Are You Really Ready for SOA?

Before you design a modern IT architecture, you have to understand your business model.

Most major organizations claim to have a service-oriented architecture (SOA) plan. Not to have one would be oldfashioned. However, successful implementation of end-to-end data and business processes integration requires not only a technology architecture but also a parallel business architecture. You simply can't have a modern business model without modern processes, software and infrastructure that are tightly integrated.

But in most enterprises, this integration between IT architecture and the business model remains poorly articulated. I call this the CEO/CIO dialogue gap. This gap exists to some extent because of the relative "newness" of IT as a discipline. Professions like finance and manufacturing have matured over hundreds of years, with principles, structures and a body of knowledge that are well understood by business leaders. However, IT has been part of the commercial landscape for only four decades.

During the last 10 years, some CEOs and CIOs have been able to close the dialogue gap. However, in today's flatter—even upside down—world, competition is much harder and business moves much faster. In such exhilarating and dangerous times, strong leadership really matters. There's no longer any room for miscommunication between the business and IT.

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The struggle for business/IT alignment is decades old. But today, the stakes are much higher because technology is becoming fully integrated into every facet of customer, supplier and employee interactions. The challenge for CIOs is multifaceted. First, they must grasp the competitive business context of their enterprise and understand the durable processes that drive the business versus organization structures that are perishable. Then they must be able to build a realistic multiyear modernization plan for the enterprise and establish process, data and investment governance structures with the executive team. Finally, CIOs must be able to articulate the value of the above to their business constituents continuously and with passion.

This is a tall order, but it's critical for the success of a modern enterprise. In the past, we could get away with short-term commitments and much less discipline because we were funding and executing projects that were contained within a business function and limited to a specific technology. But in our current era, most business processes require real-time integration of data and applications. If the business and IT integration model and investment strategy are not well-understood, aligned and managed over multiple years, you could end up with poor business results, dissatisfied customers and out-of-control IT expenses.

For example, building customer-driven self-service processes with Web-enabled applications that use real-time data requires a rock-solid and secure infrastructure. This type of "always on" business model built on SOA has become core to industries like airlines and banks. It has an upside: Because there are fewer people between the customer and the service they require, service delivery costs are lower and the customer experience is more inviting. However, the downside is if your systems go down, service collapses and there are not as many people to run interference on customers' behalf. In addition, dissatisfied customers can switch between companies more easily because their relationships are not personal. One ATM or website is the same as any other unless you can attain intimacy through the electronic portal.

Similarly, a fully integrated global supply chain makes your company more efficient with lower fixed costs. But if it ever goes down, your product flow stops within hours because you've eliminated inventory at every level. There is both value and risk when technology is woven into the business fabric.

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In addition, the always-on infrastructure is costly. The expense comes from its intensity—the volume of transactions it has to support and the number of devices such as kiosks, PDAs and pervasive edge devices like RFID tags connected to it. The value of these investments needs to derive from reducing labor, improving customer service, gaining market share, or dramatically improving supply chain and operations productivity. In other words, your IT investments must be aligned with the economics of your business.

The Business-IT Architecture

There are time-honored principles for aligning IT with your company's economic model, starting with an understanding of the business architecture.

This business architecture includes:

  • Industry context, consisting of changes to the competitive landscape
  • Business context, consisting of the company's approach to revenue growth, margin expansion, cash flow and quality
  • The business model, which is how the company is organized and governed to deliver value
  • Business processes, or how operations work end-to-end to deliver results

The IT architecture must be well-aligned with the business architecture and designed to deliver consistent quality over time. To do so, you must have an application and data architecture that is mapped to durable business processes and technology that is appropriate to the scale at which the company operates. In addition, the IT organization must reflect how the business is organized, and a governance process must be defined to manage investment decisions and trade-offs.

A good example of alignment between the business architecture and IT comes from my experience as CIO at Burlington Northern Santa Fe Railway in the mid 1990s. Our lessons there—managing in a rapidly changing competitive environment—remain true. The business leadership realized after deregulation of the railroad industry that its competitors were not the other railroads, but rather the trucking companies. Railroads historically moved coal and grain—commodities that were not schedule-dependent. Whether we delivered on a Monday or a Thursday didn't matter that much. Anything that was schedule-sensitive went to the truckers.

The competitive insight we had was that if you could run a high-velocity, reliably scheduled railroad, you could take back market share. That vision drove our subsequent investments in processes, organization and technology. In other words, the notion of building a 21st-century railroad led us to harmonize the business and IT architecture and our governance processes.

The keys to winning with IT today are no different than they were 40 years ago. You need to get alignment right, design the business and its enabling technology with an end-state in mind and deliver new capabilities in an evolutionary way. However, the speed of business has accelerated and the stakes are enormous. SOA-type implementations have increased exponentially the complexity and risk of IT. There are no silver bullets to slay these challenges, but there are great lessons and technological innovations. These are exciting times for our young profession.

Charlie Feld is the former CIO of Delta Airlines, Burlington Northern Santa Fe Railway and Frito-Lay. He is currently the senior executive vice president of applications services with EDS. Contact him at charlie.feld@eds.com.

Copyright © 2007 IDG Communications, Inc.

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