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Issue Date: June 2007

EA: enduring competitive advantage

June 2007
Stuart Macgregor, MD of Real IRM

Enterprise architecture has evolved from an obscure thing some overly clever IT people talked about into a business necessity.

Imagine you are the owner of a 100-storey office block. You are required to make major changes to the office block, including adding an extra 10 storeys and rewiring the entire building to comply with new electrical regulations.
And you have no architectural blueprint for the office block. You do not know where the plumbing conduits are, where to find the electrical reticulation, what kind of foundation has been laid, the nature of the building materials, and how and where to find the airconditioning shafts.
If this scenario sounds lunatic, it is. Yet it is how companies, by and large, have gone about creating and maintaining themselves. They have typically been created on the fly, without a grand blueprint; without an architectural plan. Is it any wonder they have found it inordinately awkward to bring order and structure to their operations? That when they introduced IT they simply automated lack of structure and articulated process?
It is no surprise then, that companies have invested in multiple IT systems, that they struggle to link strategy and operations and that they battle to obtain a clear and agreed view of return on investment.
To reverse engineer these insights, the science and discipline of enterprise architecture was formed; and as it has evolved, it has brought order, structure, direction, governance and discipline to both business and IT. It has also allowed organisations to reduce risk and manage change.
Critically, it has brought to business the same rigour as is to be found in such fields as engineering, science and medicine, where utter precision is a non-negotiable.
What is enterprise architecture?
Wikipedia describes it as: "The practice of applying a comprehensive and rigorous method for describing a current and/or future structure and behaviour for an organisation's processes, information systems, personnel and organisational sub-units, so that they align with the organisation's core goals and strategic direction.
"Although often associated strictly with IT, it relates more broadly to the practice of business optimisation in that it addresses business architecture, performance management, organisational structure and process architecture as well."
Today, we stand at a conjunction where enterprise architecture has moved business and IT closer together than ever, and where payback is easily discernible. Critically, many businesses have come to understand and internalise that without the application of such a discipline, they effectively have no way of driving and fulfilling their strategy; no way of operationalising strategy in a consistent manner; and, effectively, no way of laying a digital foundation for execution.
Enterprise architecture addresses all of these issues, and more: and it does so in a sustainable way. Moreover, it is an enabler of the ultimate enduring competitive advantage.
What triggers enterprise architecture
It is important to note that enterprise architecture is not a project or a campaign rolled out to satisfy short-term tactical requirements. Rather, it is a new, coordinated way of running the business.
This means, of necessity, that it should either be driven by the executive, or they should be brought into it. If they are not, enterprise architecture will either stutter along, be undermined, or generally fail to deliver the value an organisation seeks and demands.
Having said that, there are easily identifiable typical triggers for an enterprise architecture to be initiated. They include:
* Regulatory compliance issues such as Sarbanes-Oxley, King II, Basel II, FICA and IAS 2005. Each of these requirements drives an enormous amount of organisational and systemic change. And management is clearly exasperated with the constant need to keep reinventing the corporate wheel.
* Government-driven regulations, such as safety, health, environment and quality (SHEQ), which introduce deep and enduring systemic change, along with complex, non-negotiable checks and balances.

* Merger and acquisition, and the resultant need to bring two or more business models together.

* Major system implementation.
Here we are referring to such initiatives as ERP (typically SAP), business intelligence or business performance management, or major system conversion (mainframe to open systems or downsizing).
The first commonality across these business initiatives is that they involve massive change, typically change on an enterprise-wide scale.
The second commonality is that they disrupt the business, often inhibiting business development - and even day-to-day operations. For example, recent reports by organisations as disparate as Standard Bank, Symantec and Business Connexion have reported in the last year that their software implementations have slowed growth, impacted cash flow and inhibited customer delivery.
Change is this traumatic in businesses today because of the complexity of most organisations. Change in one area has an unavoidable ripple effect throughout the rest of the organisation.
With enterprise architecture, it is possible to predict the impact of change throughout the organisation, before it happens. This is through a detailed understanding of the operations of the organisation.
Why enterprise architecture?
Enterprise architecture is required to transform a legacy of fragmented applications, organisational structures and processes (both manual and automated) into an integrated environment with optimised processes that are responsive to change and the delivery of the business strategy.
Enterprise architecture confers a number of benefits to business:
* First of all, it is an asset to the business, and an asset that should be maintained for the duration of the company's life.

