IT Governance Course: ESA and IT Governance 2
Who owns enterprise services? Who makes a decision about creating new services?
So far in this chapter, we have discussed only two models of governance: centralized and decentralized. A decentralized model ultimately works against standardization, and since enterprise services are built on standards to ensure interoperability, a decentralized model cannot be recommended. A centralized governance model is in some cases a good choice. In this scenario, all services are centrally owned, ensuring standardization. Everyone in the enterprise (with the proper roles and authorizations) can compose with those services freely, creating composite applications based on existing services. A decision-making process is needed only for the creation of new services. After all, a proposed new service might be more strategically created as an adaptation of an existing service, maximizing reuse instead of creating redundancy. No one will argue that new services must be subject to a decision-making process.
But there is another and perhaps better choicea federal governance model that enables IT to do what it wants most and business units to do what they want most. A central authority exercises control of the underlying technology platform while business units create flexible, composite applications that take advantage of that platform. Dividing ownership of enterprise services by business unit is an alternative to centralized governance.
In fact, it now becomes possible to reorganize the business landscape as a set of domains, or self-contained entities, within which lie most of the composite apps that will be built. The organization can be carved into domains in almost any way that makes sense: ownership of business processes by line of business is one possible method.
However, in a federal governance model, this brings up some interesting questions and issues: if domains own the services relevant to their business area, business units will find themselves negotiating about what services other domains can reuse for creating composite applications. This will open up new lines of communication among divisions as well as free business units from monolithic rules.For example, instead of a one-size-fits-all policy for the entire enterprise, sales and marketing might have ownership of strategic enterprise services that empower that unit to try out new strategies to respond to changing market opportunities. Because the sales and marketing domain owns the services in question, it can create new composite applications using those services freely, without the need to consult other domains. Domains own services relevant to their needs. While some utility services might be centrally owned and available to all (a retrieval of customer data comes to mind), the door is open for a variety of approaches to divvying up enterprise services ownership. And instead of having IT own all of the services, the decisions about dividing services can be made in a way that makes the most sense from a business perspective. In this framework, business gains the agility it needs to move quickly, to compose broadly, and to innovate.
In this way, business units gain unparalleled flexibility. However, tradeoffs remain. The more authority the domains have, the more complex the relationships among domains may become. New sorts of negotiations will be necessary. Over time, however, the interface between domains and centralized governance will become clearer. Some enterprise services at first owned by a given domain may need to be centrally owned, and vice versathese decisions are inevitable. Given time, businesses will strike the right balance between flexibility and complexity, allowing for maximum effectiveness in using ESA in support of strategic business processes.
What processes make sense for approving new enterprise services?
Discovering the right decision-making models and processes for approving enterprise services is a field still in its infancy. Clearly, dependencies must be considered, and redundancy is an important concern in building new enterprise services. However, companies are not alone in dealing with such decision-making processes. One model that all companies deploying enterprise services should consider is the Enterprise Services Community. This community, facilitated by SAP, is an important resource for all companies adopting ESA. Joining this community and participating in the process is a way to build new synergies. Local governance committees stand to benefit from participation in this community. For details on the Enterprise Services Community.
Governance is all about decision making, about who has the power to make those decisions, and about how quickly decisions will be made. We should clarify that ESA will not completely do away with the traditional tradeoff that has been made between uniformity and freedom. However, it will make that tradeoff much less painful and difficult for companies. The pendulum, as it were, won’t swing as drastically as it has in the past between such disparate extremes. The granularity of services makes the decisions smaller. The separation of business logic from application logic gives businesses, for perhaps the first time, a clear way to divide governance issues along lines that make sense and offer all parties the flexibility they need to innovate while maintaining standards that keep costs low and efficiency high.
ESA in action: Whirlpool Corporation
Whirlpool Corporation practices a more decentralized form of governance. Whirlpool is the world’s leading manufacturer and marketer of major home appliances with annual revenues of more than $13 billion, 68,000 employees, and nearly 50 manufacturing and technology research centers around the globe. The company markets its ovens, freezers, dishwashers, washing machines, and thousands of other products under the brand names Whirlpool, KitchenAid, Brastemp, Bauknecht, Consul, and others in more than 170 countries. The company’s relentless focus on both customer service and continuous product innovation has already led its IT organization to embrace ESA as a means of enabling business process innovation that will help differentiate products and services and free up resources for reinvestment, instead of simply providing application support.
Instead of mapping out a strategic blueprint for ESA adoption from within a central architecture-planning unit (which was actually disbanded several years ago), Whirlpool Corporation has chosen a more tactical, incremental approach. Instead of implementing new enterprise services-based solutions and then consolidating the systems they replaced, Whirlpool Corporation is applying ESA principles when and where it canconverting SAP R/3 EDI messages into XML-based services, for examplewhile resolving to decompose these ad hoc services to more fundamental components when the chance presents itself. Instead of consciously designing an Enterprise Services Repository, for example, Whirlpool Corporation engineers intend to use the imminent replacement of their order management system as an opportunity to decompose the current system to the Remote Function Calls (RFCs) and the transactions that were called by them. Then they plan to recompose these into the first services that someday will fill an Enterprise Services Repository.
Whirlpool Corporation’s overarching goal is flexible standardization. The company has already standardized around SAP R/3 as the foundation layer of its application hierarchy. This and other transactional systems are connected to the company’s primary data center in Michigan and run on the same, consolidated SAP NetWeaver infrastructure. Whirlpool Corporation’s governance model is more decentralized, with the core IT group defining 80 percent of a new composite application’s functionality in terms of reusable services, then releasing the composite to regional units closer to the business need for implementation of the final interface and need-specific tweaking. That modelwhich manages to accommodate both reusable, standardized components and frontline initiativeswas expressly designed to drive product innovation. Whirlpool intends for its next step to be the standardization of entire manufacturing processes using services once modeling and messaging tools mature.
Until then, the company will continue using enterprise services to consolidate its menagerie of legacy systems. With SAP NetWeaver acting as the platform, legacy applications and data are migrated via the SAP NetWeaver Exchange Infrastructure (XI) and SAP NetWeaver Master Data Management (SAP NetWeaver MDM) to the core SAP R/3 systems, a process that has proven useful in sunsetting custom systems and those from other third-party vendors.
