IT Architecture Chapter 3 AJ Raven Amrit Tiwana

IT Architecture Chapter 3 AJ Raven Amrit Tiwana University of Georgia 11 September 2021

2 Architecture 1 Strategy Governance Payoffs 3 4 1

Agenda Architecture as DNA Why It’s Often Blind to Strategy Inside the Blackbox – apps, infrast, data How Non-IT Adds Strategic Firepower 2

Jargon Decoder • IT architecture: A blueprint of IT assets in your IT portfolio describing what they do and how they interact • Enterprise architecture: How a firm’s corporate IT apps, infrastructure, and data are organized • Operational performance: An IT asset’s fitness of purpose, security, and maintenance costs • Evolvability: How easily an IT asset can do unplanned things • DNA analogy: Architecture is irreversible and constrains how it can be changed over its life. • Architectural tradeoff: Operational performance now versus evolvability later • App architecture: How an app is divvyed between a user’s device and a more powerful “server” machine • Data architecture: How your firm’s data assets are organized 3

Corporate IT’s Long Tooth • $1 spent on an IT system $7 on lifetime running costs – Outlive their intended lifespan by up to 200% • Most firms obsess over initial spending that first dollar wisely – Yet they overlook how today’s IT choices hurt their strategy later • IT architecture = technological DNA: Irreversible and preordaining – Predicates evolvability before first line of code is written – IT not designed to evolve = handcuffs strategy • Consequences: Operational and strategic • IT architecture choices today sow seeds of tomorrow’s strategy – Shortcuts debt paid in maintenance costs and business agility • Without non-IT managers’ contributions, strategic consequences escape firms’ radar screens – Otherwise choosing to delegate to your IT unit – Can make IT catalysts for competitiveness – Must know just enough to converse with IT folks 4

Illustrations I • Facebook versus Skype: – A new user costs Facebook 100 times ($5; 30 k servers) Skype – The difference keeps rising – Skype’s architecture embeds cheap scalability in its DNA • Secret to Siri’s smarts – 1950 s idea DOA until Siri took it mainstream – Siri’s architecture quit trying to get a user’s machine to do voice recognition – Instead hooked phones to the brainpower of a remote supercomputer • Obamacare’s debut crash – $2 billion system for 320 million Americans unable to handle 1100 – Architecture faux pas killed scalability • How Netflix streams to 100 million viewers without a hiccup 5 – 190 countries – 1/3 rd of all Internet data flow uses a “distributed” data architecture

Illustrations II • How Delta turned around without retraining its 80, 000 employees – Architectural choice in $1. 5 billion Delta Nervous System left employees’ screens untouched while replacing everything under the hood • How UPS grows the size of Fed. Ex every Christmas without losing a package – A data architecture decision made in the 1980 s – Also owns the largest fleet of jets and cellular networks • Why Apple, not Napster dominates the music industry – Poor architecture sued it out of business • How Target lost 110 million customers’ data around Christmas – Architecture choice left its refrigerator repair crew vulnerable • Why Google’s million servers need to keep growing – and consume the power of 250, 000 homes 6

Architecture as a Universal Translator Homeowner’s intent Strategic aspiration Envisioned home Operational strategy Prioritized needs Homeowner Prioritized business needs Architecture Costs constraints possibilities Constructed home 7 IT architecture Builder Costs constraints possibilities IT project Reconciles desirable vs achievable Line functions Matches IT unit

Architecture as DNA • Imprints traits of IT systems – Largely irreversible – Influences how they can and cannot evolve • Lurks in blind spot of non-IT managers ~ a technical decision Sole focus without non-IT involvement – But IT specialists are unschooled in its strategic consequences • IT architecture is a choice among tradeoffs Immediately visible – Business-IT conversations put them on the table early on Strategic • Scalability • Evolvability Now Visible later Bakes in inflexibility 8 Lo ng -te r rm m o Sh te rt- Operational • Fitness of purpose - Fast, reliable • Security • Maintainability Costs ~ 700% Business units should define 75% tweaking 25% bug-fixing

