Aligning Business and Technology: Gartner’s View

IT Department Responsibility for IT Strategy
Some IT departments tend to become enthralled with the latest emerging technologies, but they need to know which technologies are the right ones to invest in. IT departments must understand and accept that their ultimate success is achieving business process change, and setting the stage for the ability to accomplish that by building an efficient IT infrastructure. It is common to believe IT’s job is done when the new system is up and operational. However, IT staff must accept joint responsibility with business executives to actually achieve a change in the business processes that support the enterprise.

Business’ Responsibility for IT Strategy
Business strategies are often stated in simple, targeted statements, often including value statements such as employee productivity or customer satisfaction. It’s far better for the business unit to select key areas for attention and develop concrete objectives. For example, if cost reduction is a goal, how is that to be achieved — via fewer employees, more productive employees, better use of capital equipment, better buying, less waste or fewer errors? Only at this level can the IT staff begin to understand the opportunities and determine the appropriate IT investments.

Building Joint Goals and Objectives
To be most effective in building joint goals and objectives, business units and IT departments must create a joint planning process and meet regularly to define business needs and identify technology options. Initiatives for action and investment must come from both spheres. The ideal is to find the technology that helps fix a business problem (such as speech recognition cutting the costs of the call center) or enable a new business process. When the IT investments are agreed upon jointly, then there can be a true sense of alignment and value from IT.

Measuring Performance
A useful perspective for considering strategic investment planning is that of the applications portfolio, which is a type of portfolio management. In this case, the determinant for classifying applications is the degree to which an application contributes to superior enterprise performance. The accompanying sidebar entitled “Measuring Performance” further explores this important topic.

Focus on Business Performance Improvements
It is important for IT departments to take the initiative with business units, opening a discussion of needs and strategy. The IT department must pursue its customers and identify not only areas of business importance, but the attendant devilish details. The point is to identify and appeal to stakeholders’ personal measures of interest. It’s vital at this stage to talk business, not technology. When business unit managers have no strategy and cannot easily develop one, find out what methods they use for evaluation or what measures they care about, and watch for IT intersections.

Utilize the Relationship Manager Role
The concept of the relationship manager has gained substantial popularity during the last few years within midsize businesses. The relationship manager should focus on 1) learning about the business unit, 2) helping build awareness (including limitations) of IT to the business unit, and 3) developing proposals for IT investments that will benefit the business unit. It is also the relationship manager’s job to compare the needs and proposals from other relationship managers so that common needs and sharing can be identified. This job is diminished if the relationship manager only provides technical support or becomes the project overseer for IT projects under way.

“Strategic Imperative: Form an investment council to make funding decisions and periodically review the IT portfolio.”

Success Factor: Governance and Clear Accountabilities
An investment council is a decision-making and oversight group, comprised of business and functional heads, that evaluates, prioritizes and selects major initiatives, allocates resources and reviews performance. Council membership typically includes the CIO, COO, CFO or financial controller, strategic planner and the heads of business units.

Business Units Cannot Abdicate Responsibilities
Business units must recognize that adding applications typically demands corresponding infrastructure that must be funded concurrently. It is common for more attention to be given to applications needing funding in order to satisfy urgent business or competitive needs, but to give no consideration to the corresponding requirements for infrastructure. What is far better is for the business unit to anticipate the types of applications and services it will need so that infrastructure can be built in advance. This means that there may be periods of unused capacity — whch is part of doing business.

Identifying Ownership
Because there is a broad array of potential IT projects, the issue of ownership of these projects must be tailored to the situation. Some projects are better off with business unit ownership; others with IT ownership. The share of the total budget allocated to each defined project class (BU ownership, IT ownership) is important to track.

A Typical Conflict in Ownership: Retiring Obsolete Systems
A test case for ownership involves the retirement of legacy or obsolescent IT systems. Who should be in charge? Resolution must be accomplished on a joint "business case" basis. The IT department should be able to develop several options to consider — rewrite, replace with a package, etc. For decentralized operations, motivations must be put into place to stimulate change. It is important to regularly identify obsolescent systems that are candidates for retiring and resolve them.

Key Performance Indicators for IT Departments
When the ownership issue is fully resolved and maintained between the business unit and the IT department in a midsize business, the benefits can be substantial. If, in the opinion of the business unit managers, the IT department does make a substantial contribution to the achievement of their business unit objectives, there is a high likelihood that the enterprise will perform above the average of its industry (this is based on extensive field research from CogniTech Services).

To gain that position, the most-critical element is joint interactive planning between business and IT. The IT side must accept the need to approach the business unit to explore business strategy in the business unit terms, and the business unit must accept the need to develop some degree of process strategies, initiatives and objectives. Furthermore, the business unit must accept the complexity and uncertainty regarding future IT investment estimates, and likewise comprehend the urgency of needs forecasting and building infrastructure as foundation.

Action Item: Put into place a formal process to measure effectiveness and strive to increase it.