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JP Morgenthal

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The Reason Enterprise Architects Should Study Economics

Thus, it is here that Enterprise Architects, especially those we call Chief Architects, truly show their mettle

Economics is the social science that studies the production, distribution, and consumption of goods and services and aims to explain how economies work and how economic agents interact. The really interesting thing about economics is that getting the right answer requires that you pose the right question. That is, if you choose to make conclusions based on casual observations of explicit cause/effect relationships, then your conclusions will seem logical and sound to most who will review them. However, only by ensuring that the cause/effect relationship holds up in the case where casual variables are changed, can you be sure that you have truly observed a phenomena and that the cause is accurate.

I've been reading Freakonomics (looking forward to Super Freakonomics when I'm done), and I'm astounded at how well Steven Levitt's approach to Economics could fit the needs of Enterprise Architecture. For example, in Freakonomics, Levitt uncovers the truth regarding many long-held beliefs, such as most drug dealers live at the poverty line or how little parenting actually impacts the outcome of a child. What helped to uncover these facts was asking the right question and identifying which variables in the equation needed to remain static to ensure a valid outcome. In many of the cases, Levitt undermines what many other Economists, experts and pundits before him rolled out as proven facts and only due to his keen mind and his approach to formulating the problem domain was he able to uncover that which his peers could not. To keep us focused, I won't discuss here how he discovered why violent crime rates dropped in the 90's, but needless to say well-held beliefs as to why were shredded by Levitt's innate ability to target just the right variables and "run the numbers."

If we apply Freakonomics-type analysis to current information technology markets, such as Cloud Computing, based on experts and pundits one would readily equate that: a) public Cloud Computing models offer a more cost-effective way to acquire computing resources; b) it's better to rent software than to own it and; c) in the future, all computing will be paid for based on usage versus ownership. Similarly, if you read the headlines of many tech publications, you would believe that: a) everyone is doing SOA; b) there are many successful SOA deployments and; c) SOA is the only approach to developing systems that you should consider. None of these conclusions are true in all cases, maybe in no cases, and, in fact, the real numbers would probably tell a very different story [I'm leaving this as an exercise to the reader since I want to focus this piece on the approach to EA, not the application of analysis to these issues]. These statements are being made arbitrarily based on extremely small sample sizes and are as valid as looking around you at a large business gathering noting all the iPhones and Blackberries, and concluding that iPhone & Blackberry must outsell all other phones, when in fact, their combined market share is a mere 3.0-3.5% of the overall mobile phone market.

In actuality, I see a lot of IT decisions being made using what, seemingly, is no more exploration than was used to determine that iPhones & Blackberries have a leading market share. It is the Enterprise Architect's role to ensure that the selection and approaches toward development of systems are sound relative to their business, not just other businesses. Moreover, where decisions are based on the work of other businesses' success, those successes need to be properly vetted to ensure that there is enough commonality between efforts, such that you could make the leap that your business will see similar results. Finally, assumptions and theories need to be tested by properly identifying the variables that need to remain static and then comparing; in essence normalizing the question to be homogenous in all situations. For example, in Freakonomics, Levitt points out that in order to prove that the numbers behind why violent crimes dropped in the 90's he needed to review similar trends of violent crimes in areas that had not made the purported changes that led to the large unanticipated decrease. When the trends were normalized to remove noise and anomalies, it was shown that those factors seemed to have relatively little impact on violent crime decrease.

This brings us to the all important question, "how do we demonstrate the value of Enterprise Architecture?" Unfortunately, you cannot demonstrate the value of Enterprise Architecture if you cannot monetize or enumerate the value of all possible choices relative to the choices that are being recommended or those that have been made. Moreover, it's critical that these analyses are carried out over enough time that short-term wins don't supersede long-term potential gains. Thus,  it is here that Enterprise Architects, especially those we call Chief Architects, truly show their mettle. It is their experience, coupled with the ability to focus on the right set of variables, understanding the impact of change of those variables and being able to communicate that in a way that allows the business to make effective business decisions, which sets top notch practioners apart from Sr. Software Engineers that the organization placated with a title to keep them happy so they wouldn't leave.

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JP Morgenthal is a veteran IT solutions executive and Distinguished Engineer with CSC. He has been delivering IT services to business leaders for the past 30 years and is a recognized thought-leader in applying emerging technology for business growth and innovation. JP's strengths center around transformation and modernization leveraging next generation platforms and technologies. He has held technical executive roles in multiple businesses including: CTO, Chief Architect and Founder/CEO. Areas of expertise for JP include strategy, architecture, application development, infrastructure and operations, cloud computing, DevOps, and integration. JP is a published author with four trade publications with his most recent being “Cloud Computing: Assessing the Risks”. JP holds both a Masters and Bachelors of Science in Computer Science from Hofstra University.