Business Architecture Quantified –
Assessing the Complexity of the Business
The Open Group Conference – Edinburgh 2015
Dr. Christian Schmidt
Edinburgh, October 20th 2015
Dr. Christian Schmidt | Business Architecture Quantified | The Open Group Conference Edinburgh | October 20th, 2015 2
How to deal with complexity?
The Janus face of complexity R
ed
uce
Co
mp
lexit
y
Incre
as
e C
om
ple
xity
»Our time-to-market is poor
because there are so many
dependencies«
»We need to innovate
and leverage new
technologies«
»Our costs are so high
because of a large
number of redundancies«
»We need to improve
the customer
experience«
»Projects often fail due to
the enormous level of
complexity«
»We need to comply with
increasing regulatory
requirements«
Dr. Christian Schmidt | Business Architecture Quantified | The Open Group Conference Edinburgh | October 20th, 2015 3
What is complexity
and how can we tell the “good“
from the “bad“?
Dr. Christian Schmidt | Business Architecture Quantified | The Open Group Conference Edinburgh | October 20th, 2015 4
What is complexity in the context of Enterprise Architecture?
Enterprise Architecture complexity defined
Environment
System
Element
Relationship
Requirement
In the context of enterprise architecture, the system in scope may be the whole enterprise or any
subset of it including (horizontal) architecture layers (e. g., business architecture, application
architecture, technical architecture) and (vertical) architecture domains (e. g., marketing and sales,
financial accounting, human resources).
Definition:
The (structural) complexity
is a quality of a system
(or architecture) referring to
the quantity and variety of
system elements and the
relationships between
these.
[SWK13] [SM03] [Sc15]
Dr. Christian Schmidt | Business Architecture Quantified | The Open Group Conference Edinburgh | October 20th, 2015 5
What is complexity in the context of Enterprise Architecture?
Effective and efficient architectures
ineffective effective
but inefficient
effective
and efficient
• environmental requirements
not fully met
• environmental requirements
fully met
• internal complexity above
minimum
• environmental requirements
fully met
• internal complexity at minimum
level
Depending on the fulfilment of environmental requirements and the internal complexity used to
achieve this, every system (or architecture) can be classified into one of the following categories:
Dr. Christian Schmidt | Business Architecture Quantified | The Open Group Conference Edinburgh | October 20th, 2015 6
What is complexity in the context of Enterprise Architecture?
Minimum complexity and architectural waste
effective
but inefficient
effective
and efficient
It may be assumed that fulfilling the environmental requirements will call for a certain minimum
complexity that cannot be reduced without causing dysfunctional behaviour.
minimum
com-
plexity
com-
plexity
surplus
Any complexity exceeding the minimum level may be considered architectural waste (also known as the
complexity surplus). Successful complexity management is about minimizing the complexity surplus.
co
mp
lexity
Dr. Christian Schmidt | Business Architecture Quantified | The Open Group Conference Edinburgh | October 20th, 2015 7
The complexity continuum
The right amount of complexity in the right place
Depending on the specific requirements, the optimal level of complexity may vary across architec-
ture layers and domains (with the upper layers defining the minimum complexity for the lower layers).
Technical
Architecture
Application
Architecture
Business
Architecture
lower operating
costs
lower maintenance
costs
lower procurement
costs
higher agility /
reduced change
efforts
etc.
higher customer
value
higher business
value
higher
robustness
reduced vendor
dependency
etc.
Therefore, effective complexity management is not simply about reducing complexity throughout the
landscape but rather about creating the right level of complexity in the right place.
low complexity high complexity
TD1 TD2
AD1 AD2
BD1 BD2
TD3 TD4
AD3
BD3 BD4
AD4
BD = Business Domain AD = Application Domain TD = Technical Domain
[Sc13a] [Sc15]
Dr. Christian Schmidt | Business Architecture Quantified | The Open Group Conference Edinburgh | October 20th, 2015 8
The role of business complexity
Why architects should care about business complexity
Business complexity needs to be assessed for two reasons: 1. as a reference to judge the level of IT
complexity and 2. to identify and manage a complexity surplus in the business architecture itself.
