Adaptive Enterprise: Business and IT synchronized to capitalize on change

Transcription

1 Adaptive Enterprise: Business and IT synchronized to capitalize on change An executive overview white paper Executive summary... 2 Change and the need for agility... 3 Laying a foundation for an Adaptive Enterprise... 3 The importance of IT governance... 4 The value of an enterprise architecture... 7 The outcome: improving the ability to innovate in response to change Getting started: The journey to an Adaptive Enterprise Fostering transformation Conclusion For more information... 17

2 Executive summary Around the world, enterprises wrestle with change. To stay competitive, organizations need to make large-scale changes quickly and efficiently: A car manufacturer needs to move from two model introductions per year to six. A retailer requires real-time supply chain insights to solve emerging inventory problems. A communications provider needs to deliver hundreds of new, personalized, content-rich services to build customer loyalty. A brokerage house requires systems that can change as fast as the waves of regulatory requirements. An insurance company needs to streamline its claims processing workflow using digital imaging technologies to capture, share, and store information. A bank needs to consolidate its information systems with those of a recent acquisition. How quickly can your business identify and respond to change? Can you leverage change and turn it to your advantage? Becoming an Adaptive Enterprise can help you improve your responses to both questions. In an Adaptive Enterprise, business and IT are synchronized to capitalize on change. IT moves from the inflexible, costly, silo-like architectures of the past to a shared, service-oriented infrastructure, delivering more value to the business. Rather than acting as an obstacle to change, IT becomes a business enabler to: Maximize return: Improve business results. Grow revenue and earnings. Increase cash flow. Reduce the cost of operations short and long term. Mitigate risk: Ensure the security and continuity of internal and external business operations. Minimize exposure to external risk factors such as security threats and availability issues. Ensure compliance to regulatory requirements. Recover automatically from virtually any failure instantly. Improve performance: Optimize business operations performance across the enterprise from end to end. Gain a holistic real-time view of your enterprise and all the business services enabling your operations and use that view to monitor service levels, avoid risks, and capitalize on opportunities. Increasing agility: Enable your business organization and operations to adapt to changing business needs and capitalize on emerging opportunities. Provide timely IT support for business innovation. An effective enterprise architecture with business process models reduces costs and makes it easier to address new business priorities, and integrate new technologies. At HP, we and our partners work with your team to help transform your business into an Adaptive Enterprise. We focus on the critical issues: establishing effective IT governance and enterprise architecture processes that synchronize business and IT strategy and translate them into aligned business and IT operations. As both a strategic partner and a transformational advisor, we bring experience, a portfolio of standardized, modular technologies and services, and clear architectural guidelines that help you move forward in evolutionary phases. Throughout the process, we share information, insights, and best practices, helping you to reduce costs by increasing the automation of IT. Working with HP to become an Adaptive Enterprise enables you to address core business needs to maximize returns, mitigate risk, improve business performance, and increase agility while continuing to meet today s business challenges in a timely fashion. By creating an environment in which business and IT are synchronized, we create an enterprise that can take change in stride, seize new opportunities, and capitalize upon rapidly changing market conditions all of which puts you in a singularly powerful position to deliver value, compete, and win in a rapidly changing world. 2

