Wednesday, January 15, 2020
IT Strategy and the Overall Business Strategy Essay
I-                 Introduction Business strategies were basically developed as weapons in the competition. However, with the rapid change in business environment, competition roles have changed forcing companies to redefine their way in order to compete. With the evolved role of IT, organizations started to think to use IT as a strategic weapon either as a competitive advantage or even as an enabler for growth. However, unfortunately IT solely was not enough to take that role. So, organizations needed to rethink and reinvent new management or business best practices in order to maximize the obtained IT value. As a result, organizations adopted best practices such as IT business alignment to align IT with their business strategic goals in order to survive and succeed in the competition. The aim of this paper is to determine whether an IT strategy focused on maintaining a cutting-edge position is the most effective way to support any kind of overall business strategy or not. The main hypotheses of the research are that (1) IT strategy focused on maintaining a cutting-edge technology position isn’t enough (or isn’t the most effective way) to support the overall business strategy because (2) it has to be aligned with the overall business strategy. The paper first of all defines the term â€Å"IT business alignment†, then analyzes the current situation, and finally it ends with a conclusion. II-             Definitions Before analyzing the current situation, it is necessary to define an important term such as â€Å"IT Business Alignment†. Tapia, R. S. (2006) gives a simple straight-to-the-point definition for the term ‘IT Business alignment’ â€Å"the problem of matching services offered by IT with the requirements of the business†. (p.1) III-          Situation Analysis In order to test the research hypotheses or to prove that an IT strategy focused on maintaining a cutting-edge technology position is not the most effective way to support any kind of overall business strategy, this section will analyze the current situation of IT projects and the relationship with their business strategic goals and requirement. 1.     IT projects fail to deliver a value Research showed that the gap between IT and business strategic goals still significantly exists. A significant percentage of IT projects fail to deliver a value as shown in figure (1). According to Needmuchwala, A. A., [2008], â€Å"41% of IT projects failed to deliver the expected value†. And he presented another interesting fact such as: â€Å"more than  ¼ of IT projects were canceled†(p.3) not to mention that â€Å"only 11% of organizations consider technology as a strategic weapon†(p.3) Figure (1): Failure types of IT projects (Sample size: 800 IT managers in 8 countries) Source: Dynamic Markets Limited (2007). IT Projects: Experience certainty (cited in Needmuchwala, A. A., [2008]. Evolving IT from ‘Running the Business’ to ‘Changing the Business†)            Another survey conducted by Shpilberg, D. & Berez, S. & Puryear, R. & Shah, A. (2007) showed that a hug percentage of IT projects (three-quarters of companies as shown in figure: 2) â€Å"failed to deliver as expected and drifted in the ‘maintenance zone’ where IT projects were disconnected from the overall strategic goals and objectives’. (p.52) Whereas the 11% companies in the alignment trap shown in this survey even failed to deliver results on time or on budget and spent 13% more than the average and had 14% lower revenue growth.†(p.52) Figure (2): IT alignment Survey results (Sample size: more than 500 senior and IT executives worldwide) Source: Shpilberg, D. & Berez, S. & Puryear, R. & Shah, A. (2007). Avoiding the Alignment Trap in Information Technology            Now, the current situation tells us that IT strategies focused only on maintaining cutting-edge technology position, away from business strategy, are not the effective way to support the overall business strategy. Another way to prove that is to prove that the strategic alignment between IT strategy and business strategy is the effective way to support the overall business strategy and to deliver a business value. 2.     IT Business alignment proved to deliver value 2.1 The Need for Strategic Alignment Before mentioning any facts about IT business alignment, Figure (3) shows levels of relationship between IT and business strategy and the value offered in each alignment level. These development stages were suggested by Wyatt-Haines, R. (2007) and are chosen here to explain the necessity of the engagement between IT and business strategy. Facts show that â€Å"many IT functions fail to deliver even at the first basic level ‘following the business’†(Wyatt-Haines, R., 2007, p.6) and this is obviously happens when IT simply fails to understand ‘business needs’ or in another word, the basic engagement with business strategy. Figure (3): Levels of Relationship Between IT and Business Strategy Relationship with business IT Development Stages (Levels of Alignment) 1. Following 2. Enabling 3. Leading Goals/Functions of IT in each development stage/ alignment level Reacts to business needs Maximizing value  predicting, resourcing priorities  Extremely aligned, a key player in leading thinking