Concepts of Strategic Alignment of IT and Business

Concepts of Strategic Alignment of IT and Business

Copyright: © 2013 |Pages: 24
DOI: 10.4018/978-1-4666-4185-3.ch008
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Abstract

This chapter begins by explaining the purpose of strategic information systems planning, which is followed by describing three commonly adopted methodologies. They are known as “business systems planning,” “strategic systems planning,” and “information engineering.” In addition, the six broad process dimensions that characterize the activity of strategic information systems planning are discussed. In order to provide an understanding of what is meant by alignment, the basic concepts are presented and some established principles discussed. In essence, the primary and secondary functions in alignment for a business are explained, including the purpose it serves, how optimum alignment occurs, and when. Some proposed models for strategic alignment are reviewed to provide an understanding of the different types of strategic activities that are involved, and their flow and relationships with each other for interaction. By demonstrating how each model works based on a given set of conditions, the key to achieving strategic alignment for a business is established. The strengths and limitations of each of the models are stated. In particular, the model proposed by Henderson and Venkatraman (1990), the Strategic Alignment Model (SAM), is described in detail to explain how it works. It is explained in the context of four fundamental domains of strategic choice, with each having its own underlying dimensions. In essence, SAM has been developed for conceptualizing and directing the emerging area of strategic management of IT in terms of two fundamental characteristics of strategic management. They are strategic fit (the interrelationships between external and internal components) and functional integration (integration between business and functional domains). These fundamental characteristics are defined with respect to four different perspectives of alignment. Further, three dominant domain types are introduced together with appropriate illustrations of their application. Finally, case studies are presented to show how companies with a technology vision can achieve enormous business success through applying strategic IT alignment and indeed become global players. The chapter concludes with a summary of the main points covered on the concepts of strategic alignment of IT and business.
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Strategic Information Systems Planning

In general, companies practice strategic planning in order to have direction, constancy of purpose, concentration of effort and flexibility as they continuously strive to improve their positions in all strategic areas. Broadly, the three primary steps of strategic planning have been described as (Boar, 1993):

  • 1.

    Carrying out an assessment which involves the development of a clear and thorough understanding of the current and prospective business situation from both internal and external perspectives;

  • 2.

    Developing a strategy by identifying the desired future state of the business, the specific objectives to be achieved and strategic moves to be executed; and

  • 3.

    Executing the strategy and monitoring or adjusting it as required by actual events and changing times and circumstances.

But when a company conducts strategic planning for implementing information systems, the process of Strategic Information Systems Planning (SISP) is explained as having to involve deciding the objectives for organizational computing and identifying a portfolio of computer-based applications that will assist an organization in executing its business plans and consequently realizing its business goals (Lederer and Sethi, 1988). However, for it to work effectively, it is recognized that information systems planners would have to know their organization’s goals, plans and strategy. Therefore, from a strategic perspective, SISP can help companies use Information Systems (IS) innovatively to gain advantages like creating barriers to new entrants, generating new products, and changing the balance of power in supplier relationships (McFarlan, 1984). It would then have to involve the process of searching for applications with a high impact and ability to create an advantage over competitors. But overall, McFarlan (1971) has already pointed out the potential of SISP in terms of the huge contributions it can make to businesses and other types of organizations by its core purpose to identify the most appropriate targets for automation and schedule their installation accordingly to achieve this end.

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