With the evolution of technology over the last 20 years, there has been numerous amounts of changes in the corporate world where almost every company has incorporated information technology (IT) functions and processes to help give them a competitive advantage. Innovation is a key aspect in the business world because it requires a lot of thinking outside of the box as well as utilising new technologies which have been released to help increase business performance, efficiency and many more benefits. Business and IT are two crucial areas when it comes to understanding how a business can operate and function. The significance of both these areas of knowledge can ensure sustainability for any organisation whether it be a small or large enterprise.
Business-IT alignment is the dynamic process in which an organisation is able to achieve their desired objectives by utilising information technology such as different systems with the organisation strategies. By implementing a process like this, it comes with various different benefits for the company such as increasing financial performance or marketplace competitiveness. Almost every organisation in today’s society have implemented this technique in to their firm which is known to have outstanding results on the long run and “crucial to the success of an enterprise” (Rouse, 2006).
Throughout this essay, I will be discussing about relevant, in-depth points on how business-IT alignment is important for an e-enterprise and the different ways in which this alignment can be achieved. This essay is split up in to different sections in which the literature review is where I will be discussing several different frameworks and models in relation to business-IT alignment. I will be using a broad range of sources such as books, articles, journals and websites to illustrate this essay.
Discussion of E-enterprise:
E-Enterprise is defined as the process that a company makes to ensure suitable alignment for their organisation, so they can gain a competitive advantage by integrating information technology and information systems to the business strategies within the organisation, and as a result, this could lead to a more effective output. The term ‘Enterprise’ is defined as a collection of organisations with a set
The journey of an E-Enterprise to integrate a technique like this in to their corporation would be a difficult task. Michael J. Earl has given an in-depth explanation on how to achieve this alignment within any business and he suggested that the empowerment of the individuals within the enterprise is a successful contributing factor to alignment. “The critical success factor, is to recruit, develop and empower people who have the skills to use information and act on it” (Earl, 2000). The concept of e-enterprise is to work with each other within the enterprise by communicating effectively. Moreover, it is based around a lot of decision making which inherits the concept of communicating across the enterprise. In any organisation, you can come across many different people who have different personalities and skills, however the environment/structure of the workplace is crucial to their commitment and with the change of business behaviour from the enterprise, they may feel uncomfortable.
According to Earl (2000), there is a long journey involved in the process of evolving the e-enterprise which is crucial for any organisation in this day and age to integrate this technique within their own firm. Figure 1 shows the journey needed for an e-enterprise to evolve.
Literature review:
Business-IT Alignment
The correlation between the alignment of IT services and business strategies is fundamental to ensure an efficient and effective business operation. The long-term effects of business-IT alignment (BIA) can have an overall impact on the enterprises elevation to success which includes an overall increase in the businesses performance as well as expanding profit margins, ability to improve risk control mechanisms and gain a competitive edge by utilizing their new technology. The core functionality of the alignment is to ensure that both the business strategy and IT functions are sharing common business-oriented goals.
Business strategy and IT is a successive approach to succour enterprises to run more smoothly, however to implement this technique in to an enterprise, it could result in many difficulties along the way to reach this final goal of accurate alignment between both areas. Both areas of management within an enterprise have to be interacting with one another to keep their alignment sustainable which is very difficult because both of these management teams have to have common goals between them to have an accurate alignment for the enterprise. The start-up costs for implementing new technology could be a potential problem for the enterprise, however it is known that the alignment process can help the enterprise in the long term. Due to an enterprises constant environment change, the concept alignment will need to adapt to the changes which is difficult to pursue. Another drawback would be the deficiency in work culture which is a huge factor to consider before implementing this technique in to the enterprise. Business strategy and IT are two different areas of business which could potentially result in a lack of unity and purpose. The idea of aligning a business is very complex than it sounds because a lot of factors have to be considered.
