Striving towards strategic alignment in SMEs:

an empirical analysis Adarsh Garg

IT Department, Institute of Management and Research, Ghaziabad, India, and D.P. Goyal

Information Systems Department, Management Development Institute, Gurgoan, India

Abstract

Purpose – Despite general awareness and acceptance of the benefit of strategic planning/alignment of IS strategy with business strategy, few efforts have been made to define and study the relationship. A review of literature has revealed that past studies have largely neglected the specific consideration of small to medium-sized enterprises (SMEs) especially IT/software developing SMEs in India. The purpose of this research is to investigate the prevalence of strategic planning activity in Indian IT SMEs and its decisive influence on business performance. Design/methodology/approach – A survey-based approach was adopted to understand the prevalence of strategic planning activity in Indian IT SMEs and its crucial influence on business performance at all three levels of management. A short survey instrument was designed by reviewing the literature on strategic planning activity in software developing SMEs. A sample of 23 software developing SMEs in India was used. Findings – A response rate of 88.8 per cent was achieved and included respondents at senior management, middle management, and lower level management across the software developing SMEs in India. The results indicate that the alignment of IS/IT strategy with corporate strategy has significant effect on performance of IT SMEs besides the general awareness of importance of strategic alignment in SMEs at all three levels of management. Research limitations/implications – The limited number of software developing SMEs will affect the generalizability of the study to the entire SME population. To negate the limitations of this study, multiple multi-level case studies will be conducted in SMEs in the next phase of research. This research would contribute by indicating some of the implications, for both decision makers and academia, of an extended IT capabilities viewpoint on strategic planning activity. Future study should focus on performing a global survey on strategic alignment practices in SMEs. Originality/value – The novelty of the paper lies in conducting a comparative study on the strategic alignment practices at all three levels of management in Indian SMEs and measuring its impact on the performance of the firm.

Keywords IT, SME, Strategic alignment, Performance, India, Small to medium-sized enterprises, Information technology Paper type Research paper

1. Introduction The role of information systems (ISs) has changed over a period of time with demands of dynamic business scenario. The main focus of using IS is to obtain maximum payback for agility and flexibility. As IS success is significant for organizational flexibility, it has become more significant to study IS success and its factors. The issue of IS success has been taken from three viewpoints, i.e. IS perspective, organizational perspective and user perspective as shown in Figure 1. IS perspective takes the issues related to IS maturity; IS flexibility, quality of information it provides, use of IS in

Strategic alignment in SMEs

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Received 17 August 2011 Revised 9 December 2011

Accepted 9 December 2012

Journal of Advances in Management

Research Vol. 9 No. 1, 2012

pp. 77-95 r Emerald Group Publishing Limited

0972-7981 DOI 10.1108/09727981211225662

The current issue and full text archive of this journal is available at

www.emeraldinsight.com/0972-7981.htm

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User perspective

78

Figure 1.

IS success/effectiveness factors

Business perspective

business processes while organizational perspective takes strategic planning of IS, impact of organization, whereas user perspective focuses on user involvement in the process of IS planning, user satisfaction and personal performance of user while using IS. ISs tend to be unsuccessful most of the time despite the fact that organizations are

investing heavily on procuring ISs. The reasons sought are a lack of alignment between IS planning and business planning, huge divergence in the approaches

adopted by different types of enterprises, while developing ISs due to time, cost and environmental factors, ignoring IS project management activity. The evidence of the

factors affecting success of ISs is noticeable in the literature (Adarsh et al., 2008, 2012). Academics and researchers have, time and again, considered strategic planning of ISs

as a significant issue facing IT managers (Aladwani, 2000) because of the increased investment in ISs and the growing strategic impact of ISs on business (Bai and Lee, 2003). ISs need the ability to adapt to new situations as many times organizations face IS failure due to inflexibility in managing new situations. To cope with a dynamically

changing business environment, organizations have to develop a methodology for IS strategic planning. Organizations look for flexibility to adapt quickly to environmental changes and thereby gain an advantage over their competitors (Leana and Barry, 2000). Consequently, IS researchers and practitioners have started recognizing the importance

of flexibility in ISs (Byrd and Turner, 2000; Duncan, 1995). The concept of strategic alignment (IS planning aligned with business planning) has been in use for many years

and perennially one of the top ten issues facing corporate top managers and IS executives (Brancheau et al., 1996; Watson et al., 1997; Gottschalk, 2001). Organizations typically achieve “strategic alignment” by passing through three levels, i.e. awareness,

