MIDDLEWARE INTEGRATION PLATFORMS: A NEW

CHALLENGE TO BUSINESS MODELS OF ICT COMPANIES

Unleashing the Business Potential of Horizontalization

Markus Eurich

Technology and Innovation Management (TIM), Swiss Federal Institute of Technology Zürich (ETH)

Scheuchzerstrasse 7, 8092 Zürich, Switzerland

SAP (Switzerland) Inc. Research, Kreuzplatz 20, 8008 Zürich, Switzerland

Roman Boutellier

TIM, Department for Management, Technology, and Economics, ETH Zürich, Rämistrasse 101, 8092 Zürich, Switzerland

Keywords: Middleware Integration Platform, e-Business Applications, Future Directions, Real World Internet,

Horizontalization, Business Models.

Abstract: Information and Communication Technology (ICT) has the potential to transform business on different

levels. Changes in the ICT market, the technology and its dynamics, and of customers’ demands and needs

will challenge the current business models of ICT companies. If middleware integration platforms integrate

presently isolated networks, organizations may have to re-define their role and their business scope;

especially if the assumptions hold true that middleware platforms foster disintermediation and enable new

players to enter the market. In this paper, the business potential of reusing sensing, actuation and processing

services for different applications - termed horizontalization - is described. It provides insights to the design

and architecture of middleware integration platforms designed to enable horizontal services and gives

examples of e-business opportunities that can be realized on top of middleware integration platforms.

1 INTRODUCTION

In the early stages of the Internet it was primarily

considered as an additional information channel. It

took some time before companies realized the

potential of the Internet to increase efficiency: the

Internet enables transformation of business

processes and business networks, and eventually

even business scope redefinitions (Venkatraman,

1994). The evolution of the Internet has still not

come to an end and latest advances in Information

and Communication Technology (ICT) extend the

Internet’s business potential. One of the next

evolutionary steps is assumed to be the bridging of

the physical world with the digital one by the means

of recent innovations in the fields of (Wireless)

Sensor and Actuator Networks (WSAN), Radio

Frequency Identification (RFID), Machine to

Machine (M2M) data communications, positioning

systems, and Network-Embedded Devices (NED)

(Presser et al., 2008). Vertically integrated and

closed solutions on the basis of WSANs, RFID and

M2M are already deployed for various purposes.

Middleware integration platforms now aim at

integrating information from different sources,

which means that they approach to combine vertical

solutions that were originally designed for a single

purpose. In comparison to so-called vertical

solutions (built for a single purpose), we term the

concept of reusing services in a uniform manner -

such as sensing, actuation and processing services -

horizontalization. In this way, the speed of business

transformation could increase, as the reach of the

Internet is extended to the real world and its

potential can be realized on a global inter-

organizational level. Information is not just an

auxiliary factor that supports the production and

shipment of physical products; it is even a product of

its own in electronic platforms that enable the

processing of information, communications and

transactions. The evolution of the Internet may

enable new e-business opportunities and new

business models, which can generate new value. E-

239

Eurich M. and Boutellier R. (2010).

MIDDLEWARE INTEGRATION PLATFORMS: A NEW CHALLENGE TO BUSINESS MODELS OF ICT COMPANIES - Unleashing the Business Potential

of Horizontalization.

In Proceedings of the International Conference on e-Business, pages 239-244

DOI: 10.5220/0002942702390244

 SciTePress

business opportunities can be of different nature, e.g.

Business-to-Business (B2B), Business-to-Consumer

(B2C), administration to business, or intra-

organizational (e.g., Amit and Zott, 2001; Timmers,

1998); this paper focuses on B2B and B2C.

The purpose of this paper is to foster the

understanding of the business potential of

horizontalization. Therefore, future directions of the

Internet and a prime example of a middleware

integration platform that aims at realizing the

concept of horizontalization are described in section

3. Concrete e-business opportunities on top of such a

middleware integration platform are depicted in

section 4. Section 5 is dedicated to implications of

the concept of horizontalization and the deployment

of middleware integration platforms. These

implications suggest a challenge to the business

models of ICT companies and may help managers

and strategist to anticipate a redesign of business

processes and networks and eventually even the

overall business scope.

