The Importance of Standards in Large Complex Organizations

Large complex organizations require standards with respect to developing strategic goals, business processes, and technology solutions because agreed upon guiding principles support organizational efficiencies. Without standards in these spaces, there is the increased potential for duplication of functionality, as localized business units implement processes and technologies with disregard for the enterprise as a whole. When the enterprise as a whole considers items such as applications, tools and vendors, standards help ensure seamless integration.

Examples of enterprise standards might be:

  • “The acquisition of purchased applications is preferred to the development of custom applications.” [1]
  • An example of an infrastructure-driven principle might be, “The technology architecture must strive to reduce application integration complexity” [1]
  • “Open industry standards are preferred to proprietary standards.” [1]

These hypothetical top down standards can help settle the “battle of best practices” [2]. Standards also provide direction and can guide the line of business staff’s decision-making so that the entire organization is aligned to strategic goals. Furthermore, the minimization of diversity in technology solutions typically lowers complexity, which in turn helps to lower associated costs.

Enterprise Architecture standards also have a place in facilitating “post merger/acquisition streamlining and new product/service rollouts” [2]. Successfully and rapidly integrating new acquisitions onto a common framework can be vital to success.

Here are two banking examples where post merger system integration problems arose in financial services companies:

  • In 1996, when Wells Fargo & Co. bought First Interstate Bancorp, thousands of customers left because of missing records, long lines at branches, and administrative snarls. In 1997, Wells Fargo announced a $150 million write-off to cover lost deposits due to its faulty IT integration. [3]
  • In 1998, First Union Corp. and CoreStates Financial Corp. merged to form one of the largest U.S. banks. In 1999, First Union saw its stock price tumble on news of lower-than-expected earnings resulting from customer attrition. The problems arose from First Union’s ill-fated attempt at rapidly moving customers to a new branch-banking system. [3]

Having robust Enterprise Architecture standards in place may have helped to reduce the risk of failure when integrating these dissimilar entities.

References:

[1] Fournier, R., “Build for Business Innovation – Flexible, Standardized Enterprise Architectures Will Produce Several IT Benefits.” Information Week, November 1, 1999. Retrieved from Factiva database.

[2] Bernard, Scott A. “Linking Strategy, Business and Technology. EA3 An Introduction to Enterprise Architecture.” Bloomington, IN: Author House, 2012, Third Edition

[3] Popovich, Steven G., “Meeting the Pressures to Accelerate IT Integration”, Mergers & Acquisitions: The Dealmakers Journal, December 1, 2001. Retrieved from Factiva database.

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