CIO: Insurers Must Build Capabilities on the Four Tiers of Architecture

CIOs must answer the business's needs armed with appreciation of the different levels of enterprise architecture -- business, information, application and technical -- in order to avoid a proliferation of disconnected point solutions.

Would you begin construction of your dream home or an addition to your existing house without architectural plans? To develop these plans you would have a lot of discussion with the architect about your needs, how the space would support your lifestyle and how it would integrate with your surroundings to add value to your home.

Building new IT systems and making significant changes to older systems are no different. Frequently business and IT miss this critical discussion about the architecture, and IT begins to design and build a system solution based on an understanding of the business requirements in an isolated setting. This results in a point solution for that specific business need.

Before a specific business solution is designed and built or acquired, a clear understanding of your enterprise architecture is essential. Using the analogy of building a new home, it is critical that an architectural map of services that need to be delivered, such as utilities and access to local streets, is reviewed and understood. Enterprise architecture consists primarily of business architecture, information architecture, application architecture and technical architecture.

Business Architecture

Understanding the business purpose and functional value is critical in the development of the business architecture. The business architecture will document how the new system will change the business function and the connected processes, how it will impact business users, how it will add value, etc.

One of the components of the business architecture is a clear understanding of its connection to the business strategy. For example, if a new underwriting system is being considered for development, detailed discussions must take place on how underwriters will use the system, how the new process would add value, and how the process connects with the rest of the enterprise, including loss control, claims, pricing, actuarial and financial functions. Often business architecture discussions focus mainly on narrowly defining specific business functions and related processes only.

Information Architecture

Once business architecture is developed, focus shifts to the information architecture. The information architecture is a business-strategy-driven description of the enterprise's information value chain (information flows). Information architecture extends beyond the organization's boundaries to include external sources to enable sound and efficient business decision making and information sharing. How information is brought to light at the appropriate steps in the business process is essential to establishing efficient and effective business practices that are adaptable to changing market conditions.

Application Architecture

Discussion of information architecture leads to the development of application architecture. Application architecture is a combination of application components and the services that need to be built, reused or acquired. It is similar to defining functional components in the house -- such as electrical outlets, toilets, sinks, etc. -- that are going to be reused and/or modified for reuse, or need to be built new.

Technical Architecture

Development of technical architecture begins only after the business, information and application architectures are defined and documented. This is where discussions of specific tools and technologies take place, including discussion of infrastructure services, data models, integration services, data migration and conversion services, and planning for the development of specific programming code for these services. It is important that the attention given the technical architecture does not dilute the focus on the business and application architectures. The technical architecture needs to be able to deliver the business value contemplated in the application and business architectures.

The success of a new system or major redesign requires a solid architectural foundation that is understood and agreed to by key stakeholders. The technology team needs to understand the value points of the system and make them a priority in the development of the architectural framework, as inclusion of these capabilities within the architecture framework is essential for business success.