2 METHODOLOGY

The research questions were: (1) how should a

middleware integration platform be designed and

how does it work? (2) Which e-business

opportunities may emerge on top of a middleware

integration platform? (3) What implications on

business models arise from the deployment of

middleware integration platforms and especially the

concept of horizontalization?

As we found little research has been done that

combines the aspects, in which we want to

investigate, and a comprehensive understanding of

those aspects seems missing in the current literature,

a qualitative research method was applied (on basis

of Bryman and Bell, 2007). The research approach

was divided into two parts: the design of middleware

integration platforms and the assessment of e-

business opportunities that may emerge on top of

those platforms were investigated within the

framework of the research project SENSEI

(“Integrating the physical with the digital world of

the network of the future”, SENSEI, 2010a). We

conducted 25 interviews to assess design principles

and business opportunities of middleware integration

platforms. The interviewed organizations were ICT

businesses, to which the SENSEI approach may

become relevant; this particularly includes:

infrastructure providers, service developers, and

service providers. We identified key personnel in

charge of future strategy, experts in Future Internet

and WSAN research as the valuable contact persons

and potential interviewees. The expert interviews

have been conducted via phone or face-to-face and

followed an interview guideline. The other part of

our research approach went beyond the SENSEI

project: a literature review was performed, which

was followed by another round of in-depth expert

interviews. Eight semi-structured face-to-face and

phone interviews were conducted with managers and

strategists to foster the understanding of how

middleware integration platforms and especially the

concept of horizontalization would challenge their

business models.

3 MIDDLEWARE PLATFORMS

This section describes related work and the results of

a literature review about future directions of e-

business and it presents the SENSEI framework as a

prime example of middleware integration platforms.

We validated SENSEI’s design by 25 in-depth

expert interviews.

As the Internet evolves e-business services can

become more and more sophisticated. One of the

most important drivers of the Internet’s evolution is

its extension of reach to the real world: innovations

that aim at connecting the physical with the digital

world in a network of objects are commonly termed

the “Internet of Things” (IoT; cf. e.g. Floerkemeier

et al., 2008). ReadWriteWeb (2009) provides a good

overview of recent IoT products. Recent ideas

picture the IoT as an “encompassing vision to

integrate the real world into the Internet” (Presser et

al., 2008): also referred to as the Real World Internet

(RWI). The RWI dimension and other concepts such

as the Internet-of-Services (Buxmann et al., 2009)

are parts of the so-called “Future Internet”

(European Future Internet Portal, 2010; Presser et

al., 2008). The evolution of the Internet and

especially the RWI dimension of the Future Internet

are only possible due to advances in ICT such as the

emergence of WSANs, RFID, M2M data

communications, positioning systems and NEDs.

These technology developments are considered to be

enablers of the vision of an all encompassing

infrastructure that bridges “the realms of bits and

atoms” (Greenfield, 2006). Many researchers are

about to push the evolution of the Internet forward,

especially by contributing to the realization of the

vision of the RWI dimension of the Future Internet

(4WARD, 2010; Beecham Research, 2008; EU-

MESH, 2010;

Haugli, 2009; ISSNIP, 2010;

Pachube, 2010; SENSEI, 2010a; Socrades, 2009;

uID Center, 2010; WiSeNts, 2006; and many more).

ICE-B 2010 - International Conference on e-Business

240

Most interviewed experts and researchers agree with

Haugli (2009) on the assumption that there will be a

shift “from closed vertical solution to open

horizontal layered value chains”.

Among the research activities that design and

develop technology platforms, the SENSEI project

(SENSEI, 2010a) is outstanding as it is the biggest

Integrated Project from Call 1, Challenge 1.1: “The

Network of the Future” with an effort of about 1900

person-months and involvement of 19 consortium

members from eleven European countries. The

SENSEI framework aims at “integrating the physical

with the digital world of the network of the future”

(SENSEI, 2010a). To make this vision become

reality, sensors, actuators, and NEDs have to be

deployed everywhere and interconnected. Indeed,

WSANs are already deployed on a noticeable scale.

