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Challenges in Business and IT Alignment


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Challenges in Business and IT Alignment

  1. 1. CHALLENGES IN BUSINESS & IT ALIGNMENTBUSINESS & IT CONSULTING - PROJECT REPORTDR. S. BATRA Adesh Mittal Ankit Bhardwaj Gurpreet Singh Himanshu Chopra Prashant Bansal Ritwik Jain Vidur Pandit
  2. 2. INTRODUCTIONInformation technology (IT) is changing the way companies organize their business processes,communicate with their customers and potential customers, and deliver their services. A key factor for asuccessful company is an effective and efficient alignment of the way IT supports business strategies andprocesses. The necessity and desirability of aligning business needs and IT capabilities has beenexamined in numerous articles and its importance is well recognized. The annual survey of topmanagement concerns by the Society for Information Management ( ranked „IT andBusiness alignment‟ as the no. 1 concern in five of the last six years (Society of Information Management,2003, 2004, 2005, 2006, 2007, 2008). In the year that it did not make the top spot, alignment ranked as theno. 2 concern. The alignment between business needs and IT capabilities is therefore still a prominent areaof concern.After many years of research into Business and IT Alignment (BIA), Chan and Reich (2007) list over 150studies, the prominent position of BIA as one of the top concerns, should be surprising. Why didn‟t wesolve the „problem‟? Should it be concluded that academic research still cannot provide solutions to theissues business and IT executives face in practice? We believe this is at least partly true. Some questionsthat practitioners face are not addressed in academic literature. After a comprehensive overview of thedevelopment of BIA, we will explore the known insights on BIA and provide some of the practicalconsiderations that still need more research.THE CONCEPT OF BUSINESS/IT ALIGNMENTBusiness-IT alignment involves optimizing communication between executives who make the businessdecisions and IT managers who oversee the technical operations. The implementation of flexible businessplans and IT architectures, as well as effective cost allocation, are critical components of any business-ITalignment effort. Technical department managers can formulate and submit proposals that can be tailoredto ensure the optimum return on investment (ROI). Business executives can attend IT department meetingsand seminars to improve their understanding of the technical capabilities and limitations of the enterprise.Some definitions focus more on outcomes (the ability of IT to produce business value) than means (theharmony between IT and business decision-makers within the organizations); for example,Alignment is the capacity to demonstrate a positive relationship between information technologies and theaccepted financial measures of performance.
  3. 3. This alignment is in contrast to what is often experienced in organizations: IT and business professionalsunable to bridge the gap between themselves because of differences in objectives, culture, and incentivesand a mutual ignorance for the other groups body of knowledge. This rift generally results in expensive ITsystems that do not provide adequate return on investment. For this reason, the search for Business / ITAlignment is closely associated with attempts to improve the business value of IT investments.It is not unusual for business and IT professionals within an organization to experience conflict and in-fighting as lack of mutual understanding and the failure to produce desired results leads to blaming andmistrust. The search for B/I alignment often includes efforts to establish trust between these two groupsand a mechanism for consensus decision-making.To achieve B/I Alignment, organizations must make better decisions that take into account both businessand IT disciplines. Establishing processes for decision-making and control is essentially what is meant bythe term "governance"; so B/I alignment is closely related to Information technology governance.A commonly cited definition by IT Governance Institute is: IT governance is the responsibility of the boardof directors and executive management. It is an integral part of enterprise governance and consists of theleadership and organizational structures and processes that ensure that the organization’s IT sustains andextends the organization’s strategies and objectives.Also related to the effort for better decision-making, and therefore often part of B/I Alignment - is the areaof IT portfolio management, which has to do with decisions about which IT projects are funded and whichare not.Ultimately, value must come not just from the IT tools that are selected, but also in the way that they areused in the organization. For this reason, the scope of B/I Alignment also includes business transformation,in which organizations redesign how work is accomplished in order to realize efficiencies made possible bynew IT. Thus, implementing IT to achieve its full potential for business value includes not only a technicalcomponent, but also an organizational change management component.
  4. 4. The dimension of strategic fit differentiates between external focus, directed towards the businessenvironment, and internal focus, directed towards administrative structures. The other dimension offunctional integration separates business and IT. Altogether, the model defines four domains that havebeen harmonized in order to achieve alignment. Each of these domains has its constituent components:scope, competences, governance, infrastructure, processes and skills. Henderson and Venkatraman payextensive attention to the different approaches of achieving this alignment. Maes et al. (2000) refine theStrategic Alignment Model by identifying three, instead of two, columns: business,information/communication and technology, and three, instead of two, rows: strategy, structure andoperations.It is important to consider the overall value chain in technology development projects as the challenge forthe value creation is increasing with the growing competitiveness between organizations that has becomeevident. The concept of value creation through technology is heavily dependent upon the alignment oftechnology and business strategies. While the value creation for an organization is a network ofrelationships between internal and external environments, technology plays an important role in improvingthe overall value chain of an organization.However, this increase requires business and technology management to work as a creative, synergistic,and collaborative team instead of a purely mechanistic span of control. Technology can help theorganization recognize improved competitive advantage within the industry it resides and generate superiorperformance at a greater value.
  5. 5. PHASES OF BUSINESS/IT ALIGNMENTEnsuring IT alignment with the business has traditionally been viewed as the CIOs job. However,successful IT/business alignment entails more than executive level communication and strategy translation.CIOs who achieve alignment typically do so by establishing a set of well-planned process improvementprograms that systematically address obstacles and go beyond executive level conversation to permeatethe entire IT organization and its culture.One commonly used methodology is the "IT/Business Alignment Cycle", which introduces a simpleframework that the IT organization can adopt to manage a broad range of activities. The four phases of thecycle are: plan, model, manage, and measure. Following this cycle fosters organization-wide sharedexpectations between business and IT managers, and defines a common framework for a broad range ofactivities that together serve to align IT and business objectives.The cycle also identifies best practices and common processes within and between IT functional groups tomake IT/business alignment sustainable and scalable. This framework functions best when integrated andautomated with software applications and monitoring tools.THE CYCLENow lets examine the four phases individually, describing the activities, best practices, and benefitsassociated with each phase.PlanTranslating business objectives into measurable IT services. The plan phase helps close the gap betweenwhat business managers need and expect and what IT delivers.According to Giga Research, IT leaders in poorly aligned organizations are still attempting to explaintechnology management issues to their business colleagues and have not made the leap to understandingbusiness issues and communicating with business managers on their terms.To close the gap between what business expects and what IT delivers, IT needs an on-going dialogue toclarify business needs in business terms. Without an on-going dialogue, IT may not be able to determinewhich IT services to offer or how to effectively allocate IT resources to maximize business value.Furthermore, when business needs change, IT should adapt and modify the service offering and ITresources appropriately.