BD = Business Domain AD = Application Domain TD = Technical Domain
Business
Architecture BD1 BD2 BD3 BD4
assess and optimize
business complexity
(in relation to other parts
of business complexity) assess and optimize
IT complexity
(in relation to
business complexity)
Requirements
Application
Architecture AD1 AD2 AD3 AD4
Technical
Architecture TD1 TD2 TD3 TD4
Requirements
IT Architect
Business
Architect
1 2
Dr. Christian Schmidt | Business Architecture Quantified | The Open Group Conference Edinburgh | October 20th, 2015 9
How can complexity
be assessed
and measured?
Dr. Christian Schmidt | Business Architecture Quantified | The Open Group Conference Edinburgh | October 20th, 2015 10
Assessing complexity
The need for quantitative models
Stakeholder
Concern
Qualitative
View Quantitative
View
Architecture
Data
𝐸𝑀 = 𝑓𝑖 𝑙𝑛1
𝑓𝑖
𝑛
𝑖=1
Traditional (qualitative) EA models fall short in assessing and aggregating complexity on a global scale.
They hence need be complemented by quantitative views and KPIs.
Quantitative Enterprise
Architecture (QEA)
Problems
• models are getting
very complex
• handling is very
time-consuming
• information is
difficult to
aggregate
Dr. Christian Schmidt | Business Architecture Quantified | The Open Group Conference Edinburgh | October 20th, 2015 11
How can complexity be measured?
The search for the “one” complexity figure
Today, it is widely acknowledged, that complexity is a multi-dimensional concept that needs to be
measured and assessed along its various dimensions.
Our complexity is
42
? ! ?
In the past, many organizations (and researchers) have been looking for a single measure to describe
the complexity of their enterprise or IT architecture.
Dr. Christian Schmidt | Business Architecture Quantified | The Open Group Conference Edinburgh | October 20th, 2015 12
Measuring complexity
A generic complexity model
Quantity
(Q)
Heterogeneity
(H)
Elements
(E)
Relationships
(R)
QE QR
HE HR
Business Architecture
Application Architecture
Technical Architecture
Generally, the (structural) complexity of a system can be described along four aspects: the number (or
quantity) and heterogeneity (or variety, also concentration) of system elements and relations [SWK13].
[SWK13] [SM03]
This approach is generic in the sense that it can be applied to any type of system and architecture
including technical architecture, application architecture and business architecture.
Dr. Christian Schmidt | Business Architecture Quantified | The Open Group Conference Edinburgh | October 20th, 2015 13
Measuring complexity
Framework of standard complexity measures
For each aspect, a number of standard measures have been identified. In principle, these can be
applied to any existing architecture model and layer (independent of the respective metamodel).
Number (𝑵𝑬) Number (𝑵𝑹)
Relative Number (𝑵𝑹 𝑵𝑬 )
Entropy (𝑬𝑴𝑬;𝑨∗ ) Entropy (𝑬𝑴𝑹;𝑬;𝑨
∗ )
Modularity (𝑴𝑹;𝑬)
Relative Number (𝑵𝑬𝟏 𝑵𝑬𝟐 )
Quantity
Heterogeneity /
Variety /
Concentation
Elements Relations / Paths
Rel. Entropy (𝑬𝑴𝑬𝟏;𝑨𝟏 𝑬𝑴𝑬𝟐;𝑨𝟐 )
[Sc15] 𝐸𝑀 ∗ = numbers-equivalent entropy measure
Dr. Christian Schmidt | Business Architecture Quantified | The Open Group Conference Edinburgh | October 20th, 2015 14
What measures could
be used to assess
business complexity?
Dr. Christian Schmidt | Business Architecture Quantified | The Open Group Conference Edinburgh | October 20th, 2015 15
What is Business Architecture all about?
