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Friday, January 21, 2011

The ‘Order-Deliver’ IT Model is Broken

The current IT Delivery model will not support tomorrow’s competitive environment.
It simply takes too long. While the Business is “ordering” and IT is “delivering”, another more nimble competitor has pulled their business partners into the kitchen and prepared a better dish, together, in half the time. 
Over the last five years, practicing EA has provided a front row seat to some serious shifts in corporate thinking driven by two factors:
  • Economic meltdowns that reinforced the balance sheet’s importance. Shareholder equity = Assets - Liabilities. That’s an easy formula that will not change with technology. How much equity and therefore value a company has will always be dependent on the decisions it makes about managing assets and liabilities for the greatest return. If you need an example, look no further than the housing crisis. Many of the greatest investment banks were ruined because their liabilities (shaky mortgages they helped lending institutions underwrite) far exceeded the long term asset value. This lessons still reverberates in the minds of CEOs everywhere, not just the financial sector - the business case for investment must make sense and IT is no exception.
  • Big, “Enterprise” solutions weigh heavy on corporate profits - now a new technology wave is coming. Since about 2000, large corporations have been investing heavily in big, enterprise systems that automate and optimize core business functions. Vendors have supported industry vertical solutions by a “mix/match/customize” approach, with lots of professional services for each dollar of software sold. These investments, funded with heavy capitalization, are now showing up as depreciation on corporate balance sheets. While companies pay off these large capital procurements, a new generation of technology is emerging that can collect a data from the environment with new sensors and process this ‘Big Data’ with next generation Business Intelligence in highly specialized, industry vertical solutions. The Cloud has emerged to allow much of the required technology to be rented in a pay-per-drink model, making large capital commitments a thing of the past.
It’s cliche, but true - the only constant thing is change. How well we adapt to it is what determines our survival.
The 80/20 Rule Applies
The 80/20 rule suggests that big, capitalized, enterprise technology investments are diminishing in importance. Most companies have made the 20% investment that gives 80% of the benefit, and investing more for diminishing returns doesn’t make sense. What does make sense? Building out process automations with new, “smart” technologies to measure, analyze, predict and react with great speed and agility. Vendors are beginning to offer highly specialized solutions that solve critical, industry specific problems and require little in terms of long term capital commitment. Add in the Cloud, with a pay-per-drink pricing model, and buyers will be able to ‘opt out’ of solutions that do not meet expectations. Things indeed will be different.
The New Order  - Innovation, Agility and Accountability
If the old model is broken, what new one will emerge? Three characteristics define it:
  • Innovation. Innovative businesses that can adapt their thinking to the new environment will adopt emerging technology to solve “unsolvable” business problems.
  • Agility. Business that can experiment, fail fast and quickly redirect to the right solutions will out pace their competition.
  • Accountability. Good decisions must be rewarded, and good accountability means both clarity in who gets to say “yes” and then tracking and tying the results back to executive performance.
Each of these is perhaps its own separate blog, which I will save for future posts. I conclude with a thought that summarizes EAs best role in this new model - we must become the facilitator of good business decisions by 1) understanding our business and the potential of emerging technology, 2) clearly defining the impacts of both good and bad architecture decisions and 3) enabling business ownership and shared Business/IT governance of technology investment decisions. 

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Brian has 21 years of engineering and technology leadership including 12 years as an IT professional. As an Enterprise Architect, Brian has been a leader in establishing Enterprise Architecture Practices in both the Financial Services and Defense industries. He has led the development and implementation of information management strategies, established architecture governance processes, and led multimillion dollar, multiyear program teams. In addition, Brian has extensive experience with web interoperability and data exchange standards established by the W3C and OASIS.