6-stages of IT growth
IT growth is forever evolving which has caused different companies to utilise this solution in to their business. There are 6 stages of IT growth where stage 1 is the initiation, and this was the idea of cost reduction due to the introduction of clerical operations. Stage 2 represents Expansion, and this indicates the centralised growth of business applications which causes long term efficiency. Stage 3 involves control and this is where the management team has to do a cost-benefit assessment to see whether their IT/IS systems are compatible for the business. The 4th stage is integration and this stage involves transition to achieve a more decision-making approach. The control of IT/IS systems becomes more under control as well as integrating formal planning. The 5th stage revolves around data administration and how the organisation can utilise their data to create new ideas through decision-making. At last, stage 6 focuses on the maturity of the growth where it involves business strategies to mix with the IT strategies to produce a synchronised alignment (Thakur, no date).
Figure 2. Strategic Alignment Model is a model which was created by Henderson and Venkatraman (1999). This is a widely-used model in most organisations today because it is a base of business and IT alignment theories. This model portrays a message for any organisation who utilizes this model and incorporates it in to their business by showing the importance of alignment within an enterprise. The purpose of this framework is to help organisations understand the value and importance of IT so that they can invest more in to IT to help align the business as a whole. To support this statement, the leverage an enterprise could have on IT would allow them to attain sustainable competitive advantage.
Within each quadrant of the strategic alignment model, there are three components in each section and all of them work together to achieve a form of alignment. Moreover, the links between each section shown in figure 2. Detailed Strategic Alignment Model are also very important for the alignment process. The vertical link is referred to as the ‘Strategic Fit’ and this linkage refers to the use of strategy to determine the infrastructure of the business. Furthermore, the second linkage is the function integration which refers directly to the alignment of the business strategy and IT (IT-Alignment, 2010).
The first quadrant is called Business Strategy and this section, you will have to analyse through a business scope which could include the products, the market, the customers etc. Distinctive competence is another feature to consider when analysing the business strategy. Additionally, the business governance is important because there needs to be a structure, work culture, processes, ethics etc. The second quadrant is referred to as Organisational Infrastructure & Processes. Within this section, it focuses on the management techniques used within the work environment, and administrative infrastructure such as the roles and relationships between the employees of the organisation to organise the skill sets and expertise by each employee. The third quadrant is about the technological scope of the organisation to see if their information systems are competent enough to give them competitive advantage. Information systems governance is also key within this quadrant because the organisation can ensure investments in IT are worthwhile to the business side. Likewise, IS governance can help mitigate the risks that are associated with IT systems. This quadrant is referred to as Information Systems Strategy or known as ‘IS strategy’. Lastly, the fourth quadrant involves the applications infrastructure such as network, database, communication etc., as well as the processes such as project management, IS methods for planning etc.
An example where the strategic alignment model was used is on the airline company called ‘Southwest Airlines’. Southwest airlines are an excellent example of a company which incorporated this technique in their organisation and as a result of this, in 2008, Southwest Airlines was the leading airline company in the industry. Southwest had a brand promise which was regulated by all the employees within the enterprise and as a result of this, an outstanding service was delivered to their customers which lead to an increase in customer satisfaction. “Staff morale is exceptionally high.” (Consulting, 2009). This statement shows that the company had trained their staff well through their management techniques and as a result employees felt more comfortable and appreciated which lead to a higher work rate. Southwest airlines now have the lowest operating-cost structure in the US domestic airline industry. This shows that the company underwent a successful alignment process in which they led on to be one of the most successful companies in its market. They clearly showed their business purpose and aligned it to the IT functions which caused an equilibrium between both areas. There are many factors which affects BIA such as work culture, business purposes, organisational structure, strategic goals etc. Implementing this technique in to an organisation would most likely result in a positive outcome for the business, because this technique requires a thorough analysis of the organisation to see what objectives need to be met to comply with the stakeholders e.g. customers.
COBIT framework is a business framework which was created by the ISACA for IT management and governance purposes. COBIT is an abbreviation for Control Objectives for Information and Related Technologies. This framework is widely used in the corporate world and it is known to be a successful framework which is in control of mitigating risks related with information technology. COBIT framework can help integrate and align the gaps between the control needs, technical issues and business requirements.
