Finance:Business-IT alignment

Business-IT alignment is a process in which a business organization uses information technology (IT) to achieve business objectives - typically improved financial performance or marketplace competitiveness. Some definitions focus more on outcomes (the ability of IT to produce business value) than means (the harmony between IT and business decision-makers within the organizations); for example,

alignment is the capacity to demonstrate a positive relationship between information technologies and the accepted financial measures of performance.

This alignment is in contrast to what is often experienced in organizations: IT and business professionals unable to bridge the gap between themselves because of differences in objectives, culture, and incentives and a mutual ignorance for the other group's body of knowledge. This rift generally results in expensive IT systems that do not provide adequate return on investment. For this reason, the search for business-IT alignment is closely associated with attempts to improve the business value of IT investments.

Business-IT alignment integrates the information technology to the strategy, mission, and goals of the organization. Key characteristics in order to achieve this alignment are:

1. The organization must view information technology as an instrument to transform the business. This includes exploring other revenue streams and integrating other facets of their business into each other. For example, using one central data warehouse to combine two separate, but partnering businesses.
2. An organization must hold customer service, both externally and internally, at the utmost importance. Communication between the organization and their customers must not be lost.
3. An organization must rotate both IT and business professionals across different departments and job functions. They must have the knowledge and experience of both sides of the business so that understanding and communication is achieved. Once those three characteristics are achieved,
4. An organization must provide clear and specific goals to both the IT and business employees. This will create the integration of both entities to achieve a common goal.
5. Ensure that IT and business employees understand how the company makes or loses money. This is important so that money is not carelessly poured into the IT department and there is no return on that investment.
6. Organizations must create a vibrant and inclusive company culture. There must not only be informational unity, but a company as whole.

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 and mistrust. The search for B/I alignment often includes efforts to establish trust between these two groups and a mechanism for consensus decision-making.

B/I alignment and IT governance

To achieve B/I alignment, organizations must make better decisions that take into account both business and IT disciplines. Establishing processes for decision-making and control is essentially what is meant by the 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 board of directors and executive management. It is an integral part of enterprise governance and consists of the leadership and organisational structures and processes that ensure that the organisation’s IT sustains and extends 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 area of IT portfolio management, which has to do with decisions about which IT projects are funded and which are not.

B/I alignment and business transformation

Ultimately, value must come not just from the IT tools that are selected, but also in the way that they are used 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 by new IT. Thus, implementing IT to achieve its full potential for business value includes not only a technical component, but also an organizational change management component (see the Risk3 model below).

It is important to consider the overall value chain in technology development projects as the challenge for the value creation is increasing with the competitiveness between organizations (Bird, 2010). The concept of value creation through technology is dependent upon the alignment of technology and business strategies. While the value creation for an organization is a network of relationships between internal and external environments, technology plays an important role in improving the overall value chain of an organization. This increase requires business and technology management to work as a creative, synergistic, and collaborative team instead of a purely mechanistic control instance. Technology can help the organization gaining competitive advantage within the industry it resides and generating performance at a greater value, [1] according to Bird ().

Alignment models

Henderson & Venkatraman's 1993 article can be seen as the starting point of Business-IT alignment.

Typical EA Frameworks are used to achieve business-IT alignment, as these frameworks links business and technology layers of organization over common threads.

TOGAF is a framework by Open Group which defines a very strong method of developing the enterprise architecture. The method is called ADM (architecture development method)

Zachman EA framework is developed by John Zachman and it defines which artifacts enterprises need to develop to be able to organize themselves better. It is also widely accepted framework in the industry.

In the Risk3 model, the objective of B/I alignment is to manage three separate risks associated with IT projects: technical risk (will the system function as it should?), organizational risk (will individuals within the organization use the system as they should?), and business risk (will the implementation and adoption of the system translate into business value?). Business value is jeopardized unless all three risks are managed successfully.

See also

• Business IT fusion: a concept invented by Omar A. El Sawy in his paper "El Sawy, O.A. (2003) 'The IS Core - IX The 3 Faces of IS Identity: Connection, Immersion, and Fusion' Communications of the AIS, 12, pp. 588-598.
• Van Grembergen, W., and S. De Haes, Enterprise Governance of IT: Achieving Strategic Alignment and Value, Springer, 2009.
• Van Grembergen, W., and S. De Haes, “A Research Journey into Enterprise Governance of IT, Business/IT Alignment and Value Creation”, International Journal of IT/Business Alignment and Governance, Vol. No. 1, 2010, pp. 1–13.
• S. De Haes, and Wim Van Grembergen, “An Exploratory Study into the Design of an IT Governance Minimum Baseline through Delphi Research”, Communications of AIS, No. 22, 2008, pp. 443–458.
• S. De Haes, and Wim Van Grembergen, “An Exploratory Study into IT Governance Implementations and its Impact on Business/IT Alignment”, Information Systems Management, Vol. 26, 2009, pp. 123–137.
• S. De Haes, and Wim Van Grembergen, “Exploring the relationship between IT governance practices and business/IT alignment through extreme case analysis in Belgian mid-to-large size financial enterprises”, Journal of Enterprise Information Management, Vol. 22, No. 5, 2009, pp. 615–637.
• Service-oriented modeling framework (SOMF), provides a framework for business and IT alignment through transformation of business services into solution services

External links

• The IT Governance Institute
• Strategic Alignment: Leveraging Information Technology for transforming organisations - IBM Systems Journal, vol32, NO1(-- broken URL)
• Paul Strassman
• Total Organizational Strategic Alliance Certifications
• Weill and Ross on IT governance
• ICT Standard for Management
• Information Technology Alignment and Governance (ITAG) Research Institute (-- broken URL)