Measuring The It And Business Alignment Commerce Essay

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Research in the past few years indicates that Business/IT Alignment (BIA) has become a crucial element in today's world for any organisation to sustain itself whether it is a small business entity or a multinational firm.

To achieve BIA initially an organisation needs to measure how well it is aligned. The next step would be to identify elements that prevent or assist an organisation in aligning business with IT. Both elements provide an opportunity for achieving and improving BIA. Accordingly, a process needs to be implemented to facilitate BIA.

2.0 How to Measure Alignment:

There is no silver bullet solution to measure and evaluate the status Quo of its business/IT alignment (BIA) as the alignment construct is deemed to be very complex. In literature various models exist that try to capture the complexity of BIA and due to their different approaches (with different advantages and drawbacks) it is difficult to compare the results of the different measurement models with each other. (Van Grembergen, & De Haes, 2009, p. 77). The choice of model will depend upon the organisation's specific environment.

In the following four key alignment approaches are being described.

2.1 The Matching and Moderation Approach

According to Hoffman, Cullen, Carter, and Hofacker (1992) the two most suitable methods for analysing models with two variables in the fit equation are the moderation and the matching perspective (Hoffman et al., p. 46).

2.1.1 The Matching Approach

This approach measures the difference between the ratings of related items. Parallelism between related items in IT and business is sought for and measured in scores. High alignment is indicated by a low difference in scores; whereas low alignment is indicated by a high score difference (Van Grembergen, & De Haes, 2009, pp. 77-78). The matching approach is "most commonly based on the difference between the two measures" (Hale, & Cragg, 2009, p. 128).

Fig 1: The Matching Approach (Van Grembergen, & De Haes, 2009, p. 78)

The advantage of this approach is the simplicity and therefore practicability both in organisations and research. However, the model lacks an explanation whether the scores have to be on the same level in order to reveal high BIA (Van Grembergen, & De Haes, 2009).

2.1.2 The Moderation Approach

Alignment is being measured not on the basis of parallelism but instead on the basis of interaction. According to Hofman et al. (1992) it is assumed that performance is being affected by combinations of variables, indicated by statistical interaction (Hoffman, Cullen, Carter, Hofacker, p. 46).

The moderation approach "assumes that fit reflects synergy between IS and business strategy" as performance is being primarily determined by fit (Hale, Cragg, 2009, p. 128).

Basically it is being assumed that the relationship between business and IT is of interactive nature and the difference in scores will not impact business performance. Instead the product of the two variables is of critical importance. A higher product implies high alignment (Van Grembergen, & De Haes, 2009, p. 78).

2.2 The Profile Deviation Approach

This approach is based on two phases, which are defined by Van Grembergen, and De Haes (2009) as follows: First, an 'ideal alignment scenario' has to be deducted (from theory) and next, deviations from this ideal state are calculated" (Van Grembergen, & De Haes, 2009 p. 79).

Sabherwal and Chan defined three ideal IT strategies that plot best on specific business strategies (Van Grembergen, & De Haes, 2009, p.79). Business strategy is viewed in terms of three typologies; Defenders, Analysers and Prospectors as defined by Miles and Snow (Sabherwal, & Chan, 2001, p.11).

Fig.2. IS Strategy Profile of Defenders, Prospectors, and Analyzers (adapted from Sabherwal, Chan, 2001, p. 16)

This approach enables organisations to measure their distance against the ideal state according to their business strategy (Van Grembergen, & De Haes, 2009). Thus, the validity of the ideal status presented in this model is crucial for the value of this approach.

2.3 The Scoring Approach

This tool measures alignment by requiring both business and IT people to score major IT projects. This is to verify the level of alignment against a set of defined business and IT criteria. The information economics method by Benson and Parker is a typical scoring approach (Van Grembergen, & De Haes, 2009). "The information economics process includes assigning weighting factors to reflect how well the project satisfies a given factor as well as assigning points to each impact" (Cardinali, 1998, p. 90), which are summarised and accordingly ranked. Essentially, information economics takes into account the scores for the ROI and the non-tangibles, typically scored on a scale from 0 (no contribution) to 5 (high contribution).

