Informed Investment Planning Cuts Inefficiency and Wasteful Spending

September 23, 2008

Research shows that between 10% and 30% of IT’s growing annual spending is wasted and that CFOs are mostly left guessing about timeframes, costs and returns from major IT projects. CIOs themselves are often no better informed about the predictability of projects materializing in time, scope or budget. The only way the deficit in transparency, collaboration and control between both camps can be addressed is with an integrated planning process from demand to budget.

Today enterprises are in a position to take control of IT activities across the board from initial decision making to design and implementation to operations management. Yet the missing piece has been the bridge linking the thinking and vocabulary of the business with that of IT.

Too often, when embarking on major IT projects IT managers are left wondering about unknowns, like existing data or the new application being designed or the transition from branch banking to commercial lending or the plan to offer clients new service levels for existing servers.

As with any complex activity, without a master plan from which all groups can work, there is a tremendous amount of inefficiency. Because there is none, IT organizations are mired in a swamp of annual spending in which the vast majority (80-90%) is soaked up to support existing projects and maintain the growing installed base of existing systems.

Consider the difference when a business can dig its way out of huge recurring expenses and reallocate more spending to high return projects. In those cases, individuals come into work each day knowing they are working on the optimal set of activities to generate returns and expand the benefits of IT.

CIOs must be in control of costs and be able to justify investment expenditures. Nevertheless, many IT organizations have not managed to develop reliable measurements and methods that enable proper judgment and control over the contribution that IT makes to the enterprise. In the search for more efficiency and cost control, IT managers are realizing that the exact costs for IT aren’t really known. Most CIOs know how much they spend on hardware, software and personnel, but not what their costs are for application development and hosting, business process support or IT lifecycle costs, for example. So what can be done?

Enter EAM
Enterprise Architecture Management (EAM) is a proactive planning and analytic process that supports sustained business strategy alignment, information transparency, governance and control; plus, it facilitates intra-organizational collaboration. It is a core part of the strategic IT planning and management process and when adopted in a systematic and process-oriented approach can bring about sustained improvements in the effectiveness of IT performance and investments. The remit of EAM encompasses resource planning on strategic, tactical and deployment levels for the following:

Business layer: organizational structure, business processes, business functions and business data
Technical layer: applications, standard software products, release information and operational information
Information layer: costs and planned investments

Business alignment is essential to the EAM process. Otherwise IT projects are planned for the sake of IT. The closer IT is aligned with the business, the higher the probability it will enable the business to achieve its goals and strategies. Especially in times of cost cutting, shrinking innovation budgets and shortening product lifecycles, IT faces greater pressure to deliver solutions that enable business competitiveness. In light of increasingly complex business processes shared with external partners and involving numerous stakeholders, the need for alignment becomes more acute. Otherwise the threat of chaos and disruption increases.

EAM delivers short-term wins on the operational level — e.g. discovery of redundant applications can result in immediate cost savings. Gaining understanding of the current project portfolio and the dependencies between projects originating from architectural overlaps allows corporations to optimize and better synchronize transformational activities and the associated investments. Substantial time can also be saved in capturing an accurate representation of the as-is landscape in the pre-project planning phase or in mergers and acquisitions.

In the mid term, gains can be achieved on many levels that typically depend on the maturity of the enterprises. Some of these may include rationalization of the application landscape; generating architecture evidence for regulatory compliance; reducing scope changes to projects due to better upfront planning and dramatically reducing failure rates of projects.

In the long term, EAM brings about a healthier IT organization, one more agile and responsive to market change. It delivers a closer partnership between IT and business where strategies are aligned and more informed decisions can be made. Aligning all IT planning activities with the business strategy ensures scarce financial resources are directed to where they are creating highest impact for the advancement of the business.

Despite the benefits, EAM programs may involve some difficulties and challenges. When EAM is tackled from a modelling perspective as opposed to a management perspective, problems are inevitable as consistency and accuracy of information is inherently compromised, Furthermore, significant portions of the gathered information are not accessible to automatic processes and analysis. With a modelling approach, information is prone to be stale and consequently not up-to-date. Unreliable information has proven to be the most important hurdle that can only be overcome when embracing the extended stakeholder community with a uniform, highly automated process.

It takes courage to address an enterprise architecture management issue as it broadens the community of participants from IT and business, whose collaboration is necessary for the initiative to be successful. To overcome the political and cultural factors that may play a role here, stakeholders need to show a willingness to embrace proven practices that often mean a change in work methodology. For example, instead of a last-minute panic about SOX compliancy before audits, this task can be much more easily solved with a solution that supports a collaborative and iterative workflow ensuring that information is present and accurate at all times. In addition enterprises sometimes have difficulty finding the right level of detail on which to plan. This decision should take into consideration the organization’s level of maturity.

Tools Support for EAM
When it comes to EAM, proper tools are critical to success. Tools that put too much emphasis on architecture modelling carried out by a small group of specialists and not enough on supporting the management process will only provide limited help and are ultimately a dead-end. The overwhelming complexity of enterprise architectures begs for solution support. EAM solutions are effective when they allow for the business strategy to be realized through IT actions that are part of an integrated planning process framework.

This process includes business demand management, application architecture management, enterprise architecture management, portfolio management, release planning and budget management. To perform optimally, the process must transact with a logical IT inventory with information management at its core to reach a high level of automation and efficiency. This provides stakeholders with the ability to see, analyze and control the enterprise architectures and align the IT initiatives with the busines

Business managers inherently know that well-orchestrated teams can have a dramatic impact on the success of a business. Yet organizations often struggle to create and execute the strategic IT plan because it involves tight coordination of decision makers with diverse interests, budgets and reporting lines, especially between the IT organization and business divisions. Given the complexity, collaboration is crucial to ensure transparency and accelerated productivity in project planning cycles. Ultimately, EAM is the best approach to ensure that IT and business organizations are aligned so that management can make informed investment decisions.

About Erik Masing: Erik Masing is co-founder and CEO of alfabet, the standard software provider for strategic IT planning and management. Erik has led alfabet since its foundation in 1997 in Berlin Germany, into what is today recognized by leading industry experts and analysts as a market leader with operations across Europe and the US. The company has 70 employees and a user community of 15.000 IT professionals in over 40 countries.

Prior to alfabet, Erik founded and led two other companies, bmp management consulting GmbH and mip AG, which paved the way for the foundation of alfabet. From 1991 to 1993 he served as a Senior Manager for the Defence and Hi-Tech sector at HBS Consulting Partners.

Erik Masing has received numerous awards of distinction for business innovation. In 2000 he received an “Elite of the Future” award by the German Economist magazine and 2001 he and alfabet co-founder Dr. Oleg Kovrigin were selected for the Ernst & Young “Entrepreneur of the Year” award. Mr. Masing is also a member of BITKOM, ENF (Elite Network Foundation) and is a member of the advisory council for economic affairs for the CDU political party in Germany.

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