IT-Business Strategic

Alignment Maturity

9/23/10 2/12/13

JERRY LUFTMAN Ph.D.

luftman@hotmail.com www.globaliim.com

Global Institute for IT Management

DED&M 2013

Economy

Interdependent World

Sourcing Models

(+ aging workforce, Millennials)

Natural Disasters

Politics

New Markets

Terrorism/War(s)

Big Data/BI

Mobile, Social NW

Consumerization,

BYOD, Apps

Cloud/Virtualization

THE

PERFECT STORM

IT

Global Institute for IT Management

6 IT HEADLINES

1. Focus on Swiftly Reducing Business Expenses &

Revenue Generating Applications

4. Increased Attention to IT Infrastructure

Spending

5. Growing Cloud & Consumerization of IT

2. Budgets, Hiring, & Salaries More Cautious;

Uncertainty vs Less Certain

3. Domestic Hiring & Outsourcing Declining

Offshore Hiring & Outsourcing on the Rise

6. IT Business Alignment Fundamental

IT-Business Strategic

Alignment Maturity

Global Institute for IT Management

What is strategic alignment?

Global Institute for IT Management

Why is it taking so long to

address?

Global Institute for IT Management

TOP IT MANAGEMENT CONCERNS 1980-2012

IT Management concerns 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 1994 1990 1986 1985 1983 1980

Bus. productivity& cost reduction 1 4 1 1 7 4 IT and business alignment 2 1 3 2 1 2 1 1 1 1 9 7 5 2 7 9

Business agility & speed to market 3 2 2 3 13 17 7 5 7

Revenue generating IT innovations 4 9 6 8 17

IT cost reduction 5 10 8 5 7 4 IT Strategic planning 6 5 6 7 3 8 4 4 4 2 10 3 1 1 1 1

Business Process Reengineer. 7 3 3 4 18 15 11 5 10 10 2

Enterprise architecture 8 7 13 11 11 33 15 15 9 8 4 1 8

Security and privacy 9 8 9 9 8 6 3 2 3 3 19 18 6 14 12

IT reliability and efficiency 10 6 3 6

Project management 11 11 13 11 10 23 5 10 Change management 12 12 11 14 6 7 3 2 3 3 19 18 6 14 12

CIO leadership role 13 14 10 16 10

Globalization 14 13 10 15

Knowledge management 15 15 13 17

IT HR considerations 16 17 13 17

Outsourcing/vendor management 17 18 12 11

IT organization design 18 16 15

Sourcing decisions 20 19 13 17

WHY DISCUSS IT-BUSINESS

ALIGNMENT? STILL

6. How do you know if your alignment is “appropriate”?

7. Can we move from a descriptive vehicle to a prescriptive

vehicle?

4. In search of mythical silver bullet

2. Too often considered just IT aligned with the business

3. Semantics: alignment vs fused, linked, integrated, fit,

harmony, converged, matched, melded, interwoven…

5. Focusing on infrastructure/architecture

1. Consider their organizations are not misaligned

Global Institute for IT Management

Climbing the

Strategic

Alignment

Pyramid

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·

·

·

·

·

·

-

·

-

-

- Inter -

-

IT BUSINESS ALIGNMENT MATURITY CRITERIA

PARTNERSHIP

•Business Perception of IT Value

•Role of IT in Strategic Business

Planning

•Shared Goals, Risk,

Rewards/Penalties

•IT Program Management

•Relationship/Trust Style

•Business Sponsor/Champion

SCOPE &

ARCHITECTURE

•Traditional, Enabler/Driver,

External

•Standards Articulation

•Architectural Integration:

- Functional Organization

-Enterprise -Inter enterprise

•Architectural Transparency,

Agility, Flexibility

•Manage Emerging Tech.

SKILLS

by Business

•Liaison(s) effectiveness

COMMUNICATIONS

•Understanding of Business

by IT

•Understanding of IT

•Inter/Intra organizational

Learning/Education

•Protocol Rigidity

•Knowledge Sharing

COMPETENCY/VALUE

MEASUREMENTS

•IT Metrics

•Business Metrics

•Balanced Metrics

•Service Level Agreements

•Benchmarking

•Formal Assessments/Reviews

•Continuous Improvement

GOVERNANCE

•Organization Structure

•IT Investment Management

•Prioritization Process

•Business Strategic Planning

•IT Strategic Planning

•Budgetary Control

•Steering Committee(s)

