1. CHALLENGES IN BUSINESS & IT ALIGNMENT
BUSINESS & IT CONSULTING - PROJECT REPORT
DR. S. BATRA
Adesh Mittal
Ankit Bhardwaj
Gurpreet Singh
Himanshu Chopra
Prashant Bansal
Ritwik Jain
Vidur Pandit

2. INTRODUCTION
Information technology (IT) is changing the way companies organize their business processes,
communicate with their customers and potential customers, and deliver their services. A key factor for a
successful company is an effective and efficient alignment of the way IT supports business strategies and
processes. The necessity and desirability of aligning business needs and IT capabilities has been
examined in numerous articles and its importance is well recognized. The annual survey of top
management concerns by the Society for Information Management (www.simnet.org) ranked „IT and
Business alignment‟ as the no. 1 concern in five of the last six years (Society of Information Management,
2003, 2004, 2005, 2006, 2007, 2008). In the year that it did not make the top spot, alignment ranked as the
no. 2 concern. The alignment between business needs and IT capabilities is therefore still a prominent area
of concern.
After many years of research into Business and IT Alignment (BIA), Chan and Reich (2007) list over 150
studies, the prominent position of BIA as one of the top concerns, should be surprising. Why didn‟t we
solve the „problem‟? Should it be concluded that academic research still cannot provide solutions to the
issues business and IT executives face in practice? We believe this is at least partly true. Some questions
that practitioners face are not addressed in academic literature. After a comprehensive overview of the
development of BIA, we will explore the known insights on BIA and provide some of the practical
considerations that still need more research.
THE CONCEPT OF BUSINESS/IT ALIGNMENT
Business-IT alignment involves optimizing communication between executives who make the business
decisions and IT managers who oversee the technical operations. The implementation of flexible business
plans and IT architectures, as well as effective cost allocation, are critical components of any business-IT
alignment effort. Technical department managers can formulate and submit proposals that can be tailored
to ensure the optimum return on investment (ROI). Business executives can attend IT department meetings
and seminars to improve their understanding of the technical capabilities and limitations of the enterprise.
Some definitions focus more on outcomes (the ability of IT to produce business value) than means (the
harmony between IT and business decision-makers within the organizations); for example,
Alignment is the capacity to demonstrate a positive relationship between information technologies and the
accepted financial measures of performance.

3. This alignment is in contrast to what is often experienced in organizations: IT and business professionals
unable to bridge the gap between themselves because of differences in objectives, culture, and incentives
and a mutual ignorance for the other group's body of knowledge. This rift generally results in expensive IT
systems that do not provide adequate return on investment. For this reason, the search for Business / IT
Alignment is closely associated with attempts to improve the business value of IT investments.
It is not unusual for business and IT professionals within an organization to experience conflict and in-
fighting as lack of mutual understanding and the failure to produce desired results leads to blaming and
mistrust. The search for B/I alignment often includes efforts to establish trust between these two groups
and a mechanism for consensus decision-making.
To achieve B/I Alignment, organizations must make better decisions that take into account both business
and IT disciplines. Establishing processes for decision-making and control is essentially what is meant by
the term "governance"; so B/I alignment is closely related to Information technology governance.
A commonly cited definition by IT Governance Institute is: IT governance is the responsibility of the board
of directors and executive management. It is an integral part of enterprise governance and consists of the
leadership and organizational structures and processes that ensure that the organization’s IT sustains and
extends the organization’s strategies and objectives.
Also related to the effort for better decision-making, and therefore often part of B/I Alignment - is the area
of IT portfolio management, which has to do with decisions about which IT projects are funded and which
are not.
Ultimately, value must come not just from the IT tools that are selected, but also in the way that they are
used in the organization. For this reason, the scope of B/I Alignment also includes business transformation,
in which organizations redesign how work is accomplished in order to realize efficiencies made possible by
new IT. Thus, implementing IT to achieve its full potential for business value includes not only a technical
component, but also an organizational change management component.

4. The dimension of strategic fit differentiates between external focus, directed towards the business
environment, and internal focus, directed towards administrative structures. The other dimension of
functional integration separates business and IT. Altogether, the model defines four domains that have
been harmonized in order to achieve alignment. Each of these domains has its constituent components:
scope, competences, governance, infrastructure, processes and skills. Henderson and Venkatraman pay
extensive attention to the different approaches of achieving this alignment. Maes et al. (2000) refine the
Strategic Alignment Model by identifying three, instead of two, columns: business,
information/communication and technology, and three, instead of two, rows: strategy, structure and
operations.
It is important to consider the overall value chain in technology development projects as the challenge for
the value creation is increasing with the growing competitiveness between organizations that has become
evident. The concept of value creation through technology is heavily dependent upon the alignment of
technology and business strategies. While the value creation for an organization is a network of
relationships between internal and external environments, technology plays an important role in improving
the overall value chain of an organization.
However, this increase requires business and technology management to work as a creative, synergistic,
and collaborative team instead of a purely mechanistic span of control. Technology can help the
organization recognize improved competitive advantage within the industry it resides and generate superior
performance at a greater value.

5. PHASES OF BUSINESS/IT ALIGNMENT
Ensuring IT alignment with the business has traditionally been viewed as the CIO's job. However,
successful IT/business alignment entails more than executive level communication and strategy translation.
CIOs who achieve alignment typically do so by establishing a set of well-planned process improvement
programs that systematically address obstacles and go beyond executive level conversation to permeate
the entire IT organization and its culture.
One commonly used methodology is the "IT/Business Alignment Cycle", which introduces a simple
framework that the IT organization can adopt to manage a broad range of activities. The four phases of the
cycle are: plan, model, manage, and measure. Following this cycle fosters organization-wide shared
expectations between business and IT managers, and defines a common framework for a broad range of
activities that together serve to align IT and business objectives.
The cycle also identifies best practices and common processes within and between IT functional groups to
make IT/business alignment sustainable and scalable. This framework functions best when integrated and
automated with software applications and monitoring tools.
THE CYCLE
Now let's examine the four phases individually, describing the activities, best practices, and benefits
associated with each phase.
Plan
Translating business objectives into measurable IT services. The plan phase helps close the gap between
what business managers need and expect and what IT delivers.
According to Giga Research, IT leaders in poorly aligned organizations are still attempting to explain
technology management issues to their business colleagues and have not made the leap to understanding
business issues and communicating with business managers on their terms.
To close the gap between what business expects and what IT delivers, IT needs an on-going dialogue to
clarify business needs in business terms. Without an on-going dialogue, IT may not be able to determine
which IT services to offer or how to effectively allocate IT resources to maximize business value.
Furthermore, when business needs change, IT should adapt and modify the service offering and IT
resources appropriately.

