Sunday, March 15, 2009

The Foolhardy Rush to Consolidation

Is your organization under a mandate to consolidate some aspect of IT?

Most likely it is. Consolidation is a mania that has spread across organizations of all kinds, in all sectors. It is usually driven by the business or financial side, and approved by the CIO - after all, who can argue with cutting costs through economies of scale?

But in the process, are we losing some important advantages of decentralization? Is this even part of the business case? That is, did the business case even attempt to account for the enterprise value of the existing decentralization?

Most likely not, since those benefits are usually somewhat intangible, and business cases for consolidation almost always focus on direct costs: the costs of servers, IT personnel, and software licenses.

Recently I was involved with two different calls for consolidation. One was a consolidation of IT operations: for IT to take ownership of all of the computing applications in the field and move them into a single data center, and have IT take over the apps and combine them when possible. The field is no longer allowed to write their own apps. The other effort sought to consolidate all HR functions and create a single "self-service" system: field HR personnel were eliminated or moved to the central location. The business case was based on reduced direct cost of HR personnel.

These looked compelling on paper, but both efforts foundered. Let's look at the HR effort. It turned out that people in the field did not want a self-service approach: they were accustomed to having someone to ask about HR matters. This allowed the people in the field to focus on their primary jobs. In the new approach, line of business managers found that they were spending all of their time working HR functions and were not able to focus on their own respective missions. The business case did not account for this loss of mission effectiveness, but in the words of one of the senior field managers, "the business case is flawed".1

In the case of the IT systems consolidation effort, the same mistake was made: the value of decentralization was not accounted for. As a result, people in the field will no longer have the flexibility to respond tactically to meet their own needs. The effort is still underway so we shall see what happens, but the symptoms are all looking familiar....

1. See chapter 11 of my book for techniques on how to model the value of "intangibles".

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Saturday, January 31, 2009

Enterprise Architecture is Broken

There are so many discussions going on about what IT architecture is, and the most confused seem to be those surrounding enterprise architecture.

The IT profession has the dilemma that it is continuously inventing itself and evolving, and terminology is not standardized as a result. However, many organizations have “enterprise architecture” groups. It is also generally recognized that IT needs to be more business-centric, but seldom does one see a description of what that means. What should IT do differently? What should business do differently?

Recently I proposed an experiment to the online Google group “Enterprise Architecture Network“, as follows: ask a business architect (typically trained in the IT camp) for a model of the architecture of the business: they will likely show you a process flow diagram, showing the DATA flows. Then ask a business person for a model of the same business, and they will show you a model that captures the CASH flows.

My point was that there is a great disconnect between what IT and business each consider to be the business architecture. And I claim that an EA should be able to explain each model, and inter-relate them.

Karl Garrison of that group then responded, “I quite like Cliff’s comments - particularly that EA is about process modeling, while executives think in terms of cash flow. And that they are completely different. This is really right on the mark and explains why many executives may support EA, but don’t want EA to define their business…As a side note, when I’ve worked closely with executives to help identify and analyze acquisitions or define new organizational structures, I’ve found it very helpful to just shut up about EA since it often alienates business folks.” (Emphasis added.)

Well yes, I have found the same thing. Executives don’t see the relevance of enterprise architecture to their plans, because its tangible value has not been articulated. It doesn’t appear in the cash flow model!

In other words, for EA to be relevant to executives, it will have to appear in their models.

And to accomplish that, it will take someone who understands both IT and business well enough to link the IT models with the business models.

Is that person the enterprise architect? You tell me.

- Cliff

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