3 Change and the need for agility Business as usual has long implied the absence of change, that things today are much as they were yesterday and the day before that. Yet business leaders today understand that just the opposite is true: business as usual is all about change. It is not about maintaining a static state; it is all about operating successfully in a dynamic state where change is the norm, not the exception. The rate of change has greatly accelerated over the last fifty years. Some product lines that once had a viable lifespan of 20 years or more may now have a lifespan of less than seven years, with the lifespan of individual products sometimes lasting less than a single year. The scope of change has expanded. An entertainment company no longer focuses on introducing a film for distribution only to theaters in the United States. Now it plans for distribution around the world and not just in theaters but also on regionalized DVD and videocassette, as well as in streaming formats available over the Internet and from cable- and satellite-based on-demand services. The enablers of change have proliferated. There are new technologies appearing every day that can help improve internal and external processes; foster new relationships with suppliers, vendors, and customers; and open up new ways of delivering your goods and services. The Internet itself has become one of the greatest enablers of change, stimulating the digitization of what had previously been tangible goods and services. It has also expanded the source of competitive threats, for challenges can come from anywhere with virtually no warning. The enterprise that can respond rapidly to new opportunities and threats, that can introduce goods and services at a pace that a changing market demands, that can move nimbly into new markets and geographies will outperform the enterprise that cannot adapt as quickly. Indeed, those organizations that cannot adapt quickly face significant penalties: In some industries, a six-month delay in product introduction might reduce lifetime product revenue by 30 percent or more. In other industries, a sixmonth delay means that the enterprise has missed the window of opportunity entirely. To thrive in a world where business as usual is all about change requires a new kind of enterprise, one designed to evolve quickly and easily, to respond to or, indeed, to foster change. At HP we call this an Adaptive Enterprise. Laying a foundation for an Adaptive Enterprise At the heart of an Adaptive Enterprise is the understanding that business and IT must be synchronized that is, they must become aligned and stay aligned for the enterprise to capitalize on change. A business decision whether for a new product or service, more rapid introduction of new products, adoption of a new product or service delivery modality, or any other decision triggers a series of IT changes. The critical need is to ensure that every decision receives precisely the IT services and support that the decision demands. Consider: A brokerage house needs to be able to update and change its systems to comply with updates and changes in government regulations: Update systems quickly to address short-term reporting requirements Undertake a longer-term effort in parallel to define a comprehensive, flexible architecture for auditing information systems and operations An entertainment company must distribute movies across new devices and networks. For that IT organization, this need entails still other time-consuming challenges: Develop a new media lab Develop a rights management system for protecting copyrighted property 3

4 Develop better online collaboration mechanisms with technology and distribution channel partners Develop new online support for end-user self-help A retailer requires real-time supply chain insights to solve emerging inventory problems. IT requirements that must be addressed quickly include: Identify critical supply-chain key performance indicators (KPIs) Develop and deploy web-services based transactions and workflows to propagate the KPI data across the parties in the supply chain Implement RFID to strengthen asset tracking, inventory management, and forecasting Today, every strategic business decision triggers a chain of IT events. The challenge is to ensure that those IT events occur as quickly as the business decision makers need them to occur and that is where most organizations fall short. The IT organization must translate the new priorities into updated systems and processes, sometimes across multiple layers and organizations. Too often, because the systems are inflexible, this entails complex, costly, and lengthy change initiatives. The ideal is to restructure the systems to allow rapid reconfiguration in response to unforeseen needs. However, accomplishing that requires strong IT governance and a comprehensive, well-integrated enterprise architecture. The importance of IT governance A critical factor in achieving speed of execution is being clear about who gets to make which decisions. Governance is about establishing a framework to ensure that all decisions are made by the right person or persons, according to the importance of the decision and the expertise and organizational responsibilities of the parties to the decision. Decisions with large financial impact must be made by senior managers as part of an ongoing management process, while those with lesser impact are more efficiently made by those who are accountable for executing the decisions. Enterprises should establish formal governance mechanisms for all of their key assets. An Adaptive Enterprise recognizes that information is an asset that is just as valuable as its intellectual property, finances, business relationships, and physical assets. So too are the people, processes, and technologies that manage information and automate business processes. As a consequence, an Adaptive Enterprise extends corporate governance to include IT. The notion of IT governance has considerable currency today, but there are varying ideas about just what IT governance is. HP sees IT governance as the formal process of defining the strategy of the IT organization within the context of an overarching business strategy and overseeing its execution to achieve the goals of the enterprise. Let us examine that vision a bit further: As a formal process, IT governance involves the creation of a decision rights framework and the mechanisms for enabling those decisions and managing those rights, including: Who is authorized to make which IT decisions What processes, involving which parties, will be used to make those decisions How the decisions will be enforced In defining the IT strategy, IT governance defines the IT mission, vision, goals and priorities, and KPIs the metrics by which IT is measured. It defines the business value drivers for IT services and initiatives, commits resources to the IT organization so that it can deliver on its mission, articulates IT s commitments to the business units, and outlines its change management plans. In overseeing the execution of IT strategy, IT governance aligns and synchronizes the IT organization s tactical and operational plans, provides project portfolio management and closedloop monitoring of plan execution, and ensures accountability (and regulatory compliance, as necessary). 4