6. CIOs should mandate the use of a disciplined service level management process that will lead to
agreement on specific IT services and service levels needed to support business objectives. IT
management can then translate service definitions and service levels into underlying rules and priorities
that empower and guide IT resources.
Finally, IT needs a way to measure and track both business level services and the underlying capabilities
that support the services.
Model
Design infrastructure to optimize business value The model phase identifies resources needed to deliver IT
services at committed service levels. This phase involves mapping IT assets, processes, and resources
back to IT services, then prioritizing and planning resources that support those business critical services.
The bottom line in measuring the success of alignment is the degree to which IT is working on the things
about which business manager‟s care. That means IT must have processes in place for prioritizing
projects, tasks, and support.
To successfully prioritize resources, IT needs a service impact model and a centralized configuration and
asset management repository to tie the infrastructure components back to specific IT services. This
combination is essential if IT is to effectively plan, prioritize, and consistently deliver services at agreed-
upon service levels while also reducing costs.
Manage
Drive results through consolidated service support The manage phase enables the IT staff to deliver
promised levels of service. CIOs can ensure that their organization meets expectations by providing a
single location for business users to submit all service requests, and by prioritizing those requests based
on pre-defined business priorities.
Without a single point-of-service request, it is difficult to manage resources to meet agreed-upon service
levels. Moreover, without a method for effectively managing the IT infrastructure and all changes, the IT
staffs face the risk of causing failures.
To ensure the effectiveness of the service desk, the IT staff needs to provide:
 A method for prioritizing service requests based on business impact

7.  A disciplined change management process to minimize the risk of negatively affecting service level
commitments
 An IT event management system to monitor and manage components that support business critical
services
 The underlying operational metrics that enable service delivery at promised levels, as well as the
means for measuring and tracking the progress of service level commitments using these metrics
Measure
Verify commitments and improve operations. The measure phase improves cross-organization visibility into
operations and service level commitments. Traditional IT management tools operate in functional silos that
confine data collection and operational metrics to focused areas of functionality. They typically relate more
to technology than to business objectives.
Component-level metrics and measures are certainly important for on-going service availability. However,
to support real-time resource allocation decisions, these measures must be interpreted in a broader
business context, including their relationship to business-critical services. Without a business context for
interpreting measures and metrics, isolated functional groups can't get a holistic view of IT services that
support business objectives. By committing to the cycle and integrating and automating activities using
software solutions, CIOs can align their whole organization to make systematic improvements that
overcome obstacles.
8 STEPS TO BUSINESS/ IT ALIGNMENT
The goal of perfect alignment is unachievable because of the dynamic nature of business. Every
organization operates in an ecosystem and is affected by the forces at play in it. Economy, industry,
competitors etc. are all players in this ecosystem who are continuously evolving. Similarly, knowledge and
tools – such as information technology - are also continuously changing. To remain competitive i.e.
maintain differentiation, every organization must adapt in response to the actions and activities of others in
its ecosystem. Organizations that do not adapt lose their competitive edge over time and disappear.

8. Add to this the changes in an organization‟s internal environment – structure, skills, finance, personnel,
knowledge, core competency etc. – and now one has a potent mix of forces that demand change in
response.
This continuous change is the cause of perpetual misalignment. It takes time to understand the impact of
the actions of others. It takes time to take action. While you are reacting, the world is not stationary – it is
throwing more stuff your way. By the time you are done, you are out of alignment. To be precise, while you
are taking action, you are out of alignment!
Till we have perfect predictive modeling and instant systems, no organization will ever be in perfect
alignment. The best one can do is to move “toward” alignment i.e. moving in the right direction.
Do not let this discourage you from pursuing business and IT alignment! It is a worthy goal to pursue.
Indeed, it is a critical one to pursue. You might never reach alignment but you can take steps to get ever
closer.
This requires a process. Often, we ignore the fact that business and IT alignment is a process. This
process does not have a starting point nor does it have an end. It is a series of “learn and do” cycles that
incrementally get towards alignment.

9. STEP 1: Identify Business Drivers
In this step, we identify the business needs that are driving IT. In other words, what are the business needs
that require IT enablement? Is the company launching a new product that requires, say, a new fulfillment
system? Is the company acquiring another company that requires rationalizing the systems of the two?
These business needs are continuously changing. Periodically, they should be identified so action can be
taken in response.
STEP 2: Create IT Vision
Now that we know our business‟ needs, how can IT help? This step identifies the IT Capability – strategy,
process, infrastructure and organization – required to meet business priorities.
The starting point? A vision for IT. This vision lays the general guidelines or policy that drive the creation of
this IT Capability. Remember, two people might react differently to the same requirements depending on
their underlying beliefs. It is very important to articulate these underlying attitudes and beliefs into a vision
before attempting to answer the IT Capability question.
STEP 3: Assess Current Alignment
This step answers the question: How does the current IT Capability compare to the envisioned IT
Capability? There are three dimensions of alignment – investment, asset and organization. By answering
this question for all three, this step assesses the alignment along these three dimensions.
STEP 4: Identify Alignment Gaps
Comparing the desired or “to-be” IT Capability with the current or “as is” IT Capability, one can identify gaps
that are causing misalignment. Again, this comparison is made along the three dimensions – investment,
asset and organization to precisely identify the root cause of misalignment. Once we have the root causes,
we can identify the potential fixes. One “fix” can potentially address multiple gaps!
STEP 5: Prioritize IT Initiatives
The previous step gives us a list of “fixes” that can get business and IT aligned. However, we might not be

