Managing IT as a business, for the business

Managing IT as a business refers to the ability to explicitly drive strategic and operational IT decisions – such as which IT projects should be funded, or which applications should be retired – based on facts or metrics. It is about making financially, managerially and architecturally sound decisions about large and small IT initiatives, programmes, and individual projects as well as potential project synergies or application redundancies. Furthermore, it is the ability to launch, plan, organise, architect, monitor and report on IT projects and IT programmes, and provide IT executives with aggregated information and key performance indicators about IT.

It also corresponds to a specific philosophy of how the IT organisation should act – as an internal services organisation, with the processes, tools and structure to manage prioritised, report according to the demands of the business.

Managing IT for the business refers to the ability to align IT activities to business drivers, continuously optimising the relationship between business and IT, and ensuring that IT budget is only spent on things either required to keep the business running, or on activities contributing to business advantage.

The challenges facing IT organisations around the world are well-known –faster business cycles, shrinking IT budgets, increasing IT demands, aging IT portfolios, obsolescing technologies. All organisations are taking similar actions to resolve these challenges, and are trying to adopt similar best practices. The adoption details will depend on enterprise-specific factors, including size, business objectives and their ability to adopt structured best practices that enable agility. However, the key details of these best practices are rapidly converging and maturing.

The best practices adopted by IT organisations include specific IT disciplines, but also those borrowed from the business side of the enterprises. Examples of IT disciplines include, of course, software engineering, software architecture, and mastery of technologies. But it also includes enterprise-level IT architecture, portfolio management (for applications, projects, IT assets, infrastructures), the establishment of (often outsourced) software factories and integration competency centres; and IT project and IT programme management best practices covering the whole software supply chain, from inception to integration and deployment and even retirement of applications.

The above is typically familiar to IT professionals. Where IT organisations often fail to achieve the desired results is in applying required business disciplines to IT. These business disciplines include strategy planning, financial accounting and budgeting, and the business side of enterprise architecture.

There are many objectives and benefits that can be achieved in an IT organisation without involving the business, such as reducing IT costs, normalising the application portfolio, improving time-to-market, increasing reliability of size and estimations, and improving overall application and data quality.

IT organisations that manage IT as a business are more agile in responding to new business requests. But the whole enterprise (business and IT) has to adopt a different set of best practices to align business and IT, and continuously optimise the enterprise, rather than specific IT elements of it.

Obviously, this cannot be achieved without business involvement, nor without the business side adopting its own best practices, and alignment of the business with IT – not only of IT with the business. In particular, today we consider the following business disciplines as important enabler and pre-requirements for managing IT for the business:

•Structured approaches to business strategy and business planning, in particular balanced scorecards and the various best practices around strategy focused organisations.
•Business architecture, both as a business modeling discipline, and in the definition of particular business patterns/structure/organisations pragmatically proven to work. In particular, the utilisation of predefined and optimised industry reference models.
•Business process management, in its various flavours, including business process re-engineering, and business process improvement.

It also requires a significant integration of business and IT organisations, processes and best practices. For example:
•Overall business budgeting clearly identifying the IT parts, and making IT programmes and projects compete for budget with other business initiatives.
•Business initiatives and business programmes planned both with regards to their business costs and impacts, and with regards to their IT costs and impacts.
•The business organisation and its processes take into account the IT organisation. For example, checks on someone leaving what is his responsibility with regards to accessing or updating specific IT information.

More generally, all business processes are reviewed for IT impact, analysed for IT automation possibility, and (if appropriate) aligned with their IT counterpart. On the other hand, IT processes are considered as any other business process, and re-engineered or improved following the same techniques.

Applying enterprise architecture
The term enterprise architecture (EA) is used here to indicate both a business and an IT discipline. For many enterprises, EA is the key enabling discipline for managing IT as a business, for the business. Companies excelling at managing IT as a business typically interpret EA as a set of architectural concepts, principles, guidelines, blueprints, standards and other enterprise-wide deliverables that guide an enterprise through acquiring, outsourcing, integrating, developing, modifying, operating and retiring the elements (internal and external to the enterprise) of an IT portfolio. We use the term IT architecture for this perspective on EA.

