Enterprise Architecture is by definition a business-driven endeavor that allows the business to identify and utilize the technology that best complements the operating model today and in the future. EA's main objective, which is also an advantage of EA, is enabling businesses to achieve strategic objectives through alignment of strategy and IT capabilities. This chapter aims to demonstrate how a clear and well-defined business strategy is the first step in achieving that alignment.
What does your business want to do?
How does your business want to do it?
What technology is required to do it?
Your business strategy is the starting point of answering these questions.
Alignment
Alignment is a word you hear quite often in the world of technology, but what does it actually mean? The dictionary defines alignment as “arrangement in a straight line or in correct relative positions” or “a position of agreement or alliance.” Its vagueness, however, does not take away from its importance which can be seen in how the word has continued to be part of the technology nomenclature for over 30 years. Progressive organizations have always seen the value in blending efficient business management with IT capabilities for strategy execution.
Historically, achieving organizational alignment has proven somewhat elusive as evidenced by the continued mushrooming of IT silos as evidence. Achieving organizational alignment can lead to improved efficiency, cost savings, and gaining a strategic advantage. But what are we aligning? Referring to it as “organizational alignment” is still vague; more specifically, we are referring to the alignment of the business with its IT capabilities.
Enterprise Architecture has been a tool to utilize for custom development and not for businesses that were buying business application software. There was a greater emphasis on the “architecture” which included designing and documenting IT systems and not on optimizing both business and IT processes to generate value. Over the years, Enterprise Architecture has adopted a more holistic and strategy-driven approach that encourages the synergy of IT with business functions. The “architecture” became more about organizing the enterprise in a way that creates a foundation for strategy execution with Enterprise Architecture as the structural framework.
EA has often been seen as an overly complicated IT endeavor. This book seeks to demonstrate that it is, in fact, an organizational endeavor, top to bottom. In view of this, EA should be communicated and executed in a way that everyone in the organization can understand to achieve organizational alignment. The entire organization should understand where it is today, where it wants to be tomorrow, and how it will get there in unison. This is alignment. Alignment will allow the organization to leverage a long-term decision-making framework when multiple IT implementation options exist.
As this book has a focus on SAP applications, we will consider Enterprise Architecture in the context of packaged enterprise applications and how it helps to align business and IT. It is important for the business strategy to lead the EA endeavor because what (vision, objectives, goals) you are trying to achieve is what informs how you intend to achieve it (the operational model). The operational model describes the business processes within your business units, their level of standardization, distinguishing capabilities, integration, and the data they require. This in turn informs the design and implementation of the IT infrastructure required to support those business processes and therefore creates a foundation for business strategy execution. A formal introduction to SAP will be provided in Chapter 4.
EA can easily become a purely abstract exercise proliferated with esoteric terms that have no practical use. This book seeks to depart slightly from the old way of doing things by sticking to the basics. Success starts with building a master plan (a business strategy). We shall look at the components that make up that master plan, how they relate to each other, and ultimately how they support the capturing, describing, and governing of all IT capabilities across your organization in an effort to meet the strategic goals of the business.
EA is a continuous alignment process. It is continuous because the business environment constantly changes. It is a Dynamic Alignment Process (DAP). An organization's business strategy forms the basis for this alignment, and it is crucial to understand the critical role of the business strategy in EA.
Understanding the Role of Business Strategy in Enterprise Architecture
Business strategy may be understood differently from one business to another; however, it can be generally understood as the objectives a business is pursuing and how they intend on attaining them. Every enterprise has value-generating business functions that are supported by other functions. IT in itself does not create value but acts as a supporting function to the business functions. The enterprise architect must ensure that all investments in IT support the business functions adequately. Enterprise Architecture is the means through which an alignment of an enterprise’s business strategy and IT strategy can be realized.
