Datasheet

c01_1 07/08/2008 2
transactions. If an organization can accomplish business transactions more
efficiently and at a lower cost by performing them internally, it will do so.
If, however, overall efficiency and cost optimization is achieved by others
outside of the organization performing those transactions, the best model is
outsourcing of those functions. These ideas are derived from the work of
Ronald Coase, whose work on transaction theory provides a perfect foun-
dation for SOA as a business model.
1
(See Marks and Bell 2006 for a discus-
sion of Ronald Coase and transaction theory applied to SOA and services.)
2
Exhibit 1.1 illustrates the concepts of core and context, and as an extension,
the combination of internal and external services to optimize the overall
transactional cost and efficiency of an organization.
Per our set-up discussion above, a corporation continually evaluates the
relative cost of performing business transactions internally versus externally
to best optimize its overall profitability. In fact, Ronald Coase would argue
that the relative size of a company, and its interactions with the market-
place, are ultimately based on relative costs of business transactions. Com-
bining the transaction theory of Ronald Coase with the core and context
concepts of Geoffrey Moore give us a tremendous foundation to apply SOA
concepts to.
Many small businesses outsource human resources, payroll processing,
and even their Information Technology (IT) in their early startup days, in-
stead focusing on the innovations that will help the company grow.
Payroll
Processing
HR/
Recruitment
PR
Lead
Gen
Sales
Project
Delivery
Branding
IP
Mgt
Generate
Electricity
Building
Maintenance
Cafeteria
Svcs
Client
Retention
Company XYZ
Core
Context
Solution
Innovation
Exhibit 1.1 Core vs. Context (Make vs. Buy vs. Rent)
2 THE SOA GOVERNANCE IMPERATIVE