10. able to act on them – all organizations are capacity constrained. More importantly, we should not act on all
of them. Some fixes are easier than others. Some provide a bigger “bang for the buck”. There are other
reasons why we should not attack the entire list all at once. Consequently, this list must be prioritized. Step
5 does just that.
STEP 6: Evaluate Implementation Options
A prioritized list of “fixes” or IT Initiatives is the starting point for implementation planning. This is a critical
step to ensure success. Often, organizations forget to plan for implementation and pay the price in terms of
over budget or delayed or failed projects.
This step takes the list of initiatives and creates a roadmap for IT. This roadmap is a result of careful
planning that takes is driven by one primary consideration - risk.
STEP 7: Create Migration Plan
This step creates a migration plan for the IT roadmap – steps, deliverables, responsibility, timing etc.
This is a plan. It needs these key elements in some detail. However, trying to button this down beyond a
certain point is an exercise in futility. No plan stands the test of time. Hence, this plan should also be
modified as we learn new things after implementation begins.
STEP 8: Adjust IT Strategy
This is the key step to ensure connection between the changing business needs while we are implementing
IT solutions in response. If we keep going without looking back, by the time we are done the world might
have moved away and made our solution irrelevant!
It is essential that we keep track of the changing business world – both internal and external – and make
sure our solutions are in line. If they are not, then senior leadership has the responsibility to ensure that we
do not continue those initiatives that are not. Putting good money after bad is never a good idea. CIOs are
paid to make these tough decisions.

11. CHALLENGES WITH ALIGNMENT
Despite the attention paid to aligning IT projects with business priorities, many CIOs still struggle to
understand the business' needs. To truly achieve IT/business alignment, firms must integrate their
management teams closely to build trust over time. It's a recurring nightmare for CIOs - their IT department
builds a full-blown workflow application to simplify, automate and streamline a business, spending millions
of dollars in the process, only to have the business side refuse to use the system because the technology
managers did not understand the requirements, let alone the business.
Hopefully, for most CIOs, this is just a nightmare. But the fact is, most CIOs spend much of their time
making sure that this bad dream doesn't become reality. Aligning IT with a firm's business strategy is
critical to a firm's success, and yet, it remains an ongoing challenge. "All my CIO colleagues struggle with
this same issue - 'How can I align IT strategy, resources and budget with the areas that are important to the
business side?'" says Ra'ad Siraj, CIO at Eaton Vance.
In essence, according to Kevin Shearan, CIO of Mellon Financial Corp., technology should have the same
end goal as other disciplines in the business, including sales, product development and operations. These
disciplines all work "toward the overall success of the firm, but the challenge is how each group can align
around common goals, what are the drivers and how we can work together to achieve them," he says.
Most CIOs have tried to address the problem. But, despite everyone's best efforts, the process the IT
department puts into place to align with the firm's business strategy often does not fit into the culture of that
particular organization, notes Eaton Vance's Siraj. Or the CIO may have tried to change procedures too
quickly or set expectation too high. "Aligning IT with business takes time - it can't be done overnight," he
says.
Both the business and IT must be involved throughout the development life cycle of all projects in order for
IT and business to be truly aligned, adds Siraj. "There are different ways to get aligned, and different
organizations do it differently, but as long as they have it in mind with a common goal, they'll be
successful," he says.
THE PROBLEM EXISTS IN ONE OR ALL OF THREE AREAS.

12. First, many IT decisions are driven by business executives who know little about technology. Except what
they read in magazines or have been told by salespeople. This group includes CEOs, CFOs and COOs.
They look to technology to drive the company. They believe that ERP, SCM, KM, data mining and a variety
of software solutions will enhance revenue through efficiency gains or new customer sources. In some
cases they do, but in most, the costs offset the gains. The company is structurally stronger, but on paper it
looks the same or worse.
Second, many companies are directed by IT organizations that are technology-driven but don‟t understand
the real needs of the business. They cannot translate business needs into technology solutions. Many IT
executives cannot present a business case for or against a particular technology. Their condemnation or
approval is based entirely on the performance of the technology. (Is it full of bugs or is it stable? Fast or
slow? Easy to implement or hard? Can the vendor support it?) They present factors that should be
considered during the technology evaluation stage but not at a strategic alignment level.
Third, those who run the business and those who run technology cannot agree on what alignment is. In
reality, it is all perception based on expectations. There are companies that could be greatly enhanced
through the use of technology but believe that they are perfectly aligned already. There are others that
have the most beneficial technology available and don‟t know it.
In most cases, the solution is a strong CIO who knows both business and technology. An individual who
performs a cost-benefit analysis first but also intimately understands the requirements of the technology.
Someone who also has the authority to say no when other business units attempt to implement technology
without the guidance or assistance of the IT organization.
I.T. IS SO BIG AND EXPENSIVE AND FEELS SO COMPLEX IN most corporations that IT has had to
invent complex management frameworks to manage itself. These frameworks (such as ITIL for IT Service
Management and Cobit for IT management audit) are seen by senior IT managers as the Holy Grail of
business-IT alignment.
They are not bad in themselves, just in the fact that they are "IT management frameworks" and not
"business management frameworks," with IT in the middle and the business on the outside. As long as
information technology runs with IT management frameworks and not with business management
frameworks that are shared across the business (including IT), then there is poor chance of alignment and
no chance of integration. The result is bad news for the business when it comes to agility and value for
money.