In its very nature, business strategy is a forward-looking, long-term endeavor. This makes it the perfect starting point for EA because it forms the foundation for producing EA artifacts that capture the future IT infrastructure required to support the business in executing that very strategy. This includes the basis for the articulation of a desired future state, that is, “the implementation of this strategy will have the organization in such and such a state in five years.” Existing mainstream EA frameworks such as TOGAF version 9.2 generally recommend starting the EA effort from documenting the business strategy (goals, objectives, vision, etc.).
Developing EA from your business strategy provides much-needed context. Understanding what the business is trying to achieve on a strategic level is what allows you to determine the business processes that form part of the business capabilities. The execution of these business capabilities is critical to the business strategy. These business capabilities must be standardized and supported by the right (aligned) IT infrastructure to the greatest extent feasible. This alignment endeavor triggers a journey toward a desired future state in which the business capabilities are IT enabled, in other words, digital transformation. In this way, EA is informed by and also supports the execution of business strategy. Enterprise Architecture converts the business strategy into guiding principles that must be followed in digital transformation projects that implement change toward a desired future state.
The preceding process results in providing an aligned IT infrastructure for business execution, turning IT from a liability to an asset. The idea of Enterprise Architecture is to integrate business strategy, business capabilities, and IT capabilities in order to achieve a competitive advantage. A large part of this digital transformation involves automating the core capabilities. Automating these core capabilities allows the business to focus on the aspects of the business that cannot be automated because they are constantly changing. This puts the business in a position to be agile in regard to the more volatile aspects of the business while ensuring that the core capabilities are being delivered.
EA is a change enabler. This is important because business strategies generally change more frequently than the highly specific technologies used to support them, therefore creating the old age issue of legacy systems. EA allows you to work toward a future state while still being agile enough to accommodate change. When EA is executed accordingly, there is such a detailed understanding of the business that a complete overhaul is rarely ever required; areas in need of change can be isolated and transformed.
As mentioned, there is a real danger that EA can easily become a purely abstract, jargon-filled exercise. EA includes software applications, business processes, human resources, and IT infrastructure. Using the business strategy as a point of departure helps mitigate this trap of total abstraction as it minimizes the technical jargon and position IT in a way that business executives will understand. EA closes the communication gap between business and IT, facilitates information systems planning, and aids business and IT alignment.
With all that said, enterprise architects should still seek additional information about the enterprise beyond the business strategy. The decision to use the business strategy as a basis for Enterprise Architecture should be thoroughly evaluated. It should never be assumed that a business strategy is clear enough or understood well enough by the business to form a basis for Enterprise Architecture.
For instance, business strategy can only be fully evaluated within the context of business and IT capabilities.
Business Strategy, Business Capabilities, and IT Capabilities
Increase customer satisfaction
Diversify revenue streams
Reduce production costs
Reduce customer churn
These strategic goals are all very vague as a basis for IT infrastructure decision making because they’re descriptive rather than prescriptive. For instance, we may assume that customer relationship management software might aid us in increasing customer satisfaction and reducing customer churn, but how do we know the right CRM for our enterprise? We must have insight into the existing business processes that address customer relationship management and how IT can support them to achieve the stated goals. It is also possible that there may be a need to develop new IT-enabled business processes. In either case, the enterprise’s business capabilities must be articulated because it is these business capabilities that can be aligned with IT on a more detailed level.
Business Capabilities
Business capabilities depict the required business process integration, standardization, and data for the enterprise to meet its daily mandate; see Figure 2-1. An enterprise’s business capabilities provide a more practical view of the enterprise than its business strategy and form a better foundation for alignment. Business and IT alignment ceases to be a generic process but one that is tailored to the specific business. For instance, several companies may share the same goal of increasing revenue, but each company will go about it according to its own unique business capabilities. Therefore, alignment must take place between the business capabilities and the IT capabilities.
IT Capabilities
IT capabilities refer to how well IT supports business process needs through the deployment, maintenance, and support of IT solutions in a cost-effective manner under a robust governance framework. Accordingly, IT executives work to align IT capabilities with business capabilities by approving and implementing the technology recommended by the Enterprise Architect.