  6. 6. CIOs should mandate the use of a disciplined service level management process that will lead toagreement on specific IT services and service levels needed to support business objectives. ITmanagement can then translate service definitions and service levels into underlying rules and prioritiesthat empower and guide IT resources.Finally, IT needs a way to measure and track both business level services and the underlying capabilitiesthat support the services.ModelDesign infrastructure to optimize business value The model phase identifies resources needed to deliver ITservices at committed service levels. This phase involves mapping IT assets, processes, and resourcesback to IT services, then prioritizing and planning resources that support those business critical services.The bottom line in measuring the success of alignment is the degree to which IT is working on the thingsabout which business manager‟s care. That means IT must have processes in place for prioritizingprojects, tasks, and support.To successfully prioritize resources, IT needs a service impact model and a centralized configuration andasset management repository to tie the infrastructure components back to specific IT services. Thiscombination is essential if IT is to effectively plan, prioritize, and consistently deliver services at agreed-upon service levels while also reducing costs.ManageDrive results through consolidated service support The manage phase enables the IT staff to deliverpromised levels of service. CIOs can ensure that their organization meets expectations by providing asingle location for business users to submit all service requests, and by prioritizing those requests basedon pre-defined business priorities.Without a single point-of-service request, it is difficult to manage resources to meet agreed-upon servicelevels. Moreover, without a method for effectively managing the IT infrastructure and all changes, the ITstaffs face the risk of causing failures.To ensure the effectiveness of the service desk, the IT staff needs to provide: A method for prioritizing service requests based on business impact
  7. 7.  A disciplined change management process to minimize the risk of negatively affecting service level commitments An IT event management system to monitor and manage components that support business critical services The underlying operational metrics that enable service delivery at promised levels, as well as the means for measuring and tracking the progress of service level commitments using these metricsMeasureVerify commitments and improve operations. The measure phase improves cross-organization visibility intooperations and service level commitments. Traditional IT management tools operate in functional silos thatconfine data collection and operational metrics to focused areas of functionality. They typically relate moreto technology than to business objectives.Component-level metrics and measures are certainly important for on-going service availability. However,to support real-time resource allocation decisions, these measures must be interpreted in a broaderbusiness context, including their relationship to business-critical services. Without a business context forinterpreting measures and metrics, isolated functional groups cant get a holistic view of IT services thatsupport business objectives. By committing to the cycle and integrating and automating activities usingsoftware solutions, CIOs can align their whole organization to make systematic improvements thatovercome obstacles.8 STEPS TO BUSINESS/ IT ALIGNMENTThe goal of perfect alignment is unachievable because of the dynamic nature of business. Everyorganization operates in an ecosystem and is affected by the forces at play in it. Economy, industry,competitors etc. are all players in this ecosystem who are continuously evolving. Similarly, knowledge andtools – such as information technology - are also continuously changing. To remain competitive i.e.maintain differentiation, every organization must adapt in response to the actions and activities of others inits ecosystem. Organizations that do not adapt lose their competitive edge over time and disappear.
  8. 8. Add to this the changes in an organization‟s internal environment – structure, skills, finance, personnel,knowledge, core competency etc. – and now one has a potent mix of forces that demand change inresponse.This continuous change is the cause of perpetual misalignment. It takes time to understand the impact ofthe actions of others. It takes time to take action. While you are reacting, the world is not stationary – it isthrowing more stuff your way. By the time you are done, you are out of alignment. To be precise, while youare taking action, you are out of alignment!Till we have perfect predictive modeling and instant systems, no organization will ever be in perfectalignment. The best one can do is to move “toward” alignment i.e. moving in the right direction.Do not let this discourage you from pursuing business and IT alignment! It is a worthy goal to pursue.Indeed, it is a critical one to pursue. You might never reach alignment but you can take steps to get evercloser.This requires a process. Often, we ignore the fact that business and IT alignment is a process. Thisprocess does not have a starting point nor does it have an end. It is a series of “learn and do” cycles thatincrementally get towards alignment.
  9. 9. STEP 1: Identify Business DriversIn this step, we identify the business needs that are driving IT. In other words, what are the business needsthat require IT enablement? Is the company launching a new product that requires, say, a new fulfillmentsystem? Is the company acquiring another company that requires rationalizing the systems of the two?These business needs are continuously changing. Periodically, they should be identified so action can betaken in response.STEP 2: Create IT VisionNow that we know our business‟ needs, how can IT help? This step identifies the IT Capability – strategy,process, infrastructure and organization – required to meet business priorities.The starting point? A vision for IT. This vision lays the general guidelines or policy that drive the creation ofthis IT Capability. Remember, two people might react differently to the same requirements depending ontheir underlying beliefs. It is very important to articulate these underlying attitudes and beliefs into a visionbefore attempting to answer the IT Capability question.STEP 3: Assess Current AlignmentThis step answers the question: How does the current IT Capability compare to the envisioned ITCapability? There are three dimensions of alignment – investment, asset and organization. By answeringthis question for all three, this step assesses the alignment along these three dimensions.STEP 4: Identify Alignment GapsComparing the desired or “to-be” IT Capability with the current or “as is” IT Capability, one can identify gapsthat are causing misalignment. Again, this comparison is made along the three dimensions – investment,asset and organization to precisely identify the root cause of misalignment. Once we have the root causes,we can identify the potential fixes. One “fix” can potentially address multiple gaps!STEP 5: Prioritize IT InitiativesThe previous step gives us a list of “fixes” that can get business and IT aligned. However, we might not be
  10. 10. able to act on them – all organizations are capacity constrained. More importantly, we should not act on allof them. Some fixes are easier than others. Some provide a bigger “bang for the buck”. There are otherreasons why we should not attack the entire list all at once. Consequently, this list must be prioritized. Step5 does just that.STEP 6: Evaluate Implementation OptionsA prioritized list of “fixes” or IT Initiatives is the starting point for implementation planning. This is a criticalstep to ensure success. Often, organizations forget to plan for implementation and pay the price in terms ofover budget or delayed or failed projects.This step takes the list of initiatives and creates a roadmap for IT. This roadmap is a result of carefulplanning that takes is driven by one primary consideration - risk.STEP 7: Create Migration PlanThis step creates a migration plan for the IT roadmap – steps, deliverables, responsibility, timing etc.This is a plan. It needs these key elements in some detail. However, trying to button this down beyond acertain point is an exercise in futility. No plan stands the test of time. Hence, this plan should also bemodified as we learn new things after implementation begins.STEP 8: Adjust IT StrategyThis is the key step to ensure connection between the changing business needs while we are implementingIT solutions in response. If we keep going without looking back, by the time we are done the world mighthave moved away and made our solution irrelevant!It is essential that we keep track of the changing business world – both internal and external – and makesure our solutions are in line. If they are not, then senior leadership has the responsibility to ensure that wedo not continue those initiatives that are not. Putting good money after bad is never a good idea. CIOs arepaid to make these tough decisions.
