How To Change A Business Model

SOA governance and organizational change strategy White paper November 2007 Enabling SOA through organizational change Sandy Poi, Global SOA Offerings Governance lead, associate partner, Financial Services Strategy & Change Betsy Sleight, senior managing partner, Financial Services Strategy & Change Jeffrey Viezel, senior managing partner, Financial Services Strategy & Change David Snavely, senior consultant, Financial Services Strategy & Change

Contents 2 The role of governance and change in SOA transformation 3 Why is SOA governance and organizational change necessary? 4 Benefits of SOA governance and organizational change 6 Challenges of SOA that need organizational change 7 Triggers to recognize and when to seek help 7 Organizational change strategy 11 Critical success factors for organizational change 14 Integrating organizational change strategy into the SOA governance framework The role of governance and change in SOA transformation Service-oriented architecture (SOA) is an architectural style that offers business agility, speed to market, improved profitability and reduced costs. An SOA is also widely recognized as an enabler of innovation and new business operating models. However, in order to realize these benefits, organizations are finding it takes more than developing the technology infrastructure, processes and tools. SOA enablement is a major transformation for many organizations, requiring effective governance and organizational change. When IBM asks, most business and information technology (IT) executives acknowledge the critical importance of an effective governance framework and an organizational change strategy in successfully implementing SOA. However, the same business and IT executives will also readily admit that only a small percentage of their overall SOA initiatives are focused on these two factors. IBM Global Business Services consultants have helped companies across all industries implement SOA. They have observed organizational issues that can be mitigated or avoided altogether with the proper governance and change mechanisms in place. Such issues include: Lack of strategic focus on SOA No clear accountability, especially when SOA-enabled services do not work as expected Poor alignment, across business and IT, without clearly understood interrelationships and handoffs Metrics that do not drive the desired behavior Knowledge and skills gaps Ad hoc and inconsistent decisions.

Because an SOA usually means changes for both the business and IT organizations, it is important to embed an organizational change strategy into the SOA governance framework. Based on experience, IBM espouses two tenets for successful SOA transformation: Embed governance and organizational change into your SOA plans from the beginning. Realize that SOA is not just another IT initiative and collaborate across IT and business with clear involvement and ownership in SOA activities. A well-formulated, executable organizational change strategy, embedded within a robust SOA governance framework provides a proven, disciplined approach to transformation by encouraging appropriate behaviors and attitudes. This white paper explores the role of organizational change within the larger SOA governance framework, outlines the associated benefits and risks, and provides insight into the triggers and warning signs that might indicate when additional help is required. Why is SOA governance and organizational change necessary? The decision to implement SOA usually represents a major architectural paradigm shift for a company within both the business and IT organizations. As the amount of change and anxiety increases, significant disruption and uncertainty usually occur. Most people associate change with threats to their well-being. Even change that is viewed positively is likely to affect performance. The inability to address the people issues associated with change is a recipe for project failure and organizational discord.

Failure to address the people issues of organizational change significantly increases the risk that SOA implementations will be derailed. A major manufacturing organization, for example, invested in SOA-enabling technologies and built a team of experts to support the SOA environment. After spending heavily, the executive team felt that the anticipated benefits had not been realized. Redundant services were proliferating, and the firm was no better positioned competitively than before the SOA implementation. Unfortunately, this is hardly an isolated case. A large telecommunications organization invested in an industry-based services framework of predefined industry components. The company believed that a framework based on industry standards would accelerate its ability to SOA-enable the company s applications and aid in the adoption of SOA. After the initial investment in the framework, the organization quickly became bogged down in turf battles and debates regarding the ownership of the common services. Questions, such as who should maintain the services and who decides on the overall enterprise SOA reference architecture surfaced. The lesson from these and other examples is clear. If people issues are not addressed and behaviors are not changed, the potential risk of SOA implementation failure increases significantly. Poor or nonexistent SOA governance only makes the situation worse. Benefits of SOA governance and organizational change Companies that build strong SOA governance and change management capabilities in tandem with their SOA technology and processes are poised to reap significant improvements in business agility and speed to market.

They have the discipline and framework in place to help achieve these benefits while lowering the cost of building and maintaining adaptive business processes and IT infrastructure (see figure 1). An effective SOA governance framework and change strategy helps maximize the potential value promised by an SOA. SOA benefit Agility Speed to market Reduced cost More adaptive business organization How SOA governance and organizational change can help realize the benefit An SOA governance and organizational change strategy can facilitate fast, effective decision making and enhance the ability to rapidly build, configure and assemble services to form innovative solutions in the marketplace, reducing bureaucratic obstacles that get in the way. An SOA governance framework and organizational change strategy can speed resolution when things do not work according to plan. People will understand who to go to and how best to resolve issues for maximum effectiveness. This knowledge can help speed change, enabling organizations to react more quickly and decisively to competitive threats and marketplace opportunities. Acceptance of and agreement on services that provide the greatest value encourages adoption and reuse of those services and reduces wasted effort and cost. Furthermore, tracking and managing to standards helps guide users and developers to know what to do when and where to look for available services. As existing service assets are leveraged across the organization, return on investment improves. An SOA governance framework and organizational change strategy enables a more efficient and effective environment for change by helping to optimize the culture, people, commitment, processes and technology. Figure1: SOA governance and organizational change help companies realize the benefits of an SOA.

