August 29, 2011 Executive Technology Strategies ETS 11-08-20
Leadership Series: Strategic Planning
Strategies and Guidance for IT/Business Alignment
Senior Analyst: BJ Dooley
This is the eighth research note in a series that addresses the various elements of IT Leadership. Each month in 2011 a different element will be explored using research notes and webinars[1].
The ten Leadership elements are defined as follows:
· Service Management
· Compliance Management
· Operational management
· Portfolio Management
· Organizational Effectiveness
· Partner Management
· Metrics and Marketing
· Strategic Planning
· IT Governance
· Enterprise Leadership
For more detail on each element, reference research note – (ETS 10-12-02) Management - IT Leadership Pyramid Revisited.
Experture believes that IT/Business Alignment is of critical importance to ensuring that software and technology continues to meet the needs of real business processes in a cost effective manner. Under today’s turbulent technological and business conditions, it is more important than ever to seek flexible and rapidly applied solutions that are cost effective and suited to corporate tactical and strategic objectives.
Business Imperatives
· Businesses need to develop technology solutions that solve real problems and can be deployed quickly in order to meet the needs of a turbulent environment. This requires improved collaboration between business stakeholders and IT developers that is aided by emerging technologies.
· Recent developments in IT and in business organizations have fostered a stronger and more effective partnership between business and IT sectors, with input from areas such as Cloud IT, SOA, and Agile development matching more modular business organization. These new possibilities need to be understood and explored to ensure rapid response and enhanced competitiveness.
· Business-IT alignment remains relevant, and requires continuous adjustment to ensure that the needs of the business are always at the forefront of technology development, adoption and deployment.
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August 29, 2011 Executive Technology Strategies ETS 11-08-20
Overview
Alignment is concerned with how well business objectives are incorporated into IT practices and deliverables. Improved IT/Business alignment has been often sought, but difficult to achieve. Recent evolution in the data processing environment is making it possible to find a better solution.
IT/Business alignment is a broad vision, which has been debated endlessly since the 1960s. It embraces a wide range of areas, and, although other terminology has been suggested, the debate remains the same. The business environment continues to evolve, and as part of that evolution, the relationship between IT and business processes must also change. IT continues to grow in importance in every area of business, promoting efficiency, enabling e-business, and integrating different processes across the enterprise. The result is that the relationship between IT and business is constantly shifting, and it is important to refocus from time to time to ensure that requirements are adequately being met.
It is essential to have good business processes, mature management structures, and well-defined IT processes in place before alignment can be successful.
Historical Issues
IT/Business alignment has a long history in information technology, as increasing waves of technology have been introduced to facilitate and automate business processes. The struggle to make technology provide adequate and cost-effective solutions to real business problems began in the early days with development of monolithic business applications that required companies to adjust their processes to meet the needs of the application, rather than adjusting the application to meet the needs of business processes. The problem has continued in various forms as both business organization and IT have evolved. The issue is created by failures in communication and in a lack of adequate structures to match business requirements to the possibilities available from software solutions.
Changes over the past several years have been so great that some have questioned whether the term “alignment" still adequately reflects the relationship between business processes, and IT. Instead of alignment, many now speak of convergence, integration, or linkage.
But the central challenges remain.
IT professionals and business professionals tend to think differently from business executives and workers who need to use software. IT professionals tend to think in terms of process, while business professionals tend to think in terms of outcome. Processes may be engineering excellently, yet fail to deliver the optimal business result. IT technology is also constantly changing, while the basics of business operations tend to change slowly, if at all.
Current Trends
The relationship between business and IT is now changing in important ways as a host of new factors have entered the business environment, and as IT has become inextricably involved with business processes. Factors currently affecting alignment include business regulatory compliance, requirements for transparency and auditable processes; quality programs such as Six Sigma and ISO 9000; a growing need for business agility; plus a need to integrate with frameworks such as CoBit and ITIL. Among the factors which are changing the IT/business relationship are:
· Need for IT processes to incorporate and accommodate global sourcing, including Business Process Outsourcing (BPO). Growing need for outsourcing to be easily implemented, measured and managed;
· Need to ensure that IT processes and controls aid auditability of the organization, and are themselves auditable;
· Increasing concern over, and responsibility for, cost control in IT, including matching of new projects to business objectives and developing cost justification;
· Increasing responsibility to support compliance and security requirements. Many of these new requirements extend across the board but heavily involve IT;
· Need to continually improve productivity of individual workers and processes, becoming increasingly important in troubled economic times;
· Need to support an increasingly modular form of working, resulting from outsourcing, mergers, acquisitions and evolving business processes. This means, for IT, increased pressure on standardization;
· Need to contribute to development of new business models to meet the evolving needs of the organization; many of these new business models being a direct result of information technology.
IT is becoming increasingly integrated with business processes themselves, and this means that it needs to be better focused on strategic objectives.
Effects of Current IT Upon Alignment
Information Technology has undergone significant change over the past decade, with recent developments creating significant new impacts upon IT/Business alignment. Most changes have resulted in overall improvement as companies have focused upon the higher level goal of Enterprise Agility. Agility requires rapid response to changing business and technology requirements, and such a response requires improved alignment between technology and business.
Three of the most significant instances are Agile Development, Systems Oriented Architecture (SOA) and Cloud Computing. Each of these is now having a significant impact upon the relationship between IT and business, mainly in the direction of greater customizability, improved stakeholder input into the development process; and smaller, faster and more flexible software systems.
