Building Value Through Enterprise Architecture
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This document provides contact information for Booz & Company consultants involved in a global study on building value through enterprise architecture. It discusses key findings from the study, including that most organizations surveyed view enterprise architecture (EA) as important for long-term business value, but EA maturity levels vary greatly. Higher EA maturity was clearly linked to greater value in areas like reduced costs, complexity, and risk as well as increased agility. Developing critical EA capabilities like strategic alignment, competency, performance measurement, structure, and processes can help organizations improve their EA maturity and realize more value.
![In practice, achieving strategic Similarly, another respondent, a highly skilled resources’ as the biggest
alignment requires a conscious, indeed senior executive at a government challenge to EA success. Mature
formal, effort. Said one banking organisation, noted that EA must be EA organisations have succeeded in
executive whose organisation has an integral part of strategic planning. overcoming this challenge by focusing
achieved a high level of EA maturity: ‘EA is embedded in [the] business,’ on building internal competencies,
‘Within each business unit exist joint he said, ‘not exposed as a separate particularly through strong leadership
business and technology strategy function called EA.’ and by encouraging architecture-
boards through which the business related training. These practices, in
directs and prioritises the architecture Grow EA Experts from Within turn, allow mature organisations
effort against its strategic imperatives.’ Along with strategic alignment, to promote EA as a professional
survey respondents cited ‘access to career path with formalised roles,
Exhibit 4
Leading Practices of Firms with Mature EA Capabilities
MATURITY ELEMENT VALUE DRIVERS CHALLENGES LEADING PRACTICES
- Involvement in strategic planning - Poor business engagement with and Embed EA into strategic planning
STRATEGIC - Formal engagement models adoption of EA - Build strong formal engagement with the
ALIGNMENT - Alignment to both business and - Lack of understanding of EA organisation
IT agendas throughout organisation – perceived - Focus EA on issues most relevant to the business
as an IT or compliance function
Grow EA experts from within
- Strong leadership to drive - Difficulty sourcing staff with
positioning of EA across the appropriate skills - Nurture experts who can communicate with both
STAFF business and technology
organisation - Finding leaders who can effectively
COMPETENCE
- Strong internal training and communicate value of EA to both IT Measure meaningful success
development and business staff
Increasing Importance
- Link EA to enterprise KPIs
- Monitor EA’s impact (e.g., before-and-after
- Formalised performance - Measurement of EA outcomes,
comparisons)
PERFORMANCE measurement underpinning difficulty in selling it to
MEASUREMENT the wider organisation Promote EA to the organisation
- Highlight EA’s measured impact on enterprise
priorities
- Clearly defined governance - Lack of support at senior levels - Build senior management support
ORGANISATIONAL and decision rights
Grow EA through the organisation and into the
STRUCTURE extended enterprise
- Retain a solid core EA practice
- Incorporation of EA standards - Ensuring use of standardised - Consider federated models, building business
into formal project delivery frameworks, methodologies, ownership of EA content
FORMAL and tools - Grow into the extended enterprise (e.g., partners,
PROCESSES customers)
Source: Booz & Company analysis
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![responsibilities, and decision rights, Organisations with mature EA made and the outcomes achieved.
offering employees a compelling functions have addressed this Such organisations make a point
value proposition. As one senior challenge by creating formal of embedding EA into the fabric
director at a prominent government performance measurement built on of business and operational
agency put it, ‘EA leaders are the both qualitative and quantitative data. decisions, rather than making
leaders in the business, information, At a broad level, quantitative metrics separate technology decisions. These
and technology domains by nature of used by banks include changes over organisations typically also ensure the
their roles, and [this] positions [them] time to cost/income ratio, correlated involvement of senior management
as part of the planning organisation.’ with EA-driven projects focused on in supporting EA investment and
cost. Qualitative metrics often focus in communicating its value to the
Measure Meaningful Success on collective enterprise architects’ organisation. In the words of one
Like any other business function, performance and feedback from banking executive, ‘The acid test for
EA must be accountable for how within the organisation. A banking this is that our CEO is always asking
well it performs and measures up executive at a mature organisation if we have enough resources.’
against key performance indicators. reports measuring architects as part of
And measurement and attribution an annual process that includes ‘the Yet one of the most commonly cited
of results is even more critical for percentage of funding allocated on challenges to EA maturity included
an emerging capability looking to the basis of architecture deliverables, the level of business awareness and
prove its value to the organisation. value of the input into projects by the generation of an organisation-
Survey respondents identified the the key stakeholders, how creative wide understanding of the importance
need to prove ongoing success as one and proactive we are in our solution of EA. To address these issues,
of the most common challenges in architectures, and our understanding it is critical to develop a strong
developing a mature EA function. of the business and its problems. communication mechanism that can
‘A lack of demonstrable value to the Measures are scored through a survey educate the organisation on both the
organisation [means] no successes to sent to stakeholders.’ nature and value of EA. As a banking
generate interest [in EA],’ a senior business architect put it, ‘During
government executive explained. Promote EA Across the Organisation a survey, we found that a formal
Once they gain the capacity to In organisations with mature communication plan—including case
measure results, mature organisations EA capabilities, EA champions studies to prove the realisation of
often focus on completing quick- typically communicate the value benefits—should improve [the bank’s]
win projects that allow them to of EA to the business in terms of view of EA.’
demonstrate EA’s ability to add value. the strategic business decisions
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![Case Example: Driving IT Portfolio Prioritisation
A sophisticated EA program allowed a large U.S. government agency to unify its
disparate portfolio management processes across its many business lines and
guide its US$1.04 billion IT investment portfolio. Over three years, the agency
estimates, the effort saved approximately $102 million—more than 3 percent
of its annual IT budget—primarily by eliminating duplicate investments and
capturing gains in business process efficiency.
