Companies of all sizes and types are faced with the challenges that are involved in optimizing the use of their information technology (IT) resources by aligning these assets with their business objectives, but many companies are finding the process more challenging than was first believed. In some cases, the business objectives are too nebulous to develop appropriate IT support, while in other cases, top management may step in and change the organization's response in ways that preclude a firm alignment between IT assets and business objectives. Absent a careful and thoughtful alignment between IT assets and business objectives, companies run the risk of lost productivity, increased costs and diminished profitability. This study provides a review of the relevant peer-reviewed and scholarly literature concerning the need to align IT assets with business objectives, including a background and overview as well as steps that companies can take to improve the alignment between their IT resources and their business objectives. Finally, a summary of the research and important findings concerning these issues are presented in the study's conclusion.
July 23, 2014
Chief executive officer, XYZ Corporation, LLC
Chief information officer, YXZ Corporation, LLC
Aligning IT with XYZ's Business Objectives
Background and Overview
In many organizations, there is a dramatic disconnect between business objectives and their information technology (IT) assets. On the one hand, most business leaders are familiar with their business objectives. For instance, according to Bland (2007), "For any manager, general business objectives are pretty much a no-brainer: profitability (or sustainability), customer satisfaction, staff satisfaction, manageable growth, perhaps community or charity involvement, and saleability" (p. 55). On the other hand, there remains far less knowledge and expertise concerning how best to align an organization's IT assets with their business objectives. In this regard, Bland (2007) emphasizes that, "It's in the attempt to achieve these goals that information technology grabs the spotlight; harnessed in the right place and at the right time, significant business goals can be realized through IT" (p. 55).
In reality, most companies today already have the IT infrastructure and business planning resources in place to effect meaningful alignment between IT assets and business objectives. For instance, Rand (2003) reports that, "While most associations today have either a strategic or operating plan that identifies business objectives, many of these plans are still missing a few key components: the enabling technologies that are required to support each of these initiatives, established performance metrics, and the built-in business intelligence to track performance" (p. 5). These shortcomings are not necessarily the fault of the IT department, but rather reflect a lack of top management coordination with these providers. In this regard, Rand (2003) points out that, "The lack of these elements doesn't mean that the IT department is not doing its job and doesn't have a strategy to implement its technology initiatives. What this scenario really indicates is that the overall strategic plan and the IT strategic plan are not aligned" (p. 5).
Despite these constraints, information technology is widely recognized as an essential asset, and that the effective management of IT resources is increasingly important to businesses today (Karrukh & Fraser, 2009). For example, Rang (2003) reports that, "With the importance that technology plays in helping organizations meet their objectives, it makes sense for the information technology (IT) plan and the overall strategic plan to be in alignment" (p. 1). In many cases, though, IT assets and business objectives remain disconnected (Rang, 2003). The implications of this disconnect between IT assets and business objectives is profound, and include diminished productivity, fragmented work, and redundant efforts (Rang, 2003).
As applied to information technology, the term "alignment" is relatively recent in origin; however, the notion of aligning strategic business objectives with other business operations has a long history (Hartung & Reich, 2008). For instance, Hartung and Reich (2008) report that, "Business executives are familiar with the idea that alignment should exist between objectives and other functions such as marketing and finance" (p. 285). According to Osborn (2012), aligning IT assets with business objectives involves "creating and managing a business driven IT organization for which the primary focus is implementing information oriented solutions that are most important to meeting the business objectives of the enterprise" (para. 2).
However it is defined, aligning IT with business objectives is an essential element in developing and sustaining a competitive advantage today (Benko & McFarlan, 2009). In this regard, Benko and McFarland emphasize that, "Objectives include developing mind-sets necessary to prosper on the information frontier. It is crucial to focus on optimizing the business, in large part by better harnessing the power of the business technology investment." (p. 59). Despite the importance of this alignment, there are far too many companies that have failed to optimize their IT assets by aligning them with their business objectives for a number of reasons, including the following:
IT organizations do not have a clear understanding of what is important to the business;
The value of IT is not understood by business executives (and some IT executives);
Opportunities to use information technology are not identified, authorized, prioritized, and implemented, based on importance to meeting business objectives;
The business does not participate, from an enterprise-wide perspective, in decisions regarding IT direction and priorities (Osborn, 2012, para. 3).
Notwithstanding the challenges that are involved, there are a number of desirable outcomes that can be achieved by aligning IT resources and business objectives, including the following:
Ensure that all IT activities contribute to the objectives of the business;
Encourage executive business management to become continuously involved in plans and decisions regarding the use of information technology;
Position the IT organization to best address the needs of the business;
Create a customer focused culture in the IT organization; and,
Enhance the awareness of the value of IT to the business (Osborn, 2012, para. 4).
Likewise, Hartung and Reich (2008) underscore the need for carefully and thoughtfully aligning IT with business objectives. According to Hartung and Reich (2008), "The IT direction within an organization must be aligned with the overall business direction. If the IT department is allowed to set its own direction and develop or purchase technology without reference to the overall business plan, a high likelihood exists for the wasting of resources, and the loss of any strategic advantage" (p. 286). In other words, even the most well-intentioned and up-to-date IT department will be unable to support the organization's objectives unless and until they know what these objectives are and how they can best provide the IT support that is required in order to achieve them. For example, Farrukh and Fraser (2009) report that, "The lack of a systematic approach to managing technology hampers many companies in their drive for improved organizational effectiveness" (p. 39). Indeed, the research to date consistently confirms that aligning the IT function with business objectives represents a high priority for management at companies of all sizes and types (Hartung & Reich, 2008).
Given the enormous amount of resources that have been invested in IT systems over the years, it is vitally important that organizations optimize their use in achieving business objectives. Many companies have failed to realize the full potential of their IT resources because of faulty planning and implementation. In this regard, Kavanagh and Suppert (2007) report that, "In many instances the failure lies not with the technologies themselves, but rather with the implementation of these technologies. The successful implementation of an IT solution depends not only on the technical installation, but also on the successful integration of that technology with business processes and the behaviors of employees" (p. 25).
Larger organizations in particular are challenging to align business objectives with IT resources because these resources are frequently diverse and fragmented across the overall enterprise (Farrukh & Fraser, 2009). In many cases, IT requirements are channeled according to existing requirements with little or no thought for how these resources should be organized and directed in the future to support the organization's objectives (Farrukh & Fraser, 2009). An IT initiative at Glaxo Pharmaceuticals that helped to align business objectives with the company's information technology resources to facilitate new product development was guided by the following principles:
A single global process aligning functional activities around key decisions and deliverables;
Clear accountabilities and objectives;
Measures focusing activity and behavior on business needs;
Better sharing of knowledge;
Line functions and new product development organization jointly responsible for delivery of robust products and processes;
People and teams working together as a single entity with shared goals (Farrukh & Fraser, 2009).
Beyond the foregoing initiative, other companies have also realized significant success in recent years in aligning their information technology with their business objectives. In this context, business strategies can be defined as "plans of action carried out tactically to achieve a business objective" and "business objectives" can be defined as "a desired result" while strategy is "a plan for getting there" (McGinn & Kudyba, 2002, p. 106). For instance, according to Rand (2003), "Business objectives translate strategic themes…