Good Architecture • Balances economical performance today and economical changeability later • Fulfils today’s requirements but plans for tomorrow’s expectations • Explains why some… – firms’ IT is more adaptable archrivals’ – can harness new innovations faster • Non-IT managers can help preserve enough of both 9

Corporate IT Architecture: The Big Picture • Describes how they fit together • Firmwide organizing logic of the three classes of IT assets 3 Apps Shapes 2 Data 1 IT Infrastructure Constrains 10 Enterprise IT architecture

How IT Complexity Paralyzes Agility • Business processes increasingly embedded in IT • Patchwork over decades, generations of technologies – Connected in idiosyncratic, poorly documented ways – Unpredictability of ripple effects impedes change – Brittleness a competitive liability Try tweaking this! • Inflexible IT inflexible business processes • If not a catalyst for business agility, it is an impediment App 1 App 2 App 3 ? Later Earlier 11 ?

Simplicity is the Ultimate Sophistication • • Antidote to complexity = simplicity Good enterprise architecture makes complexity manageable by 1. Increasing the autonomy of IT assets 2. Easing integration – Key idea: Lump things that change for same reasons and at similar speeds – – Apps that change faster to foster business agility Infrastructure that changes slowers costs Apps (faster) Infrastructure (slower) 12 Needs rapid change Needs cheap reliability

Thinking in Lego Blocks • Business processes are hardwired into apps Lego-like “modular” approach simplicity and adaptability – Conforming to Lego studs allows freely changing any brick and attach to others to create more complex structures – Apps relatively independent, interoperate via explicit interfaces … Permits tweaking and gluing an app back into the portfolio … Plug-and-play plug-and-pray … ~ Electric outlet: Interoperates with a toaster, coffee maker, or vacuum Two advantages 1. Enables tweakability and guarantees interoperability – One app can be tweaked in blissful ignorance of others – Enables value-stream connectivity without disclosing IP – Makes complexity more manageable 2. Contains a glitch in one app from destabilizing others – Permits business-driven innovation in IT apps without forsaking firmwide integration Like traffic lights, useful only when all apps comply 13

Lessons from Paris’ Architecture Common challenge: Preserve viable old assets while adding new ones Attribute Paris Corporate IT Portfolio Variety of… Buildings Apps Infrastructure Reliable roads, water, and electricity Reliable firmwide IT infrastructure Zoning Residential vs. commercial areas Operational vs. strategic apps Local character Neighborhoods with unique character Line functions with distinctive IT needs Mix of Preserved old & new buildings Legacy and new apps Governance Free citizens bound by city laws Autonomous apps bound by firmwide standards Evolution Gentrification of neighborhoods Once-strategic apps become operational Preservation Renovation of historic buildings Evolution of existing apps Assimilate… New immigrants New technologies 14

Layer #1: IT Infrastructure Architecture • Firmwide digital plumbing used by all line functions and apps – IT infrastructure architecture is their firmwide arrangement – Relatively stable, generic commodity, and rarely a competitive differentiator • • • Consumes over 50% of corporate IT budgets Must be reliable but economical – Key choice: Level of centralization Non-IT contributions 1. Is frugality or tailoring more important for their units? 2. Define “good enough” operational performance? • Costlier to build • Cheaper to run • Cheaper to build • Costlier to run Centralized 15 But underperformance liability Scale economies Firmwide integrations Concentrates vulnerability Decentralized Increases costs Tailoring to line functions Widespread vulnerability

Layer #2: App Architecture • App architecture = choosing where to locate three pieces – Like arranging pieces on a chessboard • Has irreversible operational and strategic consequences • PCs • Smartphone • Cash registers • Thermostats • Io. T devices User devices “Clients” Internet Three building blocks Interaction App logic ? 16 Powerful Central “Server” • Inputs • Display App’s core work ? Data Storage that app uses & produces Most business innovation here

Three Arrangements ~ App Architectures 1. Cloud architecture 2. Client-server architecture 3. Peer-to-peer architecture Centralized 17 Cloud Client-server Peer-to-peer Decentralized

