Enterprise architecture (EA) is no longer an overhead function that primarily governs technical architecture; it is shifting to a strategic enablement function for business transformation. Digitalization of the banking, financial services, and insurance industry is transforming back-end processes and customer service delivery. In addition, accelerating digital transformation in all parts of the business has become more urgent due to changes necessitated by the COVID-19 pandemic such as remote working, automated processes, and mobile transactions.
As emerging technologies continue to disrupt traditional business models, it’s imperative for financial services (FS) organizations to make the right technology investments to achieve their strategic business objectives. The good news is that EA can demonstrate leadership by enabling IT groups and business leaders to realize the full value of digital transformation initiatives and, in this climate of continuous disruption, EA leaders recognize the need to shift how the function supports business outcomes.
This post examines how the EA function is evolving into a strategic business partner focused on designing practices that enable adoption of emerging technologies for digital innovation and delivering consultative guidance on those practices. Given the quickening pace of digitalization, Agile is increasingly being used in financial services and, in turn, influencing EA’s shifting role.
Financial Services IT Moves Toward Agile
As digital transformation is the key to growth and competing with pure digital players, FS organizations are adopting Agile to bring new products to market and reinvent customer service models (e.g., mobile payments and claims submission). Agile methodology changes how software development and other functions involved in digital initiatives work because it emphasizes iterative development, responding to changes, and team autonomy, which enable speedy and flexible adoption of software applications.
While EA has been characterized as a top-down discipline, Agile development is a bottom-up methodology, placing the emphasis on responding to change over following plans. Therefore, to successfully execute on transformation initiatives, FS organizations need architecture practices to evolve by providing simple guidelines, evaluation frameworks, and best practices for emerging technologies adoption.
Architecture Function Shifts to Partner
Heads of EA are shifting their function’s approach to shape technology decisions by identifying opportunities to integrate architecture viewpoints with development processes and consulting on how to integrate technology strategy and business strategy. As stated in Aite-Novarica’s Executive Brief, CIO Checklist: Enterprise Architecture for FDIC-Supervised Firms, “The role of enterprise and application architecture in mature Agile organizations shifts from one of governance to enablement. Architecture groups are tasked with leading the way for development teams by evaluating new technology, building out reference implementations, and establishing best practices for use by Agile teams as needed.”
This shift emphasizes moving from a traditional centralized model characterized by compliance with directive policies and standards to a consultative, business partner model that supports Agile product development, data analytics, and software product development teams that drive innovation.
For example, EA is collaborating with the lines of business to provide data-driven insights for decision-making and standard architecture guidelines regarding how AI, cloud, and other technologies support digital business models. Also, EA is adopting more flexible organization design models to integrate with teams who own transformation efforts, such as embedding architecture professionals in product development teams to provide up-front guidance during ideation.
Architecture Can Lead Digital Transformation
EA can create significant value by enabling alignment of the right emerging technologies with investments in digital business and service models while governing IT. To realize this leadership opportunity, EA’s role is evolving to both coordinate technology use through establishing enterprise governance principles and provide strategic advice on how and where to integrate emerging technologies with initiatives to drive digital business models.
The seven focus areas of a strategic EA function plan identify the most important opportunities to design architecture practices that enable innovation in FS organizations through successful adoption of cloud, machine learning, and other technologies that drive digital transformation. EA can add value by providing strategic advice and frameworks to build out IT capabilities that accelerate digital transformation.
For instance, EA is designing architecture practices to enable decisions on integrating technologies like cloud services and APIs with business strategy. EA leaders are educating their IT and business counterparts on the technical and risk considerations involved in migrating customer-facing workflows onto cloud platforms. APIs are now critical for delivering the digital experience that FS consumers expect, and EA is adjusting its target-state technology blueprints to incorporate guidance on adopting APIs to develop more agile digital capabilities, such as retrieving real-time customer data when executing transactions.
Architecture blueprints are being redesigned with business stakeholder input to articulate simple guiding principles that facilitate how to leverage advanced software and digital technologies within a unified governance framework. For example, as AI and machine learning are becoming integral to managing FS operations, EA is supporting business leaders in identifying opportunities to implement AI-enabled software that builds capabilities in areas like data analytics and transaction monitoring.
The evolution of EA’s role into a strategic business partner that enables the innovation required to build future-state IT capabilities and create new digital business models is vital to delivering on the promise of transformation in financial services.
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