The best way to implement the process of alignment is to see IT as a service provider to the enterprise who serves the enterprise’s business capability needs. Broadly speaking, the services IT provides include IT-enabled business process improvement, operational excellence (email, help desk support, server maintenance, etc.), and innovation which may lead to repositioning the business in the market.
A chart depicts the interrelationship between business strategy, core business capabilities, and I T capabilities and how enterprise architecture bridges the gap between these.
The relationship between business strategy, business capabilities, and IT capabilities
Core capabilities are the business capabilities that generate the most value within your business. They are identified by the value they bring to the enterprise and mapped to the relevant information technology that supports them. This mapping process enables the identification of the information technology services that are currently not available to the core capability but represent untapped potential and room for improvement.
Let us consider a business that has product development as one of its core capabilities. Your enterprise may have set the strategic goal to introduce new and innovative products to the market. One of the crucial factors in this process is speed to market. The product development team will need a reliable and fast Internet connection to access insights from information markets and to facilitate efficient communication via email, online meeting platforms, or VOIP. These basic services may seem insignificant, but they support important aspects of new product development such as making the go/no-go decision about a new concept. The quicker an informed decision can be made, the quicker a product can go to market. The performance of this strategic initiative will then be measured according to the revenue generated from the new products.
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Analysis of the product development core capability
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Recommend the technology, IT resources, and IT-enabled processes required to address the needs of the product development core capability
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Scope and lead the project to implement change
In conclusion, as much as business strategy is a great starting point for EA, it is not the best basis on which to build alignment with IT (capabilities). In most cases, it is vague, and, secondly, strategic initiatives tend to change faster than the IT infrastructure that supports them as enterprises listen to their customers, counteract competitor initiatives, or capitalize on new opportunities. Whereas the business strategy ensures that EA is always considered in the context of a long-term vision, the business capabilities ensure that EA remains cognizant of what must take place on a day-to-day basis to achieve that vision.
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Is there a clearly defined and recognized business strategy?
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Does it provide a clear and actionable direction?
The answers to these questions are important because they determine whether the EA endeavor can be contextualized. If the answer is no, a clear and actionable business strategy must first be documented and form the point of departure. The business strategy influences the scope of the EA endeavor and the basis for monitoring it against set goals. Furthermore, the business strategy can be used to establish synergy between all stakeholders on an enterprise-wide level despite their individual interests.
The business strategy is the starting point as well as the foundation of envisioning a desired future state (where we are and where we intend to travel to).
Business capabilities articulate the business strategy in terms of what must be done to execute the business strategy (how we will travel).
IT capabilities are the platform for the execution of the business capabilities and the business strategy (the fuel and supplies for our travel).
The preceding points highlight the relationship between business strategy, business capabilities, and IT capabilities. It is important for this relationship to be as coherent and streamlined as possible to ultimately achieve the goals set out in the business strategy. The required level of efficiency can only be realized through the alignment of the business capabilities and IT capabilities. The next section looks at the role the enterprise architect must play in achieving this alignment.
The Role of the Enterprise Architect in IT and Business Alignment
Generally, management starts by creating a business strategy. Ideally, IT and business collaborate to design IT-enabled solutions to achieve the goals of said business strategy. IT then builds the IT infrastructure to support the solutions. These IT-enabled solutions go live, and IT proceeds to manage the infrastructure while offering support to business. This seems simple enough, but there are stumbling blocks that enterprises have faced over the years. The primary one is a disconnect between business and IT. Does business language or IT jargon take precedence?
Achieving IT and business alignment becomes easier when the entire enterprise speaks a common language. Often, the same word can mean different things; EA's multidomain approach (business, data, application, and infrastructure domains) translates the relationships between domains into a common language. EA documents IT and business processes in a way the applicable stakeholders understand.
In order to leverage Enterprise Architecture as a strategic tool, the Enterprise Architect must engage closely with business leadership, subject matter experts, and other stakeholders on their terms. It is the enterprise architect’s job to understand the enterprise’s strategic goals and business needs. An enterprise architect must take part in the enterprise’s business strategy planning meetings as it is crucial for the enterprise architect to engage business leaders on the business strategy. The business leaders can explain how they understand it and what they hope to achieve from it in detail.