However, almost all of them are currently used for

single-purposed vertical solutions. Horizontalization

is therefore the key design goal of the SENSEI

framework, which means the reuse of sensing,

actuation and processing services for different

applications. The open, business-driven architecture

of the SENSEI middleware platform integrates

heterogeneous WSANs and provides uniform access

to RWI service components. SENSEI services like

discovery services or query services enable the

development of e-business applications on top of the

middleware (Figure 1).

Figure 1: The simplified SENSEI framework.

The SENSEI architecture is designed in a way to

satisfy the demands of multiple players in an

evolving Internet value network and therefore

addresses several aspects, amongst others: privacy

and security (protect the privacy of users and offer

adequate security for participating systems and

entities being observed and acted upon),

accessibility (reduced complexity of accessing

sensing and actuation services for applications),

scalability (support efficient internetworking of a

large number of distributed sensor networks islands),

heterogeneity (accommodate a variety of sensor and

actuator networks with different technology and

administrative domains), manageability (permit

distributed management of participating systems and

resources), and simplicity of participation (ease the

integration of new WSANs) (SENSEI, 2010b).

The horizontal architecture of the middleware

platform should enable the reuse of real world

services in a uniform manner, which is realized by

the means of standardized resource descriptions and

flexible service composition. The platform should

offer one modular framework with real world

services at different levels: on the first level, there

are basic sensor and actuator access services, on the

second level, basic discovery or sensor and actuator

services are offered, the third level, should provide

real world context and actuation management

services, and on the fourth level, there are dynamic

real world service instantiation and composition.

The integration platform may have the ability to

create a business ecosystem with different players

offering any subset of those services. The

architecture even allows small providers with low-

value transactions to join the framework. This will

create new e-business opportunities and contribute

to bridging the gap between the net and the real

economy. The interviews revealed that the

stakeholders expect the concept of the middleware

integration platform to enable innovations, support

the innovation dynamics within companies, and lead

to changes in the market.

4 E-BUSINESS APPLICATIONS

On the basis of the concept of horizontalization,

middleware platforms like SENSEI that aim at

integrating formerly separated WSAN islands and

incorporate M2M data communications have the

potential to enable or at least improve a variety of e-

business applications. On the basis of such

middleware integration platforms, both B2C as well

as B2B e-business applications can run, providing

business opportunities in different service sectors

like retail, public transport, asset management,

building automation, smart grid, emergency

management, healthcare, or automated

manufacturing. Only the application domains asset

tracking, building and home, and entertainment can

be presented in more detail in this paper.

4.1 Asset Tracking

The need of middleware integration platforms

MIDDLEWARE INTEGRATION PLATFORMS: A NEW CHALLENGE TO BUSINESS MODELS OF ICT

COMPANIES - Unleashing the Business Potential of Horizontalization

241

becomes particularly obvious in supply chains,

where goods flow through different organizations,

each with its own information system. Current

supply chain infrastructures are limited to RFID and

barcode technologies and do not yet include sensor

data on a large scale. Middleware integration

platforms aim at enriching current applications with

sensed physical data from various entities and can

thus enable e-business applications to reduce

delivery delays, improve compliance, secure product

delivery to consumers, reduce loss or theft of goods,

minimize waste, reduce the extent of management-

by-exception, allow ongoing real-time analysis, and

ensure supply chain integrity. E-business

applications for asset tracking on the basis of

middleware platforms are especially motivated by

the anticipated achievement of the business benefits:

efficiency and quality, and supply chain integrity.

Efficiency and Quality: Sensor data on

transportation can enormously improve the

efficiency and quality of the underlying business

processes as sensors can contribute to full visibility

of the supply chain. This allows companies to know

exactly where their products are, to analyze ongoing

processes, and thus to continually redesign processes

and norms. Knowing about products’ location and

conditions helps to reduce delivery delays as well as

to identify and eventually reduce loss and theft.

