Asymmetric Demand for Defence Equipment

An independent review into the way the MOD buys equipment for Britain's Armed Forces has been published today, Thursday 15 October 2009. [Report, MoD News Article, BBC News]. Key finding.

"The Ministry of Defence has a substantially overheated equipment programme, with too many types of equipment being ordered for too large a range of tasks at too high a specification. This programme is unaffordable on any likely projection of future budgets."

That situation might sound familiar to a lot of managers, not just in the defence sector.

The report makes some favourable comments about the Through Life Capability Management (TLCM) programme, but indicates a lack of hard financial data that would be required to make quantitative decisions. There has been some discussion along these lines published in the RUSI Journal, including Agility and Innovation in Acquistion (Feb 2008) and The Meaning of Value-for-Money (Feb 2009).

The explanation for the current crisis can be found in the essential multi-sidedness of the defence acquisition ecosystem. Traditional cost accounting approaches (such as activity-based costing) fail to address the complexity of this multi-sidedness, and researchers are urgently seeking alternative cost accounting methods appropriate for complex systems-of-systems.

One of the key issues for Through Life Capability Management is that any errors or omissions in the long-term equipment programme must be repaired through what are known as Urgent Operational Requirements (UOR), which over the long haul can prove far more expensive and inflexible than the planned equipment.

The report also praises the Smart Acquisition programme, and expresses regret that the disciplines of Smart Acquisition have been somewhat diluted by recent reorganization.

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Is this report only relevant to the defence sector, or can other sectors glean anything useful? My view is that the complexities of multi-sided markets and asymmetric demand can be found in many, perhaps most sectors. And the question of coordinating effectively between short-term and longer-term spending can be found in many domains, notably IT. I have little doubt that whatever management tools and techniques are developed by the MoD and its partners to address this problem will eventually trickle into civilian management.

Enhanced Services

One of the governance mechanisms described in recent paper on the Acquisition of Information Services and SOA Systems by the SOA Acquisition Working Group (described in my earlier post on Defense Procurement) is a so-called Enhanced Services Model, which aims to improve responsiveness.

'In the current model contractor’s incentives are to provide the minimal solution that meets the requirements. As the requirements grow and change, Engineering Change Proposals (ECPs) are required, resulting in real or perceived “scope creep”, and always in cost growth. This results in delays in deployment and fielded capability.

Under the enhanced services model, the contractor will be able to exceed the requirements by providing expanded or additional services. These could be “sold” to other users as a common reusable service that others do not have to develop. The additional services could also provide the basis for further development as the system matures.'

The paper signals an intention of the DoD to apply the concept of Enhanced Services in the defence domain. However, at present much of the discussion about enhanced services around the internet is not in the defence domain but in the healthcare domain. (Even if you search for DoD Enhanced Services you just seem to get stuff about healthcare for soldiers and veterans.)

In healthcare, the enhanced services model is used to allow and encourage service providers (e.g. healthcare system suppliers) to offer additional functionality, while allowing service consumers (e.g. clinics) to use these enhanced services in enhanced or specialized processes. In a complex ecosystem, this model allows scope for innovation and improvement.

The challenge with this approach is that it is not always possible to anticipate the value of enhancements. It also potentially increases the complexity of governance. However, there seems to be a strong opportunity to use the enhanced service model to provide added-value in complex situations where the service environment is not centrally controlled.

Defense Procurement

Let me start with a couple of quotes from a speech by US Secretary of Defense Robert M. Gates, Washington, D.C., Monday, September 29, 2008.

"When it comes to procurement, for the better part of five decades, the trend has gone towards lower numbers as technology gains made each system more capable. In recent years these platforms have grown ever more baroque, ever more costly, are taking longer to build, and are being fielded in ever dwindling quantities."

"The issue then becomes how we build this kind of innovative thinking and flexibility into our rigid procurement processes here at home. The key is to make sure that the strategy and risk assessment drives the procurement, rather than the other way around."

The US Department of Defense appears to have a very clear understanding of the opportunities for Service-Oriented Architecture in enhancing the procurement process and improving the economics of governance. In July 2008, the SOA Acquisition Working Group of the AFEI produced a useful set of Industry Recommendations for DoD Acquisition of Information Services and SOA Systems.

One point that comes across very clearly from this paper is the opportunity to separate the provision of different layers within a layered architecture. So we may have one set of suppliers providing the underlying layers, and a different set of suppliers providing the upper layers.

The AFEI paper identifies three roles - Platform Providers and Commodity Infrastructure, Component Developers and Enterprise Managers - with what it calls Firewalls between them. (See Figure 3 in the AFEI paper.) These firewalls roughly correspond to the first two of what Philip Boxer calls the three asymmetries of demand. The third asymmetry (not explicitly shown in the AFEI paper) is between the Enterprise Managers and the Customers. (Including customers in the schema is essential if you want to move towards a risk-reward model of procurement, as the DoD evidently does, because it is the customers who ultimately generate the effects.)

Managing all this complexity almost certainly results in higher management cost than if you simply outsource the whole lot to a large system integrator, but it also shifts the management control (architectural governance) back to the acquiring organization.

So which kind of organizations would want to do this then? It's a question of complexity - the greater the level of complexity and volatility in your requirements, the greater the potential benefits from having finer-grained and stratified control over your procurement.

And what kind of organizations are capable of this fine-grained stratified control? Perhaps not too many at the moment, which is why we need a capability maturity model for SOA that provides a roadmap for organizations to develop an appropriate level of SOA capability.

Sources

AFEI SOA Acquisition Working Group, "Industry Recommendations for DoD Acquisition of Information Services and SOA Systems", July 2008 (register on the AFEI website for free download)

For explanation of the three asymmetries, see Richard Veryard & Philip Boxer, Metropolis and SOA Governance, Microsoft Architecture Journal, July 2005.

