For an enterprise to succeed in a fast-paced economy, it needs robust capabilities and operational versatility, which will allow it to be flexible and nimble to address customer expectations. This requires a best-in-class IT solution landscape that is equally flexible and adaptable. The challenge quickly becomes: How does one build such capabilities in the most cost-effective manner?
One cannot build best-in-class operational capabilities without architecting for them. Enterprises need to adopt a conscientious approach — a concept I call “deliberate design” — to increase the probability of success. Deliberate design is about architecting each and every aspect of the solution landscape, taking into consideration strategic goals, organizational capabilities, operational constraints, marketplace options, risks, and benefits.
I recommend the following six-step approach to architecting your enterprise solution landscape.
#1. Think in Terms of Business Outcomes and Essential Capabilities
Since success is ultimately measured in terms of business results, IT organizations must think in terms of capabilities and performance to impact business outcomes, as well as the best approach to acquire these capabilities.
Historically, businesses have built and operated their IT solution landscapes in-house, based on the assumption that internal resources are best positioned to service their business needs. These days, businesses have other options, including outsourcing and on-demand applications. These options offer several benefits — such as lower operating costs, access to resources, and speed to value — but also come with their own set of shortcomings and potential risks — such as higher third-party dependency, IP protection concerns, and limited customization options. Architects need to determine which solution option will provide the best business outcomes and ROI results.
#2. Evaluate “Build vs. Acquire”
When analyzing whether to build solutions in-house or acquire them from a third party, ask: Does our enterprise have what it takes to deliver the ultimate business outcome? Are there third-party service providers who are better positioned to assist or even provide the entire solution as a service? Who has better knowledge, skills, and competencies? Who has a better cost structure? Who is better positioned to reduce operating costs, drive innovation, implement best practices, and leverage technology? Are asset ownership and direct control important from a risk mitigation standpoint, or are there other ways to mitigate the risks?
While individual solution and service delivery components are important, what matters most is how a business brings all of the pieces together to operate as one and deliver the desired outcome. Sometimes, decisions may be influenced not by capabilities, but by other constraining factors, like available capital or relative cost. All of these factors need to be considered in the architecting process.
#3. Do Not Forget the Risks
A common error is underestimating risks. Decision makers need to evaluate risks beyond the obvious and need to assess risks related to intellectual property protection, legal and regulatory compliance, suppliers’ locations, and socioeconomic and geopolitical situations. These risks must be assessed at an enterprise level, not just a solution level.
When evaluating the options, decision makers need to consider how to address them in the most cost-efficient manner. It is incorrect to assume that in-house systems carry lower risks and a lower cost of recovery; enterprises must undertake comprehensive evaluation of enterprise capabilities, competing demands, and constraints. Specialized third-party providers often have better recovery capabilities, for instance. The appropriate balance often depends on the business and its organizational circumstances, as well as its strategic objectives.
#4. Think in Terms of Best-in-Class Characteristics
Architects must evaluate their IT options, not as isolated solutions, but as integral parts of the enterprise solution landscape. Best-in-class solution landscapes exhibit the following attributes.
Ability to Operate as a Singular Unit
The entire solution landscape needs to operate as a singular unit. The diverse range of components making up the enterprise’s capability engine must be able to operate in unison to maximize performance. Even with best-of-breed components, an inability to dovetail with the enterprise solution landscape can lead to subpar performance and a possible breakdown. Integration needs to occur at all levels — technology, application, process, and organizational.
Ease of Use and Maintenance
Productivity improves when a tool is easy to use. Intuitive solutions help drive up usage, reduce errors, and improve performance. The same goes for maintenance. Solutions that are easy to maintain can reduce downtime and operating costs.
Capacity to Evolve with Business Needs
The solution landscape must be able to easily evolve to address rapidly changing business needs. The landscape need to be modular, with plug-and-play solution components that can evolve independent of others. Adapting the concept of capability units — with each unit as a self-contained solution component consisting of technology, operating resources, and predefined processes — helps make the landscape modular and evolutionary.
An increase in operational diversity — using a mix of technologies, vendors, deployment methods, and locations — will increase complexity, cost of operations, and enterprise risk. Simplification at each level of the solution landscape can help address these challenges. However, this does not mean that companies should completely eschew diversification, since doing so increases concentration risks, which can be catastrophic. Enterprises should look beyond their own boundaries to evaluate options to simplify and reduce complexity and risks.
#5. Think Long Term
We often say, “design with the end in mind.” But the reality is that we do not know what the marketplace will be like in a few years. However, enterprises must evaluate all aspects from a long-term perspective. Enterprises must:
- Have a long-term vision for the business, with clear goals and objectives
- Benchmark internal capabilities to the market on a long-term basis
- Assess longer-term technology trends; it can provide a competitive advantage
- Recognize constraints upfront; inability to do so can be detrimental
- Understand suppliers’ capabilities and plans; misalignment of interests can be expensive
- Comprehensively evaluate solution deployment options; determine if asset ownership is essential
- Always make fact-based, value-driven decisions
#6. Collaborate for Success
Many of the IT challenges enterprises face today are a result of isolated purchasing decisions of the past. That’s why business and IT leaders need to collaborate tightly to create a winning situation. Data and process inconsistencies can destroy gains made on the functional fronts. Collaboration needs to occur at all levels and among all stakeholders to increase the probability of success.
Design Deliberately for the Best Results
Deliberate design should be more than just an approach; it must be ingrained into your company’s culture. Learn more at www.sap.com/asset/?id=d17f361e-c1fb-43e5-8929-75a9547f55ef.
Dharman Shetty (firstname.lastname@example.org) is Senior Director of Global Strategy for Outsourcing and Cloud Services at SAP. Dharman has significant experience in the fields of strategy development and business architecture design, process reengineering and operations restructuring, and IT-enabled business transformation.