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Understanding the enterprise’s business issues and business priorities allows for the effective allocation of IT resources to maximize business value. The enterprise architect must always keep in mind that Enterprise Architecture is a means for IT value creation.
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Having a continual dialogue with business leaders allows the enterprise architect to anticipate and plan for any required changes in IT services to adapt to changes in the business environment, therefore being proactive rather than reactive.
An illustration of the key questions asked by an enterprise architect.
Key questions an enterprise architect asks
The short and precise key questions in Figure 2-2 trigger discussions that allow the enterprise architect to have an understanding of the current relationship between business and IT. The answers to these questions can provide an early indication of problem areas, for example, the absence of a clear business strategy or the lack of understanding/knowledge of the business strategy.
In view of the preceding questions in Figure 2-2, a substantial amount of information will come from having conversations with various stakeholders whether the enterprise architect is asking the questions or providing the answers. It should be clear that the key factor in the success of an Enterprise Architect’s role is verbal and written communication. For instance, one of the main roles of an enterprise architect is to articulate how required technical changes will generate business value. This is done by showing the dollar value of the losses caused by the current technology systems or by demonstrating the monetary value of the proposed technical initiative. From the perspective of DevOps, the enterprise architect must encourage an environment that allows for the close collaboration of development teams and business functions in fostering IT and business alignment.
Engaging stakeholders to understand business strategy, budgets, opportunities, and threats. (One of the stumbling blocks of EA is managing multiple expectations from different stakeholders. The only way to get past this is to understand what is good for the business above and beyond everything else.)
Creating a strategic plan describing the areas for improvement, untapped potential, and the gaps between IT and business.
Working with IT and business to formulate and document policies, standards, guidelines, and procedures that align IT services with business requirements.
Proposing technical solutions that best align with business capabilities.
Monitoring progress and taking corrective action.
How to Approach IT and Business Alignment
- 1.
Plan
This first stage involves understanding the business objectives and capabilities well enough to determine the IT services that can support them in creating maximum business value. Services should not be implemented because they are an industry standard but because there is a good business case demonstrating a clear return on investment. It is crucial to gain an understanding of the business objectives in terms that the enterprise architect and the business leaders understand. This is also the time to come up with the governance structure, service-level agreements, and performance metrics that will be used to manage the IT services. The planning stage is essentially continuous because an open dialogue must be maintained to accommodate changes in business needs in the future. It is important to prioritize the business objectives and capabilities according to the business value the enterprise expects to derive from them as this will form the basis of how the business prioritizes IT resources. This forms a priority hierarchy based on business impact. Trade-off analyses take place to determine what IT services will be essential and which ones will be “nice-to-haves.”
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Design
This is when we model the IT infrastructure required to deliver the IT services identified in the planning phase. This includes the resources, IT processes, IT assets, and skills that will be leveraged in delivering the IT services. Each of these components must be mapped back to the IT service they support and associated with specific standards and service levels.
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Manage
Once the IT infrastructure has gone live, it begins to support the relevant business capabilities. It is important for the IT team to have a robust and central management tool to respond to support requests from business. Support requests must be prioritized in terms of the business impact hierarchy established in the planning stage. A change management procedure will be required to ensure that all change requests are adequately considered, and informed decisions are taken to action on them or otherwise.The monitoring of the delivery of IT services and performance of IT capabilities is a critical one. The performance metrics of software, IT processes, and IT resources have historically been considered in isolation without an enterprise view of their impact. However, metrics and analytics must be interpreted within a business context and with the consideration of the business impact hierarchy to address issues with the relevant urgency. The EA process can help in identifying the need for standards, frameworks, and best practices relevant to managing the IT environment such as the Information Technology Infrastructure Library (ITIL).