5 Finally, IT governance ensures that the IT strategy and its execution are aligned and synchronized with the enterprise strategy, including other key asset strategies (financial, business relationships, and so on). Figure 1. IT governance ensures that the IT strategy is defined within the context of the business strategy Within an Adaptive Enterprise, IT governance remains dynamic. Not only does it operationalize IT strategy so that everyone is aligned with the enterprise strategy, but through ongoing synchronization it also enables IT to stay aligned in the face of change. This synchronization involves a closed-loop system with four main stages: Planning: the IT strategy formulation stage Driving: the stage where the strategy is driven into the IT organization and infrastructure Validating: the stage where execution performance is evaluated against the plan Correcting: the stage where the execution is tuned to improve performance against the plan Figure 2. IT governance involves a closed-loop process for ongoing synchronization 5

6 As the business priorities and strategies change, IT governance drives those changes into the IT organization, stimulating the creation of new strategic IT plans and priorities and refining the priorities of existing plans and projects. Through an ongoing process of assessment and synchronization, which recurs at many levels as strategies and execution plans unfold the enterprise keeps IT aligned with business priorities. Aligning business and IT and keeping them aligned is a complex undertaking, and it helps to have a simplified framework to highlight some of the key responsibilities and relationships. The 2x2 matrix depicted in Figure 3 is a useful tool for bridging both the business-it and governance-operations dimensions. Across quadrant boundaries there is a need for both alignment (of strategies, operational plans, and execution) and visibility (of value and performance). When the visibility is across organizational boundaries, it is referred to as transparency. Also, the matrix provides a useful context for understanding many possible scenarios of where change events arise and how they flow across the quadrants. Figure 3. Framework relating Business and IT governance with Business and IT operations Running IT as a service delivery business With the treatment of information and IT as key corporate assets and with the new controls that IT governance demands the CIO must transform IT into an effective service delivery business within the enterprise and then run it that way. This is not a question of how IT charges for its time and services or a question of turning IT into a profit center for the enterprise (although these could be considered). Rather, running IT as a service delivery business is all about operating efficiently, delivering professional service, acting with a keen interest in satisfying the business customers, and managing those business relationships. It is all about responding to business needs, innovating to provide stateof-the-art service, and knowing how best to provide the business units with the services they require, including adoption of the best sourcing options. Business strategy drives IT processes, which in turn drive IT decisions. The IT governance executive team defines the IT strategy, including whether IT should provide differentiation when compared to the competition or simply provide commodity services (a utility) with utmost efficiency. The strategy determines the critical IT objectives, KPIs, and critical success factors (CSFs). The CIO, in turn, defines 6

7 the service portfolio and service level objectives (SLOs) that will focus the IT organization on meeting those KPIs and CSFs. This returns us to the idea of IT operating as an accountable service delivery business. By focusing on meeting the needs of the business units and supporting the business strategy, IT acts like any business partner is expected to act. It provides transparency through management and reporting tools (think of executive dashboards, for example) that enable corporate governance executives as well as the line of business (LOB) managers to see just how IT is performing against the KPIs and CSFs. The management and reporting tools also enable IT management and the IT governance executives to monitor and manage change itself, so that the impact and effect of business and IT changes can be observed quickly at all levels. The value of an enterprise architecture Establishing effective IT governance is critical to the success of an Adaptive Enterprise, but that in itself does not make an enterprise adaptive. In addition to IT governance, an Adaptive Enterprise has an overarching enterprise architecture to show how all of the components of the enterprise are related and to guide the decisions that affect IT. With effective IT governance and enterprise architecture in place, and working closely with an enterprise program management office to drive IT initiatives, it becomes possible to achieve the level of business and IT synchronization that characterizes an Adaptive Enterprise. An enterprise architecture structures the systems that constitute the extended enterprise. It lays out how information and IT enable the realization of the enterprise strategy, and it provides a framework for supporting and automating business processes both within the enterprise as well as across the entire supply chain using IT capabilities. Together with the IT strategic planning process, an enterprise architecture helps align IT initiatives more effectively with your strategic business imperatives. It identifies both the current state of the enterprise as well as the desired state, and it enables business and IT managers, including the IT governance team, to see how the enterprise can transform itself in stages from the current state to the envisioned future state. An enterprise architecture is not simply a static document. It is a dynamic, ongoing, disciplined process. As depicted in Figure 4, its central focus is on evolving the key operational processes of the enterprise (the enterprise business architecture) and the information systems that support them (the enterprise IT architecture). At the intersection of these two distinct architectures are the architectures for supporting the enterprise business process execution and the enterprise information/data. Figure 4. The nested architectures within an enterprise architecture 7

