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Business Architecture (2): IT-industrialization of the industries

In my Business architecture(1): likeness I discussed a bit on the likeliness of architecture (in the sense of construction, engineering of buildings etc.) and architecture (as sometimes perceived in IT). Along the discussions, which initiated these blogs, we discussed also the IT positioning within the different industries in the course of last 25 to 30 years. From such retrospective observations, you might think about revolving patterns of history or simply say history is human driven and the humans behave similar. Nevertheless, there is something like a likeliness (and probably more) I want to point to.

In the late 70’s and begin of the 80’s IT in industry was dominantly in-house development on big hardware with limited scope (from today’s common sense). It was also the time, where the “iron curtain” influences drove values and attitudes with people in western societies and countries. The defense budget was considerable high and a large number of industries profit from this very specific “custom-built” service offering. Even in automotive industry the standards were at a low level. Japan started to offer packaged solutions for very competitive pricing. Most of the people laugh at that approach and believed the car has to be configured out of a list of more than 300 items (mirror, color, window-opening mechanisms, etc.). This difference was justified by “quality” and “accentuated the trust in domestic production”.

It was also the time of “class” and “copics”, two applications to support MRP and production planning. These applications were pre-fabricated. A large number of service companies were specialized to extend the functional scope into “specialized, custom-driven” IT domains. Aerospace, defense, and engineering industries were very “specialized” in the sense “uniqueness”. This applied also to their IT as well. One believed at that time, IT is a competitive differentiator, so packaged solutions, which were used by several market participants damage competitive advantages. In fact, lot of IT engineering was repetitive, sometimes by the same consultants, only at different times, at different places.

The mid of the 80’s was determined by a large variety of changes. The first “after world-war” generation of people started into business, Gorbatschow drove his glasnost, and Japanese cars became common (at least in Europe). Suddenly European automotive companies faced changes and the need to adapt their service offerings (regarding functional spread and related costs). The budgets within aerospace and defense became smaller and limited. Defense research faced the issue of time, because most proto-types were already outdated due to the rapid changes in technology. It was still the time of espionage. This was the time of typical ERP packages to cover the IT demand for business support.

Even within aerospace and defense, industrial production was changed dramatically. Former pricing (as a percentage on top of actual costs) wasn’t anymore acceptable, so there was a heavy cost pressure. The vertical integration was reduced, former in-house production was scheduled using suppliers, Construction plans and research was joined among suppliers. In this period European Aerospace was assembled out of former famous companies with international reputation. Lessons from automotive were migrated into engineering, aerospace and defense industries. Within 5 years time the perceived competitive advantage, embedded in IT applications, became a threat and a bottleneck, regarding future flexibility. The use of IT within the organizations became the differentiator, not the IT features and functions stack.

In the early 90’s different companies confronted themselves with the value of organization setup. It was called workflow. Although they used the same software without any changes in the features/functions stack the performance and efficiency across different market participants was different. The time of “business process re-engineering” started. It became important to consider the human being within the workflow process as this meant: “the integration of knowledge and support of expertise building”.  

This was the start of business models. Before that time data interfaces were discussed on a combination of content and exchange technology. Sometimes pre-assumptions were made regarding the “existence” and “consequences” of data models, but they remain somewhere in the space of “pre-standards”. With the process modeling it became evident: “which data model is meant in the execution of the process?”. This was the business process model. Also exceptions were included as well, so processes were described/defined on a more granular level (to enable overall handling incl. exceptions etc.). The typical advantage within manufacturing industries, dealing with the supply chain, was adapted in IT services. Complementary services extensions opened the space for niche providers and specialties (among industries or even within a specific industry). This business modeling reduced risk for the typical customers of this IT provisioning in a considerable extent. This from the viewpoint of provisioning, but also from the viewpoint of quality assurance among the variety of different service providers,

  • Remarkable to this overall IT across the industries; trend-setters were globally accepted by and followers bcame on stage. This change in IT strategy was discussed in the combination of industry specific differentiations
  • Trend-setters were the typical manufacturing industries. Service-industries (like utilities, telco, and others) followed this trend as well.
  • The borders between the industries became weak and changed from time to time This phenomena I called “entrants from aside”.
  • Financial services and public services didn’t join this expertise exchange. They remain “different”

Getting back to the first blogging contribution and considering those discussions about business architecture, you recognize easily the common use of buzz words, methodology, and various target descriptions. One of the main questions regarding financial services industries might be the question whether these industries might leapfrog phases of this typical IT industrialization process (as they were processed by other industries over the last 25 years). “The ownership of knowledge and built expertise regarding the related (leapfrogged) development phases can be assumed?”. Or more precise: to discuss web-services, do you need the mental expertise of process modeling on top of process re-engineering on top of ERP implementation? Or other: you have to follow the steps in sequence; no leapfrogging is possible?

Talking about global cross-industry expertise one might ask the question when FS industries open themselves to implement other industries’ expertise. To do so, people in FS need at least a basic (common) understanding of other industries business and work-flows. If this openness will become real, one might ask about the willingness to accept and copy, to adapt, and to reduce individual IT strategy development.

To articulate FS industries are unique, is probably an almost true statement. The implication that business models from other industries can’t be copied, needs advantaged logic. To develop the appropriate FS business models “on your own” includes the handling of conceptual mistakes as well (as other industries mad them as well and built their expertise out of the resolution). Such a development requires time, not only process time but also elapse time.

Adoption of organizational models towards a process-oriented workflow belongs to the achievements of the evolutionary process along of ERP, BPR, and BPM. The mental preparation to drive changes was always forced by “outside” parameters like

  • the downgrade of defense budgets affected the engineering industries,
  • liberalization the utilities,
  • globalization the supplier infrastructure of the manufacturing industries.

Is there something beyond the subprime crisis, which will have the dramatically influence the financial services industries. If such happens, the industries (but others as well) should be prepared.

Back to architecture beauties. FS industries might consider the 80/20 rule regarding coverage and functional fit. This would allow the copy & adopt process. In that case business architects should learn about the copy “from” instead of the copy “into”. Similar in shifting the focus towards the needs from the desires.

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