Each view of an organization’s enterprise architecture (business, information, solution, and technology) presents distinct challenges for value creation. Solution architecture defines the structure of the software elements of a business capability by determining the responsibilities of each component in the software. Solution architecture can either be an important contributor to value or an insurmountable barrier to change. The key challenge in defining the structure of the software is the assignment of responsibilities to solution components in a way that simultaneously:
- Maximizes business flexibility,
- Meets technical requirements, and
- Delivers the lowest total cost of ownership.
To meet this challenge, architects must understand and leverage four sources of economic value derived from an effectively designed solution architecture: customer, profitability, reliability, and performance.
What do we mean by “economic value?”
Public companies are held accountable through the quarterly publishing of their earnings reports. At the end of the day, value shows up on a company’s income statement as revenue minus cost ultimately reflected in its operating income. Other financial metrics such as return on invested capital (ROIC) illustrate the earnings performance of a company relative to its debt and equity financing. Investors use these metrics to make investment decisions that impact companies’ stock prices. Although privately held companies and non-profit organizations have less visible forms of accountability, all organizations can benefit from wise solution architecture decisions that improve their business capabilities.
“Show me the money!”
– Rod Tidwell, in Jerry Maguire
The key point here is that value can be measured. It is the responsibility of solution architects to guide product development teams to quantify the value generated by software-based products so this value can be used to make decisions about the architecture. For example, a business capability that generates $50 million a year in gross margin should not be burdened with a solution architecture that costs $50 million a year to operate.
On the other hand, value is more than just cost. Over the past decade, many companies have realized that superior software enables them to earn higher margins on hardware-based products. Customers are willing to pay more for a superior product, and incremental margins generated by superior products can be used to justify investments in solution architecture.
Beginning with the End in Mind: Customer Value
The primary responsibility of physical architecture components is to support high-quality customer experiences, products that customers love to use. Effective solution architecture assigns the right responsibilities in the right components, enabling experience designers and application developers to deliver products that are a joy to use. Engaging experiences deliver quantifiable economic value that is measured by growing product use, increased conversion rates, and ultimately, higher customer lifetime value.
Solution architecture decisions that facilitate ease of use include things like caching information close to the point of use, incorporation of knowledge about the customer to reduce friction in a business process, security to increase trust in the product, and horizontal scaling to maximize availability.
The Bottom Line: Profitability
The profit perspective on solution architecture is all about enabling the greatest velocity of change at the lowest total cost of ownership (TCO). Customer and market demands change rapidly, sometimes through unanticipated events like the COVID-19 pandemic. Flexible architectures enable more rapid change at a lower TCO. The ability to change rapidly at a low cost increases an organization’s ability to learn from its customers, which improves the profitability of products and business capabilities.
The most critical solution architecture decisions that influence profitability focus on component simplicity and automation of change processes. The YAGNI principle (“you aren’t gonna need it”) applies here. Fewer, simpler components in an architecture mean that less overall change is required to add or modify a feature that delivers business value. Since architects are expected to be forward-thinking in their intentional plans for solutions, they tend to exhibit an inherent bias toward over-architecting things. Minimizing the architectural overhead of a business capability by making it as simple as possible is one technique architects can use to overcome this bias.
You Can’t Serve Customers if You’re Offline: Reliability
It’s about 1:30 PM on Cyber Monday, the biggest e-commerce shopping day of the year. The traffic monitors on the HTTP tier of the e-commerce site are spiking, signaling a large ramp-up in traffic over the last 30 minutes. The increase in traffic appears to be primarily impacting the front-end web servers. Joe, the Operations Director, looks at the email on his cell phone and notices a marketing email for the site arrived in his inbox about 30 minutes ago. A call to Marketing confirms his suspicion. Marketing dropped a 5-million-piece campaign at the top of the hour, and as people click through to the website from their email, traffic is spiking. Will the site handle the workload?
Fortunately, this story has a happy ending. Joe’s team conducted extensive stress testing of the e-commerce site prior to the start of the holiday season, so once he saw the arrival rate peak at about 1:45 PM, he knew that the site could handle the incoming traffic. Over the next two hours, shoppers began to become buyers, and by 6:00 PM, the e-commerce team in both India and the U.S. began celebrating what would become the largest one-day sales volume in the history of the website.
The reliability of a product or service is critical for customers to be willing to rely on it. Effective solution architecture increases reliability in a couple of significant ways. First, it helps teams deliver the required business functionality with fewer moving parts. Fewer parts result in fewer things that can break. Second, effective architectures maximize component independence and are horizontally scalable. Solutions designed for component independence can absorb the failure of a non-trivial percentage of components without degrading all customers’ experiences. Reduced failure rates lead to lower production support and maintenance costs, enabling teams to spend a higher proportion of their effort building or enhancing business capabilities.
Is Your Service Feeling Abandoned? Performance Matters
The last area of economic value delivered through solution architecture is performance. A 2018 website performance study by Pingdom found that if a website takes 5 seconds to load a page, 38% of the visitors abandon the site. Effectively designed architectures not only reduce chattiness across application services but also eliminate non-value-adding work. Improved performance not only makes it easier to satisfy customers, but it can also lower the cost per unit of work from 20 – 90%, enhancing the profitability of the organization’s business capabilities.
Customer value, profitability, reliability, and performance are the four ways that solution architecture contributes economic value to an organization. Solution architecture is primarily a structural concern in that the distribution of responsibilities across components is a way to describe the structure of the software supporting a business capability. We optimize the structure of the software by understanding how its components contribute economic value. Companies that account for these sources of economic value as they undertake their journeys to agility are more likely to achieve permanent, sustainable improvements in their ability to meet customer and market needs than those that focus solely on practices or culture.