Furthermore, the ability to reprioritise IT investments allowed the agency to
reap significant business benefits by completing major IT projects early. One
IT investment, a system designed to speed up a case resolution process, was
delivered a year early; now cases are being resolved 25 percent faster, resulting
in efficiency gains and cost savings.
The agency attributes the success of its new IT portfolio management process to
several key factors:
• EA provided executives with a common language and a single integrated
Grow EA through the Organisation
business–IT planning framework for navigating complex planning and
and into the Extended Enterprise
investment activities. The new EA-driven process enabled the agency to make
As organisations build their
trade-offs with an understanding of the implications of and dependencies
internal EA capabilities, the effort
between business processes, IT systems, and data.
to unlock value beyond their
traditional boundaries and into • EA encouraged the use of a collaborative, business-driven engagement
the extended enterprise becomes model that ensured a high level of executive and business involvement.
increasingly important. Key areas
for opportunity include supplier and • EA allowed planners to take a ‘top-down’ perspective on the many business
partner interactions. By making these challenges and capabilities that the modernisation effort needed to address.
efforts, organisations can ensure the That perspective sharpened the focus on high-priority initiatives, building
standardisation needed to provide an momentum and maintaining credibility with the business.
effective, efficient, and consistent user
Thanks to its EA efforts, the agency has significantly improved its decision-
experience and delivery of service.
making and planning capabilities; now it intends to integrate EA into planning
across all business lines. Despite the success of this pilot effort, however, the
As an executive at one government
agency faces a key challenge shared by many not-for-profit organisations:
agency put it, ‘To support IT
measuring and communicating the value of EA to the rest of the business.
strategic planning, [we are] leading
“Much of the value is related to achieving business benefits [such as increased
the effort to design and develop
operational efficiencies], not just reduction of costs,” says the agency’s senior
a single enterprise architecture,
advisor for EA.
using a strategy that federates with
external partners and incorporates
an integrated, coordinated, flexible,
and long-term strategically focused
approach.’ That view was echoed
from the banking sector by another
executive: ‘Architecture develops
and communicates the key guidelines
by which technology procurement
and development is carried out,’ he
said. ‘We influence the allocation of
funding to technology initiatives and
major business initiatives.’
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Building Value Through Enterprise Architecture
- 1. Perspective Peter Burns Michael Neutens Daniel Newman Tim Power Building Value through Enterprise Architecture A Global Study
- 2. Contact Information Beirut Ramez Shehadi Homayoun Dayani-fard Partner Senior Associate +961-1-336-433 +44-20-7393-3509 ramez.shehadi@booz.com homayoun.dayani-fard@booz.com Raymond Makhoul Tim Power Senior Associate Associate +961-1-336-433 +44-20-7393-3725 raymond.makhoul@booz.com tim.power@booz.com Canberra Munich Andrew Johnstone-Burt Johannes Bussmann Partner Partner +61-2-6279-1965 +49-89-54525-535 andrew.johnstone-burt@booz.com johannes.bussmann@booz.com Daniel Newman Jörg Sandrock Senior Associate Senior Associate +61-2-6279-1962 +49-89-54525-656 daniel.newman@booz.com joerg.sandrock@booz.com London New York Greg Baxter John Plansky Partner Partner +44-20-7393-3795 +1-212-551-6492 greg.baxter@booz.com john.plansky@booz.com Hugo Trepant Jamie Solomon Partner Principal +44-20-7393-3230 +1-212-551-6709 hugo.trepant@booz.com jamie.solomon@booz.com Michael Neutens Sydney Principal Peter Burns +44-20-7393-3215 Partner michael.neutens@booz.com +61-2-9321-1974 peter.burns@booz.com Hugo Trepant and Homayoun Dayani-fard also contributed to this Perspective. Booz & Company
- 3. EXECUTIVE The economic crisis has taught organisations a critical lesson: Only by focusing on long-term value can they ensure their SUMMARY survival during difficult times—and be ready to change when the opportunity or the need arises. Among the capabilities required to create value now and in the long term is mastery of enterprise architecture (EA)—the effort to align an enterprise’s operations, including business functions, processes, and information systems, with its business goals and strategic direction. To determine how much value EA can contribute to the business, Booz & Company recently surveyed executives across a mix of financial services and government organisations. The results are revealing. • Respondents across the board viewed EA as a key capability for building long-term business value, and are making significant investments in advancing their EA capabilities. • EA maturity levels vary greatly among the organisations surveyed. • The amount of value captured through EA was clearly linked to EA maturity level. Companies looking to improve their EA maturity must work to develop their capabilities in five critical areas: strategic alignment, staff competency, performance measurement, organisational structure, and formal EA processes. That can be difficult for any organisation, but the rewards are clear: better value from investment decisions and improved strategic advantage, now and in the future. Booz & Company 1
- 4. WHY ENTERPRISE Business lessons learned during recessions are often learned painfully. services and government sectors, it is becoming increasingly evident ARCHITECTURE Organisations that had focused that maturity of an organisation’s MATTERS their planning efforts and capital deployment on short-term indicators, EA efforts can have a significant positive impact on business value in appealing to the psychology of market several areas, including decreased speculation, learned that survival operating costs, improved speed-to- depended on short-term actions— market, reduction of complexity and across-the-board budget cuts, massive risk, and greater overall technology layoffs, reduced capital investment— effectiveness. that set them back as they reentered the growth cycle. Only by building We are aware that many the right capabilities for generating organisations have questions about lasting, long-term value can the value of EA: Does investment organisations survive, and even thrive, in EA really deliver value to the during the inevitable downturn, and business? If so, what types of be agile enough to benefit from new value are being realised? What are market opportunities as they arise. successful organisations doing to capture value from EA, and what are Now is the time, we believe, to make the greatest challenges to attaining the shift from speculation to real, an effective EA? What actions are long-term investment in the enterprise. most important for companies in Service-oriented organisations in developing their EA capabilities? particular must create value across the And how can EA be used in the short entire enterprise, from front-office, term and the longer term, given the customer-facing activities through challenges in the economic climate? business operations and processes to the underlying technology. To answer these questions, Booz & Company recently completed A critical element in the process of a global enterprise architecture study. creating value involves enterprise As part of the study, we surveyed architecture (EA), the effort to EA practitioners and key business align an enterprise’s operations—its representatives at more than 60 core business functions, processes, organisations in the financial services information systems, and services— and government sectors around with its business goals and strategic the globe, then gained additional direction (see Appendix 1 for a more understanding through one-on-one complete definition of enterprise interviews with C-level executives, architecture). For service-oriented including CIOs, COOs, and heads of organisations throughout the financial strategy and planning. 2 Booz & Company