Companies that excel at managing IT for the business typically interpret EA as a way of modelling and structuring the business, and as a direct support for business planning and business transformation. These companies use EA as a strategic element in their quest for business advantages. Often, these companies approach EA by adopting and optimising specific industry reference models, or to focus on business process reengineering and improvement.

The enterprise architecture team provides the continuously evolving structure and support an enterprise’s needs, over time, to reach the ability to optimise business initiatives (from a purely business perspective), and align its business and IT strategies, as well as individual programmes and projects.

As such, EA provides direct support during the business planning activities, providing the framework within which business plans can be efficiently defined, executed and periodically re-evaluated and improved.

The two most common pitfalls today of this business perspective of EA are:

•Adopting an industry reference model, but failing to reap any advantage from it due to the lack of understanding of how to relate this model to drive IT management, IT architecture and individual projects.
• Not having the ability to tie EA to a business planning and business transformation methodology.

Example: Enterprise services oriented architectures
Let us use a simplified example, on an IT topic that has reached the plateau of its hype this year: service oriented architectures (SOA). If you are considering what to do with SOA this year, there is both good and bad news. The good news is there is now significant industry experience – there are organisations that have been doing SOA for nearly seven years now, maturing technical, architectural, organisational, and methodological best practices. The bad news is we now know that SOA is no silver bullet. It is just one more ‘tool’ available to achieve your business objectives. Indeed, most organisations that have entered into SOA initiatives have failed to reap any benefit from them.

The two most typical errors in adopting an SOA, is to approach it as a ‘technology’, and to believe that one project will demonstrate ‘the benefits or not of SOA’. Indeed, a critical success factor for SOA adoption is adoption across projects – focusing not only on technical aspects but also, or more so, on functional aspects, within a set of reference architectures, and managing its introduction as a ‘programme’. We define this programme-driven, enterprise-driven approach to SOA as ‘Enterprise SOA’ (ESOA).

ESOA for IT simplification
Strong reduction in IT costs and achievement of IT agility typically requires not only reducing overlapping technologies, but also, and more importantly, eliminating redundant applications – ‘normalising the application portfolio’. ESOA is an important enabler; it is currently the most powerful architectural style to support a normalised integration architecture.

SOA is often approached through the introduction of a SOA infrastructure. If not driven by a well-formed IT functional architecture, this can easily lead to an application portfolio in which all applications depend on all applications – an enterprise-level spaghetti architecture. Experience teaches us that services must be functionally layered. This is one example in which an enterprise-level IT architecture, following functional enterprise-level patterns, will help reduce costs, and make your overall IT portfolio more agile.

Significant enterprise-level benefits from ESOA can be obtained by relating EA to other disciplines as portfolio management, program management, and structured approaches to IT strategy and management. Indeed, using ESOA through an integrated set of disciplines for IT simplification is today the sweet spot for IT. That combination of structured and agile best practices, technologies, architectures, applications, integration that makes for the most responsive, cost-effective, and agile IT organisation possible today.

Most ESOA programmes today unfortunately stay in the realm of IT. We work only with a handful of organisations having the vision, capability and perseverance of truly embracing both business and IT aspects, and use ESOA (as well as other IT disciplines) to rethink and optimise the business, as these new approaches allow.

The future
Today, high-performing companies already have in place what is described in this paper. On one hand, characteristics such as mastery of technologies and software architecture, structured IT governance processes, streamlined IT organisations with EA IT teams enabling IT innovation, normalised application portfolios, and more. On the other, ability to support business planning and business transformation through business architecture, integration of business and IT processes.

Managing IT as a business, for the business has itself its costs, risks, success criteria, maturity phases, and typical pitfalls. It is also a rapidly evolving way of thinking, for which the IT industry is providing new and fascinating levels of automation, suffice to mention all the new tools for portfolio management, the new crop of enterprise repositories and enterprise modelling tools, and the promising new ‘ERP4IT’ applications.

We live in a fascinating time, in which a number of business and IT disciplines are indeed coming together, and we assist at the first comprehensive second-generation enterprise approaches, such as our COSM Enterprise or PROACT.