* It promotes alignment between the business and information systems.
Systems, after all, must align/match with management's intentions for the enterprise.
* Thirdly, it integrates information. As soon as the same information is available to everyone in the enterprise at the same time, the power will shift to everyone in the enterprise, including the customer so that the enterprise becomes 'market-driven'.
* Data must mean the same thing to everyone in the enterprise if empowerment is to be successful and is to function in a knowledge-based society. Also, business rules must be consistent across the enterprise (like standard interchangeable parts).
* It dramatically cuts time to market, and the time it takes to produce an implementation from receipt of an order. The components have to be engineered such that they can be assembled into more than one implementation anywhere in the enterprise. Architecture provides for an 'assemble-to-order' strategy - an approach also known as mass customisation.
* And, critically, it creates agility for change. Descriptive representations of any object constitute the baseline for managing change to that object over time while minimising time, disruption and cost.
The Open Group and TOGAF
Because enterprise architecture touches every aspect of business and IT, it has been critical that an independent entity drive the standards around it. That entity has been The Open Group.
The Open Group develops and deploys frameworks, policies, best practices, standards, and conformance programmes to pursue its vision of 'boundaryless information flow' - the concept of making all technology as open and accessible as using a telephone. Its members working in the Architecture Forum developed The Open Group Architectural Framework (TOGAF).
TOGAF is a framework for enterprise architecture which provides a comprehensive approach to the design, planning, implementation, and governance of an enterprise information architecture. TOGAF certification is critical for any organisation or person keen on pursuing enterprise architecture.
Does enterprise architecture work?
The report cards are in, and after just over a decade of enterprise architecture application, organisations which have followed architectural principles are:
* More competitive, especially in terms of entering new markets and launching new products and services.

* More profitable, both through increasing revenues and slashing costs.

* More easily able to embrace change, including regulatory change.

* Able to remove duplicate and redundant processes, including the IT systems which support these processes.

* Able to cut IT costs (by up to 25%), identify payback on IT and more easily merge the goals of business and IT.

* Able to manage their data more easily, with less manual rekeying of data, and reduced data error and redundancy.
The example of Armscor is highly instructive. Armscor was mandated by management to reduce its ballooning IT costs, which had become its second largest cost centre. As a consequence of runaway IT costs, Armscor had no more than 5% discretionary spend and management was seriously considering outsourcing the IT function.
Armscor management froze all IT projects, and for 18 months enterprise architecture was 'the only game in town', as Mohamed Ganie, manager: ICT enterprise architecture and infrastructure at Armscor, puts it.
Despite extreme user resistance, management had bought in and sold the project internally.
Armscor's secretive past meant that the organisation operated in totally autonomous silos. We helped break down the barriers between these silos, and through this, identified a great deal of duplication and redundancy in the technology layer.
Removing this duplication meant that we were rapidly able to shut down unnecessary hardware, moving Armscor from 96 standalone servers to a single, nine-blade server. Microsoft SQL Server licences were reduced from 33 to 10. This process freed up more than 40% of IT costs, which could then be deployed as discretionary spend. An architectural move to open source promises to free up further IT spend.
In addition, Armscor was now able to match process against a RACI matrix, which has given the organisation the ability to scientifically justify its funding from the Department of Defence.
Anglo Platinum
Anglo Platinum is widely regarded as having one of the most successful enterprise architecture initiatives in the world - some observers put it in the top 5% globally.
In 2005, labour issues and other business and economic pressures spurred Amplats to embark on an enterprise architecture project, driven passionately by CIO Steve Rasmussen, and with management's full buy-in and our consulting.
Within a year, Amplats had direct payback, halving absenteeism, a key factor for a company that employs 65 000 people, and securing marked improvements in labour practices and safety, health and environmental capabilities.
Key to the success of Amplats' enterprise architecture was the application of Gartner Group's 'good enough' approach, along with TOGAF. This ensures essential short-term business value, along with the flexibility to change with business requirements.
Enterprise architecture, it is becoming increasingly clear, is the single discipline that confers enduring competitive advantage. It is now maturing to the level that organisations can happily embrace its core tenets, safe in the knowledge that they are applying industry-standard, time-tested best practices.
In future articles in this series, I will explore the process of delivering enterprise architecture; how to begin; how to make it sustainable; how to ensure the business can see rapid delivery of value; and how to identify payback.

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