2010 International Conference on Management Science and Information Engineering (ICMSIE 2010)
Bridging the gap between Technology and Business within Corporate Governance of Enterprise Focus areas of special attention in the technology domain
Igor Aguilar Alonso, José Carrillo Verdún, Edmundo Tovar Caro School of Computer Science, Technical University of Madrid, UPM Madrid - Spain
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[email protected] Abstract—This paper describes the importance of technology within the corporate governance of companies, representing two main domains in enterprise architecture: business architecture and IT architecture, helping to bridge the gap between the two main domains. IT Architecture is considered as a key domain in corporative governance, giving the adequate support to business architecture that helps to improve business. Due to evolution in markets of products and services, and technological changes, as well as the strong impact of technology on all areas of business, it is necessary to clearly distinguish the importance of the IT architecture domain, as well as focus attention on the different areas related in the technology domain. Keywords- Corporative Governance, Enterprise Architecture; Business Architecture; IT Architecture; Architecture Domain
I.
INTRODUCTION
Today, due to technological progress and the strong impact of technology on a wide range of business issues in different industries, including healthcare and life sciences, finance, business consulting, communications, transportation, civil engineering and urban planning to develop “Smarter City”, improving business performance by conserving natural resources, reducing CO2 while boosting business efficiency, and other areas of applications, these areas focus on the service sectors. All service systems are a blend of people, technology, shared information (language, laws, measures), as well as organisations (both internal and external) connected by value propositions [1]. With all these disciplines, as they are related to understanding, designing, improving, and scaling service systems, it is necessary to take into account the importance of technology, and we must distinguish clearly the wide domain of technology. Currently Information Technology (IT) plays an important role in relation to business, so most companies try to maximize value from IT investments by aligning IT and IT-enabled business process with business strategy. But business strategy is multi-faceted, encompassing decisionmaking as to which markets to compete in, the position of the company in each market, and which capabilities to develop and leverage.
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In this paper we intend to underline that business must have a solid base to properly implement business processes, which is precisely why enterprise architecture (EA) is assuming a relevant value in permitting the support of operation processes and good management within companies supported by IT; the EA and IT are closely related to achievement of business success. For the success of business with the support of IT it is necessary to consider the EA, which should provide a framework to ensure that company objectives, policies and IT objectives are consistent and reflect appropriate decisionmaking related to the construction, implementation or change of information systems to provide reasonable assurance standards for internal communication processes, nomenclature data, data representation, structure data; and information systems must be consistent and properly applied to the company. This EA-oriented approach requires the Chief Executive Officer (CEO), as directly responsible for the conduct of the company business, to work closely with the Chief Information Officer (CIO) as one of the collaborators with the highest strategic level in the organization, which enables CIOs to take responsibility for their government to ensure that the EA is used to identify the problems approached by the architecture and the architecture used for the following cases: decision-making, change management, improve communications, ensure that information technology is acquired and information resources are consistent with business planning. The structure of this paper is as follows: Section (I) is an introduction to IT and enterprise architecture. Section (II) defines corporate governance of enterprise and its components. Section (III), defines enterprise architecture and its domains. Section (IV), business architecture. Section (V), IT architecture. Section (VI), focus areas of special attention in the technology domain. Section (VII), some conclusions are drawn, which may assist other companies to create their own models of EA. II.
CORPORATE GOVERNANCE OF ENTERPRISE
Corporate governance is one of the topics of great relevance to business. Good corporate governance is important for professional investors: according to McKincey,
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professional investors are increasingly prepared to pay big rewards for investments in companies with high governance standards [2]. In today's world corporate governance is vested in a Board of Governors which is responsible for protecting the interests and rights of shareholders and other stakeholders among them (employees, customers, creditors).
Figure 1. Corporative Governance
The board of directors is the highest authority of government, together with key senior executives of the company, and is responsible for developing business strategies, good governance, implementation of the principles of government, ensuring the efficiency of organizational processes on key assets of the company as shown in Figure 1. Once the strategies have been developed and approved by the board of directors, then executive officers are responsible for their implementation and compliance, using all the key assets of the company. The Organization for Economic Cooperation and Development (OECD), published, in 1999, the principles for corporate governance which define it as the structure for determining organizational objectives and monitoring performance, to ensure that objectives are attained [3]. The government is defined as developing and managing consistent, cohesive policies, processes and decisions [4]. The principle does not change with time, but the characteristics of corporate governance are as follows: • Organizations are required to define their structure and business processes more formally and collaboratively .The responsibilities need to be clearly defined and the work must be automated, eliminating manual processes and solid decisionmaking.
