Copyright © 2013 – Curt Hill Value and Risk of Enterprise Architecture Evaluating the Effort

Introduction Any effort that one can take has costs and benefits –Costs are the investment in time and money –Benefits are the return on this investment Comparison –There are several measures used to evaluate the efficiency of an investment or to compare the efficiency of a number of different investments If the return does not equal the investment, we do not do it Copyright © 2013 – Curt Hill

Problems There are no silver bullets –All comparison require prediction of the future The return of EA is in intangibles that are hard to equate with monetary amounts The investment is not necessarily easy to calculate either –Mostly people time Hard to evaluate if the architecture accurately models the enterprise Copyright © 2013 – Curt Hill

Return What do we anticipate will be the benefits of this approach? Resource planning should be improved through better communication This should support decision-making More rapid propagation of ideas Still, these are all intangible –There is a difficulty in assessing value –This makes for a hard sell to upper-level management Copyright © 2013 – Curt Hill

Planning Every manager plans Highest levels initiate top-down planning –Bring together various viewpoints so that strategic planning is more successful Lowest levels do bottom-up planning –EA intends to coordinate the separate bottom-up approaches to align separate departments EA should support the project management of the evolution of the enterprise Copyright © 2013 – Curt Hill

Decision-making Decisions may be made with more diversity of views –Minimizes likelihood that a decision will be good for one group but equally bad for another The EA Repository gives ready access to the decision makers the state and direction of the enterprise EA links capital planning, project management and security –They should all be considered Copyright © 2013 – Curt Hill

Communications An emphasis of EA is broadening the base of voices –More stakeholders are invited to the table –Increases the two way vertical communication The repository describes the enterprise in an accessible way –Both sides of an issue may see the view of the other –Especially helpful when the corporate culture is not uniform, such as in acquisitions Copyright © 2013 – Curt Hill

Risk management The future is full of uncertainty We cannot predict the future, but we can consider potential outcomes In so doing we can employ strategies for mitigating the undesirable outcomes What are some of the risks that may be encountered in an EA program? Copyright © 2013 – Curt Hill

Funding Risks The early costs are greater than the maintenance costs If the first are insufficient the initial architecture will be outdated before complete If maintenance funding is too small the architecture will become out of date – useless In these cases the EA will be unable to fulfill its purpose as a management tool Copyright © 2013 – Curt Hill

Acceptance Risks EA is a new approach –The “we have always done it this way” syndrome This can cause tension with stakeholders who have influence –The senior stakeholders are often powerful enough to sabotage the entire process If the process is not used uniformly then its value is greatly diminished Copyright © 2013 – Curt Hill

Personnel Risks This is a new profession: enterprise architect –No certification yet –Acceptance is not universal, unlike many other professions There is a distinct skill set If one or more skilled persons leave, delays will occur –It will take some time to hire and bring up to speed Copyright © 2013 – Curt Hill

Scheduling Risks Delays may come from a variety of sources: –Personnel departure –Busy departments may not be able to afford the time to document their functions –Resistant managers may slow things down If the delays become excessive, opponents may use these as political weapons to destroy the initiative Copyright © 2013 – Curt Hill

Tool Risks The repository should contain documents are usable by any reasonably competent business person Easy to access Easy to understand The tools available are not nearly as robust and user-friendly as in other disciplines –One of the problems of a new profession Copyright © 2013 – Curt Hill

Audience Participation Suppose VCSU were going to embark on an EA program. Describe what some of these risks might look like: –Funding –Acceptance –Personnel –Scheduling –Tool Copyright © 2013 – Curt Hill

Mitigation Many of the risks previously given are manageable if and only if the executive support is solid and unwavering Managers will be afraid to resist Personnel will be replaced promptly Funding will be sufficient Things can help Adopt a solid framework, methodology and choose good tools Ensure that there are no irreplaceable people Honest and justifiable budgets Communicating with all stakeholders on progress and needs Copyright © 2013 – Curt Hill

Value Quantification How are the intangible gains of an EA program translated into dollar amounts? An EA should normally help with: Shorter planning and decision making cycles Better reference material More effective planning meetings Fewer duplicated resources Better vertical and horizontal communication Less rework from conflicting projects The quantification is still problematic Copyright © 2013 – Curt Hill