8 By describing the essential, overall design of these architectures as a holistic system of systems and by providing the context, guidance, and discipline for the development of the more detailed, systemand service-specific architectures, the enterprise architecture provides a way to translate between business needs and IT capabilities. It shows how the business needs are to be met by the enterprise s information systems and the information services they provide, thereby creating a bridge that ensures alignment of business and IT. Taking a holistic architectural view of the enterprise helps strike an effective balance across all business and IT imperatives, with a particular emphasis on agility. It helps planners see how the enterprise currently works, and how it could and should work in the future. The strategy provides the overall direction (vision, goals/objectives, and measures) for the enterprise and the IT capability, while the architecture describes the operational and information systems as they are, and as they should be to realize the strategy. The IT investment planning aspect of strategic planning (often referred to as project portfolio management) uses the architecture to identify initiatives with high strategic value and acceptable risk and adds them to a committed plan of record. The program management office then drives execution of the initiatives in the plan of record, with reviews against the architecture at appropriate points in the initiatives lifecycles. Enterprise architecture has long been promoted as a key tool in bridging the gap between business and IT. In the past, the practice of enterprise architecture has failed to deliver on the hype, causing many to lose interest. Several factors have combined to once again bring enterprise architecture to the fore: The discipline of enterprise architecture has matured, learning from past mistakes of over-reaching, not paying enough attention to benefits vs. costs, and focusing too much on IT considerations. The costs to operate and maintain information systems have continued to grow, providing a large payback for architecture-led efforts to rationalize processes and consolidate systems. Architecture methods and tools have advanced significantly, including improvements in modeling of business strategies, processes, and metrics, and relating them to IT capabilities. Many partial models and other architectural elements are widely available, greatly lowering costs and significantly improving the ability to provide automated, flexible, real-time linkages between enterprises. The advent of the Internet has made it much easier to incorporate partners in the value chain. The competitive imperative is now to focus on areas of strategic competence, partnering for specialized but non-core capabilities. Having accurate models of enterprise processes and systems is a critical requirement for executing this new business model. Properly envisioned and implemented, an enterprise architecture is a fundamental tool that anticipates future needs and enables you to implement change rapidly in response to changing business priorities. It enables your IT organization to respond rapidly to changes in business strategy, processes, and environment. It enables your business units to realize their critical business goals and strategies by providing a framework that supports all the processes, information, and IT systems that those goals and strategies require. 8

9 Business services: The building blocks of an enterprise architecture One of the important innovations in enterprise architecture is the recent focus on business services. Business services are well-defined, automated components that provide the information that the enterprise needs both to deliver goods and services to customers and to coordinate and perform work as part of an operational process. What constitutes a business service? At the highest level, business services are services provided to customers, such as the online support for shopping: finding, ordering, and paying for products, tracking their delivery, and perhaps coordinating returns. At a lower level, business services are finer-grained services that automate or orchestrate individual steps in the enterprise s business processes: add a part into inventory, look up a customer, check credit, check availability, look up order status, note a problem, notify an interested party of a change in status. High-level business services are built on lower-level services, without the higher-level services knowing anything about the implementation details of the lower-level services they use. By evolving the enterprise to become service oriented, and modeling it using a service-oriented architecture (SOA), an Adaptive Enterprise can respond quickly to key business needs. Imagine having a set of building blocks with a standard snap-together interconnection mechanism. An SOA enables the enterprise to use and reuse business services from a variety of sources in new ways, without a lot of development or integration effort or knowledge of the service s location, enabling a rapid response to new opportunities and business priorities. Along with its emphasis on services, an enterprise architecture also identifies the service events that are relevant to the business. These events can then be viewed through business activity monitoring tools; they can also alert the appropriate people or trigger automated processes to handle conditions associated with the event. By enabling support for near-real time processing of service-related events, the enterprise s information systems become, in effect, the digital nervous system of the enterprise. Finally, the enterprise architecture also translates between the business services and the underlying IT infrastructure services that provide the resources that the business services require. More and more this translation takes place without the need for procedural programming; instead, service designers provide an operational model defining the key parameters of the service, and the service delivery management system automates the delivery of service based on those parameters. This approach is known as model-based automation, and it plays an important role in enabling the agility that characterizes an Adaptive Enterprise. Because it is easy to change a parameter value in a model much easier than it is to rewrite a hard-coded service it becomes much easier to adapt a service quickly to changing needs. 9

