Information Systems Strategy and business alignment

What is IS Strategy Doherty et al. (1999), describe IS strategy development as: ‘the process of identifying a portfolio of computer-based applications to be implemented, which is both highly aligned with corporate strategy and has the ability to create an advantage over competitors’.

Elements of an effective IS strategy – a reminder 1. Help support the future direction of an organization. 2. Achieve advantage for the organization (strategic objectives). 3. Define the allocation of resources to achieve this advantage. 4. Be primarily driven by the needs of the organization, but also by the needs of stakeholders such as shareholders, customers, suppliers or employees. 5. Be responsive to the dynamic environment in which an organization operates.

Requirements of IS Strategy Achieves alignment of IS strategy with business strategy while identifying competitive opportunities available through IS. These are the two core goals of any IS strategy as explained at the start of this chapter. Simplicity through well-defined stages. The process should possess clearly defined, repeatable steps or stages that can be performed in a logical order. Such simplicity can help senior business managers work together with technical IT managers to develop the strategy. Continuous process with evaluation and improvement built-in. It should be recognised that the strategy development process is a repeatable process that will have strengths and weaknesses which should be evaluated at the end of each planning cycle and adjustments made accordingly. Flexibility. The process should enable changes within the business environment to be reflected in updated IS plans.

Example of long-term IS Strategy Phase Business application(s) Year 1. Basic internal and external communications Simple company intranet, Internet e-mail and customer-facing web site Year 2. Buy-side e-commerce – main suppliers E-procurement system with top 10 suppliers Year 3. Sell-side e-commerce – smaller customers and buy-side e-commerce – smaller suppliers Introduce simple transactional site for smaller customers Roll-out e-procurement to smaller suppliers Year 4. Sell-side e-commerce – larger customers New customer relationship management system Year 5. Mobile commerce Online orders from mobile platforms. Alerts from suppliers

Top-down method of IS strategy definition Starts with the business objectives and then assesses which information systems can be used to help achieve these objectives. For example, if the Lo-cost Airline Company has a business objective of increasing the volume of repeat business through developing or enhancing a customer loyalty scheme, then IS such as customer relationship management systems can be developed or enhanced to help create this.

Bottom-up method of IS strategy definition Here the selection of the IS applications portfolio partially or completely determines the emphasis of IS strategy and how it impacts corporate objectives. For example, different managers in the Lo-cost Airline Company such as the marketing manager, HR manager and E-commerce manager request different systems according to their own departmental or functional needs, then this helps determine IS strategy.

IS Strategy defined The IS strategy involves setting relative investment priorities for applications, support services and infrastructure. The infrastructure includes both hardware and network architecture, but also information architecture (and information management).

Business alignment With the business alignment approach to IS strategy definition, the selection of the application portfolio is driven primarily by the business objectives and information needs. Enterprise resource planning to support, for example financial applications is an example of this approach.

A problem with the alignment mindset? Computer Weekly (2003) reported the comments of Jean-Louis Previdi, director of research at analyst group Meta which suggests the danger of this approach. He said: ‘IT directors need to change business perceptions of IT as a cost centre or face having their IT departments outsourced.’ He told IT directors to manage the expectations of the whole enterprise and stop trying to align IT with the business, adding: ‘A chief financial officer will never say he is aligning finance with the business IT is the business.’ ‘CIOs are change agents for the enterprise and should speak in terms of value, accountability, finance and return on investment across the whole business.’

Techniques for integration of IS with business 1. Direct communication using regular or ad-hoc meetings and e-mailed reports and memos. 2. Liaison roles such as when an IS person is co-opted into the line-of-business operation. 3. Temporary task forces such as an IS project team. 4. Permanent teams such as an IT Steering committee. 5. Integrating roles where the IT person may lead a business process innovation team for example. 6. Managerial linking roles such as product management involving both a marketer and an IT person.

Business impacting The business impacting approach involves identification of innovative applications for information systems which can potentially deliver competitive advantage since other competitors in the sector are less likely to use them. This often implies the early adoption of relatively new technologies. The identification and adoption of Internet technologies for customer relationship management in the late 1990s is an example of the type of applications that can be selected through an impacting approach. Driven by value creation.

Applications portfolio Figure 6.18 Applications portfolio Source: Ward and Peppard (2002)

Applications portfolio analysis Strategic. Applications that are critical to sustaining future business strategy. Test: Results in a clear competitive advantage for the business? Enables the achievement of specific business objectives and/or critical success factors? Key operational. The organization currently depends on these applications for success (mission critical). Test: Overcomes known business inefficiencies? Support. These applications are valuable to the organization but not critical to its success. Test: Does it improve the productivity of the business and so reduce long-term business costs? Does it enable the organization to meet statutory requirements? High potential. These applications may be important to the future success of the organization. Test: Likely to provide future benefits, not yet quantified.