/Tag: Operating Models

SOA in the Unification Model

By |2007-10-27T15:16:00+00:00October 27th, 2007|Enterprise Architecture|

This is third in a series on the impact of the business operating model on Service Oriented Architecture.  (see overview)

What can you get from this series?

My prior post raised a bit of ire with one of my readers, a fellow whom I respect.  He felt that my posts were not telling a positive story about SOA. 

I believe that SOA is a highly valuable paradigm for enterprise integration.  I also believe that the ability to apply SOA to a problem is not uniform.  Some problems can be solved with SOA.  Others cannot.  There is no magic bullet. 

I am hopeful that this series helps folks to

  1. identify which situations they are in,
  2. understand the challenges they will face when applying SOA to their situation, and
  3. improve their odds of successfully providing value to their business.

I am not attempting to sell SOA to anyone.  I make no money from “Selling SOA.”  I have no personal or professional stake in the success of the SOA paradigm.  That said, I believe strongly that SOA has a value, and if we do a good job of avoiding mistakes, we can demonstrate that value to our respective businesses.

The Unification Operating Model

“When organizational units are tightly integrated around a standardized set of processes, companies benefit from a Unification model.  Companies applying this model find little benefit in business unit autonomy.  They maximize efficiencies and customer services by presenting integrated data and driving variability out of business processes.” (Enterprise Architecture As Strategy, by Ross, Weill, and Robertson)

I illustrate this model as follows.  (I described how to read these images in a prior post).

operational models - Unification

Companies that use a Unification model work very hard to wring out every drop of waste from often-complex processes.   Some attributes:

  1. Highly centralized management environment
  2. Company grows through leveraging economies of scale
  3. Process standardization seen as a key element of corporate success
  4. Frequently found in commodity businesses

One example that Ross uses is the core chemicals manufacturing business of Dow Chemical. 

IT in the Unification Operating model

As I said before, the operating model is the single largest driver of decisions in your SOA.  The impact of the model starts with the business, extends through business funding of IT, and into the architecture, design, and complexity of the IT ecosystem.  In a company based on the unification model, the following situations are typical:

  • Shared enterprise systems – Large IT systems are often used to reinforce the centralized nature of these companies.  It is not uncommon to see an ERP system managing a wide array of core functions, including HR, manufacturing, customer relationship management, and financial management.  It is also common to see a best-of-breed approach, where large systems from different vendors are implemented to support each function separately.  Integration is key to success.  However, the data models for the information typically is defined by these applications themselves.
  • Process owners – In order to get process consistency among the various operating units, a single person is identified to own each key process and they, along with their team, is responsible for insuring that the process is efficient, cost-effective, and productive. 
  • Central IT decision making – Decisions in the IT organization are central.  Systems are purchased, and deployed, with the goal of improving the cost effectiveness and efficiency of the company’s core business processes.  These companies tend to have very tight IT budgets, as IT is frequently not seen as a core contributor to process innovation.  Data masters are often centrally mandated.

Note that, in the unification model, variation between business units is kept to a minimum.  It is common to see the CIO report to the Finance Director or Chief Financial Officer. 

SOA and BPM in the Unification Model

The Unification Model is interesting because (a) SOA is expensive and may take years to reap full benefits, and (b) this IT environment is very cost conscious.  That said, the environment is already familiar with purchasing large software systems and taking a long period of time to implement them.  If you work in an environment like this one, and there is no SOA in place, you may make some traction by framing SOA as a single software package.  (Not as large as ERP, but larger than a shipping management system, for example.)  On the other hand, you could also get traction by tying SOA to a large system upgrade (see below).

The common data model

Once again, the key to implementing Enterprise SOA is the common data model.  While the cost of creating a common data model is far less in this model, the benefit may be difficult to explain.  That is because the data model is driven by the central systems that produce or consume the data.  The urgency for creating a common data model may not be high.

In this model, SOA provides two benefits.  Both require the common data model:

1) Protection from Vendor Lock-in: If the company has taken a “best of breed” approach to technology acquisition, then they have likely purchased different systems from different vendors for key business functions.  Integrating these systems is expensive, and there are scars to prove it.  This creates a “high barrier to entry and high barrier to exit” for these companies.  It costs a lot to put in a system, but even more to leave.  SOA can help lower those barriers by creating an abstract layer that processes abstract transactions in a standardized way. 

This allows a company to purchase a new Financial system (Microsoft Dynamics AX, for example), and instead of integrating each of the other systems to it, the IT department would simply write adapters to connect the new system to the abstract services layer.  Other systems can now directly consume the new system without substantial modification  (in theory, anyway.  Nothing is perfect.)