13. LIMITATIONS OF STRATEGIZING
The season for defining IT strategy is upon us. You will soon hold meetings, often off-site; to ponder how to
align IS with business strategy. Driven by high-level business imperatives or wish lists from users, IT
management will go through the matching and prioritizing process to decide what new developments to
undertake.
And when it's all over, you'll publish your strategic plan and consider yourself done with IT strategy until
next year. But before you congratulate yourself on completing the process, I'd like to suggest that your
strategic planning may not be very strategic at all. Why? Consider these three common fallacies:
 IT strategy always follows the organization's business strategy. Recent enthusiasm for business-IT
alignment is a welcome improvement in the way organizations approach IT strategy. But there is a
problem: Organizations typically implement the business-IT alignment with a unidirectional focus on
aligning IT with business strategy and rarely on the converse--using IT to influence the business
strategy itself. This limited perspective hinders organizations from exploiting IT to create and identify--
not just support--new business opportunities. While simply supporting existing operations delivers
operational efficiencies, the significant payoffs occur when using IT for market positional gains or
reconceptualising of the value chain.
 Strategic IT planning produces IT strategy. Why do we need strategic IT thinking? Because the
intended strategy is not always the realized one. The reasons can be manifold. New options and
unexpected constraints present themselves and render parts of intended strategy undesirable,
insufficient, or unfeasible. Unforeseen changes are stimulated by the actions of competitors,
customers, and suppliers. And, for purely internal reasons, organizations aren't successful at
implementing some of their intended strategy. In this environment of constant change, the arrival of
threats and opportunities can't be forced into a convenient timetable to suit the organization's planning
cycle. And a business that wants to be flexible must be prepared to respond to fast-moving stimuli and
to adapt its plans and strategies accordingly.
 A brilliant IT strategy is always better than a less-ambitious one. IT strategy can be evaluated only in
the context of the organization for which it was defined. Not all organizations are equally positioned to
reap benefits from IT. And the wrong or unrealistic strategy can prove harmful to an organization's

14. long-term ability to use IT in defining and reaching its business goals. A successfully implemented--
though less ambitious--IT strategy will increase the organization's confidence in its ability to obtain
value from IT. And subsequent, evolutionary steps in the use of IT that stretch the organization's
capabilities will produce significant incremental benefits. Moving to an iterative, organization wide
ability to learn about the impact of IT is a challenging task that requires deliberate planning, often in
conjunction with organizational and cultural changes. A structured process and documentation are
needed to record and communicate current thinking about the organization's IT strategy. But keep in
mind its limitations. For one, such IT plans don't necessarily foster IT management's participation in
crafting and influencing business strategies. Plus, planning can't substitute for the continuous process
of strategic IT management in an organization. And these types of plans won't work unless they're
suited to the organization's particular level of IT and organizational capabilities. When your
organization attempts to utilize IT for maximum business benefit, strategic IT planning will be very
useful, but not sufficient.
ALIGNMENT – THE HOLY GRAIL
Let‟s look at what alignment is and what it is not. What alignment isn‟t is allocating two programmers to the
smart grid, two to billing and two to energy dispatch and expecting them to take care of things. That won‟t
achieve any kind of alignment with business. In particular, such an approach falls far short as it fails to take
into account overall strategy and existing or planned management initiatives.
So what is it? Alignment means seeking out business needs and translating them into prudent IT initiatives
that support on-going objectives. It is being ready to provide a solution that the business unit needs in a
timely manner that delivers the services they require in order to move forward.
This is an important point. One of the key challenges in alignment, after all, is gaining agreement on what
alignment is. Only by achieving that agreement is it possible to synchronize IT and business strategies. It is
vital, therefore, that IT spends time getting to know the ins and outs of the various business units, and what
they each consider the most important aspects of alignment so that everyone can get on the same page. If
this is not done up front, failure is inevitable.
Statistics from analyst firms very much back up these assertions. 75 per cent of those who attempt IT
alignment fail. Of the other 25 per cent, about half are only partially successful. So you end up with about

15. 10 to 15 per cent that eventually arrive at proper alignment. Faced with such statistics, it‟s understandable
that many in IT are reluctant to even attempt to attain alignment. Yet alignment is vital if smart grid and
other ambitious programs are to achieve any measure of long-term success.
CULTURAL BARRIERS
There are many reasons for alignment failure. One of the big reasons is not appreciating that there are
cultural issues, IT maturity issues and company issues that impact the ability to achieve alignment.
Therefore, timing is important – you have to ensure these challenges are fully addressed before attempting
any kind of alignment initiative.
The first thing you have to take stock of is the corporate culture. Is IT viewed as a cost center/expense or a
profit center/investment? Both cost money, so what‟s the difference? With an investment, you expect a
return. You expect to get more out of it than you put into it. The viewpoint within management says a lot
about the corporate culture. Are they mainly complaining about high IT costs, or are they intent on utilizing
IT to facilitate growth into the future? If the former is the case, this should be addressed before engaging in
an IT/business alignment program.
Similarly, if IT is regarded as a service/support center, there is work to do from a cultural perspective. IT
has to apply organizational best practices such as the IT Infrastructure Library (ITIL) if it is to move itself
into the investment category and thereby bring about success. IT can‟t just sit back and expect the various
energy business units to grant it equal rights at the conference table. IT has to earn it. The way to
accomplish that is to become fully professional as a business unit and learn to speak the same language
as the various line-of-business leaders and C-level executives.
The organizational structure also plays a roll. Some companies have everything in silos that make
alignment virtually impossible. Other organizational barriers come about when IT is lumped in with another
C-level department or is positioned under Finance. All this means that IT won‟t have the clout it requires to
do the job effectively. It must, must, must participate at a C level. To get there, however, you have to
demonstrate tremendous business value. If you are not operating at a strategic level, your chances of
aligning business with IT are very small as you have no real idea about where the business is heading.

16. BUSINESS MATURITY
There are, too, several different kinds of decision making types that can be encountered in the commercial
landscape. These include reactionary, opportunistic, strategic, trial and error and even happenstance. If the
culture is reactionary, you never know what‟s coming i.e. you are continually responding to one factor after
another without long term direction. In such an environment, it is almost impossible to grow.
Let‟s look at some of these other categories. In the happenstance category, things just tend to happen and
the organization goes along with it. This is an unsuccessful stance. If the company is opportunistic, it
means they may be good at responding to opportunities, but the culture is such that the organization has to
wait for those opportunities to arise. In this setting, your best course of action is to align most closely to
existing opportunities. However, your efforts in this climate will be largely hit and miss.
Where you need to be, then, is strategic. By strategic is meant more than just the creation of a document
stating corporate strategy. It has to be an all-encompassing emphasis which drives all further decisions and
propels the organization towards a stated and finite goal.
Further, everyone has to be on board. But even with strategy in place and well known, IT may still have
plenty of work to do. For example, most business units really don‟t know what technology can do for them.
If you go ask, they will look at you blankly. It is up to IT to drive technology into the various departments by
educating the business heads on what can be accomplished.
Further, IT alignment will not fix bad business processes. If process weaknesses are not addressed, you
end up importing bad processes into an IT framework. This is a recipe for disaster.
IT MATURITY
Just as a business must be strategic, so is it the case with IT. Is your IT organization strategic or is it too
busy fighting fires? One road towards more strategic IT is via good practices such as ITIL. Note, however,
that ITIL and other similar initiatives will not make you strategic. They help, but they don‟t create alignment
on their own.
To achieve maturity, IT staff has to embrace knowledge beyond the technology perimeter. If IT does not
achieve a strong understanding of business as well as technology, it will not be capable of identifying

