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Enterprise Systems

The aims of this module


The

aim of this module is to provide students


with knowledge of the purpose, design and
context of enterprise architectures and
systems within an organisation.

Learning Outcomes I
Explain the concepts of enterprise wide IT systems.
Explain the role of IT within the organisation and the
organisational factors that guide IT decisions
Classify enterprise systems on the basis of their
purpose, architecture and role within the
organisation
Describe the various processes within the
organisation supported by enterprise systems.
Describe the primary applications found in an
organization.

Learning Outcomes II
Analyse the role of enterprise architecture
Describe common enterprise architectures
Analyse and evaluate enterprise integration
concepts and architectures
Analyse and compare major enterprise
integration technologies
Compare different service delivery approaches
and the business and technology issues
associated with these architectures

Examples of topics covered


How IT fits in the Organisation
Enterprise Systems Architectures including ntier, distribution, role of enterprise services
(security etc)
Enterprise Integration Technology
Enterprise Integration Architectures (EAI and
SOA)
Service delivery models: OSS, cloud computing,
out-sourcing etc

The world of enterprise IT

What is Enterprise IT?

Enterprise IT is an engineering discipline. Not


a science.

Engineering is the discipline of acquiring and


applying knowledge of design, analysis, and/or
construction of works for practical purposes.

Enterprise IT is as much about business and


people as about technology
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What is an enterprise?

A larger business or organisation.


Sometimes used in contrast to a SME (Small to Medium
Enterprise)

In the UK, SME means <250 employees


In the USA, SME means <500 employees

An Enterprises IT requirements are more complex and


they will typically have internal IT staff capable of
developing and deploying systems.
This course will focus primarily on open/standards based
software. Microsoft solves the problems within its own
technology world.
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Understanding the enterprise IT


environment

Decision making in enterprise IT is driven by the need to


balance a number of different factors apart from
technical feasibility.

The way that these are balanced is sometimes called IT


governance

Processes designed to ensure the right decisions are made


and that all stakeholders, including senior management,
internal customers, and departments such as finance, have
the necessary input into the decision making process.

There are 5 main factors which impact the decision.


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Understanding the enterprise IT


environment
There
1.
2.

3.

4.

5.

are five primary drivers

Skills: Costs and availability


Technology life-cycle: How enterprise IT evolves
and how the IT industry evolves
Business requirements: how IT supports
business strategy
IT organisation: how IT is itself organised, the
roles in an IT department
How investment and benefit can be measured
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Understanding the enterprise IT


environment
There
1.
2.

3.

4.

5.

are five primary drivers

Skills: Costs and availability


Technology life-cycle: How enterprise IT evolves
and how the IT industry evolves
Business requirements: how IT supports
business strategy
IT organisation: how IT is itself organised, the
roles in an IT department
How investment and benefit can be measured
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The technical skills pyramid


Rare: Systems
software developers

Medium availability:
Application developers

Highly skilled systems


software developers are
rare.
Therefore, they must be
used to solve exclusively
technical issues.
The solutions of the higher
groups in the pyramid are
used to developers lower
down the pyramid.

Common:
Assemblers and configurers
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Specialisation of skills
Technical skills

Combination

Business skills

Most staff will either have be


predominantly technically
skilled or business skilled
even in IT departments.
Attempting to use
technically focused staff on
business focused problems
will result in poor solutions
and vice versa.
Therefore, the way we
develop software should
attempt to allow separation
of roles between the two.
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Dealing with the skills challenge

Goal 1: Reduce the technical skills requirement and


allow more staff to participate in any software
development process

Solution:

Rely on products instead of custom coded solutions;


Reduce the difficulty in the code itself by moving as much of
the difficult code into the products you buy
Use tools to make both development easier and the
process of development easier (e.g. Visual C++ or eclipse
or Business Process Modelling tools)
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Dealing with the skills challenge

Goal 2: Reduce the amount of code that needs


to be written.

Allow developers to focus on writing business logic


that is specific to the problem at hand, not
infrastructure code which is generic
Maximise the amount of reuse of existing systems,
codes, designs etc

Reducing the amount of code written also


reduces the cost of maintenance
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Understanding the enterprise IT


environment
There
1.
2.

3.

4.

5.

are five primary drivers

Skills: Costs and availability


Technology life-cycle: How enterprise IT
evolves and how the IT industry evolves
Business requirements: how IT supports
business strategy
IT organisation: how IT is itself organised, the
roles in an IT department
How investment and benefit can be measured
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The IT life-cycle is driven by many


factors

The IT industry itself

The business environment

Technology innovation

New customer demand


eCommerce in 1990s
Investment from VCs
Economic cycle
Competition among end-users

Inhibited by the lifespan of IT systems

What is the average lifespan of an enterprise IT system?


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A nave view of enterprise IT life-cycle

Evolution is the survival of the fittest. Each stage dies


out as the next on is better.

Korn

IT evolution consists of technological progress which


replace previous waves of technology
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The reality of enterprise IT life-cycles

IT systems dont evolve new systems get deployed

SOA

Web
Services

CORBA
Korn

CICS

Client/
server

J2EE

IMS

Systems are only decommissioned when there is a


compelling business need.