2) Process Composition across systems:  It can be difficult to track a single transaction, through a complex process, across many systems.  The customer doesn’t care.  You can directly impact customer satisfaction if it is difficult to figure out which system has the information that your customer needs to know, or to make it difficult to retrieve that information readily. 

So, if customer satisfaction is important, process composition across many systems is a key capability of your IT infrastructure.  To solve for this problem, you need four things: SOA as an integration mechanism, a common information model as a unifier, an enterprise identifier scheme to allow the transaction to be traced from start to finish, and tools to inspect each system for the information related to a unique transaction (using SOA, of course).

Funding SOA

If you get your information model in place, you could implement SOA as a combination of a package install and software adapters that is tied to a larger project, like an ERP replacement.  On the other hand, with this operating model, it is possible to build a bottom-up SOA, where the services are produced as part of IT projects without architectural coordination, primarily in areas where the information model is well-understood. 

Direct Impacts of the Unification Model on SOA Operations

The following effects would be typical for SOA+BPM in a Coordination model:

Centralized Process Management – Process owners manage a subset of the processes.  Processes are often coordinated.  Using the same BPM tool and repository is a best-practice, and one that will make immediate sense to the business.  The tool must be able to support a wide array of BPM needs, and must leverage standards.  

Centralized Governance Model – SOA Governance tools are quite useful in this model, and they should be used.  (SOA Software and Amberpoint are two Microsoft partners that I would suggest, for readers interested in this space.) 

SOA Service Adoption – Due to centralized decision-making, the decision to consume a service can be tied to project funding.  This bit of overhead should pay for itself quite easily, since you would end up with a greater amount of service reuse, and therefore, less code to maintain in the long run.  Some organizations have even gone all out, and implemented a set of core SOA services as a single project, then turning to governance to require all new projects to adopt them.  (Top-down SOA). 

Cross-system process concerns – Getting SOA benefits out of processes that look to a single enterprise system is a fairly quick win.  I like quick-wins.  You can build credibility for SOA by rolling out a few of these “low-hanging fruit” projects.  However, to get real enterprise benefit out of SOA, you need to be able to compose a process across many systems.  This can be easy, or this can be hard. 

To make it simple, repeatable, and adaptable, you need to create your common information model.  That model must contain not only information entities, but also a notion of what business documents you will communicate with, and what events occur on each document. 

SOA Readiness – While a central group may decide to implement SOA, each of the IT teams that surround the major systems will have different levels of understanding of the concept of event-driven services.  You will need to build a common understanding, and common standards, to make sure that these different groups, using different technologies, can reduce the friction that could occur when a process consumes many different services.

Centralized Service Catalog – You are likely to end up with a single catalog, but it may be a good idea to consider splitting the catalog into layers, with the upper layer of services oriented towards the business process areas that the organization cares about, and the lower layer of services to makes the information available.  Services in the upper layer consume services in the lower one. By separating services in this manner, you can simplify the SOA composition process. 

Conclusion

The Service Oriented Architecture for the unification operating model should take a cost-focused approach to delivering business value, orienting the services towards both process and information.

SOA in the Coordination Model

By |2007-10-19T21:12:00+00:00October 19th, 2007|Enterprise Architecture|

This is second in a series on the impact of the business operating model on Service Oriented Architecture.  (see overview)

Quick note about the CISR models

Before I go into a lot of detail about the operating models, I want to make one thing clear: The operating models from CISR follow the same laws as any other reference model.  To whit: “All models are wrong.  Some models are useful.” 

In other words, most enterprises will exhibit behaviors of each of the four CISR models in one aspect or another.  That said, most businesses will exhibit the behaviors of one model more than the rest.  This is usually apparent in the financial filings of the company (annual report, 10-Q) because it is difficult to hide the operating model of a company when you have to tell investors how you plan to deliver value in the coming year.

Also, as with all models, before you assume that your business is a Coordination model, make sure that you ask the business, not the IT team.  Best case: ask the executive leadership (CxO level) to debate the point.  It does no good for IT to have one view and the business to have another (path of pain).

The Coordination Operating Model

“The Coordination model provides integrated service to each key customer group.  The integration results from sharing key data across the business units to present a common fact to the customer.” (Enterprise Architecture As Strategy, by Ross, Weill, and Robertson)

operational models - coordination

The illustration that I use is above.  I have similar illustrations for the other models in the overview page. 

How to read this image: a single gray horizontal box represents commonality across business units.  In this case, a coordination model company will share customers and partners, even though each of the business units are managed seperately.  The business processes are distinct by each business, as is the operational data, but it is all brought together in the business intelligence as a way of understanding the customer from a 360-degree view. 

The example provided by Ross for a Coordination model company is Metlife, a financial products company that provides insurance and other financial services to millions of customers.  The customers themselves may qualify for, and should benefit from, the products of many different business groups.  However, each group may have their own “view” of the customer that is pertinent to their business. 

