Prepared by Nirankush Dutta (Research Scholar)

Contents
Chapter 13: IT Strategy & Planning.........................................................................................................................2
Chapter Note............................................................................................................................................................2
Alignment of Business and IT Strategies.............................................................................................................2
IT Strategy Initiation............................................................................................................................................3
IT Strategic Planning............................................................................................................................................3
Outsourcing, Offshore Outsourcing, and IT as a Subsidy....................................................................................4
Managerial Issues.................................................................................................................................................5

Chapter 13: IT Strategy & Planning

Chapter Note
Alignment of Business and IT Strategies
Business strategy sets the overall direction for the business. The information systems strategy
defines what information, information systems, and IT architecture are required to support the
business. Based on the prioritization of needs, the information technology strategy indicates
how the infrastructure and services are to be delivered. Information technology- business
alignment refers to the degree to which the information technology division understands the
priorities of the business and expands its resources, pursues its projects and provides
information consistent with these priorities. IT business alignment includes two facets: (1) IT
alignment and (2) IT strategic alignment.
Governance Structure for IT-Business Alignment
The governance structure within an organization should be designed to facilitate IT-Business
alignment. The CIO oversees the IT division and is responsible for the companys technology
direction.
Achieving IT-Business Alignment
IT-Business alignment can be fostered within an organization by focusing on activities central
to alignment.
1. Understanding IT and Corporate
Planning

5. Shared planned goal

2. CIO is a member of senior

management

6. Deep end user involvement

3. Shared culture and good

communication

7. Joint architecture / portfolio

selection

4. Deep commitment to IT planning

by senior management

8. Identity of plan factors

Challenges in Achieving IT-Business Alignment

The key to achieving IT-business alignment is for the CIO to attain strategic influence. CIOs
must be both business and technology savvy. And have a more strategic role in (a) promoting
collaboration between IT and organizational business units, (b) persuading senior
management about the importance of IT to the business, (c) contributing to strategic planning
and business growth initiatives, (d) identifying opportunities for business process automation
and improvement and (e) improving internal and external user experience and satisfaction.

Successful alignment also requires the development of a partnership between the IT division
and business management. Another challenge to successful alignment is clearly defining ITs
role in an organization.

IT Strategy Initiation
The Critical Strategic Role of IT
Companies must determine the use, value and impact of IT to identify opportunities and
create value that supports the organizations strategic vision. IT can add value to a company
either directly by reducing the costs associated with a given activity or subset of activities or
indirectly by increasing revenues. IT can also play a strategic role in a firm through enabling
a temporary or sustained competitive advantage. IT has the capability to contribute to
improvements in many domains of business activity through technological resources,
technical capabilities and managerial resources.
The Value of IT to the the Business
The CIO must communicate clearly the value of IT to the business so that the potential and
role of IT are understood. Being able to explain how IT is providing value to the business is a
critical skill that can be facilitated with an Opportunity Matrix of Business Improvement
with IT.
A Partnership between the IT Division & Business Management
Inclusion of the CIO on the CEOs senior management team promotes a partnership between
the CIO and the CEO. The CIO must continually educate and update the other executives in
the C-suite (chief executive) team about technological advances and capabilities relevant to
the business needs. The partnership between the IT division and business management can
extend to fuse with the business, wherein the CIO becomes responsible for managing some
core business functions. Alternatively, the CIO can work directly with other top executives to
influence strategic directions, suggest changes in internal business processes and lead a
diversity of initiatives that encompass more than just technology projects. To realize the
greatest potential from IT, the business strategy must include the IT strategy and the use of IT
must support the business strategy.

IT Strategic Planning
A good IT planning process can help ensure that IT aligns and stays aligned within an
organization. Because organizational goals change over time, IT strategy also has to be a
continual process. The IT planning process may result in a formal IT strategy or may result in
a re-evaluation each year of the existing portfolio of IT resources to be developed.
IT strategic planning is the organized planning of IT resources done at various levels of the
organization.

The IT Strategic Planning Process

The output from the IT planning process should include an evaluation of the strategic goals
and directions of the organization and how IT is aligned, a new or revised IT vision and
assessment of the state of the IT division, a statement of the strategies, objectives and policies
for the IT division and the overall direction, requirements and sourcing of resources.
Tools and Methodologies of IT Strategic Planning
Most of the methodologies start with some investigation of strategy that checks the industry,
competition, and competitiveness and relates them to technology. Others help create and
justify new uses of IT. Some of the methodologies are:
(1) Business Service Management

(4) Critical Success Factors

(2) Business Systems Planning Model

(5) Scenario Planning

(3) Balanced Scorcecard

Outsourcing, Offshore Outsourcing, and IT as a Subsidy

IT is an enabler only and it is complex, expensive and constantly changing. Since IT is
difficult to manage for many companies, the most effective strategy for managing IT
effectively may be outsourcing.

Outsourcing
Outsourcing is contracting work to be completed by an outside vendor. The major reasons for
outsourcing are: (a) desire to focus on core competency, (b) cost reduction, (c) improved
quality, (d) increased speed to market and (e) faster innovation.
Outsourcing may be (a) transactional, (b) co-sourcing alliances, or (c) strategic partnership in
nature. Outsourcing may lead to improved financial, technical, management, human
resources, quality and flexibility related capabilities. But there are also disadvantages of
outsourcing arising from (a) shirking, (b) poaching and (c) opportunistic reprising practices.
Other losses may occur because of irreversibility of the decision, possible breach of contract
by the vendor or its inability to deliver, loss of control over IT decisions, loss of critical IT
skills, vendor lock-in, loss of control over data, loss of employee morale and productivity and
uncontrollable contract growth.
The Offshore and Global Outsourcing Debate
Offshore outsourcing is outsourcing with a vendor located in a country other than the one in
which the client company is based. This trend is primarily due to global markets, lower costs
and increased access to skilled labour. Offshore outsourcing can reduce expenditure in the
long term and improve the quality of IT services delivered. But organizations must balance
the risks and uncertainties involved, including (a)cost-reduction expectation, (b) data security
and protection, (c) process discipline, (d) loss of business knowledge, (e) vendor failure to
deliver, (f) scope creep, (g) government regulation, (h) cultural differences, (i) turn-over of
key personnel and (j) knowledge transfer.
Evaluating Outsourcing
Outsourcing relationships are assessed on how well business value is delivered. Balanced
scorecard is a useful tool in measuring the business value of outsourcing relationships in both
single vendor as well as multi-vendor approach.

Managerial Issues
1. Aligning IT Strategy and Business
Strategy

4. Undertaking the
Planning Process

2. Organizing for Effective Planning

5. Dealing with Outsourcing and Offshoring

3. Initiating IT Strategy

IT

Strategic