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This document proposes a framework called FINFLEX to help with cost-benefit analysis of enterprise architecture roadmaps. FINFLEX aims to support financial analysis of roadmaps by incorporating variables like uncertainty and flexibility that are often omitted from existing modeling approaches. The framework is based on a conceptual model and seeks to address limitations in current methods for roadmap analysis, which can make interpretation difficult and fail to account for uncertainty over the multi-year planning periods of roadmaps. FINFLEX's goal is to provide more accurate financial indicators to support decision making around enterprise architecture transformations.

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0% found this document useful (0 votes)
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Main

This document proposes a framework called FINFLEX to help with cost-benefit analysis of enterprise architecture roadmaps. FINFLEX aims to support financial analysis of roadmaps by incorporating variables like uncertainty and flexibility that are often omitted from existing modeling approaches. The framework is based on a conceptual model and seeks to address limitations in current methods for roadmap analysis, which can make interpretation difficult and fail to account for uncertainty over the multi-year planning periods of roadmaps. FINFLEX's goal is to provide more accurate financial indicators to support decision making around enterprise architecture transformations.

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Framework FINFLEX: the cost-benefit analysis of Enterprise Architecture's


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FINFLEX: A framework for cost-benefit analysis
of Enterprise Architecture roadmaps considering
flexibility and uncertainty

Yeimi Pena, Ph.D Candidate

Universidad de Los Andes, Software Engineering Department, Bogota, Colombia,


[email protected]

Abstract. The high complexity of deciding on an Enterprise Architec-


ture (EA) transformation plan requires decision support analyses through
modeling approaches and financial indicators. A transformation plan,
known as a roadmap, represents the business initiatives. Through the
roadmap, the company can realize its strategies and objectives. However,
modeling and financial approaches directly related to roadmap analysis
are limited, and they omit relevant variables such as uncertainty and flex-
ibility. Due to this situation, various adverse impacts could limit the suc-
cess of an EA exercise. Our proposal presents an innovative framework,
founded on a conceptual model, which seeks to support the financial
analysis of EA roadmaps. Our objectives, contributions, and challenges
in this research field are briefly presented in this proposal.

Keywords: Enterprise Architecture, roadmap, conceptual model, cost-


benefit analysis, uncertainty, flexibility

1 Motivation
Defining and modeling Enterprise Architecture (EA) in a company is one of
the major challenges for enterprise architects because an EA determines the ap-
proach to achieving a company’s objectives, identifies the alignment between
business and technology [26], responds to a company’s concerns [29], allows
business goals to be translated into processes and systems [15], supports new
technology tendencies, and manages the company’s transformation through the
definition of its principles, tactics and transformation plans [1].
An EA exercise is supported by EA frameworks such as TOGAF [29]. TO-
GAF provides standard processes, methods, tools and guidelines for designing
and managing EA [27], [18]. It is conducted in phases (Figure 1) that allow iden-
tifying the company’s current situation, known as AS-IS [29], [1], as well as its
future situation, known as TO-BE [29], [28], [1]. TO-BE implies the identification
of company capabilities and employee abilities required to realize a company’s
strategies and goals [29], and to add to the business value [32]. Each capability
contains a set of activities that could impact the business and technology com-
ponents, such as defining a new business process, proposing an IT governance
framework, and developing a software application.
II

ArtefactsT
ofTTO4BE

1NTCurrentTsituationTyAS4ISW
BusinessT
ArtefactsT

TTT4NTRoadmapTanalysisT
objectives

2NTFutureTsituationTyTO4BEW
ofTAS4IS
PrinciplesdT

3NTGapTAnalysis
politics WorkT
BusinessT Packages
strategies
SelectedT
Capabilities roadmap
Current
Concerns RoadmapTorT
problems
transformationT
plan

Architecture
Initiatives

input phases output

Notation

Fig. 1. EA view (Source:Authors)

These phases are modelled through modeling languages like Archimate [30]
and UML2, which account for the four key architecture domains of business,
data, applications and infrastructure [29]. These domains include components
such as business processes, application designs and prototypes, among others. As
a result, the architects obtain models that they can use in the analysis of future
changes, new concerns, and impacts of decisions. These models also maintain
the standardization and understanding between company stakeholders. For these
reasons, it is possible to recognize modeling as one of the most valuable supports
for defining, designing and analyzing enterprise architectures.
Based on the results of AS-IS and TO-BE analyses, a gap is identified by
the architects, which must be analyzed and resolved to achieve the future archi-
tecture. To close the gap between AS-IS and TO-BE, a transformation plan is
defined (known as a roadmap), which groups the activities identified for each ca-
pability. A roadmap can have different attributes like costs, benefits, length (the
number of activities), and duration (time to execute a roadmap). Considering
these attributes, the architects should analyze the roadmap from different per-
spectives such as technological, marketing, risks, impacts on the company, reuse,
economic, and financial (cost-benefit analysis), among others. These analyses
require diverse data sources, stakeholders, technological and business experts,
tools, methodologies and models.
The modeling of the last phases (Gap Analysis and Roadmap Analysis) could
be more critical than the AS-IS and TO-BE modeling because a roadmap al-
lows the company to determine the most profitable investments, their execution
order over the time and offers the direction to achieve company strategies and
objectives.
However, current modeling approximations related to roadmap analysis, specif-
ically in the cost-benefit analysis, are limited. As a result, analysis execution is
difficult, concepts and definitions are not well standardized, interpretation of
III