User involvement

User satisfaction

IS flexibility IS success

Impact of organization SPIS

Pers

onal p

erfo

rma

nce

IS p

ers

pe

cti

ve

IS m

atu

rity

In

form

atio

n q

ualit

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integration and alignment (Chan et al., 1997). The importance of aligning the ISs function with other business functions is widely recognized and has been documented since the late 1980s (Brancheau and Wetherbe, 1987; Dixon and John, 1989a, b; Earl, 1993; Daniels, 1994; Neiderman et al., 1991; Weill and Baroudi, 1990; Adarsh et al., 2012). Empirical studies have found IS strategic alignment influences business performance (Henderson and Venkatraman, 1993; OECD, 2004; Adarsh et al., 2008).

1.1 IS planning in small- to medium-sized enterprises (SMEs) IS is one of the main issues for SME in their routine functional activities and it has become critical in SME as technology now plays a more central role. This advocates the need to plan IS according to business needs (Blili and Raymond, 1993). The IS role must imitate the functional activities of business and organizations must align IS planning with business strategy (Premkumar, 1992). Frequent changes take place in business processes due to dynamic business scenario, various changes that take place in an organization must be considered in IS planning process (Levy and Powell, 2000). Table I shows the study of SMEs by various researchers.

The ISs is effective only if IS development is aligned with the business system development strategy (Brumec, 1998; Hammer and Champy, 1994; Segars and Grover, 1998; Jouirou and Kalika, 2004) which, in fact, influences business performance (Henderson and Venkatraman, 1993; OECD, 2004) as shown in Figure 2.

The issue of IS alignment has been studied in depth. However, limited research has been done in the area of strategic planning of IS especially in SMEs. Before exploring the extent of strategic planning/alignment and its effect on organizational performance in software SMEs, there is a concise explanation of IT industry and strategic planning/ alignment process and definition of SMEs in India.

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Author Issues addressed

Burn and Szeto (2000) Studied strategic use of IT

Blili and Raymond (1993) Sohal and Lionel (1993)

IS planning is critical due to centralization of technology in the organizations

IT usage is positively related to organizational performance by maximizing the role of IT in organizational strategy

Fink (1998) Studied ten IT adoption factors, analysed the significance of organizational culture, internal resources and appropriate procedures

Palvia and Palvia (1999) Poon and Swatman (1999)

Identified manager/owner factors, user training, S/W maintenance, documentation and vendor support as key areas of IT dissatisfaction No strategy to integrate internal business applications and internet

Seyal et al. (2000) Managers must have technical knowledge Levy and Powell (2000)

Developed an approach that reflects IS strategy must echo organizational change

Love and Irani (2004) Evaluated IT and its benefits in IS planning Sharma and Bhagwat (2005) Adarsh et al. (2008, 2012) Almajali and Dahalin (2011)

Formal practices of IS are yet to be implemented to get maximum benefit of IS

Lower-level management is not aware of the Strategic alignment activity in the organizations Evaluated successful IT implementation as one of the factors of strategic alignment success

Table I.

IS planning and SME

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1.2 Overview of IT industry The awesome growth in the Indian information technology sector in past decades has had a huge multiplier effect on national income and employment generation as well as on the increase of many ancillary industries.

1.2.1 Industry structure. The Indian IT industry is segmented into IT services, ITeS- BPO, engineering services and R&D, software products and hardware. The overall growth rate of these segments is 27.8 per cent. Table II shows a segregated view of the revenue of each segment of the IT industry, from 2004 to 2010. According to NASSCOM strategic review 2007, 2008, 2009, 2010, the Indian IT-BPO industry would grow at a CAGR of 25 per cent and exports of about US$88.1 billion by 2011.

A changing global business scenario, liberalization of Indian economic policy and outsourcing trend are key drivers for growth in the Indian IT industry. Indian IT-ITeS industry foresees a quantum growth over the next couple of years, focusing on better productivity and operation rates and thus improving the value chain. In the growing globalization trend, many Indian IT companies have started looking China as a promising destination.

IS aligned with

organizational goals

Business strategy

IS development

IT/IS strategy

Alignment

Long-term

effectiveness

Figure 2.