EA Costs EA is never free Staff costs for those dedicated to the project Software tools and repository costs These are the obvious costs Meeting costs –Stakeholders are not doing real work while in meetings Interview and information gathering –Another hidden cost Copyright © 2013 – Curt Hill

Skills IT people are generally hired because of their knowledge of particular packages or technologies Technology such as networking Packages such as Apache web servers Focus is usually on solving problem with technology Often lack the larger view of enterprise management and organization What skill sets should an Enterprise Architect have? Copyright © 2013 – Curt Hill

EA Professional Skills Should have knowledge, understanding and experience of several areas: –Business skills and methods –Information and information systems –IT infrastructure –Project management –Legal environment Copyright © 2013 – Curt Hill

Personal skills Analytical skills Ability to identify a concept or problem, isolate its components, organize information, establish evaluation criteria, draw conclusions Communication skills Both verbally and in written form Ability to negotiate Maintain and improve a position Capacity for abstraction Learn new situations; adapt previous principles to a new area Sensitivity and empathy Sensing other’s feelings and position Copyright © 2013 – Curt Hill

Roles An enterprise architect must adopt any of the following roles during the course of a project Change agent Communicator Leader Manager Modeler These roles require the skills mentioned Any question why these people command the big bucks? Copyright © 2013 – Curt Hill

Life Cycle EA is a project like most other projects The implementation costs occur before any benefit is gained –These are generally one-time costs Maintenance costs will continue indefinitely Overwhelming majority of costs are personnel Copyright © 2013 – Curt Hill

Outsourcing The skill sets needed for enterprise architects command serious salaries Hiring consultants does not help the cost situation –Consultants can charge more than $100/hour ($200K/year) –The outside consultants generally do not have the best grasp on the corporate culture –This may be useful in the initial implementation Copyright © 2013 – Curt Hill

Evaluation How are projects evaluated? Several techniques: –Cost Benefit Analysis –Return On Investment –Net Present Value All of these have the problem of quantifying intangibles and predicting the future You should have learned about these elsewhere but here is the executive summary Copyright © 2013 – Curt Hill

Cost Benefit Analysis Jules Dupuit – 1848 Corps of Engineers have been obligated to use this to evaluate projects since 1936 Principles: –Common unit of measurement – often money –Money gains value, future money is less valuable Copyright © 2013 – Curt Hill

Process List alternatives –Doing nothing is always an alternative List stakeholders Choose measurement unit Predict costs for each year Predict benefits for each year –Over all stakeholders Apply discount rate for future years Calculate net present value for each Do sensitivity analysis Copyright © 2013 – Curt Hill

Commentary There may be either a positive or negative effect Predict values for these effects for –Participants –Non-participants There is inherent uncertainty –A range of values should be employed rather than a single –Sensitivity analysis is the examination of this uncertainty, its sources and effects Copyright © 2013 – Curt Hill

Net Present Value We would like a return on invested money Money increase in value over time One dollar invested today will be worth more next year than a dollar Invest $1 and receive $1.05 yields an NPV of 1.05 Video Copyright © 2013 – Curt Hill

Return on Investment Copyright © 2013 – Curt Hill

ROI Questions Can we afford this? Will it pay for itself? How much will we get out of the this? Is this the most we can get out of this investment? Will the benfits to the enterprise make it worth the investment? Copyright © 2013 – Curt Hill

Other Methods There are many other methods: –Architecture Tradeoff Analysis Method (ATAM) –Economic Business View (Part of FEA) –EA Assessment Framework (from OMB) –Enterprise Value Management To name just a few Copyright © 2013 – Curt Hill

Numbers CBA, NPV and ROI are more process than number –Especially costs and results Each of them requires substantial estimation of intangible impact No easy way to do this The process may be biased towards one result or another Copyright © 2013 – Curt Hill

Finally In order for EA to have maximum benefit it must connect strategy, business and technology This is done by including top-down and bottom-up planning –Makes the strategy drive the business, rather than diverse projects consuming resources Copyright © 2013 – Curt Hill