Distributed Event Processing

Went to a good talk at the BCS SPA last week by Paul Vincent of TIBCO entitled "Advanced CEP and EDA - Why the buzz on Wall Street?"

• BCS SPA website
• Paul's summary
• Paul's slides (pdf)

I was particularly interested in Paul's emphasis on the distributed aspects of event processing.

• Distributed event source - "A series of produced items fails at various QA stages, and their common attribute was a storage location - Multiple suppliers for a subcomponent are reporting delivery delays"

• Distributed event cache - This is a key component of TIBCO's advanced CEP architecture

• Distributed event consumption (destination) - Delivering rich situation awareness to field operations. This is related to the military doctrine of "Power to the Edge".

At my prompting, Paul talked briefly and circumspectly about the use of CEP in the military. He averred that at present the military are mostly using hand-built event processing rather than commercial products (but see later comment by Tim Bass).

Business Case for SOA 3

ZDnet blogger Joe McKendrick has uncovered an interesting difference of opinion between stakeholders in the US Government and Defense space about the viability of SOA, as described in the following posts:

• Defense doesn't rest with SOA (Nov 10)
• Study: the public sector ‘gets’ SOA, or at least ’shared services’ (Nov 15)

The US Defense Information Systems Agency (DISA) seems pretty committed to SOA. The problem apparently lies with some large US contractors, who seem to think that this threatens a profitable line of business selling software to the Department of Defense. David Bryan, a retired general who is now a vice-president at Northrop Grumman Defense Group, says that "Industry is struggling to determine a sound business case for the SOA approach". [source: FCW.com, Nov 8]

There are four things I want to say in response to this, which relate to the business case for SOA.

1. The Department of Defense evidently appreciates the potential of strategic-level or Enterprise SOA to reduce their IT costs and to improve the efficiencies and flexibility of their business. And if SOA enables the Department of Defense to get better value-for-money from its contractors, then this strengthens the business case for SOA within the Department of Defense. (DISA is clearly doing something right.)

2. If the Department of Defense insists on the SOA approach, then this will create a very strong business case for SOA within the ecosystem of defense contractors. (If you don't want the work, there's plenty others that do.)

3. SOA is not just a technological initiative, but carries significant changes to organization and governance, including procurement arrangements. Enterprise SOA is, in part, about commodity services - buying pre-existent capability - and minimizing the custom development.

4. There is a learning curve for defense contractors. To be successful in the enterprise SOA market, traditional integrators will have to change their business models from being dependent on big custom software development projects. But some are still loading their bids with software costs, according to DISA Procurement Director Evelyn Palma. IBM has already won a major supply contract under the new regime, and we might expect future contracts to go to the most SOA-literate contractors.

Deconfliction and Interoperability

Deconfliction

Deconfliction is an important type of decoupling. In October 2001, a Time Magazine cover story (Facing the Fury) used the term.

Bush's gambit — filling the skies with bullets and bread — is also a gamble, Pentagon officials concede. The humanitarian mission will to some degree complicate war planning. What the brass calls "deconfliction" — making sure warplanes and relief planes don't confuse one another — is now a major focus of Pentagon strategy. "Trying to fight and trying to feed at the same time is something new for us," says an Air Force general. "We're not sure precisely how it's going to work out."

The military take interference very seriously - it's a life and death issue. Deconfliction means organizing operations in a way that minimizes the potential risk of interference and internal conflict, so that separate units or activities can be operated independently and asynchronously.

But deconfliction is often a costly trade-off. Resources are duplicated, and potentially conflicting operations are deliberately inhibited.

As communications become more sophisticated and reliable, it becomes possible to reintroduce some degree of synchronization, to allow units and activities to be orchestrated in more powerful ways. This is the motivation for network-centric warfare, which brings increased power to the edge.

Although the word isn't often used in commercial and administrative organizations, a similar form of deconfliction can be inferred from the way hierarchical organizations are managed, and in traditional accounting structure of budgets and cost centres. This is known to be inflexible and inefficient. Whenever we hear the terms "joined-up management" or "joined-up government", this is a clue that excessive deconfliction has occurred.

Interoperability

Deconfliction leads us towards a negative notion of pseudo-interoperability: X and Y are pseudo-interoperable if they can operate side-by-side without mutual interference.

But there is also a positive notion of real interoperability: X and Y are interoperable if there is some active coordination between them. This forces us to go beyond deconfliction, back towards synchronization.

General Shoomaker: "We've gone from deconfliction of joint capability to interoperability to actually interdependence where we've become more dependent upon each other's capabilities to give us what we need." (CSA Interview, Oct 2004).

Philip Boxer writes: "The traditional way of managing interoperability is through establishing forms of vertical transparency consistent with the way in which the constituent activities have been deconflicted. The new forms of edge role require new forms of horizontal transparency that are consistent with the horizontal forms of linkage needed across enterprise silos to support them. Horizontal transparency enables different forms of accountability to be used that take power to the edge, but which in turn require asymmetric forms of governance." (Double Challenge, March 2006)

Relevance to Service-Oriented Architecture (SOA)

It is sometimes supposed that the SOA agenda is all about decoupling. Requirements models are used to drive decomposition - the identification of services that will not interfere with each other. These services are then designed for maximum reuse, producing low-level economies of scale.

Clearly there are some systems that are excessively rigid, and will benefit from a bit of loosening up.

But this is only one side of the story. While some systems are excessively rigid, there are many others that are hopelessly fragmented. The full potential of SOA comes from decomposition and recomposition.

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Further Reading
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Other Sources

• Statement to the US House Armed Services Committee by Lieut General Robert Wagner, Feb 2004
• Discussion of German translation 
• Humorous definition of deconfliction from NBC-Links