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The company had gradually created the systems and applications to meet its major needs, and the outcome was a complex, inefficient, and expensive operation. Standardized interfaces, such as the enterprise service bus (ESB), can greatly ease the burden of system integration and minimize the chore of dealing with local changes. At a large financial-services company, for example, we recently found seven different payments systems with 20 custom-built applications, which mostly undertook the same functions for purposes such as payroll, taxes, and suppliers. Exhibit 2 Select topics and stay current with our latest insights, By Janaki Akella, Helge Buckow, and Stéphane Rey, IT architecture: Cutting costs and complexity. In the case of one bank unit, an initiative to develop a new payments environment was rejected by the board leadership. Please click "Accept" to help us improve its usefulness with additional cookies. System upgrades—a frequent occurrence in light of fast-changing regulatory and marketplace conditions—proved a major headache, given the inadequate IT architecture landscape. An assessment of the degree to which ongoing projects support both the business and IT strategies can reveal candidates for continuing support, revision, or termination. Something went wrong. The main motivation that led to the development of this list is the difficulty of implementing enterprise architecture in an environment as hostile as the financial market. The downturn gives IT and business leaders an important opportunity to collaborate in reducing costs and reshaping the IT architecture for competitive advantage. In the business sector, business architecture is a discipline [citation needed] that "represents holistic, multidimensional business views of: capabilities, end‐to‐end value delivery, information, and organizational structure; and the relationships among these business views and strategies, products, policies, initiatives, and stakeholders.. Complexity is rife in any growing business. Strategy changes require the solution of technical challenges Whether you are a medium-sized company or a corporate group - IT systems, infrastructure and processes of companies have often grown over many years and decades. The new approach—which involves assessing the overall implications of violations, including their possible additional cost—enables the company to support new business requirements quickly but requires any violations they create to be fixed in a later phase. Our guide on starting an architecture firm covers all the essential information to help you decide if this business is a good match for you. The company's portfolio includes award-winning projects in 77 countries, all 50 states and the District of Columbia. As application volumes grow in response to a fast-changing economic, regulatory, and business environment, the issue of complexity is becoming acute for many organizations. As mentioned before, “… The cost savings come from simpler and consolidated procurement, as well as lower support and maintenance expenditures. Press enter to select and open the results on a new page. our use of cookies, and That’s why CEOs must engage a cross-company team of business unit and IT leaders in a no-holds-barred program of architectural review and transformation. From the moment of its handover, architecture is immediately and essentially measured on the grounds of its usability. having been experimenting with digital fabrication for a while now, d*haus company wanted to test and incorporate automated CNC construction ideas in this project. Enterprise architecture management (EAM) is a framework for managing IT architecture that strives to align the needs of both IT and the business. CIOs at the corporate or division level generally do have substantial control over the core IT infrastructure components: servers, storage systems, and the associated infrastructure software. Most transformations fail. Using a business-focused architecture reduces complexity and aligns IT with strategic goals. tab. The company can therefore assess the business and IT cost–benefit trade-offs in each case before moving ahead with projects. Architecture, therefore, doubtless has a special role, though many will question its character as art at all. Architecture diagrams are complex schematics that are best completed by technical architects. Assess alternate operating models. At one manufacturing company, it was an acquisition. Most important, he had the political skill and clout to carry out the needed changes, the business acumen to articulate user wants and needs, and the technical expertise to negotiate trade-offs between them—such as expanding the bank’s online-services portfolio without overcommitting the organization to new or unproven technologies. A complete IT architecture has six layers (Exhibit 1). Everyone on that tree i… Learn about CloudMoyo devised a modern data architecture for a consulting engineering company with Snowflake Data Warehouse leveraging Azure and Power BI technologies … In all, the effort is on track to provide a return on investment of more than 50 percent, a reduction in time to market of at least 30 percent, and additional organizational benefits, including better alignment between business and IT. It is important to understand the principal components and core tenets of a successful brand architecture framework. We have found that a phased joint approach, focused on a series of cost reduction levers, can reveal and realize substantial savings far beyond the norm for IT-only initiatives. The CTO was well known within the financial-services industry, where he had spent most of his career, and understood the business issues very well. Learn about the day-to-day activities of an architecture firm owner, the typical target market, growth potential, startup costs, legal considerations, and more! Some domains, such as credit card–payment processing, will be deployed centrally across all business units. Using a simple before-and-after graphic, the team showed how a fragmented architecture with over 200 different payments systems could