Why IoT is changing Enterprise Architecture

[tl;dr The discipline of enterprise architecture as an aid to business strategy execution has failed for most organizations, but is finding a new lease of life in the Internet of Things.]

The strategic benefits of having an enterprise-architecture based approach to organizational change – at least in terms of business models and shared capabilities needed to support those models – have been the subject of much discussion in recent years.

However, enterprise architecture as a practice (as espoused by The Open Group and others) has never managed to break beyond it’s role as an IT-focused endeavor.

In the meantime, less technology-minded folks are beginning to discuss business strategy using terms like ‘modularity’, which is a first step towards bridging the gap between the business folks and the technology folks. And technology-minded folks are looking at disruptive business strategy through the lens of the ‘Internet of Things‘.

Business Model Capability Decomposition

Just like manufacturing-based industries decomposed their supply-chains over the past 30+ years (driving an increasingly modular view of manufacturing), knowledge-based industries are going through a similar transformation.

Fundamentally, knowledge based industries are based on the transfer and management of human knowledge or understanding. So, for example, you pay for something, there is an understanding on both sides that that payment has happened. Technology allows such information to be captured and managed at scale.

But the ‘units’ of knowledge have only slowly been standardized, and knowledge-based organizations are incentivized to ensure they are the only ones to be able to act on the information they have gathered – to often disastrous social and economic consequences (e.g., the financial crisis of 2008).

Hence, regulators are stepping into to ensure that at least some of this ‘knowledge’ is available in a form that allows governments to ensure such situations do not arise again.

In the FinTech world, every service provided by big banks is being attacked by nimble competitors able to take advantage of new, more meaningful technology-enabled means of engaging with customers, and who are willing to make at least some of this information more accessible so that they can participate in a more flexible, dynamic ecosystem.

For these upstart FinTech firms, they often have a stark choice to make in order to succeed. Assuming they have cleared the first hurdle of actually having a product people want, at some point, they must decide whether they are competing directly with the big banks, or if they are providing a key part of the electronic financial knowledge ecosystem that big banks must (eventually) be part of.

In the end, what matters is their approach to data: how they capture it (i.e., ‘UX’), what they do with it, how they manage it, and how it is leveraged for competitive and commercial advantage (without falling foul of privacy laws etc). Much of the rest is noise from businesses trying to get attention in an increasingly crowded space.

Historically, many ‘enterprise architecture’ or strategy departments fail to have impact because firms do not treat data (or information, or knowledge) as an asset, but rather as something to be freely and easily created and shunted around, leaving a trail of complexity and lost opportunity cost wherever it goes. So this attitude must change before ‘enterprise architecture’ as a concept will have a role in boardroom discussions, and firms change how they position IT in their business strategy. (Regulators are certainly driving this for certain sectors like finance and health.)

Internet of Things

Why does the Internet Of Things (IoT) matter, and where does IoT fit into all this?

At one level, IoT presents a large opportunity for firms which see the potential implied by the technologies underpinning IoT; the technology can provide a significant level of convenience and safety to many aspects of a modern, digitally enabled life.

But fundamentally, IoT is about having a large number of autonomous actors collaborating in some way to deliver a particular service, which is of value to some set of interested stakeholders.

But this sounds a lot like what a ‘company’ is. So IoT is, in effect, a company where the actors are technology actors rather than human actors. They need some level of orchestration. They need a common language for communication. And they need laws/protocols that govern what’s permitted and what is not.

If enterprise architecture is all about establishing the functional, data and protocol boundaries between discrete capabilities within an organization, then EA for IoT is the same thing but for technical components, such as sensors or driverless cars, etc.

So IoT seems a much more natural fit for EA thinking than traditional organizations, especially as, unlike departments in traditional ‘human’ companies, technical components like standards: they like fixed protocols, fixed functional boundaries and well-defined data sets. And while the ‘things’ themselves may not be organic, their behavior in such an environment could exhibit ‘organic’ characteristics.

So, IoT and and the benefits of an enterprise architecture-oriented approach to business strategy do seem like a match made in heaven.

The Converged Enterprise

For information-based industries in particular, there appears to be an inevitable convergence: as IoT and the standards, protocols and governance underpinning it mature, so too will the ‘modular’ aspects of existing firms operating models, and the eco-system of technology-enabled platforms will mature along with it. Firms will be challenged to deliver value by picking the most capable components in the eco-system around which to deliver unique service propositions – and the most successful of those solutions will themselves become the basis for future eco-systems (a Darwinian view of software evolution, if you will).