Integrated Business Architecture framework
Business Execution
Business Model Business Motivation
[Si15]
Dr. Christian Schmidt | Business Architecture Quantified | The Open Group Conference Edinburgh | October 20th, 2015 16
How to measure business complexity
Measure candidates for business execution complexity
Business Execution
Business Model Business Motivation
Number of Capabilities Capability Dependencies
Capability Redundancy
Organizational Modularity
Process Concentration
Number of External Drivers
Number of Goals
Number of Customer Segments
Product Variety
Distribution Relations
… …
…
Goal Relations
Dr. Christian Schmidt | Business Architecture Quantified | The Open Group Conference Edinburgh | October 20th, 2015 17
Capability redundancy
KPI fact sheet
ID Type
Q
V
E R
Name
BA-05 Capability redundancy
Required Metamodel Elements
Description
The average number of busi-
ness capability realizations
per number of (logical)
business capabilities. 𝑁𝐶𝑎𝑝𝑎𝑏𝑖𝑙𝑖𝑡𝑦 𝑅𝑒𝑎𝑙𝑖𝑧𝑎𝑡𝑖𝑜𝑛
𝑁𝐶𝑎𝑝𝑎𝑏𝑖𝑙𝑖𝑡𝑦
Layer
Rationale / Interpretation
The KPI measures the redundancy of a
business entity with respect to capability
implementation and is an indicator for the
business execution complexity surplus.
Example
A pharmaceutical group, whose procurement capability is implemented
multiple times across different countries and deploying different variations of
the same process type has a higher business execution complexity than a
competitor with a global shared service organization providing this centrally.
• ensure the efficiency and focus of the
organization by minimizing
redundancies at the level of business
capabilities
Adressed Concerns Primary Stakeholders
Calculation
Range Breakdown
0;∞
Optimum: 1
• by Entity
• by Capability
• by Capability
Group
realizes
Capability
Cap. Realization
Board Member
Executive Manager
Business Strategist
Dr. Christian Schmidt | Business Architecture Quantified | The Open Group Conference Edinburgh | October 20th, 2015 18
Capability redundancy
Example: procurement capability
Capability
Procurement
Cap. Realization
Procurem. Austria
Cap. Realization
Procurem. UK
Cap. Realization
Procurem. Germany
Process
Procurem. Proc. GAS
Process
Procurem. Proc. UK
Org. Unit
ABC Germany AG
Org. Unit
ABC Austria GmbH
Org. Unit
ABC UK Ltd.
𝑁𝐶𝑎𝑝𝑎𝑏𝑖𝑙𝑖𝑡𝑦 𝑅𝑒𝑎𝑙𝑖𝑧𝑎𝑡𝑖𝑜𝑛
𝑁𝐶𝑎𝑝𝑎𝑏𝑖𝑙𝑖𝑡𝑦= 3
Capability
Procurement
Cap. Realization
Procurement Int.
Process
Procurem. Proc. Int.
Org. Unit
Shared Service Ltd.
𝑁𝐶𝑎𝑝𝑎𝑏𝑖𝑙𝑖𝑡𝑦 𝑅𝑒𝑎𝑙𝑖𝑧𝑎𝑡𝑖𝑜𝑛
𝑁𝐶𝑎𝑝𝑎𝑏𝑖𝑙𝑖𝑡𝑦= 1
Dr. Christian Schmidt | Business Architecture Quantified | The Open Group Conference Edinburgh | October 20th, 2015 19
How to measure business complexity
Measure candidates for the business model
Business Execution
Business Model Business Motivation
Number of Capabilities Capability Dependencies
Capability Redundancy
Organizational Modularity
Process Concentration
Number of External Drivers
Number of Goals
Number of Customer Segments
Product Variety
Distribution Relations
… …
…
Goal Relations
Dr. Christian Schmidt | Business Architecture Quantified | The Open Group Conference Edinburgh | October 20th, 2015 20
Product variety
KPI fact sheet
ID Type
Q
V
E R
Name
BA-12 Product variety
Required Metamodel Elements
Description
The variety of the product
portfolio with respect to
product types.