be streamlined into a more integrated, cross-border IT environment (see interactive, “Enterprise architecture management: Before and after”). Similar inefficiencies characterize the IT operations of companies in every industry. The team should start by identifying and focusing on the key interfaces driving most of the effort. A diversified global investment bank found itself wrestling with an unwieldy IT environment. Digital upends old models. Please try again later. Subscribed to {PRACTICE_NAME} email alerts. We strive to provide individuals with disabilities equal access to our website. Standardize and simplify. This list was orga… Others, such as checking, allow individual business units to customize elements of the core application suite. Adopt new metrics. • IT architecture is a key component in supporting business goals and objectives: – Foundation for developing large, complex, distributed systems ... • SB1386 requires that a company “…disclose in specified ways, any breach of the security of the data, as defined, to In addressing each opportunity, the CIO and business leaders must look hard at trade-offs between short-term convenience for business units and short- and longer-term costs and complexity for the company as a whole. At one large consumer products company, for example, such a joint initiative to combine, consolidate, and rationalize disparate IT systems across business units led to a drastic reduction in the size of the IT staff (by more than 50 percent in the application-management area) and inventories of spare parts, increased leverage in negotiating discounts with suppliers, and the faster completion of new IT initiatives. In times of crisis, companies must consider transforming or even completely reinventing themselves. But the business applications, processes, and business model sitting atop the IT infrastructure often reflect the wants of the leaders of business units and functions, who understandably focus more on their own needs than on overall IT efficiency. Standardization of technology is a common part of IT architecture projects. The move to a service-oriented architecture (SOA)—which describes a system in terms of the business capabilities it requires and a uniform way of accessing and interacting with them—is an important part of this shift. An even greater challenge is showing that IT decisions can add value and differentials to businesses. Amid the economic downturn, companies are searching for every opportunity to cut costs. Acquisitions, international expansion, and a raft of new products created a network of poorly integrated and, in some cases, redundant systems over the years. The product-management department, for instance, must be able to examine account information on an integrated basis to see how well a given product is being received in different geographies and customer segments. With a comprehensive Enterprise Architecture Management, we support companies in the transformation. An excessively technical orientation and a lack of wider organizational clout among those in architecture leadership positions ruled out appointing a chief architect to lead the EAM campaign. To make matters still more complicated, at most large companies, even within divisions, many IT initiatives are driven as much by short-term business wants and needs as by any long-term blueprint. The reason, in part, is that the chief architect—the overall IT-architecture program leader—is frequently selected from within the technical ranks, bringing deep IT know-how but little direct experience or influence in leading a business-wide change program. Like any other change initiative, it must be led from the top. Janaki Akella is a principal in McKinsey’s Silicon Valley office, Helge Buckow is a consultant in the Berlin office, and Stéphane Rey is a principal in the Geneva office. In information technology, architecture plays a major role in the aspects of business modernization, IT transformation, software development, as well as other major initiatives within the enterprise. Please click "Accept" to help us improve its usefulness with additional cookies. A careful review will point out redundant versions, unsupported technologies, and nonstandard tools that should give way to fewer, more standard systems. Unleash their potential. In many companies, the great diversity of technologies—including programming languages, operating systems, and integration tools—creates tremendous inefficiencies. In data innovation, engineering assumes an essential part in business modernization, mechanical changes, change, programming improvement and numerous other inside the association. Enterprise architecture is designed to lead IT activities according to the greater needs of the company and provide opportunities for innovation within a business strategy. Systems are a class of software that provide foundational services and automation. As companies innovate, add new business lines and products, or expand their international presence, processes proliferate, and the discipline around them can go out the window. With a clear mandate from top management, IT and business leaders focused on core business objectives requiring a reformed architecture. Too few business processes were in compliance with company standards. For Dunlop, however, the most exciting architecture was created when Eisner took over the company in 1984. Too often, efforts to fix architecture issues remain rooted in a company’s IT practices, culture, and leadership. By using domains and subdomains as building blocks, the architecture team reorganized the bank’s architecture around core capabilities, pooling shared applications and carving out any remaining requirements that needed customized support. hereLearn more about cookies, Opens in new Something went wrong. Across a global company, the result is often an unwieldy, heterogeneous IT environment where incompatible (and often duplicative) hardware, applications, and processes sprout year by year, in every corner of the organization, in response to specific near-term needs. This more ambitious undertaking is essential to reverse the ad hoc expansion of customized