Forrester View

SOA will change how IT works

To be effective, an IT organisation must develop an orientation around end-to-end business processes, say Alex Cullen (above) and Laurie Orlov

The flexibility provided by service-oriented architecture (SOA) enables the continuous optimisation of business processes. But the traditional IT organisation, which is oriented towards discrete business units and supported by vertically integrated applications, constrains rather than helps this optimisation. A number of existing IT roles need to be redefined to ensure that this process orientation is reflected in strategies and plans. Further, the IT organisational structure itself should change to make these redefined roles effective and deliver service-oriented IT (SO-IT).

Siloed IT organisations can’t capitalise on SOA opportunities

Through the history of corporate IT, a number of technologies have changed how IT is organised and managed. For instance, the migration from mainframe to client-server pushed IT to become less centralised and develop new business support functions. SOA has the potential to do this again. For SOA to provide value to the business, it must facilitate business process optimisation: streamlining steps, improving coordination and driving down costs. Going beyond Web services to SOA and a broad SO-IT strategy greatly expands the strategic possibilities of organic business, creating a long-term vision of responsive, adaptive, optimised business performance.

Traditional IT structures emphasise narrow solutions and skills

The traditional IT organisation is structured around building and supporting vertically integrated, siloed applications. IT roles, responsibilities, skills and budgets are focussed on discrete projects addressing specific business activities—a focus that emphasises the view of IT as an order taker. These IT organisations will not be able to identify or work with their business partners to capitalise on opportunities that SOA provides. Forrester has described six different strategies for leveraging SOA. These range from the simple internal integration path to the core business flexibility path. A business-unit-focussed IT organisation may be successful at executing several of these paths but will have difficulty executing the core business flexibility path without a balance of business unit and enterprise focus. Their narrow focus too often results in:

• Point solutions to common problems. Application development projects are scoped and delivered with little recognition of common business functions, missing an enterprise perspective and the opportunity for optimal solutions. For example, one medium-sized insurance company found itself simultaneously developing two new underwriting systems, neither of which was intended to replace two existing ones.
• Shortsighted enhancements to legacy applications. Firms continue to add code to aging apps as the quickest way to address immediate business needs. Thus, opportunities for radically improved support to business processes evaporate due to a lack of shared vision between IT and business areas. For example, the same insurance company spent millions of dollars to add business functionality to a monolithic and inflexible customer service application developed in the early nineties.
• IT as a support organisation and not as a strategic competency. By focussing narrowly on individual projects, applications and departmental needs, a premium is placed on existing application knowledge over a grasp of the business domain. As a result, when a strategic contribution is needed, the value that IT can provide to its business partners is hamstrung. For example, an investment management firm found that it needed to bring in consultants to drive IT planning and analysis whenever the business sought radically new application capabilities; the IT organisation was viewed simply as support staff for the existing application portfolio.

IT must re-orient itself towards business process and services

IT must switch its emphasis from supporting departments and applications to playing a facilitative role in improving business operations. These initiatives range from process improvements (such as combining user job roles) or eliminating steps in their workflow to improving the functionality of IT services that a process uses to extending a process to business partners, including business process outsourcing. Firms will use a service-oriented infrastructure to embed their business processes inside the processes run by their customers and partners. Key aspects of this re-orientation are process knowledge, scope, architecture influence and vision (see Figure 1).

Change existing IT roles to support the delivery of business services

IT needs to overhaul several roles that are key to its ability to capitalise on the potential of SOA. To support an SOA strategy, IT will require a number of new roles based on the need to champion, specify, design and manage business services. These roles, if supported by appropriate organisational models, will evolve from current roles and responsibilities. This overhaul must be deliberate, planned and tracked.

