© Peter Evans-Greenwood 2011. All rights reserved.

! The Value of Enterprise Architecture

RMIT Masters in Enterprise Architecture
2010/05/12

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© Peter Evans-Greenwood 2011. All rights reserved.

Slide 1. Title Page

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© Peter Evans-Greenwood 2011. All rights reserved.
Slide 2. Is Enterprise IT is in danger of becoming irrelevant?
“why should business bother with
enterprise architecture”
• some companies are already “doing
without” EA
• enterprise architecture does not
directly generate value
• put aside arguments on “the
importantce of IT is modern business”
• what value does EA bring?
• EA is an IT planning function. It’s
overhead on an enabler.
EA has a proud history, stretching back
~30 years, but developments in the
technology market are making the old
ways of doing things irrelevant.
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A good example of the potential impact
is to look at CRM (Customer
Relationship Management) rollouts over
the last few years
• Siebel has been the gold standard for a
long time
• Typical engagements are 2-4 years, ~
$50 million
In the last few years we’ve seen the
emergence of software-as-a-service
CRM
• Salesforce.com is now considered
“best of breed”
• Some features are considered market
leading
• Salesforce.com crowd sourcing was
used by Barak Obama as part of
change.gov
• A typical SaaS CRM engagement is 9
months, ~$5 million
To a first approximation, the IT services
industry will shrink 90%
Analogy: The role of scribes in the
1400s during the emergence of
moveable type.
• Hand rendering books
• Most of the effort was in copying, not
original works
• Overnight, the invention of moveable
type slash the cost of production
~95%
• Very similar to IT and SaaS
• In 1492, Johannes Trithemius, the
Abbot of Sponheim, published De
Laude Scriptorum (in praise of scribes)
• He argued that writing had a higher
benefit than simply copying book, and
should be preserved
• His pamphlet was published on
movable type, of course
• Despite his and others best efforts,
they could not preserve their
profession
• Scribes soon became irrelevant other
than as a hobby
There are changes in the IT environment
which will have a similar impact on us
• How do we keep ourselves relevant?
Slide 3. Session structure
Structure Housekeeping
• The old rules no longer apply When do we want questions?
• The rise of unbusiness
• Some new rules to live by

Tigers & Aardvarks

This is a very acronym rich area, so feel
free to put a hand up if I start spouting
unknown 3LAs

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Slide 4. Assumptions
IT is founded on a rather large
assumption:
• Enterprise IT applications provide
businesses with a competitive
advantage.
IT strategy is typically an application
strategy.
We’ve used this assumption to build IT
organizations with are very efficient
application delivery engines.
• This made sense since if applications
drive competitive advantage.
• Our job is the delivery of new
applications into the IT estate.
This has worked well for us till now.