10 The Adaptive Enterprise Architecture The Adaptive Enterprise Architecture from HP offers a set of models, principles, and design rules that you can use to stimulate the establishment and evolution of an enterprise architecture designed to strike the right balance across your needs to enhance agility, maximize financial return, improve performance, and minimize risk. In concert with IT governance and the ongoing business IT synchronization processes discussed earlier, it can help guide you on your journey toward an Adaptive Enterprise. Your business objectives and strategy define your portfolio of product and service offerings and the overall process by which these are delivered. That process is not entirely internal, of course. An enterprise consumes business services from its suppliers; transforms, augments, or otherwise adds value to them; and in turn delivers business services to its customers. An airline, for example, consumes airplanes, gates, fuel, and other business services from its suppliers. It delivers a valueadded transportation service through its people, processes, and technologies (using facilities, equipment, and other resources). Indeed, there are many component business services involved in this delivery process. We prefer that our bags arrive when and where we do, for example; we like our frequent flyer benefits, and so on. An effective enterprise architecture helps you map your business objectives and strategies to your delivery process, value chains, people, IT services, and all the other resources that your operational processes require. Figure 5. The business process model is key to aligning delivery with strategy As presented in Figure 5, the Adaptive Enterprise Architecture links an enterprise s business objectives and delivery processes. It also identifies how these processes must be managed from a business perspective. Enterprises have business objectives, define business strategies to achieve them, and establish management processes to assure their delivery process execution aligns with the strategy and objectives. The bi-directional arrows linking business objectives and strategies (at the top of Figure 5) to the business process model (in the center of the figure) indicate that alignment of strategy and delivery processes depends on information flowing both ways: the business strategy must be informed by the actual performance of the delivery processes, and can in turn set targets for their future performance. 10

11 The business process model discussed previously is crucial to realizing this alignment. The business process model defines the flow of work and the associated key performance measures. The model is refined into a series of more detailed levels, and ultimately transformed into an executable model that shows how people and automated systems combine to perform work. The executable model is used to define how the component business services are combined to deliver high-level business services to customers and other users of the enterprise s information systems. The performance measures are used to establish policies that automate the management of the services. When an enterprise invests in modeling its business processes and using model-based automation, it puts itself in a position to make changes quickly and easily. Adaptive Enterprise design principles The Adaptive Enterprise Architecture provides core ideas for an enterprise architecture, both from a business and an IT perspective. It encourages the use of standards in both realms, even though it does not prescribe the use of particular technologies, middleware, or applications. As an architectural framework, it emphasizes critical layers and relationships, modules of capability, and points of flexibility. It also emphasizes the need to provide effective management of the services. Experience has shown that it is useful to select two primary dimensions to organize an architectural framework. The IT services of the Adaptive Enterprise Architecture, depicted in Figure 6, uses the same dimensions as the simplified framework of Figure 3 but focuses on the IT quadrants and defines more distinctions along each dimension: The horizontal dimension defines three columns in the IT governance/management/operations continuum. The vertical dimension defines four layers of service capabilities, with the highest closest to the business and lowest addressing IT concerns. Figure 6. IT service components of the Adaptive Enterprise Architecture Enterprise Business objectives and strategy IT business management Business services Information services Application services Infrastructure services Service delivery management Service delivery 11