IS alignment with organizational goals

Organizational

structure

Organizational

performance

Segments FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11(Est.)

Table II.

Indian IT industry segmental revenue (2004-2010) in US$billion

IT services 10.4 13.5 17.8 23.7 31.0 35.2 39 47.1

IteS-BPO 3.4 5.2 7.2 9.5 12.5 14.8 14.1 17.3 Engineering services and R&D, software products 2.9 3.9 5.3 6.5 8.6 9.5 10 11.7 Total software and services revenue 16.7 22.6 30.3 39.7 52.0 59.6 63.7 76.1 Hardware 5.0 5.9 7.0 8.2 12.0 12.1 9.4 12.0 Total IT industry 21.6 28.4 37.4 47.8 64.0 71.7 73.1 88.1

1.2.2 Definition of SMEs. The definition of SMEs varies from country to country and the numbers of employees or capital investment or both have been used as criteria for defining SMEs across the world (Ghose, 2001). In India, according to Micro, Small and Medium Enterprise Act, 2006 (MSMED) enterprises are classified broadly into two sections, i.e. enterprises either manufacture goods or provide services. Further classification is done under these two sections as shown in Table III.

1.2.3 SMEs in IT industry. Thriving domestic and export markets and growing opportunities are some of the major factors that contributed to the establishment of SMEs in the IT sector since 2000. SMEs play a crucial role in driving economic growth in developing countries as well as in developed ones. They account for more than 15 per cent of India’s GDP, 35 per cent of India’s total exports, 95 per cent of total industrial units, 40 per cent of India’s industrial output and provide direct employment to 29.5 million people. In India IT SMEs are segmented in terms of turnover. In total, 40 per cent of the total companies from north operate with turnovers between oRs 10 million upto Rs 50 million, respectively. In total, 53 per cent of the SMEs in the southern region have turnovers in the range of Rs 10-50 million. A total of 50 per cent companies in the eastern region fall in the turnover range of oRs 10 million. In the western region, 55 per cent companies fall in the bracket of Rs 10-50 million.

A major chunk of revenue for the Indian IT industry is earned from exports; however, a contrary trend is noticeable in the case of SMEs in this segment. IT SMEs obtain the maximum of their revenue (65 per cent) from the domestic market with only 35 per cent of revenue coming from exports. Furthermore, the majority of the exports are to the Asia Pacific region. The IT industry seems to be the fastest growing sector in the country over the last couple of years and SMEs play a significant role in driving the Indian IT industry to new heights by sustaining the current growth. The Indian SMEs have been consistently outperforming large industry on key parameters such as growth in production and growth in employment.

Considering the IS planning as one of the major issues of concern in IS success as well as organizational flexibility and limited research in SME service industry this research investigates the prevalence of strategic planning activity in IT SMEs and its decisive influence on business performance.

2. Research objectives and hypotheses We attempted to survey software developing/IT SMEs:

(1) to explore the prevalence of strategic planning activity in IT SMEs; and

(2) to study the deviation of perception of strategic planning between different groups of respondents (at three levels of management and IT and non-IT).

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Source: National Small Industries Corporation (NSIC) (2002)

Table III.

Definition of SMEs in India

Size of enterprise Investment limits in Rs Manufacturing (plant and machinery only)

Service (equipment only)

MICRO SMALL MEDIUM

Up to 25 lakhs From 25 lakhs to 5 crores From 5 crores to 10 crores

Up to 10 lakhs From 10 lakhs to 2 crores From 2 crores to 5 crores

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To answer our research question, several research hypotheses are proposed:

H1. Business strength positively influences strategic planning of IS.

H2. Business scope influences strategic planning of IS.

H3. Key strategic issues positively effect strategic planning of IS.

H4. Feasibility of the business planning has positive relation with strategic planning of IS.

H5. Business environment positively influences strategic planning of IS.

H6. IT and non-IT executives differ in their opinion about influence of business environment on strategic planning of IS.

H7. Different levels of management have different perception on influence of factors on strategic planning of IS.

3. Research scope The organizations selected for the study were software SMEs of IT industry with head offices located in National Capital Region. Organizations were defined according to total annual turnover and number of employees. In each organization levels of associates, i.e. top-level managers, middle-level managers and lower-level associates were taken. Strategic-level executives included IT professional also. Overall 23 companies participated in this study. Since all were IT companies, they were largely studied to understand the range of services offered by them, market (domestic and international), diversification to verticals and turnover.

