l oo A sT es in us B

Assessing I/T and Business Alignment

By Jerry Luftman Professor, Stevens Institute of Technology

Includes: A scoring sheet for each of the six alignment categories A tally sheet to help synthesize the data

Assessing I/T and Business Alignment

in

Level 1 Without Process

(No Alignment)
I/T management lacks understanding

Level 2 Beginning Process

Level 3 Establishing Process

Level 4 Improved Process

Level 5 Optimal Process

(Complete Alignment)

Communication
practices

Understanding of business by I/T

1 1 1 1 1 1

Limited understanding by I/T management Limited understanding by managers Newsletters, reports, group e-mail One-way, somewhat informal

2 2 2 2 2 2

Good understanding by I/T management Good understanding by managers Training, departmental meetings Two-way, formal

3 3 3 3 3 3

Understanding encouraged among I/T staff Understanding encouraged among staff Formal methods sponsored by senior management Two-way, somewhat informal

4 4 4 4 4 4

Understanding required of all I/T staff Understanding required of staff

5 5 5 5 5 5

Understanding of I/T by Managers lack understanding business

Casual conversation and meetings Business to I/T only; formal

Organizational Learning Style and ease of access

Learning monitored for effectiveness Two-way, informal and flexible

Leveraging intellectual Ad-hoc assets I/T-business liaison staff

None or use only as needed

Some structured sharing emerging

Structured around key processes

Formal sharing at all levels

Formal sharing with partners

Primary I/Tbusiness link

Facilitate knowledge transfer

Facilitate relationshipbuilding

Building relationship with partners

Assessing I/T and Business Alignment

in

Level 1 Without Process

(No Alignment)
Technical only

Level 2 Beginning Process

Level 3 Establishing Process

Level 4 Improved Process

Level 5 Optimal Process

(Complete Alignment)

Metrics Metrics
practices

I/T metrics

1 1 1 1 1

Technical, cost; metrics rarely reviewed Cost/unit; rarely reviewed

2 2 2 2 2

Review, act on technical, ROI metrics Review, act on ROI, cost

3 3 3 3 3

Also measure effectiveness

4 4 4 4 4

Also measure business ops, HR, partners Balanced scorecard, includes partners Balanced scorecard, includes partners Includes partners

5 5 5 5 5

Business metrics

I/T investments measured rarely, if ever Value of I/T investments rarely measured Use sporadically

Also measure customer value

Link between I/T and business metrics Service level agreements Benchmarking

Business, I/T metrics not linked

Business, I/T metrics becoming linked With units; becoming enterprise wide May benchmark formally, seldom act

Formally linked; reviewed and acted upon Enterprise wide

With units for technology performance Sometimes benchmark informally

Seldom or never

Routinely benchmark, usually act

Routinely benchmark, act and measure results Routinely assess, act and measure results Practices and measures wellestablished

Formally assess I/T investments

Dont assess

1 1

Only when theres a problem

2 2

Becoming a routine occurrence

3 3

Routinely assess and act on findings

4 4

5 5

None Continuous improvement practices

Few; effectiveness not measured

Few, starting to measure effectiveness

Many, frequently measure effectiveness

Assessing I/T and Business Alignment

in

Level 1 Without Process

(No Alignment)
Not done, or done as needed

Level 2 Beginning Process

Level 3 Establishing Process

Level 4 Improved Process

Level 5 Optimal Process

(Complete Alignment)

Governance Governance
practices

Formal business strategy planning Formal I/T strategy planning

1 1 1 1 1 1 1 1

At unit functional levelslight I/T input At unit functional levellight business input Central/Decentral some co-location CIO reports To CFO Cost center by unit

2 2 2 2 2 2 2 2

Some I/T input and cross functional planning Some bus, input and cross functional planning Central/Decentral or federal CIO reports To COO Some projects treated as investments Also a process enabler

3 3 3 3 3 3 3 3

At unit and enterprise, with I/T

4 4 4 4 4 4 4 4

With I/T and partners

5 5 5 5 5 5 5 5

Not done, or done as needed

At unit and enterprise, with business Federal

With partners

Organizational structure Reporting relationships How I/T is budgeted Rationale for I/T spending Senior Level IT Steering Committee How Projects are Prioritized

Centralized or decentralized CIO reports To CFO Cost center, Spending is unpredictable Reduce costs

Federal

CIO reports To COO or CEO IT treated as investment

CIO reports to CEO Profit center

Productivity, efficiency

Process driver, strategy enabler

Competitive advantage, profit

Dont have

Meet informally as needed

Formal committees meet regularly

Proven to be effective

Also includes external partners

React to business or I/T need

Determined by I/T function

Determined by business function

Mutually determined

Partners priorities are considered

Assessing I/T and Business Alignment

in

Level 1 Without Process

(No Alignment)

Level 2 Beginning Process

Level 3 Establishing Process

Level 4 Improved Process

Level 5 Optimal Process

(Complete Alignment)

Partnership Partnerships
practices

Business perception of Cost of doing business I/T I/Ts role in strategic business planning
Not involved

1 1 1 1 1 1

Becoming an asset

2 2 2 2 2 2

Enables future business activity

3 3 3 3 3 3

Drives future business activity

4 4 4 4 4 4

Partner with business in creating value I/T, business adapt quickly to change Managers incented to take risks Processes are continuously improved Partner, trusted vendor of I/T services CEO is the business sponsor/ champion

