Information Technology and Business Alignment: Why it is Important
Introduction: What is IT Business Alignment and Why it is Important
The saying about the Blind Men and the Elephant in which three blind men touch the Elephant and state different things without knowing that it is an Elephant, firms and organizations must ensure that their IT and business strategies are complementary and supplementary to each other and not like the blind men in the parable quoted above.
IT Business alignment is defined as the dynamic actualization of organizational goals and objectives and the Operationalization of the IT strategies according to those objectives. Typically, the organizational objectives are expressed in terms of improved financial performance and sustained market competitiveness.
For instance, organizations can state that using IT, they hope to increase sales and revenues by 20% and reduce costs by 10% and increase profits by 15% and achieve profitability. Further, organizations might also want to state their market based objectives such as increased market share wherein they hope to penetrate into newer segments and extend their reach in established segments with IT.
Thus, IT business alignment is the organizational capacity to leverage the former for the success of the latter. This means that for an organization to claim that its IT and business strategies are aligned, there must be harmony between them and little or no friction between the decision makers in corporate/business departments and the IT department.
IT business alignment is also defined as the organizational imperative to actualize a positive relationship between the use of information technologies and stated and accepted measures of financial and business performance. However, IT business alignment is easier said than done in practice as there exist significant gaps between what the business wants and what the IT systems deliver. This is mainly due to an inadequate understanding of how IT systems work and how they deliver value as well as due to cultural aspects in addition to a lack of coordination and cooperation between the business and IT departments.
Often, one hears the complaint that IT staff talks in arcane terms, which is the refrain among the business and corporate executives. On the other hand the IT staff point to how the business and corporate departments expect the moon from an IT system when in reality an IT system delivers more or less what the realistic requirements state.
Many CIOs also complain that CEOs, CFOs, and COOs often think of the CIOs as Magicians who can help the organizations reach the stars. Further, they also are frustrated because in practice, IT systems and their Operationalization are according to the mutually accepted requirements and not something, that manifests from thin air.
The Six Steps to Actualize IT Business Alignment
IT business alignment is usually referred to as the Holy Grail which the organizations must strive for as there are substantial benefits of aligning IT and business strategies in terms of the significant value that can be added to the organizations provided they leverage IT strategically, efficiently, and efficaciously. To do this, organizations can do six things or six characteristics that would ensure that IT and business are aligned with each other.
IT Business Alignment, Governance, and Transformation
The key to successful IT business alignment is the creation of value at each step of the value chain of the organizations internal and external processes. This value is created through technology as well as process improvements. Since we are discussing the role of IT in creating value, we can think of IT as the enabler and transformer of organizational processes that lead to increased productivity and higher value at each chain of the internal and external value chain for the organizations.
Further, IT is used by many organizations to automate, integrate, assimilate, and deliver real time information in the business processes. Thus, the business driver in these cases is the leveraging of synergies between these processes that were otherwise inefficient.
Moreover, organizations also use IT to ramp up their operations which are known as actualization of the benefits from the economies of scale. Apart from that, IT is used to expand into newer geographical and virtual market segments as automating and using IT often results in an anywhere, anytime, everywhere, every time experience for the end users.
For all these to happen, the IT and the business functions must work together as a team and in a synergistic manner. IT must become a tool of transformation as well as a source of sustained competitive advantage.
For instance, if your bank offers 24/7 virtual banking as well as an extensive network of ATMs would you prefer a competitor whose banking hours are restricted and which forces you to visit the branch for even minor transactions? This is the power of IT and which can only be achieved if the business strategies and the IT strategies complement and supplement each other.
Conclusion
In real world organizations, it is often the case that there are ego clashes, turf battles, resistance from vested interests, and pushback from established power centers for any new initiative.
Considering the fact that IT is seen as a positive force for change, it is in the interests of the organization to avoid these friction points and instead align their IT and business strategies for the continued success of the organization.
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