Technology Supply and Business Demand: How's Your Alignment?

By Steve Discher
Senior Vice President

The topic of technology and business alignment inevitably comes up in almost every client assignment we conduct. Either it’s the executive questioning their technology cost, the CIO who attempts to drive costs down while facing increased business pressure for new systems, or the CEO who hears both sides and questions the impact and value technology investments have on the bottom line.  Especially now, as the economy continues to strengthen and increased technology spending is considered, we see the debate intensifying.

Addressing the issues often comes back to considering how well Technology Supply and Business Demands are aligned.  In sizing up the potential problem, there are three questions we ask:

1. How well is your Technology Supply aligned with the IT marketplace?
   In other words, is your IT delivery as efficient as it should be?  Objective, fact-based comparisons against industry peers and outsourcers are a useful and often revealing exercise for the business and IT.  In addition, we ask whether your IT infrastructure and applications are adequate compared to today’s technologies and trends.  For example, you may have an extremely efficient IT shop, but if the technology is not upgradeable, you may have unsustainably low IT costs and a large technology investment in the future (i.e., pay now or pay later).
2. How well are Business Demands aligned with the organization and its strategy and behaviors?
   All too often, there is a misconception that the business strategy is clearly understood by all levels of the organization.  Couple this with accountability gaps or the wrong behaviors and you may have problems.  For example, we often see IT decisions delegated to organization levels which either do not understand or are not accountable for delivering material results.  Initiatives end up being launched which everyone presumes are good ideas, but in fact have little to do with achieving the strategy.  The result is value leakage, or even worse, wasted effort.  Another common symptom is where organizations look to IT automation as the primary alternative to achieving results.  Check the results of your projects.  Also, check your project list.  If they are all IT projects, you may have a problem with internal business alignment. 

3. How well are the Business and IT aligned? Do the business and IT believe they are in step with one another?
   While comprehensive studies and plans are important (e.g., IT Strategic Plan), the easiest diagnosis is to survey business executives and IT.  We often find highly disparate views resulting in varying degrees of value leakage or lost opportunity.  Examples of this can be found in Nolan’s 2003 insurance IT study (www.renolan.com/techsurvey), which compared the responses to identical questions asked of business and IT executives.

   Almost two-thirds of the IT respondents (62 percent) were satisfied, while only about a third (37 percent) of the business respondents were satisfied.  Those are disturbingly low satisfaction levels, especially on the business side.  In another example from the study, 30 percent of IT respondents and 57 percent of business respondents believed business process impacts are measured and documented before major IT projects are begun.  In other words, major decisions about systems initiatives are made without the preparation of a sound business case and without an understanding of expected benefits.

So what are the benefits?

If you think that improved alignment is a “soft” issue, think again.  It can cost you dearly in ongoing spending, or it can realize plenty in additional value.  Improved alignment does yield significant and real benefits.

For example, improved alignment of IT supply with the technology marketplace often yields savings of 10 to 40 percent.  Benchmarking, outsourcing, contract renegotiation, and process and organization redesign can all contribute to better, more efficient IT delivery.

Conversely, alignment within the business and between IT not only yields considerable savings but also significant value to the business in the form of higher-impact projects. For example, a client recently reduced business applications demand by more than 20 percent without cutting a single high-value business program. Increased accountability, improved prioritization processes, governance changes and fact-based analysis are all important levers to achieving these results.

While the debate will most certainly continue, the facts show that it is important and materially valuable to address and resolve your business and IT alignment issues. Left unaddressed, the results can cost you real money now and into the future.