How Should EA Be Funded – And What Impact Does That Have On EA Value?

Recently I participated in a roundtable discussion by members of Forrester’s EA Council on “Getting Strategic In A Tactical World.” Members talked through the challenge of maintaining a strategic focus when the IT (or business) organization was very tactical and of getting the enterprise architecture function to have the right balance of tactical and strategic activities. “Strategic/Tactical Focus” is one of the dimensions of the Archetypes of EA that Forrester has written about, including in this blog, and the balance between tactical and strategic is a key factor in how the larger organization views EA’s relevance as well as the support it provides to EA. 

One of the participants, who headed a team of more than 50 architects, asked the others, “How is your department funded – as overhead operations or as part of the project investment budget?” The person who asked this question said that his organization is more than 70% funded out of the project budget. Others responded with a range of 100% operations to 100% project-based. The comments around these different funding mixes were very interesting (all comments paraphrased):

“It’s easier to justify the size of my team if the funding is tied to the amount of project investments we are making.”

“Investment funding levels are too variable – two years ago we cut way back, now we’ve ramped way up. If my team size was a factor of investment funding, we wouldn’t be prepared for the amount of investment we are making now.”

“EA funding as part of ongoing operations budget makes us look like overhead. I don’t want architecture to look like some sort of overhead.”

“The IT areas with the project budgets expect my team to work on their problems. This drives a tactical focus.”

One participant even offered the observation that, if the architecture team is funded from project budgets, there are two risks to the success of EA:

  • Project teams try to minimize EA involvement to reduce their cost, or
  • The rationale for centralized architecture gets much weaker – why not just transfer the architects into the project organization?

As this back-and-forth points out, there isn’t one right answer. Forrester – and I expect all our clients – sees that EA’s greatest value arises from the strategic perspective it can provide – and how EA is funded does impact how much EA can invest in shepherding this strategic perspective. I thought the most interesting comment was from one participant:

“I was brought in as part of the centralizing of architecture. I told my CIO that he would not get the benefit of this centralization unless EA was funded as part of a strategic planning bucket. Now, funding for all core EA domains and disciplines comes from our base operating budget – the same one that pays the CIO’s salary.”

How is architecture funded in your organization? If you could change this, what would you do?

Comments

How about treating EA funding

How about treating EA funding in the same way as research and development for the enterprise as a whole? http://davethinkingaloud.blogspot.com/2010/11/how-should-ea-be-funded.html

Management budget

My experience has been that the most effective budget to use for EA was the overall management budget for three main reasons:
1) Control/oversight of both projects and operations to ensure a centralised approach to IT and projects (basic aim of EA).
2) EA is the interface between technology and the business and as such has a responsibility to both, in an oversight and "dotted line" role. This also means that EA needs to be empowered to make decisions about both to be effective.
3) Ultimately, the management budget is about justifying costs and informing business about the implications of technical decisions. In addiiton, it helped to ensure that EA was fiscally responsible and accountable - generating savings to the business. The degree to which EA contributed to oveall savings was a key metric and more appropriately fit into the overall management budget.

Funding IT Strategic Initiatives

What has worked for me is to tie IT strategic initiatives with the current or the "NOW" needs of business. This delicate balance needs to be managed in tough economic times to enable the strategic parts to go through via operational needs of today.

There is no way that I can explain conceptual cloudy EA to a frontline line manager who has a bottomline transactional need that must be met today. Hence, I remove that layer and tie to current operational initiatives.

Nice article. Here are some

Nice article. Here are some thoughts on this topic....
Enterprise Architects have the challenge of bringing 2 opposing forces Strategic & Operational to make value be seen in the work we do for the Enterprise. The workforces that support these "opposing forces" have diametrically opposite perspectives as well. To build the blueprint for the Enterprise - the Architects have to work diligently in bringing these "opposing forces" and show alignment. EA continues to be viewed as overhead to the Enterprise no doubt.
Unless EA activities are tied/tracked within EVERY Budget Item identified by the Enterprise for a given Fiscal Year value brough by EA & the Architects will not be realized.
Regards
Ms Vidhya

Architecture or EA funding?

I think there is distinction between the EA function and the (solution) architecture function. There may be different ways of funding them. I'll limit the discussion to EA.

Funding depends on how the EA activity is conducted at a point in time, as Business As Usual or on project basis.

As a project the funding for the duration should be approved and extracted from the project funds.

As BAU and standalone function the budget should be allocated to this function annually. But because it spills over in other domains, there is a need for the budget to support the EA related work.

Because it enables decision making, roadmapping, strategy, governance and so on it should come from a management fund that is permitted to cover all these spillover activities.

Unfortunately though, both project and BAU usually report to IT, as such funding comes from IT.
http://www.enterprise-architecture-matters.co.uk/home

EA governance

My experience tells me it is important to keep the solution/design work tightly connected to the project governance and funding while it is just as important to keep the EA and strategy process aligned to the corporate strategy governance and funding.

If the solutions and design work is not tied to project governance then you encounter issues with resourcing/scheduling. I've seen lots of conflicts around setting priorities and ownership if a central design body tries to work with a volatile project portfolio. Skills, capacity and capabilities for design needs to reflect the project portfolio.

The core EA processes are an investment like corporate strategy. The governance needs to align so EA deliverables are clearly tied to enterprise strategy and planning.

Unfortunately for me I needed to work through some real life scenarios before it was that clear to me....