American Express, located in New York City, was founded in 1850 (Corporate Profile, 2015). It is one of the 30 companies in the Dow Jones Industrial Average (Corporate Profile, 2015). American provides services such as credit cards, charge cards, and traveler’s checks (Corporate Profile, 2015). American Express cards account for 24% of credit card transactions in the U.S. (Corporate Profile, 2015). According to the company’s 10k, the company generates $33 billion in revenue and over $5 billion in income. The company’s total assets are over $150 billion. American Express has one of the largest IT infrastructures and is able to handle an extremely high number of transactions each second (Demirkan, 2006).
In 2011, the company won the first annual InfoWorld/Forrester Enterprise Architecture Award for its EA initiatives (Knorr, 2011). American Express chose to use an Enterprise Architecture (EA) as their IT framework that aligned their business and organizational needs to their information technology. Enterprise architects were the employees responsible for using this framework to continuously make their processes more efficient and utilizing their IT/IS to the fullest extent (Pearlson and Sanders, 2013).
I will be analyzing the success of American Express’s Enterprise Architecture, how Zachman Framework is used to structure the EA, and how this improved their existing service-oriented architecture (SOA). Changes in the way that mobile payments were being used by their clients, the company had to be flexible and adapt to the transformation. New delivery channels required American Express to adjust their prior time-to-market guidelines for payment services (Pearlson and Sanders, 2013). The company turned to its Enterprise Architecture (EA) to guide them through the current market conditions.
The opportunity that American Express saw was to use EA to meet the demands for a hastily changing environment. EA is a complex framework of rigid standards for developing an IT architecture and infrastructure that provides a design of how the IS of a company relates to the businesses and processes (Pearlson and Sanders, 2013). The architecture analyzes a great deal of the company, identifies core processes and how they work together, and then organizes how business units will interact and how IT will provide support (Pearlson and Sanders, 2013.
The EA includes the Core business processes, shared data, linking/automating technologies, and customer groups (Pearlson and Sanders, 2013), with key components like the ability to do business effectively while utilizing new payment methods and mobile devices (Knor, 2011). Though an EA can help organize a company in a meaningful way, there are also potential drawbacks, which are discussed below.
Zachman Framework is a tool that can be used to obtain the knowledge about itself with Enterprise architecture. It is a logical structure that classifies and organizes the descriptive representations of an enterprise (Pereira, Marques and Sousa, 2004). The framework integrates and aligns the IT infrastructure and business goals (Nogueira etc. al, 2011). Whereas an EA is used to document and develop the organizational data for American Express, the company uses the Zachman framework methodology to implement the EA.
Zachman proposed the framework for IT architecture so that all of the IS architectures are depicted from top to bottom. It uses a matrix to provide a standard to ensure information environments are properly integrated (Nogueira etc. al, 2011). The 5 roles included in the framework are Planner, Owner, Designer, Builder, and Subcontractor.
The EA provided several good things to the company. The EA system streamlined American Express’s processes, even as they were constantly re-analyzing how their business was being performed with the added intricacies of new delivery channels (Pearlson and Sanders, 2013). The employment of their enterprise architecture was key to adapting to this new business environment the company now found itself in. The enterprise architects worked closely with other departments and were able to both standardize applications throughout the organization and help create the strategies for each division. The Zachman framework positively assisted in the implementation by answering the questions: What (data), How (function), Where (network), Who (people), When (time) and Why (motivation). It helped point out the information needed for the EA and their relationships (Nogueira etc. al, 2011).
The strategies they helped create involved initiatives for each business, along with their IT support, that aligned well with the overall business plan of the organization. These initiatives, referred to as “road maps,” standardized their tools, architectures, governance, capabilities, and many other processes (Pearlson and Sanders, 2013). Three types of roadmaps in particular were used by American Express: Technology, reference architecture, and utility/capability. The three roads maps all used a consistent lifecycle management standard and a standardized architecture governance process.
Another helpful aspect of the system included the flexibility that EA provided, which worked well with their existing architecture service-oriented architecture (SOA). SOA is an architecture type where larger software programs are broken down into services connected to each other via orchestration (Pearlson and Sanders, 2013). The services work together to form a business process, creating an agile, reusable system for creating applications. The existing software components can be modified to quickly build applications in a rapidly changing environment like the one American Express was experiencing. The enterprise architects assisted in the company’s SOA with an emphasis on reusable utilities and components (Demirkan, 2006). This system is ideal for a rapidly changing environment such as the one American Express was experiencing.
Though SOA is a widely-used technology that can increase the IS’s agility, flexibility and interoperability between applications, there are also drawbacks, including the economic and personnel resources (Choi, Nazareth and Jain, 2010). SOA can reduce IT costs and increase the company’s return on IT investment, however the short-term requirements to implement SOA could outweigh long-term benefits (Choi, Nazareth and Jain, 2010).
There are also some drawbacks to implementing an Enterprise Architecture, including the cost of implementation, the risk of stakeholders’ unwillingness to accept it, and the new EA not corresponding to the business goals. When implementing SOA or EA, the entire IS organization is affected, along with the business alignment (Choi, Nazareth and Jain, 2010). Using a Zachman framework to implement the EA defined the involvement of stakeholders, as well aligning the EA goals with the business goals, which alleviated much of the risk of implementing the EA. The Zachman framework helped to avoid the risk that the architecture was not a fit for the employees and customers.
In conclusion, the implementation of an EA is a complex endeavor, but was a necessary one for American Express to have the necessary tools to organize and document the whole enterprise, allowing them to quickly and efficiently change with the ever-changing business environment and customer needs. The Zachman Framework assisted in the implementation of the EA, and the company’s SOA gave it the desired agility needed to meet the customers’ needs.
My recommendation is that American Express’s continue to use the agility of their SOA to keep up with the changing environment. Their current EA was a great architecture that fit in perfectly with their business strategy. Moving forward, American Express will continue to use their highly efficient EA to meet the industry demands that they and their customers will face. The EA has worked well for them thus far, and should carry on as the ideal architecture of the firm in the near future.
American Express will continue to face challenges beyond the near-term future and need re-analyze the situation prior to considering another overhaul of their current infrastructure. Many companies fail when attempting to implement an enterprise architecture. An EA will often fail if it is regarded as a separate initiative (Lohe, 2014), but American Express used it as a driver of their business and embedded it into their corporate strategy. Per the drawbacks noted above, this is a large and potentially costly undertaking. The agility of their current SOA and EA should allow the company to adapt future challenges and they should not rush into an architecture overhaul.
Furthermore, I would recommend using this system to its fullest potential by embracing the changing environment as much as possible. They can gain an edge on their competitors by focusing on mobile payments, new payment methods, and the newest innovations and technologies their clients are exposed to. The technological environment is constantly changing with new payment methods like Google Wallet and Apple Pay. Due to their EA, American Express is in prime position to accept these new methods as they develop.
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