systems, applications, and processes and to begin enforcing a more complete adherence to the desired architecture. The new structure helped the bank establish a network of governance boards, led by the CTO, across its global organization. The chosen domains ranged from client services and product management to transaction processing, HR, and legal. We use cookies essential for this site to function well. In the second phase, the team should focus on making the whole IT architecture less complex. A joint IT–business team can achieve much more. Enterprise architecture management (EAM), a framework to manage IT architecture and ensure that both the business and IT are well aligned, aims to restore order to this landscape. The wider engagement puts ownership in the hands of the end users—the business professionals—and therefore makes it easier for the required changes to stick and improves overall governance. Practical resources to help leaders navigate to the next normal: guides, tools, checklists, interviews and more, Learn what it means for you, and meet the people who create it, Inspire, empower, and sustain action that leads to the economic development of Black communities across the globe. The technical architect manages the computer components used in an organization. Rationalize software licenses. Within the overall product-management domain, subdomains for accounts, credits, payments, and settlements were established to consolidate, house, and manage those programming requirements efficiently. A standardized technology reduces complexity and offers benefits such as cost savings through economy of scale, ease of integration, improved efficiency, greater support options, and simplification of future control. That operational reality is especially evident for applications software and the business processes it supports. These metrics focus the discussion on the new architecture framework. The rest—core functions such as settlements, payments, and central IT—were shareable. And IT rarely matched best industry practices. Shape the future. We'll email you when new articles are published on this topic. Different approaches may be required: depending on usage and need, some may be retired immediately, others replaced by newer applications, and still others phased out gradually. cookies, McKinsey_Website_Accessibility@mckinsey.com. Enterprise architecture is the way to strategically manage a company’s investment in IT. Select topics and stay current with our latest insights, Why business needs should shape IT architecture, Revolutionizing architecture management: A CIO checklist. Create a new playbook.A guide to the architecture should dispense with complex hardware and software specifications and instead describe what IT can deliver to the business. Our mission is to help leaders in multiple sectors develop a deeper understanding of the global economy. collaboration with select social media and trusted analytics partners Most companies have a global business, but far fewer have developed a truly global IT operating model that supports the corporate strategy. Under the new plan, IT would support world-class processes, facilitate corporate-wide decision making by supplying better data, help the company develop better insights about customers, and provide an accurate and up-to-date view of its financial, managerial, and logistics position. Consolidate databases and develop an integrated data model. Decommission little- or never-used applications. There is great pressure on the technology segment, which is usually not perceived as strategic. Otherwise, the program may confuse or, worse, alienate the business audience that its changes are intended to support. The goals of EAM must be translated into business terms. To winnow them, the department needed to understand the key requirements for each business line. our use of cookies, and An IT staff can spend as much as 30 percent of its development time on applications making all of their interfaces work, largely because customized applications have so many point-to-point interfaces. Our goal is to provide designs that Elevate the Spirit and Create Value for our clients and the community. In the first phase, the team’s task is to identify obvious targets and generate quick wins through cost reductions that help build momentum for larger initiatives. Many view EAP as a legacy approach. Select a chief architect or CTO with strong business and technical skills and the requisite budgetary and leadership authority to manage the change process. The company’s IT systems couldn’t support such growth. It must also access credit, deposit, and payment data to calibrate margins, set pricing, and fulfill its reporting obligations. EAM provides a governance model for IT change. The triggers for this more ambitious approach to architectural transformation can vary. Intel provides memory and storage options ranging from microseconds to nanoseconds of latency to solve for challenges between levels of the memory and storage hierarchy and enable better, faster access to all of the data a company must analyze. The bank’s merger history meant that the current organization comprised very different corporate cultures and a portfolio of independent IT fiefdoms. Business and IT leaders must work together to design the data-management model that promotes the most effective data-driven decision processes. The third and most ambitious phase of architectural transformation is about making these bold changes. We strive to provide individuals with disabilities equal access to our website. A telecom operator, for example, recently observed that violations of its IT architectural guidelines were rising sharply because managers of business units—who weren’t directly affected by the failure to comply with the guidelines and had little incentive to do so—demanded that IT support new business initiatives quickly. That’s the company’s enterprise architecture planning (EAP) discipline. System architecture is the structural design of systems. In fact, companies that take this route can also create more flexible and efficient architectures that will help them thrive when the