  11. 11. CHALLENGES WITH ALIGNMENTDespite the attention paid to aligning IT projects with business priorities, many CIOs still struggle tounderstand the business needs. To truly achieve IT/business alignment, firms must integrate theirmanagement teams closely to build trust over time. Its a recurring nightmare for CIOs - their IT departmentbuilds a full-blown workflow application to simplify, automate and streamline a business, spending millionsof dollars in the process, only to have the business side refuse to use the system because the technologymanagers did not understand the requirements, let alone the business.Hopefully, for most CIOs, this is just a nightmare. But the fact is, most CIOs spend much of their timemaking sure that this bad dream doesnt become reality. Aligning IT with a firms business strategy iscritical to a firms success, and yet, it remains an ongoing challenge. "All my CIO colleagues struggle withthis same issue - How can I align IT strategy, resources and budget with the areas that are important to thebusiness side?" says Raad Siraj, CIO at Eaton Vance.In essence, according to Kevin Shearan, CIO of Mellon Financial Corp., technology should have the sameend goal as other disciplines in the business, including sales, product development and operations. Thesedisciplines all work "toward the overall success of the firm, but the challenge is how each group can alignaround common goals, what are the drivers and how we can work together to achieve them," he says.Most CIOs have tried to address the problem. But, despite everyones best efforts, the process the ITdepartment puts into place to align with the firms business strategy often does not fit into the culture of thatparticular organization, notes Eaton Vances Siraj. Or the CIO may have tried to change procedures tooquickly or set expectation too high. "Aligning IT with business takes time - it cant be done overnight," hesays.Both the business and IT must be involved throughout the development life cycle of all projects in order forIT and business to be truly aligned, adds Siraj. "There are different ways to get aligned, and differentorganizations do it differently, but as long as they have it in mind with a common goal, theyll besuccessful," he says.THE PROBLEM EXISTS IN ONE OR ALL OF THREE AREAS.
  12. 12. First, many IT decisions are driven by business executives who know little about technology. Except whatthey read in magazines or have been told by salespeople. This group includes CEOs, CFOs and COOs.They look to technology to drive the company. They believe that ERP, SCM, KM, data mining and a varietyof software solutions will enhance revenue through efficiency gains or new customer sources. In somecases they do, but in most, the costs offset the gains. The company is structurally stronger, but on paper itlooks the same or worse.Second, many companies are directed by IT organizations that are technology-driven but don‟t understandthe real needs of the business. They cannot translate business needs into technology solutions. Many ITexecutives cannot present a business case for or against a particular technology. Their condemnation orapproval is based entirely on the performance of the technology. (Is it full of bugs or is it stable? Fast orslow? Easy to implement or hard? Can the vendor support it?) They present factors that should beconsidered during the technology evaluation stage but not at a strategic alignment level.Third, those who run the business and those who run technology cannot agree on what alignment is. Inreality, it is all perception based on expectations. There are companies that could be greatly enhancedthrough the use of technology but believe that they are perfectly aligned already. There are others thathave the most beneficial technology available and don‟t know it.In most cases, the solution is a strong CIO who knows both business and technology. An individual whoperforms a cost-benefit analysis first but also intimately understands the requirements of the technology.Someone who also has the authority to say no when other business units attempt to implement technologywithout the guidance or assistance of the IT organization.I.T. IS SO BIG AND EXPENSIVE AND FEELS SO COMPLEX IN most corporations that IT has had toinvent complex management frameworks to manage itself. These frameworks (such as ITIL for IT ServiceManagement and Cobit for IT management audit) are seen by senior IT managers as the Holy Grail ofbusiness-IT alignment.They are not bad in themselves, just in the fact that they are "IT management frameworks" and not"business management frameworks," with IT in the middle and the business on the outside. As long asinformation technology runs with IT management frameworks and not with business managementframeworks that are shared across the business (including IT), then there is poor chance of alignment andno chance of integration. The result is bad news for the business when it comes to agility and value formoney.