Layer
Rationale / Interpretation
The KPI measures the heterogeneity of the
product offering and is an indicator for the
supply side complexity of the business
model.
Example
The business model of an organization with a highly heterogeneous set of
products and services, for example, including mobile devices, displays,
printers, and household appliances may be considered more complex than
that of a company with a very focused offering.
• ensure the focus of the business model
with respect to product segments
Adressed Concerns Primary Stakeholders
Calculation
Range Breakdown
1;∞
• by Entity
+
+ Category
Product
Executive Manager
LoB Manager
Business Strategist
𝐸𝑀𝑃𝑟𝑜𝑑𝑢𝑐𝑡;𝐶𝑎𝑡𝑒𝑔𝑜𝑟𝑦∗
Dr. Christian Schmidt | Business Architecture Quantified | The Open Group Conference Edinburgh | October 20th, 2015 21
Product variety
Example: product portfolio in consumer electronics
𝑁𝑃𝑟𝑜𝑑𝑢𝑐𝑡 = 19 𝑁𝑃𝑟𝑜𝑑𝑢𝑐𝑡 = 424
𝐸𝑀𝑃𝑟𝑜𝑑𝑢𝑐𝑡;𝐶𝑎𝑡𝑒𝑔𝑜𝑟𝑦∗ = 2.57 𝐸𝑀𝑃𝑟𝑜𝑑𝑢𝑐𝑡;𝐶𝑎𝑡𝑒𝑔𝑜𝑟𝑦
∗ = 4.03
0%
20%
40%
60%
80%
100%
Smartphones / Tablets (7) PC / Notebooks (10)
TV / Audio / Video (2)
0%
20%
40%
60%
80%
100%
Smartphones / Tablets (33) TV / Audio / Video (145)
Displays / Printer (94) Household App. (135)
Foto (17)
Dr. Christian Schmidt | Business Architecture Quantified | The Open Group Conference Edinburgh | October 20th, 2015 22
How to measure business complexity
Measure candidates for the business motivation
Business Execution
Business Model Business Motivation
Number of Capabilities Capability Dependencies
Capability Redundancy
Orgnizational Modularity
Process Concentration
Number of External Drivers
Number of Goals
Number of Customer Segments
Product Variety
Distribution Relations
… …
…
Goal Dependencies
Dr. Christian Schmidt | Business Architecture Quantified | The Open Group Conference Edinburgh | October 20th, 2015 23
Number of goal dependencies
KPI fact sheet
ID Type
Q
V
E R
Name
BA-36 Number of goal dependencies
Required Metamodel Elements
Description
The total number of
dependencies between
business goals.
Layer
Rationale / Interpretation
The KPI measures the interdependencies
between business goals and is an indicator
for the inherent complexity of the goal
system of the enterprise.
Example
An insurance company operating under the Solvency II regime will have to
follow a larger number of mutually dependant business goals than it would
have to without the Solvency legislation.
• ensure that the different goals to be
followed and their interdependencies
are clear and adequately adressed by
the underlying business model and
business execution
Adressed Concerns Primary Stakeholders
Calculation
Range Breakdown
0;∞
• by Entity
Goal
Board Member
Executive Manager
Business Strategist
𝑁(𝐺𝑜𝑎𝑙→𝐺𝑜𝑎𝑙)
depends on
Dr. Christian Schmidt | Business Architecture Quantified | The Open Group Conference Edinburgh | October 20th, 2015 24
Business motivation complexity
Example: regulation of the insurance industry
External Driver
Shareholder expect.
