Aligning Information Systems and Business Strategy - Research Paper Example

Aligning Information Systems and Business Strategy: A Case Study The alignment between the functions of the information system (IS) and the strategic objectives and interest of the organization as a whole is one of the central concern for senior executives in the information technology department. This paper provides a comprehensive analysis of the efforts by a large corporation in seeking to achieve and maintain a business and Information technology alignment. The paper analyzes the strategic IT and Business planning process as the vehicle for achieving the alignment, as well as analysis of the relationship between communications, strategic information technology planning, shared visions, and organization structure (Wyatt-Haines, 2007:275). This report also presents a comprehensive observation of the complex and subtle relationship that determine the success or failure of an organization. With a brief analysis, the report concludes the case, presenting a few suggestions drawn from the study. Introduction According to a 2004 survey by CSC Consulting involving more than 500 Information System executives, the main concern for IS executives is the alignment of IS to organizational goals. Currently, more organizations are embedding information system and information technology functions into their business activities, increasing the necessity for alignment between corporate goals and IS (Keyes, 2005:169). The central focus of this report is the strategic Information technology and Business plan as one of the ways of achieving alignment. The paper provides a comprehensive analysis of GTE Government Systems Corporation and its three-year efforts in developing a strategic IT plan (GTESystems, 2012:24). GTE Government Systems Corporation GTE Government Systems Corporation is a subsidiary of GTE Corporation, a communications giant. The headquarters of the corporation is in Needham, Massachusetts. The principle customer of the organization is the Federal Government, which makes about 80% of the corporation’s revenue. The corporation deals with space and earth-based systems, voice and data communication software and hardware, telecommunication installation, maintenance, and operation of computer-based network systems, intelligence imaging services, and electronic warfare (Cale and Kanter, 2000:1). All these products display the characteristic leading edge technology in image technology, computing, and communication. Fig1: Simplified Organization chart for GSC. Available from http://jitm.ubalt.edu/IX-1/article1.pdf. The corporation has five lines of products that the corporation develops and markets to customers: Communication systems, service sector, Systems Operation, Electronic Defence System, and Service sector. Moreover, the corporation adopts a corporate organizational structure that incorporates vice presidents for finance, legal, human resources, business development, and engineering, as well as their staffs. The corporation runs technically, with majority of the management having engineering backgrounds. In 1991, the company realized $2.1 billion in revenues, but they soon went down to about $1.3 billion in 1994, declining further to $1.2 billion in 1995 and 1996 (Cale and Kanter, 2000:2). The decline in revenues, resulting from decreasing military spending, prompted the management of the company to initiate campaigns to cut costs to ensure that necessary spending occurred due to relevant and effective expenditures only. Among the targets was the IS functions at the corporation. The paper presents the functions of the IS before the cost cutting measures, decision of executives about the functions of the IS, and the planning process resulting from the reorganization (Khosrowpour, 471). IS Prior to Cost Cutting Fig2: Partial Organization Chart before IS Reorganization. Available from http://jitm.ubalt.edu/IX-1/article1.pdf. The IS at the corporation was predominantly centralized. Most of the products at the corporation rely heavily on technology and engineering, thus the IS function reported to the engineering vice president. Nonetheless, there were IS units within all divisions, but these reported to corporate technology officers, with a faint reporting relationship to division general managers. The responsibility of the IT group was designing and operating all the IT applications of the company, whether for inclusive or exclusive use in the corporation (Bansal, 2009:164). This led to a conflict between the decentralized business structure and the centralized IS function of authority. As the initialization of cost-cutting pressures progressed, the reduction strategies concentrated more on IT. The IS function allocated budget to all the five divisions, enjoying a fully burdened charge-out system. Consequently, the general managers of the divisions began demanding substantial reduction on the cost of IT services. Furthermore, the managers filed complaints against the charge-outs as well as the centralization organizational aspect of the IS (Hammett, 2005:86). The management found great sense in this, especially the argument that a centralized IS was not capable of responding effectively enough to the concerns and needs of the different divisions, as well as the concerns that decisions did not incorporate enough divisional input, and the possible bias insofar as engineering projects and other vital business IS. The initial reduction strategies saw the transfer of the IT functions from the engineering vice president to the finance vice president, and the early retirement of some employees including the Director of Information (DIT). The structural change and the departure of the DIT gave way to a new approach of IT function within the organization. The management appointed a new information technology director, charged with identifying the problems of the information systems as well as a reorganization remedy (Birchall et al., 2004:33). The new information technology director formed a cross-functional committee to examine the problems, drawing high-level managers from all divisions. Reorganization One thing was obvious: a centralized IT organization would not work in the future. The divisions required and demanded increased control on the functions and directions of the IT system, especially those that had significant impacts to their unique business aspects (Smith, 2006:67). The DIT, however, was responsible for ensuring that there was a balance for the need of divisional control with the objectives of utilizing common critical applications, implementation of an information structure, software and hardware standards support, designing and implementing a centralized data centre, and building and managing a corporate WAN network (NCC, 2012:24). Armed with this blueprint, the information technology director introduced a new unit, IT planning, and Architecture, whose central focus would be aligning and planning the IT initiatives to the business needs. The manager of the Wide Area Network, Data centre and the managers of the common application groups of the corporation reported directly to