  13. 13. LIMITATIONS OF STRATEGIZINGThe season for defining IT strategy is upon us. You will soon hold meetings, often off-site; to ponder how toalign IS with business strategy. Driven by high-level business imperatives or wish lists from users, ITmanagement will go through the matching and prioritizing process to decide what new developments toundertake.And when its all over, youll publish your strategic plan and consider yourself done with IT strategy untilnext year. But before you congratulate yourself on completing the process, Id like to suggest that yourstrategic planning may not be very strategic at all. Why? Consider these three common fallacies: IT strategy always follows the organizations business strategy. Recent enthusiasm for business-IT alignment is a welcome improvement in the way organizations approach IT strategy. But there is a problem: Organizations typically implement the business-IT alignment with a unidirectional focus on aligning IT with business strategy and rarely on the converse--using IT to influence the business strategy itself. This limited perspective hinders organizations from exploiting IT to create and identify-- not just support--new business opportunities. While simply supporting existing operations delivers operational efficiencies, the significant payoffs occur when using IT for market positional gains or reconceptualising of the value chain. Strategic IT planning produces IT strategy. Why do we need strategic IT thinking? Because the intended strategy is not always the realized one. The reasons can be manifold. New options and unexpected constraints present themselves and render parts of intended strategy undesirable, insufficient, or unfeasible. Unforeseen changes are stimulated by the actions of competitors, customers, and suppliers. And, for purely internal reasons, organizations arent successful at implementing some of their intended strategy. In this environment of constant change, the arrival of threats and opportunities cant be forced into a convenient timetable to suit the organizations planning cycle. And a business that wants to be flexible must be prepared to respond to fast-moving stimuli and to adapt its plans and strategies accordingly. A brilliant IT strategy is always better than a less-ambitious one. IT strategy can be evaluated only in the context of the organization for which it was defined. Not all organizations are equally positioned to reap benefits from IT. And the wrong or unrealistic strategy can prove harmful to an organizations
  14. 14. long-term ability to use IT in defining and reaching its business goals. A successfully implemented-- though less ambitious--IT strategy will increase the organizations confidence in its ability to obtain value from IT. And subsequent, evolutionary steps in the use of IT that stretch the organizations capabilities will produce significant incremental benefits. Moving to an iterative, organization wide ability to learn about the impact of IT is a challenging task that requires deliberate planning, often in conjunction with organizational and cultural changes. A structured process and documentation are needed to record and communicate current thinking about the organizations IT strategy. But keep in mind its limitations. For one, such IT plans dont necessarily foster IT managements participation in crafting and influencing business strategies. Plus, planning cant substitute for the continuous process of strategic IT management in an organization. And these types of plans wont work unless theyre suited to the organizations particular level of IT and organizational capabilities. When your organization attempts to utilize IT for maximum business benefit, strategic IT planning will be very useful, but not sufficient.ALIGNMENT – THE HOLY GRAILLet‟s look at what alignment is and what it is not. What alignment isn‟t is allocating two programmers to thesmart grid, two to billing and two to energy dispatch and expecting them to take care of things. That won‟tachieve any kind of alignment with business. In particular, such an approach falls far short as it fails to takeinto account overall strategy and existing or planned management initiatives.So what is it? Alignment means seeking out business needs and translating them into prudent IT initiativesthat support on-going objectives. It is being ready to provide a solution that the business unit needs in atimely manner that delivers the services they require in order to move forward.This is an important point. One of the key challenges in alignment, after all, is gaining agreement on whatalignment is. Only by achieving that agreement is it possible to synchronize IT and business strategies. It isvital, therefore, that IT spends time getting to know the ins and outs of the various business units, and whatthey each consider the most important aspects of alignment so that everyone can get on the same page. Ifthis is not done up front, failure is inevitable.Statistics from analyst firms very much back up these assertions. 75 per cent of those who attempt ITalignment fail. Of the other 25 per cent, about half are only partially successful. So you end up with about
  15. 15. 10 to 15 per cent that eventually arrive at proper alignment. Faced with such statistics, it‟s understandablethat many in IT are reluctant to even attempt to attain alignment. Yet alignment is vital if smart grid andother ambitious programs are to achieve any measure of long-term success.CULTURAL BARRIERSThere are many reasons for alignment failure. One of the big reasons is not appreciating that there arecultural issues, IT maturity issues and company issues that impact the ability to achieve alignment.Therefore, timing is important – you have to ensure these challenges are fully addressed before attemptingany kind of alignment initiative.The first thing you have to take stock of is the corporate culture. Is IT viewed as a cost center/expense or aprofit center/investment? Both cost money, so what‟s the difference? With an investment, you expect areturn. You expect to get more out of it than you put into it. The viewpoint within management says a lotabout the corporate culture. Are they mainly complaining about high IT costs, or are they intent on utilizingIT to facilitate growth into the future? If the former is the case, this should be addressed before engaging inan IT/business alignment program.Similarly, if IT is regarded as a service/support center, there is work to do from a cultural perspective. IThas to apply organizational best practices such as the IT Infrastructure Library (ITIL) if it is to move itselfinto the investment category and thereby bring about success. IT can‟t just sit back and expect the variousenergy business units to grant it equal rights at the conference table. IT has to earn it. The way toaccomplish that is to become fully professional as a business unit and learn to speak the same languageas the various line-of-business leaders and C-level executives.The organizational structure also plays a roll. Some companies have everything in silos that makealignment virtually impossible. Other organizational barriers come about when IT is lumped in with anotherC-level department or is positioned under Finance. All this means that IT won‟t have the clout it requires todo the job effectively. It must, must, must participate at a C level. To get there, however, you have todemonstrate tremendous business value. If you are not operating at a strategic level, your chances ofaligning business with IT are very small as you have no real idea about where the business is heading.
