August 1st, 2007
'Whole-brained' enterprises need SOA: here are the numbers to prove it
Okay, okay, we get it — business and IT need to be aligned. They’re obviously not in alignment, or we wouldn’t have 50,000 conference speakers and analyst reports telling us so. So, let’s have at it, and align away.
Finally, a study that provides hard numbers on the connection between business-IT alignment and business success
Finally, however, we have a study that provides some hard numbers on the connection between the business-IT alignment everyone talks about and business success.
Ronan Bradley over at Lustratus Research pointed to the study, recently published and posted by the BTM Institute. The study, called the “Business-Technology Convergence Index,” is exactly that — a measurement on how successfully business is converging with technology across various organizations. (PDF of the study available here.)
BTM Institute looked at the state of companies across 50 industries in 2002 and again in 2006, and actually connects the dots between success and “converged technology management.” The report states that companies with well-aligned IT-business operations saw 12% average annual growth versus four percent for their industry groups. In addition, the aligned IT-business companies saw 36% average annual earnings per share growth versus seven percent for their industry groups.
Good stuff. So how did BTM determine which companies are “whole-brained” (I like that term) versus those that treat IT as an expense off to the side? BTM provides a detailed explanation of its framework, which looked at factors such as process maturity, process automation, and governance. The researchers then divided the companies into five levels of maturity, starting with Level 1, in which they execute strategic capabilities in a disaggregated, task-like manner (in other words, more of an ad-hoc versus systematic approach), to Level 5, in which they fully leverage technology to adapt and lead the competitive landscape.
In his analysis, Ronan correctly points out that the report does not mention SOA by name, but observes that BTM’s definition of a successful “whole-brained” company clearly would include a successful SOA strategy: “[In such companies] this means that technology not only enables the execution of current business strategy but also anticipates and helps shape future business models and strategies…”
You can see the footprints of SOA all across the convergence factors discussed throughout the report. Here are some nuggets as to what constitutes a successfully converged, whole-brain enterprise:
Governance: “…there is a consistent, managed process for ensuring that business management is fully engaged in decision surrounding business technology… …there is clear communication of business technology initiatives…” Precisely the goal of SOA governance.
Strategic technology investments: “…there is a standardized means of structuring projects and of ensuring that they are managed in accordance with enterprise standards…” Which would be SOA-based standards.
Enterprise architecture: “…there are documented, integrated business and technology architectures which describe the organization fully and which represent the business technology necessary for it to reach its goals.” Again, sounds like SOA.
Enterprise data model: “For these organizations, data has become information. …this information is available through and managed in an integrated, enterprise-wide automated system that facilitates decision making…” SOA supports enterprise data management to make this enterprise view possible.
Ronan observes that the report covered a period when SOA was only emerging (2002-2006) and therefore, SOA cannot be wholly credited with delivering these great results.
In addition, as I frequently point out in this blog, the companies that appear to have mastered whole-brained management are larger concerns that probably could have achieved wonders without SOA during this time — but are the most likely early adopters, because their managements believe in staying on the cutting edge of management thinking. There were no surprises in BTM’s list of whole-brained/converged high-achieving companies: FedEx, UPS, Harah’s, Lockheed-Martin, Wal-Mart.
I agree with Ronan that it will be interesting to see what the next five years bring as SOA becomes more embedded into the operations of these companies. And, it would be interesting to be able to measure how much SOA contributes to the whole-brained enterprise.
Joe McKendrick is an author and consultant with deep knowledge and insights regarding trends and developments in the technology industry. See his full profile and disclosure of his industry affiliations.
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