- 5. INVESTING IN The results of the study were revealing. First, every organisation of EA across both business and IT, or ‘institutionalised.’ More than 80 EA MATURITY we surveyed is making significant percent of organisations fell within investments in its EA capability, either the ‘standardised’ (level 3) and sees it as a continuing priority. or the ‘operationalised’ (level 4) Furthermore, more than 60 percent categories, indicating that EA is of the executives interviewed say they gaining traction as a value lever view investing in their EA capabilities across the business (see Exhibit 1, as a top-five priority for executing page 4). For those that fell within their strategy in the coming year. the ‘emerging’ and ‘standardised’ categories, however, EA remains At the same time, however, the study limited primarily to the IT function. revealed a wide range of maturity None of the organisations we levels across organisations. On the surveyed were rated either ‘none’ or basis of their responses, we assigned ‘institutionalised,’ indicating that organisations a number from 1 to 5 every organisation is investing in EA on an EA maturity index that reflected to some degree, but there is still much a range between no investment in ground to be gained to reach the EA, or ‘none,’ and full integration highest level of maturity. “Maturing our EA capabilities is a top-three priority this year. We will be using EA as the basis to re-scope and prioritise our multibillion-dollar investment program.” —CIO, government agency Booz & Company 3
- 6. As Exhibit 1 indicates, by and large, evolved sometimes inconsistently cant architectural challenges confront- the financial services firms surveyed over time. With the exception of one ing public-sector organisations, which scored higher than the government small agency, government organisa- are often complex and interlinked agencies, a difference that may be tions all displayed either ‘emerging’ or with other organisations through due to the public sector having more ‘standardised’ EA capabilities. These cross-department portfolios. complex business models that have capability levels indicate the signifi- Exhibit 1 The EA Maturity Index and Survey Results LEVEL 1 LEVEL 2 LEVEL 3 LEVEL 4 LEVEL 5 NONE EMERGING STANDARDISED OPERATIONALISED INSTITUTIONALISED - Little or no EA maturity - Emerging but limited and - Capability is becoming - Capability is operationalised - Capability is institutionalised within the organisation ad-hoc capability within the standardised, yet is not fully and operates as an effective and is critical in delivering - EA is not formally supported organisation effective or consistently core function innovation, agility, and or executed within the - Limited by lack of alignment followed throughout the - Effectively aligns business strategic advantage, and organisation to business and IT, organisation and IT through governance, enabling key outcomes of - No formal investment governance and - Typically limited to the IT communication, and the organisation planning commitment domain only engagement - Operates across the breadth of the organisation and at its most senior levels Financial Services Government EA Maturity Index EA Maturity Group Key Value Type Key Lowest index Least mature third of organisations Median index Middle third of organisations Upper index Most mature third of organisations Source: Booz & Company Enterprise Architecture Maturity Model 4 Booz & Company
- 7. Case Example: Cutting Costs Over the course of a two-year EA program, a leading Australian bank realised cost savings of more than AU$200 million (US$161 million), or about 1.4 percent of total operating expenses—primarily through consolidation, sharing, and reuse of technology assets. The bank’s EA maturity score placed it in the top third of organisations surveyed. The bank integrated EA deeply into its operations, an effort that has been fundamental to its success. Bank executives point to three key mechanisms in pursuing that integration: • Ensuring that the strategic planning process includes input from the EA program, particularly where investment decisions are required. • Securing EA input into other governance processes, such as project planning, which in turn has steadily increased EA’s profile across the organisation. • Building a federated EA model with a central EA practice supporting domain experts in each business unit. This enabled the delivery of business-specific information underpinned by consistent frameworks. The proven value of EA has only whetted the bank’s appetite for expanding its EA capability. “There is sufficient feedback,” the bank’s head of enterprise architecture noted, “to suggest that senior management expects EA to step up to the next level to set the strategic agenda.” For that to happen, however, the bank must develop the hybrid business and technology skills enterprise architects need. Doing so means creating more attractive career paths for enterprise architects to ensure that their skills are retained. Booz & Company 5
- 8. Connecting Booz & Company experience and initial interviews with executives The few organisations reporting that their EA efforts have reaped little or Maturity indicated these four areas were no value are all at the ‘emerging’ level and Value the most common benefits being achieved by EA capabilities. Of the of EA maturity. In each of these cases, EA is restricted to the IT function, one-third of organisations with the with no clear engagement with the highest EA maturity ratings, more business—in sharp contrast to those than 60 percent reported having higher on the maturity scale. In our efforts to establish the link realised all four sources of business between EA maturity and value, value. Those organisations are also Our study further suggests that there we looked at four critical areas continuing to invest in EA, indicating is an order to the sources of value of business value: decreased cost, that they believe there is still value delivered via EA. As organisations reduced complexity, reduced risk, to be captured by pushing their EA mature, they capture cost savings and increased agility (see Exhibit 2). maturity further. and operational risk reduction Exhibit 2 The Relationship between EA Maturity and Value Least mature third Middle third of Most mature third of organisations organisations of organisations 100 Proportion of Organisations Reporting Value (% per group) EA Maturity Group Key 90 Lower 80 Median Reported value 70 increases with Upper EA maturity 60 Value Type Key 50 Cost 40 Agility 30 Complexity 20 Risk 10 0 1.0 2.0 3.0 4.0 5.0 NONE EMERGING STANDARDISED OPERATIONALISED INSTITUTIONALISED EA Maturity Index Source: Booz & Company analysis 6 Booz & Company