IT in the Coordination Operating model

The business model is the single largest driver of decisions in your SOA, whether you know it or not.  The impact of the model starts with the business, extends through business funding of IT, and into the architecture, design, and complexity of the IT ecosystem.  In a company based on the coordination model, the following situations are typical:

  • Shared data sources – in order to “bring together” the results of many different transactions into a rational Business Intelligence view, systems across the enterprise typically consume a set of core data tables, often from a small number of “source” systems.  If you agree on the ids for things like “country” and “operating unit” and “employee”, then business intelligence becomes possible. 
  • Coordinated Transactions – a business transaction in one business unit may affect the view of the customer in another unit.  For example, it would be rational to offer a discount on auto insurance to a customer who has purchased life insurance.  You may also have a situation where the revenue from a single customer has to be divided up among two or three business units for reporting. 
  • Integrated Business Intelligence on customers, products and suppliers – If you make no attempt to understand your customer in an all-up view, you are probably not in this business model.  The goal of this (frequently expensive) business activity is to provide insight into the patterns and behaviors of your customers, both in how those patterns work to the company’s advantage and how to root out sources of customer dissatisfaction. 

Note that, in the coordinated model, each of the business units is managed separately.  This allows business leaders a great deal of flexibility (and accountability) for making their part of the business successful.  It also means that the IT group tends to be divided up so that there are separate funding or reporting models to each of the different business units.  Centralization is infrequent, and coordination (of funding, of architecture, of standards) requires consensus.

SOA and BPM in the Coordination Model

The Coordination Model is interesting because (a) SOA can provide real benefits, and (b) this is the most difficult of the four models in which to create a SOA.  That is because of the impact of separate business management on IT funding, especially of a shared infrastructure like “common data models” or “common messaging standards” or even “common OS platforms.”  Anything ‘common’ is difficult, because the business units do not typically provide an incentive for their IT teams to create common models, and yet commonality is the key to getting value out of SOA.

The following effects would be typical for SOA+BPM in a Coordination model:

Distributed / Federated Process Management – Each business unit manages its own processes, using its own tools.  Processes are rarely coordinated across business units.  This is a fact of life for the BPM tools, and frequently there is little business value behind forcing all business units to use the same BPM tool, since they cannot share the primary value chain processes anyway.  Common corporate processes (like HR and Finance) are typically the only exception to this independent spirit.

Distributed / Federated Governance Model – A favorite topic among SOA folks is governance.  Governance has many meanings.  SOA Governance tools may prove ineffective if you use the tool to find a service, because you may not be able to tell which of your businesses paid for that service.  This is important because the businesses themselves are quite likely to affect the amount of governance they want to occur, and therefore the governance rules that “their” services are to be judged against.  

Semantic dissonance in the data – Making a service that is useful is nice.  Make a service that is reusable is great.  Getting two or more business units to adopt the service is darn near impossible.  That is because, in this model, you are expected to integrate the data, but not the business processes.  This usually creates a situation where the “semantic understanding” of the data is quite different between businesses. 

For example, in one business, a purchase order may be created by anyone but is followed by an approval process if it exceeds a threshold.  In another business, the purchase order cannot be created until the approvals have occurred, and perhaps, all purchase orders require approval. 

So, if you look in a database and you see a purchase order… has it been approved or not?  The answer depends on the business unit that created it.  While this example is overly simplistic, the goal is to show that, for some core business entities, there will inevitably be places where the underlying states for the information cannot easily be aligned.  This is semantic dissonance, and it makes Enterprise SOA a distant fantasy for those enterprises who are unprepared or unable to muster the consensus needed to find the commonalities in the various business processes. 

To bring together the full benefits of SOA will require a costly process to align the events that create your business documents and to create a shared understanding of “when the purchase order becomes a purchase order.”  That says nothing about “what data is in a purchase order” or “what system does a purchase order live in.”  All of these variables create complicating effects on Service Oriented Architecture.

Consensus processes for designing and deploying SOA – the decision to deploy Service Oriented Architecture cannot be made by one central group.  It must be made by many people, working together.  In a “coordination model” company, centralized groups are rare and often quite small.  They don’t have the clout to bring about the kind of change needed to deliver truly reusable services.  That requires “virtual teams” or “steering committees” that are often difficult to manage and can seriously delay deployments.

Service consumption is voluntary – Ever heard this fantasy: “If you build it, they will come.”  In a Coordination model, this idea, far fetched in any model, is downright silly.  IT projects, especially ones funded by different business units, are going to have a difficult time explaining to their business why they created a service that another business can use… especially if they don’t get some benefit out of it.  Reusable services are more expensive than point-solution services. 

