Standardized IT systems can appear to make a lot of sense – standardization can be cost efficient, aligned with industry approaches and can help promote re-use. However, the business advantages standardization yields can be easily replicated by competitors. So what are the trade-offs and when does it make sense to choose standardization?
Standardization is typically preferred when cost efficiency is the motivation and/or when there is a requirement for interoperable IT components and process interfaces. The cost motivation is straightforward and is particularly appealing to organizations that are subject to cost pressures in their own market. Selecting standardized technology can yield immediate savings. The combination of multiple suppliers and ease of interchangeability creates a buyer's market. This can stimulate ongoing price reductions. The drive to achieve cost efficiency through standardization can be seen in all stages of technology deployments. In the design stage, selecting standardized technologies can increase interoperability and reduce complexity in system design. In the deployment stage, standardized products can enable a more predictable operating environment that is typically less costly to manage. In the operational stage, use of more standardized technologies may increase access to skilled personnel. Interoperability is an increasing concern for many organizations, especially those that operate in markets where eco-systems and partnerships are critical factors or those markets in which merger and acquisition activity is common. The process of linking or bringing together multiple heterogeneous IT systems can be greatly simplified when IT environments are built from highly standardized systems.
'Reducing complexity' is a reason frequently given by organizations when instigating an application rationalization initiative. However, complexity can be challenging to define and measure in all but subjective terms. For many organizations embarking on rationalization, the primary focus is the reduction or elimination of complexity. Complexity is often associated with higher costs and reduced adaptability or agility. However, where the value of complexity to the organization is high (due to the competitive advantage or ability to maintain/defend a market position and brand equity), these may be prices worth paying. EAs play a critical role in defining those areas where complexity can add value and what the trade-offs are. This enables organizations to take a more rounded view of complexity in the context of application rationalization.
Complexity to Achieve Market Differentiation
When competitors use similar IT systems, their capabilities and efficiencies in serving customers probably will be similar to yours. In effect, this makes organizations more interchangeable. To mitigate this, organizations seek an edge in terms of service differentiation, capability or cost. This consideration is particularly important in highly populated marketplaces. For example, many services organizations use quality of service or customer reputation as key tools for online sales. This means that IT capabilities and efficiencies play a major part in defining these organizations' relative market positioning.
A common question Forrester gets from organizations planning an application rationalization strategy is “How many applications should I aim for?” It is a good question, but can be symptomatic of an approach where less equals success. This is very common with executives and senior stakeholders, who often can take this type of singular view of application portfolios. While it is a straightforward way of examining your application portfolio, inherently it is a binary dimension. It does not account for the multiple prisms through which organizations should view and make decisions about their application portfolios.
Enterprise architects can help organizations determine where their objectives are placed on a wider range of applications continuums than just the number of applications, for example:
§ Customized Vs Standardized– What degree of customization do my organization's applications require? What differentiation does standardization provide? What is the opportunity cost of customization? What is the right balance for my industry sector ?
§ Control Vs Freedom – What level of freedom on application choice best serves my organization? How much control of the application portfolio is appropriate or mandated for my market and what is the cost of this? What is the cost/benefit of decentralization of choice compared with control of choice?
§ Centralized Vs Localized – What differentiation is provided by localized applications? What is the opportunity cost of centralized applications? What is the right balance of localized differentiation and centralized standardization for my organization?
One of the great things about working in enterprise architecture is the opportunity to work on a diverse range of initiatives. Findings from our Global EA Maturity Survey in Q2 2012 show it is going to be a busy 2013 for enterprise architects:
While variety is to be expected in the enterprise architecture role, EAs will be multi-tasking more than ever. As businesses increasingly experience the value of enterprise architecture, the demands on the EA function increases also. It is a good problem to have - but it is a problem nonetheless. Equally, many of the priorities are linked and progress (or lack of) in one area informs another. For example, strengthening emerging technology processes and simplification of the application and technology portfolio are interlinked. At the same time, many businesses expect results in shorter timeframes and some of the priorities are inherently longer-term and deliver over an extended period of time - which is not always fully appreciated by stakeholders. These are clearly challenges and although it will be a busy year, EAs can look ahead with confidence. Demand for EA services are growing. Businesses are looking for more from their EA functions, in more parts of the business - and the opportunity for developing the scope, importance and relevancy of EA is ever growing.