Combining Geoffrey Moore's business strategy ideas with EDS' BATOG model provides a good perspective from which to view the long-term, enterprise-level, big picture I mentioned in an earlier post. EDS BATOG is a business foundation for technology planning.
The following diagram illustrates EDS' five BATOG elements (Business, Applications, Technology, Organization, and Governance) from a particular viewpoint that incorporates some of Moore's concepts.
"B" as in Business
In the current discussion, the key attribute of Business is the company's strategy concerning "core" versus "context", as defined by Geoffrey Moore in his book Living on the Fault Line. Moore defines "core" to be those activities that can increase shareholder value if they are performed better than the competition. These core activities need to be differentiated; they are the source of competitive advantage, the source of economically profitable revenue. He defines "context" to be all the other activities required to run the business; for these activities, poor execution can decrease shareholder value, but exceptional execution cannot increase shareholder value. Context activities must be performed using best practice, no better and no worse. It is important to take account of the dynamic nature of core versus context; to quote Geoffrey Moore, "Today's core is tomorrow's context."
"A" as in Applications
Applications support the business activities needed to run the company. Each company must perform Industry, Enterprise, and Information Technology process activities. Industry process activities are common to companies in the same industry; for example, manufacturing companies perform manufacturing activities and financial services companies perform financial services activities. Enterprise process activities are performed by all companies, and include human resources, finance & accounting, supply chain management & procurement, sales & marketing, customer relationship management, and legal.
"T" as in Technology
Information Technology includes infrastructure platforms and services, and application platforms and services. For most companies, Technology is a context, enterprise activity. For some, especially those in the IT industry, Technology is a core, industry activity.
"O" as in Organization
For present purposes, the key attribute of the Organization dimension is determining which people are in-sourced and which are out-sourced. Organization and Business should be aligned: core business activities should be in-sourced to gain competitive advantage, whereas context activities should be outsourced to provide non-differentiated, best practice service performed with appropriate "hygiene" (to use another Geoffrey Moore term). Outsourcing context activities allows the company to focus its scarce resources (money, time, talent, and management attention) on its core value-creating activities. In addition, the company benefits from the focus the outsourcer places on performing the context activities.
"G" as in Governance
The Governance dimension defines ownership of the various business processes. It is common for the "Business" to own the Industry processes, "Corporate" to own the Enterprise processes, and the CIO to own the IT processes. As Charlie Feld points out in his recent synnovation article, the success of most companies depends on their ability to keep these three complementary functions in synch with one another.
Custom versus Replicated versus Shared versus Infrastructure Solutions
Company-specific custom applications or dedicated platforms should be reserved for core activities that need to be differentiated to create competitive advantage. In contrast, context functions should be outsourced by using either replicated or shared solutions. Industry and Enterprise frameworks and packaged commercial, off-the-shelf (COTS) applications are examples of replicated solutions. Infrastructure, application platform, software, and business processes, each being delivered as services (i.e., IaaS, PaaS, SaaS, BPO), are examples of shared utility solutions. There can be significant differences in the economics of these different kinds of solutions (i.e. "The Economics of IT Solutions"). To take full advantage of these economic tradeoffs, the company must efficiently manage the integration at the boundaries between themselves and their solution providers.