more in integration over the last few years, and better data governance, we would have significantly reduced the risk in terms of our banking infrastructure, our credit infrastructure, the kinds of mortgages that went out there. ... another very interesting thing about SOA. It’s easy to think of it as paper reduction. If you look at a lot of the mortgage approvals, many of them included information that was wrong. By working with a service oriented architecture by making sure that you digitized your information, we would have made better decisions, and reduced all risk. Clearly, that’s a massive benefit."

As businesses grapple with today's rough-and-tumble economy, James advocates greater investments in service orientation, which can pay off not only in terms of reduced costs, but also new business growth. In fact -- and we state this frequently here at this blogsite -- companies need to look down the road and prepare to stay ahead of the next wave of growth during the looming economic recovery. SOA is a shovel-ready stimulus for companies, and if sold to the business correctly, a growth enabler.

"In this difficult business environment, clearly we need to cut costs. But you know what? Nothing is sustainable if you're not driving new revenue streams, if you're not able to get new customers," James says. "Very clearly, from SOA, you're able to reach out to new customer sets." For example, being able to extend internal applications to customer and partner-facing Websites is a solid strategy for new growth. SOA will help leverage internal applications -- whether they're on mainframes or Windows boxes -- for this next round of growth.

SOA is not going to transform things overnight. As James puts it, SOA is "really hard work, nothing is easy. It really does require significant investment, but if you can lower your costs and find new revenue streams in the kind of business environment we’re currently facing, you're in pretty good shape."