All the participant companies operate in software products besides a few operating in IT services, hardware and ITeS-BPO. It was mandatory for each participating company to offer software products to contribute in this study. Most of the participating companies cater to the domestic market with a few to the international market also. The visibility of accreditation with quality certifications is varying in different companies.

Companies offer different products and services, among which custom application development is the most prevalent service. The participating companies vary in the verticals which include banking and financial services, manufacturing, retail and distribution, media and entertainment, healthcare and life sciences, construction and infrastructure, energy and utilities, government and defence, telecom, logistics and travel and tourism.

4. Research methodology 4.1 Design of the questionnaire A questionnaire-cum-interview methodology was used for the survey, thus a questionnaire was designed. The questionnaire named best practices questionnaire (BPQ) was designed on the basis of literature survey and input from academia. The questionnaire was first pre-tested on 22 management and IT professionals from the actual sample of respondents for checking its reliability and content validity.

The pre-tested and modified questionnaire was arranged in two sets SET-I and SET-II. The detail of SET-I is discussed as it relates to the current research paper.

4.1.1 BPQ SET-I – strategic alignment of ISs. In total, 55 items were identified including the general information about the respondents as well as the organization and framed in the form of questionnaire SET-I. These items were identified for strategic alignment of IS, on the basis of literature study and input from the practitioners during pre-testing of the questionnaires. All 55 items were put in different sub-headings of the questionnaire SET-I. The sub-headings are as follows:

(1) strategic planning in the organization;

(2) usage of IT/IS in the organization;

(3) influence of IT/IS usage on organization; and

(4) IT/IS planning.

4.2 Testing of the questionnaire The questionnaires were tested for their reliability, content validity and scale sensitivity before they were finalized and framed in two sets, i.e. BPQ SET-I and BPQ SET-II. The testing of the questionnaire was carried out as follows.

4.2.1 Reliability. Cronbach’s a test was applied to check the reliability of the scale and the value of the coefficient was more than 0.7 in all the components of the questionnaire sets thus indicating the goodness of scale measurement. Details are given in Table IV.

4.2.2 Content validity. A total of 22 respondents from the actual sample test administered using the questionnaire-cum-interview method. Detailed discussion was done with five executives. The questionnaire was tested for the intensity of the study reflected by the variables taken in the questionnaire for the study in hand, relevance of the topic keeping current business scenario in mind and response time of the respondents.

Observation and feedback of the respondents. It took almost 25-35 minutes for each respondent to furnish the details enquired in the questionnaires. On average the questionnaire was found comprehensive and the topic of the research was found appropriate considering the importance of SMEs in the current business environment. A few of the suggestions given are shown below:

(1) It was suggested to sub-categorize the questionnaire SET-II (not used for this paper) for the ease of understanding.

(2) Use of IT/IS instead of only IS wherever written in the questionnaire.

(3) The extent of usage if IT/IS was found to be important for its inclusion in SET-I.

Appropriate changes were incorporated in the questionnaires.

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Sl. no. Components Items Cronbach’s a

1 Strategic planning 25 0.851

2 Usage of IT/IS 8 0.789 Table IV.

3 Influence of IT/IS usage on organization 9 0.742 Scale reliability of the

4 IT/IS planning 9 0.776 survey tool (Cronbach’s a)

BPQ developed and evaluated

SET-I of BPQ SET-II of BPQ administered

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4.2.3 Sensitivity of scale measurement. In general a five-point Likert scale was used. Some questions were asked more than once with a similar theme but with different ways to cross-check the subject. In some cases questions were asked on a yes and no scale depending upon the possibility of responses.

The research procedure which is followed in the study is outlined in Figure 3. The questionnaires were administered to collect the primary data. For the purpose of having an insight into organization strategy process questionnaire SET-I was administered to strategic-level managers which included IT professionals also. Most of the respondents at this level were interviewed as they felt more comfortable giving verbal answers.

