Essay About Strategic Alignment Of Business And Information Technology

Strategic Alignment of Business and ItEssay Preview: Strategic Alignment of Business and ItReport this essayAbstractThe 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.

The Transition to the Enterprise Market: Businesses and the Transformation of Information Technology from Small to FirmIn 1975, when companies were looking to expand, the United States passed the Federal Communications Commission and its Universal Communications Act, respectively, establishing the new Commission for Information Technology and Information (CITIZ). The Information Technology Act established the CITIZ, and to this day, only two States—Washington and Vermont—have elected to provide a single agency with the authority to regulate, implement and operate IT, regardless of their jurisdiction. For more than 60 years, information technology has been viewed in terms of its status as a “system” and as a separate entity that can be leveraged through government agencies, public agencies and private actors. Yet in recent years, it has been perceived in many ways as a third or more-party system designed to operate information on its own.

The transition between information technology and enterprise has been viewed with a more general view of the role information technologies have played in increasing business. In 1979, a United States Department of Commerce report identified information technology as a major consumer market for the United States and defined it as “information technology that engages consumers in information-based, interactive and information-based business practices and provides businesses with the opportunity to access, manage information technology systems, manage information technology infrastructure, manage the activities and costs associated with information technology, and implement such technologies in a business model.” The report also recognized an emerging business model in which information technology is employed primarily for the primary dissemination of products, data, systems and services, and provides management and assistance to the public. For this, large-scale adoption of information technology has been the norm in the United States within the past 150 years.

The Globalization of Information TechnologyOver the past 200 years, the globalization of information technology has occurred with almost no exception. As the technology has proliferated and evolved and has increased in number and complexity, the global economy has become an important and pervasive driver of the growth of information technologies. For instance, the “globalization of computing” has increased the frequency and pace with which information technologies are accessed by people worldwide to communicate information and communications worldwide. An example of the worldwide shift in the information technology mix can be found in the emergence of large-scale Internet-connected systems. It is often argued that the information technology market has evolved to cover new markets and new systems in unprecedented ways. Although these markets have been highly interconnected and have become more integrated, the rapid adoption of information technology has not necessarily transformed the world economy. For instance, as a general trend in the world economy, the percentage of growth in the percentage of information systems and applications in industries as a percentage of GDP increased from around 16.5 percentage points in 1970 to 15.4 percentage points in 1985, and from 35.2 percent in 1970 to 50 percent in 1995 (Figure 1). The following table shows the trends in the percentage of data center applications and cloud operating systems from 1970 through 2005 for the United States, based on the data center application and cloud market data for the period 1977 through 2005 (Figure 1).

Figure 1: Percentage growth in the data center applications and cloud market data over 1977 through 2005 for a specific period: the United States, 1980 to 2007, the United Kingdom (2.9 billion business accounts), and the United States (2.6 billion business accounts).

Over this period more than 70 percent—or more than half—of business and public sector IT organizations were based on data center applications. However, data center application, cloud and data center operators were much more expensive to move over to the cloud. In some cases, their

The Transition to the Enterprise Market: Businesses and the Transformation of Information Technology from Small to FirmIn 1975, when companies were looking to expand, the United States passed the Federal Communications Commission and its Universal Communications Act, respectively, establishing the new Commission for Information Technology and Information (CITIZ). The Information Technology Act established the CITIZ, and to this day, only two States—Washington and Vermont—have elected to provide a single agency with the authority to regulate, implement and operate IT, regardless of their jurisdiction. For more than 60 years, information technology has been viewed in terms of its status as a “system” and as a separate entity that can be leveraged through government agencies, public agencies and private actors. Yet in recent years, it has been perceived in many ways as a third or more-party system designed to operate information on its own.

The transition between information technology and enterprise has been viewed with a more general view of the role information technologies have played in increasing business. In 1979, a United States Department of Commerce report identified information technology as a major consumer market for the United States and defined it as “information technology that engages consumers in information-based, interactive and information-based business practices and provides businesses with the opportunity to access, manage information technology systems, manage information technology infrastructure, manage the activities and costs associated with information technology, and implement such technologies in a business model.” The report also recognized an emerging business model in which information technology is employed primarily for the primary dissemination of products, data, systems and services, and provides management and assistance to the public. For this, large-scale adoption of information technology has been the norm in the United States within the past 150 years.

The Globalization of Information TechnologyOver the past 200 years, the globalization of information technology has occurred with almost no exception. As the technology has proliferated and evolved and has increased in number and complexity, the global economy has become an important and pervasive driver of the growth of information technologies. For instance, the “globalization of computing” has increased the frequency and pace with which information technologies are accessed by people worldwide to communicate information and communications worldwide. An example of the worldwide shift in the information technology mix can be found in the emergence of large-scale Internet-connected systems. It is often argued that the information technology market has evolved to cover new markets and new systems in unprecedented ways. Although these markets have been highly interconnected and have become more integrated, the rapid adoption of information technology has not necessarily transformed the world economy. For instance, as a general trend in the world economy, the percentage of growth in the percentage of information systems and applications in industries as a percentage of GDP increased from around 16.5 percentage points in 1970 to 15.4 percentage points in 1985, and from 35.2 percent in 1970 to 50 percent in 1995 (Figure 1). The following table shows the trends in the percentage of data center applications and cloud operating systems from 1970 through 2005 for the United States, based on the data center application and cloud market data for the period 1977 through 2005 (Figure 1).

Figure 1: Percentage growth in the data center applications and cloud market data over 1977 through 2005 for a specific period: the United States, 1980 to 2007, the United Kingdom (2.9 billion business accounts), and the United States (2.6 billion business accounts).

Over this period more than 70 percent—or more than half—of business and public sector IT organizations were based on data center applications. However, data center application, cloud and data center operators were much more expensive to move over to the cloud. In some cases, their

MOTIVATIONOrganizations 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 MODELThe Strategic Alignment Model was first introduced by Henderson and Venktraman in the 1980s[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 organizations 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 PERSPECTIVESIdentifying 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 perspective2) Technology potential perspective3) Service level perspective4) Strategy execution perspectiveThe 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 organizations 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 MATURITYStrategic 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