Enterprise Architecture Helps Enable Portfolio Management

I’m working with a company in the financial services industry to help maximize the impact of their enterprise architecture program. In order to communicate the value of architecture to the business sponsors, it’s important to describe it in terms that they can relate to. Fortunately, I was able to refer them to the recent Business-IT Strategies Executive Report “Finding the IT Improvement Zone” by Cutter Consortium Senior Consultants Bob Benson, Tom Bugnitz, and Bill Walton to introduce the concepts of IT portfolio management and its importance in achieving the greatest overall impact of IT investments. The client was immediately able to understand the concept of balancing risk throughout the portfolio and managing the performance of assets.

A critical implication of managing IT as a portfolio is that the portfolio manager requires the ability to remove assets from the portfolio. The concept is simple enough, but achieving it is extremely difficult. This places new requirements on the IT architecture and infrastructure, and the business model as well. Until now, almost all IT organizations have been like “Hotel California,” where applications can check in, but they can never leave.

Architecture to the rescue again. Virtually all enterprise architectures today incorporate the concepts of a service oriented architecture (SOA). The idea is that, over time, you can decompose monolithic business processes into smaller modules or units of business functionality (services). The IT infrastructure provides the ability to easily add new services and to recompose the smaller business services into new applications, products, or processes. This is the capability we’re referring to when we describe an “agile enterprise.” The participation of the business is critical in correctly defining the fundamental services and data needed to compose things of useful business value. This is the role of the business model that I described in my last Advisor, “Business Direction Is Critical to SOA Success” (21 April 2004).

It turns out that many of the characteristics of an SOA that enable new business processes (assets) to be plugged into the business-IT infrastructure are also the characteristics and features that can allow them to be unplugged. There are some modifications and extensions necessary to support additional areas of asset management, configuration control, versioning, interface control, and SLAs, but the fundamental mechanisms are the same. So, we can think of enterprise architecture as being an enabler of IT portfolio management.

With the ability to add, replace, or remove services, you can now perform several interesting portfolio management activities. For example, you may have some important business processes that have underperforming implementation (perhaps licensing or maintenance is too expensive). You can now consider alternatives for replacing the implementation with less-costly off-the-shelf or custom applications. Or, you may have some business processes that are also important, but which have become commodities over the years. Portfolio management and enterprise architecture allow you to consider more effective outsourcing of these functions, both reducing costs and allowing your internal IT to focus on more strategic activities. To facilitate these activities, the architecture can build in capabilities for SLA enforcement, outsourcing performance management, reporting, and so on.

There is one more important function that is necessary for effective portfolio management. That is the ability to measure the performance of IT assets. Most organizations have little if any ability to measure the real short- or long-term costs of IT applications, or the ability to measure application performance against goals. Without adequate measurements, how can you determine which assets in the portfolio are performing well and which are underperforming? The concepts of metrics setting, collection, analysis, and reporting should be integrated into all aspects of the enterprise architecture. The metrics need to measure performance against business goals, cost of implementation or integration, cost of maintenance and operations, performance against contracts and SLAs, and so on.

Portfolio management provides important and useful concepts for the management of IT assets. But unlike financial portfolios, it has been virtually impossible to remove any IT assets from the enterprise. A well-designed enterprise architecture can help in several ways. First, in providing the underlying infrastructure that allows assets to be added or removed from the enterprise IT portfolio. Secondly, by providing features to support management and outsourcing of assets. And finally, by providing mechanisms to measure the cost and performance of IT assets. As an enterprise partner with IT, the business needs to work with the architecture group to ensure that these capabilities are available. Conversely, enterprise architects should understand that providing these capabilities will greatly simplify the challenge of demonstrating the business value of a good architecture. Together, it’s a winning combination.

— Michael Rosen, Senior Consultant, Cutter Consortium


This article was originally published by Cutter Consortium


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