12 The columns of Figure 6 separate the service delivery systems (on the right) from the service delivery management capabilities (in the middle) from the IT business management capabilities (on the left). Service delivery systems are the highly automated, functional systems that provide IT services to users. Service delivery management systems address the operational concerns of service availability, cost, capacity, performance, security, and quality of service. IT business management addresses longer-term IT management concerns, including financial and asset management, customer and supplier relationship management, strategic planning, architecture, and project portfolio management. HP focuses on management technologies that automate IT tasks associated with these management concerns, enabling IT to provide timely and affordable support for business innovation. The layers of Figure 6 provide four broad layers of information system capability: business services, information services, application services, and infrastructure services. Business services comprise both the top-level (composite) services and the component services previously discussed, including the orchestration of work flow across both automated and manual steps in a business process. Information services provide authoritative data for the business services and manipulate information in an application-service-independent manner. They include: document services, master data services, search services, transformation services, and metadata services. Application services provide the detailed processing for the automated steps, often bridging to legacy enterprise applications. Infrastructure services provide a common platform of generic middleware, operating systems, servers, storage, networks, printing and imaging, and physical infrastructure to host the application, information, and business services. An enterprise architecture provides models of both the current and future (to-be realized) states of the enterprise, along with a series of intermediate stages. The Adaptive Enterprise Architecture offers both an idealized future state and a set of common paths or journeys to reach that state. It includes a framework and a set of recommendations that describe how all the systems and processes supporting the business operate and interact at an information level. It suggests how work can be coordinated and how information-based services are best delivered, ultimately focusing on the capabilities, relationships, and principles that can help you build and maintain an agile Adaptive Enterprise. The Adaptive Enterprise Architecture embodies a set of design principles that serve as actionable guidelines for designing and implementing an enterprise architecture. These four principles are highlevel approaches for making an enterprise more adaptive: Simplification: simplify complex IT environments through the consolidation of applications and infrastructures, the automation and orchestration of processes, and the virtualization of resources. Standardization: reduce costs and simplify the management of change establishing corporate standards. Standardize business processes using established and emerging, industry-standard operational reference models, like the IT Infrastructure Library (ITIL), the Supply Chain Operational Reference (SCOR) model from the Supply Chain Council, or the ebusiness Telecom Operations Map (etom) from the TeleManagement Forum. Enable collaboration across the enterprises in a valuechain by standardizing on how information and services will interoperate across organizational boundaries. 12

13 Modularity: improve resource sharing and cost effectiveness by modularizing monolithic capabilities into reusable business services that allow independent work on either side of the module boundary. The interface to a module should be well-defined, stable, and coarse-grained, enabling a loose coupling between service consumers and suppliers distributed across a network. Integration: improve agility and reduce costs by dynamically linking business processes and heterogeneous, reusable IT resources both within and beyond the enterprise. Of prime importance is the ease of configuring component services to meet new needs. These design principles establish the fundamental guidelines that will shape the evolution of the enterprise architecture. The intent here is not to define or constrain every development contingency in advance but rather to put forward a small set of clear and compelling guidelines that will have the same effect on the emerging enterprise architecture that the guidelines for zoning and building codes have on the emergence of an urban landscape. This approach allows a multitude of parties to pursue initiatives in a manner that is nearly independent yet coherent. The city planning analogy is particularly apt for an evolving enterprise architecture: No one can fully envision, much less control, the city that takes shape it just emerges. At the same time, the characteristics of that city, its buildings and its dynamics, are not completely random. Their character is clearly influenced by the zoning ordinances, building codes, and shared resources such as water, electricity, and so on. An enterprise architecture provides an equivalent structure for business. The four Adaptive Enterprise Architecture design principles, for example, help establish a flexible link between your IT infrastructure and your business. HP uses these principles to drive technology decisions that give you attainable and practical value. Applied consistently across your business processes, applications, and infrastructure, these principles enable you to design an enterprise architecture that will meet your agility needs as an Adaptive Enterprise. The Adaptive Enterprise Architecture also codifies a set of design rules (design decisions that are consistent with the principles) that are vitally important when evolving IT capabilities to enable a flexible, automated response to change. The rules reinforce the role of services and emphasize the importance of loosely coupled modularity and integration as enablers of agility: Service oriented architecture (SOA): to enable the rapid assembly and integration of IT services (business services, application services, and infrastructure services) based on reusable components, especially web services. Virtualization: to pool and share IT resources across applications, business processes, and suppliers to balance IT supply automatically with business demand. Model-based automation: to define and manage IT services quickly and easily. As noted on page 11, this approach creates a comprehensive model of a business service, including its functional and management aspects, service management policies and objectives, and constituent components and their configuration. Through the use of an SOA, an enterprise s IT team can quickly and easily reassemble and reconfigure core application and infrastructure services into a wide range of new business services. They can use and reuse existing business services in new combinations to meet new business needs. They can use model-based automation to facilitate all aspects of business service management from setting up a service to deploying, monitoring, and refining it. This makes it easier to manage a service across its lifecycle, which lowers its costs and enables more rapid change. They can use virtualization to sense IT service needs and bring additional business services and infrastructure resources online quickly in response to demand. 13