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Slide 5. Lyon’s electronic office
September 1951 as the probable birth of
business computing
Lyons (the owner of a chain of tea shops
in Britain) first ran their Bakeries
Valuations application on a home-
brewed computer, LEO (the Lyons
Electronic Office).
This was the culmination of a journey
started in 1947 when Thomas Thompson
and Oliver Standingford, two managers
with wide experience of clerical
procedures, returned from a trip to
America.
A report they produced for the Lyons
board summarized what they had learnt
on their trip, and concluded that
electronic computers held the key to
office efficiency.
Thompson and Sandingford suggested
that for £100,000, Lyons could build a
computer themselves that would deliver
operational savings of £50,000 per year.
Calculating pay went from 8 minutes to
1.5 seconds
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This was the template going forward.
Walmart built a data warehouse in the
early 80s:
• Completely customer solution
• Multi-year project (2-3)
• Cost ~100 million US (1.[234] billion
in today’s money)
This application provided a competitive
advantage
• populate with supply chain
operational data
• analysis the data to identify
bottlenecks etc
• use the analysis to statically optimize
the supply chain
• result was the lowest cost supply
chain in the world
• 1/2 the saving were past to customers:
every day low prices
• 1/2 went to the bottom line
The rest is history.
Slide 6. Applications are commodities
IT strategy for Walmart—in this case—
meant application strategy:
• Applications were assumed to deliver
competitive advantage
• IT strategy was the challenge of
identifying which applications to field
• Execution involved the delivery of
large applications into the IT estate
We built our IT departments/methods to
support this:
• IT departments are built as application
factories
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• IT strategy frameworks (Zachman,
TOGAF, et al) are designed to feed the
application factory
Let’s pick out the assumptions that this
approach relies on.
• To provide a unique capability
application must be rare.
• To provide a barrier to competition
development must be expensive (in
time or money).
• To provide a barrier to competition
integration must be expensive (in time
or money).
• To align business and IT, the rules of
engagement, the business cycle must
be similar to the application delivery
cycle.
That was 20 years ago, and the
technology world has come quite a long
way.
• these assumptions no longer hold
Lets attack them in order.
First, applications are now considered
commodities
• Vendors provide solutions to a
number of clients
• They use this to drive cost savings
• We use vendors because its cheaper
than doing it ourselves
• Multiple solutions are available from a
range of vendors
• the market will offer you a
solution to meet the vast majority
of your needs
• competition between vendors
pushes prices down further
• we know this for fact, as the market
for enterprise applications has been
growing exponentially for some years
• the following is a chart from
INPUT
• INPUT tracks market
demographics for the US
government
• this shows the exponential growth
Slide 7. Growth of the US enterprise application market in billions

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Slide 8. Integration is a commodity
So, we can see that for the vast majority
of business needs, someone will
provide a solution that should provide
best practice.
• Applications are therefore common
and cheap: commodities
The other factoring the commoditization
of applications is the cost of integration
• Bespoke development makes
integration part of the solutioning
processes
• You build the solution to match your
integration situation/requirements
• One of the effects of adopting COTS
solutions was a significant increase in
the cost of integration
• Applications are not commodities if
we can’t mix-and-match
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The cost of integration needed to fall
• The rise of application suites
(integrated at the database) was a
partial solution
• Tooling helped
• But neither was enough, either along
or in combination
The solution was standards based
integration
• Providing a common interface
minimized effort
• Combined with suites and tooling, we
were able to slash the costs of
individual integration
• The explosive growth of web
standards ensured that integration
points where covered to enable mix-
and-match
The next chart is my attempt to plot this
growth
• You can see the explosive growth of
standards from an initial foundation
(SALT et al) through to the current raft
of semantic/industry specific solutions
Slide 9. Growth of open standards

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Slide 10. Disconnect between business and IT cycles
Together commodity applications and
commodity applications have
transformed the assumptions
• applications are not longer scarce
• provisioning is not expensive
The final factor was the alignment of the
business and application cycles
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Business IT alignment has two factors
• budget alignment--for value
• cycle alignment--for agility
Back in the LEO and Walmart examples
business IT moved at roughly the same
pace.
• markets and products developed
slowly
• communication was expensive
It’s like watching Life on Mars
• a cop from the 80s goes back to the
70s
• everything is manual
• even simple things take a long time
The business has been working hard
since then, transforming itself
• LEAN & Six Sigma
• Global sourcing and the world is flat
• technology and the productivity gains
it can bring
Business has changed radically
• It has accelerated radically in recent
years
• What took years now takes months, or
even weeks
While at the same time we’re still
working under the same rules
• We are seeing is a disconnect
between IT and business cycles
To make this real I’ve been showing the
a figure to the CIOs and strategy people
I talk to
• It’s simple and geeky, but captures the
impact well.
• It’s two wavy lines: one for business,
and one for IT.
• The IT line shows the steady sine
curve of the IT application investment
cycle: 4 years, $50 million
• The business curve show show
investment decreasing and the peaks
coming closer together as the
competition forces the business to
react to shorter and more transient
opportunities
We can see that the disconnect between
the two has grown over time.
Slide 11. Disconnect between business and IT cycles