An SOA initiative requires agreement on issues of ownership, responsibility, processes and measurement that cross departmental and organizational boundaries. Challenges of SOA that need organizational change Fundamental change in behaviors and attitudes is required in addition to the new business and technology paradigm. Cross-organizational and technology barriers must be addressed to maximize the potential value promised from SOA. It s important that everyone involved in the initiative knows the answers to the following questions: Who owns the services or SOA in general? How do business and IT align to develop services collaboratively? Who intermediates between business units that have functional, technological or quality of service dependencies? How do we work with each other? Who pays for the initial build? Who pays for ongoing maintenance? Who pays for modifications that are not required by all of the users? To increase the probability of SOA adoption and continued funding, you need processes and measurements in place to help demonstrate that your investments align with business goals and are delivering the expected results. How do you ensure the effectiveness of incentives and implementation metrics? How do you balance line-of-business needs with the needs of the enterprise as a whole? How do you enable a sustained business model? Neglecting to consider any of these questions can increase the risk of SOA failure. Although a strong governance framework and organizational change capabilities are not panaceas to avoiding SOA implementation issues, they can help companies handle some of the more vexing problems.

There are clear warning signs that signal when an SOA implementation is in trouble because of ineffective governance and change management. Triggers to recognize and when to seek help IBM realizes that even with the best intentions, projects can bog down and problems can arise. There are a number of triggers or warning signs to be aware of that will assist you in determining if additional help may be required: Multiple SOA projects are under way with little or no enterprise focus or oversight. Already built services and other assets are not reused, while requests for new services continue to proliferate. Executives start questioning the SOA investment and do not see or understand demonstrated results. Problem resolution often leads to a not-my-problem attitude and the blame game. There is no clear business case that outlines the expected benefits (both hard and soft), and funding for SOA is ad hoc and random. SOA benefits are not being realized even though required SOA infrastructure has been implemented. The organization is struggling to adapt to services as they are implemented, as well as manage the requirements for new services and versions. Organizational change strategy The IBM SOA Governance Framework includes support for organizational change. Many organizations understand the need for proper governance mechanisms when implementing SOA. These mechanisms include oversight bodies such as local review boards or cross-divisional steering committees, role definitions and lifecycle development processes. While these governance mechanisms are required, they do not address the need to change the behaviors of the organization. Without significant focus on organizational change, we believe the odds for success are greatly reduced, and that the mechanisms put in place to govern SOA will not gain traction.

SOA vision Compliance IBM has differentiated its Governed processes SOA Governance Framework by including organizational change management as a standard component. Vitality Service strategy Define service focus process Identify service owners Define service owners Service design Identify services Specify services Realize services Service transition Design services Assemble services Test services process Service operation Manage quality of service Manage service levels Manage service change process Communication Deploy services Manage service security process Managed by Implemented by Monitored by Governance mechanisms Principles, policies, standards and procedures Monitors and metrics Skills Supported by Organizational change management Infrastructure and tools Exceptions and appeals Figure 2: IBM has differentiated its SOA Governance Framework by embedding comprehensive organizational change management capabilities to help accelerate SOA adoption.

The proven IBM SOA governance and change management approach helps enable the level of participation, collaboration and accountability required to accelerate successful SOA implementations. Through experience, IBM has learned that implementing SOA is not just about technology, and that simply restructuring the IT organization and focusing on new skills and training is not enough. To affect the fundamental strategic business change, the organization must become much more collaborative, flexible, energized and accountable. As a result, IBM has differentiated its SOA Governance Framework by embedding comprehensive organizational change management capabilities. IBM believes that this proven approach will result in accelerated SOA implementations. (A more detailed discussion of the SOA governance framework depicted in figure 2 can be found in the Introduction to SOA governance white paper.) The IBM change methodology focuses on two areas (see figure 3): The change strategy to build and sustain a case for change The organizational strategy to build the change into the fabric of the organization

Change strategy: Leadership Change strategy Change vision Organization design D D D Deliver business benefits L Commitment People performance Culture Benefits Organizational strategy: Figure 3: The IBM SOA Governance organization change management capabilities help companies focus on both building a case for change and also on building change into the fabric of the organization.

