Avoiding the Alignment Trap in Information Technology

Avoiding the Alignment Trap in Information Technology

Executive Summary

IT “alignment trap” occurs when the organization’s IT functions are correctly aligned with the business strategy and yet still fail to accomplish the business objectives. This case study covers information technology of large companies using technological tools to streamline their business process allowing them to take advantage of economy of scales. The study uncovered many large companies have ineffective IT capabilities and suggested ways to accomplish effectiveness. IT needs to be both highly aligned with overall business strategy objectives and be highly effecting in achieving those goals. Companies that have achieved alignment and efficiency and now is on the process of enabling growth through IT, their movement is a continuing effort and not a one-time process.

Current Situation

The authors of this article conducted a survey of 500 senior business and technology world-wide. The study suggested four patterns that companies are currently facing. It mostly reflects ineffectiveness in bringing alignment with IT and the business objectives.

1) “Alignment Trap”

a. 11% of respondents

b. High IT alignment to business objectives, low efficacy in completing IT projects

c. High IT cost, lowest revenue growth

2) “Maintenance Zone”

a. 74% of respondents

b. Low IT alignment to business objectives, low efficacy in completing IT projects

c. Average IT cost, below average in revenue growth

3) “IT-enabled growth”

a. 7% of respondents

b. High IT alignment to business growth, high efficacy in completing IT projects

c. Below average IT cost, very high in revenue growth

4) “Well-Oiled IT”

a. 8% of respondents

b. Low IT alignment to business objectives, high efficacy in completing IT projects

c. Low IT cost, above average in revenue growth

Organizations that focus on aligning IT strategy with business strategy can gain more competitive advantage than those who do not. As they try to incorporate new technological advances into to each department unit in the organization, they stand a better chance in surpassing their competitors. When IT department knows the organization’s goals and learns how each unit works and its needs, they will know how IT fits in the overall business plan and will be able to measure its progress on the way to its goals, and make better decision.

However, the survey revealed that 85% of the respondents reported that their IT capabilities were not highly effective and 11% of that is very aligned with their business objectives. As organizations try to align their business goals with IT, they get stuck in maintaining their current infrastructure and not focusing on growth. IT is being trap in aligning the business goals and IT goals. This results in complexity as IT becomes too focused on meeting individual solutions leaving redundant overlapping systems.

Criteria

In order for a company to be part of “IT-enabled growth” sector, three criteria were identified by the study to achieve highly effective IT projects. IT should invest in effectiveness of the department by emphasizing simplicity, “rightsourcing”, and creating end-to-end accountability.

Simplicity. Simplicity should be emphasized. IT should reduce complexity by standardizing infrastructures then implementing it companywide. Complexity happens when companies choose a much quicker and cheaper way to address individual units immediately rather than creating a standardized infrastructure and eliminating legacy systems. Simplifying the IT infrastructures requires a huge investment of time and money, however the return will be sufficient over time as long as simplification is being maintained.

“Rightsourcing”. The article discusses finding and choosing the right sources of functions. Businesses have option to insource or outsource IT projects. It is important to determined which project solutions should be kept and maintained in-house to meet the business objectives and become a source of competitive advantage while outsourcing non vital or routine IT functions.

End-to-end accountability. Someone needs to be held accountable in delivering results on the and on budget. There should be a well-defined accountability for decisions and it should be well understood. Also, clear escalation paths for issue resolutions must be defined. This will institutionalize good practice through organizing activities in processes and promote transparency.

Alternatives and Recommendation

If a company is placed under the “Alignment Trap” sector, there are some alternative paths to get out of this state. First alternative is to place emphasis on increasing effectiveness of IT solutions. This involves standardization of systems and eliminating complexity by company-wide