Introduction to Enterprise

Architecture

Charu Naithani
Information Technology and Systems
Indian Institute of Management Lucknow
What is IT?
Hardware

Operating System

Database

Application

User Interface

Can you map them to the organization resources?

Why are they layered?

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Application Software – ERP

C S
u U
Sales
s P
Force Back-
t P
& Office
o L
Customer and
m I
Service Workers
e E
Rep
r R
s S

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Upgrade Challenges
I would love that functionality but I can’t justify the upgrade!
‘Read my lips: No new software! We have far too much already!’
‘I don’t need a new ERP system, I need to choose one that I already have and
consolidate on it’
‘Functionality? We only use 50% of what we have bought and the function
we really need is not available’
‘Don’t touch that ERP system! Who knows what will happen! Let’s wrap it in
a portal and BW and try to integrate it with EAI !’
Unfortunately, many companies are frustrated by the cost, complexity and
return of their ERP landscapes

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One Organization – Multiple Architecture

The Distinction Between Enterprise

Architecture and Application
Architecture Makes a Difference to
Business Outcomes.
https://www.gartner.com/document/
3738048?ref=solrAll&refval=1972494
92&qid=9ce5722ec68108d6788a4898
c357f237

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From strategy to business requirements – IT Blueprint

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Costly Infrastructural Spaghetti
Can go wrong in three ways: Strategy may not be clear enough, Each initiative may
result in separate IT solution, IT is always reactive and hence constant bottleneck
◦ Include the plans for how an organization will build, deploy, use and share its data, processes
and IT assets.

IT costs that exceed the benefit they deliver

Rising IT costs without increasing benefits
Long delays in the delivery of new systems
System disasters
Difficulty recruiting and retaining top IT talent
Fractious relationships between IT and business leaders
Unified EA will standardize enterprise wide hardware and software systems with
tighter links to the business strategy
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Desired Result

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Stability vs Agility
Service Oriented Architecture (SOA) is an application framework that takes
everyday business applications and breaks them down into individual
business functions and processes, called services.
◦ An SOA lets you build, deploy, and integrate these services independent of applications
and the computing platforms on which they run

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Business Processes
A set of related tasks or
activities that cut across
traditional business
functions and create
value for the customer
A process perspective
implies a strong
emphasis on how work
is done within an
organization, in contrast
to a product focus
emphasis on what

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What is a Business Process
Business Process defined by Davenport (1993):

“a structured set of activities designed to produce a specific output for a

particular customer or market. ...A specific ordering of work with a
beginning, an end, and clearly identified inputs and outputs”

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Enterprise Architecture ?
SOA => ESA (SAP)
“Enterprise Services Architecture (ESA) is SAP's blueprint (set of standards/
principles/ values) for how enterprise software should be constructed to
provide maximum business value.”

Enterprise architecture is the organizing logic for business processes and IT

infrastructure reflecting the integration and standardization requirements of
the company’s operating model.
◦ Process Architecture: Business processes and their relationship.
◦ Data Architecture: Data models and access protocol
◦ Application Architecture: Individual applications and their interfaces
◦ Technology Architecture: Infrastructure services and the technology standard they are
developed on.

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Key Concepts
Operating Model
◦ The desired level of business process integration and business process standardization
for delivering goods and services to customers.

IT Engagement Model
◦ System of governance mechanism that ensure business and IT projects achieve both
local and companywide objectives
◦ Managers are typically not involved much with application architecture or technology
architecture.

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Enterprise Architecture as Strategy

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What is Architecture ?
Strategy

Business Business IT Strategic Technology

Opportunity Strategy BluePrint Availability
Enterprise wide focus

Enterprise Architecture

Business IT
Architecture Architecture
Planning - Processes - Applications
- Information - Data Enterprise
- People - Integration Architecture
- Locations - Technology
“the city plan”
Transition Plan
Project focus

Business Operating Environment

and IT Infrastructure
Design and
Delivery
IT Solutions System Architecture
“the building design”

Architecture covers Business and IT Architectures, providing the “city plan” for “building projects”

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The move from monolith to components

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Elements of Enterprise Architecture
While architecture for a new building is captured in blueprints, EA is often
represented in terms of principle, policies and technology choices. However,
to initiate the discussion, a one page core diagram of following elements are
created.
Core Business Processes
◦ Defines the stable set of company wide capabilities needed to execute operating model
Shared data driving core processes
◦ Customer Supplier or item data that is shared across the organization
Key linking and automation technologies
◦ "Middleware" that enables integration across organization
Key customers
◦ Major customer group served (Customer Definition)
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Four Operating Models

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EA for Diversification Model
Portfolio includes
Radisson Hotels,
T.G.I. Friday,
Carlson Marketing
Group, Carlson
Wagonlit Travel,
Radisson Seven
Seas Cruises etc.
(Low on
standardization
and integration)
◦ Shared technologies
to reduce overall
cost of IT

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EA for Replication Model
Key processes are
standardised across
the company and
supported by
automating
technology allowing
rapid expansion and
business scalability
Data and customers
are business unit
specific

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EA for Coordination Model
High process integration
to present a common face
to the customer ( Key
data sharing) without
forcing process
standardisation
Because most processes
in a coordination model
are unique, it is less
important to show them
on diagram
◦ Shared data and shared
customers