14 Management is the critical link between your business processes and IT services. Management solutions for an Adaptive Enterprise enable you to link your IT plans and operations with your business strategies. In support of the ongoing synchronization efforts, management solutions for an Adaptive Enterprise enables you to measure, assess, and optimize IT strategy execution. They help you manage your IT and business services effectively across the service lifecycle, particularly during operations, by enabling rapid reconfiguration to match changing business priorities. The outcome: improving the ability to innovate in response to change As a result of establishing effective IT governance and enterprise architecture processes, and using these to synchronize IT with the strategic plans of the organization, an enterprise increases its ability to innovate and to change at the speed that business requires. For many of today s organizations, far too great a percentage of the IT budget 70 percent or more in many cases goes to operating and maintaining the existing infrastructure, with all its silos, complexity, and inefficiencies. Only 30 percent of the budget remains to innovate in the face of new challenges. In order to be able to respond quickly to new opportunities or changes in business strategy, an Adaptive Enterprise strives to flip the ratio of spending on operations and maintenance to spending on new initiatives. Consider the experience of HP: An analysis of IT expenses in the wake of the acquisition of Compaq showed that application and infrastructure maintenance accounted for 72 percent of the budget. Only 28 percent of the budget could be used to innovate. At the time, HP had more than 7,000 applications running on 25,000 servers in more than 300 data centers. By expanding corporate governance to include IT and by evolving a more effective enterprise architecture, HP has simplified its business and IT systems. By the end of 2004, HP had only 4,000 applications, 19,000 servers, and 85 data centers. Simultaneously, innovation as a portion of IT budget rose from 28 percent to 34 percent. As we work toward flipping the ratio of maintenance to innovation, we have grown more agile, more capable of innovative responses to a changing business world, and more capable of responding quickly to situations and opportunities that arise. Figure 7. Flipping the ratio of expenditures for maintenance and innovation is key to increasing the agility of IT and the ability of an Adaptive Enterprise to respond to change 14

15 Nor are we finished with our efforts to simplify, consolidate, modularize, and virtualize. In the future, HP expects to run only 1,500 applications, on 10,000 servers, in just 11 data centers. Projected application and infrastructure maintenance costs will account for only 45 percent of the IT budget, leaving 55 percent of the budget available for innovation and putting HP in an even better position to respond proactively to the opportunities that a changing world affords. Getting started: The journey to an Adaptive Enterprise Adaptive Enterprises are built, not bought. It is a transformational process. Every enterprise arrives at the task of transforming itself with a different history, differing goals and priorities, and different transformational needs. Accordingly, for every enterprise there lies a unique path with a unique set of steps. Fostering transformation The process of transformation must begin with a thorough understanding of what your enterprise looks like today: What are your critical business priorities and strategies? Do you govern IT as a critical corporate asset? What are the strengths and weaknesses of your existing enterprise architecture? Does it facilitate IT governance? What are the strengths and weaknesses of your people, processes, and technologies? Where in the organization are you more or less agile today and where do you want to be as a result of transformation? Where is your IT budget currently spent and what percentage goes to maintaining the existing applications and infrastructure and what percentage to innovation? How does business view IT and why? Is IT viewed as a strategic business partner? These questions and others should be asked within the context of a formal assessment process, and the answers will help you develop an important baseline understanding of the state of your enterprise. HP has worked closely with INSEAD, the internationally known school of management, to develop an assessment service that helps you understand your current and desired agility, both in relation to other enterprises in your industry as well as in relation to the agility associated with an Adaptive Enterprise. This assessment considers three distinct dimensions of agility: The dimension of time considers the speed at which your organization can promote, enable, and react to change. How quickly can you make the necessary changes that are triggered by your business decisions? How well can your organization keep pace with the rate of change in your industry? The dimension of range considers how you implement change across your business, whether across processes, organizations, or technologies. Do you have to limit initial implementation of those changes to a certain geography and then roll it out across the enterprise? Can you do it worldwide from the start? To refer back to the example of the entertainment company introducing a film: How effectively can you roll out your product in all the different formats and modalities that the global marketplace requires? The dimension of ease considers the level of effort and cost required to introduce or support change. How effectively are you taking advantage of the enablers for change that are arising in the marketplace? You may have been able to merge all your corporate directories to streamline processes, but if you had to rely extensively on expensive contractors and exhausted your own personnel in the process of doing this, the effort was far from easy, even though you were able to accomplish it. 15

