It used to be that a typical enterprise IT department performed its functions in relative isolation from the other departments that made up the company. It provided a service to those other arms, such as finance, human resources and marketing, whereby it ensured whatever computing tools they used were functioning properly.The thought of IT playing any kind of larger role by actually contributing to the strategic success of the business was a foreign concept.
Not so today.
With the rise of robust software tools and instant communication methods, IT is increasingly being called upon to help steer strategic thinking. Nevertheless, inherent complexities linger from the legacy of earlier eras in computing. Aligning IT with the larger business has become one of this decade’s most pressing — and daunting — challenges for organizations of all sizes.
“(Previously), the IT department was something that would have been added as a services department. If something was wrong you went to them,” says Professor Rod McNaughton, Eyton Chair in Entrepreneurship at the University of Waterloo in Waterloo, Ont.
He adds that this type of role was often viewed positively by those in IT. “One of the ways IT could create power for themselves was to be seen as specialists who said, ‘Other people can’t do this, so you have to come to us to get service.’ But if you function in that way it doesn’t create a very strategic view of what IT can do.” Reengineering this mindset, and that of the other parts of an organization who still view IT as a pure internal-oriented service, is a challenge McNaughton sees some organizations still grappling with.
At one firm where he recently did some consulting work, for instance, the IT people were telling him that they saw opportunities “all the time” for great new services for customers. “But the internal process for innovation was set up in such a way that it couldn’t flow through to marketing and to the board level....It only flowed in the opposite direction.”
There are also, however, many examples of firms that have successfully aligned IT efforts with those of the business. Indications that alignment will only become more prevalent can be seen in the changing demographics of many companies, McNaughton says.
“There is a big crop of managers that are about to retire, and the new people who are going to have to fill those positions are probably going to be even younger than they would have been [in other eras]. And they have been educated in a time period when IT was ubiquitous, so that is also part of the issue.”
Going to school
Much of the curricula that exist in post-secondary educational institutions are beginning to take into account the role IT plays in the business process. Many Masters degrees, for instance, combine courses both on IT and management skills. These streams are designed to accept students possessing either an undergraduate business background or an undergraduate computer science background, McNaughton says.
“They do the core courses together and it forces them to interact more, and to learn a common language. These are new integrated educational experiences.”
Firms can replicate this form of cross-pollination themselves when, for instance, they create project-based teams for creating a new service, McNaughton adds.
“It would be very unusual for an IT person to spend any time in marketing or sales, but it could be a very valuable [experience].” Spending time in those areas and then moving back into a more managerial area within IT will, in the long run, be beneficial, he says.
“Their tech skills are going to wane a bit, which is a loss, but they are going to gain the basics of the technology and they get a strategic overview of the whole organization.”
Language barriers In many companies, one of the biggest impediments to IT-business alignment is the simple fact that both sides aren’t speaking the same language — and we’re not talking English, Spanish or French here.
IT department personnel tend to speak in a dialect of performance metrics, which might have to do with security, downtime or some such concern.
“If you make an argument to business using these metrics, you are not making any impact,” McNaughton says. “They want to know how it will help them sell more products or increase service levels to customers. You have to take whatever the technical thing is and translate it into what creates value.”
Fragmentation
To a large degree, the level of success a company reaches around IT-business alignment depends upon the structure in place within that organization. In some instances, the inherent fragmentation between supplier and purchaser can sufficiently scuttle any attempts to achieve alignment. McNaughton uses the health care sector as an example.
“It would be great if you could walk into any doctor’s office and they could pull up a common file for you about all the tests you’ve ever had done. That would mean you could easily switch between physicians.”
One barrier to that, he adds, is that “doctors are basically self-employed corporations, so they have to make the individual investment in the infrastructure, and you have to get agreement on the standards of communication between them.”
Needless to say, such cohesion would not be attained easily and no one is holding their breath for it to happen.
By way of contrast, McNaughton offers the example of the automotive industry.
“[Car manufacturers] have a large number of suppliers but the car company has much more power over them because the suppliers are more dependent on that single purchaser,” he says. “With these large [industries] you see pretty good integration.”
Bubble benefits
For McNaughton, the shift happening around IT-business alignment comes down to a simple idea. “It’s about, ‘How do I build a business around a fax machine?’ rather than ‘What do I use a fax machine for?’ The issue is about how IT starts to transform the organization and the way business models work, as opposed to simply making something cheaper or faster or more efficient.”
While the bursting of the dot-com bubble in the early part of this decade is generally viewed as a negative occurrence, McNaughton believes that this “business-around-a-fax-machine” attitude was allowed to flourish, and is still resonating today.
“Large companies are picking up on a lot that was learned during that time frame,” he says. “A startup during the bubble had to worry about brand, a physical presence, delivery, etc., and that’s what killed their business.”
Big business picking up on the ideas of the dot-com era today, however, don’t have to worry abut those kinds of things because they are already in place in such organizations.
“They just have to worry about how to integrate into their business strategy all the wonderful things that e-business can do.” Another factor driving the synergy of IT with the business side of the house is related to Nick Carr’s theory of IT not mattering — that technology has essentially been commoditized and therefore does not offer any adopter a distinct competitive advantage simply by possessing it.
McNaughton observes, however, that it is not what technology you have, but rather, what you do with it. “Almost everyone has equal access to this technology, so it becomes a question of, ‘What can I do with this technology that others can’t do with it?’ The capabilities are not technological anymore...they relate to other parts of the business.”
As a result, this is where IT has an opportunity to align with the strategic planning efforts.
The farming-out factor
Another driver of IT-business alignment, according to McNaughton, is related to the increased tendency of companies to outsource much of their business to third-party providers. The mantra of business schools in the 1960s, he says, was how to manage within your organization.
“What you see now is (a question of) how do you manage between businesses. The organizational structure is changing so that more and more things are outsourced. You acquire more things from external vendors, and the issue becomes dealing with outside partners — how do I get them to do what I want them to do because I don’t have control over them?”
According to McNaughton, this is where IT is poised to make one of its biggest marks on the business world in the years to come.
“IT can play a really big role because it provides a means for monitoring and communication. To me, that’s the new application. In the 1970s, it was dealing with large volumes of data. The new application of IT that is going to solve a big business problem is about monitoring coordination, control and communication between organizations that do not have ownership relations.”
Helping to facilitate this type of communication are a number of new technologies that enable business to spread beyond its own four walls. Mobile technologies, for example, now allow workers to work in ways previously thought unimaginable. “They are helping sales people go outside the organization,” says McNaughton. “Many of them are on site with clients, sometimes for weeks at a time. Giving them data in real time helps with that integration.”
Another technology that represents the entire movement from internal responsibilities to those that now look outward is that of the extranet. These networks are set up to make communication between, for example, a service provider’s staff working at a customer’s location and that provider’s home office. Previously, when the bulk of correspondence flew only between employees inside their own locations, an intranet was sufficient. “An intranet used to be fine because [communication] was all internal, but now you have to go outside,” says McNaughton.