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Levels of sophistication differ between organizations. The size of industry can have an impact on an organization in its governance practices. • The complexity of information tends to increase government processes, beyond financial reporting. As a result of participation in global markets, organizations today must consider the impact of global laws. In addition, expanding business networks, such as suppliers and partners, and also the impact of how information and decisions are managed. Below is a brief description of the most important elements of corporate governance and key assets of the company. A. The Board of directors The board of directors or executive board of the enterprise has the ultimate executive responsibility for the formulation and implementation of the group’s business strategy and for sustainable value delivery to its stakeholders. The underlying responsibility of the board of directors is to supervise and advise management while representing the interests of shareholders. Major strategic issues including merger and acquisition opportunities, negotiating large outsourcing agreements and making sizable investments in technology, require the board’s participation and approval. Because technology touches on each of these strategic issues, the board has a renewed interest in IT [5]. The board of directors is central to the delivery of value, together with other critical components, such as information technology, which is the main key to successful business. This Board of Directors, which meets several times a year, is chaired by a senior executive and has amongst its active membership a minimum of three main senior executives together with the CIO of IT. B. The senior execitives The senior executives have the mission of properly conducting the company’s business. Each of these senior executives plays a major role within the business, and the sum of their knowledge and ideas will lead to business success. Figure 1 shows the senior executives involved in major decision making for business success. All organizations have specific goals and objectives that they are trying to accomplish. The senior executives devise strategies and formulate policies to ensure that these objectives are met. According to The CEO Study conducted by IBM [6] and its other senior managers, a vision is offered of the business and the features considered essential for transforming business growth and success in the years to come. Not only do these studies summarize the sentiments of senior executives of the business leaders in companies of different sizes, sectors and regions around the world, they also illustrate the convergent thinking that is occurring on the Executive Board and the powerful implications for CIOs. Among the most important senior executives involved in planning and decision making in a corporate enterprise we have the following: Chief Executive Officer (CEO), Chief
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Information Officer (CIO), Chief Financial Officer (CFO), Chief Operating Officer (COO), and Chief Human Resources Officer (CHRO); their roles are described in this paper. IT, senior executives and board of directors contribute to the success of the business [7]. The senior executives are responsible for their respective business units: within each unit there are several teams that are responsible for the implementation of various operational processes of the business of the organization. C. Key Assets of Corporate Governance Within the corporate governance in the enterprise there are key assets that are necessary to perform all operations related to business. [8]. These key assets play an important role in the company, all together allowing the execution of business processes and activities to achieve the objectives of the company, under the direction of senior executives. Among the most prominent are the following: 1) Financial assets: Made up of cash money capital, cash flow, cash, investments. Liabilities, assets and other receivables. 2) Human resources:comprising people, skills, carer paths, preparation, reporting, mentoring, skills and others. These are positioned at the intersection of strategy and execution, in each business unit, and the success of a business depends largely on the capabilities and skills of each member or team to perform certain tasks. 3) Physical assets: These assets are made up of office buildings, industrial plants, equipment, maintenance, security, use, and others assets necessary in the company to complement business operations. 4) The assets of Relationships: include relationships within the enterprises as well as relationships with external companies, brand and reputation with customers, supplies, business units, regulators, competitors, channel partners and others. 5) The information and IT assets:made up of digitized data, information and knowledge about customers, processes performance, finance, information systems and others. 6) Intellectual Property Assets: Related to the intellectual property of the company, including products, services and knowledge of formal processes patented, copyrighted, or embedded in the enterprises and systems. The government of key assets of the company is carried out by various organizational mechanisms; among which are the following: structures, processes, committees, procedures and audits. Some mechanisms are unique to specific government of an asset and others may affect multiple key assets of the company. After reviewing the structure of corporate governance of the company, taking into account their key assets for the operation, it is necessary to represent it in architecture, known as enterprise architecture. III.