Typical Alignment Scenarios
Examples of Business Agility, Standardization, and Strategy According to Enterprise Size
Type of Enterprise | Business Agility | Business Standardization | Business Strategy |
|---|---|---|---|
Small enterprise | High | Low | Differentiation |
Medium enterprise | Medium | Medium | Balance of the two |
Large enterprise | Low | High | Cost leadership |
Small enterprise (row 2)
Business agility: High
Business standardization: Low
Business strategy: Differentiation
Medium enterprise (row 3)
Business agility: Medium
Business standardization: Medium
Business strategy: Balance of differentiation and cost leadership
Large enterprise (row 4)
Business agility: Low
Business standardization: High
Business strategy: Cost leadership
Large enterprises typically compete on cost. High business standardization allows efficient operations and cost savings. Large enterprises will typically utilize standard applications supported by standardized IT infrastructure that allows for the control and predictability of costs to the greatest extent possible. The size of the organization also influences buying decisions. Large organizations will get discounts on SAP software and its supporting hardware because they purchase in bulk. Consequently, the IT capabilities of large enterprises are highly standardized with greater focus on IT governance and service-level agreements. The enterprise architect will collaborate with IT to build standardized IT capabilities that will support the highly standardized business processes of the large enterprise.
Closing Points on IT and Business Alignment
Business strategy drives IT strategy planning.
IT and business alignment is continuous; there is no final destination.
The degree of alignment is determined by the extent to which the IT services support the business capabilities.
IT and business alignment is measured and judged according to the business value generated from IT-enabled business processes.
- Achieving IT and business alignment ensures that the IT budget is in line with the requirements set by the business functions of the enterprise. This can be seen through
All IT projects speaking to proven business needs
All IT projects being in line with the enterprise’s business strategy
IT investment being seen as a change enabler in the context of business strategy
Alignment Beyond Business Strategy
Thus far, the discussions have focused on aligning IT with business strategy to generate business value. It should be noted, however, that IT alignment goes beyond strategy. Cultural and budgetary realities are also areas for IT alignment. Cultural alignment refers to the organization’s view of technology and aligning it in a manner that allows the organization to make the most of their IT capabilities. Budgetary alignment refers to IT costs being understood and communicated in a way that fits in with the other costs in an enterprise’s budget.
Developing a Business Case
IT and business alignment are only achieved when there is complete alignment and the enterprise’s IT initiatives do not deviate from business needs whatsoever. The goal is to ensure that all IT investment (every single cent) directly contributes to maximizing business value. Thorough analysis is required in determining how business processes can be IT enabled. This means developing a business case for the investment in a business process and the IT services that support it.
The business case highlights the potential value that can be realized through the investment of time, money, skills, and enterprise facilities. The business case is developed as follows.
A Business Need Is Identified
A business need for IT services/support is identified by a particular business function. The enterprise architect is tasked with evaluating this business need and assessing the potential business value it can generate through the support IT.
Analysis of Current State
The enterprise architect analyzes the current business process and the IT services that support it to confirm if they do not meet the business need. The enterprise architect must articulate how and where discrepancies exist in the current processes as any new process will have to directly speak to these discrepancies.
Collaborate on Business Case Development
In accordance with the business function’s budget, the business function approves the development of a business case in collaboration with the enterprise architect. The information gathered in the analysis of the current state is used to describe the business need in terms of gaps in operational performance that result in not maximizing business value. This should be stated in monetary terms where possible. Monetary terms should also be used to express the impact of not addressing these operational gaps and how it affects the enterprise’s bottom line.
Explore Alternative Solutions
Several alternative solutions should be explored. A Cost-benefit analysis must be conducted for each alternative to gain an in-depth understanding on the positives and negatives of each solution. The solutions must also be explored in other aspects beyond cost such as the degree of difficulty in managing change to facilitate their implementation or their impact on organizational culture. The cost-benefit analysis should be coupled with a calculation of the return on investment of each alternative and projection of anticipated future costs and benefits over a period of time.