results is complicated, and the characterization of the roadmap attributes is a


hard task for enterprise architects. In addition, some roadmaps’ financial analysis
fails to consider uncertainty in the data, which is important given the extensive
planning time (between three and five years for a roadmap). Failing to consider
uncertainty can produce inaccurate financial indicators, which could be critical
for the decision-making process affecting the EA implementation [19], [20].
Considering the previous problem, our main objective is to present a frame-
work to analyze the financial and flexibility perspectives of an EA roadmap (we
refer to our framework as FINFLEX). FINFLEX supports the cost-benefit anal-
ysis considering: 1) standardization of the concepts, definitions and analysis; 2)
uncertainty in the data; 3) flexibility of the roadmap to support deferring or
later changing decisions; and 4) calculation of the financial indicators.
To achieve our objective, this research question has been formulated:

RQ: How can the enterprise architecture process be improved through use of
the roadmap modeling and indicators calculated by FINFLEX?

Taking into account the complexity of our main objective, we divide it into
the following sub-objectives:

– Proposing and defining a conceptual model that includes the concepts re-
lated to the EA roadmap’s financial analysis and relationships among them.
This model supports all FINFLEX’s components (methodology, methods,
algorithms).
– Investigating and establishing the structures that support the classification
and characterization of cost-benefit analysis data.
– Investigating, selecting and implementing methods and algorithms to calcu-
late the cost-benefit analysis for an EA roadmap, considering the uncertainty.
– Developing an algorithm to analyze the flexibility of EA roadmaps regarding
their ability to adapt to changes.
– Designing a methodology to guide use of FINFLEX and to allow the inter-
pretation of its results, maintaining alignment with its conceptual model.

Thus, the answer to the research question and the success of the main objec-
tive depend on the achieving of the five sub-objectives.
The rest of the proposal is organized as follows. In the next section, the basic
concepts related to financial analyses for EA roadmaps are presented. The third
section describes the current research in our FINFLEX Framework. The fourth
section illustrates the related work, and finally, the conclusions are presented in
the fifth section.

2 Concepts of the EA Roadmap’s Financial Analysis

We have selected TOGAF [29] because it is recognized in both academia and


industry [4], and it describes an explicit methodology to perform an EA exer-
cise. As explained in Section 1, TOGAF defines some phases for EA design and
IV

management. Among the TOGAF phases, we included 1) The AS-IS analysis;


2) The TO-BE analysis; 3) The gap analysis; and 4) The roadmap analysis. This
section is focused on phases three and four respectively; phases one and two were
briefly explained in the section 1.
The gap analysis. Enterprise architects must resolve the gap between AS-
IS and TO-BE [16] to achieve the company’s alignment and transformation [29].
Some activities have been suggested by Bente [1] and The Open Group [29] to
close this gap, which include 1) the definition of work packages and 2) the defi-
nition of a roadmap. The first involves the identification of capabilities and their
activities, the classification and prioritization of them, and the definition of work
packages. A work package is composed of a set of activities [29] associated with
the capabilities. The second identifies the changes, new components, renovations
and definitions determined in the TO-BE analysis and capabilities required by
the company. A roadmap is composed of a set of work packages ordered over the
time, taking into account dependencies among them [29].
The roadmap analysis. A financial analysis, specifically cost-benefit anal-
ysis, seeks to determine an investment’s profitability [5]. In addition, it considers
cost and benefit variables to calculate indicators and determines if investments
are beneficial to a company [3]. Among cost-benefit analysis variables, a cost
represents the purchase price of a service or asset, and a benefit is a consequence
of an action that helps the company improve [20]. The cost-benefit analysis es-
timates and compares the costs and benefits of an investment [20]. Among the
principal uses of the cost-benefit analysis, the North Atlantic Treaty Organisa-
tion[23] emphasizes: 1) supporting decisions to select an investment’s option; 2)
evaluating the effect of changes; 3) allowing comparison between investments.
The results of the financial analysis are fundamentally addressed to the iden-
tification of the appropriate roadmap for a company. Once a roadmap is selected,
a project portfolio could be established, formalized and managed by project man-
agers [1]. Each work package might represent, in the project portfolio, a project,
a part of a project, or a program of projects [29]. For clarity, it is important to
emphasize the differences between a work package and a project. A work package
supports one or more capabilities that in turn seek to accomplish various com-
pany objectives and strategies. In addition, a work package abstracts variables
such as total cost and benefits at a higher level of abstraction than a project. In
contrast, a project is a temporal effort to achieve a unique result, usually lim-
ited by the time, budget and deliveries [1], [11]. A project includes more detail
in its variables, and its definition is supported by the Methodology of Project
Management [11]. It also requires other components such as a detailed schedule,
risk analysis, and identification of resources [1].

