This Executive Report covers the
important topic of business/IT alignment in the e-business realm. It
examines the Internet's unsurpassed ability to exchange information, and
its de-constructive affect on business as we know it. It explores how
these same forces affect IT organizations, and the paths by which IT can
re-construct itself. The report also describes an approach to align IT to
the corporate e-business vision through an assessment of IT's current
state and desired future state, and focuses on the people, process,
portfolio and platform components that are affected by the transformation.
E-business is ubiquitous. Another holiday
season has passed with record online sales. The buzz around January's
Superbowl game was more about the splashy and pricey "dot com"
ads than it was about the athletic contest. Pure play Internet companies
still enjoy stratospheric market valuations at the time of writing. Why
this obsession?
The Internet's ability to exchange
information in entirely new ways has rewritten the rules by which we do
business. Access to information shifts the balance of power in
relationships, eliminates artificial borders and demands new ways of
assessing value. While technology may have started the e-business
revolution, business and economic forces now drive it. In a manner eerily
reminiscent of the 1980’s leveraged buy-out era, businesses can be
deconstructed into value-adding and commodity components. The value of
information is now de-coupled from the value of products and services.
Products and services that at one time commanded a premium now must
compete as commodities, while value is created through standards,
information and access to buyers.
As the revolution continues to unfold,
the drastic changes reshaping the business world will also reshape IT
organizations, impacting everything from the organization’s mission to
its structure and processes. E-business offers IT organizations the
opportunity to increase their stature and value to their corporations
significantly. By shifting from a tactical to a strategic role, IT can
help shape their company’s e-business vision and directions, and
measurably impact the company’s performance.
How should IT change? Expecting every IT
organization to match the nimbleness and creativity of the best competitor
in every functional category is naive and unrealistic. Success in a
rapidly evolving e-business world requires playing to one's strengths. IT
organizations must honestly assess where their strengths lie and how they
can use those strengths to offer the greatest value to their corporations.
IT organizations have typically tended to
operate from the middle of the value-chain down, with a heavy
concentration in commodity services. In an e-business future, IT
organizations will face increased competition in their commodity services
as corporate boundaries crumble and specialty services firms appear. To
move up the value-chain, IT must become more business-focused and assume a
larger role in the origination and strategic implementation of
value-creating ideas.
Two basic paths are open to IT. In the
first path -- really an updated version of the status quo -- IT keeps its
traditional role as builder, manager and operator of IT assets, but
applies skills, process and technology upgrades to support e-business
applications. IT sticks with its strength in technology and emphasizes its
operational efficiency, providing value through its ability to outperform
its competition. In the second path -- the value-driven IT organization --
IT seeks to add capabilities that enhance business value and offloads
commodity activities more effectively performed elsewhere. This path
concentrates on the strategic support of e-business initiatives rather
than the long-term operation of the resulting applications.
No matter which path IT chooses,
achieving alignment between IT and business is impossible unless both
sides have a common goal and shared objectives. Identifying a core,
unifying vision of the company's e-business direction sets this common
goal and allows IT and other company areas to develop and implement
appropriate strategies.
Setting a vision is the first step. Next,
the company must bring its IT organization into line with that vision.
This process involves an assessment to determine if IT is currently
capable of supporting the vision, and what steps may be needed to gain the
desired capabilities expeditiously. The assessment process consists of
four standard steps: define the desired state of IT, assess the current
state of IT, determine the gaps between those two states and devise a plan
to eliminate those gaps.
When improvements are necessary, IT can
pursue an evolutionary or revolutionary implementation
approach. An evolutionary implementation introduces changes in a piecemeal
fashion over time, requires less of an initial investment, and allows
technology and best practices to be incorporated as they appear. In
contrast, a revolutionary implementation calls for immediate, drastic
changes to an IT organization. Compelling business reasons may dictate
this approach, or the IT assessment may have indicated significant
deficiencies. A revolutionary implementation requires a greater up-front
investment, but reaps considerable benefits once the implementation is
complete.
Any investigation into IT's e-business
readiness must explore the four fundamental building blocks of people,
process, portfolio and platform components. Although each component
focuses on a discrete aspect of IT, all are inter-related; changes to one
component will have ramifications on others.
- People
are at the core of every IT organization. When properly trained, managed
and motivated, they can accomplish almost anything; when ineffective,
nothing can compensate. To assess the people aspect, an evaluator should
focus on the organization and management of IT staff, available skills
and skill levels, and resource allocation and productivity issues.
E-business ventures may require completely new organizational structures
and expertise to complement their existing counterparts.
- Processes
define how IT does its work. They serve as an overlay for the people,
portfolio and platform pieces of IT. Strong processes can enhance
productivity, ensure consistency and improve the quality of all IT
deliverables. E-business programs may require the creation of new
processes, the modification of existing processes, or the combination of
multiple processes, and may impact both business and IT areas.
- Portfolios
contain
IT assets such as internally developed applications, commercial or
packaged applications, and various sub-pieces that comprise those
applications such as documentation or test data. These assets represent
the accumulated intellectual property of the company, and have
significant value. To support an e-business program, IT may need to
create new assets and integrate them with existing ones.
- Platform
components include the technology infrastructure -- hardware, network
equipment and other embedded technology -- which underpins IT and the
company. These items are physically distributed throughout an
enterprise, and much effort is required to configure, manage and upgrade
these items. Implementing e-business capabilities will affect a
potentially significant portion of platform components, and may require
a large capital investment.
Rather than simply react to the pressures
of a web-based world, companies can take a proactive stance by embracing
e-business and defining their own strategy and vision. For corporate
survival, IT must to align itself to the corporate e-business vision. In
the end, IT organizations must choose an evolutionary or revolutionary
path to take them to the next level.