Enterprise systems are typically used for 7+ years.


Only sometimes is that it is too old to maintain

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The ideal of the enterprise IT

Modern technologies
A consistent architecture
Sleek and efficient
Capable of supporting
business change for years
to come

Swiss RE Building
in London
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The reality of enterprise IT

The Winchester Mystery House

Combined pressures of new technology and business results in chaos.


38 years of construction 147 builders 0 architects
160 rooms 40 bedrooms, 6 kitchens, 2 basements, 950 doors
65 doors to blank walls, 13 staircases abandoned, 24 skylights in floors
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No architectural blueprint exists

Who drives adoption of new


technology

Participants:

End-users: Business needs


Vendors: Selling opportunities
Industry analysts: Spotting trends

Industry analysts:

Gartner, Forrester, IDC


Work with both vendors and customers to identify
trends
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Understanding the enterprise IT


environment
There
1.
2.

3.

4.

5.

are five primary drivers

Skills: Costs and availability


Technology life-cycle: How enterprise IT evolves
and how the IT industry evolves
Business requirements: how IT supports
business strategy
IT organisation: how IT is itself organised, the
roles in an IT department
How investment and benefit can be measured
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IT and Business Strategy

Any investment within an enterprise will be evaluated in


the context of whether it fits into the overall business
strategy.

A strategy is a long term plan of action designed to


achieve a particular goal.

A company's strategy is its overall plan of development.


Corporate strategy can be more formally defined as a
comprehensive plan or action orientation that identifies
the critical direction and guides the allocation of
resources of an entire organization.
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Role of IT is pivotal in supporting


business strategy

Contribute to the achievement of business goals.

Deliver objectives in a manner which is:

Launch of new product


M&A
Entry to new market

Cost effective
Timely
Flexible

Over 50% of US corporate capital investment is IT related


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IT Strategy

The plan an organisation uses in providing information


services.
IT allows business to implement its business strategy.
IT helps determine the companys capabilities.
IT Strategy must make sense in the context of the
organisational structure and approach
Four key IT infrastructure components are key to IT strategy:
Hardware, software, networking, data
These key components are sufficient to allow the general
manager to assess critical IT issues.

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Building a business strategy


Core
Competency

The resources and capabilities that have


been determined to be a source of
competitive advantage for a firm over its
rivals.

Leads to

Strategy

An integrated and coordinated set of actions


taken to exploit core competencies and gain a
competitive advantage.

Leads to
Business
Level Strategy

Actions taken to provide value to customers and gain


a competitive advantage by exploiting core
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competencies in specific, individual product markets.

Building a business strategy


The resources and capabilities that have
been determined to be a source of
competitive advantage for a firm over its
For a chosen business orrivals.
organisation analyse:

Core
Exercise:
Competency

What is its core competencies?


Leads to
How does that fit with its business strategy?
An integrated
and coordinated set of actions
How does it fit with its business
level strategy?
Strategy
taken to exploit core competencies and gain a
competitive
advantage.
How does it fit with its technology
strategy?
Leads to
Business
Level Strategy

Actions taken to provide value to customers and gain


a competitive advantage by exploiting core
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competencies in specific, individual product markets.

Generic Business Level Strategies


Source of Competitive Advantage
Cost

Uniqueness

Differentiation

Relatively

standardised products
Features acceptable to many

customers
Lowest competitive price

Value

provided by unique features


and value characteristics and
command premium price
High customer service
Quality, prestige or exclusivity
Rapid innovation

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Understanding the enterprise IT


environment
There
1.
2.

3.

4.

5.

are five primary drivers

Skills: Costs and availability


Technology life-cycle: How enterprise IT evolves
and how the IT industry evolves
Business requirements: how IT supports
business strategy
IT organisation: how IT is itself organised,
the roles in an IT department
How investment and benefit can be measured
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Eight Core Activities of IT department

What are they?

What is not part of ITs purpose?

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Eight Core Activities of IT department

Anticipating new technologies.

Strategic direction.

IS can act as consultants to management.


Educate managers about current technologies/trends.

Process innovation.

IT must keep an eye on emerging technologies.


Work closely with management to make appropriate decisions.
Weigh risks and benefits of new technologies.

Review business processes to innovate.


Survey best practices.

Supplier management.

Carefully manage outsourced IT.


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Eight Core Activities


(continued)

Architecture and standards.

Security

Important to all general managers.


Much more than a technical problem.

Business continuity planning

Be aware of incompatibilities.
Inconsistent data undermines integrity.

Disaster recovery.
What if scenarios.

Human resource management.

Hiring, firing, training, outsourcing, etc.


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What IT Does Not Do

Does not perform core business functions such as:

Selling
Manufacturing
Accounting.

Does not set business strategy.

General managers must not delegate critical technology decisions.

In most cases, IT is a service to the rest of the business.

In some cases, IT is seen as a cost of doing business.