and planning Relationship with business strategy  Understanding of business needs Understanding of business strategy Understanding of business environment Business Results/Value (Alignment Impact) Delivering value Strategic success Creating strategic opportunities  Source: Development Stages (Following-Enabling-Leading) were adopted from: Wyatt-Haines, R. (2007). Leadership Impact Through IT  Also, Jahnke, A. (2004) assured that â€Å"the full participation and engagement of the business is the only guarantee to turn IT capabilities into business benefits†. So, the strategic alignment in this case is considered to be a necessity not a luxury. Now, after realizing the fact that IT alignment is a necessity to obtain a business value, it’s time to analyze the IT business alignment current situation. First of all, research findings showed that â€Å"management practices such as strategic alignment contributes to higher levels of IT business value†. (Tallon, P. P. & Kraemer, K. L. & Gurbaxani, V., 2001, p.1: Sample size: 304 business executives worldwide). Also, according to CIO update (2004), â€Å"96% of IT executives predict a positive impact of aligning IT strategy with the corporate strategy†. (As shown in figure: 4) 2.2 The ROI or the value of the Alignment To make sure that IT business alignment is an effective way to support the business strategy, this section also will focus on the situation of the successfully aligned companies to make sure that the strategic alignment enables companies to obtain a value or ROI. First, Holmes, A. (2007) found these companies who succeeded in aligning IT with the business strategy generated â€Å"a new revenue stream more than twice as often as other companies who said they were not aligned†. Figure (4): IT alignment survey results (Impact and Challenges) Source: CIO update (2004). Aligning IT & Business Strategies Still Elusive Also, the survey –mentioned before- conducted by Shpilberg, D. & Berez, S. & Puryear, R. & Shah, A. (2007) showed that the successfully highly aligned highly effective companies (7% of respondents as shown in figure 2) â€Å"recorded a compound annual growth rate –over three years- 35% higher than the survey average†. (p.53) These companies successfully -as the authors described them- â€Å"have put IT where it belongs ‘at the heart of the business processes’ that define organization’s position in business environment or the marketplace†. (p.58) So, IT in these companies didn’t focus on the cutting-edge technology position but it focused on how to support the business strategic position by aligning IT strategy with the overall business strategy. IV-          Conclusion Now, after analyzing the current situation of IT projects, it is obvious that an IT strategy focused only on maintaining a cutting-edge technology position is not enough (or not the most effective way) to support any kind of overall business strategy, because facts say that IT disconnected and isolated strategies failed to support business overall strategies and even became a heavy burden on their organizations. On the other hand, aligned IT strategies proved to deliver a value and this value differs and are maximized depending on the engagement level with business strategy. In another word, the first success factor is to strategically align IT with the business goals and requirements meaning to support the business strategic position and not the cutting-edge technology position. Finally –upon these findings- the crime –as described by Jahnke, A. (2004) is the lack of alignment because â€Å"the lack of alignment represents a waste of money, a waste of effort, and wasted opportunities.†References CIO update (2004). Aligning IT & Business Strategies Still Elusive. CIO. Retrieved April 29, 2008 from http://www.cioupdate.com/insights/article.php/3328551 Holmes, A. (2007). The ROI of Alignment. CIO. Retrieved April 29, 2008 from http://www.cio.com/article/27969/The_ROI_of_Alignment/ Jahnke, A. (2004). Why is Business-IT alignment So Difficult?. CIO. Retrieved April 29, 2008 from http://www.cio.com/article/32322 Needmuchwala, A. A. [2008]. Evolving IT from ‘Running the Business’ to ‘Changing the Business†. Retrieved April 29, 2008 from http://www.tcs.com/SiteCollectionDocuments/White%20Papers/DEWP_05.pdf Shpilberg, D. & Berez, S. & Puryear, R. & Shah, A. (2007). Avoiding the Alignment Trap in Information Technology. MIT Sloan Management Review, Fall 2007, 49(1) pp. 51-58. Retrieved April 29, 2008 from http://sloanreview.mit.edu/wsj/insight/pdfs/49102.pdf Tallon, P. P. & Kraemer, K. L. & Gurbaxani, V. (2001). Executives’ Perceptions of the Business Value of Information Technology: A process-oriented approach. Journal of Management Information Systems, 16(4), 145-174. Retrieved April 23, 2008 from http://repositories.cdlib.org/cgi/viewcontent.cgi?article=1057&context=crito Tapia, R. S. (2006). A Value-Based Maturity Model for IT Alignment in Networked Businesses, Netherlands. Retrieved April 29, 2008 from http://eprints.eemcs.utwente.nl/2778/01/Subprojectproposal.pdf Wyatt-Haines, R. (2007), Leadership Impact Through IT, Business Leadership Review IV:IV, October 2007. Retrieved April 29, 2008 from  http://mbaguide.mbaworld.com/downloadblrarticle/1047/index.htm
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