  16. 16. BUSINESS MATURITYThere are, too, several different kinds of decision making types that can be encountered in the commerciallandscape. These include reactionary, opportunistic, strategic, trial and error and even happenstance. If theculture is reactionary, you never know what‟s coming i.e. you are continually responding to one factor afteranother without long term direction. In such an environment, it is almost impossible to grow.Let‟s look at some of these other categories. In the happenstance category, things just tend to happen andthe organization goes along with it. This is an unsuccessful stance. If the company is opportunistic, itmeans they may be good at responding to opportunities, but the culture is such that the organization has towait for those opportunities to arise. In this setting, your best course of action is to align most closely toexisting opportunities. However, your efforts in this climate will be largely hit and miss.Where you need to be, then, is strategic. By strategic is meant more than just the creation of a documentstating corporate strategy. It has to be an all-encompassing emphasis which drives all further decisions andpropels the organization towards a stated and finite goal.Further, everyone has to be on board. But even with strategy in place and well known, IT may still haveplenty of work to do. For example, most business units really don‟t know what technology can do for them.If you go ask, they will look at you blankly. It is up to IT to drive technology into the various departments byeducating the business heads on what can be accomplished.Further, IT alignment will not fix bad business processes. If process weaknesses are not addressed, youend up importing bad processes into an IT framework. This is a recipe for disaster.IT MATURITYJust as a business must be strategic, so is it the case with IT. Is your IT organization strategic or is it toobusy fighting fires? One road towards more strategic IT is via good practices such as ITIL. Note, however,that ITIL and other similar initiatives will not make you strategic. They help, but they don‟t create alignmenton their own.To achieve maturity, IT staff has to embrace knowledge beyond the technology perimeter. If IT does notachieve a strong understanding of business as well as technology, it will not be capable of identifying
  17. 17. technology solutions that meet business objectives. Therefore, you have to become visionaries in bothbusiness and technology. If you don‟t have the people who can do this, obtain them from elsewhere.TECHNOLOGY SUPPORTOf course, there is technology that can help IT arrive at its destination. Automated capacity planning andperformance management tools offer a step change in IT operations. Instead of working in reactionary orhappenstance mode, these tools can immediately propel IT into a greater zone of effectiveness. They canprovide, for example, the required flexibility to accurately predict traffic patterns and growth trends whilebeing able to detect unexpected peaks and troughs, and make the necessary adjustments.Capacity planning makes it possible to know if the current infrastructure is adequate to cope with theaddition of new applications or a greatly increased traffic volume. If more resources are called for, capacityplanning highlights how much extra equipment needs to be deployed. And with so much top managementattention on smart grid initiatives, such automated tools enable IT to load up existing systems with greaterworkloads without causing a bottleneck. Thus it becomes possible to maximize the ability of systems torespond to market volatility.Capacity planning also reaps big rewards by revealing what IT assets are already in place. There is hardlyan energy company in the nation that can honestly say it knows the location and role of every server in itsmidst. By conducting such an inventory automatically, capacity planning software permits optimization ofwhat is currently in place. In many cases, this action reveals large pockets of unharnessed resources thatcan be corralled to cope with on-going expansion. While capacity planning could be characterized as acrystal ball, performance management is the trouble-shooter. Despite the most meticulous planning,unforeseen circumstances sometimes result. Whether due to massive spikes in demand, a local blackoutor the impact of uncontrolled application roll out, IT departments must occasionally deal with performancedegradation. The challenge is to quickly isolate the source so the proper remedial actions can be executed.With the right tools in place, energy companies can stay one step ahead of trouble.It is advisable, for instance, to always monitor metrics concerning the utilization of processing power,memory and the network. Thus when an issue shows up, it is relatively easy to drill down into the affectedarea to discover the application, server or business unit responsible. This directly correlates to the bottomline. Instead of throwing more servers, more disk capacity, more bandwidth or more powerful processors at
  18. 18. the issue, performance management often reveals specific areas of bottleneck that can be reorganized foroptimum throughput and availability.MORE CHALLENGESAcademics have touted the need to align technology with business since the 1960s. The issue has madethe top ten concerns of management since the 1980s.Despite Band-Aid after Band-Aid, alignment issuesperpetuate, perhaps because the Band-Aids don‟t deal with root causes. Before considering what to do, it‟shelpful to understand what hasn‟t worked and why.By and large, efforts to align business and IT fall into two categories: funding and leadership.FundingFunding efforts center on documenting business intent and estimated value as part of budgeting. Becausethe finance department typically “owns” budgeting, business justifications are usually structured by financefrom a financial perspective. Collaboration with IT is seldom required or even encouraged, although ITmight have to plug in costs for anticipated hardware and software needs. Few organizations take a holisticlook across business cases to identify overlapping and conflicting requests, or opportunities to consolidate.In the worst of cases, justifications is a bureaucratic rather than intellectual exercise – the search for soundbites and spin known to be effective at securing funding rather than a rigorous analysis. Decisions tend tobe made based on financials alone, making strategic positioning and infrastructure investments difficult tosecure because ROI and payback are difficult to forecast when it‟s impossible to anticipate every potentialuse.LeadershipLeadership efforts tend to focus on reporting relationships. Most recently, the leadership fad was to havethe CIO report to the CFO, under the assumption that finance knows how to tie capital investments andexpenses to profit and loss. True, but the value of IT is not limited to financials. Besides begging the 3measurement question for valuing return on technology , alignment with finance alone is functionallybiased.Why Funding and Leadership Fail. One-dimensional approaches like funding and leadership tend to failbecause they target symptoms. Both business and IT are dynamic and affected by a complex network of
  19. 19. internal and external forces. Treating them as static and independent encourages unproductive andconflicting use of resources that results in chaos at worst and diluted return at best. Figure 1: Lack of Alignment across Functions Dilutes Enterprise EffectivenessThe Root ProblemWhat‟s missing? What‟s derailing enterprise perspective and effective assignment of accountability despitesolid advice from academicians and best practices from the field? It‟s none other than the bogeyman calledculture.Command and ControlThe pervasive organizational design in U.S. companies was modeled on the military and codified forbusiness by Alfred P. Sloan. Decision making is highly centralized but operations are decentralized. A rigidand hierarchical “chain of command” links the two. Commonly referred to as “command and control,” orderscome down from the omniscient top, and the rank and file execute as directed, no questions asked. Inpractice, some organizations are less rigid about hierarchical control than others, but the idea of self-
  20. 20. contained units taking direction from someone “above” is so ubiquitous that we tend to confuse autocraticbehavior with leadership. Figure 2: Sample “Command and Control” Organizational StructureParticipative ManagementIn the mid-1980s, the concept of “participative management” caused a buzz among students in MBA andexecutive development programs, and led to experimentation with matrix reporting and cross-functionalteaming. Both create opportunities to overcome the isolating and organizationally divisive effects of“command and control. Figure 3: Sample of a Matrixed Organizational StructureGenerally, matrixed roles have been used to enable business-IT alignment. Most commonly, an IT expertwith good interpersonal skills is positioned by IT management to insinuate IT into the business function. It‟smuch rarer to see an expert in the business function put into a matrixed role by a functional manager in
  21. 21. order to insinuate the business into IT. Unfortunately, alignment requires outreach, education and decisionrights from both sides in equal measure.The only thing worse than having IT or the business function dominates a matrixed position is having thematrixed role performed and controlled by a third workgroup – a project management office, for example.The worst situation removes both business and IT expertise from the equation. In the second part of thisarticle, we‟ll look at ways in which IT can fix the problem.THE ROAD TO BUSINESS/IT ALIGNMENTAcknowledging that culture, as manifested in organizational structure, is the key barrier to alignment isscary and demoralizing because culture is so pervasive and difficult to change. Fortunately, there are anumber of indirect ways to chip away at culture without reorganizing. Persistence, consistency andopportunism are the keys to success in chipping away at the problem over the long term. The following tipsrepresent opportunities for both IT and business functions to take the initiative.PLANNINGIt‟s easier to tweak an existing process than to introduce a new one. Almost every company has some sortof formal planning process whose activities can be easily modified to enhance alignment and create anenvironment conducive to on-going collaboration.Capacity PlanningAdd a step to the planning process whereby IT interviews business users and workgroup managers touncover business intent that will substantially change the volume of existing transactions. If business userscomplain about outages or the impact of IT performance on their ability to do their jobs, they are likely tojump at the chance to provide information that promises to ease their pain. If your IT environment is stableor its problems are invisible to most business users, you may have a harder time interesting them in talkingto IT; under such circumstances, it may be better to start the process using an electronic survey and thenfollow-up face-to-face or in small groups to explore unclear or problematic input.Talk to people who really know about volumes. Vice presidents and directors are experts on the new endstate they expect to create. Front line staff, on the other hand, know intimately what takes place daily and inwhat patterns.