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Slide 12. The older rules not longer apply
So we started with three assumptions:
• Applications are rare—to provide
advantage
• Development and integration are
expensive—to protect it
• The IT and business cycles are similar
—to provide alignment
None of this is true any more:
• Applications are freely available
• Development and integration are
cheap
• Business has accelerated
Buy building our profession around
application delivery we’ve tied
ourselves to the application cycle.
• As the business has move on, we’ve
stayed still
• We’re not longer responsive and
aligned with the business
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Walmart has recognized this.
• In 2007 the data warehouse was
replaced with an off the shelf solution
• Cheaper to maintain
• Better than the bespoke
Walmart still has one of the best supply
chains in the world.
What are we to do if the application
centric model we built our
organizations on doesn’t work anymore?
There are three big trends we’re seeing:
• Mass -> Acceleration
• Computing -> Connections
• Data -> Decisions
Slide 13. The new relationship between business and technology

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Slide 14. The need for business-technology
Differentiation is now driven by our
ability to integrate technology &
business
We’ve seen a new raft of technologies
emerge in recent years
• Web 2.0: Wikis & blogs
• SaaS & Cloud Computing
Some of the are already having a
dramatic impact on our industry
• Siebel -> Saleforce : 50M 2y -> 5M 9
months
• NY Times: digitize a few terabytes of
paper images for $250, rather than
250,000
Companies are already starting to
emerge that that use technology in
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different ways to create organizations Differentiation comes from the IP our
that out perform the market. knowledge workers create and use
Craigs List • Integrate Web 2.0 / Enterprise 2.0 and
transactional systems to provide
• Started as a hobby ~10 years ago
knowledge workers with joined up
• Now the largest classified ad company work surface and remove the friction
in the US from their jobs
• 30 people in a shed in SF • Capture the common patterns
• 100M revenue knowledge workers use to solve
• 10M cost problems in tools like BPM and rules
• 90M ebit engines to create time and space
• Use this time and space to drive costs
• 90% margin
down, or to invest in the creation of
There’s been a shift in how we view better IP
technology in the last decade
• From mass to acceleration
• From computing to connections
• From data to decisions
So how does this deliver a sustainable
competitive advantage?
We need to use technology to amplify
IP and solve client problems
• All the value is now in how our
knowledge workers solve problems
• Knowledge creation, not use.
• Example: supply chain exception
management
Slide 15. Rolls-Royce
From The Economist article on Rolls-
Royce.
Was in trouble in the 1960s/70s:
• 10% market share.
• Rising labour costs
• Fierce competition from the US
market
• No patients
• Military contracts
• Large domestic market
Roll-Royce chose to try and be smarter
than the competition:
• Rather than focus on incremental
development, it designed a
completely new engine
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• Carbon composite blades & a • It sells hot air out the back of engines
completely new engine architecture (3 • Completely transforming business its
shafts rather than 2) model
• More complex to design, build & • Qantas is more like a butcher
maintain
Rolls-Royce is a great example of
• Also a lot more fuel efficient business-technology
• And a lot more scalable to different • Differentiation is driven by the IP its
aircraft sizes knowledge workers create
Most of the margin for jet engines is in • IT provides a joined up knowledge
maintenance though: worker and delivery environment
• Rolls-Royce used this as a lever to get If you want to catch Rolls-Royce, then
into the maintenance business
you need to clone it’s infrastructure and
• Focused on selling razor blades, rather recreate the IP
then razors
• Rolls-Royce is still capturing /
The next step was to integrate the developing its IP
expertise from the two businesses: • You can’t catch up
• Operations centers where they
• A sustainable competitive advantage.
monitor engines in real time
• 3500 jet engines around the world
• Real time telemetry
• Just in time maintenance
• Less maintenance and more operating
hours
• Spotting problems earlier also helps in
the design in business
Rolls-Royce no longer sells engines
Slide 16. The impact
• The need for rapid project turn-around
is pushing us toward running large
portfolios of small projects, rather than
a small number of large projects.
• A lot of the admin work we used to do
is now baked into web delivered
solutions (BaseCamp et al).

