Open Source Enterprise Architecture tool

During my UML modeling days, this question always stuck me with no answer. When you define a class, let me take an example as  male, you inherit a super class called human. All human attributes will be made available to male class. Then you define sub class like infant, child, teen, middle aged, aged etc.. inheritance takes the attributes from its super class. When you instantiate an object like middle aged male and let the name of the object be “Joe the plumber“, the object, Joe the plumber will have all the attributes defined in all of his class and his super classes. For generalization of the attributes of an object, UML has been doing an exemplary job. However, Joe the plumber is not same as all middle aged male. He has some unique attributes that most of plumber nor middle aged male does not have it. How to capture the unique attributes in the model. UML models completely failed to capture the attribute for an unique case or object.

We have seen marketing ads and commericals in TV that personalization is key for this and next generation marketing and sales. Each individual customers are targeted for promoting a product or service. Three to four years ago, I initiated my search to seek what industry is doing to address personalization design and that is when I ended with OWL, Protege.

Protege is an ontology tool. Ontology is few thousand  years old concept. I think it started from Ancient Greeks. Ontology is a presentation of knowledge. Immediately I became the registered member of Protege and have been using it (Frequency -> 1 hour a month, an average) for last 3-4 years. It is a very good tool to present information asset in the organization. It is easy to use once you spend significant amount of time to understand the concept and usage. I believe it will take some time to be ready for commercial use with idiot proof user interface.

Lately, I came to know that there is an open source enterprise architect plugin developed for Protege. It is called EssentialProject. It is a good enterprise architecture ontology editor. You can download it from enterprise architecture.org site.

IT Finance Management Framework – Part 2

Understanding how the IT budget process fit into the overall corporate finance is essential to grasp the big picture.  The following figure illustrates how the IT G&A operating budget fits into the over all corporate finance.

it_ga_budget2

IT organization must decide the technique suitable for the budget cycle. To select the best suited techniques the organization must make them self familiar with the available options. Let me list the various widely used technique available to create the IT G&A operating budget.

  • Static Budget – Presents one forecast for a given time frame and does not change for budget cycle
  • Flexible Budget – Budgeted Revenue and cost are adjusted during the budget cycle
  • Incremental budget – Previous year actual are taken as the base line and added or deleted additional cost for current year
  • Zero Based budget – Begins from ground up
  • Top Down budget – Each directors are given a budget task to align to CIO budget target
  • Participatory Budget – Developed as a collaboration with all directors (generally very difficult to make it practical)

There are other budgeting technique like activity based budgeting, Kaizen budgeting and etc. Kaizen  is a type of incremental budget with cost effectiveness target are given to each directors. To make the framework complete, I understand the widely used budgeting technique must be captured and it will eventually.

For this version 0.1, I want to start with zero based budget since I like the concept. It is very practical and gives an opportunity to each director or even senior manager or manager level to challenge every activities and look for some level of business case. Zero based technique can be used if it is top down budget and budget task are given by CIO to each director. Let me start with ZBB.

Zero based budgeting must be done in the manager or team leader level and rolled up to director and CIO level.  It requires the manager or team lead to understand the business and forecast the work required to keep the systems lights on, enhancements and G&A project.

it-finance-mgmt-how-to

The cost for lights on, enhancement and projects are will be incurred by employee, contractor, purchase servie, software cost & hardware cost. Each manager or team lead under each director will forcast for lights on, enhancement and project in terms of employee, contractor, purchase service, software cost and hardware cost.

The training required to perform the forecast will be the starting session of next part of this initial IT Financial Framework.

IT Finance Management Framework – Part 1

There is a need to develop an IT finance management framework and I propose a general framework for a specific organization as a starting point.

Some of you may be wondering why EA & IT strategy person proclaims a need for development of a general IT finance management framework and proposes one for a specific organization type.

To develop practical enterprise architecture and receive value from it, understanding the financial management and integrating to the enterprise architecture is a key. IT Finance management plays a vital role in enterprise architecture analysis. For instance, to identify and report the cost drivers for systems with high maintenance cost in the enterprise, enterprise architects required to generate the list of software systems which has high maintenance cost first. If the enterprise system landscape is not integrated with the IT fiancé management, this of kind of analysis becomes manual, laborious and inaccurate.

Current state of IT Finance Management:

IT Finance management function is performed in non-uniform way across the industry. Lack of a general framework in IT Finance Management leads the IT industry to proliferate inconsistent methodology and creates a challenge to collaborate and share knowledge.

For broader utilization of the framework, the framework development needs collaboration and participation from IT financial analyst across multiple industries. As a starting point, I’m going to propose a general framework to manage IT finance for a specific organization type and welcome critiques from others to improve it.

Organization Type:
The proposed framework is for IT organizations which are business enablers, does not directly generate revenue, does not pay cash directly to payables and perform three major functions.