#1: Cloud Architecture All heavy lifting is done on the server side via the “cloud” (e. g. , Siri) Clients can be feeble & cheap only input and display information – Reincarnation of 1960 s mainframe architectures Centralizes everything Easy maintenance only a central copy needs updating Low upfront costs ~ utility-like model Ongoing, variable operating costs replace upfront costs A single point of vulnerability Strategically undifferentiating (common providers) User devices “Clients” Central “Server” Internet Interaction App logic Capital-economizing for strategically unimportant apps 18 Data Storage

#2: Client-server Architecture Centralizes only data; clients do heavy lifting Most common in corporate portfolios; predates cloud Offers more potential for competitive differentiation Costlier if custom-built ($15 -$40 per line + 700% maintenance) Burdensome upgrades Two newer cloud-inspired variants enable building cheaper, faster custom apps 1. Service-oriented architectures: Some server-side functionality purchased as a service, integrated into custom apps 2. Micro-services: Many discrete generic services cobbled into an app’s logic User devices “Clients” Central “Server” Internet Interaction 19 App logic Data Storage

#3: Peer-to-peer Architecture No central server every client performs all app functions • Every client simultaneously acts as a little server for all other clients – Strength in numbers; every new client increases the hive’s collective capacity Infinite, dirt-cheap scalability – Reason for 100 -fold user cost difference between Facebook (cloud) vs. Skype (peer-to-peer) Zero control over user devices relegates it to niche, eclectic uses – Why Netflix needing scalability avoids it • Recommended only for scale-hungry apps that demand no control Interaction User App logic Internet User Data Storage User 20 User

Every App Architecture Figure 3 -14 is a Tradeoff • None optimal because every one of them involves tradeoffs • Non-IT managers must weigh in on… – Rank order operational priorities for your business activities – Acceptable tradeoff in operational performance to avoid a strategic penalty later? Speed None inherently more secure Reliability Operational Security Maintainability None inherently more evolvable Scalability Strategic Evolvability 21 Client- Server Cloud Peer-to-Peer

Layer #3: Data Architecture • Where is your firm’s data stored? Integrated firmwide data is the foundation for automation and analytics • Widespread problem: Proliferation of duplicated, inconsistent data Two causes: 1. Fragmented across apps (app architecture is for individual apps) – All apps collectively determine how a firm’s data assets are organized and where they are located – Data warehouses assemble copies of data to integrate siloed data ~ Library of Congress for books 2. Geographic dispersion - Two solutions To pick appropriate data architectures, non-IT managers must decide: 22 1. What data should be centralized firmwide for executing your core business processes or for analytics? 2. What data must be shared across your markets?

Two Solutions to Geographic Dispersion of Data Replication Copy 23 Partitioning Copy

Summary • • IT architecture is technology’s DNA Irreversibly preordains tradeoff between operational performance and evolvability – Operationally: Fitness of purpose, security, and maintenance costs – Strategically: Scalability and capacity to evolve in not-yet-anticipated ways • • • Complexity causes brittleness; thoughtful architecture lowers complexity IT architecture translates between business-speak and IT-speak to foster a shared purpose Enterprise architecture spans all three classes of IT assets in a IT portfolio 1. Infrastructure architecture: Centralizing lowers costs but decentralizing helps tailor it to diverse business needs 2. App architecture is how its three building blocks are split across the Internet 3. Data architecture determines data consistency and accessibility • Without non-IT involvement, architecture is strategically blind – Disengagement causes the wrong tradeoffs 24

Operational and strategic consequences of IT architecture Consequence What it means Operational performance Fitness of purpose How responsive it is (speed) and can you count on it (reliability)? Security How vulnerable is it to malicious tampering? Maintainability How cost-effectively can you make incremental improvements to keep it functioning smoothly? Strategic Scalability How cost-effectively can it grow with your firm’s needs? Evolvability Can it adapt to do things that it was never designed to do? 26

Operational apps Old infrastructure New infrastructure Fragmented data Centrally-accessible data Old Delta IT portfolio 27 Flight ops Tower Gate Baggage Delta DNS Figure from Sidebar Delta Nervous System New Delta IT portfolio