The converged enterprise will consist of a combination of human and technical capabilities collaborating in well-defined ways. Some capabilities will be highly human, others highly technical, some will be in-house, some will be part of a wider platform eco-system.

In such an organization, enterprise architects will find a natural home. In the meantime, enterprise architects must choose their starting point, behavioral or structural: focusing first on decomposed business capabilities and finishing with IoT (behavioral->structural), or focusing first on IoT and finishing with business capabilities (structural->behavioral).

Technical Footnote

I am somewhat intrigued at how the OSGi Alliance has over the years shifted its focus from basic Java applications, to discrete embedded systems, to enterprise systems and now to IoT. OSGi, (disappointingly, IMO), has had a patchy record changing how firms build enterprise software – much of this is to do with a culture of undisciplined dependency management in the software industry which is very, very hard to break.

IoT raises the bar on dependency management: you simply cannot comprehensively test software updates to potentially hundreds of thousands or millions of components running that software. The ability to reliably change modules without forcing a test of all dependent instantiated components is a necessity. As enterprises get more complex and digitally interdependent, standards such as OSGi will become more critical to the plumbing of enabling technologies. But as evidenced above, for folks who have tried and failed to change how enterprises treat their technology-enabled business strategy, it’s a case of FIETIOT – Failed in Enterprise, Trying IoT. And this, indeed, seems a far more rational use of an enterprise architect’s time, as things currently stand.

 

 

 

 

 

 

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Why IoT is changing Enterprise Architecture

4 thoughts on “Why IoT is changing Enterprise Architecture

  1. I believe we are at another turning point and facing the same challenges faced a decade ago when smart phones were on the rise, a highly heterogeneous unmanaged devices running different technologies creating a nightmare to maintain a consistent experience for all users.

    Yet – and this is my opinion – there is a standard just around the corner, and it’ll not be the result of conscious effort by an enterprise instead perhaps it’d be the result of the effort of many smaller companies resulting in a de facto industry standard.

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    1. @System Analyst – you may be right, but there is no reason (apart from cultural) why any large organization couldn’t come up with its own de-facto standard optimized for its own situation – there’s certainly enough solid technical building blocks out there.

      But large enterprises still largely view technology like a commodity that must be tightly managed and controlled – this favors dependency on vendors over internal innovation, and a least-common-denominator approach to technology across whole sectors. It is more likely we will see the steady decomposition of firm’s capabilities to smaller, tech-oriented providers (external or acquired) who collectively have the problem nailed.

      I guess this is just a roundabout way of agreeing with you.. 🙂

      Liked by 1 person

  2. In financial services enterprise architects were ignored for many years because banks (especially investment banks) created products that were by design non-standard. By doing this they could create a mystique around these products and charge enormous margins as a consequence. The financial crisis laid that bare and now these complex products have all but disappeared leaving only the simple products with consequently smaller margins. The new regulations now require more standardisation pushing much of the OTC market to look like exchange traded products. However the banks failed to create standardisation around even the most simple products during the “gravy years” hence even a straightforward interest rate swap (first developed around 1985) cannot be handled in a straight through processed manner in most of the large banks.

    Rather belatedly, banks have understood that they need to understand and standardise the “units of knowledge” around these products and ensure that this facilitates a clear structure that their technology departments can use to ensure the products can be more efficiently processed through their organisation….this seems to be appearing more within the Chief Data Officer function, but in reality is the enterprise architecture function they derided for so long.

    I like the IoT analogy here as I believe that many of the Fintech startups will start to provide small components of the end to end lifecycle (within the eco-system)…as you state above “picking the most capable components in the eco-system around which to deliver unique service propositions”. The large banks will find themselves being eaten alive, only realising once its too late that they are left with a small part of the eco-system without the revenue to support it.

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    1. @Gavraq – very insightful comments. I think the same can apply to all the excitement around blockchain: it effectively enforces standardization of contracts but from a technical innovation and commercial opportunity perspective, rather than from a regulatory perspective. Regulators should find all the chatter around blockchain quite interesting, as for the first time the regulators interests and the interests of fintech innovators will start to align…

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