- 9. earliest, whereas reduced complexity • As with cost benefits, organisations sectors indicate that standardisation and increased agility become more realised the benefits of reduced risk across the IT function is the key apparent as their EA maturity relatively early in their maturity factor in reducing complexity. increases. As companies reach higher efforts. That, we believe, can be levels of maturity, value tends to be attributed to EA’s ability to provide • Organisations found that realised across all four of the sources an enterprise-wide view of planned agility—a combination of the identified. investments, and thus to limit the flexibility needed to create new problems that can arise through business products and the speed • Virtually every organisation we misaligned programs. at which they can be brought to surveyed cited cost reduction as one market—is the most challenging of the most commonly captured • Managing complexity remains source of value to capture. For sources of value. Yet those with a challenge for organisations many organisations, only strong the highest levels of maturity that have yet to reach at least a architectural alignment between reported significantly greater cost ‘standardised’ level of EA maturity. business and technology could savings, implying that the tighter Many organisations in both the enable the nimbleness needed the alignment between business financial services and government for effective change, such as and technology, the greater the cost advantage. “The bank has leveraged EA to manage the governance and complexity of its channels, processes, and systems, resulting in increased customer satisfaction and growth in key customer segments.” —Executive VP, financial services organisation Booz & Company 7
- 10. Case Example: Improving Efficiency and Customer Service As part of a government mandate, a large U.K. government agency embarked on a transformation to improve its efficiency and customer service. The agency had been largely paper-based, with separate business processes for the various benefits it administered. Fragmented workflow processes and outdated IT systems had adversely affected customer service, efficiency, and staff morale. The use of EA was a key enabler in the transformation, which resulted in a reduction of the average time it took to process claims by more than 70 percent, from more than four weeks to just five days, and reduced the number of processing centres by 60 percent, from 25 to 10. Among the benefits of the agency’s EA efforts: • EA provided clarity for the agency’s vision and helped it facilitate the transition from its paper-based processes to modern CRM-based processes. The transition plan allowed for the coexistence of old and new processes, while targeting quality assurance on activities in critical areas. This helped reduce reengineering an existing product operational risk while the transformation was taking place. to respond to market changes • EA drove the alignment of business and IT objectives by following focused quickly. Furthermore, they found principles and discipline. It enabled the use of common software packages that the business must lead the with minimal customisation, for example, and the implementation of a CRM effort to identify and coordinate system in a “wrapper” pattern to cut costs and minimise the new system’s the various enterprise functions impact on legacy systems. needed to enhance speed-to-market. • EA encouraged the reevaluation of a number of third-party contracts; Organisations in both the financial subsequent renegotiations resulted in a reduction of 25 percent on the services and government sectors agency’s end-to-end IT systems integrator contracts, for a total savings gain business value as their EA estimated at £10 million (US$14 million). maturity improves. Yet the study indicates that the two sectors vary By providing an integrated view of its business and IT architectures, EA was significantly in how they use EA, and instrumental in helping the agency meet its transformation objectives, while in their expectations for the kinds managing operational risk along the way. The agency had initially outsourced of value they might get out of it. its EA efforts to external professionals, but by adopting a systematic approach Financial services companies typically to capturing the knowledge gained, it now has the expertise to continue with focus on using EA to help guide minimal external support. organisation-wide strategies such as cost control, pre-merger and post- merger integration, infrastructure consolidation, and the delivery of new products. They see EA as a tool for gaining competitive advantage. Government-sector organisations, on the other hand, see EA as a tool to enhance internal collaboration, interoperability, and the ability to share information among different departments and agencies. By focusing their EA efforts on standardising government services, these organisations aim to manage their portfolios of resources more effectively, particularly for the implementation of large programs. 8 Booz & Company
- 11. Driving Value explain, however, what it takes to reach the higher levels of maturity. Furthermore, those elements with the greatest link between maturity and Achieving EA maturity involves five value are also the ones respondents critical elements: strategic alignment, viewed as the biggest challenges (see staff competence, performance Exhibit 3). Unsurprisingly, there is measurement, organisational structure, no free lunch, but those who can The connection between EA maturity and formal processes. Each is vital to overcome the most significant EA and business value is clear—the value the success of every EA effort, yet they challenges will reap the rewards. captured is directly correlated with vary significantly in their link to the the level of maturity. That doesn’t value created through EA. Exhibit 3 The Five Elements of EA Maturity MATURITY ELEMENT ELEMENT DESCRIPTION LINK TO VALUE CHALLENGES Relative difference in element Respondents noting the maturity maturity between organisations that element as a key challenge to did and did not report value(1) maturing EA(2) The extent to which the EA function is involved STRATEGIC in both business and technology strategic planning and how well EA engages with the 1.7 40% ALIGNMENT wider organisation The level of competency of EA’s leaders and STAFF practitioners and how well EA is recognised and 1.6 40% COMPETENCE fostered as a career path PERFORMANCE How well EA’s success is defined, measured, and improved with formal metrics 1.5 24% MEASUREMENT The extent to which the EA function is formally ORGANISATIONAL structured and governed, the seniority of EA’s practitioners, and the level of recognition of EA 1.1 18% STRUCTURE throughout the business The extent to which formalised frameworks, FORMAL methodologies, and supporting technologies PROCESSES are used within the EA function and the breadth 1.0 7% of the adoption of EA standards firm-wide 1 The average difference in maturity scores between organisations that did and did not report value was calculated for each maturity element. The differences displayed are normalised to the lowest difference, which is set to 1.0 (i.e., on the formal processes maturity element). 2 Percentage of respondents noting the maturity element as a key challenge to maturing an EA capability. Source: Booz & Company analysis Booz & Company 9
