Focus on core business capabilities

The decisive element for the successful differentiation on the market is always the identification of the core business capabilities: Where is our company better, less expensive, or different in comparison with our competitors? The EA model can be used to depict the collaboration among the core business capabilities relevant for the differentiation on the basis of the application and infrastructure capabilities of the IT.

The capabilities always show units comprising processes, resources (people and information), and IT systems. They do not form procedural sequences, but represent the core capabilities relevant for competition and their relationships among each other, which can be illustrated on a “capability map”. The core business capabilities are frequently distributed among various organizational units in the company. For example, mergers and acquisitions frequently give rise to redundancies. Then it becomes the CIO’s task to develop a domain model as an organizational framework of core business capabilities of his/her company and to allocate the corresponding IT capabilities to them within the scope of the enterprise architecture without any overlap.

EAM and SOA for financial services

When regarded against the backdrop of the financial and economic crisis – and the wave of mergers and acquisitions in the financial services sector which is to be expected in the next few years – the use of SOA and EAM at banks and insurance companies appears to make especially good sense. The IT is the backbone of business for banks and insurance companies. EAM and the capability map are particularly suitable for use as planning instruments for the integration of the IT and its orientation to new business processes which are required subsequent to a merger. Mergers should always be seized upon as an opportunity to carry out for the new company the restructuring of business functions in business departments and IT from top to bottom which is actually needed anyway – and to eliminate the above-mentioned redundancies.   

Enterprise architecture management assesses – on the basis of the defined business functions – which (IT) applications in the merging companies must be retained, which ones must be rationalized, which ones expanded, and which ones, if any, should be outsourced. EAM also decides which applications should be newly developed or purchased. So EAM can produce a broad range of various benefits which turn up in the form of reductions or avoidance of costs, shortening of development or launch cycles, improvement of time to market, or more efficient business processes. The EAM model has proven its practical maturity at AXA-Versicherung, for example. AXA has carried out a simple cost-benefit calculation for its architecture-related initiatives over a period of eleven years. The results: the bottom line shows expenses of $35 million for planning development, tests, and implementation in contrast to profit of $55 million because it was possible to eliminate superfluous software.