16 By understanding the agility of your business and IT organizations today in terms of time, range, and ease, you can begin to understand where the critical disconnects exist within the enterprise and to use that understanding to focus and prioritize your transformation strategies. Beyond assessing the state of the enterprise today, you must develop a transformation plan. As a result of the work it has done with companies intent on improving their agility, HP has developed a unique process designed to help you develop and then execute the transformation plan that is right for your enterprise. Working with both the business and IT teams, you and HP can make rapid headway in a number of critical areas: Developing the baseline and expectations where are you today and where do you need to be in the future? Identifying opportunities for transformation Establishing effective IT governance, IT strategy, and enterprise architecture processes Building a transformation vision shared by business and IT prototyping the closed-loop processes for ongoing synchronization Prioritizing the service portfolio, investment initiatives, and working project list Building an Adaptive Enterprise transformation plan and creating an Adaptive Enterprise program management office to oversee execution Transformation is an ongoing process that takes place one step and one solution at a time. Projects that promise to facilitate transformation must have both near-term and long-term benefits. The real key to success is the ability to pick the right projects to execute at the right time, ensuring that they deliver both short- and long-term business value. This ability comes only from the combination of transformation experience and a thorough understanding of your business needs and priorities. HP can help you with the former; only you can provide the latter. Together we can cover both aspects. Conclusion We live and work in a world of accelerating change. To thrive in that world we must be able to embrace change quickly, thoroughly, and efficiently. Traditional enterprise models have always emphasized just the opposite view: that change is not the norm but the exception. The reality is that ever more rapid change is the norm and we must evolve our enterprise models, people, process, and technology to acknowledge that truth. An Adaptive Enterprise epitomizes the enterprise designed to succeed in a changing world to innovate in response to or in anticipation of change. In essence, being an Adaptive Enterprise is about timely and affordable IT support for business innovation. Becoming more adaptive helps you achieve greater simplicity, agility, and value across your organization. It makes your business not just your IT more efficient and effective. Imagine adding partners to your supply chain securely in days instead of months, doubling the pace of new product introductions without sacrificing quality, or shifting your investment dollars from infrastructure maintenance to innovation. These are the types of gains achieved by an Adaptive Enterprise. Becoming an Adaptive Enterprise helps you address core business needs to maximize return, mitigate risk, improve performance, and increase agility. By working together to create an environment in which you really can synchronize business and IT, we create an enterprise that can adapt to change, create new opportunities, and capitalize upon rapidly changing market conditions all of which puts you in a singularly powerful position to deliver value, compete, and win in a rapidly changing world. 16

17 For more information For more information about how HP can help your organization become an Adaptive Enterprise, contact your HP Account Representative today. Adaptive Enterprise Understanding the Adaptive Enterprise Architecture The HP Adaptive Enterprise Journey Adaptive Enterprise Customer Stories HP Management Solutions for an Adaptive Enterprise HP IT Consolidation Solutions HP Business Continuity and Availability Solutions Hewlett-Packard Development Company, L.P. The information contained herein is subject to change without notice. The only warranties for HP products and services are set forth in the express warranty statements accompanying such products and services. Nothing herein should be construed as constituting an additional warranty. HP shall not be liable for technical or editorial errors or omissions contained herein. 4AA0-0760ENW, Rev. 1, 06/2005