Strategy-focused architecture investment decisions Ana Ivanović

169 Pages·2011·2.92 MB·English

by  David Regeczi

Strategy-focused architecture investment decisions

Ph.D. thesis

by

Ana Ivanović
Part of this research has been carried out under the DARWIN project at Philips
Healthcare, which runs under the responsibilities of the Embedded Systems Insti-
tute (ESI). The DARWIN project is partially supported by the Dutch Ministry of
Economic Affairs under the BSIK program.

Copyright (cid:31)2011 by Ana Ivanović
All rights reserved. Reproduction in whole or in part is prohibited without the
written consent of the copyright owner.

A catalogue record is available from the Eindhoven University of Technology
Library
ISBN: 978-90-386-2452-5

Printer: Eindhoven University Press
Cover design: Henny Herps
Strategy-focused architecture investment decisions

PROEFSCHRIFT

ter verkrijging van de graad van doctor aan de
Technische Universiteit Eindhoven, op gezag van de
rector magnificus, prof.dr.ir. C.J. van Duijn, voor een
commissie aangewezen door het College voor
Promoties in het openbaar te verdedigen
op donderdag 24 maart 2011 om 16.00 uur

door

Ana Ivanović

geboren te Kragujevac, Servië
Dit proefschrift is goedgekeurd door de promotor:

prof.dr. C.C.P. Snijders

Copromotor:
dr. P. America

A catalogue record is available from the Eindhoven University of Technology
Library
ISBN: 978-90-386-2452-5
Table of Contents
Part I: Challenges ...................................................................................................................... 1 
1  Introduction ........................................................................................................................ 3 
1.1  Motivation .................................................................................................................. 3 
1.2  Research challenges ................................................................................................. 5 
1.3  Goal of the thesis ....................................................................................................... 7 
1.4  Thesis overview ......................................................................................................... 9 
2  Literature ........................................................................................................................... 11 
2.1  Introduction ............................................................................................................. 11 
2.2  Methods for decision making on architecture investments ........................... 12 
2.3  Information use of experts in decision making ................................................. 17 
2.4  Strategic vs. architecture decision-making ........................................................ 18 
2.5  Conclusions and research questions .................................................................... 22 
3  Practical challenges in architecture investment decision making: a business
case at Philips Healthcare ..................................................................................................... 25 
3.1  Study design ............................................................................................................. 26 
3.2  Case: Phase out legacy at Philips Healthcare ..................................................... 28 
3.3  Study 1: The legacy phase-out decision by the expert team ........................... 30 
3.4  Study 2: The legacy phase-out decision by applying the real options way
of thinking ......................................................................................................................... 37 
3.5  Practical challenges to support architecture investment decisions .............. 46 
3.6  Conclusions .............................................................................................................. 47 
Part II: Information ................................................................................................................ 49 
4  Information needs of architects and managers for architecture
investment decisions ............................................................................................................. 51 
4.1  Study design ............................................................................................................. 52 
4.2  Step 1: A preliminary set of information ............................................................ 54 
4.3  Step 2: Frequencies of information needs by architects and managers ........ 56 
4.4  Step 3: A comparative analysis on information needs by architects
and managers .................................................................................................................... 58 
4.5  Step 4: Discussion .................................................................................................... 62 
4.6  Conclusions .............................................................................................................. 64 
5  Drivers of architecture investment decisions: business and individual
perspectives ............................................................................................................................. 65 
5.1  Study Design ............................................................................................................ 66 
5.2  Measurements ......................................................................................................... 71 
5.3  Results ....................................................................................................................... 72 
5.4  Discussion and Conclusions ................................................................................... 78 
Part III: Best practices ............................................................................................................ 81 
6  Modeling customer-centric value to support architecture investment decisions 83 
6.1  Study design ............................................................................................................. 85 
v
vi
6.2  Study 1: Customer value-in-use ............................................................................87 
6.3  Study 2: Customer segments .................................................................................94 
6.4  Discussion and conclusion .................................................................................. 100 
7  Strategy-focused architecture investment decisions: A real-world example ..... 105 
7.1  Introduction .......................................................................................................... 105 
7.2  Strategy-focused architecture (StArch) method to support
investment decisions .................................................................................................... 107 
7.3  StArch: A real-world example ............................................................................ 112 
7.4  StArch evaluation ................................................................................................. 122 
7.5  Discussion and Conclusions ................................................................................ 124 
Part IV: Conclusion and appendices ................................................................................. 127 
8  Conclusion ....................................................................................................................... 129 
8.1  Focus and approach ............................................................................................. 129 
8.2  Summary of main findings.................................................................................. 131 
8.3  Discussion .............................................................................................................. 134 
8.4  Future lines of research ....................................................................................... 137 
Appendix A: Interview format ........................................................................................... 139 
Appendix B: Case descriptions: automotive and consumer electronics ..................... 141 
Appendix C: Data and analyses .......................................................................................... 145 
Reference list ........................................................................................................................ 149 
Summary ............................................................................................................................... 157 
Acknowledgements ............................................................................................................. 161 
Curriculum vitae .................................................................................................................. 163
PART I: Challenges