  22. 22. Conduct interviews close enough to the completion of business planning that plans are stable. If you‟re tooearly, you risk forecasting capacity on pipe dreams. If you wait too long, IT will have trouble integrating theinput into their plan on time.Keep the interview to 30 minutes by tightly focusing your questions. If the interviewee wants to talk longer,so be it, just don‟t require any more than a half hour. Be sure to take good notes; you‟ll need them toaggregate and analyze.Come armed with facts from the past year – charts and graphs are wonderful ways to communicate factsand depersonalize touchy topics. Show current performance against capacity limits, and use thatinformation to discuss interruptions, failures and outages in terms of business impact and tolerance. Try touncover the business cause of peaks and valleys; maybe there‟s a way to spread them.Finally, be sure to close the loop with the interviewees once the capacity plan is developed. They need toknow they were heard and their input was used. Similarly, if budget for capacity is cut and the cuts arelikely to impact a particular activity, establish the situation as a shared issue to be addressedcollaboratively.Service Level Agreement Check-UpsAlthough service level agreements (SLAs) should be renegotiated whenever business needs change, theyshould also be reviewed regularly for continued relevance. Setting up a review is as simple as including thedate for review, a review interval or an expiration date when you create or modify the agreement.At a minimum, include the business signatory on the SLA (most likely the business sponsor), the IT personresponsible for the operation and support of the system or application covered by the SLA, and the datasteward. There can be advantages to including other stakeholders and treating the session as a type ofsummit meeting.Use the format and organization of the SLA to structure the agenda, but also include topics that create anopportunity to raise questions about future plans and emerging technologies. The scope should provide ITadvanced warning on emerging business needs and priorities that may affect IT planning, and givebusiness stakeholders an opportunity to consider the advantages and disadvantages of emergingtechnologies and potential enhancements.
  23. 23. Be sure to document the key issues and decisions, and give participants a chance to validate the minutes.Then update the SLA as agreed, and post it where stakeholders can access it – open communication andtransparent interactions are required to build trust, and thus make it possible to resolve misunderstandingsbased on documentation instead of recollection. We recommend making the session minutes generallyavailable for the same reasons.Business Process Observation and MappingIT is full of technology experts, but they don‟t understand the daily reality of your function – not really.Without that awareness, it‟s very hard to design a solution that fits daily routine, offers an interface simpleand logical to those users, or simplifies procedures in ways that the function values. A comprehensive mapof the business activity (who does what when, in what order and for how long) helps IT understand thecontext in which the solution must fit.In general, the best person to observe and map is the business analyst. In some organizations, thebusiness analyst reports to the business function. In others, it reports to IT; and in some, it‟s a positionmatrixed between IT and the business. Whatever the reporting relationships, be sure that the businessprocess is accurately and comprehensively captured. It may make sense to team the lead business person(e.g., call center supervisor for a call center application) with the IT architect who will be designing thesolution for joint observations.If IT is stretched too thin or doesn‟t have the skills to do the job, then consider having your business analysttutor IT. A third option is to let IT handle the observation process in their own way but have a validation stepwhere front-line businesspeople sit down with IT to review the process map and answer questions aboutwhat was observed before IT goes any further.What‟s the incentive for IT to participate? Why should they go through this extra step? There are a numberof benefits for them just in terms of designing and delivering a usable solution. But there‟s also a strategicadvantage in fully grasping the business activity they‟re enabling, particularly if it requires newinfrastructure that can be leveraged for other applications.
  24. 24. Standardize Application DescriptionsIn most companies, finance develops and manages the planning templates and process. As a result, theyreflect a financial perspective – and time frame. Establishing a common template for outlining key aspectsof a needed business system or application frees everyone to begin planning for new development as theneed emerges, and enables a cross-functional comparison of needs to: Assure that applications competing for scarce resources are compared on a standard set of criteria, not just cost and payback period Make it easier to spot duplicates that can be collapsed into one development project that benefits multiple functional groups, or prioritized based on breadth of business impact Identify dependencies so that applications might be scoped for incremental development and deployment, thereby enabling the business to start deriving value sooner Figure 1: Example of a Description for a “Partner Profile” ApplicationResource AllocationThe problem with relying on the formal budgeting cycle for allocating resources to projects is that businessneeds don‟t evolve synchronously with the fiscal year. Furthermore, budgeting only allocates financialresources – the specific skills and knowledge required for the project tend to be concentrated in a fewindividuals who are often overextended. The alternate option is to allocate individuals who have weakerqualifications. Both circumstances introduce risk.