So business and technology are driving

a number of changes in IT
• The increase reliance on partners, the
broader partner ecosystem this
implies, and an increasingly global
approach to business will create more
complex operational environments,
increasing the importance of planning
the IT estate and steering a company’s
IT in the right direction.
• The need to reduce leverage, and free
up working capital, is pushing
companies toward BPO and SaaS
solutions, rather than the traditional
on-premisses solutions, where the
solution provider is paid per-seat, or
might even be only paid a success fee.

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Slide 17. Kogan
A glimpse of where this might be going.
• Started in 2006 by Ruslan Kogan with
a credit card
• He discovered that the
components in flat panel
televisions were made by just a
handful of manufacturers
• Cost driven business, using
offshore manufacturing to sell
cheap goods direct in the
Australian market.
• At first glance this is not much
different from Chevy in the USA,
where a Korean product is sold with
GM branding.
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• The difference is in execution
From that standing start:
• 3.7M$ by 2007-2008 Kogan
• Four full-time staff and nine part
timers
• No real asset of it’s own
• The business is built around its ability
mobilize both customers and
suppliers.
Since then
• The business has grown to roughly
$18M in 2009-2010
• Expanded into the United Kingdom
• Still has only thirty people in the
Melbourne based business.
The business continues to build
knowledge:
• LivePrice
• Applying yield management ideas to
fund their manufacturing process.
• Customers who are willing to pay
earlier in the manufacturing process –
effectively providing Kogan with the
working capital it needs – can access
a lower price.
A knowledge creation business
• The core team invests their time in
steering the business
• Looking externally to understand what
features customers are asking for
• Creating product to suit
• Finding the best way to get the
products into the customer hands.
• This has broadened the range of
products to include DVD players,
ebook readers, PVRs and set top boxes
GPS and Internet radios.
• In some cases this also means
bundling products that a more
conventional company would prefer
to sell as separate items, such as
televisions and personal video
recorders (PVRs).
The company’s differentiation rests in
the intellectual property
• The techniques the company has
created around selecting the right
product configurations, and
production and logistics providers.
• The networks and relationships
required to deliver the products.
Slide 18. The changing face of the IT department
1 3 5

2 4 6

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Slide 19. If we want to be relevant
We need to change our relationship • And we need to reorient our
with the business. departments, away from application
factories, and toward IT enablement
If we want enterprise IT/architecture to
be relevant going forward
• We need to stop thinking about IT
assets and roadmaps of major projects
• We need to think in terms of business
capabilities and outcomes.
• We need to find tools and techniques
to deliver business-technology
•

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Slide 20. Some new rules to live by

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Slide 21. We need to transform our organisations
We used to build cathedrals We need some new rules
• Bespoke • Focus on what really matters
• Unique • Externalize
• Expensive to deliver • Reduce the cost of planning
• Time: generations From dogma back to doctrine.
• Money: billions
• Human lives: 100s/1000s
• Expensive to maintain
Now we want to focus on prefab
• Clear overarching design
• Understanding of where to focus our
investment
• leverage commodity components
where appropriate
• save our money for the important /
differentiating details
• Delivered in a short time frame

