Tuesday, February 07, 2006

Enterprise Architecture Musings

While perusing the Enterprise Architecture Network, I ran across a couple of discussion threads that grabbed my attention.

The first was a posting by Scott Goodin who wrote an entry entitled "Lost, Wandering or Both?" It talked about the following:
Current State = where you are
If you don't know where you are, you are lost.
Future State = where you're going
If you don'’t know your where you're going, you are wandering.
If you don'’t know where you are or where you're going, it's insane to just continue on lost and/or wandering. You've obviously got work to do.

On the other hand, even if you do know where you are and where you're going, you still need a roadmap or strategy to help you get from your current state to your future state.

The second discussion thread that attracted my attention was posted by Tod Goulds. He asked the community for help in presenting a business case for Enterprise Architecture that could show real, measurable ROI (Return On Investment).

Tod received lots of responses to his posting. Many referred to the savings organizationion can achieve through standards and consolidation (a topic I, too, have written extensively about -- see IT Standards Manifesto). Others suggested less quantifiable benefits, such as the value of replacing out-dated applications thereby reducing the forward cost of maintenance, or the impact of aligning strategic IT plans with business needs.

David Rico, in responding to Tod's thread, referenced an article he had written entitled "A Framework for Measuring the ROI of Enterprise Architecture" which methodically looked at measuring:
  • Costs (total amount of money spent on enterprise architecture)
  • Benefits (total amount of money gained from enterprise architecture)
  • Benefit to Cost Ratio (ratio of enterprise architecture benefits to costs)
  • ROI% (ratio of adjusted enterprise architecture benefits to costs)
  • NPV -- Net Present Value (discounted cash flows of enterprise architecture)
  • BEP -- Break Even Point (point when benefits exceed costs of enterprise architecture)
Unfortunately, as the article indicates, few organizations consistently collect cost and benefit data, and certainly not according to a standard. Much of the data reported in this paper by David Rico comes from U.S. government assessments of the maturity, state, status, and progress of federal enterprise architecture initiatives (personally, I don't place much stock in the trustworthiness of the government's estimates of costs or benefits).

Ron Baillie responded that "there were different views as to what the 'returns' for EA are". He provided three examples of different views:
  • standardization provides re-use of components, data entities, building blocks, etc. -- leading to cost reduction
  • greater integration provides better information flow -- leading to cost reduction, efficiency, additional revenue opportunities, etc.
  • architecture addresses tactical 'project' needs while building 'capabilities' in IT, such as agility, ability to innovate, etc. -- leading to strategic competitive value
My own perspective on this topic is that whenever management asks IT for measurable ROI they're usually just erecting a roadblock. I wonder if anyone has ever successfully demonstrated ROI for e-mail or PowerPoint or web servers! Enterprise Architecture is similar to IT Infrastructure in that I'm not quite sure how you measure its ROI, but if it's not there it's going to cost you big time.

I'd be dumbfounded to imagine any CIO without a strategic vision. The question is, how is that strategic vision communicated to others -- both inside and outside of IT? That's where Enterprise Architecture demonstrates its most important Return On Investment -- by enabling the CIO to share his/her vision.


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