5. Result and discussion The data collected from the selected organizations has been analysed to know if there exists any IS alignment with organizational goals in SMEs or not. Factors were extracted for business strategy components and IS strategy components for reducing the data and arriving at some useful conclusion. Nine factors extracted for business strategy have factor loadings 40.3 in the rotated matrix. These extracted factors have a cumulative variance of 90.1 per cent. Two factors have been extracted for IS strategy with factor loading for each item 40.5. These factors explain the cumulative variance

Figure 3. Research procedure

IT industry

Software SMEs

Strategy level

executives

Software

professionals

Adoption of best practices

View of S/W industry

professionals Initial literature review

Conclusion and recommendations

of 76.7 per cent. Remaining items of BPQ SET-I have been taken as such which are Utools, usage of IS/IT and influence of IS/IT on organizational performance. Figure 4 shows the various items of the alignment constructs taken in this study.

Facts 1-9, i.e. business strength, formal business planning process, business scope, business environment, information sharing, business-IT understanding, key strategic issues, business dynamism and business planning process feasibility are taken for business strategy, Pfact1 (IS strategy formulation) and Pfact2 (business-IT communication) are taken as IS/IT strategy. Utools representing organizational structure and influence of IS shows organizational performance. The detail of these items is given in Table V. The shaded oval signifies that IS development has not been taken in BPQ SET-I but in BPQ SET-II.

All the items of strategic planning of IS were ranked according to the average score of the collected data so as to conclude which of the extracted factors is most satisfying or dissatisfying. Table V shows the extracted factors, average score of the extracted factors and the ranking of the factors according to the average score. The analysis of Table V reveals that business strength is the most important factor in strategic planning of IS thus supporting H1.

Business strength of any organization lies in its relation with the competitors and past and present relations with the partners. Followed by it is the business scope with average score of 4.15 and ranked second which again holds up H2.

Business scope is defined by the regularity of strategy formulation, with defined set of procedures. All managers including that of IS department are interested to know the business planning and participate in the process. Key strategic issues and feasibility of the business planning are ranked third with an average score of 4.14 hence in alignment with H3 and H4, respectively.

Business environment (4.09) comes at Rank 4. Business planning depends upon the internal operating environment of the business with emphasis on decision implementation and allocation of the resources which in turn supports H5. Business

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Figure 4. Items of strategic

alignment construct

IS aligned with organizational goals

Business strategy

IS Development

FACT1- FACT9

IT/IS strategy Alignment Long-term

effectiveness

PFACT1-PFACT2 Organizational performance

Organizational structure

INFLU

UTOOLS

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Strategic planning factors Issues

Average score Rank

Business strategy Business strength (Fact 1)

86

Formal business planning process (Fact 2)

Business scope (Fact 3)

Business environment (Fact 4) Information sharing (Fact 5) Business-IT understanding (Fact 6)

Organization identifies its strengths and weakness, business planning influenced by competitors, business planning affected by past/present relations with business partners IS is part of business planning, IS department is part of business planning, separate planning for SME partners, organization has separate IS to measure performance, organization considers restructuring of organization Strategic planning is regularly performed, defined set of procedures for BP, all managers participate, employees interested to know BP IS department aware of BP Internal operating environment of organization, decision implementation, allocation of the resources Business plan shared with business partners, frequent gathering of employees data Mission of organization a written statement, understanding of mission

4.21 1

3.97 7

4.15 2

4.09 4

3.60 10

4.03 5

Key strategic issues (Fact 7)

BP identifies key strategic issues 4.14 3

Business dynamism (Fact 8)

Frequently changing BP, BP depends upon size of the projects

3.69 9

Business planning process feasibility (Fact 9)

BP depends upon its feasibility 4.14 3

Organizational structure Utools (use of IS in business functions) 3.76 8 Organizational performance IS strategy

Influence (influence of IS on business performance) 4.03 5

Table V.

Ranking of the extracted factors for strategic

IS strategy formulation (Pfact 1)

Business-IT communication (Pfact 2)

IS strategy separately formulated, separate IS for each department, only IS managers participate, all transaction carried out with the use of IS, investment on IS is properly managed Business managers have understanding if IS Business and IS managers communicate IS mangers understand business goals IS managers decide the allocation of resources

3.34 11

4.00 6

planning of IS Usage Extent of usage of IT in organization 1.83 12

understanding (4.03) and influence of IS/IT on organizational performance (4.03) are ranked fifth followed by business-IT communication (4.00) at Rank 6. Formal business planning process (3.97) is essential for strategic planning of IS, with IS and IS department as part of business planning, separate planning for SME partners, considering of restructuring of organization is ranked seventh among factors. Organizational structure comes next with the extent of usage of IS/IT tools (3.76).