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Slide 22. Focus on what really matters
Analogy: digging a hole:
• We’re all resource constrained
• If the whole is one foot around, then
more people/money won’t help
• We need to focus on where to dig
Not all business activities / processes /
rules are equal
• Applications force us to treat large
areas evenly
• Long lists of requirements
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• We play the prioritization game
We need to find a way to manage
technology enablement in line with
business role
Telco business story
• Client had two key problems
• Improve time to revenue turn on
• Introduce new product portfolio
• Internal IT came up with 4 years,
$50million
• Rip and replace all applications
• New platform
• This was not acceptable to the
business
• We used a business centered
approach to develop a different
approach
• Identify the business activities in
scope
• Heat map based on how to
manage each activity
• The solution was focused on
addressing key business drivers
• Surround and destroy to isolate the
mess
• BPM to streamline time-to-
revenue-turn-on
• Bespoke for product portfolio
management
• This enabled us to set aside work to
do later that was not core to the
problem
• CRM renew
• billing consolidation
• …
• ~9 months and a few million
And remember that enabling knowledge
creation is more important than
streamlining knowledge use.
Slide 23. Externalise
Second is to externalize
We need to consider options beyond
on-premises applications:
• Business process outsourcing
• Software as a service
• Partner ecosystems
Focus on doing one thing well, and
leverage other entities for supporting
activities.
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For areas that are not core to the We need to continually optimize the
business performance of the business
• Push them out of the business (to the • Be externally focused
CFO) • Build a portfolio of capabilities
• Create time and space for our team to • Each providing different performance
focus on what really matters profiles
Telco example: BPO rather than billing • Blend them to get what you want
consolidation And remember
• Rip rating out of billing • Knowledge creation is more important
• it needs to be part of product than execution
definition management
• this commoditized billing
• sell existing assets to a BPO provider
• invest the money back into
developing capability
We have a wide range of tools
available:
• business process out-sourcing
• software as a service
• partner ecosystems
Slide 24. Reduce the cost of planning
Third is to reduce inertia.
Our current approaches to planning are
not longer appropriate
• 9 month and multi-year planning
cycles don’t fit
• major engineering efforts to deliver
agility
Don’t confuse agility with flexibility
• Business agility requires IT to have
some flexibility
• We tend to make the mistake that we
need to design for maximum flexibility
• But flexibility comes at a cost
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• More moving parts to develop
• Increased maintenance costs
• So we end up delivering late and
paying huge maintenance costs
The business is amused when told that
it’ll take a multi-year project to deliver
agility
• Isn’t this a contradiction in terms
Think about F1 cars, which are
incredibly agile:
• Be light: minimize inertia
• Provide flexibility where it is required.
• Be prepared to act
To be agile we need to:
• Reduce weight (what we have to build
& planning overhead)
• Support change when and where
required (shorten planning and
delivery cycles)
Telco example
• Four week effort
• Resulting in series of ~1million$AU
projects
We need to find a new place on the
planning spectrum
• Bottom up doesn’t work: results in a
rats nest of integrations
• Top down doesn’t work: takes so long
that we need to be tactical and end up
with the same rats nest
People use a different approach
• imagine how you planed to get to
work
• not top down: sitting in bed with MS
Project
• not bottom up: waiting for something
to happen
• set long term goal
• establish where you are
• use scenarios to work toward the goal.
Our goal is plan every quarter
• clear goal
• series of small projects
• reorder / reconsider the projects
This lets us align business and IT cycle:
• another geeky graph
Slide 25. Aligning business and IT
Our goals is to continually optimize the
business monocoque.

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Slide 26. Conclusion
Enterprise IT is in danger of becoming
irrelevant
• The application centric approach
doesn’t work any more
• Growth of the application market
• Decrease in the cost of integration
• Misalignment with the business
cycle.
The business have moved on without us
• Companies are picking out the
synergies to create new businesses
• Craig’s list
• Nike
• Rolls-Royce
• This new bread of company is nearly
impossible to compete against
• We need to create a new relationship
(rules) with the business.
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If we want to be relevant going forward
then we need to change the rules of our
profession
• Focus.
Work with the business to understand
what matters, and what doesn’t.
• Externalize.
Don’t do things that are not core to
the business, pass them to partners et
al.
• Inertia.
Reduce the inertia in delivery and
planning to provide real business
agility.
Slide 27. End title

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