Funding models for enterprise architecture are an indicator as to the status and effectiveness of EA efforts within an organization. How EA is funded reveals much about levels of EA practiced and what the results are (or will be) in organizations using the discipline. I've been searching for and reviewing research and commentary on how enterprise architecture is funded in organizations, with a goal as to gaining some insight between specific funding mechanisms/models and success or failure of EA efforts.
Below are 3 common funding models that I've seen in actual practice:
- EA is funded on a per-project basis: Every project allocates budget and resources for EA directly and exclusively of other projects or the IT and business organizations as a whole.
- EA is funded via a 'tax' on projects and operational systems: All projects and operational systems pay a fee, or 'tax' as a percentage of their budgets to fund EA initiatives, with the EA effort and resources serving the entire organization.
- EA is funded as a capital expense out of the overall IT and/or business budgets exclusive of specific projects, systems, or lines of business.
There are, of course, other models and hybrids of the above, but I'll stick to these three to start. Each of these models has strengths and drawbacks, and the purpose of this post is to call them out for your review and comment, and not necessarily to advocate one over the other.
FUNDING ENTERPRISE ARCHITECTURE ON A PER-PROJECT BASIS
In this model, every project plans and accounts for EA costs and resources on its own, exclusive of the planning, budgeting, or use of EA services and resources by other projects within the organization.
Advantages - Tighter cost control, resource utilization, and flexibility/agility. Projects have the option to only use "enough" EA (including none) to satisfy their needs and requirements.
Disadvantages - Several, including: no motivation or perceived need to coordinate EA efforts across the organization; failure to utilize EA to 'save money/time' or to control scope;' governance issues; increased operational costs from design and implementation execution differences across projects (silo architectures --> silo systems developed); no accounting for operational systems (i.e. few or no projects underway, no EA funding);
FUNDING ENTERPRISE ARCHITECTURE WITH A 'TAX' ON PROJECTS AND/OR OPERATIONAL SYSTEMS
This model is shares similarities with the classic IT "chargeback" model, where all non-IT parts of the organization pay out of their budgets for IT services. All project and operational budgets are assessed a fee for EA services whether they utilize them or not (and that's a separate, but important issue in it's own right), usually as a set percentage of the project or operational budget for all systems being developed or in production.
Advantages - almost guaranteed revenue stream from budgets, since all projects and systems provide funding to some degree based on budget or other metrics; inclusion of EA on all projects
Disadvantages - specific demands for services in direct proportion to a project's "investment" in EA, whether justified or not; complaints and/or negative actions from the business or IT project managers about having to "pay for EA" as it is perceived by them as a "waste of money;" dissatisfaction with EA efforts relative to the costs incurred.
FUNDING ENTERPRISE ARCHITECTURE AS A CAPITAL EXPENSE FROM IT AND/OR BUSINESS BUDGETS
Enterprise architecture is funded as a set, capitalized expense from the overall IT budget and is not directly dependent on the budget of specific projects or business initiatives.
Advantages - guaranteed revenue stream (at least for the current fiscal year); EA is not beholden to the whims of specific projects as with "chargeback" or ad hoc funding models described above.
Disadvantages - like training, easy to drop from fiscal budgets in times of cost cutting - whether justified or not; tends to promote "ivory tower" syndrome if EA's have no accountability to the business or to other IT staff; requires yearly justification to CFO or CEO if results achieved are not in-line with business' expectations.
If anyone has other stories, models, or insights they'd like to share on this, I'd love to hear them. I'd also like to hear about the ways organizations measure the effectivesness of EA budgets/investments. If anything, such metrics will give perspective on how EA is viewed organizationally, because everybody, myself included, has an opinion about getting "one's money's worth" when spending their budget dollars.