Goal
ROI above average
External Driver
Solvency II regime
𝑁(𝐸𝑥𝑡𝑒𝑟𝑛𝑎𝑙 𝐷𝑟𝑖𝑣𝑒𝑟→𝐺𝑜𝑎𝑙) = 2
𝑁𝐸𝑥𝑡𝑒𝑟𝑛𝑎𝑙 𝐷𝑟𝑖𝑣𝑒𝑟 = 2
𝑁𝐺𝑜𝑎𝑙 = 4
Goal
Min. admin. costs
Goal
Diversified risks
Goal
SCR satisfied
𝑁(𝐺𝑜𝑎𝑙→𝐺𝑜𝑎𝑙) = 4
External Driver
Shareholder expect.
Goal
ROI above average
𝑁(𝐸𝑥𝑡𝑒𝑟𝑛𝑎𝑙 𝐷𝑟𝑖𝑣𝑒𝑟→𝐺𝑜𝑎𝑙) = 1
𝑁𝐸𝑥𝑡𝑒𝑟𝑛𝑎𝑙 𝐷𝑟𝑖𝑣𝑒𝑟 = 1
𝑁𝐺𝑜𝑎𝑙 = 2
Goal
Min. admin. costs
𝑁(𝐺𝑜𝑎𝑙→𝐺𝑜𝑎𝑙) = 1
Dr. Christian Schmidt | Business Architecture Quantified | The Open Group Conference Edinburgh | October 20th, 2015 25
How can
complexity measures
be put to practice?
Dr. Christian Schmidt | Business Architecture Quantified | The Open Group Conference Edinburgh | October 20th, 2015 26
Application scenarios
Possible applications for complexity measures
1. Decision support / simulation for (major) architecture decisions
(e. g., mergers and acquisitions, business transformation planning,
target application landscape planning)
2. Comparative analyses within an organization (e. g., to explain
differences in costs and flexibility between domains or business lines,
time series analyses)
3. Cross-organizational architecture benchmarkings (complementing
existing cost benchmarkings, etc.)
4. Systematic planning of target values as part of a continuous
architecture management (e. g., differentiated by architecture layers
and domains)
Dr. Christian Schmidt | Business Architecture Quantified | The Open Group Conference Edinburgh | October 20th, 2015 27
Implementing a quantitative EA / complexity reporting
Process model and tools (overview)
Identify and
prioritize
stakeholder
concerns
Derive set of
required KPIs
and views
Extend
metamodel and
maintenance
processes
Implement
KPI calculation
and views
Establish
regular
reporting
KPI Calculation
Toolsets
Catalogue
of concerns
Stakeholder
interviews Catalogue
of KPIs
EA repository / tool
Dr. Christian Schmidt | Business Architecture Quantified | The Open Group Conference Edinburgh | October 20th, 2015 28
Application example
Enterprise IT architecture reporting
Domain Applications Interfaces
Number Risk Class EUC Functional
Redun-
dancy
Platform
Variety
Number Domain
Internal
Technical
Variety
1 2 3
Master Data 8 14% 29% 57% 0% 1.50 5.16 50 6% 1.51
Underwriting 22 60% 0% 40% 50% 2.13 2.78 22 29% 2.01
Client Systems 11 44% 0% 56% 20% 4.76 2.43 13 5% 3.56
Exposure Mgmt. 33 5% 25% 70% 80% 3.52 5.43 45 45% 4.56
Accounting 24 15% 25% 60% 10% 2.23 4.65 46 61% 3.46
Consolidation 8 10% 10% 80% 0% 1.45 2.78 24 27% 3.65
Business Intell. 14 5% 30% 65% 25% 2.45 4.56 42 5% 3.02
Controling 18 25% 25% 50% 43% 1.76 4.24 29 26% 6.76
Investment 6 5% 50% 45% 5% 2.03 4.21 13 56% 4.53
Other 43 33% 34% 33% 23% 2.54 5.43 34 27% 3.45
Dr. Christian Schmidt | Business Architecture Quantified | The Open Group Conference Edinburgh | October 20th, 2015 29
Application example
EA complexity dashboard (domain view)
37.3
Application Vendor
Variety
Above
Average
3.4
Business Capability
Redundancy
Above
Average
Business Architecture
Application Architecture
Technical Architecture
0.2
Application
Interface Modularity
Below
Average
7.3
Application
Platform Variety
Above
Average
2.1
Functional Infrastructure
Redundancy
Below
Average
3.4
Functional Application
Redundancy
Above
Average
28.7
Business Process
Variety
Above
Average
Dr. Christian Schmidt | Business Architecture Quantified | The Open Group Conference Edinburgh | October 20th, 2015 30
Conclusion
Summary and outlook
conceptual foundation established
unified measurement model and
set of standard measures provided
measures defined (KPI catalog)