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CIO

The CIO (Chief Information Officer) is the head of the IS


organisation.
CIOs primary goal is to manage IT resources to implement
enterprise strategy.
Provide technology vision and leadership for developing and
implementing IT initiatives to help the enterprise maintain a
competitive advantage.
As the importance of technology has increased so has the
position of the CIO.

Sometimes reports directly to the CEO.


Otherwise Chief Operating Officer or Chief Financial Officer
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Twelve Main Responsibilities

The following responsibilities often define the role


of the CIO:
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.

Championing the organisation.


Architecture management.
Business strategy consultant.
Business technology planning.
Application development.
IT infrastructure management.
Sourcing.
Partnership developer.
Technology transfer agent.
Customer satisfaction management.
Training.
Business discontinuity/disaster recovery planning.
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IT Organisational structures

Centralised bring together all staff, hardware, software,


data, and processing into a single location.
Decentralised the components in the centralised
structure are scattered in different locations to address
local business needs.
Federalism a combination of centralised and
decentralised structures.

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Federalism

Most companies would like to achieve the advantages


derived from both centralised and decentralised
organisational paradigms.

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Understanding the enterprise IT


environment
There
1.
2.

3.

4.

5.

are five primary drivers

Skills: Costs and availability


Technology life-cycle: How enterprise IT evolves
and how the IT industry evolves
Business requirements: how IT supports business
strategy
IT organisation: how IT is itself organised, the
roles in an IT department
How investment and benefit can be measured
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Calculating the cost of IT

The most basic method of determining costs is to add up all of


the hardware, software, network, and people involved in IS.

Real cost is not as easy to determine.

Most companies continue to use the over-simplistic view of


determining cost and never really know the real cost.

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IT Investment Monitoring

If you cant measure it, you cant manage it.

Management needs to make sure that money spent on IT


results in organisational benefit.

Must agree upon a set of metrics for monitoring IT


investments.

Often financial in nature (ROI, NPV, etc.).

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Valuing IT Investments
Valuation Method

Description

Return on Investment (ROI)

ROI= (Estimated lifetime benefits- Estimated lifetime


costs)/Estimated lifetime costs

Payback Analysis

Time that will lapse before accrued benefits overtake


accrued and continuing costs.

Net Present Value (NPV)

Calculated by discounting the costs and benefits for each


year of systems lifetime using present value

Economic Value Added (EVA)

EVA = net operating profit after taxes

Internal Rate of Return (IRR)

Return that the IT investment is compared to the corporate


policy on rate of return

Weighted Scoring Methods

Costs and revenues/savings are weighted based on their


strategic importance, etc

Prototyping

A scaled-down version of a system is tested for its costs and


benefits

Game Theory or Role-playing

These approaches may surface behavioral changes or new


tasks attributable to a new system

Simulation

A model is used to test the impact of a new system or series


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of tasks; low-cost method

Total Cost of Ownership

Total Cost of Ownership (TCO) is fast becoming the industry


standard

It looks beyond initial capital investments to include costs


associated with technical support, administration, and training.

This technique estimates annual costs per user for each


potential infrastructure choice; these costs are then totaled.

Careful estimates of TCO provide the best investment numbers


to compare with financial return numbers when analyzing the
net returns on various IT options

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TCO Component Breakdown

For shared components like servers and printers, TCO


estimates should be computed per component and then divided
among all users who access them

For more complex situations, such as when only certain groups


of users possess certain components, it is wise to segment the
hardware analysis by platform

Soft costs, such as technical support, administration, and


training are easier to estimate than they may first appear

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Return on Investment calculation

Calculate the lifetime costs of the project (normally set to 3 or 5


years depending on the organisation)

Initial equipment and software costs


Staff costs including salary, benefits, recruitment and training costs for
development and roll-out phase.
Staff costs (as above) for each year the system is maintained.
Software, hardware and network maintenance costs.

Calculate the lifetime benefit of the project.

Return on investment = (Benefit Cost)/Cost

RoI < 0 means the investment is never covered


RoI > 0 means the investment is covered. It must then be compared
to other potential investments to see which is the best.

Payback anaylsis identifies how long it will take before RoI>0


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Internal rate of return

Commercial organisations are judged by the owners on the


basis of profit (and sometimes revenue).

In order to deliver any profit target, the organisation will set a


rate of return it expects from any existing or new business.

Building in evaluation of the riskiness of the business.

This internal benchmark is called the Internal Rate of Return.

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Valuing IT Investments

Soft benefits, such as the ability to make future decisions,


make it difficult to measure the payback of IT investment

IT can be a significant part of the annual budget, thus under close


scrutiny.
The systems themselves are complex, and calculating the costs
is an art, not a science.
Because many IT investments are for infrastructure, the payback
period is much longer than other types of capital investments.
Many times the payback cannot be calculated because the
investment is a necessity rather than a choice, and there is no
tangible payback.
IT has been oversold in the past and too many high-profile
failures are well known!
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IT Investment monitoring: A hard job

CIO Insight 2006:

IT investments can be
hard to measures.

40% of companies do not


measure IT investments.

And IT investments do
not have to be financially
justified but lack of
justification makes
investment harder.

http://www.cioinsight.com/articl
e2/0,1540,1999135,00.asp

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