Agile Development
Agile development methodologies include eXtreme Programming, Scrum, Crystal and others. These methodologies were designed to create software that functions well, is built swiftly, and responds to real business needs. Agile development has business needs and dynamic change at its core. Software development cycles are brief (“Sprints”), and features to be implemented are agreed upon with stakeholders from the business side who help to direct development and set priorities. Key agile values, as expressed in the Agile Manifesto, are:
· Individuals and interactions are valued above processes and tools;
· Working software is valued above comprehensive documentation;
· Customer collaboration is valued above contract negotiation;
· Responding to change is valued above following a plan.
The Agile movement was developed in response to often ineffective large software development projects based upon a command and control (“waterfall”) model. Large projects were seen as subject to failure, impossible to change as customer needs shifted, and difficult to direct toward meeting real business needs or supporting existing processes.
Agile development has refocused development toward greater collaboration between business software users and developers in creating relevant, usable, and flexible software solutions.
SOA
Systems Oriented Architecture (SOA) has impacted IT/Business alignment in a positive way by making software development faster and more efficient, and by creating a mechanism by which non-IT personnel can assemble small applications that meet their current needs. SOA represents an evolution from middleware-based enterprise application integration. Services are provided over the network and integrated to form composite applications. SOA results in greater modularity and improvements in agility, flexibility, and rapidity of response to changes in the business environment. It is naturally aligned with Business Process Management (BPM), which manages and orchestrates processes from the business side. BPM and SOA can be integrated and supported by management software to provide a closer relationship between required business processes and the software used to support them.
Recent movements in SOA have included greater integration of user developed “mashups” and Web-based services supplied using REST rather than the more rigid development techniques of the original SOA concept (WS-* services--XML, WSDL, SOAP, and UDDI).
Cloud Computing and SaaS
Cloud IT has created a range of new ideas of services distribution and provisioning, which continue to impact software development and IT/Business alignment. Among these are:
· Effective and efficient access to applications through SaaS on an as-needed basis, establishing a lower cost for business response;
· Capability to easily deploy and test applications, making it possible to adjust services to business requirements;
· Growing availability of Cloud-based services that can be accessed through published API from SaaS sources;
· Access to a wide range of business applications and services that can be fitted to business process requirements;
· Increasing deployment of small mobile “apps” that access Cloud services is also changing how software is deployed.
Cloud services can be faster and more responsive to business needs, and incorporate elements of both SOA and Agile development. Rapidity of adaption to changing business environments is emerging as a critical need, and Cloud is a key enabler.
Continuum of Development
Software development today needs to support a range of projects and requirements, from enormous fixed development cycles for highly secure deployment of critical services down to rapid creation and assembly of individual services to create applications that immediate solve simple needs in a changing environment. There are now a wide range of development methodologies that might be deployed to meet specific business and organizational needs. It is increasingly important to consider a variety of development models to determine an appropriate fit between specific business needs and IT processes.
Software can be developed as large projects, incrementally, as a compilation of services (SOA), though small sprints (Agile), and with a variety of techniques for applying stakeholder expertise and oversight. In determining which development methodology to employ, it is important to focus constantly upon real business needs being served, efficiency, scalability, and cost-effectiveness. These objectives have always been a part of IT. In the current environment, however, there are many more ways of meeting them.
New Roles Supporting Alignment
As increasing numbers of tasks become integrated with IT, functional workers will also need to develop significant IT skills and in meeting the demands of their jobs. They, too, will need to collaborate with the IT department and follow the procedures that have been set down in IT, effectively creating a matrix management structure.
One of the issues in defining alignment is that IT organizations tend to vary in how they act and how business management perceives them. Sometimes, the IT organization is viewed as a utility, sometimes it's viewed as a supplier of services, and sometimes it is viewed as a partner in the growth of the business. Although most IT organizations would prefer to reach the third area, in reality, many function quite well in the top two. Alignment requires IT to meet the needs of business, and sometimes business expectations extend only to utility functions in continuing to provide a base level of services. This may indeed be satisfactory for certain types of businesses, which are at the level of maturity that does not require wide-scale innovation or tremendous growth. The alignment process must include a definition of the role of IT within the organization, and development of proven capabilities to support that role. That definition is in many cases crucial, as it will have an impact upon costs, hiring and outsourcing as well as flexibility in response to changing business conditions.
Implementation and the Future
The best way to address alignment is to take a careful look at processes and communications and evaluate them from a business perspective. This means maintenance of the effective communication between IT and business managers, ensuring an effective IT governance process is in place, measuring IT value and keeping IT costs contained, developing partnerships between business units and IT, setting up an effective IT infrastructure and ensure it is operating efficiently. Good communication is absolutely essential.
Focusing upon alignment issues alone can create new difficulties. This has been pointed out in a 2007 study from MIT Sloan Management Review entitled “Avoiding the Alignment Trap in Information Technology". The study identified a state where a company aligns a poorly performing IT organization to the correct business objectives, resulting in a situation where IT costs continue to rise and business goals continue to remain unmet. Companies in the “alignment trap” attempt to create good IT policies at the same time as they are aligning IT with business. This can result in tremendous inefficiencies and is likely to be doomed to failure. Companies doing this performed even worse than those having good IT processes, but poor alignment with the business.
It is important to ensure there is a clearly defined IT strategy that supports real company objectives. Establishing an IT steering committee is generally advisable to ensure alignment issues are addressed. IT liaison roles can be created in business units to better represent issues. Finally, it is important to ensure that good processes are in place for ensuring business requests are accepted, managed, and acted upon.
Summary
Alignment between IT and business is a long-standing concern that has existed since the earliest days of computing. Lack of alignment has resulted in enormous and extremely costly development efforts, which failed to result in significant business benefits. Significant process has been made in recent years, however, as development has become more agile and better focused upon business objectives and meeting the needs of stakeholders.