  25. 25. We recommend separating the identification, description and prioritization of new business applicationsfrom budgeting. Here‟s how: Document new business needs per the previous recommendation (Standardize Application Descriptions) Consolidate the descriptions in a cross-functional Application Portfolio Establish a cross-functional program for systematically reviewing and prioritizing the portfolio on a regular basis – quarterly, for example; use the quarterly session to add new applications, modify applications already in the portfolio, delete applications that are redundant or no longer needed, and prioritize them cross-functionallyAt any given time, the priorities for allocating both financial and human resources to projects are knownwithout disrupting the existing planning and budgeting cycle. Furthermore, posting a list of portfolioapplications, current status and the sponsor on the company‟s intranet can help avoid redundant requestsand improve general understanding of current priorities.Performance ProfilingAs part of each SLA negotiated with IT, require a report on the technical performance of the system orapplication. The information allows both the business and IT to monitor technical performance againstrequirements relevant to business activity, and assures fact-based problem solving should technicalperformance degrade – too often such issues are assessed on perception instead of metrics, and generatearguments instead of solutions.What do we mean by technical performance? Business performance includes the business metrics that tellyou how well the targeted function is performing against plan. A marketing organization, for example, mightmonitor business metrics like the campaign conversion, defection rate and cost per acquisition. Technicalperformance depends on metrics that reflect how well the systems and applications supporting thebusiness function are performing. Typical technical metrics for a marketing system might include: on-timedata loading, trapped entry errors and unplanned outages.
  26. 26. PROJECT METHODSAlthough application and system development efforts are usually considered the province of IT, in analigned organization, the sponsoring business function participates in the project and is accountable for keydecisions. Here are some ways to build alignment into your development process.Requirements DefinitionIssues about requirements are about as old as those about alignment. Baseline believes the twofundamental problems are: IT believes they know what the business needs without asking them, or the business tries to dictate the solution to IT without explaining what they need to do Requirements are viewed as a bureaucratic hurdle or as the initial design documentBoth weaknesses are easily overcome by making sure there are four separate components ofrequirements developed somewhat linearly before any thought is given to the solution: business, data, 1functional, and technical specifications.Business RequirementsBusiness requirements are best gathered by a business analyst who reports, ideally, into the businessfunction. When the business analyst reports to IT, communication and trust can be issues.Requirements are best gathered in one-on-one interviews with a representative sample of business usersand enhanced with information from business plans, existing reports and other relevant artefacts. Why one-on-one? Because group sessions tend to yield results skewed on perceived power and assertiveness.Group sessions are best left to the end of the requirements activity, and used to demonstrate that everyonewas heard, work through inconsistencies, and validate the requirements. Why a representative sample?Because challenges, awareness and agendas differ with role and responsibilities; a value-addingsustainable solution addresses them all.The objective of each interview is to understand specific business actions and questions. Asking questionslike “What information do you need?” or “What do you want the application to do?” encourages answerslike “Columns 6 and 7 from the XYZ database” or “I need Oracle CRM.” Instead, ask questions that focuson the interviewee‟s responsibilities and the difficulties he has fulfilling them. Don‟t miss the opportunity to
  27. 27. estimate solution value by asking how much time is spent each week correcting X, how fixing Y might affectthe customer, or what the interviewee could do if task Z were eliminated.Take notes or record the session. You are sure to miss details or confuse who said what as you completethe interviews. You need to be able to refresh your memory.As you complete the interviews and analysis, engage the data analyst so that he can begin to derive thedata requirements while you finish documenting the business requirements – this little bit of overlap canspeed the requirements activity substantially.Include among the business requirements how the business will evaluate the solution during acceptance.Declaring acceptance criteria and evaluation procedures up front prevents surprises at the end of theproject.Data RequirementsThe business analyst passes the results of the interviews with the stakeholders to a data subject matterexpert, data steward or data analyst who uses them to identify the information required to meet their needs.The data analyst creates or enhances the logical data model to identify existing subject areas that need tobe tapped as well as new or enriched subject areas that will be required. Physical data models arecompletely irrelevant at this point; the data requirements are strictly logical and business-based.Once the data analyst has identified the needed information, he does a quick survey of sources to identifythose that might become systems of record; if there‟s time, he may also profile the data in each potentialsource to roughly grasp the their quality problems. Information for which there‟s no known source issimilarly identified, and the business rules that will govern the creation or conditional use of data aredocumented.Finally, the data analyst creates a traceability matrix, which links each business question to a businessobjective (both from the business analyst‟s work) to a data requirement, and subsequently to a functionalrequirement. Although traceability matrices are tedious to develop and maintain, they provide a quickmeans for assessing who will be impacted in what way by anticipated changes to a source, a data elementor function. Such impact analysis is another critical success factor for business-IT alignment.
  28. 28. Functional RequirementsTypically, the business analyst derives the business functional requirements while the data analyst isworking on the data requirements. Like the data requirements, functional requirements are derived from thebusiness requirements. They have to do with the way business users need to work, their interfacepreferences, accommodations required for skill gaps, and any other constraints on the user interfaces. Inmost cases, it behooves the business analyst to prototype interfaces as it will be much cheaper and easierto get commitment or corrections from business stakeholders before anything is designed and coded.Once the business, data and functional requirements are documented, the business analyst validates themwith the interviewees and secures sign-off from the sponsor. Adhering to this procedure assures that ITdoes absolutely no work – design or development – until the business certifies in writing that therequirements are complete and correct, and that any subsequent changes in requirements will benegotiated between the sponsor and IT to manage scope creep and changes to the project budget andschedule.After the business sponsor signs off on the requirements, the project lead shifts to IT until the user 2acceptance activity. At this point, IT has all the business information needed to define the technicalspecifications and begin solution design. Similarly data professionals have what they need to begin in-depth data analysis and development activities.Status ReportingCommunication of project status is important, and it is our view that different audiences need differentstatus information. Most project methodologies only focus on two audiences: those on the project team andthe project sponsor.Baseline knows that communicating status to business users is essential to setting and managingexpectations (another aspect of alignment). These individuals care about the status of the project in termsof what will be delivered when and how it is expected to change their daily activities – for the most part,technical details are of little interest. The project manager may wish to tap the business analyst tocommunicate progress, issues and new insights to the business stakeholders since she may be betteracquainted with their interests and concerns.