The IBM Organizational Change Strategy focuses on both the tangible and intangible factors that affect behavioral change. The change strategy helps ensure that there is a vision for change that instills the organization with the necessary leadership capabilities and establishes the need for change and associated buy-in. The organizational strategy helps ensure that the organization is properly equipped to affect the change by having the people with the right skills and an organization that is optimally configured for change. While SOA governance can help you make sure that the proper oversight and approval processes are in place, an organizational change strategy makes sure that the organization will be ready and able to adapt to the new SOA paradigm and that the right leadership is present. Critical success factors for organizational change Although a supporting organizational change approach is critical for effective SOA governance, rarely recognized is the need for including organizational change management techniques early in the process. Many executives and managers are surprised when their organizations do not readily embrace the newly defined SOA lifecycle processes, the governance mechanisms and operating principles, the architectural artifacts and methods. Governance without organizational change is not enough to deliver the behavioral changes needed for effective SOA implementation. The IBM Organizational Change Strategy includes both tangible and intangible components that comprise a set of critical success factors requiring due diligence. Tangible change considerations Stakeholder management helps ensure potentially conflicting stakeholder interests are managed and balanced correctly. In addition, it can improve prioritization of actions focused on gaining buy-in and commitment for SOA.

Tangible change considerations address stakeholder management, including communication strategy and clarity of roles, responsibilities and decision-making authority. Without effective stakeholder management, key participant issues can come back and derail SOA governance or establish spurious processes and controls that are of little value. A strong communication strategy and plan help ensure that the right messages are delivered to the right people at the right time. There are two common errors made in communication. The first is that development of the communication plan is top priority, but execution of the plan falters. The second error occurs when executives believe that they only need to deliver the message once and that everyone will hear, understand and buy in. This belief does not reflect reality. Messages need to be communicated in multiple ways, multiple times, and must be constantly and consistently reinforced. In addition, interaction across roles and associated handoffs needs to be clear. What is often missing is organization agreement about the correct roles and responsibilities leading to confusion, missed handoffs and overall frustration. Organizational change strategy builds out key activities to ensure the right roles have the right responsibilities and are accountable for specific actions within each activity. Implementing transformation across an organization requires multiple decisions that can sometimes be at odds with different business lines. Decision frameworks without the necessary empowerment and leadership often result in frustration and work stoppages, because decisions must be escalated to senior management. Developing and agreeing upon how decisions will be made removes much of the politics. Clear role participation and decision criteria can help clarify what decisions must be made, how and by whom.

Performance metrics and rewards that align with SOA goals can help encourage cultural change by modifying such intangible factors as employee attitudes, beliefs and behaviors. Intangible change considerations Cultural change and change leadership typically are seen by the technology community as soft components. However, IBM believes both are critcal for successful SOA implementation and adoption of the necessary SOA governance constructs. Agile business models are one of the benefits expected from SOA; these models require significant behavioral changes from the organization. Changing the culture is about changing the way people in the organization do their work. To accomplish this change usually requires modifying attitudes, beliefs and behaviors. The IBM Change Readiness tool assesses the current organization s capability to address change requirements and then targets those areas that need improvement. The tool can help you discover hidden disagreements and ambiguity in your governance and leadership framework, bringing issues to light while there is still time to effectively address them. Affected members of the organization need to be encouraged to adopt SOA standards, processes and procedures into their daily routines. Cultural change often requires a new way of thinking about the same problem and sometimes requires an external catalyst, such as a consultant or nonindustry new hire, to bring about the desired changes. In addition, performance rewards must align with SOA goals. Developing incentives and metrics to drive the organization to adopt the new standards, processes and procedures is sometimes overlooked or minimized in importance. Metrics that focus on organization and individual silos need to be revised to help ensure the required behavioral change and the effectiveness of the SOA program.

The IBM SOA Governance Framework helps organizations manage the human and organizational elements necessary for achieving the benefits of an SOA. Integrating organizational change strategy into the SOA governance framework When asked what consumes the majority of SOA implementation effort, most people will name organizational change. If the majority of the effort is around changing the people and helping them most effectively change the organization s behaviors and attitudes, then how much of the total resources are applied to address this area? IBM has found that, in typical SOA implementations, less than ten percent of resources address this need. Technical skill gaps are often the focus of formal training, leaving the organizational change capability to evolve on its own. This omission can lead to failure in achieving the desired behaviors required for successful SOA adoption. IBM believes that in order to meet the demands of SOA, organizations must find new ways to manage the human and organizational elements associated with process changes. An SOA has the potential to radically reconfigure business and IT models and the processes to make them more flexible, user friendly and cost-effective. However, to achieve these benefits companies must be willing to adapt to and adopt the new models and new ways of creating value. To help you address these challenges, IBM has integrated organizational change strategy as a key component in its SOA Governance Framework.

For more information To learn more about SOA governance, contact your IBM representative or visit: ibm.com/software/solutions/soa/gov

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