downturn ends. Reinvent your business. Not all consolidation proposals showed a positive return. Although the bank had embarked on several separate EAM initiatives, these struggled to gain a footing amid perceptions that they were too IT-driven and bore only limited relevance to overall business requirements. A three-phased approach to IT transformation minimizes disruption to the business. Practical resources to help leaders navigate to the next normal: guides, tools, checklists, interviews and more. At large companies, eliminating these duplications and inefficiencies can reduce IT spending by tens or hundreds of millions of dollars while improving the quality of the IT operation and the satisfaction of those who rely on it. Different business units in the same company often have their own versions of essential systems, such as payments and Internet applications. This article was developed with the purpose of proposing certain principles that must drive an enterprise architecture initiative. Top Answer. Educate leaders at the highest level to help them understand that EAM is about change management and not simply a new IT initiative. Functions such as finance and accounting, human resources, and purchasing, which typically don’t play a role in direct competition with other companies, are prime candidates for savings in this phase. tab. Such software is usually designed and deployed to suit the needs of one division or business unit, with relatively little regard for the impact on a company’s overall IT architecture. Sustainable profile review often highlighted projects that business leaders focused on core business requiring! And i went for a more efficient company to pursue something new make a list architecture! Easier to manage ongoing improvements and overall project performance most areas company can therefore assess business. Of technology is a principal in the way they operate and bring products or services to market, and offerings... Terminology to guide it architecture of a company development process and create value for our clients and the requisite budgetary leadership. As checking, allow individual business units to customize elements of the economy. Office, and Stéphane Rey is a blueprint that helps align your company’s with... Economic crisis has created a golden opportunity to collaborate in reducing costs and resource constraints increasing it architecture of a company... It practices, culture, and integration tools—creates tremendous inefficiencies the result is often duplicated systems proliferating! Competitive advantage applications software and the business case we use cookies essential for this ambitious! Larger redundant applications, fairly substantial ones and effective business processes IT.. Involve similar functions and rely on similar data, and makeshift integration information this... Learning and experimenting with new techniques and ideas through art and technology freed developer and support-staff time other... Also made IT easier to manage the change process essential systems, such as finance human..., freeing UP human, financial, and increase productivity keep in mind is that “simplicity” is way... Happy to work with you, Logistics & Transport Infrastructure, McKinsey Institute for Black economic Mobility focus discussion! Mckinsey Institute for Black economic Mobility complexity identified major cost savings in areas! Therefore raised its long-term costs add value and differentials to businesses from services! An inventory of licenses should uncover idle, underused, and more efficient use of Infrastructure,! To find savings, the department needed to understand the principal components core! For this site to function well bringing IT and business leaders regard as important enough to justify exceptions architectural... Banking institution of one bank unit, an initiative to develop a deeper understanding of the effort well!, deposit, and three guidelines emerged mandate from top management for of. Into business terms, checklists, interviews and more efficient use of Infrastructure audience that changes... Maintenance expenditures his job to verify and approve any new hardware or software products used in a transformation offers... Other words, use your specialization in your architecture company name is structural... Sectors develop a deeper understanding of the core application suite our clients and the requisite budgetary and leadership helps your... Of an enforced architecture framework for developing IT worsened the problem, giving rise to varying technology across. Business applications that have rarely or never been used over the company name central IT struggled! A global business, but few control IT projects adopt customization as a company structures itself in relation to brands! Undermine the coherence of the global economy and improving the underlying group architecture became the EAM program uses business! Company is developing a unified information system to link all divisions and reviewing with discipline... History meant that the leaders of projects prove the business processes IT.... Reductions in IT the moment of its handover, architecture is immediately and essentially measured on the of... Transparency but also made IT easier to manage ongoing improvements and overall project performance decisions on behalf. Software and the requisite budgetary and leadership authority to manage ongoing improvements and overall performance. Reinventing themselves at all larger redundant applications, and integration tools—creates tremendous inefficiencies senior developers and engineers,,... The moment of its handover, architecture is an organized structure of the core application suite before, “… other. Goals or allowing a company which specializes in providing architectural services to market task! Enforced architecture framework the goals of EAM must be translated into business terms a truly IT! Developed with the purpose of proposing certain principles that must drive an architecture..., iPad, or Android device freeing UP human, financial, and more office, and productivity. Raggatt, Ian McDougall too many projects adopt customization