- 12. The use of EA to aid in the alignment across the organisation. However, One could argue that the success of between an organisation’s operations a large percentage of respondents every service firm relies ultimately and its business goals is the most recognised the difficulty of building on the quality of its people, and critical driver in achieving business that engagement, particularly when an EA program is no different. value; every EA effort must be the wider organisation has only a Organisations with high levels of EA focused on actual business results. limited understanding of what EA maturity have typically succeeded in Hence, successful organisations consists of or why it matters. If overcoming two major competence overwhelmingly design their EA an EA program is to succeed, it is hurdles: They have cultivated leaders functions to be included in both critical that it remain relevant to who can effectively communicate technology and business strategic the firm’s strategic agenda, and that EA’s value throughout the planning processes—to force strong the overall organisation remains organisation (in both technical and formal engagement between the two cognizant of its importance. non-technical settings), and they have “Previous IT-led attempts to mature EA failed. EA is now located within and led by the business, making the organisation more responsive to changing priorities and business challenges.” —CIO, government agency 10 Booz & Company
- 13. established training and development that EA is not simply the preserve of paths for enterprise architects to the IT department. grow the practice from within. Investing in internal development Interestingly, the study reveals that not only helps alleviate difficulties in organisation (how the EA function is procuring external talent, but also structured) and process (EA-related breeds architects with the necessary frameworks, tools, methodologies, intimacy with business knowledge. and the like) maturity were less significant differentiating elements Performance measurement is in the value realised from EA than the third key maturity element. were the other maturity elements. Successful organisations have learned By and large, organisations find how to measure accurately the these maturity elements easy to outcomes of their EA efforts and use ‘do’ well. This being the case, these the results to further drive support elements should be considered as in the business. Alignment of those ‘givens’ in developing a functional EA metrics with organisational strategy capability—they are important but not is critical. Successful EA functions differentiating. Organisations would measure, and communicate, results do well to focus effort primarily on that matter to the business, which strategic alignment, staff competency, in turn only strengthens the message and performance measurement. Booz & Company 11
- 14. Case Example: Managing Complexity A leading European bank needed to ensure that its recently outsourced IT activities continued to provide optimum service to the business. By expanding its EA capability, which had traditionally resided within the IT function, the bank successfully integrated those outsourced services. And by reusing applications and processes across its previously siloed business lines, it also reduced complexity and costs. The success of the program was driven by: • Formalising EA’s strategic role in the governance of the new outsourcing arrangements to ensure that services provided by the extended organisation were aligned with the needs of the business. • Building comprehensive organisational knowledge of the EA capability by locating architects within each business line. • Maintaining EA’s technology roots through close engagement between internal solution and infrastructure architects internally and the new outsourcing partners. The bank has begun to reap the rewards of EA’s growing profile and influence, DELIVERING in part because it is now the only function able to provide an integrated VALUE view across the extended enterprise. The bank’s key future challenges lie in further strengthening the relationship between business and IT, and their joint governance of EA, and in formalising its business processes and aligning them with a corresponding master plan for IT. Each of the five drivers of value discussed above carries its own set of challenges, and overcoming those challenges is key to getting the most impact from investments in EA. The results of the study reveal that successful organisations—those that have managed to capture, demonstrate, and communicate the value of their EA investments—all turn to a similar set of practices to reach those goals. Exhibit 4 lays out in detail both the challenges organisations encounter in capturing value through EA, and the leading practices they put in place to do so. Embed EA into Strategic Planning Ultimately, the success of any EA program depends on its relevance to business decision makers, and the business value it creates—and that, in turn, depends on how helpful it is in aligning enterprise structure with overall business strategy. Thus, every EA program must be structured from the start to ensure its efforts are directed toward projects of significant business importance. 12 Booz & Company
- 15. In practice, achieving strategic Similarly, another respondent, a highly skilled resources’ as the biggest alignment requires a conscious, indeed senior executive at a government challenge to EA success. Mature formal, effort. Said one banking organisation, noted that EA must be EA organisations have succeeded in executive whose organisation has an integral part of strategic planning. overcoming this challenge by focusing achieved a high level of EA maturity: ‘EA is embedded in [the] business,’ on building internal competencies, ‘Within each business unit exist joint he said, ‘not exposed as a separate particularly through strong leadership business and technology strategy function called EA.’ and by encouraging architecture- boards through which the business related training. These practices, in directs and prioritises the architecture Grow EA Experts from Within turn, allow mature organisations effort against its strategic imperatives.’ Along with strategic alignment, to promote EA as a professional survey respondents cited ‘access to career path with formalised roles, Exhibit 4 Leading Practices of Firms with Mature EA Capabilities MATURITY ELEMENT VALUE DRIVERS CHALLENGES LEADING PRACTICES - Involvement in strategic planning - Poor business engagement with and Embed EA into strategic planning STRATEGIC - Formal engagement models adoption of EA - Build strong formal engagement with the ALIGNMENT - Alignment to both business and - Lack of understanding of EA organisation IT agendas throughout organisation – perceived - Focus EA on issues most relevant to the business as an IT or compliance function Grow EA experts from within - Strong leadership to drive - Difficulty sourcing staff with positioning of EA across the appropriate skills - Nurture experts who can communicate with both STAFF business and technology organisation - Finding leaders who can effectively COMPETENCE - Strong internal training and communicate value of EA to both IT Measure meaningful success development and business staff Increasing Importance - Link EA to enterprise KPIs - Monitor EA’s impact (e.g., before-and-after - Formalised performance - Measurement of EA outcomes, comparisons) PERFORMANCE measurement underpinning difficulty in selling it to MEASUREMENT the wider organisation Promote EA to the organisation - Highlight EA’s measured impact on enterprise priorities - Clearly defined governance - Lack of support at senior levels - Build senior management support ORGANISATIONAL and decision rights Grow EA through the organisation and into the STRUCTURE extended enterprise - Retain a solid core EA practice - Incorporation of EA standards - Ensuring use of standardised - Consider federated models, building business into formal project delivery frameworks, methodologies, ownership of EA content FORMAL and tools - Grow into the extended enterprise (e.g., partners, PROCESSES customers) Source: Booz & Company analysis Booz & Company 13
- 16. responsibilities, and decision rights, Organisations with mature EA made and the outcomes achieved. offering employees a compelling functions have addressed this Such organisations make a point value proposition. As one senior challenge by creating formal of embedding EA into the fabric director at a prominent government performance measurement built on of business and operational agency put it, ‘EA leaders are the both qualitative and quantitative data. decisions, rather than making leaders in the business, information, At a broad level, quantitative metrics separate technology decisions. These and technology domains by nature of used by banks include changes over organisations typically also ensure the their roles, and [this] positions [them] time to cost/income ratio, correlated involvement of senior management as part of the planning organisation.’ with EA-driven projects focused on in supporting EA investment and cost. Qualitative metrics often focus in communicating its value to the Measure Meaningful Success on collective enterprise architects’ organisation. In the words of one Like any other business function, performance and feedback from banking executive, ‘The acid test for EA must be accountable for how within the organisation. A banking this is that our CEO is always asking well it performs and measures up executive at a mature organisation if we have enough resources.’ against key performance indicators. reports measuring architects as part of And measurement and attribution an annual process that includes ‘the Yet one of the most commonly cited of results is even more critical for percentage of funding allocated on challenges to EA maturity included an emerging capability looking to the basis of architecture deliverables, the level of business awareness and prove its value to the organisation. value of the input into projects by the generation of an organisation- Survey respondents identified the the key stakeholders, how creative wide understanding of the importance need to prove ongoing success as one and proactive we are in our solution of EA. To address these issues, of the most common challenges in architectures, and our understanding it is critical to develop a strong developing a mature EA function. of the business and its problems. communication mechanism that can ‘A lack of demonstrable value to the Measures are scored through a survey educate the organisation on both the organisation [means] no successes to sent to stakeholders.’ nature and value of EA. As a banking generate interest [in EA],’ a senior business architect put it, ‘During government executive explained. Promote EA Across the Organisation a survey, we found that a formal Once they gain the capacity to In organisations with mature communication plan—including case measure results, mature organisations EA capabilities, EA champions studies to prove the realisation of often focus on completing quick- typically communicate the value benefits—should improve [the bank’s] win projects that allow them to of EA to the business in terms of view of EA.’ demonstrate EA’s ability to add value. the strategic business decisions 14 Booz & Company
- 17. Case Example: Driving IT Portfolio Prioritisation A sophisticated EA program allowed a large U.S. government agency to unify its disparate portfolio management processes across its many business lines and guide its US$1.04 billion IT investment portfolio. Over three years, the agency estimates, the effort saved approximately $102 million—more than 3 percent of its annual IT budget—primarily by eliminating duplicate investments and capturing gains in business process efficiency. Furthermore, the ability to reprioritise IT investments allowed the agency to reap significant business benefits by completing major IT projects early. One IT investment, a system designed to speed up a case resolution process, was delivered a year early; now cases are being resolved 25 percent faster, resulting in efficiency gains and cost savings. The agency attributes the success of its new IT portfolio management process to several key factors: • EA provided executives with a common language and a single integrated Grow EA through the Organisation business–IT planning framework for navigating complex planning and and into the Extended Enterprise investment activities. The new EA-driven process enabled the agency to make As organisations build their trade-offs with an understanding of the implications of and dependencies internal EA capabilities, the effort between business processes, IT systems, and data. to unlock value beyond their traditional boundaries and into • EA encouraged the use of a collaborative, business-driven engagement the extended enterprise becomes model that ensured a high level of executive and business involvement. increasingly important. Key areas for opportunity include supplier and • EA allowed planners to take a ‘top-down’ perspective on the many business partner interactions. By making these challenges and capabilities that the modernisation effort needed to address. efforts, organisations can ensure the That perspective sharpened the focus on high-priority initiatives, building standardisation needed to provide an momentum and maintaining credibility with the business. effective, efficient, and consistent user Thanks to its EA efforts, the agency has significantly improved its decision- experience and delivery of service. making and planning capabilities; now it intends to integrate EA into planning across all business lines. Despite the success of this pilot effort, however, the As an executive at one government agency faces a key challenge shared by many not-for-profit organisations: agency put it, ‘To support IT measuring and communicating the value of EA to the rest of the business. strategic planning, [we are] leading “Much of the value is related to achieving business benefits [such as increased the effort to design and develop operational efficiencies], not just reduction of costs,” says the agency’s senior a single enterprise architecture, advisor for EA. using a strategy that federates with external partners and incorporates an integrated, coordinated, flexible, and long-term strategically focused approach.’ That view was echoed from the banking sector by another executive: ‘Architecture develops and communicates the key guidelines by which technology procurement and development is carried out,’ he said. ‘We influence the allocation of funding to technology initiatives and major business initiatives.’ Booz & Company 15
- 18. EA IN THE • Controlling costs and budget: When cost pressures are high, choose the winning vendors. By helping executives better SHORT AND executives must find ways of doing understand how specific outsourced LONG TERM more with less. During downturns, organisations often make the services are being supplied to specific business lines, EA can help mistake of cutting costs by a executives manage their portfolio predetermined percentage across of vendor relationships as these every part of the business, a tactic changes take place. that too often results in destroying Enterprise architecture is a critical value and alienating customers. • Generating capital at a time of capability for organisations looking EA provides executives with the need: Given the high cost of capital to create long-term value. Building transparency to look across aspects in tough times, particularly at long-term value, however, will also of the business holistically, to assess financial services organisations, IT bring benefits in the shorter term. their investments in operations and and operations assets can serve as By improving transparency, refining specific projects, and thus prioritise a source of leverage. By providing business processes, and tightening those areas that will bring in the a holistic view across the landscape the connections between tactics most value. of IT systems and vendor services, and strategy, EA can help support EA can help executives carve out prudent near-term planning and • Managing the extended enterprise areas that can generate cash. These decision making—a vital capability for value: As demand for offshore might include creating innovative as organisations work to improve services shifts and currency financing arrangements when their agility in response to every markets fluctuate, the offshore buying hardware or software, market situation. vendor landscape and offerings switching to leasing deals for major will likely change. In order to keep assets such as server farms, or EA can help executives make up, executives, particularly those moving to more highly leveraged significant contributions to the in operations and IT, will need to financing arrangements for large- business in the near term in four make the right decisions to extract scale outsourcing contracts. key areas: value from vendor contracts and 16 Booz & Company
- 19. • Developing positive relations with offering effective solutions while that can put them at a competitive regulators and external parties: limiting the cost and distraction. advantage as markets change and Regulators are demanding more grow. In this scenario, EA can help and more data from organisations Short-term agility offers a further organisations over the longer term in and greater control over IT as they long-term advantage. At a time three key areas: try to manage risk, particularly when industries are being reshaped, at financial services companies. organisations must be sure to define • Efficiency and lean operations: At the same time, public service their strategies clearly, and implement Providing visibility across the organisations find themselves and maintain cohesive architectures enterprise, EA helps ensure under greater scrutiny as oversight of operations and IT capabilities disciplined standardisation and agencies demand more transparency around those strategies—including consolidation across operations and internal controls. By providing the extended enterprise of partners, and IT functions by removing top-down clarity into IT assets and vendors, and other stakeholders. redundant systems, phasing information, EA can help executives Organisations possessing these capa- out costly and complex legacy respond to regulatory requirements bilities will be best equipped to create systems, and managing across the and external stakeholder demands, innovative new products and services extended enterprise. That in turn “EA is a core function; investment in it remains a high priority. EA plays a major role in enabling a common vision and strategy across our five business units.” —CIO, financial services organization Booz & Company 17
- 20. CONCLUSION By establishing, improving, and measuring the connection between an organisation’s operations and technology and its overall strategic goals, a mature EA capability has the potential to create value no matter how weak or strong the economic climate. The key is the ability to be agile, to be responsive to markets and customers, to be flexible in approaching partnership and delivers real savings, measured by customers with a single view of the acquisition opportunities—in short, monitoring metrics such as cost/ organisation. Doing so requires the to be able to change. Change is never income ratio, total and targeted focused integration of information easy, but EA offers the potential to cost savings achieved, and number and customer preferences across guide companies in their efforts to of processes improved. multiple channels, as well as change, to link business processes the standardisation of processes and technology more tightly with • Agility and innovation: The value familiar to the customer across strategy, to make better investment of any innovation lies not just in the enterprise and across decisions, and to measure the results the innovation itself, but in the geographic boundaries. of those decisions—all in the service ability to deliver it quickly. A of generating greater business value. mature EA function will improve Here, EA helps enhance the the agility needed to bring new traditional distribution system products to market more quickly, by enabling the identification of while increasing the number of new lucrative new channels, as well as products launched in alignment the channel mix that will produce with overall business strategy. How the greatest margins. This might EA contributes to agility can be include developing the common difficult to measure; still, executives IT infrastructure needed for can track metrics such as time- multichannel sales, and supporting to-market for new products and business process integration with the number of new business plans transaction layers between the front executed with the help of EA. and back ends. • Customer-focused services: Again, measuring the gains Building and maintaining attributable to EA can be competitive advantage depends challenging. Some of the basics, greatly on continuously improving such as the number of new the services and support offered channels and services developed to customers. EA can play a key for the customer, can be measured role in planning and executing easily. More complex, but just as customer-focused services and important, are comparative managing the end-to-end customer metrics such as customer care experience. That means creating performance changes for specific the right product and service channels and services, and new mix, offering compelling and customers acquired versus customer integrated channels, and providing groups targeted. 18 Booz & Company
