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The Strategic Value of Enterprise Architectures

CIOs are expected to run IT like a business. CFOs expect one of their biggest internal investments to produce returns that meet or exceed shareholder expectations. Enterprise Architects bridge these expectations into actionable architectures.

Enterprise Architecture (EA) has emerged as an area critical to deriving business value from IT investments. EA -- a method of defining and aligning the principal standards that comprise an organization’s technical, application, information, and business-process needs -- is no longer viewed as an esoteric concept that is too complex to implement. Nor is EA still erroneously associated strictly with information technology infrastructure. However, there remain a surprisingly large number of projects that fail to achieve the benefits of EA. Only 52% of such projects realize their intended strategic value. (Maizilish et. Al)

Think of EA as a bridge over troubled water, such as: • Silos of applications • Post-merger islands of automation • Service reps opening eight windows to answer a customer’s question • Managers scrounging for information they need to make decisions • The loudest voice winning IT project funding decisions

The river of cash flowing through many organizations is being dammed by IT strategies that are not aligned with business goals. EA spans the gap between business goals or strategies and IT resources and assets across the entire enterprise. A properly structured EA leverages an adaptive architecture to speed time-to-market, reduce IT costs, integrate business processes, and create a common standard for how all IT groups use, extend, and manage a company’s IT systems, processes, and people.

“In a world of rapid change, the Enterprise Architecture is real, has significant benefits, and is more important now than ever (Maizilish et. Al). EA is worth a C-level discussion. A high-level grasp of EA may go a long way toward finally achieving that business/IT alignment that always seems to be on the horizon. (CIO.com)

Progressive organizations realize Enterprise Architecture is not marketing hype or a buzzword. A solid EA methodology helps answer basic questions such as: • How can the company create a road map for change? • Is the IT portfolio adaptive, efficiently managed, and is it capable of supporting the organization’s strategic goals? • Could new or different technology, like Service Oriented Architecture (SOA), help reach business goals better, faster, and cheaper?

IT investments represent a significant part of most companies’ budgets. Even so, there is an alarming failure to create business value in the majority of companies. As illustrated in the following statistics from DM Review – organizations are simply not attaining value from their IT investments at acceptable risk levels. • 84% of companies do not do business cases for their IT projects, or they do them on only a few key projects • 57% of companies perceive they are balancing the pressures of cost cutting and IT effectiveness • 52% of the projects realized strategic value (DMReview)

Every organization faces the harsh reality of doing more with less. However, most businesses lack the flexibility, adaptive planning, portfolio management, performance measurements, and processes necessary to properly manage their IT spending. Research (Maizilish et. Al) identifies these problems as chronic: • 83% of companies are unable to adjust and align their budgets with business needs more than once or twice per year; • 72% of IT projects are late, over budget, lacking in functionality, or never delivered; of the 28% successful projects, 45% were over budget and 68% took longer than planned; • 54% of the projects realized strategic value, and so out of 11 projects only 1 or 2 will deliver strategic value at plan and budget.

Their efforts are often frustrated by inconsistent performance measurement, siloed applications and systems, no adaptive planning, no portfolio view of projects, and slow and painful cost or ROI analysis. Despite these startling realities, IT management and architects are expected to justify the business value of IT as well as: • Achieve alignment with corporate vision • Demonstrate the flexibility to adjust priorities in rapidly changing environments • Balance resources and investments across different parts of the business • Establish realistic cost- and risk-control mechanisms • Employ good decision-making processes • Achieve compliance with best-practices and regulatory requirements • Deliver faster time to market • Respond rapidly to provide new competitive capabilities

Meeting these expectations is where EA is essential. “Consulting firm Meta Group Inc. says companies that embrace EA spend 30% less on IT and are more adaptive and make better decisions.” (CFO.com) The top reasons organizations are using EA, in order of importance are: • To support decision making • Manage the IT portfolio • Deliver road maps for change • Support systems development • Manage complexity and reduce cost (The Institute for Enterprise Architecture Development )

Enterprise Architecture — a Prerequisite to Effective IT Project Portfolio Management

Not “boiling the ocean” is essential to building a practical Enterprise Architecture. Managing the different dimensions of EA is an iterative process that ultimately migrates your current systems to a future architecture where there are: • few, if any redundant systems, • faster time to market for new initiatives , and • substantially lower maintenance costs.

Developing an EA strategy that aligns with business strategy is an important first step. However, making EA real and practical requires that your IT Project Portfolio Management (PPM) processes use project selection criteria that are also aligned with both of these strategies.

As illustrated in Figure 1, connecting EA to IT PPM requires a cascading process of business alignment as described below: Enterprise Strategic Intent • What are you trying to accomplish across the enterprise? • Have you established your critical success factors?

Enterprise Business Objective What are the requirements that support those objectives? What is the architecture that is going to allow you to fulfill those objectives? What are your Key Performance Indicators (KPIs) as you begin those objectives? How do you measure successful completion of the objectives?

Business Unit Objectives / Requirements (business alignment processes) • Using business intelligence and competitive intelligence, what will you measure to gauge the successful completion of objectives? • What business value will be created? • What are the gaps between your current capabilities and future capabilities?