3 Solution: FINFLEX Framework

In this section, we describe our current research. First, we explain the improve-
ments we propose for an EA roadmap’s cost-benefit analysis. Then, we outline
V

the research methodology. Next, our strategy to develop the FINFLEX frame-
work is introduced. Finally, the advances in our research are presented.

3.1 Improvements

An EA roadmap typically includes risky long-term investments, which can be im-


pacted by unpredictable and unknown situations [24], [31], such as new business
models, changes in government regulations that affect the company, continuous
technological improvements and innovations, and changes in economic factors
(inflation, taxes) [31], [1]. These situations can produce positive or negative ef-
fects for a company with an unknown degree of uncertainty [21]. Due to this,
analyzing and managing uncertainty are necessary for understanding these ef-
fects, exploring new opportunities, and evaluating threats. As a result, possible
scenarios can be identified that would increase the flexibility and robustness of
the financial analysis [21]. Flexibility is understood as the ability to wait, observe,
and adapt a decision when new information is discovered. Then, the company
can update its decisions to avoid negative consequences or to take advantage
of new opportunities [21], [13], [22]. We propose the following improvements to
permit modeling of the impact of uncertainty and flexibility on the financial
analysis:

1. The EA roadmap’s financial analysis should consider uncertainty during its


calculation process to support present decisions anticipating a range of pos-
sible future situations.
2. The concepts involved in a financial analysis should be formalized. This
formalization will likely be beneficial, considering the diversity of frameworks
and methods and definitions thereof.
3. Multiple roadmap alternatives should be defined, allowing analysis and com-
parison of various scenarios, taking into account the possible changes that
impact their variables. Currently, architects define a unique roadmap. How-
ever, if uncertainty and flexibility are considered, this could be insufficient
and risky for the analysis of roadmap’s attributes and possible changeable
situations during the EA implementation.

3.2 Research methodology

Throughout our research, the design science methodology is followed [8]: For
each research sub-objective, an artifact will be created representing our contri-
butions to the research topic. These artifacts will contribute to composing the
FINFLEX Framework and guiding its use. The different design science artifacts
to be developed in this project are:

– A conceptual model that includes the concepts of the EA roadmap’s fi-


nancial analysis. We expect that this will facilitate standardization among
stakeholders.
VI

– Structures to collect and characterize the financial data required in an EA


roadmap’s financial analysis.
– Algorithms to calculate cost-benefit analyses considering uncertainty and
other factors to maintain flexibility and respond to a company’s strategies
and goals.
– A methodology for guiding the financial analysis process and interpreting its
results.

The development of these artifacts will happen through the execution of our
strategy explained in the next section.

3.3 Strategy to develop FINFLEX


To implement our proposal, a strategy illustrated in Figure 2 has been defined.
Once determined, this strategy delivers the FINFLEX framework that includes
a methodology, methods and guidelines to perform the financial analysis.

2. Determining 4. Designing and


1. Defining the 3. Defining the 5. Describing the
structures implementing
FINFLEX FINFLEX FINFLEX
to collect and financial
conceptual financial model methodology
clasify algorithms
model
financial data

offers the formalizes standardizes


output concepts

supported on established on established on supported on

FINFLEX conceptual model

Fig. 2. FINFLEX Framework’s Strategy (Source:Authors)

1. We identified the first step of the strategy: Defining the FINFLEX conceptual
model. This step is the core of our framework because it covers concepts
and relationships of all stages. Therefore, the formalization, foundation, and
basic structure of the financial analysis are established. Once the FINFLEX
conceptual model has been identified, it will be used as a standard base to
express FINFLEX’s different activities and results. Concepts that have been
identified in diverse studies during this research and validated with a group
of EA experts.
2. Subsequently, the next step, defining the structures to collect and classify
the data of the financial analysis, was determined. These structures are en-
tirely supported by the conceptual model, and their objective is to permit
the classification and characterization of the data required (costs, benefits
and other economic factors). In addition, the structures include the detailed
information about the uncertainty and flexibility. To do this, current ap-
proaches have been carefully inspected such as Irani [12], Remenyi [25], and
NATO [23]. Moreover, interviews with EA experts are required in order to
VII

