Strategic Management

Benefits and Challenges of Business IT/IS alignment

Posted on Posted in IT Strategy
  1. What business IT/IS alignment is

There is no universal definition for IT/IS Alignment. It is the process that brings a degree of strategic intent and coordination to the business activities.

Henderson and Venkatraman (1993) describe IT/IS alignment as the degree of ‘Fit’ or the ‘support’ to ensure the integration of IT into the business strategy by alignment between and within four domains:

  1. Business Strategy
  2. IT Strategy
  3. Organizational Infrastructure
  4. IS Infrastructure and processes

Ward and Peppard (2003) and Bannister and Remenyi (2005) argue that alignment is about achieving purposeful connection between strategy, organization, processes, technology and people.

Linking and configuring the strategic elements, key organisation systems, processes and structure in such a way that their implementation achieves the organisation’s shared vision and results beyond expectations (Strategic Alignment Inc., 2007).

The concept of strategic IT/IS alignment centres on 3 arguments (Hirscheim and Sabherwal 2001)

  1. Organisational performance depends on structures and capabilities that support the successful realization of strategic decisions
  2. Alignment is a two-way process, where business and IS strategies can act as mutual drivers
  3. Strategic IS alignment “is not an event but a process of continuous adaptation and change”

(Henderson and Venkatraman 1993)

  1. The core dimensions that must be considered

On a more contemporary view, there are 5 dimensions that also need to be applied to achieve full IT/IS Alignment. These are not exhaustive; but they do explore the difficulties of IT/IS alignment in intellectual, technical, operational, political practical and strategic dimensions .

  1. Strategic and intellectual dimension

This is where IT and business objectives are consistent, valid, and working in harmony. The issue here is to try and separate the IS and the business plans from the alignment model and how signal how much staff need to know about the business and how much the business needs to know about IT/IS.

  1. Structural dimension

Is the degree of structural fit between the technology, business processes and those who use or who are served by the technology?  It is the degree of influence based on how powerful the IT decision makers are. Knight and Murray (1994) argues that power is at the heart of an organisation and is not tied to individuals.

  1. The informal structural dimension

(Chan 2001,2006) Is the relationship often forgotten and is based structure that cuts across the formal structural boundaries that exist in the management of functional work activity. These informal networks include social networks, communities of practise, cross-departmental relationships, unofficial agreed on processes and flexible divisions of work that are present within the organization.

  1. Social dimension

Is the state is which business and IT executives in an organization unit understand, are committed to each other’s missions and plans and to the collective ambitions / aspirations of the organization.

  1. Cultural dimension

Is the degree to which the corporate culture promotes (or inhibits) the fusion between the IT/IS function and the business. Hnady(1986) identified four main types of organisational culture: power ,role, task and person.

Once these 5 dimensions have been covered further observations can be made, namely the level of alignment and how it can be measured.

  1. The Level of alignment is the degree in which different levels of business have alignment at the micro and macro level of work engagement.
  2. Measuring alignment refers to how managers know they have or do not have alignment in terms of the tangible and intangible aspects. This is a constant quest as methods, approach and boundaries change on how to best justify IT expenditure. 
  1. The benefits of IT/IS alignment

Research by Wagner and Weitzel (2006) concludes that strategic IT business alignment and operational alignment are both positive influencers of competitive advantage. The greatest benefits of alignment are the achievement of strategic business outcomes. With aligned business and IT/IS, an organisation is better placed to develop and supply market-leading products and services with more consistent levels of quality.

Other main benefits include:

Customer Service – can be improved with more effective and consistent customer handling, increased customer knowledge and insight.

Organisational agility – Agility is much improved by managing systems alignment of business needs by standardizing and reusing mature components rather that iteratively developing alignment which can cause system diversity and scaling issues. Agility has pros and cons if not managed properly.

Operational efficiency – business relationships with suppliers, customers, service providers are complicated. IT/IS needs to be effectively aligned to the needs of these relationships to be efficient.

IT cost reduction – where IT/IS is developed iteratively without much ‘macro’ thought into the organization alignment needs will increase capital costs and produce fragmented solutions that are difficult to support. IT/IS Alignment will facilitate standardization and consolidation with subsequent reductions in cost.

Risk management – where alignment planning forces an organisation to consider the effectiveness of its systems against a diverse range of factors (legal, compliance, regulatory). By improving visibility, alignment also aids the ongoing management of risk.

  1. The major challenges in achieving alignment

An organization can purchase, deploy and manage IT/IS successfully without detailed understanding of its future direction but without business strategy in the right format and at the right level of detail, there is a risk that the organisation may shape and steer its technology in such a way as to prevent future alignment.

Carr (2003) lends some support for the ‘at drift’ view of the strategic use of IT/IS’.  His views are:

  • IT is a commodity
  • Due to its ubiquity has matured and lost its strategic value
  • Calls on management to focus its attention on minimising IT related risks.

However, he fails to acknowledge its strategic value is likely to be achieved in the long term and by its very nature is difficult to acknowledge and evaluate. He also ignores that business value can result from IT/IS in innovative form such a Facebook, Google and Blackberry. Carr’s recent work (2008) the big Switch: Rewiring the world, from Edison to Google seems to clearly state that IT is a strategic tool.

Levy (2000), using a resource-based perspective, cautions that IT – even aligned IT – in and of itself is not strategic. In order for IT to be strategic, it must be valuable, unique, and difficult for competitors to imitate. Formal business strategies are often too ambiguous for business managers to understand (Campbell, 2005). The business environment is constantly changing, and thus there may be no such thing as a ‘state’ of alignment. Strategic choices made by one organization frequently result in imitation by other organizations. Thus, strategic alignment is a process of change over time and continuous adaptation (Henderson and Venkatraman, 1993).  Van Der Zee and De Jong (1999) cite a main problem with alignment as the time lag between business and IT planning processes. That is, given that the business environment and technology change so quickly, once an IT plan is enacted, there is a high probability that the plan and the technology are already obsolete. Also the trouble with most plans is that they do not indicate what the business value us and what strategic or tactical business benefits the organisation is planning to achieve.

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