What are the challenges and problems with existing models?

What are the challenges and problems with existing models?

ESA simplifies the relationship between IT and business, yet standards remain as important as ever, if not even more important, to a successful deployment of ESA within any particular user organization. ESA calls for strict adherence to certain technical standards when creating enterprise services. Without standardized networking interfaces and semantic definitions, for instance, any enterprise services that an organization builds for itself will be unlikely to integrate properly with any other enterprise services, whether homegrown or acquired from SAP or its partners. Fluid integration, of course, is the primary goal of ESA. So, without the right policies and incentives in place to make sure that ESA-related standards are employed, ESA's essential value will be lost.

Standards policies are hardly a new, ESA-specific issue for IT. Enterprises have been grappling for years with how best to select, support, and enforce IT standards within their own ranks and across boundaries when dealing with suppliers, customers, and other business partners. When a corporation is powerful enough in its own industry, it can pretty much dictate the use of certain standards to any other firms with which it does business. Just look at the clout that Wal-Mart wields in retailing, as seen most recently in its mandate that suppliers must start adding a certain type of radio frequency identification (RFID) tag to the pallets they send its way. At the other end of the spectrum is Yahoo!, the web portal, which has forfeited the benefits of blanket IT standardization and permitted its disparate business units to develop and operate their IT systems pretty much as they see fit. In fact, Yahoo! may have little choice in the matter. Evidently, it has decided that this approach is the best one, financially and technically, in the kinds of volatile, high-growth, technology-driven markets where it does business. What's more, the web giant has acquired many of its business units as independent, self-sustaining startup companies which, by the time they join the Yahoo! fold, are well along in developing their own systems.

Wal-Mart and Yahoo! have chosen the approaches that are most appropriate to their respective marketplace and strategy. A key element of Wal-Mart's business strategy is to squeeze cost and inefficiency out of every possible business process, and that calls for a high degree of standardization in those business processes and in the IT systems that support them. Standardization of IT tends to hinder flexibility, but mass retailing is not subject to dramatic change. Success, therefore, is mainly a matter of progressively improving business processes and cost structures. To help keep IT costs down, Wal-Mart strives to standardize as much IT activity as possible, making it easier to replicate existing systems and teams wherever required and to keep training and operations costs to a minimum.

Yahoo!, in contrast, must continually scramble just to keep up with the fast-expanding, highly entrepreneurial web marketplace. There, new opportunities emerge and are jumped on virtually every day, it seems. Yahoo! can't afford to hinder its internal developers or newly acquired businesses by imposing on them more than a minimal slate of IT standards. It does, of course, pay for granting this freedom: it has to foot the bill for an exceptionally talented IT team whose ministrations are necessary to keeping Yahoo!'s plethora of systems running and integrating them at the relatively basic level of user interface (UI) and customer billing, for instance.

Most companies do not fit either one of these extreme molds: the highly centralized Wal-Mart mold or the highly improvisational Yahoo! mold. Instead, they will find themselves somewhere in between. Their challenge, therefore, is to work out a form of IT governance that's most appropriate to their circumstances. But they would do well to understand these extremes and glean from this picture a fundamental factnamely, that in the IT organization, governance typically comes down to control. Who, it must be decided, has how much control over IT decisions, and therefore, control over expenditures of money?

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