CIOs because of the hard decisions to make in relation to resources, investment, information, applications and technology. For that reason, to manage all these elements, enterprise architecture is required. The EA helps communication of key elements that explain the operations of an organization, enabling their directors to have a clear idea about which cases should be detailed to achieve their desired goals. In this way, the entire organization is represented, expressing the alignment of the objectives, vision, strategies, principles of governance, operational processes, organizational structure, automation aspects, such as information systems and technology infrastructure [9]. The objective of the EA is to be a consistent reference for business and IT planning, for decision-making in large enterprises globally integrated, through the relationship of various business and technology stakeholders, including support for strategic planning, new initiatives, project planning, planning for the optimization of operations, business units, integrated operation teams, the activities of the processes to define a single integrated view of strategic architecture and mapping the route, ensuring conformity to the architecture, while allowing us to state exceptions for unique business requirements. This also serves to find new business changes with appropriate IT solutions. The EA is responsible for defining and maintaining architectural models, governance and transition initiatives necessary for effective coordination of semi-autonomous groups toward common business and IT goals [10]. The EA will accelerate business transformation and strengthen linkages and relationships between business and IT. The management of senior executives view EA as a critical component in making decisions that are consistent with the strategic plan for their organization. Architecture can be defined as the representation of Conceptual Framework components and their relationships at a point in time. Discussions of architecture have to be traditionally focused on technology cases. The EA is taking a broader view of business, considering the information associated with such businesses [11]. A. Enterprise architecture domains Various organizations involved in the business of the industry, services, public sector and others; have developed different EA framework with time, for this reason, from the IT point of view, an approach is necessary which clearly distinguishes two domains for the EA. These domains will be coordinated in order to bridge the gap between business and technology. This enterprise architecture has two main domains: (1) business architecture, and (2) IT architecture as well as that represented in figure 2, adapting the model of EA development [12].
ENTERPRISE ARCHITECTURE
The EA is perhaps one of the most highly topical ideas on the agenda for IT organizations, and especially for the
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IV. BUSINESS ARCHITECTURE This architecture is a high-level analysis of work performance, to support the business mission, vision and objectives. The business processes can be described by the decomposition of processes derived from business activities to determine the information needs and processes for the organization. The analysis of business processes determines information needs and processes for the organization. Each business process should incorporate the management structure of the operation, known as the cycle of plan, do, check and act. Business architecture is responsible for managing design, development, implementation and improvement of the architecture of the company business, to deliver value to businesses. Business architecture must be supported by the Business Process Management (BPM). It also describes the core components of business processes that support the mission of the organization. The components for the architecture of the business units usually focus on the requirements of reporting external, internal and functional areas. From the perspective of discretionary standards that the company can select as part of these architectures, standards should be used for policy-based national and international industries: standards which are to provide reusability of assets and migration from current environment to a proposed environment, and standards for sharing information. From the perspective of mandatory standards, a company must adhere to the best business practices and legislation. V.
Figure 2. Enterprise architecture model
In this figure, we see the two main domains of enterprise architecture. In the domain of business architecture, implementation, the type of organizational structure in the company, business processes in different business units must be taken into account, as well as other aspects to be considered. The domain of IT architecture is responsible for supporting business architecture, and it is necessary to take into account the 4 types of architectures that shape it. The selection of the architecture for the technological infrastructure must be adequate for the company; the type of application architecture should be implemented for the development of business, the type of model of the architecture of the data to be stored, the type of information models to be delivered to senior executives, board of directors and other users. This IT architecture domain is responsible for managing the design, development and implementation of all technology assets to execute business operations, designed in business architecture, as well as the improvement of each of the architecture models to deliver value to businesses.
IT ARCHITECTURE
Considering how IT supports business principles, whose principles state implicitly or explicitly the requirements for process standardization and integration in an enterprise. It is also considered as the organizing logic for data, applications, and infrastructure, captured in asset of policies, relationships, and technical choices to achieve desired business and technical standardization and integration. [13]. These architectures, as a whole, are those that serve to give adequate support to business architecture, transforming business opportunities and opportunities for innovation in design solutions, implementation and maintenance. The IT architecture is considered as an integrated set of technical choices to guide the organization in satisfying business needs. The architecture is a set of policies and rules that govern the use of IT and plot a migration path to the way business will be done (includes data, technology, and applications) [14]. The following figure 3 shows those IT architectures and describes each of them and the relationships between them:
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automation and procedures oriented to information systems that support information flows and produces and distributes the information according to the requirements of the architecture and standards. The components for architecture applications refer to specifications, requirements, applications, modules, databases and procedures; this architecture defines the approaches to the development of information systems, such as an approach to object orientation, and application development of languages, such as the use of java or ActiveX to design methodologies and flow processes. Standards must be the business of software development.