17. technology solutions that meet business objectives. Therefore, you have to become visionaries in both
business and technology. If you don‟t have the people who can do this, obtain them from elsewhere.
TECHNOLOGY SUPPORT
Of course, there is technology that can help IT arrive at its destination. Automated capacity planning and
performance management tools offer a step change in IT operations. Instead of working in reactionary or
happenstance mode, these tools can immediately propel IT into a greater zone of effectiveness. They can
provide, for example, the required flexibility to accurately predict traffic patterns and growth trends while
being able to detect unexpected peaks and troughs, and make the necessary adjustments.
Capacity planning makes it possible to know if the current infrastructure is adequate to cope with the
addition of new applications or a greatly increased traffic volume. If more resources are called for, capacity
planning highlights how much extra equipment needs to be deployed. And with so much top management
attention on smart grid initiatives, such automated tools enable IT to load up existing systems with greater
workloads without causing a bottleneck. Thus it becomes possible to maximize the ability of systems to
respond to market volatility.
Capacity planning also reaps big rewards by revealing what IT assets are already in place. There is hardly
an energy company in the nation that can honestly say it knows the location and role of every server in its
midst. By conducting such an inventory automatically, capacity planning software permits optimization of
what is currently in place. In many cases, this action reveals large pockets of unharnessed resources that
can be corralled to cope with on-going expansion. While capacity planning could be characterized as a
crystal ball, performance management is the trouble-shooter. Despite the most meticulous planning,
unforeseen circumstances sometimes result. Whether due to massive spikes in demand, a local blackout
or the impact of uncontrolled application roll out, IT departments must occasionally deal with performance
degradation. The challenge is to quickly isolate the source so the proper remedial actions can be executed.
With the right tools in place, energy companies can stay one step ahead of trouble.
It is advisable, for instance, to always monitor metrics concerning the utilization of processing power,
memory and the network. Thus when an issue shows up, it is relatively easy to drill down into the affected
area to discover the application, server or business unit responsible. This directly correlates to the bottom
line. Instead of throwing more servers, more disk capacity, more bandwidth or more powerful processors at

18. the issue, performance management often reveals specific areas of bottleneck that can be reorganized for
optimum throughput and availability.
MORE CHALLENGES
Academics have touted the need to align technology with business since the 1960s. The issue has made
the top ten concerns of management since the 1980s.Despite Band-Aid after Band-Aid, alignment issues
perpetuate, perhaps because the Band-Aids don‟t deal with root causes. Before considering what to do, it‟s
helpful to understand what hasn‟t worked and why.
By and large, efforts to align business and IT fall into two categories: funding and leadership.
Funding
Funding efforts center on documenting business intent and estimated value as part of budgeting. Because
the finance department typically “owns” budgeting, business justifications are usually structured by finance
from a financial perspective. Collaboration with IT is seldom required or even encouraged, although IT
might have to plug in costs for anticipated hardware and software needs. Few organizations take a holistic
look across business cases to identify overlapping and conflicting requests, or opportunities to consolidate.
In the worst of cases, justifications is a bureaucratic rather than intellectual exercise – the search for sound
bites and spin known to be effective at securing funding rather than a rigorous analysis. Decisions tend to
be made based on financials alone, making strategic positioning and infrastructure investments difficult to
secure because ROI and payback are difficult to forecast when it‟s impossible to anticipate every potential
use.
Leadership
Leadership efforts tend to focus on reporting relationships. Most recently, the leadership fad was to have
the CIO report to the CFO, under the assumption that finance knows how to tie capital investments and
expenses to profit and loss. True, but the value of IT is not limited to financials. Besides begging the
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measurement question for valuing return on technology , alignment with finance alone is functionally
biased.
Why Funding and Leadership Fail. One-dimensional approaches like funding and leadership tend to fail
because they target symptoms. Both business and IT are dynamic and affected by a complex network of

19. internal and external forces. Treating them as static and independent encourages unproductive and
conflicting use of resources that results in chaos at worst and diluted return at best.
Figure 1: Lack of Alignment across Functions Dilutes Enterprise Effectiveness
The Root Problem
What‟s missing? What‟s derailing enterprise perspective and effective assignment of accountability despite
solid advice from academicians and best practices from the field? It‟s none other than the bogeyman called
culture.
Command and Control
The pervasive organizational design in U.S. companies was modeled on the military and codified for
business by Alfred P. Sloan. Decision making is highly centralized but operations are decentralized. A rigid
and hierarchical “chain of command” links the two. Commonly referred to as “command and control,” orders
come down from the omniscient top, and the rank and file execute as directed, no questions asked. In
practice, some organizations are less rigid about hierarchical control than others, but the idea of self-

20. contained units taking direction from someone “above” is so ubiquitous that we tend to confuse autocratic
behavior with leadership.
Figure 2: Sample “Command and Control” Organizational Structure
Participative Management
In the mid-1980s, the concept of “participative management” caused a buzz among students in MBA and
executive development programs, and led to experimentation with matrix reporting and cross-functional
teaming. Both create opportunities to overcome the isolating and organizationally divisive effects of
“command and control.
Figure 3: Sample of a Matrixed Organizational Structure
Generally, matrixed roles have been used to enable business-IT alignment. Most commonly, an IT expert
with good interpersonal skills is positioned by IT management to insinuate IT into the business function. It‟s
much rarer to see an expert in the business function put into a matrixed role by a functional manager in

