Information Technology Strategy

It is elusive task for the organization to achieve alignment between Business and IT strategy. King & Teo (1996: 309) defined alignment as the "coordination between the business and IS planning functions and activities". Luftman, Papp & Brier (1999) argue that "alignment focuses on activities which management perform to achieve cohesive goals across the organisation".

The Strategic Alignment Model (SAM) of Henderson & Venkatraman (1990) addresses four domains. Those are business strategy, IT strategy, organisational infrastructure and processes and information systems infrastructure and processes.

Every domain has the key components; total number of key components is eight. Two dimensions of strategic integration and functional integration also included in SAM. Luftman (1996) later extended SAM to twelve components that define alignment between business and Information Technology. These components are divided into four major areas such as business scope, distinctive competencies, business governance, administrative structure, processes, skills, technological scope, systemic competencies, IT governance, IT architecture, processes and skills.

But King (1978) given a different perspective "IT strategy should be directly derived from business strategy and thus a hierarchy of strategies emerges." Afterwards this was found to be flawed (King & Zmud 1981, Baets 1992) by the same author who had different view that Business strategy formulation process and IT strategy formulation process has to be integrated as business strategy is always changing although between industries the degree of integration will vary.

Alignment of Business Strategy and Information Technology has weighted down the management for many years and has stayed an one of the most important matter for the organization.

SUCCESS OF ALIGNMENT BETWEEN BUSINESS AND IT STRATEGY

It is much more easy to understand the success of alignment between IT strategies from different numbers of point of views. "For alignment to be successful it must be realised, that is, where business strategy is evident in IT decision-making as opposed to remaining in a document " Mintzberg (1978). According to Chan et al (1997) and Rockart, Earl & Ross (1996) "Successful alignment is the understanding business opportunities through IT."

Broadbent & Weill (1993) has given more wide-ranging definition. They stated "successful alignment is exhibited through the outward display of competitive advantage or successful achievement of business goals from the use of information or IT". They also included that IS strategy has to be consistent with the need of business, has to be flexible and formation process oriented with the fact of different organizational levels; in order to achieve the alignment.

With the aspect of financial terms Henderson & Venkatraman (1993: 472- 473) included successful alignment is achieved when "economic performance is directly related to the ability of management to create a strategic fit between the position of an organisation in the competitive product-market arena and the design of an appropriate administrative structure to support its execution".

From the above different views we conclude the successful alignment between Business and IT where a planned alliance can be demonstrate for both business and IT and can lead to the successful, business oriented and tangible outputs.

IMPORTANCE OF ALIGNMENT BETWEEN BUSINESS AND IT STRATEGY

The major influence of alignment between Business and information Technology is as follows:

  • Potential key element in competitive positioning
  • It can influences IT on Business such as image technology, online processing, achieving independence locations and business relationship changes.
  • Process reengineering can be done as a major IT influences.
  • Simply supporting operational functions can be changed as a critical strategic organizational resource.
  • Being able to exploit the functionality to achieve business goals.

FACTORS THAT INFLUENCE DEGREE OF ALIGNMENT BETWEEN BUSINESS AND IT STRATEGY

To find out how to achieve successful alignment between business and IT strategy in an organization is to identify the factors that influence the degree of alignment. By analysing facts, functions, strategies and relevant literature ten factors have been identified (Broadbent and Weill 1993, Burns and Szeto 2000, Rockart, Earl and Ross 1996, Henderson and Venkatraman 1993, Choe 2003, Pollalis 2003, Earl and Feeny 1994, Kaplan and Norton 1996, Luftmann, Papp and Brier 1999).

The ten factors are:

  1. Firm wide active involvement;
  2. Long term focus;
  3. Meeting of the minds;
  4. Clarity and consistency;
  5. Management skill and capability;
  6. Alignment facilitating processes;
  7. Organisational structure;
  8. Organisational culture;
  9. Communication;
  10. IT as an organisational tool.
  11. Firm-wide active involvement

Business and IT functions need two way relationship to achieve the alignment during the strategy formulation. "This requires extensive firm-wide participation, information flow and interaction between business and IT staff" (Henderson & Venkatraman 1993; Kantrow 1980, Choe 2003; Luftman, Papp & Brier 1999). "In particular the Chief Information Officer (CIO) should be actively involved in all strategy formulation within the organisation"(Rockart, Earl & Ross 1996; Ross et al 1996; Keen 1991).