2.4 The Maturity Model Approach

It is a scoring approach that permits the organisation to grade its position on a scale from 0 (non-existent) to 5 (optimised). The current situation is compared to the target situation and facilitates the organisation to benchmark itself against "best practices and standard guidelines" (Van Grembergen, & De Haes, 2009, p. 82). The company is able to identify gaps and to develop action plans to reach the aspired level of strategic alignment maturity (Van Grembergen, & De Haes, 2009, p.82).

To achieve different levels of maturity Luftman and Duffy have established two different models. Both models include criteria based on a variety of attributes. Basically both models provide a helpful tool to management when aligning business with IT (Van Grembergen, & De Haes, 2009, p.84).

3.0 Enablers and Inhibitors of Alignment

A lot of work which has been done to theorize alignment between business process and IT processes. Luftman and Brier used the strategic alignment model by Henderson and Venkatraman to study the alignment between the IT and Business processes. Given below the list of enablers and inhibitors (Luftman & Breir, 1999, p. 109):

Fig.3. Enablers and Inhibitors (adapted from Luftman & Brier, 1999, p. 109)

It is observed that both enablers and inhibitors incorporate a common theme. For example if an organisation's IT does not have support from senior executives, this element becomes an inhibitor to BIA. However if IT is supported by senior executive, the same element becomes an enabler to BIA.

4.0 Components of BIA

Although past research has recognised the importance of BIA, little work has been to transfer theoretical findings into practice. Henderson and Venkatraman' strategic model provides twelve components necessary for alignment. After a five year research Luftman and Brier have further modified this model as shown below:

Fig.4. The Twelve Components of Alignment (adapted from Luftman & Brier, 1999, p. 111)

For BIA to be successful it is necessary to achieve alignment between the above mentioned components.

5.0 Strategic Alignment as a Process

Once the organisation has measured its level of alignment with IT, it should take the following steps to align the twelve components identified earlier (Luftman & Brier, 1999):

5.1 Set the goals and establish a team

A cross functional team consisting of executives from major business units and IT should establish a clear direction for the organisation prior to making any decisions regarding technology. Involvement of IT is crucial and it is imperative that that all members of the team not only have a clear understanding of the business goals but are also in agreement with the goals.

5.2 Understanding the link between Business and IT

Organizations need to understand the present and future states of the each of the twelve alignment component shown in the model above. Everyone's involvement is necessary in this timely process. These discussions improve IT's understanding of business and vice versa thereby improving mutual understanding and resulting in better relationships across the organisation.

5.3 Analyzing and prioritizing gaps:

This involves looking at the gaps between the current and the desired future state of each component of the alignment. Through discussions gaps are identified and prioritised with those having a higher impact on business being given a higher priority.

5.4 Specify the actions:

Once the gap and projects required to reduce these gaps have been identified, steps must be taken to action the recommended projects. This involves focussing on the IT infrastructure and processes area of the strategic alignment model and answering questions such as (Luftman & Brier, 1999):

· Identifying what are the deliverables?

· Identifying what needs to be done to achieve these deliverables?

· Who is responsible for what aspect of the project?

· What are the risks involved in the project?

5.5 Choose and evaluate success criteria

This step involves a revisit of strategic goals and selection of appropriate measurement criteria to assess the implementation of project plans.

5.6 Sustaining IT alignment

IT alignment is a continuous process. Once the complex task of achieving BIA has been achieved steps must be taken to maintain alignment. Following have been identified as key factors for sustaining BIA (Luftman & Brier, 1999):

· Effective IT governance: An effective IT governance strategy plays an important role in prioritising IT initiatives and ensuring their effectiveness in achieving the organisation's goals.

· Clear communication between line managers and IT personnel: A communication plan is required to not only to develop a stronger relationship between line managers and IT personnel but also to ensure that the IT staffs understand the working of business units and vice versa.

· Soft Skills: Along with good technical skills it is also important to up skill IT professionals in soft skills such as active listening, marketing, negotiation etc.

6.0 Conclusion

Over the years role of IT in business has changed from being a utility to a strategic tool for supporting business strategies and achieving a sustainable competitive advantage over competitors. A key success factor is achieving and sustaining IT alignment. This ensures that both IT and business share the same vision and complement each other. Without Business-IT alignment, IT can quickly turn into a cost factor detrimental to business. Through appropriate steps one can measure the alignment in their organisations and identify the inhibitors of alignment. The six step process will further assist the organisation in changing those inhibitors to enablers of alignment. Business-IT alignment is a continuous process and steps must be taken to continuously review and sustain it.