Note to self:
# This weeks Q&A comes thanks to Seyran Dehbokry.
Seyran has worked as Business/Process Analyst in the variety of IT projects for over 6 years. She is currently a PHD student at the University Technology, Sydney, Australia where she is developing a cross-disciplinary Business Architecture framework applicable for Small and Medium Enterprises (SMEs). This research topic has been motivated by his industrial experience in performing Business Analysis in Enterprise Architecture projects in medium size organisations.
Here is her first question that has been raised in her recent research.
“The cloud computing technology has been considered as a technology initiative rather than a business transformation tool that solves business requirements. Not for all companies the cloud strategies and principles have become a clear perspective to configure and giving rise to cloud oriented business. The reason for this gap is that the technologies are adopted through a bottom up (technology need) approach. The main challenges for a businesses in using cloud computing technologies is architecting business services and capabilities to support cloud computing model and managing internal and external cloud capabilities. However this comes about as a realisation that architecture, from a cross-disciplinary perspective, is required to guide the definition, development and governance of business services that will be supported by the cloud technology.
Seyran’s question this week:-
Could Business Architecture facilitate migration toward the cloud in companies?”
I believe that when done well business architecture is our best tool to facilitate migration towards cloud in companies. This is part of the reason I’m uncomfortable with the way enterprise architecture is often presented as an integrated stack across Business, Information, Application, and Infrastructure. Its use in these disruptive scenarios is one of the reasons why business architecture has value even when it isn’t integrated with those other layers.
I believe there are three tools that help facilitate migration towards the cloud in companies. These tools are actually also effective in facilitating other disruptive technology trends (big data, virtualisation, mobility, etc.):
1. the pre-technology business case
2. capability-based planning (i.e. business architecture)
3. the economics of the cloud
## The economics of the cloud
Starting with #3. I think you can talk about “the economics of the cloud” but you shouldn’t talk about “the business case for the cloud”. This is just a rephrasing of Seyran’s comment in the question about cloud initiates have typically been bottom-up, technology initiatives rather than business transformations.
While you shouldn’t talk about “the cloud business case” (because this is by definition a technology-driven approach) a rich understanding of how cloud changes the economics of the organisation is required whether the initiative is technology-driven or business-driven. Often this is forgotten when a business-driven approach is taken – you still need to understand the impact of the tech if not the tech itself.
The economics of the cloud – like other disruptive technologies – can be analyses through multiple dimensions: automation, service category progression, transaction costs, digital value chain, time shift, geography shift, risk shift.
a. Automation – i.e. basic automation of manual tasks. In the case of Cloud this largely occurs through the economies of scale within cloud providers themselves.
b. Service category progression – i.e. how does this raise the level of value for services that can be cost-effectively managed. Cloud already has IaaS, ASP, etc. but the ultimate might well be what I’d call “outcome-as-a-service”.
b. Transaction costs – i.e. if transaction costs are reduced by the technology how does that impact the boundaries of the firm or the ability to take market-based coordination approaches within the firm. In the case of cloud this means the ability to acquire resource coordination and collaboration technologies that bring market-based co-ordination into the firm.
c. Digital value chain (with apologies to Don Tapscott) – i.e. the ability to independently manage the value of service delivery versus the value of the information generated during service delivery. In the case of cloud this could both dis-aggregate and re-aggregate industries or business segments where previously the costs of outsourcing where too high.
d. Time shift – i.e. can the technology defer decisions or facilitate activities to more convenient times. In the case of cloud this can occur when capital investment decisions can be deferred, sometimes indefinitely. Another example might be reducing the lead time for capacity upgrades so that they directly mirror the business planning cycles rather than running separate IT planning cycles that need to predict business requirements ahead of business plans.
e. Geography shift – i.e. the economics of outsourcing and taking advantaged of differences in resource costs, etc. In the case of cloud this is a very similar economics to outsourcing in general.
f. Risk shift – i.e. how does this impact how risks are transferred or shared. In the case of cloud this can significantly shift at both b2b and b2c. A cloud service associated with a product can aggregate information on say health that can allow the risk of health issues with a consume to be transferred. (eg. if your Fitbit data was provided to your health insurance company do you get a lower premium? This is effectively enabled by cloud).
## The pre-technology business case
The “pre-technology business case” is simply a top down business case – or business case model – that defines the outcomes that would need to be achieved for a business unit or process for a given investment to have an acceptable return.
When applied in conjunction with an understanding of the economics of say cloud the impact of both the cost and benefits side of the business case can be adjusted.
With reduced budget being controlled by IT departments it won’t be up to IT departments to make a case for IT spending. However, there will always be a need to spend on information technology in order to keep up with potential competitive advantages.
The pre-technology business case does this. You might ask how this is different to a business case? In many ways it’s not. Except that it forces discussion of value prior to the involvement of the IT department.
Once the decision of value is clear any capabilities internal or external to the organisation can make effective bids to commit to that value. Given cloud is external to the organisation a mechanism to allow bids and commitments to value is vital.
## Capability-based planning
The capability-based planning governance and planning is an approach that makes the top-level governance of an organisation based on the capabilities in the business capability map – rather than functional or product-based approaches. Capability-based planning extends this governance approach to the way new initiates are planned.
This is best illustrated with my diagram here:
In short the capability-based planning approach is what allows the bidding and commitment to outcomes as discussed above.