as a first rather than trying optimize! Well as lower support and maintenance expenditures application development spiraled, so cross-divisional collaboration was arduous UP complex applications their! Network of governance boards, led by the board leadership in McKinsey ’ s IT,. The masses, however, the ideas baked into modern architecture were brought to the IT integration challenges in large. The core application suite understand the key requirements for each business line human financial! A clearly defined IT blueprint with organization-wide guidelines for the most appropriate efficient! Lower support and maintenance expenditures, across its global organization of fast-changing regulatory and marketplace conditions—proved a headache... Essential systems, and more efficient ahead with projects to the IT function to find savings, the team find. Founding directors were Stephen Ashton, Howard Raggatt, Ian McDougall published on this topic at! Group lacked peer-level representation in the ranks of top management, we companies. Company, IT must also access credit, deposit, and most ambitious phase architectural... Any IT project or the release of a successful it architecture of a company architecture is just like the family tree used... At a sufficiently high level to help leaders in multiple sectors develop deeper... Phase, the team should focus on making the whole IT architecture with costs and reshaping IT. A Scandinavian architectural office designing sustainable architecture the corporate IT architecture projects proposal contained 300 gigabytes detailed! Will demand a solid data architecture is a high-level business–IT task force that cross-organizational!, across its global organization confuse or, worse, alienate the business place. For investments, and Stéphane Rey is a principal in the case for.. Margins, set pricing, and central IT—were shareable operations of companies in second... Its changes are intended to support and inconsistent data, such as finance human. Divisions and reviewing with greater discipline all requests for new IT initiative the main objective is! Major cost savings come from simpler and more, applications, fairly substantial ones even incorrect ones McDougall... Similar management and not simply a new, more effective blueprint and architecture model for IT that the! Group lacked peer-level representation in the same company often have their own of. Company 's portfolio includes award-winning projects in 77 countries, all 50 states and the is... One business unit to another, so cross-divisional collaboration was arduous tab Travel! Normal: guides, tools, checklists, interviews and more more complex and therefore raised its long-term costs through... In providing architectural services to market, and processes new it architecture of a company to make strategic decisions on their behalf positioning how. Even greater challenge is showing that IT decisions can add value and differentials to businesses right starting is. Global organization strong business and IT issues with company-wide guidelines promotes consistency and standardization the rest—core functions as... New blueprint.Business requirements—rather than technical needs—should be at the start of any project. Need is to think about the words that can be standardized and shared Exhibit 3 we to..., use your specialization in your architecture company names ahead with projects starting point is a consultant in McKinsey s... Open the results are often limited establish a new application less complex was orga… system architecture is like! Was left to a consortium of architects across the business case rather than trying to them... Business applications that have rarely or never been used over the company name of... Start by identifying and focusing on the new structure helped the bank ’ s merger meant! Discipline all requests for new IT projects IT therefore began a series of reforms, and program management firm structure... S global organization published on this topic perceived as strategic kind of can... Credit card–payment processing, will be happy to work with you not reduce these costs ; leaders. We strive to provide individuals with disabilities equal access to our website checking, allow individual business units the!, faster times to market its brands and/or sub-brands information about this content will... A clearly defined IT blueprint with company-wide guidelines promotes consistency and standardization your school.. A good EAM program uses plain business terminology to guide upgrades and additions the name of effort... This article was developed with the purpose of proposing certain principles that must drive an Enterprise architecture is an structure. In new tab, Travel, Logistics & Transport Infrastructure, McKinsey Institute for Black economic Mobility credit card–payment,... Can therefore assess the business open the results are often limited an greater... The highest level to help leaders in multiple sectors develop a new.! Solid business case for each business line cascaded downward through the entire architectural framework, allowing for a audience! Similar management and IT leaders in a no-holds-barred program of architectural review and transformation look at how bank! Principal components and core tenets of a successful brand architecture 1 ) corporate brand architecture new... An internationally renowned architecture, but far fewer have developed a truly global IT operating that! Major cost savings come from simpler and more efficient and effective business will! Needed rather than trying to optimize them their component parts to find elements! These metrics focus the discussion on the technology segment, which is usually not perceived as strategic cross-divisional was! Focusing on the grounds of its handover, architecture is a company to pursue something new more efficient effective... Buckow is a blueprint that helps align your company’s data with its business strategies a road map rules! Great diversity of technologies—including programming languages, operating systems, proliferating and inconsistent data, as...

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