Waste can be minimized, for instance, if the ripest

product can be delivered first. For companies this

means that fewer products need to be discarded,

which leads to lower cost. Moreover, existing

infrastructures are limited when it comes to reacting

upon deviations between real world data and plan

data. Middleware integration platforms that combine

WSANs and enable M2M interactions could be

designed in a way to immediately trigger actions

(via actuators) to counteract deviations between real

world data and plan data. Companies can implement

proactive processes that are triggered by actuators

and thus become a proactive instead of a reacting

organization.

Supply Chain Integrity: During the products’

flow through the supply chain, companies are faced

with compliance requirements, like external

regulations imposed by external authorities (e.g.,

legal, tax, and transport), environmental (e.g., waste

electrical and electronic equipment guideline) or

social regulations (e.g., business code of conduct).

Compliance with these rules in an economical way

is essential for companies’ competitiveness. The

ability to seamlessly trace supply chain integrity

protects consumers from rotten food or flawed

medicine and gives manufacturers the proof of

compliance. Transports sometimes require that

shipments get consolidated into cooled trailers with

temperature registration. The information from

recent temperature registering devices was only

available after the trip. Now, middleware platforms

can gather real-time information about current state,

location or temperature via sensors that are deployed

throughout the supply-chain in order to compare that

data with compliance-based planning data and to

detect deviations between the ‘to be’ and the ‘as is’

state. In case of critical deviation, information

systems that are connected to WSANs can initiate

appropriate actions to re-establish the supply chain

integrity and to prevent further implications of the

deviation.

4.2 Building and Home Automation

In the building and home automation application

sector an increasing number of objects can be

monitored, like water, gas, and electricity

consumption or automated, like heating, lights,

shutters, or blinds. Innovations such as automatic

collection of consumption and status data from

metering devices are commonly termed as

“Advanced Metering Infrastructure” (AMI). The

combination of data from AMI with sensor data, e.g.

presence of people, and data from information

systems can facilitate various e-business

applications. Middleware integration platforms can

gather the data that organizations need to integrate

from different vertical solutions, share information

with other parties, and eventually outsource non-

core infrastructure and thus lower cost (see also

Haugli, 2009). E-business opportunities are mainly

related to applications that help to reduce energy and

cost as well as to increase security.

Consumption and Cost Reduction: Recent

developments in miniaturization of sensors and

actuators and lower prices for bandwidth have

increased the potential for integration of different

systems: e.g., plausibility checks decrease the

number of false alarms, integration of weather

forecasts with heating systems reduce energy use.

Reduction of energy is especially important in places

where people are not too concerned about energy

billing as in offices or in public buildings. A

probably well-known example of reducing energy is

to combine information from a calendar about

occupancy of a meeting room with the central

heating and lighting system. Temperature and light

only need to be convenient in times of meetings in

that room. Consumers may benefit from better

notification and control of consumption. Concerning

water and energy they could realize the concrete

consumption of a washing machine and they can be

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informed about leakage, waste, or malfunction use,

e.g. in toilets.

Increased Security: The integration of AMI and

WSAN data into one middleware platform can help

to detect leakages. Water or gas leakages are

difficult to detect because most tubes are

underground. The detection of gas leakage is

especially important to happen in real-time for

security reasons. The integration of data may also

help to notice a loss of electricity. Electricity theft

occurs in slums of big cities and creates safety risks,

e.g. fire or blackouts caused by short cuts.

4.3 Entertainment

In Western societies many people spend a lot of time

in entertainment activities such as sports and video

games as well as money on equipment and

accessories. Consumers seem to appreciate new

applications like new games or personalized training

programs. A key adoption driver for middleware

integration platforms is the fact that several sensors

are already deployed for other purposes, e.g. weather

forecast, in urban areas. The integration of and

ubiquitous access to sensed information of different

kind and the connection to information system can

pave the way and add value to sophisticated mass

customization services. Modern e-business services

may satisfy two major customers’ needs and wants:

real-world assistance and greater amusement.

Real-world Assistance: Integration of sensed

information and services like geo-positioning into a

middleware platform together with connections to

information systems, allows e-business applications

to be implemented that users can be supported when

moving through unknown cities. Weather forecasts,

notifications about traffic jams, or write-ups from

other users and recommendations that pop-up in

real-time when passing by, might become applicable

on cell phones to ease the get along and enrich the

experience of visitors. Training plans may be

aligned with weather forecasts and modified, e.g. if

the air pollution level is too high at the initial

planned training session.