  • Lights on support to IT systems to enable business
  • Perform Enhancement/Discretionary changes to meet business requirements
  • Execute projects to transform/thrive/sustain the business

Key steps in IT Finance Management:

  • IT Financial Planning
  • IT Budgeting
  • IT Finance Reporting

IT Financial Planning: It is a first step in the ITFM. Financial planning must be aligned to corporate strategy. Corporate strategy provides a road map to reach corporation’s vision and corporate annual plan is a step towards reaching the organization vision. Annual corporate plan is an execution step of corporate strategy. Based on annual corporate plan, IT financial plan is developed by the IT Financial analyst, office of CIO in collaboration with financial controllers (Office of CFO) and office of Chief operating officers. The decisions like, invest in more product development, penetration to a new market segment, expand the presence to new country and etc are made, part of the annual corporate plan. IT financial plan is a high level executive plan to support the annual corporate plan. It will consists of major line items like, improve IT spend on new security projects, change systems to support multiple languages, continue the same level of lights on operation , improve the system reliability and etc. IT Financial plan will be created and will be used as base line to develop the IT budget.

IT Budget: Budgeting is a one of key piece of IT Finance management. Budgeting is a development of  IT organization cost plan for the year. Cost plan answers questions like, What is the total cost IT organization can spend and how they are going to spend. Once the budget is approved by CIO and corporate controlling, then the actual cost are tracked on monthly basis and variance analysis are preformed and reported to the various stakeholders like CIO, controlling office, senior management team, managers and others.

There are three different types of budget for different purposes.

  • Capital Budget – Lays out a plan for investment like plant installation, product development and provides a principle for investment life cycle steps like depreciation, amortization. Generally it is managed by a generalized group for the entire company. It is one of the functions under controlling organization under the CFO.
  • Cash Budget – It is a predication of expected cash balances the organization will experience during the forecast period. Cash budget depends on operating and capital budget. It also evaluates if the corporation has sufficient liquidity (like cash in hand, credit) available to meet the expected cash disbursements. It is part of the management accounting. The cash flow and fund flow of the corporation depends on the cash budget.
  • Operating Budget – It is a plan to reflect the daily operating expenses and depreciation. Typically the operating budget is developed annually.

For the organization selected, IT budget will be an operating budget. The major functions performed by the organization are lights on, enhancement and projects. It is so tempting to categorize all the cost under these categories in the highest level. It will become difficult to analyze different perspective of the IT cost structure like by hardware, provider etc.

Cost Categorization:

  • Employee – (On roll employees)
  • Contractors – (includes purchased service, consultants and etc)
  • Sourcing Providers – (in source, out source, multi source and etc for a specific service)
  • Software recurring fee – (includes software maintenance fee, service fee and etc)
  • Hardware recurring fee – (includes all servers, mainframe, disks, network, hardware maintenance fee and etc)
  • Others – (It is a catch all category includes like travel, training, depreciation, office & admin, rent, telephone, stationary, depreciation, rent)

The categorization is not a clean separation. As needed, the items in each category can be shifted between the category.

Direct cost vs indirect cost, project cost vs lights on cost are various categorization of cost structure. Those cost categorization  are just allocation issue. Once the cost are captured in the above categories, then the various other perspective can be easily created. I will demonstrate it specifically how to capture and how to report it.
Any line item in general & administration (G&A) spend in the IT organization should come under in one of the above category. This does not include the capital budget. Any capital project under taking or any new capital software purchase will not be included under IT G&A budget. That will come under capital budget. The scope of the framework at this point is to focus on G&A only. Once the framework is matured for G&A, capital budget can be added at the later stage. However, the capital budget will feed the depreciation value to the G&A.

Let us say the IT organization has the budget of $100. CIO has 4 directors reporting to him and there is a small set of staff in the office of CIO who directly support the CIO in the strategy, architecture, IT financement and etc. Let me show the end result of the budget and walk through the steps involved in the framework. After the budget cycles are complete the budget of IT organization of $100 will look like as given in the figure.

it-finance-mgmt

Let me walk through in part #2 what technique should be followed and each and every steps to develop an IT budget for the $100.

Intalio BPMS

I had a dream . The dream was to map out all business processes in an organization, develop the run time from the process map, validate the function of the new run time and sun down all existing systems. It was a dream few years ago. I challenge myself, it is not a dream any more and we, as an industry,  are moving towards it. We may not be there today to make it real but we are in the path of it.

Information technology is slowing becoming business technology and technology will become a black box managed by set of providers. Business technology management team will manage only set of  providers but not technology in near future.

Phase #1 of the dream:

  • Select a cost effective BPMS software
  • Utilize internal & external resources to map out the processes using the BPMS
  • Host it in the cost effective platform as a service (Cloud computing)
  • Leverage the centralized business process map to simulate/emulate any new business ideas
  • Validate the new business ideas for strong business case
  • Develop the application from the process map and launch it in PaaS (Platform as a service) like Google apps.

 The first step of the phase #1 is to select the cost effective BPMS software. I do not need to amplify why it needs to be cost effective and economical option. Due to the global economical crisis, most of the organization is on the lights on mode, and minimum budget allocated for any discretionary spend for this year. Economical and cost effective alternatives are not differentiators in the competitive environment, it is a survival ingredient.

When I explored the cost effective BPMS software, Intalio, the open source BPMS is in top of the list. Intalio also integrates with Google Apps and salesforce.com.