•Cultural Locus of Power

•Change Readiness

•Innovation, Entrepreneurship

•Management Style

•Career crossover;

training/education

•Hiring and retaining

Interpersonal Environment •Social, Political, Trusting

Global Institute for IT Management

•Improved/ managed process

•COMMUNICATIONS: Bonding, unified

•COMPETENCY/VALUE: Cost effective;Some partner value;Dashboard managed

•GOVERNANCE: Managed across the organization

•PARTNERSHIP: IT enables/drives business strategy

•SCOPE & ARCHITECTURE: Integrated with partners

•SKILLS: Shared risk & rewards

•Established focused process

Strategic

Alignment

Maturity

Summary

•Initial/Ad-Hoc process

•Committed process

•Optimized process

Level 2

Level 1

Level 3

Level 4

Level 5

•COMMUNICATIONS: Good understanding; Emerging relaxed

•COMPETENCY/VALUE: Some cost effectiveness; Dashboard established

•GOVERNANCE: Relevant process across the organization

•PARTNERSHIP: IT seen as an asset; Process driver;Conflict seen as creative

•SCOPE & ARCHITECTURE: Integrated across the organization

•SKILLS: Emerging value service provider;Balanced tech & business hiring

•COMMUNICATIONS: Business/IT lack understanding

•COMPETENCY/VALUE: Some technical measurements

•GOVERNANCE: No formal process,cost center, reactive priorities

•PARTNERSHIP: Conflict; IT a cost of doing business

•SCOPE & ARCHITECTURE: Traditional (e.g., acctng, email)

•SKILLS: IT takes risk, little reward; Technical training

•COMMUNICATIONS: Limited business/IT understanding

•COMPETENCY/VALUE: Functional cost efficiency

•GOVERNANCE: Tactical at Functional level,occasional responsive

•PARTNERSHIP: IT emerging as an asset; Process enabler

•SCOPE & ARCHITECTURE: Transaction (e.g., ESS, DSS)

•SKILLS: Differs across functional organizations

•COMMUNICATIONS: Informal, pervasive

•COMPETENCY/VALUE: Extended to external partners

•GOVERNANCE: Integrated across the org & partners

•PARTNERSHIP: IT-business co-adaptive/improvisational

•SCOPE & ARCHITECTURE: Evolve with partners

•SKILLS: Education/careers/rewards across the organization

Global Institute for IT Management

Communications •Customer Understanding

of Provider

•Provider Understanding

of Customer

•Organizational Learning

& Knowledge Sharing

•Customer-Provider Liaison

Value

Measurements •Customer & Provider Metrics

(tech. & bus.) for services

•SLA & Management Process

•Benchmarks

•Formal Assessments &

Improvement Reviews

Governance •Use of Joint Strategic,

Tactical & Operational

Committees

•Formal/Informal Mechanisms

•Prioritization Process

•Resource Allocation Process

•Statutory & Regulatory

Requirements

Partnership •Role of Provider in Customer

Strategy & Planning

•Shared Goals, Risks,

Rewards/Penalties

•Mutual Trust

•Formal & Informal

Agreements

• Joint Sponsor & Champions

Scope &

Architecture •Architectural Agility,

Transparency, Flexibility

•Standards Adherence

•Impact of Provider

Services on Customer &

its Partners

Human Resources &

Skills •Technical & Business Skills

of Customer & Provider

•Cultural Match

•Change Readiness

•Cross Training/Education

•Hiring/Retaining; Skills

Management & Portfolio

CUSTOMER-PROVIDER ALIGNMENT MATURITY CRITERIA

Global Institute for IT Management

Where is the organization strong/weak?

Where is there disagreement?

What are the implications?

What can be done to improve the maturity level

(prescriptive)?

It opens the door to discuss alignment

IT IS NOT JUST THE LEVEL OF

MATURITY

Global Institute for IT Management

7 10 9

98

12 126

30

58

12 167

75

813

5

0

20

40

60

80

100

120

Industry Classification

Global 1,000 Companies N= 379

Global Institute for IT Management

0

100

200

300

400

500

600

700

800

900

1000

1100

1200

1300

1400

1500

SAM Participants Profile

CIO's CEO's CFO's VP's/ COO

Bus. Unit Execs

CTO's IT Execs

1,627 1,334 N=2,971

1,391

127 109 88 54

105

1,087

Global Institute for IT Management

SAM Geographic Participation

Total Number Of Companies = 378 Global Institute for IT Management

2.50

2.70

2.90

3.10

3.30

3.50U

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val

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rew

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rela

tions

hip/

trus

t sty

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IT

Governance

Avg. Score: 3.21

Partnership

Avg. Score:

3.14

Scope & Architecture Avg. Score: 3.14

Skills

Avg. Score: 2.97

Communications

Avg. Score: 3.03

Value Metrics

Avg. Score: 3.03

Overall SAM Assessment Maturity

2 1 2 4 4 6

Average BUS

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Overall Alignment Average Score: 3.09 * *