21. order to insinuate the business into IT. Unfortunately, alignment requires outreach, education and decision
rights from both sides in equal measure.
The only thing worse than having IT or the business function dominates a matrixed position is having the
matrixed role performed and controlled by a third workgroup – a project management office, for example.
The worst situation removes both business and IT expertise from the equation. In the second part of this
article, we‟ll look at ways in which IT can fix the problem.
THE ROAD TO BUSINESS/IT ALIGNMENT
Acknowledging that culture, as manifested in organizational structure, is the key barrier to alignment is
scary and demoralizing because culture is so pervasive and difficult to change. Fortunately, there are a
number of indirect ways to chip away at culture without reorganizing. Persistence, consistency and
opportunism are the keys to success in chipping away at the problem over the long term. The following tips
represent opportunities for both IT and business functions to take the initiative.
PLANNING
It‟s easier to tweak an existing process than to introduce a new one. Almost every company has some sort
of formal planning process whose activities can be easily modified to enhance alignment and create an
environment conducive to on-going collaboration.
Capacity Planning
Add a step to the planning process whereby IT interviews business users and workgroup managers to
uncover business intent that will substantially change the volume of existing transactions. If business users
complain about outages or the impact of IT performance on their ability to do their jobs, they are likely to
jump at the chance to provide information that promises to ease their pain. If your IT environment is stable
or its problems are invisible to most business users, you may have a harder time interesting them in talking
to IT; under such circumstances, it may be better to start the process using an electronic survey and then
follow-up face-to-face or in small groups to explore unclear or problematic input.
Talk to people who really know about volumes. Vice presidents and directors are experts on the new end
state they expect to create. Front line staff, on the other hand, know intimately what takes place daily and in
what patterns.

22. Conduct interviews close enough to the completion of business planning that plans are stable. If you‟re too
early, you risk forecasting capacity on pipe dreams. If you wait too long, IT will have trouble integrating the
input into their plan on time.
Keep the interview to 30 minutes by tightly focusing your questions. If the interviewee wants to talk longer,
so be it, just don‟t require any more than a half hour. Be sure to take good notes; you‟ll need them to
aggregate and analyze.
Come armed with facts from the past year – charts and graphs are wonderful ways to communicate facts
and depersonalize touchy topics. Show current performance against capacity limits, and use that
information to discuss interruptions, failures and outages in terms of business impact and tolerance. Try to
uncover the business cause of peaks and valleys; maybe there‟s a way to spread them.
Finally, be sure to close the loop with the interviewees once the capacity plan is developed. They need to
know they were heard and their input was used. Similarly, if budget for capacity is cut and the cuts are
likely to impact a particular activity, establish the situation as a shared issue to be addressed
collaboratively.
Service Level Agreement Check-Ups
Although service level agreements (SLAs) should be renegotiated whenever business needs change, they
should also be reviewed regularly for continued relevance. Setting up a review is as simple as including the
date for review, a review interval or an expiration date when you create or modify the agreement.
At a minimum, include the business signatory on the SLA (most likely the business sponsor), the IT person
responsible for the operation and support of the system or application covered by the SLA, and the data
steward. There can be advantages to including other stakeholders and treating the session as a type of
summit meeting.
Use the format and organization of the SLA to structure the agenda, but also include topics that create an
opportunity to raise questions about future plans and emerging technologies. The scope should provide IT
advanced warning on emerging business needs and priorities that may affect IT planning, and give
business stakeholders an opportunity to consider the advantages and disadvantages of emerging
technologies and potential enhancements.

23. Be sure to document the key issues and decisions, and give participants a chance to validate the minutes.
Then update the SLA as agreed, and post it where stakeholders can access it – open communication and
transparent interactions are required to build trust, and thus make it possible to resolve misunderstandings
based on documentation instead of recollection. We recommend making the session minutes generally
available for the same reasons.
Business Process Observation and Mapping
IT is full of technology experts, but they don‟t understand the daily reality of your function – not really.
Without that awareness, it‟s very hard to design a solution that fits daily routine, offers an interface simple
and logical to those users, or simplifies procedures in ways that the function values. A comprehensive map
of the business activity (who does what when, in what order and for how long) helps IT understand the
context in which the solution must fit.
In general, the best person to observe and map is the business analyst. In some organizations, the
business analyst reports to the business function. In others, it reports to IT; and in some, it‟s a position
matrixed between IT and the business. Whatever the reporting relationships, be sure that the business
process is accurately and comprehensively captured. It may make sense to team the lead business person
(e.g., call center supervisor for a call center application) with the IT architect who will be designing the
solution for joint observations.
If IT is stretched too thin or doesn‟t have the skills to do the job, then consider having your business analyst
tutor IT. A third option is to let IT handle the observation process in their own way but have a validation step
where front-line businesspeople sit down with IT to review the process map and answer questions about
what was observed before IT goes any further.
What‟s the incentive for IT to participate? Why should they go through this extra step? There are a number
of benefits for them just in terms of designing and delivering a usable solution. But there‟s also a strategic
advantage in fully grasping the business activity they‟re enabling, particularly if it requires new
infrastructure that can be leveraged for other applications.

24. Standardize Application Descriptions
In most companies, finance develops and manages the planning templates and process. As a result, they
reflect a financial perspective – and time frame. Establishing a common template for outlining key aspects
of a needed business system or application frees everyone to begin planning for new development as the
need emerges, and enables a cross-functional comparison of needs to:
 Assure that applications competing for scarce resources are compared on a standard set of criteria,
not just cost and payback period
 Make it easier to spot duplicates that can be collapsed into one development project that benefits
multiple functional groups, or prioritized based on breadth of business impact
 Identify dependencies so that applications might be scoped for incremental development and
deployment, thereby enabling the business to start deriving value sooner
Figure 1: Example of a Description for a “Partner Profile” Application
Resource Allocation
The problem with relying on the formal budgeting cycle for allocating resources to projects is that business
needs don‟t evolve synchronously with the fiscal year. Furthermore, budgeting only allocates financial
resources – the specific skills and knowledge required for the project tend to be concentrated in a few
individuals who are often overextended. The alternate option is to allocate individuals who have weaker
qualifications. Both circumstances introduce risk.

