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Show Me The Money

May 15, 2017

IT Architects — this is a call to arms — we’re needed to save the world!

As a result of digital technology, modern life is more complex than ever. While the benefits are significant we are also seeing many related challenges. Some of them are really big ones like structural changes to business models and systems of government — changes which can represent an existential threat to businesses and major societal disruption when applied to governments. In this post I want to take a look at one particular management approach that I think IT architects have the skills and tools to take on and deliver significant new value, to the benefit of all of their stakeholders. I’m talking about cost transparency in complex systems. 

 

Or for the purposes of marketing … Show me the money!!

 

 

Why is this so important?

Money is what we use to manage resources — be that CPU cycles, peoples time and energy or assets from the physical world. It’s the oil in the engine of any reasonably complex system. If it doesn’t flow correctly or efficiently, resources can become scarce for critical systems or are wasted by less critical systems. Neither scenario is good in a complex system and if the issues are structural if they are not fixed incrementally then sometimes a major restructuring event can come along to re-balance the system and eggs will be broken — a lot of them — dare I mention The Donald? Cost does not always represent value but it is really difficult to get value without understanding the real cost.

 

 

IT Architects and Cost Transparency

 So where do IT architects fit in here? It might not be obvious at first. Here’s my take on this:

 

1. We’re the Business Technology Strategists

In Iasa we believe that the role of the IT Architect is to be the Technology Strategist for the business. We believe that making sure that organisations make the right digital investments is our most important job. And cost estimates are critical part of any investment decision. OK, we can do other valuable things too like making sure the (system) builders use the right tools and processes but that’s secondary to making sure the right things are being built in the first place.

 

2. We can model complex systems

So this is where it get really interesting. I don’t think anyone would argue with the fact that IT architects are good at modelling complex systems. It’s our world and we’re better at it than anyone else. While the systems in question have traditionally been software systems, why can’t we use these skills to model other systems? The modern organisation for example? Now, I’m not saying it is simple — many of our models, while complex, are too static in nature. We need to add a much more dynamic element to our models but I think all the pieces of the puzzle are emerging (I’ll give you my take on the link between microservices architectures and complex, dynamic human systems in another post).

 

So, when you combine the 2 areas you get something new. Cost transparency in complex dynamic systems … such as the modern organisation. Still with me? OK — so who could benefit most from this new service?

 

The CFO — a new customer for the IT Architect?

Your average CFO has the pretty tough, if not impossible, job of trying to help the CEO figure out the best investment strategy for the business as a whole. How much should you allocate to each division for running costs and where should additional funds be invested to grow or change the business? In modern organisations your classic finance function has typically developed a planning and budgeting process to try and meet this need. For such processes to have real success, most medium to large organisations will have to overcome two pretty big obstacles …

 

Modelling Organisational Complexity

Modern organisations are very complex. Tracking costs in one area e.g. IT systems, back to the core success metrics of turnover and margins can be really difficult. What we have in reality is a complex network of teams, each one carrying out work, using different mixes of processes and technologies (some dedicated, some shared), to deliver value to their direct stakeholders. While in some teams it is easy to link their work back to turnover and margin e.g. front-line sales team, for many teams there is no direct customer relationship so other metrics must be used. For example, in ACME the IT team has no direct connection to the organisations customer base. In the absence of value related metrics the next best thing is often used — costs. This is why many IT departments are still seen as a cost center despite all the talk of digital strategies.

 

Tracking Return on Investment

Sometimes called Benefits Management, how many organisations go back to measure actual performance of investment in change and growth versus the story that was told in the business case? In my experience very few. OK — sometimes it is obvious so you don’t really need to do this e.g. you buy a core revenue generating asset e.g. factory, store, truck — whatever, which increases delivery capacity and you see revenue going up — simple. But, modern organisations are typically much more complex than that, so estimating potential value from investments is often not so simple, and if people are honest, business cases are often based on speculation, hunches and less than accurate financial data models. I believe that using the correct model, business will be able to much more accurately measure the impact of investment through the full value chain.

 

 

One model to rule them all?

So, are there any good models that we can start from? I think there is. One day about 2 years ago, I was searching for a model that combined business, applications, services and infrastructure into a standard set of components (as you do if you’re an IT architect). I was looking at the TOGAF models but while good they just didn’t do it for me — too solution oriented. Anyway, I’m not sure what search query I entered but I stumbled across ATUM(tm) — Apptio TBM Unified Model also know as the Standard Model for IT Costs. Not quite what I was looking for but as I looked more closely I began to realise that this model had more things integrated into it than any model I had seen before.

 

It seemed to combine best practices from multiple parts of IT — capability models, service catalogs, app portfolios and IT infrastructure. And on top that that they added one that I had never seen explicitly added before — the cost centers from the general ledger.

 

So here we had one model that combined everything into one. And the more I saw from the TBM and Apptio world the more I liked it. It felt like I had found a key piece of the puzzle that had been missing in our models to this point.

 

Since then I have devoured everything that is published by the TBM (Technology Business Management) Council and Apptio and I am more convinced than ever that this approach is critical both to IT architecture as a profession, but also, more importantly, to organisational survival in the digital age.

 

Complex Digital Organisations, Finance and IT Architects

For the IT architect, aka the Business Technology Strategist, working with finance to ensure that business cases are built on an accurate cost model will benefit the whole organisation and not just IT (even though the IT function should also be a major beneficiary as investment will be based on a much more accurate cost picture of what it does — which in turn will be a win-win for the organisation in the digital age).

There are many challenges still to overcome but I believe that this is an immensely rich area of potential collaboration between finance and the traditional enterprise architecture community. Tools like Apptio are really hard to implement successfully without the skills and expertise that IT architects can bring to the table. So far, from what I have seen, it has been the CIO’s and IT finance functions that has led the way predominantly. I have seen this reflected in the attendee mix at the TBM conferences and webcasts I have attended and the general community that has gathered around the TBM movement. And it is my own personal first-hand experience that when we get involved directly in the area of IT finance management huge strides can be made. So much of what we do in IT architecture at the enterprise level can be re-used to support this need.

 

IT Architects — This is a call to arms

Those of you that know me know that I have been banging this drum for a while now and I’m not oblivious to the blank/confused looks I have received from many of my IT architect colleagues. There is a long tradition among technologists of sometimes leaving the money thing to managers and project managers to figure out — it’s changing, particularly for more senior architects, but it should be a foundation skill and not something you add on later.

 

I know — who wants to read those license agreements, deal with vendor salespeople or hardest of all be able to truly justify the investment in your favourite technology solution?

 

But that has to end. IT Architects must take ownership of the cost aspect of any system they design. Cost is a feature like any other. Not just the up-front capital cost but the true cost — the monthly charge-back cost that combines both build and run into one number. No design should be complete without a clear cost model that runs from day 1 to the end-of-life of the system as driven by the expect component lifetimes and the depreciation rules agreed with the finance function.

Are you with me .... ??

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