1. ALIGNING IT WITH TIE BUSINESS STRATEGY7 ASSESSING IT/BUSINESS ALIGNMENTJerry LuftmanAlignment is the perennial business chart-topper on top-ten lists of IT issues. What foliows isa methodology developed by the author for assessing a companys alignment. Modeled afterthe Capability Maturity Model developed by Carnegie Mellons Software Engineering Institute,but focused on a more strategic set of business practices, this tool has been successfullytested at more than 50 Global 2000 companies and is currently the subject of a benchmaricingstudy sponsored by the Society for Information Management and The Conference Board. Theprimary objective of the assessment is to identify specific recommendations for improving thealignment of IT and the business.ILIGN1MENT IS THE PERENNIAL BtJSLNESS U chart-topper on top-ten lists of IT issues. Educating line management on technolo-ALIGNMENT CATEGORIESThe tool has sLx IT-business alignment crit:eria,or maturity categories, that are included in gys possibilities and limitations is diffi- each assessment:cult; so is setting IT priorities for projects,developing resources and skills, and integrat-L Communications Maturitying systems with corporate strategy. It is even 2. Competency/Value Measurements Maturitytougher to keep business and IT aligned as3. Covernance Maturitybusiness strategies and technology evolve.4. Partnership MaturityThere is no silver-bullet solution, but achieving 5. Technology Scope Maturityalignment is possible. A decade of research has 6. Skills Maturitvfound that the key is building the right relation-Each maturity category is discussed below. Aships and processes, and pioviding the neces- tist of specific practices for each of the sixsary trainiing.alignment criteria can be found in Exhibit 1.What follows is a methodology developedby the author for assessing a companys align-ment. Modeled after the Capability Maturity Communications MaturityModel developed by Carnegie Mellons Soft- Effective exchange of ideas and a clear under-ware Engineering Institute, but focused on astanding of what it takes to ensure successfulmore strategic set of business practices, thisstrategies are high on the list of enablers antd in-tool has been successfully tested at more thanhibitors to alignment. Too often there is little50 G;lobal 2000 companies and is currently thebusiness awareness on the part of IT or little IT ,JERRY LUFTMAIN issubject of a benchmarking study sponsored by a professorat the Howe appreciation on the part of the business. (iiven School of Technology the Society for Information Management andthe dynamic environment in which most orga- Management atThe Conference Board. The primary objectiveof the assessment is to identify specific recom-nizations find themselves, ensuring ongoing Stevens Institute of Technology inmendations for improving the alignment of ITknowledge sharing across organizations is par- hIoboken, New Jersey.and the business. amount.:N FO RM AT; O NSY ST E MY S MAN AG FM EN2003 9 FAlL

2. ALIGNING IT WITH THE BUSINESS STRATEGYEXHIBIT I Alignment CriteriaAlignmentLevel 5:CrIterion.Level 1: Level 2:Level 3:Level 4:Optimal ProcessCommunicationsWith Process Beginning EstablishingImproved(CompleteMaturity(No Alignment) Process Process Process Alignment)Understanding otIT managementLimiteaGood understanding UnderstandingUnderstancling Business by IT lacksunderstanding byby IT management encouraged amongrequired of ali ITunderstandingIT management IT staff staffUnderstanding of IT Managers lack Limited Good understanding UnderstandingUnderstandingby Business understanding understanding by by managersencouraged amongrequired of staffrmanagers staffOrganizationalCasual conversation Newsletters, reports, Training, Formal methodsLearning mon:toredLearning and meetings group e-mail departmental sponsored by for effectiveness meetings seniormanagementStyle and Ease of Business to IT only;One-way, somewhat Two-way, forrnalTwo-way, somewhat Two-way, informalAccess formal informal informal,and flexibleLeveragingAd hocSome structured Structured around Formal sharing at all Formal sharing withIntellectual Assets sharing emerging key processeslevelspartners.T-Business Liaison None or use only as Primary IT-Business Facilitate knowledge Facilitate Building relationsnipStaffneeded iink transfer relationship withbuildingpartnersIT MetricsTechnical onlyTechnical cost; Review, act onAlso measureAlso measuremetrics rarely technical, ROI effectiveness business ops. HR,reviewed mnetrics partnersBusiness Metrcs IT investmentsCostlunit; rareiy Review, act on ROI, Also measureBaianced scorecard,rneasured rarely, ifreviewed cost customer valueincIudes partnerseverLink between IT and Value of ITBusiness, IT metricsBusiness, IT metrinsFormally linked;BalancedBusiness Metricsinvestments rarelynot linkedbecoming linked reviewed and acted scorecard, includesmeasuredupon partnersService Level Use sporadicallyWith units for With units; becomingEnterprisewideIncludes partners Agreementstechnology enterprisewide performanceBenchmarkingSeldom or never SometimesMay benchmark RoutinelyRoutinely benchmarkformaily, seldom benchmark, usuallybench mark, act on,informallyact actand measure resultsFormally Assess ITDo not assess Only when there is a Becoming a routineRoutinety assess Routinely assess, Investrnentsproblemoccurrenceand act on findingsact on, and measure resultsContinuousNoneFew; effectivenessFew; starting to Many; frequently Practices and Improvement not measuredmeasuremeasuremeasures well- Practiceseffectiveness effectivenessestablishedFormai Business Not done, or done as At unit functional Some IT input andAt unit andWith IT andStrategy Planning needed level, slight IT input cross-functionalenterprise, with ITpartnersplanningFormal IT StrategyNot done, or done as At unit functional Sorne business input At unit and With partners Planningneededlevel, light businessand cross-enterprise, with inputfunctionai planning businessOrganizationalCentralized or Central/decentral: Central/decentralFederai Federal Structure decentralized some collocation or FederalReporting CIO reports to OF0 CtO reports to CFO CIO reports to COO CIO reports toCiO reports to CEO Relationships COO or CEOHow IT Is Budgeted Cost center,Cost center by unitSome projectsIT treated as Profit center spending is treated asinvestment unpredictableinvestmentsRationale for iTReduce costs Productivity,Also a process Process drnver, Competitive Spending efficiency enablerstrategy enableradvantage, profit N F