CASE 1.

DANFORTH

Danforth Manufacturing Company Scene 1: Possible Need for an EA Program

The Danforth Manufacturing Company (DMC) develops, produces, and sells several lines of photovoltaic
storage cells (solar-powered batteries) for use in various consumer, business, and aerospace products.
Robert Danforth, the President and Chief Executive Officer (CEO) of DMC, las called a meeting of the
Executive Committee to review several recent capital investment requests. The largest two of these was
a request by Kate Jarvis, the Chief Operating Officer (COO), for at now sales and inventory tracking
system and a request by Jim Gorman, the Chief Financial Officer (CFO) to invest in a new cost accounting
system. Also invited to the meeting were Sam Young, the company's first Chief' Information Officer (CIO)
who joined the company two weeks before, and Gerald Montes, the company's Chief Counsel.

Robert Danforth was the last one to enter the executive boardroom. He smiled at his top management
team and said, “Thank you all for coming by to talk a bit more about several investment requests that
came out of our annual planning meeting last month. Sam, you hadn't joined the company yet, so I'm
particularly interested in your thoughts today. Mainly, I want to better understand from the group why
our current capabilities are insufficient and how these new systems will help bottom-line performance.
Kate, why don't you go first and then we'll hear from Jim."

Kate rose and walked to an easel that held several charts and diagrams. "Gentlemen, as mentioned at
the planning meeting, my request for at New Sales and Inventory Tracking System (SITS) is based on an
insufficient current ability to match inventory and production information with customer orders. We are
also experiencing excessive turnaround time for orders in the industrial product lines, as compared to
our competition. Our sales representatives in the field are beginning to lose orders. They can't provide
on-the-spot quotes based on real-time chocks of available inventory and current pricing. The same goes
for our representatives. They are not able to see when the custom and small job production runs are
being scheduled. This would help sales in this high-profit area which we will be expanding. Our major
competitor fielded this information capability almost a year ago. While I was skeptical at the time about
the impact it would have on their sales, I now believe that it's a successful model for them and therefore
is going to make or break us in the industrial product line.”

Robert leaned forward. “Kate, this sounds quite serious. Even so, from a cost perspective I am
concerned about the return on investment (ROI) for SITS. Last month you stated that initial cost
estimate for the development of SITS was over three million dollars. We have tight budgets for the next
two years... have you looked at ROI?” “Yes,” responded Kate. “These charts show the level of
investment and payback period for SITS, which I estimate to be two years, depending on how quickly
and thoroughly the sales force adopts it. The lifecycle for SITS should be seven years, with positive ROI
seen in years three through seven, and an average of about twelve percent per year."

Robert turned to Sam, “What do you think Sam? Isn't part of the problem here that many of our
information systems don't talk to each other?" Sam grimaced slightly and said, “I think you're right, from
what I've seen in my initial survey of information technology (IT) capabilities, a lot of our systems were
built as individual projects based on what then were unique requirements. We now have some
duplication of functionality and evidence of inefficient support for evolving business processes.” Robert
responded quickly, “Isn't the SITS proposal just more of the same?” “Perhaps” said Sam, “I'm hearing
that Kate wants to integrate information exchanges across the sales, inventory, and production lines of
business. This represents a somewhat higher-level approach to meeting several business requirements ."

Robert turned to Jim, “What do you think about Kate's problem? Jim answered with a pensive look,
“Well, I agree that we need to address our competition's capability. While our aerospace product line is
the most profitable, the industrial product line brings in the most revenue, so there would be a
significant impact on the entire company if we lose market share in the industrial product area.” Robert
then turned to Gerald, “So what does the Chief Counsel think?” Gerald paused for a moment and then
said, “I think that we must act decisively to protect market share in the industrial product line, but I'm
not sure that SITS is the answer. You might be right Robert, the proposal that Kate is making might be
more of the same type of technology solution that Sam says got us in this situation."

Robert leaned back in his chair and said, “Before going further on this proposal, let's talk about Jim's
investment request. I wonder if there are any parallels." Jim activated the conference room's projector
and brought up a set of briefing slides. “My request is for a cost accounting system that would replace
the current accounting system. As Robert mentioned, there are tight budgets the next two years, and
having the ability to more readily see spending and profit generation within each line of business will
help us to manage the budget more effectively. This system is one module of "WELLCO” a proven
commercial enterprise resource planning (ERP product. We can utilize this product by expanding it if
other back office requirements emerge. The cost of the investment is just under $600,000. According to
the vendor, the historical payback period for this cost accounting module is eighteen months, with an
average annual ROI of sixteen percent during the subsequent years."