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EA for Unification Model
Core Business Processes
◦ Customer experience,
Operational pipeline,
Business reflexes and
employee relationship
Shared data driving core
processes
◦ Nine database critical to
process execution
Linking Technology
◦ Delta nervous system
Key Customers

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Focus on Standardization Differs by Operating Model

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Decision Domains Across Architecture Levels

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How to get IT
Enterprise
Systems

Buy Build

Software as
Package In-house Outsource
a service

Open Open
Proprietary Proprietary
source source
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How are Software Services Priced?
Pricing Model Unit of Measure Customer Risk Provider Risk
Time & Material FTE Effort variance SLAs adherence
Schedule variance Quality
Quality
Technology change High Low
Business outcome
Incentive to Innovate

Fixed Price Project Size Schedule variance Effort variance

Scope change (CRs) SLAs adherence
Technology change Med Med
Business outcome
Incentive to Innovate

Transaction Price Transaction Schedule variance Effort variance

Technology change Low Volume variance
Med
Business outcome SLAs adherence
Incentive to Innovate

Outcome Based Business outcome Business outcome Effort variance

Volume variance
SLAs adherence
Low Schedule variance High
Technology change
Return on investment
Incentive to Innovate

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Funding IT

Method Description Why Do It? Why Not Do It?

Chargeback Charges are calculated Fairest method for IT dept must collect
based on actual usage recovering costs because details on usage. IT must
it is based on actual be prepared to defend
usage. Dept ownership the charges
Allocation Total expected IT Less book keeping for IT May charge low usage
expenditures are divided because rate is set once department more than
by login IDs/ employees per fiscal year, and well their usage
/ desktops understood
Corporate budget Corporate allocates No billing. IT exercise Competes with all other
funds to IT at annual more control over what budgeted items for
budget session projects are done. Good funds. Less end user
for new tech oriented

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Total Cost of Ownership
Looks beyond initial capital investments to include costs associated with
technical support, administration and training.

Estimates annual cost per user for each potential investment choice.

Hardware, Software, Network, Data, Technical Support, Administration,

Training

Can be used to compare with industry average

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How to Measure IT ?
Leverage Infrastructure
◦ Shared services, outsourcing
◦ TCO, Operation and infrastructure cost as % of revenue, IT headcount cost as % of sales

Drive profitable growth

◦ Improve NPD speed, TTM, customer satisfaction, lifetime value using BI
◦ IT contribution to net income, New revenue stream from existing customers

Achieve proprietary advantage

◦ Differentiate product, Enter new market, Barriers to entry or switching cost (ATM)
◦ Increased market share, Brand value, market capitalization

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Gartner View – Integration of Disciplines

Strategy

IT Portfolio
Management
Project
Management Architecture
Office

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Characteristics of IT Savvy
IT Savvy refers to the planned
ongoing use of a set of
interlocking business practices
and competencies that
collectively derive superior
value from IT investments

Successful IT portfolio
techniques changes the
conversation from technical to
strategic considerations by
applying a commercial lens to
IT investments

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IT Savvy Gets Premium Returns
How?
◦ Strategic IT: Can mitigate risk
◦ Information IT: Because of the discipline required to use common sets of information
effectively
◦ Transactional IT: Process digitization enables innovative new products and services by
freeing up managers to innovate on the platform of these digitized process
◦ Infrastructure IT : Turn enabling investments into value faster

What about low IT Savvy companies

◦ Reduce IT investments to essential areas only and re-weight their portfolios towards
lower risk transactional IT assets until they have improved their overall IT savvy

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Considering IT Investments as Portfolio
Different IT asset class with
its own unique risk return
profile

Investment for any single

project can be spread over
one or more asset class

Same IT may give different

Risk Return profile

What Benefits Diversification

EA offers?

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Considering IT Investments as Portfolio
Top performers in financial
services spend 10% less on IT
than the industry average
(Portfolio heavily weighted
towards IT infrastructure)

Top performers in wholesale,

retail and transport sectors
spend 11% more on IT
(Portfolio heavily weighted
towards informational assets,
indicating there is still
competitive advantages in
effective use of information)

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Evolution of Information Technology
“Track” Business “Drive” Business
Systems Department: Dot-com
bust
Managing computers and Dot-com boom
hardware
IT Dept:
Business Value

Rationalization of
Managing IT technology adaptation
Projects Outsourcing to
outsourced to offshore IT IT Dept
service Service becomes
providers Providers strategic
division

Offshore
Business alignment
Captives
of technology
set up

Internet Wave
Advent of Enterprise Software Globalization

Cost Reduction & Increased Efficiency 2000 Increased Business Value & Greater Effectiveness
Technology Case, Technical Engineers Business Case, Business Stakeholders

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Summarizing

Strategic Initiatives

Operating model

Defines integration Enterprise architecture

and
standardization
requirements

Foundation for execution

• Core business processes
• IT infrastructure

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Enterprise Architecture will:
Help management analyze, plan and execute change faster and with
better insight.

Get IT and business stakeholders collaborating for better alignment

around requirements.

Create enterprise blueprints as a roadmap for exploiting IT architectural

building blocks and achieve business transformation.

Attain improved compliance and more predictable project outcomes.

Improve IT contribution to business returns with improved integrity and

agility.
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 Thank you

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