enterprise systems and integration ronan bradley [email protected]
TRANSCRIPT
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The aims of this module
“This module covers the range of enterprise architectures and enterprise application systems that are used within organisations. The module aims to provide the student with a basic understanding and knowledge of the enterprise computing techniques used in industry and to provide hands-on experience using leading industry-standard software.”
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Learning Outcomes I Concepts of enterprise wide IT systems.
Understand the principles of enterprise IT management
Understand how business strategy impacts and drives IT strategy.
Understand how the organization and roles within IT organisations.
Understand the role of CIOs and architects
Understand the various processes within the organisation supported by Enterprise systems.
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Learning Outcomes II Demonstrate a clear understanding of the
requirement for component based systems for software reuse and system integration in the enterprise.
Develop applications using a selection of enterprise level technologies such as those in the J2EE suite.
Describe and demonstrate a thorough appreciation of the fundamental technical and theoretical issues involved in distributed system design and implementation.
Select, evaluate, compare and contrast a variety of approaches to developing distributed applications and systems.
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Learning Outcomes II Explain enterprise integration concepts and
architectures. Analyse and evaluate enterprise integration
development/practices strategies. Analyse and compare major enterprise integration
technologies including Web Services, Enterprise Application Integration and Service Oriented Architecture
Concepts Enterprise Resource Planning (ERP) , Customer Relationship Management (CRM) and Supply Chain Management (SCM) systems.
Benefits and drawbacks of ERP, CRM, SCM. Knowledge of ERP techniques and tools.
Learning outcome III
Understand the reason why Understand underlying concepts and trends – not
just details. You can buy a book if you need the details.
Understand how enterprise systems support business objectives and how business objectives drive how enterprise systems are developed.
Be equipped to learn more about any individual topic if required.
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General Enterprise IT reading list…
The best information for this module is on the web: Management perspectives: www.cio.com Industry trends: www.news.com Architects: www.intelligententerprise.com,
www.bijonline.com Architects & Developers: www.serverside.com,
Find web-sites which suit your background and style of learning.
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Examination
Written Examination 60% Continuous Assessment 40%
The world of enterprise IT
Dealing with complexity and legacy within a business
environment
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 Enterprise’s 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 are five primary drivers for IT decisions1. Skills: Costs and availability
2. Technology life-cycle: How enterprise IT evolves and how the IT industry evolves
3. Business requirements: how IT supports business strategy
4. IT organisation: how IT is itself organised, the roles in an IT department
5. How investment and benefit can be measured
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Understanding the enterprise IT environment
There are five primary drivers1. Skills: Costs and availability
2. Technology life-cycle: How enterprise IT evolves and how the IT industry evolves
3. Business requirements: how IT supports business strategy
4. IT organisation: how IT is itself organised, the roles in an IT department
5. How investment and benefit can be measured
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The technical skills pyramid
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.
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Rare: Systems software developers
Common: Assemblers and configurers
Medium availability: Application developers
Specialisation of 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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Technical skills
Business skills
Combination
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 are five primary drivers1. Skills: Costs and availability
2. Technology life-cycle: How enterprise IT evolves
3. Business requirements: how IT supports business strategy
4. IT organisation: how IT is itself organised, the roles in an IT department
5. How investment and benefit can be measured
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The IT life-cycle is driven by many factors The IT industry itself
Technology innovation
The business environment 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 naïve view of enterprise IT life-cycle
Evolution is the survival of the fittest. Each stage dies out as the next on is better.
IT evolution consists of technological progress which replace previous waves of technology
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© Korn
IT systems don’t evolve – new systems get deployed
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
The reality of enterprise IT life-cycles
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© Korn
CICSCICS IMSIMS
Client/serverClient/serverCORBACORBA
J2EEJ2EE
Web Services
Web ServicesSOASOA
Understanding the enterprise IT environment
There are five primary drivers1. Skills: Costs and availability
2. Technology life-cycle: How enterprise IT evolves and how the IT industry evolves
3. Business requirements: how IT supports business strategy
4. IT organisation: how IT is itself organised, the roles in an IT department
5. 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. Launch of new product M&A Entry to new market
Deliver objectives in a manner which is: 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 company’s 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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CoreCompetency
The resources and capabilities that have been determined to be a source of competitive advantage for a firm over its rivals.
Building a business strategy
StrategyAn integrated and coordinated set of actions taken to exploit core competencies and gain a competitive advantage.
Business Level Strategy
Actions taken to provide value to customers and gain a competitive advantage by exploiting core competencies in specific, individual product markets.
Leads to
Leads to
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CoreCompetency
The resources and capabilities that have been determined to be a source of competitive advantage for a firm over its rivals.
Building a business strategy
StrategyAn integrated and coordinated set of actions taken to exploit core competencies and gain a competitive advantage.
Business Level Strategy
Actions taken to provide value to customers and gain a competitive advantage by exploiting core competencies in specific, individual product markets.
Leads to
Leads to
Exercise:
For a chosen business or organisation analyse:
What is its core competencies?
How does that fit with its business strategy?
How does it fit with its business level strategy?
How does it fit with its technology strategy?