“Jim, can this new accounting capability support what Kate is looking for?” said Gerald. Jim responded,
“The WELLCO module can handle some of the things Kate is probably looking for, including price and
volume information in sales, inventory, and production activities, but this module is not configured to
specifically support all of the information I believe she will need." “Can it be modified?” Interjected
Robert. "Possibly so,” said Jim, "and if not, I would think that other modules of WELLCO could handle it.
Sam, help me out with this one if you can.” Sam responded, “I know that WELLCO is one of the leading
ERP products designed to support many front and back office functions. It might be possible to get
enough functionality to support both Jim's and Kate's requirements. I am concerned that we are still
looking at requirements from a program-level and systems-level viewpoint... essentially bottom-up
planning. Wouldn't the company benefit more from a more strategic approach that evaluates
requirements and proposed solutions across the entire enterprise in the context of our strategic goals?”.

The group was silent for a moment, and then Gerald spoke. “Our annual planning retreat is where most
of the company's strategic planning happens. We look at our current strategic goals and initiatives. We
look at what changes are needed to keep us competitive. As you saw from the meeting last month, new
proposals are also surfaced during the retreat and then followed-up on. That is to say if they merit
consideration for funding and implementation.” Sam asked, “Is there some model of the enterprise that
is used to support these discussions?” “Well, if you mean our annual business plan, we have that” said
Jim. “More than that” said Sam, “A model of strategy, business, and technology that enables you to see
what we have now and what is planned for the future. Something that gives us the ability to play with
the model to see what other future investment and operating scenarios would look like.” “We don't
have anything as fancy as that” said Kate, “Though a model like that would have helped me analyze
what we could do to help the field.”

Robert stood up and walked to the window. “Sam, you are new to the team, but sometimes a fresh look
at a situation can provide valuable insights. What I believe you are telling us is that we lack a true top-
down, strategy-driven capability to surface requirements and solutions... is that right?” “Yes” responded
Sam. “DMC is not alone. Many companies have the same problem because they still support program-
level decision making. We tend to let it occur in a relative vacuum with few overarching goals and
standards to guide analysis, planning, documentation, and decision-making. I am going to propose that
both Kate's and Jim's proposals be reviewed through a different lens, that of an enterprise-wide
architecture. If we had this type of model, we could see current capabilities, future requirements, and
gaps in our ability to meet those requirements. We could also see duplicative current capabilities and
future solutions. From what I have heard at this meeting we may have some overlapping requirements
which probably should not be met with separate solutions if we are to optimize our financial and
technology resources.”

“Interesting” said Robert. “Sounds like a silver bullet, and I am wary of those” said Gerald. Robert spoke
again, “Sam, would an enterprise-wide architecture really help us? If it is do able, that's great, but why
haven't we heard about it before? I know there are no free lunches and where is the ROI in such an
architecture?” Kate added “While I appreciate the idea, I don't have time to wait for the entire company
to be modeled, I need a new capability now."

“Well,” said Sam. “You are right, establishing an enterprise architecture will not be free and it will take
time. Fortunately there are approaches being used by the public and private sector that support the
modeling of requirements and solutions in a standardized way between multiple lines of business, which
are referred to as architecture segments. So, as each segment is completed it adds to the architecture as
a whole. By treating Jim's area as the company's financial segment, and Kate's area as the production
segment, we can just address these areas first, thereby reducing the time for completion of the
architecture part of the larger project that may implement a combined solution. We can do this by
modeling only those strategic drivers, business services, and technology solutions that apply those no
segments. Eventually though, for the architecture to be the most valuable to DMC, the entire company
should be modeled in its Current state, and several possible due states,"

"As far as R0I,"continued Sam, "that is more difficult to pinpoint since the cost of doing the analysis and
modeling depends on the amount of existing information and the degree of cooperation that is achieved
with stakeholders. By the way, these stakeholders include our executives, Managers, and support staff.
But let's say that a top-down architectural analysis reveals that there are common requirements
between Kate and Jun, and we can meet those requirements either through adding functionality to SITS
or by buying several more modules of the commercial WELLCO product, and doing some customization,
We potentially could save several hundred thousand dollars, or perhaps millions of dollars compared to
doing SITS and WELLCO separately... all of which become ROI from the architecture effort. You probably
haven't heart about enterprise architecture because when a company is doing it Well, it can become a
strategic asset that makes the company more efficient and agile. That type of capability is normally not
broadcasted.”

"So what's the downside?" asked Gerald. “Enterprise architecture tends to be viewed as a hostile
takeover by program managers and executives who have previously had a lot of independence in
developing solutions for their own requirements" said Sam. "Also, architecture brings a new language
and planning processes, which like any type of change can be seen as threatening to those involved and
therefore may be resisted. Strong executive sponsorship and stakeholder involvement can overcome
much of this,"

"Sam, the architecture approach seems to make sense, but I am not completely sold yet” said Richard,
"Let's do a pilot project, I want you to work with Kate and Jim and bring me a plan and business case
within two weeks to develop the part of an architecture for DMC that addresses their current
capabilities and stated future requirements. We'll use this as the test for whether we want to go
forward with an enterprise-wide architecture. Thank you all for your time today, see you in two weeks."