Improving Performance by Aligning it Assets With Business Objectives

Aligning IT with Business Objectives 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.

Memorandum July 23, 2014 Chief executive officer, XYZ Corporation, LLC Chief information officer, YXZ Corporation, LLC Subject: 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 into operational terms and initiatives that have clearly defined measurements for success.

By defining business objectives and measures, organizations create a basis for testing the effectiveness of their strategies" (p. 2). In addition, Osborn (2012) reports that, "An alignment strategy matches what an organization 'can do' versus what it 'might do'" (para. 6).

Some recent trends with respect to IT assets and business objectives include the following: Businesses are moving out of cost consolidation mode and into growth mode -- there is a re-emergence of growth-related IT projects; Information technology is being used to support more business transactions as opposed to generating more users -- more transactions equals more information and a move away from manual processes; So-called 'Green' business initiatives are aligned with the need for better power and cooling for IT systems -- server virtualization technologies and servers that make better use of existing IT infrastructure and address these issues are in demand; The infrastructure value of IT needs to be measured using better metric standards; there is a need to form better ways of measuring IT value in general; There are emerging changes in management thinking that recognize IT can be used to dynamically respond to changes in the business as they occur; There are emerging changes to IT vendor business models which are now more tailored and user-led (Bland, 2007, p.

55). Given the complexity of most IT systems, especially with larger organizations, it is essential that IT assets be aligned with business objectives in order to move a company from where it is to where it wants to be. In this regard, Kavanagh and Suppert (2007) note that, "Successful planning and evaluation of IT projects, as well as effective management of IT assets, is key to realizing value from the dollars invested in technology" (p. 25).

In some cases, companies even go overboard by strategizing the alignment of their IT assets with future business objectives that may or may not materialize. For example, according to Bland (2007): Many businesses attempt to build a 'bulletproof' IT infrastructure to cover future IT needs but if the new infrastructure does not support business [objectives], it is future proofing for its own sake. These problems commonly result from a lack of meaningful engagement between the IT vendor and the business and an inability to inter-translate IT and business concepts. (p.

55) In yet other cases, companies' business objectives are too vague or diffuse to develop corresponding strategies to align their IT assets appropriately (Bloomfield & Coombs, 2008). In addition, there is always the possibility that top management will deviate from the best strategy for aligning IT assets with organizational objectives (Bloomfield & Coombs, 2008). In this regard, Bloomfield and Coombs (2008) emphasize that, "Regardless of written plans, senior management maintains their freedom to react to events as they occur. The discrepancy between the explicit and implicit strategies leads to confusion for IT planners" (p. 27).

Clearly, although the process is not easy, there are some steps that organizational leaders can take to ensure that their IT assets are closely aligned with their business objectives, and these issues are discussed further below. Identifying Opportunities to Improve the Alignment of IT with Business Objectives One approach that has been used to good effect in helping companies develop timely business strategies to achieve organizational goals and identify requisite IT resources to facilitate the process is the use of the Balanced Scorecard Model (McGinn & Kudyba, 2002).

According to McGinn and Kudbya (2002), [The Balanced Scorecard Model] is a conceptual framework for translating an organization's strategic objectives into a set of performance indicators distributed among four perspectives: financial, customer, internal business processes, and learning and growth" (p. 107). The Balanced Scorecard Model is depicted graphically in Figure 1 below. Figure 1. The Balanced Scorecard Model Source: Adapted from Tatikoda & Tatikonda, 1998, p.

51 The Balanced Scorecard uses several metrics that are used to gauge an organization's progress with respect to its stated objectives; in addition, other metrics are used to evaluate the organization's progress towards long-term success (McGinn & Kudyba, 2002). In essence, the Balanced Scorecard Model provides a useful framework in which organizations can align their IT assets with their business objectives (McGinn & Kudyba, 2002). For instance, according to McGinn and Kudya (2002), "The Balanced Scorecard approach has been recognized as one of the top management techniques.

This strategic technique becomes an even more powerful tool when utilized in conjunction with software technology that supports business intelligence" (p. 107).

Using the Balanced Scorecard Model, the major design factors for aligning IT assets with business objectives including the following: Developing a methodology to facilitate bidirectional communication of corporate strategy from the top of the organization all the way down to each staff member and back up again; Creating the ability to emphasize organizational growth and value creation by other than traditional financial measures; Identifying lead and lag indicators that help measure the organization's performance and developing business intelligence that directly relate to those measures; and, Aligning each business function with enabling technologies to create a balance between business and technology (Rand, 2003, p.

3). In fact, one of the major benefits of using the Balanced Scorecard Model is the ability to clarify business objectives so that they can be more readily aligned with IT assets (McGinn & Kudyba, 2002). Further, the Balanced Scorecard Model can be used for both long and short-term business planning, as well as for companies of any size or type (Jalbert & Landry, 2003).

In addition, according to Fletcher and Smith (2004), "If properly implemented, [the Balanced Scorecard Model] is an excellent management framework to help managers track the many factors that influence performance" (p. 2).

Although every organization is unique in some fashion, some of the core components of an IT system include the following: Data Warehouses; Data Marts; Data Extraction Technology; Query and Reporting Software; Online analytical processing (OLAP); Data Mining/Quantitative Analysis/Expert Systems; Server mainframes; Personal computers needed to establish local area networks (LANs) and wide area networks (WANs), and, Internet-Related Technology for Web Deployment (Intranets and Extranets) (McGinn & Kudyba, 2002, p. 108).

As can be seen from this non-exhaustive list, an organization's IT assets comprise a wide range of hardware, some of which may not be taken into account by top management and other stakeholders when formulating business objectives.

Likewise, there are a number of IT software categories as well that comprise an organization's IT assets, including the following: Central data repository -- supports a core business application utilized for handling multiple business functions within an organization; Vertical applications -- software applications that relate only to a specific business function or process; Enterprise application integration -- facilitates corporate data exchange between multiple applications; Business process management -- internal workflow procedures used by an organization to accomplish a task; Collaboration -- when two or more entities communicate and work together in order to achieve a common goal or mission; Business intelligence -- the ability to convert data into knowledge; Internet-based technologies -- utilizing technologies and methodologies derived from the Internet in order to enhance or streamline business processes; Information technology infrastructure -- local- and wide-area networking components, including hardware and operating systems; and, Technology management -- tools and methodologies for deploying and supporting technology (Rand, 2003, p.

4). Using the foregoing IT assets as a basis, it is then possible for companies to align their IT assets with their business objectives (Rand, 2003). Moreover, by establishing business objective priorities, it will also be possible to improve the administration of IT assets in ways that facilitate project staffing, training and support (Rand, 2003). An important point made by Rand (2003) concerns the needs for all stakeholders to have their voices heard during the alignment process.

In this regard, Rand (2003) advises that, "With the central role that strategy plays in the success of an organization, as well as the increased importance of technology to business operations and customer care, information technology professionals must be involved in strategy development" (p. 5). Furthermore, the alignment process requires oversight and periodic evaluation to ensure that the alignment is achieving the desired outcomes. For example, Rand adds that, "Just as software programs that 'talk' easily to one another function best,.