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Solvency II regulatory initiative aims to normalize the way Insurance companies will measure risks, will manage their portfolio in accordance and will report on their record to control authority.
Such a big change may lead companies to reorganize their steering processes : some driven by internal momentum willing to get market differentiators, some others driven mainly by regulatory constraint. Whatever the vision, this will end up with major business transformations and, for some companies, with industry recombination due to portfolios optimization.

Hopefully, most of companies have launched transformation programs and, as Deloitte reports in its 2011 survey, more than 52% of UK companies had reached implementation phase by 2011 with 75% among big companies. Moreover the same report shows that budgets are expected to be contained between 1,2m and 12m euros, larger amounts being intended only for biggest organizations.

But, if boards seem to be aware of Solvency II new responsibilities and opportunities, projects and programs still undergo uncertainties and questions :

• on capital calculation methods which still have to be tuned and for some of them fullly specified
• on data which have to be collected, processed, checked and validated for each calculation method
• on organization which have to get responsibilities of subprocesses and define how they intend to performe them
• on management which have to prepare people and to request investment for resources

Finally, companies undergo 2 opposing forces : strong dependancies between Solvency II aspects and fragmentation forces coming from solving approach which have been selected to deal with complexities : technical (actuary, computing, business,…) and social (actors, governance, influence,…). Technical fragmentation comes from necessity to adopt partial analytical approach. Social fragmentation comes from business mindset, culture, influence competition.

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CIOs don’t need to read any comprehensive Chaos Manor report to know that project deliveries come always in late and are never or rarely in advance. It is like flights or train travels, things always happen in such way.  They undergo asymmetric events. If we try to get measures of it, we could find that when projects portfolio undergo 2 months delay in average on delivery planned time, there is no or few chance any project will be above 10 months delay, but real chance to have 30 above 2 months for hundred projects portfolio.

IT budgets always increase year after year. It is their fate since new projects increase IS functions and, consequently, yearly maintenance. To cope with this situation, CIOs have settled portfolio management process:they assess projects from several points of view -technical, business, risks, strategy…- and make priorities. It results in postponing low prority projects…

After a while, postponed projects pile up like sand and become high priority. So, IT budgets contain also low priority projects which have become high prority for budget year.

Finally, projects portfolio is viewed by Business units as postponing facility on behalf of IT Division. No matter Business units are main projects issuers who make IT budget growing. Moreover they use to complain for additional IT costs though they are not accountable for expected gains which projects business cases have set under their responsibility.

When a project is delayed, costs usually increase in proportion of the time. So current IT capital expenditure budget is also made of slipped projects pieces as current IT operations expenditure budget still contains projects slipped since they have already rolled out platforms.

As current IT budget is flood of slipped past projects, less and less room remains for new ones. Negotiations are hard. Pure IT projects are scrutinized and often postponed if they have not a strong costs saving business case. So are pieces around Business projects that not seem to be required to Business even though IT has stated they are highly desirable.

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Change approach

European economic prospects are gloomy. Just have a look to newspapers frontpages if you are not yet convinced. In such context, as I wrote once, best strategy would be to “be prepared to start again“. That means to be aligned with customers expectations and to be competitive when business will start, in short, having a good position, on good place, at good price. Yet every european companies have cut at first their 2012 budget to save cash which threatens to rarefy.

Then, for most of companies, business equation will be : transforming themselves while saving capital spending

Currently, Europe is hit by a severe liquidity crisis which have its roots in questionable solvency of states which spread to banks. Financial european world does not trust each other and borrows liquidities at very high interest rates which darken states and banks solvency more and more. How to get out this revolving door circle is the question which hogs every european summits for months.

What is taking out from all that: the urge to restart cash machine by restoring economic growth based on enterprises competitivity. Several medicines are contemplated : euro depreciation which lower prices but rise fears of capital shrinking and more questions on solvency, frugal states budget and tax cuts which mitigate unit labour costs but rise fears on social model and states solvency. Anyway, all this would take time and is drawing a bleak outlook for next years.

Then, according to their own prospects enterprises would follow 2 strategies :

• be prepared : get slimmer and stay prepared for economy recovery
• be active : contribute to restore growth and transforming themselves to be more competitive

Then how to get transformed while saving capital expenditure ?

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Most of enterprises expect from their IT Division to develop and maintain information and communications infrastructure which includes networking and telecommunications, desktop computing, business management information systems, systems for technical information and computer security. This is not the less classical in governance landscape. Then, IT Divisions have gathered excellent engineers, among them architects, who continuously arrange technology for the best of Business people. When business is looking after better machines to manufacture quickly engine parts or better systems to conduct more effectively business cases, it is supported by an IT Division able to deal with all technical questions. All seem to be fine for the best… except that during the pas ten years we crossed the road little by little.

Though business is now looking after whole plants which would be able to manufacture several type of products or whole systems which may be used for different types of business cases, investment choice is conducted the same way it was when we were on the other side of the road. Business people relying on its business background try to figure out how a whole plant should work and forward technical issues to engineers and IT Divisions. Would you entrust the design of a business building to business people ? You have the risk to get a warehouse with a row of tables and not much heating nor air conditioning except for exectives. I am not kidding, I really saw it in a high tech company.

By now, for such a design, it is usual to hire architects for this job, since everybody knows that people are more effective in an environment build for them, not only considering the job, but considering that they spend a fair part of their life doing the job. Even plants are arranged specifically around people doing their job, which contribute to high productivity and high quality. This is the result of a mix of comprehensive manufacturing knowledge, social psychology, building knowledge, business understanding, security all things which don’t fit in one head only. Architecure is the field of knowledge which gather input of all these fields to find effective solutions for buildings.

