SRT510 Business Case Studies

Aligning IT Investments With Business Strategy

Strategic Alignment

Strategic Alignment:“The whole point of aligning IT with the

business is to provide value by using technology in a way most profitable to the organization.”

http://www.informationweek.com/news/management/showArticle.jhtml?articleID=16400834&pgno=2&queryText=&isPrev=

Strategic Alignment

Alignment drives IT investment:Reactive

to market conditions and competitors' uses of technology

Collaborative working with the business to define solutions to

business problems

Innovative to advance new business objectives

Strategic Alignment

IT alignment….a tool for:“…creating significant new profit or increases

in the size of your customer base or improvements in your brand. Almost always, increases in value are eventually measured in terms of increased profits.”

http://www.cio.com/article/333713/_Tips_on_IT_Alignment_That_Can_Generate_Profit

Strategic Alignment

Proper IT Alignment requires:Documented strategic goals of the organizationList of initiatives currently proposed to support

those goals Identification of ways in which IT could further

contribute to the goalsPrioritizing these initiativesPost-implementation audit of initiatives to see if

goals were achieved.

Organization’s Strategic Goals

Examples: "Increase our market share by 2 percent over

the next 12 months" "Open up a new market in the Pacific Rim of at

least $50 million in sales in the next 18 months" "Increase sales by 15 percent annually for the

next three years.“ Respect client information—no client data will be

used for corporate gain.

In Smaller Organizations:

Often time specific written strategic goals don't exist except as vague notions in the head of the CEO

Responsibility then falls on the CIO to work with the senior leadership team to create strategic goals

In Larger Organizations:

The CEO often looks to the CIO to take the lead in working with the executive team to develop strategic goals.

These goals then become the target that the entire senior leadership team focuses on for the next 12 to 24 months.

Establishing An Alignment Plan

For an IT Investment Being Considered:Only accept an IT Investment return

(payback, NPV, BCR, IRR) that supports the business strategy in terms of $.

Only accept an IT Investment that supports any stated moral/ethical beliefs that are part of the strategy.

Put an audit plan in measure that the IT Investment did indeed succeed.

Example

Corporate Strategy:“Client security of information is our top

priority”We want to increase our security facility

revenue by 20% over 3 years.We cannot afford to consider any investment

with an IRR of less than 15%.

Example Alignment Plan

For Project to upgrade security equipment in the facility:The project must ensure/increase client

information security.Must contribute (whole or part) to increase in

revenue of 20% over 3 years IRR must be greater than 15%Project must have an audit plan.

Example Alignment Plan

Business Goal Project to Upgrade Security Facility

Increase/Ensure Client Information Security

•This project is adding a second layer of security to a network that already has a proven track record—zero data loss

Increase revenue by 20% over 3 years

•Expected to increase security facility revenue by 15% after 3 years (see attached analysis). This will contribute 4% of the desired organizational revenue increase.

IRR > 15% •IRR is 17%, detailed analysis attached

Project has audit plan •Plan is in place for 3 years of quarterly audit—see attached for details.