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Generic Business Level Strategies
CostCost UniquenessUniqueness
Source of Competitive AdvantageSource of Competitive Advantage
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
Understanding the enterprise IT environment
There are five primary drivers1. Skills: Costs and availability
2. Technology life-cycle: How enterprise IT evolves and how the IT industry evolves
3. Business requirements: how IT supports business strategy
4. IT organisation: how IT is itself organised, the roles in an IT department
5. 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 IT’s purpose?
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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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Eight Core Activities of IT department
IT is responsible for the delivery of new solutions and maintenance of existing solutions.
Apart from project specific requirements, it has 8 core activities
Anticipating new technologies. IT must keep an eye on emerging technologies. Work closely with management to make appropriate decisions. Weigh risks and benefits of new technologies.
Strategic direction. IS can act as consultants to management. Educate managers about current technologies/trends.
Process innovation. Review business processes to innovate. Survey best practices.
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Eight Core Activities (continued)
Supplier management. Carefully manage outsourced IT.
Architecture and standards. Be aware of incompatibilities. Inconsistent data undermines integrity.
Security Important to all general managers. Much more than a technical problem.
Business continuity planning Disaster recovery. “What if” scenarios.
Human resource management. Hiring, firing, training, outsourcing, etc.
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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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Impact of technical evolution on IT organisations
Sometimes the technology drives the organisation of IT, sometimes the other way around.
1. 1960s - mainframes dictated a centralised approach.
2. 1970s - remained centralised due in part to the constraints of mainframe computing
3. 1980s - advent of the PC and decentralsation
4. 1990s - the Web, with its ubiquitous presence and fast network speeds, shifted some businesses back to a more centralised approach
5. 2000+ - the increasingly global nature of many businesses makes complete centralisation impossible
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Chief Information
Officer
ChiefKnowledge
Officer
ChiefTechnology
Officer
ChiefNetworkOfficer
IS Managers
NameTitle
Systems Developers/Developers
Business Analysts
Database Administrators
Support Personnel/Operations
Other
How IT organises
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CIO
The CIO (Chief Information Officer) is the head of the IS organisation.
CIO’s 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 COO or CFO
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CTO and other senior roles
The CIO, particularly in larger organisations, cannot guide the enterprise toward the future alone.
Other strategic areas require more focused guidance.
Often supplemented by a Chief Technology Officer Track emerging technologies Advise on technology adoption Design and manage IT architecture to insure consistency and
compliance
Some organisations have other senior positions Chief Security Officer Chief Knowledge Officer
Understanding the enterprise IT environment
There are five primary drivers1. Skills: Costs and availability
2. Technology life-cycle: How enterprise IT evolves and how the IT industry evolves
3. Business requirements: how IT supports business strategy
4. IT organisation: how IT is itself organised, the roles in an IT department
5. How investment and benefit can be measured
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Funding the IT department
In order to determine how much funding is given to the IT department, there needs to be understanding of how that budget will be spent
How are costs associated with designing, developing, delivering and maintaining IT systems recovered? Particularly if the system is used by multiple departments.
There are three main methods for measuring where funding is spent: Chargeback Allocation Corporate budget
The first two are done for management reasons, while the latter recovers costs using corporate coffers
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Chargeback
IT costs are recovered by charging individuals, departments, or business units
Rates for usage are calculated based on the actual cost to the IT group to run the system and billed out on a regular basis
They are popular because they are viewed as the most equitable way to recover IT costs
However, creating and managing a chargeback system is a costly endeavor
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Allocation
Recovers costs based on something other than usage, such as revenues, log-in accounts, or number of employees
Its primary advantage is that it is simpler to implement and apply
True-up process is needed where total IT expenses are compared to total IT funds recovered from the business units.
There are two major problems: The 'free rider' problem Deciding the basis for charging out the costs
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Corporate Budget
Here the costs fall to the corporate P&L, rather than levying charges on specific users or business units
In this case there is no requirement to calculate prices of the IT systems and hence no financial concern raised monthly by the business managers.
However, this creates a disconnect between the cost and the benefits of IT investment.
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Funding Method
Description Why do it? Why not do it?
Chargeback Charges are calculated based on actual usage
Fairest method for recovering costs since it is based on actual usage
Must collect details on usage; often expensive and difficult
Allocation Expenditures are divided by non-usage basis
Less bookkeeping for IT
IT department must defend allocation rates
Corporate Budget
Corporate allocates funds to IT in annual budget
No billing to the businesses. Good for encouraging use of new technologies.
Have to compete with all other budgeted items for funds
Comparing funding methods
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Calculating the cost of IT projects
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 can’t measure it, you can’t 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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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 system’s 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
Some approaches to measuring cost
These are some of the approaches and elements used in cost calculation. They address different aspects of the problem.
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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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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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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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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>1
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IT Investment monitoring: A hard job CIO Insight 2006:
http://www.cioinsight.com/article2/0,1540,1999135,00.asp
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.
Conclusions: The ideal of the enterprise IT
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Decisions made for the ‘correct’ technical reasons
Modern technologies updated regularly.
Built by the best with the latest equipment and skills
A consistent architecture ensures everything fits well together
Sleek and efficient supported by a single agenda
Capable of supporting business change for years to comeSwiss RE Building
in London
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Conclusions:The reality of enterprise IT is closer to…
Combined pressures of new technology and business results in almost 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 No architectural blueprint exists
The Winchester “Mystery” House