25. We recommend separating the identification, description and prioritization of new business applications
from budgeting. Here‟s how:
 Document new business needs per the previous recommendation (Standardize Application
Descriptions)
 Consolidate the descriptions in a cross-functional Application Portfolio
 Establish a cross-functional program for systematically reviewing and prioritizing the portfolio on a
regular basis – quarterly, for example; use the quarterly session to add new applications, modify
applications already in the portfolio, delete applications that are redundant or no longer needed, and
prioritize them cross-functionally
At any given time, the priorities for allocating both financial and human resources to projects are known
without disrupting the existing planning and budgeting cycle. Furthermore, posting a list of portfolio
applications, current status and the sponsor on the company‟s intranet can help avoid redundant requests
and improve general understanding of current priorities.
Performance Profiling
As part of each SLA negotiated with IT, require a report on the technical performance of the system or
application. The information allows both the business and IT to monitor technical performance against
requirements relevant to business activity, and assures fact-based problem solving should technical
performance degrade – too often such issues are assessed on perception instead of metrics, and generate
arguments instead of solutions.
What do we mean by technical performance? Business performance includes the business metrics that tell
you how well the targeted function is performing against plan. A marketing organization, for example, might
monitor business metrics like the campaign conversion, defection rate and cost per acquisition. Technical
performance depends on metrics that reflect how well the systems and applications supporting the
business function are performing. Typical technical metrics for a marketing system might include: on-time
data loading, trapped entry errors and unplanned outages.

26. PROJECT METHODS
Although application and system development efforts are usually considered the province of IT, in an
aligned organization, the sponsoring business function participates in the project and is accountable for key
decisions. Here are some ways to build alignment into your development process.
Requirements Definition
Issues about requirements are about as old as those about alignment. Baseline believes the two
fundamental problems are:
 IT believes they know what the business needs without asking them, or the business tries to dictate
the solution to IT without explaining what they need to do
 Requirements are viewed as a bureaucratic hurdle or as the initial design document
Both weaknesses are easily overcome by making sure there are four separate components of
requirements developed somewhat linearly before any thought is given to the solution: business, data,
1
functional, and technical specifications.
Business Requirements
Business requirements are best gathered by a business analyst who reports, ideally, into the business
function. When the business analyst reports to IT, communication and trust can be issues.
Requirements are best gathered in one-on-one interviews with a representative sample of business users
and enhanced with information from business plans, existing reports and other relevant artefacts. Why one-
on-one? Because group sessions tend to yield results skewed on perceived power and assertiveness.
Group sessions are best left to the end of the requirements activity, and used to demonstrate that everyone
was heard, work through inconsistencies, and validate the requirements. Why a representative sample?
Because challenges, awareness and agendas differ with role and responsibilities; a value-adding
sustainable solution addresses them all.
The objective of each interview is to understand specific business actions and questions. Asking questions
like “What information do you need?” or “What do you want the application to do?” encourages answers
like “Columns 6 and 7 from the XYZ database” or “I need Oracle CRM.” Instead, ask questions that focus
on the interviewee‟s responsibilities and the difficulties he has fulfilling them. Don‟t miss the opportunity to

27. estimate solution value by asking how much time is spent each week correcting X, how fixing Y might affect
the customer, or what the interviewee could do if task Z were eliminated.
Take notes or record the session. You are sure to miss details or confuse who said what as you complete
the interviews. You need to be able to refresh your memory.
As you complete the interviews and analysis, engage the data analyst so that he can begin to derive the
data requirements while you finish documenting the business requirements – this little bit of overlap can
speed the requirements activity substantially.
Include among the business requirements how the business will evaluate the solution during acceptance.
Declaring acceptance criteria and evaluation procedures up front prevents surprises at the end of the
project.
Data Requirements
The business analyst passes the results of the interviews with the stakeholders to a data subject matter
expert, data steward or data analyst who uses them to identify the information required to meet their needs.
The data analyst creates or enhances the logical data model to identify existing subject areas that need to
be tapped as well as new or enriched subject areas that will be required. Physical data models are
completely irrelevant at this point; the data requirements are strictly logical and business-based.
Once the data analyst has identified the needed information, he does a quick survey of sources to identify
those that might become systems of record; if there‟s time, he may also profile the data in each potential
source to roughly grasp the their quality problems. Information for which there‟s no known source is
similarly identified, and the business rules that will govern the creation or conditional use of data are
documented.
Finally, the data analyst creates a traceability matrix, which links each business question to a business
objective (both from the business analyst‟s work) to a data requirement, and subsequently to a functional
requirement. Although traceability matrices are tedious to develop and maintain, they provide a quick
means for assessing who will be impacted in what way by anticipated changes to a source, a data element
or function. Such impact analysis is another critical success factor for business-IT alignment.

28. Functional Requirements
Typically, the business analyst derives the business functional requirements while the data analyst is
working on the data requirements. Like the data requirements, functional requirements are derived from the
business requirements. They have to do with the way business users need to work, their interface
preferences, accommodations required for skill gaps, and any other constraints on the user interfaces. In
most cases, it behooves the business analyst to prototype interfaces as it will be much cheaper and easier
to get commitment or corrections from business stakeholders before anything is designed and coded.
Once the business, data and functional requirements are documented, the business analyst validates them
with the interviewees and secures sign-off from the sponsor. Adhering to this procedure assures that IT
does absolutely no work – design or development – until the business certifies in writing that the
requirements are complete and correct, and that any subsequent changes in requirements will be
negotiated between the sponsor and IT to manage scope creep and changes to the project budget and
schedule.
After the business sponsor signs off on the requirements, the project lead shifts to IT until the user
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acceptance activity. At this point, IT has all the business information needed to define the technical
specifications and begin solution design. Similarly data professionals have what they need to begin in-
depth data analysis and development activities.
Status Reporting
Communication of project status is important, and it is our view that different audiences need different
status information. Most project methodologies only focus on two audiences: those on the project team and
the project sponsor.
Baseline knows that communicating status to business users is essential to setting and managing
expectations (another aspect of alignment). These individuals care about the status of the project in terms
of what will be delivered when and how it is expected to change their daily activities – for the most part,
technical details are of little interest. The project manager may wish to tap the business analyst to
communicate progress, issues and new insights to the business stakeholders since she may be better
acquainted with their interests and concerns.