and (partly) validated for the
domain of IT architecture
initial measures defined (KPI
catalog) for the domain of business
architecture
process model developed and
reporting views created
gather more experience on the use
of the defined measures and
determine their practical relevance
develop methods for measure
integration (cross-layer) and
aggregation
define standards to support intra-
and inter-organizational
benchmarkings
What has been achieved What still needs to be done
Dr. Christian Schmidt | Business Architecture Quantified | The Open Group Conference Edinburgh | October 20th, 2015 31
Recommended reading
Business Architecture Management
An Architectural Approach to
Strategizing: Structure and Orientation
for Developing the Business Motivation
(Daniel Simon)
From Business Motivation to Business
Model and Beyond: A Customer Value-
Driven Approach
(Jörg Heiss)
Business Motivation / Model
Effectively Modeling Your Architecture
(Gerben Wierda)
Business Architecture Quantified:
How to Measure Business Complexity
(Christian Schmidt)
Building Agile Enterprises
(Marc M. Lankhorst / Bas van Gils)
Modeling and Measuring
Bringing Business Architecture to Life:
How to Establish Business Architec-
ture Practices in Your Organization
(Christian Schmidt / Daniel Simon)
Business Architecture for Niche-
Market Enterprises
(Tom S. Graves)
(and others)
Implementation
Using Capability Models for
Strategic Alignment
(Wolfgang Keller)
Can Culture Be Designed?
(David W. Gray)
Business Architecture for Change
Program Design and Planning
(Adrian P. Apthorp)
Business Execution
2015, XII, 304 p.,
84 iIllustrations
Springer
Management for
Professionals
Dr. Christian Schmidt | Business Architecture Quantified | The Open Group Conference Edinburgh | October 20th, 2015 32
References
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[Sc13a] Schmidt, C.: Measuring and Managing Enterprise Architecture Complexity. Sebis Workshop on the
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[Sc13b] Schmidt, C.: How to Measure Enterprise Architecture Complexity: A Generic Approach, Practical
Applications, and Lessons Learned. The Open Group Conference, London, 21.10.2013.
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and Alignment. Springer, Berlin.
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References
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[Si15] Simon, D.: Demystifying Business Architecture. In: Simon, D.; Schmidt, C. (Eds.) (2015): Business
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Springer, 2012; S. 18-34.
[SWS13] Schmidt, C.; Widjaja, T.; Schütz, A.: Messung der Komplexität von IT-Landschaften auf der Basis von
Architektur-Metamodellen: Ein generischer Ansatz und dessen Anwendung im Rahmen der Architektur-
Transformation. Informatik 2013 – Beiträge der 43. Jahrestagung der Gesellschaft für Informatik. Köllen
Verlag, Bonn (in German).
[SWK13] Schütz, A.; Widjaja, T.; Kaiser, J.: Complexity in Enterprise Architectures – Conceptualization and
Introduction of a Measure from a System Theoretic Perspective. European Conference on Information
Systems (ECIS), Utrecht, 2013.
[TOG13] The Open Group (Ed.): TOGAF (The Open Group Architecture Framework) V. 9.1.
http://www.opengroup.org/togaf, 2013.
[Wi12] Widjaja, T.; Kaiser, J.; Tepel, D.; Buxmann, P.: Heterogeneity in IT Landscapes and Monopoly Power of
Firms: A Model to Quantify Heterogeneity. International Conference on Information Systems (ICIS),
Orlando, 2012.
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