Plus, reusable services force the IT team writing the consumer service to take a dependency on another team for delivery.  That nearly always causes problems.  Therefore, the only services you can easily reuse are services that (a) developed by the same business unit, or (b) are dictated from executive management, or (c) are so “thin” that they provide no real processing, and therefore, no real value.

Federated Service Catalog – Since processes may be different in each business unit, but some data elements are expected to be shared, it is typical to see one of two effects on the service catalog.  Either (a) each business unit has it’s own catalog, or (b) one common catalog exists, but each service is flagged with whether that services is “core” or if it is provided by a particular business.  The assumption is that non-core services will only be consumed by applications that are part of the same business unit as the service publisher. 

Conclusion

The Service Oriented Architecture for each of the business operating models will be quite different.  Those differences can determine not only how difficult it is to create a SOA in that business environment, and the amount of business value that can be generated by doing so.

SOA and the CISR Operating Models

By |2007-10-12T11:04:00+00:00October 12th, 2007|Enterprise Architecture|

I’m begining a new series on Integration.  Five parts.   Clear up some of the noise on SOA.  This series will refer to the set of four Operating Models described in the excellent book, “Enterprise Architecture as Strategy” from the great minds at MIT’s Center for Information Systems Research (CISR), Jeanne Ross and Peter Weill.  If you have not read the book, that’s OK.  Working Paper 359 on the CISR site will provide the right level of depth (there is a free registration on the site).

To quote from the working paper:

Companies make two important choices in the design of their operations: (1) How standardized their business processes should be across operational units (business units, region, function, market segment) and (2) how integrated their business processes should be across those units.

That’s two variables.  Assuming each has two values: Low and High, and you get four possible combinations.  Ross gave these four types of models different names.

  1. Low Integration, Low Standardization – the Diversification Operating Model
  2. High Integration, Low Standardization – the Coordination Operating Model
  3. Low Integration, High Standardization – the Replication Operating Model
  4. High Integration, High Standardization – the Unification Operating Model

I’ve illustrated these models in this way.

operational models

The book I mentioned above goes into excellent detail on the implications of these models, and what kinds of companies are well suited to each model.  Using success as a guide, you can quickly see how these two choices: Integration, and Standardization, drive huge effects across the organizations of these companies.  They also drive the kind of “Big Picture” Enterprise Architecture models that the organization should produce, because each one benefits differently from EA.

Many folks now believe that SOA and EA will gradually combine, so that they are two parts of the same message.  That story is interesting when you consider these four models, because SOA is radically different in each one.  I believe it is true, because the four models each benefit from both EA and SOA, but in different ways.  I believe there will be four types of Enterprise Architecture organization, and for each one, there will be a different set of methods, artifacts, and outputs… and a different SOA for each one.

And that is what this series will be about: the effects of the operating model on SOA.  I will cover each of the operating models and describe the effect on a high level SOA reference architecture for that type of business, as well as the technical implications with respect to governance, catalogs, standardized schema, and mechanisms for gaining unity.

Here are a list of links to follow-up blog posts that discuss the different aspects of SOA in each of the business operating models described by CISR.

SOA in the Diversification Operating Model
SOA in the Coordination Operating Model
SOA in the Replication Operating Model
SOA in the Unification Operating Model

Why do this?

I see arguments every day, in the blogosphere and in books and white papers, where thinkers disagree about the value of a catalog or the need for standards or the future of SOA in general.  The problem with these arguments is that most of the speakers are (a) correct, from their viewpoint, and (b) not changing their minds.  We have a set of entrenched voices saying different things.  So how can all of them be right?

I believe that there is more than one right answer, and that it depends on the operating model of the company.  In other words, the tools, standards, and approach that is useful for a Unification model are simply not optimal when applied to a company with a Coordination model.  That doesn’t mean that you won’t get progress, but you won’t get as much as you could without considering the operating model first.

For years, the IT thinkers have been saying “let’s get closer to the business… then IT becomes more useful.”  Guess what, folks!  There is no “THE” in business!  There are ten thousand ways to make money, and we need to serve all of them.  One size, or one approach, or one toolset, will not suit all businesses.  But chaos and cacaphony won’t suit our ability to be effective.

By using simple models like the Operating Model concept from CISR, we can create reference architectures that can be reused in different organizations to base not only their Enterprise Architecture program, but their SOA implementation, and with it, the toolset that they need to build an agile, responsive, efficient, and highly valuable IT organization.

Once the SOA leaders realize that there is more than one right answer, we can begin to have productive conversations, not about whether a catalog is needed, or not, for everyone, but what role a service catalog plays in a Coordination operating model SOA, and how that role is different in a Diversification model.  (it is, wildly).  Consensus can be reached if we understand the scope of the problems that we are trying to solve.

That is my goal.