• Revive the role and increase the scope of the business analyst. The business analyst (BA) is the existing IT role best suited to grasp business processes and their dependencies on application functions and data. The scope of this role, which today has often atrophied with the focus on individual projects, must be expanded to encompass business process understanding and analysis. For instance, a BA focussed on SAP financial reporting modules could become an expert in reporting and compliance management processes—some of which may not tap SAP functionality at all. Further, the knowledge of these analysts must be documented in a repository as a foundation for future business improvements.
• Build business architecture as a new competency. Many of today’s IT architects are technical. Instead, IT needs architects focussed on business processes and associated services. These new architects will define an analysis framework and work with BAs to develop a target portfolio of applications that use business services—enabled by SOA. They will work with technical architects to define design principles for business services. They will also work with business management, relationship managers, and BAs on whether to use existing services, develop new ones, or source them externally. This competency can draw on existing architects but should be structured as a separate group with appropriate goals.
• Charge relationship managers with being process optimisation champions. The relationship manager plays a key role in developing and communicating IT’s strategy to its business partners. Forrester has identified relationship managers as a key strategic function, and this role is leading innovation. Relationship managers typically have had a business unit and vertical application focus; they now need to champion IT’s involvement within the context of an IT vision for process optimisation.

Support these roles with new organisational structures

Changing specific job roles won’t be effective if the IT organisation continues to emphasise discrete business units and application silos. To take advantage of SOA, Forrester recommends partitioning the IT organisation differently (see Figure 2).

• Balance a business-unit focus with an end-to-end vision via competency groups. Developing the skills, mindsets and a shared knowledge base of BAs and business architects will be more difficult if they only work within a business unit silo. A counterbalancing ‘competency group’ addresses end-to-end vision and emphasises skill development. Competency groups can be instituted as a shared resource pool or as a virtual overlay on the formal IT organisation. BAs and business architects will have matrix-reporting relationships to an IT functional head responsible for IT delivery, and to a competency group head who is responsible for role development and for the focus on end-to-end business processes. John Hancock and Halifax Bank of Scotland used this model to build credibility within line-of-business IT units while at the same time promoting a common architectural vision. Business architects at John Hancock had 25 percent of their time dedicated to cross-business-unit architectural definition, with 75 percent allocated to working on business unit concerns.
• Divide application development managers into two camps. Two very different project types will exist in SO-IT: business solution projects and service development projects (see Figure 3). Business solution projects assemble services into the composite applications, such as portal or workflow systems used by business. These projects are dynamic—functionality rather than schedule-driven—and likely to be less technically sophisticated. They are good candidates for agile processes. The use of agile processes is taking off in corporate IT shops. Approximately two-thirds of large organisations working with Forrester are adopting—overtly or inadvertently—some form of agile processes for their internal application development efforts. Service development projects will be more complex, technically sophisticated, and more schedule-driven to meet the needs of the business solution projects. They will also use structured development processes. Project managers for these different projects need different skills and mindsets to manage the different project dynamics.
  

• Measure business solution and service development groups appropriately. As service orientation progresses, both at the service level and at the business solution level, the different IT groups responsible for these two levels will need distinct goals and measures to promote their respective cultures. Solution delivery will be focussed and measured on interaction with their business partners and on their achievement of a business architecture. Service development will be measured on reliability and cost as the provider of high-quality services.
• New skills, process and management move it to a new level

As the IT organisation executes on an SOA strategy, involvement with business improvement efforts will increase. A new set of strategic levers will rise to the forefront of management attention as:

• Business services sourcing is more closely linked to business strategy. Business services may be sourced internally, built on existing or new applications, or from an external entity. Each option exposes tradeoffs of business proprietary knowledge, best practices, and cost and time-to-market that were not apparent when bolting on enhancements to existing applications.
• IT outsourcing options are clarified. IT’s core business value will evolve to include business process understanding, improvement, and service sourcing and management. These are the least amenable to being outsourced. Service development and provisioning can be more remote from the business, and benefit from tapping a larger pool of technical skills, meaning that outsourcing and offshoring are viable strategies for these functions.
• Business process outsourcing becomes easier. As whole business functions— such as manufacturing or customer service—are sourced from an external entity, the need to expose internal applications and integrate with the BPO supplier’s applications increases. As this integration becomes easier, BPO will more readily become a part of the business’ strategic arsenal of optimisation.

For more information, contact Forrester India Country Manager Sudin Apte on sapte@forrester.com or phone 020 25674390/91.