E1's compensatory exchange 

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... altered by the outflow event. III. V ALUE -O RIENTED C OMPENSATION – O UR A PPROACH As stated by Mili et al.[4], current implementations of compensation in service-oriented architectures have inherent problems in regards to language constructs. The designer of a service orchestration (i.e. the consumer of web services) has the responsibility to account for the many exceptions errors that may occur during the execution of a business process with little or no guidance. In other words, the designer has to know what services he should invoke to compensate a given service or has to implement his own compensatory activities – thus impeding service reusability. We share the view that compensation is essentially a business problem. However, we argue that behind the seemingly infinite variety of compensation responses that organizations can deploy to a given failure, there lay a handful of principles that we should be able to codify [4]. This, in turn, relies on our ability to analyze the activities within a typical e- business process in pure economic and business terms, abstracting away—for the time being—the idiosyncrasies of the corresponding record-keeping by the IT system. To this end, we propose, as a first step to our approach, to use the REA framework as an ontological framework for analyzing business processes. The second step would involve defining the requirements of compensating activities expressed in a purely business perspective. These requirements are intended to provide the process designer with a desirable insight on which compensation activities should be considered and what each activity should be concerned about. The last step will construct the compensatory process’ value chain. In the following paragraphs, we will build on the Amazon example introduced earlier in order to explain each step of our approach. The REA framework allows describing the business process at different levels of abstraction. Figure 1 models our Amazon process at a high level. Yet, this high level abstracts many economic events and resource consumptions that we may otherwise see by further decomposing the high level exchange. Therefore, a decision must be made as to which level one should stop breaking down the coarse grained exchange. In [10] Geerts et al. suggest to stop at the level needed to plan, control and evaluate the business process. When starting to break down the high level process, and given our knowledge of the business process, we notice that the exchange could not happen as presented since both parties are in different locations. Therefore, we need to alter our resources Location properties for the exchange to happen. In order to change the Book ’s location property, Amazon relies on a transport company who provides it with transportation rights. For the sake of simplicity, we suppose that these transportation rights have been previously acquired from the transporter. Similarly, the change of Money ’s location involves a financial institution handling the credit card transaction. This, in turn, involves transaction fees charged by the financial institution . However, we decide that we do not want to account transaction fees at the level we need to plan, control and evaluate the process. Therefore, we aggregate these transaction fees as property of the production event Transport book . This results in the E3 REA exchange shown on figure 2 3 . By continuing further down we notice that the book cannot be shipped as is and must be packaged prior to shipping. In REA terms, we need to alter the book’s packaged property within a conversional exchange. This exchange requires the consumption of packaging (that would cease to exist after the exchange) as well as an employee’s labor. As we did with banking fees, we decide to account for employees’ labor as a production fee. Figure 2 depicts the global value chain. The analysis and design of the value chain has enabled us to establish the rationale behind Amazon ’s sale and distribution business process. We will now focus on assessing the compensation activities following the same business rationale. Let’s consider the exchange E1 from our example in Figure 2. In order to reverse the exchange, we want to assess the effect of the process on the resources: the packaging has been consumed during the exchange and therefore could not be gained back; the book was structurally changed by being enclosed in a box and fees were involved (ex.: labor fees). This assessment raises a handful of questions as to how one should compensate for the exchange: How to cover for the loss in after the book has been ordered? Although these questions exhibit the complexity behind compensation, we argue that the problem could be codified by a few factors in pure business terms. In the following paragraphs, we introduce the four factors we have identified: Relying on these factors and the initial value chain, we are able to automatically construct the compensatory exchanges as shown in Figure 3. As presented in section II, the REA framework distinguishes two types of exchanges. Transactional exchanges involve an exchange in resource rights. Compensating a transactional exchange would require to reverse the exchange by returning the said rights to their provider. For example, the exchange E1 from Figure 1 would involve returning the ownership over the money to the customer and the ownership rights over the book to Amazon . Conversional exchanges, on the other hand, imply an alteration in a set of resources properties. Given the stock-flow relationship, we could conjecture how to compensate for the altered resource: - A consumed resource would be compensated by a claim or an equivalent value of the ...