Greater Amusement: Video games may be

extended to the real world, e.g. scavenger hunts on

cell phone based on geo-positioning services.

5 IMPLICATIONS

The deployment of middleware integration platforms

and the realizatio of horizontalization may have

different implications on business:

Application service providers and WSAN owner

can address a broader market: application providers

who base their services on top of a middleware

platform can compose more sophisticated

applications by consolidating information that stem

from formerly disconnected networks like WSAN

islands (cf. Figure 1). Currently, WSAN are mainly

deployed for single purpose use and provide only

some niches with data. Through the connection to a

middleware platform, single sensing, actuating, and

processing services from WSAN islands can be

reused for multiple services.

New business roles may emerge: at the moment

no “sensor data repository” exists. A new role may

be the one of a sensor information broker, some kind

of “Google for sensor data”, who pre-collects

information, caches and re-sells it. The revenue

generation mechanism may work by pay-per-use. A

similar new role could be a kind of apps store that

offers a platform on which new applications can be

developed and bought. The business model could

imply an open innovation approach, similar to the

one of Apple’s iPhone apps store.

Rivalry among competitors may increase:

Middleware platforms that aim at integration on a

global scale provide business opportunities to

competitors worldwide. In accordance with Porter

(2008) rivalry will increase due to: (1) augmented

bargaining power of customers because of higher

transparency. Consumers gain ever more

transparency about advantages and disadvantages of

providers as well as about the quality of services.

Internet forums and blogs foster this development,

(2) threat of substitute products and services,

because higher penetration of mobile services,

emerging technologies, and paradigm shifts will

provide new product and service possibilities, (3)

bargaining power of suppliers, as increased volumes

but falling prices may encourage suppliers to cut out

intermediaries (disintermediation) or at least

strengthen their bargaining power, especially if

middleware platforms facilitate direct connections

between business partners, and (4) threat of new

entrants as the architecture of middleware

integration platforms allows small providers with

low-value transactions to join the framework.

6 CONCLUSIONS AND

OUTLOOK

The sketched implications may challenge the

business models of ICT companies as changed

assumptions about the environment of an

MIDDLEWARE INTEGRATION PLATFORMS: A NEW CHALLENGE TO BUSINESS MODELS OF ICT

COMPANIES - Unleashing the Business Potential of Horizontalization

243

organization entails changes to the “Theory of the

Business” (Drucker, 1994). In the context of

middleware integration platforms being deployed

and presently isolated networks being integrated,

organizations may have to re-define their role and

their business scope. It will be a challenge for ICT

organizations to assess which business opportunities

will generate revenue. This will depend on the

attitude of consumers and their willingness to pay

for the services, as well as on how middleware

platforms will be implemented. Future research is

necessary to identify business opportunities that

really pay off and to define the companies’ roles

within a value network in which the concept of

horizontalization is realized.

Further challenges and future research topics

include: first, the assessment of the extent to which

businesses are willing to apply WSAN and M2M

technology. Incentive schemes might need to be

elaborated to get everyone involved who is required.

Second, companies must be empowered to share

information via middleware platforms. Risks, which

go along with the inter-organizational sharing of

data must be identified and minimized. Third,

standardization and interoperating among devices is

needed. On the one hand, it is important to enable

consumers to easily plug in devices and on the other

hand it is a prerequisite to reap business benefits due

to economy of scales. Forth, security and privacy

aspects must be taken into account. The privacy of

users must be protected and the adequate security

mechanisms must be provided for the participating

systems and entities being observed and acted upon.

Approaches and solutions to these research topics

will foster the evolution of the Internet and extend

its business potential.

ACKNOWLEDGEMENTS

Parts of this paper describe work undertaken in the

context of the SENSEI project, ‘Integrating the

Physical with the Digital World of the Network of

the Future’ (www.sensei-project.eu). SENSEI is a

Large Scale Collaborative Project supported by the

European 7th Framework Programme, contract

number: 215923.

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