The question is, what is the total cost of ownership for Intalio installation in an enterprise. More to come on the findings..

IT Sourcing Risk Management

Risk in general can not be eliminated but it should be managed. The likelihood of geo-political risk and security exchange  risk of any IT sourcing partners located at India was very low three months ago. It is not low any more due to the recent terror attacks at Mumbai and last week financial scandal by the Satyam services and recent world bank backlists Wipro

Terror Attack:

Tension between India and Pakistan has been there for past 45 years and Kashmir is the center piece of the conflict. Three wars were  fought between these nations after their independence.  Yearly, there were thousands of people died on both sides for so many years. Both nations have nuclear weapons tested in last ten years. This is a known fact and the likelihood of any major conflict that would impact the out sourcing business was not ignored  but, before few months ago, the probabability of occurence was assigned as low as zero.

Mumbai terror attack caught many corporate America’s attention because the attack was strategically planned by terrorist  mainly to get corporate America’s attention.  It was executed during the Thanks giving holiday when majority of the American people spend their time with family eating turkey and watching TV (Lions and Dallas cowboys football games). Unlike terror bomb blast attacks, this attack was prolonged for three to four days and constanly the progress of the attack was updated in the television. (Human mind believes what it sees more) The geo-political risk what was considered as low as zero before in selecting the sourcing partner from India has increased significantly after this terror attack. It is not as low as zero from any out sourcing assessment.

Financial Scandal:

Satyam scandal is India’s Enron scandal. What happend after Enron collapse?  There were more regulation introduced, more stringent fedral, SEC policies and resulted in SOX. Does SOX will ensures that Enron similar debacle will never repeat in US again? In my opinion, I do not think so. It created more regulation and audit controls on IT general controls including processes, procedures, policies and etc. It is not guranteed to never repeat the similar corporate collapse, but it will make the corporate executives not easy to make the similar mistakes. Taking the reaction to Enron’s situation into consideration, I speculate, the similar steps will be taken by SEBI (similar to SEC in India) to tigthen the regulation in India.

How this is related to IT sourcing risk? Coincidently, Satyam is one of the top 5 sourcing provider to major clients in US. Had a client in US picked Satyam as their souring partner, they need to go through the motions and cycles to over come the Satyam’s situation which will not help the client in any form or shape to increase their productivity or their bottom line. In some case, if a client depends on Satyam for major core business functions, there are potential risk that their core operation would be interrupted due to this astronomical scandal by a sourcing provider. What happend to Satyam could happen to any sourcing provider or to any company managed by SEBI ? Adding fuel to the fire, world bank back lists Wipro, another major sourcing provider from India.

Based on the sourincg strategy and solution design, the risk management plan of sourcing strategy should consider these recent risks which are made visible to corporate America.

Vivek – New IT Role Model

Vivek Kundra is a new role model  for me and he will be a role model for any ambitous enterprise architects and IT strategiest. For the enterprise architects who enjoys their job to make an impact to organization’s bottom line, Vivek would be one of a good role model to them.  It is encouraging to me that he has been able to push IT innovative solutions to a Government organization by over coming the office  politics,why can’t the Enterprise architects in the corporate America be able to push those kind of innovative, cost effective solutions. It is encouraging!!

I wish good luck to Vivek and inspire more innovative minds  of future economy.

High Demand IT jobs in 2009

In the recent well know IT industry research firm’s study, analysts (the authors of the paper)  identified list of IT roles hard to fill even in this market. In the  paper, the top most of list is enterprise architect. EA role is  hard to find even in this poor job market. The report also stated that the demand of enterprise architect in 2008 grew and predicted that the demand of enterprise architect will continue to grow in 2009. The sample taken in the study is in the range of 250 companies.

Why companies hire enterprise architects even in this poor job market and here are my rationale.

  1. Enterprise Architect is not like programming or administration skill. It can not be mastered by under going a certification process. It is a good balanced combination of  IT  and business knowledge to assist the senior executives to identify the discretionary and mandatory  spend of organization.
  2. Cost optimization ideas are most needed and common in this economic climate and enterprise architect would play a significant role. Enterprise architects would be able to come with out of box ideas to sustain in the market condition. The specific ideas are based on the industry. Just to amplify the above point, let me take BFSI industry. A seasoned enterprise architect in BFSI industry will understand the major driver of the business and propose an investment strategy to the office of CIO.  Even to be more precise, in this credit market, consumer leading companies shall look for a refined credit score cards and EA would provide recommendation to executive management office that the systems in the IT landscape should be flexible to accommodate the changes to support the credit score card. Influence the executive steering committee of investment strategy team to assign more weights to credit scorecard project since it has direct impact to the bottom line of the lending business. Even in some cases, based on their business knowledge depth, EA are in good position to even recommend the credit risk management team in the lending company  various options available to non traditional credit score card fit the current economical situation. In stead of traditional logistic regression credit scoring model, they would be in better position to recommend how the joint time frequency analysis (like wavelet analysis, Gabor transformation, short time Fourier transform and etc)  can be applied particularly in this economy. There is no standard scoring model available which analyze the behavior of the credit market in the joint time and frequency domains and it is very appropriate in this economic situation.