Evaluation
The business case is firstly evaluated on the robustness of the analysis conducted to create it and its alignment with the goals of the business function that feed into the enterprise’s strategic goals. Secondly, a financial analysis takes place to ensure the accuracy of the business case in financial terms. A recommendation is then made to the final decision makers on whether to proceed or not.
Approval/Disapproval
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Alignment with the enterprise’s strategic goals.
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Clear measures and metrics for the success of the initiative.
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The solution completely addresses the business need and closes the performance gaps that were highlighted.
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The solution aligns with the enterprise’s IT road map and Enterprise Architecture guidelines in transitioning to a future state. This is to avoid the IT services soon becoming redundant.
- 5.
A cost and operational efficient implementation methodology has been identified.
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“How much of a priority is this potential investment?”
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“Does it offer a greater return than competing potential investments?”
These questions move beyond examining the business case in isolation. They consider the potential impact of implementing the changes on the rest of the business.
If the business case is approved, funding is provided for a new implementation project to begin. It is managed by the responsible business function and reviewed periodically by a steering committee set up specifically for this project. The committee takes special note of cost and keeping schedule. A lessons-learned procedure is conducted upon the completion of the project to help improve future project management efforts. The solution itself is continually assessed over time to ensure that the enterprise still derives value from it and that it still has a rightful place in its Enterprise Architecture. The enterprise must always be vigilant about identifying area to improve the solution or opportunities to replace it.
In the case of a disapproval, the decision may be based on a lack of economic resources, and so the project is postponed until said economic resources are available. Alternatively, the business case may not have shown the desired level of business value to justify a significant investment.
Revisiting the Four Enterprise Domains
- 1.
Business architecture – Business strategy and key business processes
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Application architecture – A guide for deploying individual systems
- 3.
Data architecture – Documents data assets and data structures
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Technology architecture – Describes the software, hardware, and IT infrastructure necessary to support applications
Throughout the sections on business strategy, IT alignment, and the enterprise architect’s role in IT alignment, all of the preceding domains were explored to some degree. Business architecture was the starting point as the enterprise architect engages with business leaders on business strategy, key business processes, and governance. It is critical for the enterprise architect to develop an accurate business architecture as this is a depiction of how well they understand the enterprise and the vision of its leaders. The business architecture should be a true reflection of the enterprise’s business capabilities that shows how the company generates value and how it intends on generating value in the future.
Throughout these business conversations, the enterprise architect must gain an understanding of the business processes that generate the most value. Thereafter, the enterprise architect must identify software applications that enable these essential business processes and the way they interact with each other.
The applications that support essential business processes require reliable data sources defined in the data architecture. The essential business processes and applications cannot generate business value with inaccurate, unavailable, or missing data. The enterprise architect must document the structure of logical and physical data assets and also determine rules for data governance to ensure that the data remains accurate and consistent.
Lastly, the enterprise architect works closely with IT to analyze, design, and build the IT infrastructure required to support all of the preceding architectures. The technology architecture includes networks, servers, email, Internet, and other IT services that are essential to the running of the enterprise.
Summary
In this chapter, you saw how Enterprise Architecture can be utilized in a strategic manner to create a foundation for the execution of business strategy and why an enterprise’s investments in IT must be consistent with its business strategy. We delved into how Enterprise Architecture aids IT and business alignment which may lead to several benefits such as improved performance through lower costs, higher revenues, and higher returns on investment and competitive advantage through IT. IT and business alignment is a cyclical process of learning and executing; it never ends.
Enterprise architects operate at the strategic level and are the main influence on IT and business alignment. Enterprise architecture revolves around maximizing business value through ensuring that value-generating business capabilities are supported by the relevant IT capabilities. The key to success as an enterprise architect is the ability to communicate and manage different stakeholders accordingly. An enterprise architect must have an intimate understanding of the enterprise’s business strategy in order to translate it into applicable IT services. EA is an alignment process, a continuous one. It is continuous because business requirements constantly change. It is a Dynamic Alignment Process (DAP).