the office of the IT director. The divisional managers, previously reporting to the corporate information technology, would now report to the division controllers. Therefore, the divisional IT manager would be directly responsible for end-user computing, local area network, internal division library, and support for division specific application. Thus, the divisions now had 50% responsibility for annual IT budget of the corporation, as well as providing the necessary control for their long-term success (Gartlan and Shanks, 2007:25). New IS Development With the help of a local IT research centre, the corporate established the essential components. The approach of the information technology director was to begin with inventory of current in-process applications then current installed and on-order equipment. However, the priority of current projects and the new projects was largely dependent on the business strategy of the different divisions as well as the entire corporation. The most significant part of the restructuring plan was the provision for constant review and revision. Even to date, the planning process still evolves, remaining the most important element of management and decision making in GSC. The management perceived the plan as the critical restructuring component and cost-containment initiative for the corporation, improving the linkages between IT initiatives and management (Cale and Kanter, 2000:5). The teamwork and communication of the cross functional team increased the credibility of the IS organization in the corporation. Moreover, the team listed six important business objectives against information technology initiatives, based on a scale of one-to-ten. Consequently, the team established a priority for information technology initiatives based on their consequences on all technologies of the business (Birchall et al., 2004:33). Additionally, the team ranked applications based on their relevance to stated business objectives. This was an important base for the establishment of priorities in applications. This applied to both business specific applications and corporate-wide applications. The Planning Process Analysis The vigorous continuity of the development process and the involvement of all individuals across the corporation indicate the success and necessity of eth planning process. Conceptually, the most important achievement of the restructuring was the re-establishment of the credibility. The projected reduction in IT operational costs was the central focus of the re-structuring, and the plan is delivering good results. The plan was a success, a fact that is evident from the analysis of three factors: motivation behind the plan, planning success factors, and meeting the needs of stakeholders. One of the factors contributing to the success of reorganization was the coherent and strong motivation that brought together all parties in the planning process. Moreover, the decision by the information technology director to have the business needs of the division drive the planning process ensured the participation of all divisional management personnel. Furthermore, the fact that the corporation is a technological-oriented company ensured that all personnel understood the importance of IT incorporation into their product line as well as management support. The success of the plan was a contribution of various aspects of the planning processes. The establishment of the cross-functional team as well as the meetings of the information technology director with divisional general managers broke barriers between divisional management and the corporate information systems. Moreover, shifting the IT department from engineering to finance ensured a business touch of the IS. The lack of procedural or ponderous methodologies ensured that the panning process ran quickly and smoothly (Papp, 2001:194). The consistent follow-ups and the capability to adapt to new changes in the business environment remain the most vital components of the IT function. The most significant determinant of the success of the project has to be the ability of the plan to meet the needs of all stakeholders. The divisional management was able make IS function respond to business needs, reduced the operational costs, as well as providing a continuous methodology of prioritizing and coordinating inter-divisional needs (Sanwal, 2007,49). The plan enabled the vice president of finance to achieve cost-cutting objectives and provided a medium for tackling technological and business changes of the corporation. The information technology director was able to cut costs aggressively, and align business and IT objectives. By ensuring that information technology functions align to the business objectives, all the divisions of the corporation are able to carry out their business activities efficiently and effectively (Hammett, 2005:82). This includes addressing the demands of the customers appropriately. In large, the restricting of the IT department and the Information system structure was, and continues to be, the success of the company, as it enjoys one of the most effective IT organization and IS functions in the world. On Luftman’s levels of IT maturity, the company is at the highest level: innovating. This is evident from the implementation of standardized Information technology processes in the corporation, formalizing IT policies and associating them with adherence, mapping IT initiatives and activities to corporate planning, matching technology complication to business skills and needs and IT, and facilitating communication across the different divisions, especially through creation of a cross-functional team (Infotech, 2011:24). The current information technology organization and function at the corporation is at its high maturity level, meaning that it is decentralized, standardized, and optimizes information technology resources and skills to achieve the best alignment of information technology functions and corporate objectives of the company. Conclusion The planning process at the GSC is a valuable lesson to other companies initiating alignment of business goals and IT functions. The restructuring of the information technology organization began at a crucial stage in the business development of the corporation. Interestingly, the company did not have any assurance that the plan and the implementation process would enhance embedding information technology in strategic manner to the business units, but that was the actual result. The corporation planning process adopted some traditional thinking on planning, including bringing the information technology and business executives together (Streitberger, 2007:24). Moreover, the planning process also involved unique elements such as application prioritizing methods and the regular meetings to determine the progress of the project. The most significant advantage of the process was the introduction of new technological methods to determine how well the information technology initiatives satisfied six important business objectives of the corporation. Bibliography Bansal, S., 2009. 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