Global Institute for IT Management

HIGHEST ELEMENTS Averages

LOWEST ELEMENTS Averages

1. Career Crossover 2.79

2. Change Readiness 2.84

3. Knowledge Sharing 2.86

4. Balanced Metrics 2.88

5. Understanding of IT by business 2.89

3.09 3.09

1. Demonstrated Contribution of IT to Business 3.48

2. Protocol Rigidity 3.36

3. Prioritization Process 3.32

4. Business Sponsor/Champion 3.23

Global Institute for IT Management

Geography Number of

Companies COMMUNICATION COMPETENCY GOVERNANCE PARTNERSHIP

SCOPE OF IT

ARCHITECTURE SKILLS

Overall

Average

Middle

East/Africa 9 2.15 2.29 1.98 2.24 1.86 2.33 2.14

USA 184 2.86 2.87 3.06 2.96 2.98 2.77 2.92

Europe 70 2.98 2.89 3.20 3.15 3.07 2.93 3.04

Latin

America 42 3.22 3.12 3.09 3.24 3.33 3.13 3.19

Asia 73 3.49 3.55 3.68 3.59 3.58 3.46 3.56

Geography: Maturity by Component

Overall Alignment Average Score: 3.09

378

Global Institute for IT Management

1. Protocol Rigidity 3.50

2. Business Strategic Planning 3.40

3. IT Strategic Planning 3.40

4. Business Sponsor/Champion 3.37

5. IT Program Management 3.30

HIGHEST ELEMENTS Averages

LOWEST ELEMENTS Averages

1. Knowledge Sharing 2.47

2. Balanced Metrics 2.65

3. IT Metrics 2.73

1. Education, Cross-Training 2.74

2. Budgetary Control 2.77

Alignment Average Score: 2.80 EUROPE

Global Institute for IT Management

Industry Maturity Levels By Component

Industry

Name # of

Companies Communications Analytics Govern. Partnership

Tech.

Scope Skills

OVERALL

AVERAGE

Retail 7 3.37 3.41 3.57 3.64 3.71 3.31 3.50

Services 75 3.38 3.45 3.55 3.58 3.48 3.52 3.49

Hotel/Entertainment 19 3.32 3.47 3.52 3.56 3.68 3.35 3.48

Manufacturing 58 3.21 3.17 3.22 3.15 3.21 3.07 3.17

Government 12 2.92 2.92 3.17 3.18 3.1 2.87 3.02

Utility 5 3.07 3.22 2.7 2.77 3.37 2.82 2.99

Transportation 21 2.92 3.05 3.05 2.97 3.16 2.8 2.99

Pharmaceutical 16 2.93 2.8 2.99 2.96 3.11 2.91 2.95

Healthcare 12 2.89 2.84 3.04 2.99 3.04 2.86 2.94

Finance 98 2.91 2.83 3.1 3.06 2.96 2.78 2.94

Telecom 8 2.7 2.85 3.08 2.89 3.26 2.87 2.94

oil/gas/mining 12 2.77 3.02 2.95 2.81 2.91 2.78 2.87

Education 9 2.88 2.72 3.01 2.98 2.76 2.8 2.86

Insurance 30 2.81 2.76 3.2 2.89 2.88 2.56 2.85

Chemical 10 2.7 2.63 2.94 2.68 3.07 2.35 2.73

Agriculture 7 2.54 2.61 3.13 2.63 2.5 2.41 2.64

Overall Alignment Average Score: 3.09 Global Institute for IT Management

SAM Performance Framework

Communications

Competency

Governance

Partnership

Tech Scope

Skills/HR

Strategic

Alignment

Maturity

Performance

Organizational

Structure

Reporting

Structure

Global Institute for IT Management

The direct impact of the

individual components on

Company Performance is

negligible.

η2

Company

Performance

γ1,7=0.063 γ1,8=0.193* γ1,9=0.417* γ1,10=0.167*

β2,1=0.387*η1

SAM Alignment

ξ1

Communications

ξ2

Value

Measurement

ξ3

IT Governance

ξ4

Partnership

ξ5

IT Scope

ξ6

Skills

ξ7

Industry Sector

ξ10

Reporting

Structure

ξ8

Region

ξ9

Organizational

Structure

*p<0.001

Global Institute for IT Management

Cobit & Business-IT Alignment

Cobit Maturity Cluster Levels

Busin

ess-I

T A

lignm

ent

Ref: ”IT Executives' Perception of CobiT: Satisfaction, Business-IT Alignment and Benefits” by Mauricio Marrone, Lukas Homann

and Lutz M. Kolbe (Proceedings of the Sixteenth Americas Conference on Information Systems, Lima, Peru, August 12-15, 2010.)

n=113

Global Institute for IT Management

22%

Decentralized

5%

Matrixed

25%

Centralized

Networked

30%

17%

Federated/Hybrid

2.98

3.60

2.69

2.87

Alignment Maturity 3.09

3.67

Global Institute for IT Management

Organization Structure

CIO Reporting Structure

President,

Chairman,

CEO

56 % 30 %

9 %

5 %

COO

CFO

Business

Unit Exec

3.45

3.36

3.25

3.01

Alignment Maturity 3.09 Global Institute for IT Management

Open up the

door to improve

the relationship

of IT & Business!