- 21. APPENDIX Defining EA: A Strategic Framework and an Operating Practice Despite its importance, EA remains a fuzzy concept in corporate strategic planning. No common industry definition really exists, and there is no general agreement on its role, scope, and functional responsibilities. If anything, it is typically seen primarily as an IT function, limited to the design of IT infrastructure and systems. Yet that notion severely constrains both the organisation-wide importance of EA and its ability to deliver real business value. We define EA as a logical framework that establishes the links between overall strategy and the organisational structures, business processes, information, and technology needed to fulfil that strategy and deliver the enterprise’s business vision. By providing an end-to-end holistic view of the enterprise, EA aims to support the decision-making process needed to continuously improve and fine- tune the effectiveness and efficiency of the business. As a framework, EA serves as a guiding reference and a communication bridge connecting business operations with IT. Because it is a dynamic function, it should be actively managed to support the business as its competitive environment changes. EA ideally depicts two views: the existing enterprise, and the enterprise of the future as it is envisioned to achieve its business goals. On paper, EA is the blueprint and the road map for the development and management of several components (see Exhibit 5). In practice, it must include how all those components operate and work together. That includes putting in place the proper organisational structure and hybrid business/IT roles, consolidating and standardising information and data stores, and integrating applications and infrastructure to support the right business processes across the enterprise. Exhibit 5 Key Components of Enterprise Architecture Results (for Business and Customers) Business Vision and Strategies (Enterprise) Business Processes1 - Strategy planning - Product processing - Financial management - Sales and marketing - Account management - Portfolio management - Customer services - Payment processing - Regulatory reporting services requirements Alignment Standards Organisation Information Technology Integration - Structure - Data architecture and - Application services - Roles and responsibilities management - Product platforms - Skills/competencies - Business information - Integration layers - Performance management - Customer data - Infrastructure Extended Enterprise - Associations - Third-party service - External systems providers 1 Example business processes. Not exhaustive. Source: Booz & Company Enterprise Architecture Definition Booz & Company 19
- 22. Research Methodology The Booz & Company enterprise architecture study was conducted between October 2008 and March 2009. There were 129 respondents representing 64 companies worldwide who participated in an interview, online survey, or both. The respondents were directors or heads of technology, leaders within business lines, and chief architects across the targeted enterprises. In order to provide a balanced view of EA maturity across both the public and private service sectors, half of the responding organisations came from financial services and half from government. We also set out to achieve a geographic balance—33 percent of participating organisations were based in North America; 36 percent were based in Europe, the Middle East, and Africa; and 31 percent were based in Asia and Australia. All quantitative data presented in this report was drawn from the results of the online survey. Participants were asked to rate elements of their organisations’ EA maturity on a five-point scale and identify different forms of value attributable to their EA capabilities. In cases where more than one employee responded from a single organisation, we calculated the maturity score for that organisation by averaging the responses. The qualitative data, including quotations and case studies, was drawn from detailed interviews and text responses to online survey questions. 20 Booz & Company
- 23. About the Authors Peter Burns is a partner with Daniel Newman is a senior Booz & Company based associate at Booz & Company in Sydney. As the leader of based in Canberra. He has the firm’s service operations extensive experience working business in the ANZSEA region, with government clients he focuses on financial services on business & IT strategy, and government clients. enterprise architecture, and operating model development. Michael Neutens is a principal based in Booz & Company’s Tim Power is an associate in London office. He focuses Booz & Company’s London on strategy, operations, and office. He focuses on business performance improvement with strategy and IT across the financial services companies. financial services and civil government sectors. Booz & Company 21
- 24. The most recent list of Worldwide Australia, Dublin Middle East Mexico City our office addresses and Offices New Zealand & Düsseldorf Abu Dhabi New York City telephone numbers can Southeast Asia Frankfurt Beirut Parsippany be found on our website, Adelaide Helsinki Cairo San Francisco www.booz.com Auckland London Dubai Bangkok Madrid Riyadh South America Brisbane Milan Buenos Aires Canberra Moscow North America Rio de Janeiro Asia Jakarta Munich Atlanta Santiago Beijing Kuala Lumpur Oslo Chicago São Paulo Delhi Melbourne Paris Cleveland Hong Kong Sydney Rome Dallas Mumbai Stockholm Detroit Seoul Europe Stuttgart Florham Park Shanghai Amsterdam Vienna Houston Taipei Berlin Warsaw Los Angeles Tokyo Copenhagen Zurich McLean Booz & Company is a leading global management consulting firm, helping the world’s top businesses, governments, and organizations. Our founder, Edwin Booz, defined the profession when he established the first management consulting firm in 1914. Today, with more than 3,300 people in 59 offices around the world, we bring foresight and knowledge, deep functional expertise, and a practical approach to building capabilities and delivering real impact. We work closely with our clients to create and deliver essential advantage. For our management magazine strategy+business, visit www.strategy-business.com. Visit www.booz.com to learn more about Booz & Company. Printed in London ©2009 Booz & Company Inc.