Strategic Alignment of Business and It

Abstract

The transformation of organizations has been an ongoing debate for the last decades. The market context in which businesses occur has become highly dynamic and fast evolving. Information Technology is intrinsically dynamic as the technology renews in extremely short cycles, thus anticipating to the dynamism of the market context. The transformation of organizations is seen as a clear evolution towards integrating business models and Information Technology, engaging them together to respond to the dynamism in which events are happening. This paper discusses the Strategic Alignment Model and how to put it into perspective for enterprise optimization, providing several viewpoints on how to measure the readiness and maturity of such alignment inside enterprises.

MOTIVATION

Organizations are currently divided into two different domains: business and the supporting infrastructure (nowadays being Information Technology). Such division of both domains is a classic view that has been carried for several decades and it has naturally separated businesses from technology. In other words, Information Technology (IT) has been only seen as a set of tools to support business models and business strategies. [1]

Several researches point to the fact that this division hinders business processes optimizations in organizations and results in a less-efficient manner of performing actions as an enterprise. In fact, such researches analyses and study the outcomes of engaging business and IT, bringing them as close as possible, in order to deliver maximum quality results with maximum effectiveness and efficiency, while keeping competitive and strategic advantage [2].

STRATEGIC ALIGNMENT MODEL

The Strategic Alignment Model was first introduced by Henderson and Venktraman in the 1980's[2] and it proposes a balanced division inside the organization using four components: business strategy, IT strategy, organizational infrastructure and processes, and information systems (IS) infrastructure and processes. These four competences are depicted in figure 1, showing the strategic alignment model [3].

Fig. 1. Strategic Alignment Model [3]

The Strategic Alignment Model, represented in figure 1, proposes two building blocks: strategic fit and functional integration, working at the external and internal level of the organization, respectively [3]. The strategic fit is the vertical relationship of the business strategy with the IT strategy, showing the organization's performance at an external level; whereas the functional integration represents the horizontal relationships, extending the strategic fit across functional domains [2].

The Strategic Alignment model also proposes a linkage across different domains as well as an automation, where an internal balance should be found and prioritized. In classic views, either business or information technology were over-prioritised. The Strategic Alignment Model invites to find a perfect harmony across all domains and establish the balance in the middle of the diagram shown in figure 1 [3].

Accordingly, the concept of Strategic Alignment may be seen as the set of actions performed inside an organization in order to engage business and technology, giving them the same priority and using them both equally well to provide the right strategic fit. Such engagement is supported by a proper functional integration across functional domains inside the organization. [3]

STRATEGIC ALIGNMENT PERSPECTIVES

Identifying the initial domain pivot and perspective in order to fit the proper method for applying the strategic alignment framework, is a must when preparing for strategic alignment. Luftman, Lewis and Oldach list four strategic perspectives: [2]

1) Competitive potential perspective

2) Technology potential perspective

3) Service level perspective

4) Strategy execution perspective

The purpose is to study which perspective provides the fundamentals behind the application of the alignment framework. In each case, the perspective is the vehicle for identifying the correct approach, and it depicts the interaction between the three domains left. Please consider figure 2. [2]

Fig. 2. Strategic perspectives [2]

The competitive potential view may be seen as the IT strategy view, and analyses how technology influences new business strategies in order to create competitive advantage.

This perspective models how information technology can be put into practice to optimise the business strategy and result in a transformation in the organization's infrastructure, namely re-engineering. [2]

The technology potential focuses on establishing strategic fit for the information technology. In this view, IT is used to enable new business strategies. The service level, on the other line, view proposes a steady business and focuses on the ability to deliver information technology products and services to the organization. [2]

Last, the strategy execution perspective involves the relationships between business strategy, organizational infrastructure and processes, and IT infrastructure and processes. This view takes into account the fact that a business strategy must be present and guide both organizational design choices and define the structure of IT. Furthermore, the strategy execution perspective considers how to achieve strategic advantage in a top-down approach. [2]

MEASURING ALIGNMENT MATURITY

Strategic alignment may sound as a solid theoretical solution to the problem of enterprise transformation and engagement between business and information technology. However, the market is a real-world context and therefore organizations must seek