Business dynamism (3.69) depends upon the frequently changing business planning and the size of the projects taken by the organization and it is ranked ninth. Information sharing of employees and business plan with the business partners has the

tenth rank. A separate planning for IS (3.34) is less significant with the 11th rank. Where as usage of IS (1.84) in different functions has the least effect on strategic planning of IS. Thus taking IS as an indispensable part of business and its extent of usage does not affect the planning process and thus can be ignored.

Furthermore the data has been analysed taking responses from top-level executives. Which were grouped as IT and non-IT executives to know the relevance of H6 that if there is some significant difference of the opinion between two groups. t-test was applied to compare the mean of two groups. Table VI shows the comparison of means and standard deviations of two groups and calculated t-value depicts that both the groups have an almost similar response. Business strength, business scope, key strategic issues, business planning feasibility remains as top-ranked factors for both the groups. While usage of IS/IT remain the least valuable factor for strategic planning. Though IT and non-IT executives have a similar viewpoint, they differ significantly on the business environment issue and thus hold H6. According to IT executives internal operating environment of the organization, resource allocation and decision implementation with IS contribute more to the strategic planning of IS as compared to the viewpoint of non-IT executives and t-value for the factor is 2.78 which is significant at 0.01 level.

To know the perception of respondents at all the three levels of management the data has been further studied for analysis of variance with the help of one-way ANOVA which is used to calculate means of more than two groups. Furthermore f-test was used to study between-group variations. Table VII portrays the comparison of strategic planning factors among three groups of respondents, i.e. Group 1 for executives, Group 2 for middle-level and Group 3 for operational-level respondents.

Groups 1 and 3 have an almost similar viewpoint on all the factors of strategic planning of IS except information sharing, IS strategy formulation and business-IT communication. Operational-level respondents favour greater information sharing of employees and business plans, a separate formulation of IS strategy and better communication between business and IT professionals. Group 1 differ from Group 2 in

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alignment in SMEs

87

IT executives (n ¼ 20)

Non-IT executives (n ¼ 23)

Components Mean SD Mean SD t-value

Table VI. Comparison of

components between IT and non-IT executives

(respondents)

USAGE (extent of usage of IT in organization) 2.15 1.18 1.56 0.94 1.80

Utools (use of IS in business functions) 3.94 0.43 3.60 0.78 1.71 INFLU (influence of IS on business performance) 4.07 0.28 4.01 0.21 0.82 Business strength 4.20 0.50 4.21 0.49 0.12 Formal business planning process 4.05 0.39 3.90 0.39 1.21 Business scope 4.23 0.38 4.07 0.52 1.08 Business environment 4.30 0.65 3.91 0.15 2.78* Information sharing 3.45 0.89 3.73 0.36 1.43 Business understanding 4.05 0.74 4.02 0.69 0.13 Key strategic issues 4.20 0.52 4.08 0.41 0.79 Business dynamism 3.55 0.63 3.80 0.72 1.23 Business planning process feasibility 4.10 0.55 4.17 0.72 0.37 IS strategy formulation 3.57 0.44 3.13 1.20 1.51 Business-IT communication

Note: *Significant at 0.01 level

3.97 0.42 4.02 0.29 0.43

JAMR G1 (n ¼ 43)

G2 (n ¼ 164)

G3 (n ¼ 23) G1 vs

G1 vs

G2 vs F-

9,1 Components Mean(SD) Mean(SD) Mean(SD) G2 G3 G3 value

USAGE (extent of usage of IT in organization) Utools (use of IS in business

1.84(1.09)

3.76(0.65)

2.15(1.21)

3.79(0.63)

2.43(1.53)

3.95(0.22)

– – – 1.92

– – – 0.84

88 functions) INFLU (influence of IS on 4.04(0.25) 3.94(0.37) 4.14(030) – – * 4.08*

business performance) Business strength 4.21(0.49) 3.94(0.47) 3.98(0.75) * – – 4.59**