identify data employed in diverse industries and real cases. These structures
will be dynamic; that means enterprise architects can adjust the structures
considering the particular cases, allowing different detail levels in the results.
3. The next methodology’s step defines a financial model, which includes the
calculations and formulations to perform a financial analysis [25], [2]. This
model is supported by the FINFLEX conceptual model and the data rec-
ognized through the structures. The financial model aims to identify the
best way to calculate cost-benefit analyses and flexibility analysis for EA
roadmaps. In addition, it seeks to model the financial equations to support
this research.
4. Based on the financial model, financial and flexibility algorithms are ana-
lyzed, designed, developed and performed. These are supported by simulation
models and algorithms that include cost and benefits variables, as well as
their uncertainty. The results of these algorithms are represented by graphics
showing the variables’ behavior over time, and reports with financial indica-
tors and flexibility indicators for all roadmap alternatives.
5. As a final step, a methodology for the use of FINFLEX is defined. This
methodology aims to describe the inputs, outputs, and process for each stage
of FINFLEX, and offer clear guidelines for the interpretationg of FINFLEX’s
results. To define that, the studies by Hubbard [9], McGarry [17] and Wilkin-
son [33] will be considered.

3.4 Preliminary results

Regarding the motivation and research methodology, the first step aimed to
identify the state of our research topic in the literature. As a result of this
activity, a systematic review was presented, which demonstrates the limitations
in the modeling and financial analysis of EA roadmaps and shows the possible
research directions for the future. This systematic review is now under review
for journal publication.
As a second result, the FINFLEX conceptual model was defined. It is di-
rected to a financial analysis of the EA roadmap, considering uncertainty in the
data and flexibility to respond to strategies and goals of a company. Our model
was supported in the careful revision of concepts identified in the current mod-
els, metamodels, and EA frameworks. Moreover, it was presented through an
example and validated with a group of EA experts. The FINFLEX conceptual
model has been presented in a paper sent to the ER-2015 conference.

4 Related work

Different studies addressing our problem have been developed and presented.
In this section, we summarize a few. First, an interesting framework was intro-
duced by Franke [6], which aims to support cost-benefit analyses for decisions
regarding application consolidations. The methods employed were supported by
cost taxonomies, probabilistic relational models and addressed to the Ministry
VIII

of Defense Architecture Framework. These methods consider variables such as


cost, uncertainty and dependencies among applications. However, its scope was
limited to the application consolidation perspective, and addressing to flexibility
was not explicitly treated in the framework.
A study focused on analyzing the architecture changes and their value for
the business was proposed by Iacob, et. al.[10]. It was conducted through EA
migration modeling, which was supported by Business Model Canvas, an Archi-
mate extension, a Business Model Ontology for expressing business elements, the
TOGAF Framework, and cost-benefit calculations. This approach provides an
impressive and clear modeling perspective to analyze the impact of changes, and
presents an interesting way to identify the relationships between EA components
and financial variables. However, the calculation of cost-benefit analysis was not
explicit in this study, and the uncertainty and flexibility were not considered for
EA analysis.
Ronald Giachetti [7] presents a real options framework for deciding which
project alternative is better given budget and time constraints. The method
was aimed at an EA portfolio of projects that represents the transformation
between AS-IS and TO-BE architectures. The proposed framework allows mod-
eling information for each project as real options, implemented with a stochastic
mathematical model and a Monte Carlo simulation. This study was well-done
and explicit. However, it was focused on project portfolio management, the step
after EA roadmap analysis. Its approach is interesting and complete, but lacks
both flexibility to change decisions over time and use of a conceptual model to
formalize its concepts.
Finally, Lagerstrom [14] presented an IT valuation based on the link between
models of business requirements and EA structure. This approach included the
computation of costs of different elements and assigned them to the company’s
goals. This approach can be adopted in the field of information systems, but it did
not consider all parts of a roadmap’s initiatives (business, data, application and
technology). Furthermore, uncertainty and flexibility variables were not taken
into account in the calculations.

5 Conclusions

This proposal presents a partial view of the challenges to support and improve
the financial analysis of an EA roadmap through our FINFLEX framework.
We have identified key points during this process that impact future research
and contributions to the industry and academia. We have focused on critical
activities and their consequences and we have presented objectives that direct
our contributions and research artifacts (expected results) supported by the key
component of our research, the FINFLEX conceptual model.
Further research will help the decision-making process for investments, and
will contribute to decreasing the possible risks that companies confront today.
We would like to participate in this symposium to validate our approximation
IX

with the feedback of experts and, if necessary, modify our approach to obtain
successful results and make significant contributions to our research topic.

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