1 Introduction
Organizations have been investing in the development of software-intensive systems,
such as medical devices, airplanes, or satellite systems, for decades. Over time, these sys-
tems become complex and unique, making them hard to imitate by competitors. They
develop into crucial assets of an organization. Continuous quality improvements of these
systems are critically important for a company’s competitive advantage on the market
and for business success. Investments in these system-quality improvements are called
architecture investments. Architecture investments have a strategic importance because
they are large, risky, and lengthy with long-term benefits spread across an organization
and different products. To make a successful investment decision, the organization asks
an expert team to evaluate architecture. In this process, the expert team challenges the
architecture solution to maximize utilization and to create the most value over its life-
time.
Nowadays, a decision on architecture investment is treated like any other development
investment in the organization. An expert team, which consists of architects and business
managers, evaluates architecture to support architecture investment decisions. The sys-
tem architect, who creates architecture, provides a proof-of-concept on how quality
improvements meet the business goals, while business managers attempt to assess busi-
ness consequences of these quality improvements. This implies a cost benefit analysis
that is not straightforward in industrial practice. While costs of architecture investments
are routinely calculated using established cost models, benefits of quality improvements
are difficult to identify and quantify. A common approach to estimate benefits of archi-
tecture changes is by using quality scores. Quality scores are sufficient to compare
architecture alternatives, but not to decide on architecture investments based on the
business value creation. Therefore, there is an urgent need for a systematic evaluation
with business indicators in mind, such as sales, customer satisfaction, cash flow, or reve-
nue. Without a systematic method to guide decisions based on business value, a decision
is driven by the anecdotes and personal preferences of deciders. Such decisions, driven by
personal rather than business incentives, are sub-optimal for an organization’s success.
In this chapter we explain in more detail this need for developing a systematic approach
to evaluate system architecture to support an investment decision, which is driven by
business goals rather than personal preferences. Then, we elaborate on research chal-
lenges in the literature to support architecture investment decisions. Based on the
research challenges, we define the goal of the thesis and highlight the main research con-
tributions. Finally, we present an overview of the thesis to help a reader to more easily
navigate the book.
1.1 Motivation
In software-intensive systems, software architecture is a dominating part of system ar-
chitecture. Therefore, in this thesis, we often refer to the software-architecture literature
to address important aspects of system architecture. System architecture represents a set
of the most significant system design decisions (Jansen and Bosch 2005; Tyree and Aker-
3
4 | Part I: Challenges
man 2005). These design decisions are made by a system architect, a creator of the system
architecture, to meet business goals (Bass, Kazman et al. 2003). The literature suggests a
large number of business goals are accommodated by system architecture, such as to im-
prove market position, reduce total cost of ownership, improve capability/quality of
system, support improved business processes, and improve confidence in and the percep-
tion of the system (Kazman and Bass 2005). This business perspective implies high
expectations from system architects to select design decisions and assess their benefits
and costs aligned with the business goals.
The type of design decisions, business goals, and therefore the scope of architecture eval-
uation, evolved dramatically over time. In the early beginnings of system architecture as
a discipline, architecture decisions referred mainly to deciding upon a system structure
(Parans, Clements et al. 1984). For example, structuring a system in independent modules
enabled multiple teams to work in parallel to increase productivity. In that period, the
main objective of architecture evaluation referred to checking proof-of-concepts com-
pleted by the system architect. Under these circumstances, business managers would
allocate resources required by architects to implement architecture changes without any
economic assessments. Thus, architecture investment decisions were rather driven by a
sound proof-of-concept and resource availability rather than by the benefits created by
architecture changes.
Over time, system architecture shifted its focus from structuring system designs towards
designing systems to fulfill quality-attribute requirements (e.g., performance, reliability,
or upgradability) to meet business goals (Bass, Kazman et al. 2003). Explicit business ob-
jectives of system architecture implied changes in architecture evaluation, involving
cost-benefit analysis. Multiple stakeholders scored how architecture alternatives could
realize quality requirements to meet business goals (Kazman, Asundi et al. 2002). The
quality/cost ratio of architecture alternatives are compared to decide on the best invest-
ment. Although a cost-benefit analysis was the first economic evaluation, it was mainly
used by architects to support tactical decisions on “best” architecture design given lim-
ited resources (Moore, Kazman et al. 2003).
According to Clement and Shaw (2009), we left a golden age of innovation and concept
formulation in system architecture. System architecture is beginning to enter a more
mature stage of reliable use and maximum utilization. Design decisions relevant to archi-
tecting are the ones with a significant impact on business strategy (Malan and
Bredemeyer 2002). These design decisions should maximize the value creation of archi-
tecture over its lifetime and be aligned with the business strategy. The evaluation process
of architecture becomes closely related to the evaluation of any other strategic invest-
ment in an organization (Smit and Trigeorgis 2004). Consequently, the scope of
architecture evaluation has changed again.
First, strategy-focused architecture investments need to deploy many management and
financial tools to make a meaningful business case analysis to support architecture in-
vestment decisions. Management tools help identify information considering business,
processes and organizational aspects that is used as an input for economic valuation (van
der Linden, Schmid et al. 2007). Financial tools help break down an architecture invest-
ment into a set of investments over time to anticipate the maximum value created by the
architecture over its lifetime. In this respect architecture evaluation is consistent with