Returns on Event Processing
By perren.walker on Sep 19, 2008
Returns on event processing are highly specific to the industries in which they operate. Event processing does not lend it self to general return on investment characterizations of enterprise technologies. For example, middleware technology can enable customer self-service and consequently reduce the capacity requirements of a human sales and service organization. Organizations also employ middleware technology for internal facing self-service applications. Another example, data backup and disaster recovery can be viewed as a form of self-insurance. Both middleware and data backup have broad business value propositions that cross industry boundaries, with investment returns clearly tied to use cases.
For organization that has not evaluated the business impact of event processing, how can one imagine the potential returns on event processing? Identifying event processing opportunities within your organization can be extremely profitable resulting in improved processes, customer interaction and ultimately margin expansion. At worst, asking and exploring this question may lead to a better understanding of your internal processes and value flow within your organization. Lets take a look at existing event processing use cases and examine how event processing is used to identify and capture value:
Aircraft collision avoidance systems, their investment return is immeasurable preventing the loss of life. Yet in the shipping industry, some 18 years after the Exxon Valdez, there are still maritime collisions occurring such as the Cosco Busan’s collision with the San Francisco Bay Bridge on November 7, 2007. So clearly, very large opportunities still exist for event processing today.
With algorithmic trading, event processing enables the profitable capture of very small returns. Achieving a one-tenth-of-one-percent net-return (0.10%) on selling a security might not sound very appealing; however, if you were able to achieve that net-return every day without loss, over 200 trading days you would have a 22.12% compounded-return.
The above two investment returns could not seem more different - identifying and capturing lots very small returns and identifying and avoiding, relatively infrequent, costly outcomes. Both examples are enabled by the low marginal cost of event processing. In both cases significant returns are achieved. When evaluating event processing opportunities within your enterprise, keep these examples in mind as you look to identify and capture value that may be left on the table with your existing processes. There is almost no return too small for an event processor to programmatically detect and capture.
Now lets examine the role that human interaction versus automated processing plays event processing opportunities. Take for example programmed trading, if a true arbitrage opportunity exists, frequently trades are automatically placed - no human intervention is required. If the opportunity is less certain with a larger time-window, a trader may be asked to make the final decision. With human intervention there is a higher cost associated with human involvement and hopefully a corresponding return that justifies that cost. The net effect is business process segmentation, where a potential return can be matched to a process resulting in a profitable transition. This finance example is an internal process, however, there is no reason why customer-facing process couldn’t benefit as well.
Both examples outlined above are core to their respective business and the total return from each respective use case can be immense. With the dramatic fall in the cost of event processing development and maintenance, it is worth exploring the profitability of event processing within every area your organization, not just the core business.