The Enterprise IT Plan • Are you using performance scorecards to measure the business value from EA and to measure the performance of your IT portfolio? • Which policies are you enforcing? The IT Roadmap • How are you going to execute that high-level plan? • What capabilities are you going to deliver back to the enterprise? • What resources and assets are available, and which must be created and when? • How will new capabilities be introduced to the business units to assure adoption? IT Portfolio Management • What are the decision criteria used to choose which projects to fund and when? • When do you kill a project because it will not achieve the hurdle rate for ROI? • What is the appropriate mix of high risk/high return to low risk/low return projects?

One of the greatest areas of confusion in these PPM decision criteria is how to measure business value. When looking at how companies make money, their River of Cash™, there are only five ways that IT projects can impact business value: • Increase Revenue • Reduce Costs • Improve Process Efficiency • Mitigate Risks • Preserve Sustainability

Evaluating business value creation within EA or SOA initiatives is the new challenge for architects, CIOs, and any good technologist. It is just not what they have been trained to do, and there are few tools or methodologies that bridge this gap between business impact analysis and technical impact analysis.

A new role, the Enterprise Business Architect, has emerged as someone skilled at using EA to do business alignment and business transformation. Very few organizations have an Enterprise Business Architect permanently on staff. Companies that are focusing on deriving measurable business value from IT investments will find coaching or mentoring by an external Enterprise Business Architect expedient to achieving the following results while they build this capability internally: • Rapid time to market • Doing more with less • Deliver competitively differentiating capabilities • Substantially lower IT costs

When a company is starting to adopt EA or integrating SOA, starting PPM or more effective Performance Management, an Enterprise Business Architect becomes an indispensable team member for business alignment of these IT initiatives. As innovators in professional EA services, the IdealCMS® Enterprise Business Architects are recognized for effectively applying strong business and technological expertise and avoiding the pitfalls that are precursors to EA failure. Our Enterprise Business Architects help clients by: • Bridging strategic growth goals to the systems and processes needed to realize those goals. • Analyzing technology alternatives to select the ones that produce the best risk/returns balance. • Assuring that during system development, even as EA becomes more complex, our clients can still quickly make critical project, development, and funding decisions. • Implementing adaptive planning processes and tools which accelerate planning and execution. • Employing change adoption techniques to ensure that the people who will use new systems and processes are ready and their behaviors/work will produce the desired business value.

Our firm understands that getting true value from EA, SOA, and PPM initiatives can be frustrating, unclear as to where to start, and overwhelming when listening to the software vendors’ guidance on “business cases” and what to do. With expertise in a number of industry-standard software tools, we help clients QuickStart their thinking, strategies, IT plans, software selection, and ROI analysis, and then assist in actually getting something built that will deliver the expected benefits.

For example, Northrop Grumman asked IdealCMS to customize and extend the Telelogic System Architect® software for the Department of Interior’s DEAR program (DOI Enterprise Architecture Repository). Since DEAR and the Methodology for Business Transformation (MBT) are public domain resources, IdealCMS is encouraged to help commercial companies leverage these new EA standard practices and tools to accelerate their EA programs. Integrating our proprietary Business Alignment processes streamlined the MBT to further speed the rate that companies can achieve business value and faster time to market from IT investments.

The other tools we and our clients use to rapidly complete complex analysis of business, technical, architectural, business process, and ROI decision criteria are Telelogic Focal Point® and MPowerIQ™ Project Portfolio Manager.

The combination of proven best practices, practical methodologies for planning and implementation combined with software that simplifies the process assures a QuickStart for teams that are committed to get business value from EA and IT investments.

The demands on IT to create measurable business value, better decision making, and to do so faster and at lower costs force the need for managing your IT resources as Enterprise Architectures. Enterprise Architects working with a new role, Enterprise Business Architects, are responsible for bridging a company’s business needs and goals into IT capabilities that will: • Increase Revenue • Reduce Costs • Improve Process Efficiency • Mitigate Risks • Preserve Sustainability

For example, a company may commit to using Service Oriented Architecture (SOA) as a means of integrating siloed applications to accelerate time to market and reduce costs. The Enterprise Business Architect works with the Enterprise Architect to translate the business strategies, goals, and objectives into architectural and development environment requirements that: • Create actionable architecture • Eliminate waste and redundancy • Enable adaptive planning • Define key criteria in the PPM selection process • Span the life cycle of SOA

EA is critical to any business transformation initiative and can deliver tremendous business value. However, EA is an evolutionary process that enables business transformation and that cannot be approached as solely an IT or technical initiative. EA is proven to achieve the desired results, and there are methodologies and software that make EA a workable and practical initiative for companies that are committed to getting greater business value from IT.

“Techs and City,” CFO.com “Tech and the City,” CIO.com “Enterprise Architecture – The Value Proposition,” DMReview “IT Portfolio Management,” Bryan Maizilish and Robert Handler (John Wiley & Sons, Inc., 2005) “Trends in Enterprise Architecture 2005: How Are Organizations Progressing?” The Institute for Enterprise Architecture Development

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