Figure 3. IT Architecture Relations
A. Information Architecture Information architecture involves the definition of a framework that reflects the "Model Company" from the point of view of information and processing [15]. The information architecture (flow of information and relationships) analyzes the information components used by the organization's business processes, identifying the information used and the movement of information within the organization. The components of the architecture include original documents, data, reviews, and responsible organizations. The discretionary standards include safety standards, rules and procedures to ensure the integrity of information. Other standards which a company must take into consideration are those of government and / or industrial regulatory requirements. The relationships between the various flows of information are also described in this component and indicate where information is needed and how information is shared to support the missions of the function. This level represents the flow of technical information and management as well as the impact of time on the integrity of information and meaning. B. Application Architecture Application architecture, also known as information systems architecture, represents applications and their relationships that allow managing data and supporting the execution of business functions, without specifying the technology to be used [16]. This architecture identifies, defines and organizes activities to capture, manipulate and manage business information to support mission operations and the logical dependencies and relationships between business activities. This establishes a framework to meet the requirements of specific information given by information architecture. It uses its components to acquire and process data, enables
C. Data architecture Data architecture (description of data and relationships), identifies how the data is kept, their access and use. At a high level, it defines the data and describes the relationships between data elements in information systems in organizations. It also defines interfaces for application system components, for storing or locating information required to process, or storage for subsequent application systems. The components of this architecture may include data models describing the nature of the data underlying the business and information needs, such as physical database design, database structures and files, data definition, data dictionaries and data elements that support the information systems of the company. In this architecture it is important to minimize data redundancy and support new applications. The standards that the company can select as part of the architecture are for compatibility of database and files, specifically in the areas of interest shared processes. D. Technology Architecture Technology architecture (infrastructure and communication technology) describes and identifies the architecture which links information systems, service network and components, including operational characteristics, capabilities, and interconnections of the hardware, software and communications (networks, protocols and nodes). This represents the connection diagrams of the physical infrastructure of IT, provides necessary support requirements and must reasonably accommodate and connect these assets in an integrated manner. From standards for this architecture, a company can select the standard Open System Interconnection Reference Model (OSI), data exchange standards, hardware, network and portal architectures and optical storage. VI.
FOCUS AREAS OF SPECIAL ATTENTION IN THE TECHNOLOGY DOMAIN
During the last century, IT architecture was not universally accepted in the context of research and industry [17]. Today great preoccupation exists in company technology to improve business objectives in alignment with technology objectives in order to achieve optimum performance in the minimum time and at the lowest cost.
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Therefore, technology companies are focusing their attention on the research of the following areas. • Technology that creates new business value; in relation with optimization, risk and compliance, business intelligence, information-based medicine, services and software to improve business performance, social networking, modelling and data analysis, services in science, management and engineering, tools for globalization and others. • Innovative software.; in relation to new expressive ways of manipulating computers, programming models and tools, language understanding, ontologies, real-time systems, intelligent imbedded systems, web 2.o, 3D internet, and others. • New types of computers; in relation to the use of massive parallelism for non-scientific / engineering applications (including those applications), green computing, nanotechnology and post-CMOS devices for digital logic, memory, communications and others. • Interdisciplinary projects that create social and business value; in relation to water and energy modelling and management, management of computer centers virtualization, autonomic computing, cloud computing, internet data centers, green systems/data centers, green computing, and others. All these focus areas in the broad technology domain are related to enterprise architecture in order to achieve the strategy objectives of the company.
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VII. CONCLUSIONS The conclusions that can be drawn are as follows: • Today business visions are changing due to the great impact of IT, which facilitates their growth, reduces costs and increases their return on investments. • To achieve success within corporate governance of enterprise, it is necessary have an organizational structure well defined, with its boards of directors, senior executives and key assets for the good operation of business processes. • Corporate governance is represented through the enterprise architecture that has two main domains: business architecture and IT architecture. To bridging the gap between business and technology is necessary that the business objectives are aligned with IT objectives. • Today IT architectures play an important role in business, is responsible for supporting for business processes implemented trough in architecture business. • In some cases, the companies need advanced technology to achieve the desired goals, exist broad technological preoccupation for companies in focusing their attention company on the research of the following areas: Innovative software, new type of computers, technology that creates new business
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