Earl & Feeny (1994) found by researching six organisations that to achieve strategic advantages the CIO has to deployed the organizations IT functions. According to Broadbent & Weill (1993) "IT staff should feel like they are part of the organisation and not just the IT industry". Haeckel & Nolan (1993) stated that if it does not happen then the IT department need to take some critical decision by itself alone.

Long term focus

"Both IT and business strategies should hold a long-term focus on critical issues for successful alignment" (Broadbent & Weill, 1993; Kaplan & Norton, 1996). "When either IT or business strategy lacks a long-term focus alignment is impeded. In particular, senior management attention is required when formulating IT strategy to ensure a long-term focus"(Broadbent & Weill 1993; Rockart 1988).

Meeting of the minds

"Management must reach consensus about firm-wide strategic issues between the business and IT functions for successful alignment"(Broadbent & Weill, 1993; Rockart, Earl & Ross, 1996; Kaplan & Norton, 1996). "If this "meeting of the minds" occurs then a clear understanding of key strategies spreads throughout the organisation"(Simons & Davila 1998). "Consensus is best achieved when both the Chief Executive Officer (CEO) and the CIO share a clear vision and focus and communicate in a common language"(Slywotzky & Morrison 2000).

Clarity and consistency

"Both the business and IT strategies need to be clear and consistent with business goals of the organisation for successful alignment" (Broadbent & Weill 1993; Henderson & Venkatraman 1993; Chan et al 1997; Willcocks & Plant 2001; Choe 2003; Pollalis 2003; Kaplan & Norton (1996).

Management skill and capability

"Management skill and capability needs to be well developed in both IT and business managers to facilitate alignment"(Broadbent & Weill 1993; Rockart, Earl & Ross 1996; Choe 2003; Luftman, Papp & Brier 1999; Kaplan & Norton 1996). Kantrow (1980) added "the skill of understanding technology is not just needed at upper management but is central to business thinking at all levels". "The need for IT managers to understand business needs is particularly important"(Kaplan & Norton 1996).

Alignment facilitation processes

"Strategically-oriented decision-making processes that are maintained and managed by key stakeholders are important for successful alignment" (Broadbent & Weill 1993; Luftman, Papp &Brier 1999; Kaplan & Norton 1996).

Organisational structure

"Having an organisational structure that provides mechanisms for accountability and ownership of strategy formulation is important for successful alignment"(Broadbent & Weill, 1993; Henderson & Venkatraman, 1993; Luftman, Papp & Brier, 1999).

Pollalis (2003) noted "those organisations with smaller IT units were more flexible and therefore more readily able to the align business and IT strategy more successfully than those who had larger IT units".

Organisational culture

"A supportive organisational culture is required to establish a strong working relationship between the business and IT functions and achieve successful alignment (Kantrow 1980). Senior management support is important is the establishment of a supportive organisational culture" (Luftman, Papp & Brier, 1999).

Communication

"Purposeful and strategically focused communication is important for successful alignment" (Broadbent & Weill (1993); Broadbent & Weill 1997; Choe 2003; King & Teo 1996; Kaplan &Norton 1996). "Communication facilitates understanding and promotes mutually beneficial thinking about strategy"(Rockart, Earl & Ross, 1996 ;Pollalis 2003).

IT as an organisational tool

"IT needs to be perceived by organisations as a resource or business asset"(Willcocks & Plant 2001;Haeckel & Nolan 1993; Keen 1991; Luftman, Papp & Brier 1999). "This perception needs to be deeply instilled within organisations to ensure that new IT opportunities that emerge are recognised and can impact business strategy formulation"(Henderson & Venkatraman 1993).

CONCLUSION

From the study above a number of important conclusions can be drawn. Organizational factors are hard to perform to gain the successful alignment between Business and Information Technology. The capability, knowledge and the skills of the business decision makers of the organization is the most important key function to get the successful alignment. Improper and due to lack of alignment is the cause to achieve the goals.

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