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Who did not attend to the CESAMES conference at “La Maison des Arts et Métiers” ? According to me, a few as the place was crowded and requiring to get more chairs than prepared. Why such a success ? CESAMES is a business association which promote an original vision regarding Architecture. It sees System Architects, Enterprise Architects, real time systems Architects, as all of them Architects with common practices and methods.

Architects are special people who cook their own methods and are reluctant to share views.  But, when it is worth and possible, they are keen to see what happens in the neighbours kitchen. According to the crowd, it seems that the CESAMES kitchen is valuable as may testify its website. Moreover, during the show, they appeared like a close-knit team, always ready and entusiastic to share their commitment to Architecture. Because they are convinced that is the main challenge of the XXIst century.

The conference was unusual. Few traditional speakings, except the well known professeur Jacques Printz which talk about architect, uncertainty and chaos. Most part of the conference has been taken by workgroups, one on a System Architecture case from Claude Feliot (Alsthom Transport), the other on an Enterprise Architecture case from Jean-Marie Faure (Crédit Agricole). Each attendee was expected to follow both of them.

Very good formula of Architectures Design experience which makes feel attendees how closed they are, every subjects which filled conversations during the closing cocktail.

From my point of view this vision is very interesting and worth to support. System Architecture practitionners may help Enterprise Architects for explaining they really deal with functioning enterprise complexity and not with application dataflows complication.

And not the least, the team gathered around Daniel Krob spread entusiastically values of being open minded, sharing knowledge and practices, transparency.   

• Most of big french companies front-office are machines : internet services, interactive vocal responders. And when it is not automated, call center operators are difficult to reach, they have not the good level of knowledge to answer customers questions, and customers have still to pay through call  taxation. In other cases, delivery is done  by employees or subcontractors who are not deemed nor able to endorse company point of view.
• .
• Trade off is on one hand rising the number of services offered to customers and on the other mitigating front end costs. Then, all operations are executed processes unless a grain of sand requires a human actor to fix a little unattended situtaion which may become pain in the neck for a customer. (cf comte bougainville conference)
• .
• This situation is often encountered with telecom operators, railway operators and in some respect flight companies.
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Often I wonder why people start thinking about Enterprise Architecture only when “Information system” word comes on the table. All seems defined and almost decided, when the baton is passed to IT people who are requested to manage an ERP system integration project or a CRM one. Then, the IT people worry is upon alignment, asking how to implement the selected  solution to best meet the business needs and requirements.  They go back to Business to capture and model requirements in details,  and they plan accordingly integration and roll-out. Around there, an Enterprise Architect brings a global point of view which insure that no impact have been missed in the project plan.

When the project scope comes to include several IT solutions, it becomes a true challenge, even for experimented solution architects, to drive such a project.  So, when enterprise architect has been called, it has to roll-back to business expectations to produce a realistic business plan.  Indeed, to sort out functioning enterprise complexity, enterprise architect ought to work at usages level.

Who could doubt of functioning enterprise complexity ? Enterprise may be compared to a knot of flows. For each of them,  the enterprise perform some activities and manage those done by partners or contractors.  For example, in the RH flow, collecting applying forms and qualifying them may be done by a subcontractor, or payroll activity may be outsourced. If it does not perform an activity required for a flow, at least enterprises need to control it. The same occurs for customers relationship flow, end customers may not be direct enterprise customers, nevertheless the entire flow has to be controlled.

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EPITA is a graduate school of computer science. Last week, I made the presentation below as an introduction to Enterprise Architecture. Some French remains, but few. Click on this link to get an enlarged view

Last month, I attended to the Foundation Cigref symposium on Digital Innovation for Business Transformation. I won’t tell you a whole story that you are able to listen there : 2nd symposium. I would just outline some special moments.

Françoise Mercadal-Delasalles, Head of Human Resources at Socgen, outline how the bank current strategy based on innovation and on weaving new ways of customer relationship, is in line with Cigref Foundation researches objectives which are to show how  usages of Information Technology sustain business innovation.  I am noting too another similarity on strong international  culture of Socgen and Cigref Foundation which may claim to be a first class international think tank on Information Technology.

Taobao.com, leading Chinese company in e-commerce, has just entered the top 100 companies with the highest numerical value in the unlisted world. Lu Peng his vice-president told its impressive story. I had the opportunity to discuss a little bit about its terrific numbers.  If we have a look beyond  the business size indicator we  would discover soon that China is at the first stage of e-Commerce which is “produced locally-sold locally”. All remain to be build for next stages which are “produced remotely-sold locally”, especially a strong logistic business to bring goods and services to the costumer premises.

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Most of CIOs and managers see as an achievement to increase the competences of their organisation. They have better chance to outperform their goals and are stronger to withstanding the setbacks. Moreover, the collaborators who crossed a gap, improve their loyalty to them and to the company. They lower they attrition rate.

Yet, with architecture and enterprise architecture, you may be surprised. Although you have trained all your architects, you may not quicken the pace of changes in your information system architecture. This is because architects are doing only a small part of the architecture, main design and decisions are done by Project managers. Some companies have even coined the name “Technical Project managers” to promote architects to management position. This means that if you have invested to roll-out a framework like TOGAF among your architects, you may likely miss your ROI.

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