Formal business planning 3.97(0.39) 4.00(0.42) 3.97(0.47) – – – 0.14

process Business scope 4.14(0.46) 3.93(0.37) 4.069(0.33) * – – 5.74*

Business environment 4.09(0.49) 3.99(0.49) 4.00(0.20) – – – 0.81 Table VII. Information sharing 3.60(0.67) 3.56(0.855) 4.10(0.54) * * 4.67** Comparison of strategic Business understanding 4.03(0.71) 3.81(0.86) 4.08(0.47) – – – 2.03 planning factors among Key strategic issues 4.14(0.46) 3.78(0.90) 4.00(0.60) * – – 3.62* three groups of Business dynamism 3.67(0.68) 3.66(0.81) 3.50(0.79) – – – 0.84 respondents (G1, executives; G2, middle level; G3, operational level)

Business planning process feasibility IS strategy formulation

4.14(0.64)

3.34(0.94)

3.72(0.55)

3.78(0.46)

4.00(0.60)

4.10(0.82)

* – * 9.83**

* * * 13.3** one-way ANOVA – analysis of variance –

Business-IT communication 4.00(0.35) 3.91(0.52) 4.28(0.34) – * * 6.09*

Duncan’s mean test Notes: *Significant at 0.05 level; **significant at 0.01 level

business strength factor with F-value 4.59 significant at 0.01 level, business planning process feasibility (9.83) and IS strategy formulation (13.3) both significant at level 0.01. Group 1 has the opinion of better business strength, feasibility of the planning process whereas just the reverse for IS strategy formulation. Group 3 also advocates the stronger relation between business planning process feasibility and strategic planning of IS. Similarly Group 3 supports information sharing, business-IT communication and IS strategy formulation as evident from Table VII.

Thus a study of deviation of perception of different managerial groups indicates that all the employees do not share a common understanding of the strategy formulation process which supports H7 which states that different level managerial groups have different opinions about the influence of factors on strategic planning of IS. It is also observed that information about the business planning is not even disclosed to middle- and operational-level employees in some of the surveyed organizations. These two level employees find it hard to work in flow with the organization goals without knowing the business strategy. Even IT managers are sometimes not told last minute changes in the business strategy. The reason sought was a high attrition rate. As a result strategic planning of IS may be defined by top- level management with a mix of non-IT and IT professionals. Thus it is highly recommended to have an open communication about business strategy so that every employee can work aligned with the goals.

6. Managerial implication of the research The application of modern technologies is useful if there is synergy between IS strategy and business strategy. There is a strong need to institutionalize the best practices in strategic alignment so as to develop successful ISs. The software

developing SMEs would get the benefit from this research. The research would help various practitioners, i.e. strategic-level managers, software developers, quality managers and project managers to first understand the importance of alignment of IS planning with business planning and its role in developing successful ISs. The research would assist the organizations to estimate their current business scenario and redefine their uniqueness among other partners in industry.

7. Conclusion This paper has used the data of software developing SMEs in National Capital Region of India to examine the process of strategic alignment. It has developed a comprehensive model including several factor affecting alignment and effect of alignment on organizational performance. At the most basic level our results provide additional empirical support for the popular argument that strategic alignment of ISs improves organizational performance. The study shows that the organizations under study were aware of the importance of strategic planning process of IS and implemented the same in the organization which in fact is the basic requirement for the success of IS in today’s business scenario. Furthermore, the mechanism used to attain the alignment depends upon the organizational business strategy, IT usage, taking IT as part of business as well as information sharing between business and IT people. The study is limited to software industry and highlights the need for future research on strategic-specific IS alignment.

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About the authors Adarsh Garg has a Postgraduate qualification in Computer Applications and a Doctorate in Information Systems and is Associate Professor of Information Technology at the Institute of Management and Research, Ghaziabad. She has published over 20 research papers in refereed international/national journals of repute. Her interest areas include information systems, software engineering, data warehouse and mining, e-commerce and green IT.

D.P. Goyal has a Postgraduate qualification in Business Management and a Doctorate in Management Information Systems and is Professor of Management Information Systems at the Management Development Institute (MDI), Gurgaon. Professor Goyal has more than 25 years of experience in teaching, research, executive training and consultancy. He has supervised a dozen PhD scholars; published two books on MIS and ERP; and published over 50 research papers in refereed international/national journals of repute. His interest areas include management information systems, strategic information systems, CRM, e-commerce, and business analysis for IS solutions.

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