Friday, February 26, 2010

Holistic SOA - Financial Perspective

Expanding on the BSC. For each of the blocks in various perspectives, the BSC recommends having the following 4 things
Objective - Intent for conducting an activity that the organization plans to accomplish. These are vision/mission type of statements for an organization Ex: Reduce Cost
Initiatives - Projects / initiatives that the organization should embark on so as to achieve the objective
Measures - Various Performance indicators that will help in measuring the success of such initiatives. These indicators can be subdivided into Lead and Lag indicators. Put simply, if your objective is reduce your weight, then you need to reduce calories intake and burn more through exercise. In this case your weight is the lag indicator and the calories intake and calories burnt are lead indicators as they LEAD you to loosing weight (theoritically).
Targets - The specific targets that the organization would like to set for the current year or the next 3 years.

The important thing to understand is the Objective and Targets are specific to an organization whereas the Measures and Initiatives are not (atleast for a fairly horizontal effort such as SOA which is very much like software development i.e. business agnostic). Put another way, things like reliability may have different targets in different industries but how you measure it is typically the same

The reason I mention this is I will try to elaborate on the perspectives while focusing on the initiatives and performance indicators and try to link them together to form the lead lag chain but not the other two. My intention in doing that is to
  • Backtest the initiatives with what is going on the industry and supplement it based on the feedback
  • Facilitate a pallette of initiatives so organizations can choose to adopt along with the indicators
  • Backtest the indicators to firm up that list
 Financial Perspective

Ok, so financial perspective seems to be mentioning a lot of generic terms i.e. Reduce Cost, Generate Revenue etc. These are really generic to what every business does so how does SOA help in any of this ? Let me first of all take the chance to define what I mean by these terms so that we are semantically interoperable :). Let me start with defining these objectives first

Reduce Overall Cost - Reduce the total cost of creating a sellable unit. In the case of SOA this sellable unit happens to be the service. So this objective is about reducing
Change Channel Mix to Increase Revenue - Have a multichannel strategy where you can not only sell through your own website (B2C) but through other people's websites (B2B) and mobile based transactions to get to more people (and make more money)
Reduce Operating Expenses - Wait, didn't we talk about this in Reduce Overall Cost. Ok, the operating cost is the money required to maintain the transaction from Supply to the Demand. Simply put this is the cash (to supply) to cash (from demand) cycle. 
Reduce Risk - Reduce the risk in the transactions by being compliant with regulatory organizations i.e. PCI, PII, the usual suspects

So what initiatives can we do to achieve these objectives ? It depends on the IT operating model you have. These are defined below

Initiatives for Financial Perspective
Explanation for each of these initiatives are expressed in the table below.
Initiatives Definition and Purpose

In the next article I will try to break out the indicators for each of these initiatives

What do you think ? Are there any initiatives I am missing or have misplaced ? Are there more indicators than those that are currently expressed ? Any real world case study you are aware of ? Shoot back.

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