  29. 29. AcceptanceIn most cases, there need to be two acceptance activities: data validation and case study acceptance.The purpose of data validation is to have business stakeholders declare that they trust the data comingfrom the solution. Depending on the solution, that may require looking at data input from source systems,tracing it through a cleansing process, manually checking business rule calculations, evaluating errortrapping, and determining that the output is as expected.Data validation is done by business stakeholders who already know the data and are respected by theirpeers for their knowledge. Likely candidates include analysts who manually prepare reports or correcterrors. If your company has a data stewardship program, then the relevant data stewards might beentrusted with the job.Elements of Organizational AlignmentOrganizational alignment describes the degree to which multiple organizations are positioned to worktogether effectively and achieve high quality results with minimum conflict, confusion, miscommunication,and political interference. Three elements have profound impact on organizational alignment: Processes are the procedures and activities through which interaction occurs, needs are communicated, products and services are delivered, and payment or chargeback is achieved. Important influences include the degree of formality in processes, the level at which they are documented and understood, the extent to which they are followed, results-orientation without undue bureaucracy, consistency of application, and much more. Relationships involve both the state and the quality of interaction between organizations. Organizational relationships have a structural component and a cultural component. Structure expresses the form or forms of a relationship - contractual, partnership, and collaborative for example. Culture expresses the attitudes and emotions of a relationship - friendly vs. combative, trusting vs. distrustful, comfortable vs. awkward, etc. Skills are the abilities to produce solutions in a problem domain. Business skills, technology skills, and interpersonal skills are all important for organizational alignment. It is increasingly important that business people have some technical skills and that technical people have some business skills.
  30. 30. Elements of Working RelationshipsWorking relationships determine the state and quality of interaction between organizations - thoserelationships described above as an element of organizational alignment. The axis for organizationalalignment examines those relationships collectively. The working relationships axis explores relationshipsin greater depth. Working relationships exist at several levels including organization-to-organization, team-to-team, and person-to-person; and they must work effectively at all of these levels to achieve trueorganizational alignment. Organization-to-organization relations are ideally structured and business-like.Conversely, person-to-person relationships are best when unstructured and friendly. Team-to-teamrelationships seek a balance between the two extremes. Both extremes are needed to achieve robustworking relationships.The much desired characteristic of trust, for example, begins at the personal level before it can extend tothe team and organizational levels. Partnership, however, is difficult to realize at the personal level andideally begins with organizations. Collaboration is a preferred characteristic of team-to-team relationshipsand is frequently the bridge between personal and organizational behaviors.Managing working relationships is clearly a complex and difficult process. Yet it is an essential processbecause relationships (as illustrated in Figure 2) are at the very core of Business/IT alignment. Althoughchallenging, managed relationships are both necessary and possible. The critical elements of managedworking relationships include:
  31. 31.  Governance provides the structure and controls needed to achieve value from IT resources, minimize risk of IT initiatives, ensure long-term viability of IT systems, ensure that IT systems support regulatory compliance, raise the level of information technology maturity, and satisfy business expectations of IT. Governance addresses ownership, responsibilities, measurement, policies, and working practices for data, technology, and information systems. The goal of governance is to align as closely as practical the interests of individuals, teams, organizations, and the enterprise. Competency is the ability to produce and deliver results and encompasses both knowledge and ability to apply that knowledge. Effective Business/IT relationships demand competency in three domains - business, technology, and program/project management. Although frequently considered to be subjective and intangible, competency is readily affirmed and demonstrated through references which may range from internal word-of-mouth impressions and reputation to recognition as a best practices leader. Competency is essential for each of individuals, teams, and organizations. Communications are a cornerstone of Business/IT alignment - the connections that enable access, understanding, cooperation, and teamwork. Every aspect of the framework depends in some way and to some degree on communication.Skills, for example, are individual and problem domain specific; Competency is collective and resultsoriented; Moving from skills to competency and from problem to results depends largely uponcommunications.Continuous Alignment ActivitiesContinuous alignment is the goal and the challenge - continuous because organizations, people,processes, and technology continuously change. One-time alignment simply will not do. Identify Misalignment - This activity focuses on knowing where alignment problems exist and why they exist. Examine each of nine points identified by the COA framework to seek out specific misalignment issues as shown in the table below:
  32. 32. Figure 3: Identifying Misalignment Correct Misalignment - This activity effects change. The only way to improve Business/IT alignment and relationships is to change what we think, say, and do in areas of misalignment. Both organizational and personal change is important. Personal change is frequently driven by the messages (communications, actions, and behaviors) that occur organizationally. Inconsistent messages - actions differing from communications - will damage the overall effort to improve alignment and working relationships. Organizational change involves multiple organizations and brings forth a subtle but important distinction: Do not undertake an effort to "align IT with the business" but an effort to "align business and IT" to best serve the needs of the enterprise. Sustain Alignment - This activity is directed at impact with a goal of achieving real, substantial, and lasting value through alignment of business and technology. Sustainability depends on feedback and monitoring to ensure not only that change occurs, but that the desired changes occur. In a climate of continuously changing organizations and technologies the feedback system is particularly important. Extending the scope of change to encompass people, processes, and politics raises the stakes. Routine check-ups are necessary to ensure long-term alignment.
  33. 33. CONCLUSIONSAligning IT to business needs is still an important challenge for many organizations. The numerous studieson alignment provide many valuable insights. These insights are analysed in the previous sections.However, given specific organizational contingencies, the practical application of these insights is a fieldthat is yet to be explored. This paper has also identified a number of aspects of alignment that have not yetbeen covered.These include the application of policies and strategies in more complex organisational settings, like a multi-business company or an multi-national company; alignment in SMEs with limited qualitative and quantitative resources; the relationship or „fit‟ between alignment and business strategy; the effect of outsourced IT operations on alignment; The social aspects of alignment: culture, perceptions, etc.The overview presented in this paper aims to provide both academics and practitioners a guide to furtherdevelopment of the knowledge of BIA. After six years of being a major concern for executives, it should bethe first priority for creating a better understanding of how IT enables or innovates business. This lastaspect especially makes this understanding a must for both IT and business professionals. The futuresuccess of organizations depends on their ability to innovate and improve their businesses continuously. ITis the key to doing this and therefore the key to a successful future.