In the following image figure 3. COBIT Framework Principles, it shows the different principles involved within the core of COBIT 5 Framework. By exploiting these principles of the framework in to an organisation, it Is known to be a very effective technique to help better IT investments and decisions. Information Systems would be the solution for taking the first step of change to a more technological driven way of business. This would be the logical idea to do, to help give the company a more competitive advantage.
Within COBIT, there are various components which include the framework. This helps organise the objectives of IT governance and links business requirements. The next component would be the process descriptions and this is a reference model where the planning, building, running and monitoring of any IT systems/processes are implemented. Control objectives is another component which provides a full list of requirements which has been chosen by the management team to assess IT business control. The maturity models address the gaps between the areas of business. Management guidelines, in simple words is an effective management technique to inherit in which the responsibilities of analysing performance, agreeing on objectives etc. is complying with the management guidelines.
The first principle of the COBIT framework is the ‘Meeting the stakeholder’s needs’. This principle represents the value of the stakeholder to the enterprise by linking the enterprise objectives with the IT objectives. The second principle is referred to as ‘Covering the Enterprise End to End’. This principle symbolises the effective use of IT within the enterprise by converting the mentality of IT being cost to IT being an asset. The third principle involves applying a single integrated governance framework to ensure its optimal value from their IT assets. Number 4 of the COBIT principles is ‘Enabling a Holistic Approach’. This is about the GEIT which is an abbreviation for Governance of enterprise IT and this involves more of a holistic approach which takes in to consideration many components which are referred to as ‘Enablers’. The sole purpose of the enabler is to determine whether something would work or it if would not work. Within the COBIT Framework, there are seven different enablers to help improve the governance of enterprise IT. These seven enablers are principles, policies and frameworks, culture, processes, people and information. Finally, the last principle is called ‘separating governance from management’ and the principle represents the decision making, compliance and prioritisation involved when trying to meet the goals by analysing the stakeholders’ desires. This then gets analysed by the business and IT management who plan, run and monitor activities to create the alignment.
An example of a corporate company using this framework would be ‘ENTSO-E’. ENTSO-E are responsible for operating 42 Transmission System Operators (TSO) across Europe in 35 different countries. The COBIT framework was first implemented by this company in 2014 and 2 years later their analysis on the framework which aligned the IT department with the business department and the external consultants turned out to be a success. With this technique implanted in the company, they had found a “new way of working” (ISACA, 2016) through prioritising the processes and their development, as well as overcoming their practical issues. This proves that the company had gone through a successful alignment with their business and IT departments. As a result of this, there has been positive results back which makes this technique a success. The COBIT framework has proved to be a reasonable technique which can be embedded within the organisation. However, the challenges which
Conclusion:
The business executives within an organisation have to have good communication with the IT department managers in order for more adequate information being passed over and prevention of misleading information. The development of businesses in this day and age are increasing because of the new technological resources which companies have now decided to implement. Information systems is the key to having a structured and organised enterprise.
From the mass amounts of research which I had conducted, I had gathered a lot of information about companies who implement this technique in to their company. I had learnt that companies need to build their trust with one another and the opportunities that are given to them should be exploited. Business departments may not like to consider the IT departments attributes in which they could potentially merge together to bring an alignment. Communication is another big issue; the present consists of technology and therefore will have to run via the internet in order to be the threat against their competitors.
With the use of these models, companies can undergo a lot of changes to become the best at what they do. Alignment is a very important issue and it is seen as being in a dynamic state which is dependent on many factors such as relationships, communication etc. If the communication is not up to a high standard then this can result in external stakeholders being affected because of their needs not being met. IT and business people need to have a strong communication and relationship in order for the firm’s success to rise.
My learning experience throughout completing this essay has enabled me to grasp extra knowledge on the basics which we have learnt. Further reading has allowed me to gain extra knowledge about the corporate world and how it runs. By gaining the understanding of the importance of alignment within an organisation could benefit me in the future when working in the corporate world.
Finally, BIA can be achieved by using many different models to whatever fits your company best. Planning out objectives and corresponding with the different departments involved are a necessity in a successful business. Furthermore, work culture is major factor for alignment of business and IT. Each employee should feel comfortable enough to work in the environment and should have the ability to speak to another employee without hesitation.