5 5 5 5 5 5

Enables business processes

Drives business processes

Enables or drives business strategy

Shared risks and rewards Managing the I/Tbusiness relationship

I/T takes all the risks, receives no rewards I/T-business relationship isnt managed

I/T takes most risks with little reward Managed on ad hoc basis

I/T, business start sharing risks, rewards Processes exist but not always followed

Risks, rewards always shared Processes exist and complied with

Relationship/trust style Conflict and

mistrust Usually none

Transactional relationship Often have a senior IT sponsor/ champion

I/T becoming a valued service provider I/T and business sponsor/ champion at unit level

Long-term partnership Business sponsor/ champion at corporate level

Business sponsors/champions

Assessing I/T and Business Alignment

in

Level 1 Without Process

(No Alignment)
Cost of doing business

Level 2 Beginning Process

Level 3 Establishing Process

Level 4 Improved Process

Level 5 Optimal Process

(Complete Alignment)

Technology Technology
practices

Primary systems

1 1 1 1

Becoming an asset

2 2 2 2

Enables future business activity

3 3 3 3

Drives future business activity

4 4 4 4

Partner with business in creating value I/T, business adapt quickly to change Managers incented to take risks Processes are continuously improved

5 5 5 5

Standards

Not involved

Enables business processes

Drives business processes

Enables or drives business strategy

Architectural integration How I/T infrastructure is perceived

I/T takes all the risks, receives no rewards I/T-business relationship isnt managed

I/T takes most risks with little reward Managed on ad hoc basis

I/T, business start sharing risks, rewards Processes exist but not always followed

Risks, rewards always shared Processes exist and complied with

Assessing I/T and Business Alignment

in

Level 1 Without Process

(No Alignment)
Discouraged

Level 2 Beginning Process

Level 3 Establishing Process

Level 4 Improved Process

Level 5 Optimal Process

(Complete Alignment)

Human Resources
practices

Innovative, entrepreneurial environment Key I/T HR decisions made by: Change readiness

1 1 1 1 1 1 1

Somewhat encouraged at unit level Same, with emerging functional influence Change readiness programs emerging

2 2 2 2 2 2 2

Strongly encouraged at unit level Top business and unit management; I/T advises Programs in place at functional level

3 3 3 3 3 3 3

Also at corporate level

4 4 4 4 4 4 4

Also with partners

5 5 5 5 5 5 5

Top business and I/T management at corporate Tend to resist change

Top business and IT management across firm Programs in place at corporate level

Top management across firm and partners Also proactive and anticipate change

Career crossover opportunities Cross-functional training and job rotation Social interaction

Job transfers rarely occur

Occasionally occur within unit

Regularly occur for unit management

Regularly occur at all unit levels

Also at corporate level

No opportunities

Decided by units

Formal programs run by all units

Also across enterprise

Also with partners

Minimal ITbusiness interaction

Strictly a businessonly relationship

Trust and confidence is starting Technology and business focus; retention program

Trust and confidence achieved Formal program for hiring and retaining

Attained with customers and partners Effective program for hiring and retaining

Attract and retain top talent

No retention program; poor recruiting

I/T hiring focused on technical skills

Tally Sheet
Practice Categories
1 2 3 4 5 6 7 8

Practices
Understanding of business by I/T Understanding of I/T by business Organizational Learning Style and ease of access Leveraging intellectual assets I/T-business liaison staff I/T metrics Business metrics 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5

Averaged Scores
2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3.5 3.5 3.5 3.5 3.5 3.5 3.5 3.5 3.5 3.5 3.5 3.5 3.5 3.5 3.5 3.5 3.5 3.5 3.5 3.5 3.5 3.5 3.5 3.5 3.5 3.5 3.5 3.5 3.5 3.5 3.5 3.5 3.5 3.5 3.5 3.5 3.5 3.5 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4.5 4.5 4.5 4.5 4.5 4.5 4.5 4.5 4.5 4.5 4.5 4.5 4.5 4.5 4.5 4.5 4.5 4.5 4.5 4.5 4.5 4.5 4.5 4.5 4.5 4.5 4.5 4.5 4.5 4.5 4.5 4.5 4.5 4.5 4.5 4.5 4.5 4.5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5

Average Category Score

Communication

Metrics

9 Link between I/T and business metrics 10 Service level agreements 11 Benchmarking 12 Formally assess I/T investments 13 Continuous improvement practices 14 Formal business strategy planning 15 Formal I/T strategy planning

Your Alignment Score

Governance

16 Organizational structure 17 Reporting relationships 18 How I/T is budgeted 19 Rationale for I/T spending 20 Senior Level IT Steering Committee 21 How Projects are Prioritized 22 Business perception of I/T 23 I/Ts role in strategic business planning 24 Shared risks and rewards 25 Managing the I/T-business relationship 26 Relationship/trust style 27 Business sponsors/champions 28 Primary systems

Partnership

Technology

29 Standards 30 Architectural integration 31 How I/T infrastructure is perceived 32 Innovative, entrepreneurial environment 33 Key I/T HR decisions made by: 34 Change readiness 35 Career crossover opportunities 36 Cross-functional training and job rotation 37 Social interaction 38 Attract and retain top talent

Human Resources