29. Acceptance
In most cases, there need to be two acceptance activities: data validation and case study acceptance.
The purpose of data validation is to have business stakeholders declare that they trust the data coming
from the solution. Depending on the solution, that may require looking at data input from source systems,
tracing it through a cleansing process, manually checking business rule calculations, evaluating error
trapping, and determining that the output is as expected.
Data validation is done by business stakeholders who already know the data and are respected by their
peers for their knowledge. Likely candidates include analysts who manually prepare reports or correct
errors. If your company has a data stewardship program, then the relevant data stewards might be
entrusted with the job.
Elements of Organizational Alignment
Organizational alignment describes the degree to which multiple organizations are positioned to work
together effectively and achieve high quality results with minimum conflict, confusion, miscommunication,
and political interference. Three elements have profound impact on organizational alignment:
 Processes are the procedures and activities through which interaction occurs, needs are
communicated, products and services are delivered, and payment or chargeback is achieved.
Important influences include the degree of formality in processes, the level at which they are
documented and understood, the extent to which they are followed, results-orientation without undue
bureaucracy, consistency of application, and much more.
 Relationships involve both the state and the quality of interaction between organizations.
Organizational relationships have a structural component and a cultural component. Structure
expresses the form or forms of a relationship - contractual, partnership, and collaborative for example.
Culture expresses the attitudes and emotions of a relationship - friendly vs. combative, trusting vs.
distrustful, comfortable vs. awkward, etc.
 Skills are the abilities to produce solutions in a problem domain. Business skills, technology skills, and
interpersonal skills are all important for organizational alignment. It is increasingly important that
business people have some technical skills and that technical people have some business skills.

30. Elements of Working Relationships
Working relationships determine the state and quality of interaction between organizations - those
relationships described above as an element of organizational alignment. The axis for organizational
alignment examines those relationships collectively. The working relationships axis explores relationships
in greater depth. Working relationships exist at several levels including organization-to-organization, team-
to-team, and person-to-person; and they must work effectively at all of these levels to achieve true
organizational alignment. Organization-to-organization relations are ideally structured and business-like.
Conversely, person-to-person relationships are best when unstructured and friendly. Team-to-team
relationships seek a balance between the two extremes. Both extremes are needed to achieve robust
working relationships.
The much desired characteristic of trust, for example, begins at the personal level before it can extend to
the team and organizational levels. Partnership, however, is difficult to realize at the personal level and
ideally begins with organizations. Collaboration is a preferred characteristic of team-to-team relationships
and is frequently the bridge between personal and organizational behaviors.
Managing working relationships is clearly a complex and difficult process. Yet it is an essential process
because relationships (as illustrated in Figure 2) are at the very core of Business/IT alignment. Although
challenging, managed relationships are both necessary and possible. The critical elements of managed
working relationships include:

31.  Governance provides the structure and controls needed to achieve value from IT resources, minimize
risk of IT initiatives, ensure long-term viability of IT systems, ensure that IT systems support regulatory
compliance, raise the level of information technology maturity, and satisfy business expectations of IT.
Governance addresses ownership, responsibilities, measurement, policies, and working practices for
data, technology, and information systems. The goal of governance is to align as closely as practical
the interests of individuals, teams, organizations, and the enterprise.
 Competency is the ability to produce and deliver results and encompasses both knowledge and ability
to apply that knowledge. Effective Business/IT relationships demand competency in three domains -
business, technology, and program/project management. Although frequently considered to be
subjective and intangible, competency is readily affirmed and demonstrated through references which
may range from internal word-of-mouth impressions and reputation to recognition as a best practices
leader. Competency is essential for each of individuals, teams, and organizations.
 Communications are a cornerstone of Business/IT alignment - the connections that enable access,
understanding, cooperation, and teamwork. Every aspect of the framework depends in some way and
to some degree on communication.
Skills, for example, are individual and problem domain specific; Competency is collective and results
oriented; Moving from skills to competency and from problem to results depends largely upon
communications.
Continuous Alignment Activities
Continuous alignment is the goal and the challenge - continuous because organizations, people,
processes, and technology continuously change. One-time alignment simply will not do.
 Identify Misalignment - This activity focuses on knowing where alignment problems exist and why they
exist. Examine each of nine points identified by the COA framework to seek out specific misalignment
issues as shown in the table below:

32. Figure 3: Identifying Misalignment
 Correct Misalignment - This activity effects change. The only way to improve Business/IT alignment
and relationships is to change what we think, say, and do in areas of misalignment. Both
organizational and personal change is important. Personal change is frequently driven by the
messages (communications, actions, and behaviors) that occur organizationally. Inconsistent
messages - actions differing from communications - will damage the overall effort to improve
alignment and working relationships. Organizational change involves multiple organizations and brings
forth a subtle but important distinction: Do not undertake an effort to "align IT with the business" but an
effort to "align business and IT" to best serve the needs of the enterprise.
 Sustain Alignment - This activity is directed at impact with a goal of achieving real, substantial, and
lasting value through alignment of business and technology. Sustainability depends on feedback and
monitoring to ensure not only that change occurs, but that the desired changes occur. In a climate of
continuously changing organizations and technologies the feedback system is particularly important.
Extending the scope of change to encompass people, processes, and politics raises the stakes.
Routine check-ups are necessary to ensure long-term alignment.

33. CONCLUSIONS
Aligning IT to business needs is still an important challenge for many organizations. The numerous studies
on alignment provide many valuable insights. These insights are analysed in the previous sections.
However, given specific organizational contingencies, the practical application of these insights is a field
that is yet to be explored. This paper has also identified a number of aspects of alignment that have not yet
been covered.
These include
 the application of policies and strategies in more complex organisational settings, like a multi-business
company or an multi-national company;
 alignment in SMEs with limited qualitative and quantitative resources;
 the relationship or „fit‟ between alignment and business strategy;
 the effect of outsourced IT operations on alignment;
 The social aspects of alignment: culture, perceptions, etc.
The overview presented in this paper aims to provide both academics and practitioners a guide to further
development of the knowledge of BIA. After six years of being a major concern for executives, it should be
the first priority for creating a better understanding of how IT enables or innovates business. This last
aspect especially makes this understanding a must for both IT and business professionals. The future
success of organizations depends on their ability to innovate and improve their businesses continuously. IT
is the key to doing this and therefore the key to a successful future.