Business to IT Alignment – A Practical Discussion

Business to IT alignment is an objective that most technology and business leaders would agree as essential for agility.  However, ask for a definition of Business to IT alignment or how to implement an alignment strategy and the likely results are conflicting information and vague guidance.  In the following blog I will try to add clarity to this topic as well as provide practical guidance.

Definition

Let’s start with a basic definition of Business to IT alignment by addressing some common misconceptions.  Business to IT alignment is far more than just Project Portfolio Management (PPM).  Business to IT alignment consists of several domains:

Knowledge Map for Alignment

Business – IT Alignment Domains

Several Tier I & Tier II ERP software vendors provide software solutions to address certain Business to IT Alignment requirements, including PPM and Communications (social collaboration).  However, it is important to remember that technology alone is not the answer.  Collaboration tools can be used to generate more noise than effective communication.   Also consider that having strategic initiatives stored in a common platform (ex. PPM) does not mean the all stakeholders share a common interpretation.    

Just as Business – IT alignment is more than just PPM, enterprise governance is much more than just IT governance.  In simple terms, enterprise governance is a process that ensures that enterprise capacity (Business, Operations, IT) are working on the right things at the right time to enable business goals. It’s a set of guidelines that focuses on organizational success while managing associated risks.  Alignment is hard to achieve when governance is not consistent across the enterprise.  Knowledge transfer is the most underestimated and misunderstood area.  Effective knowledge transfer is more about education and trust than software and templates.  Before one can be successful with Business – IT alignment it is important to fully appreciate the scope and breadth of effective alignment.  A viable alignment strategy must address the key challenges listed in the next section.

The Challenges of Business to IT Alignment

Consider the following alignment model.  This is a very simple model that I would like to use for discussion purposes.

Governance Model

Business – IT Alignment Governance Model

Allow me to highlight some key challenges associated with the traditional alignment model provided.  First is the notion that Business and IT operate separate silos.  Notice in the example above that there are separate Business and IT goals.  Thus, there must be an exercise to reconcile Business goals and IT goals to identify commonalities and gaps.  Practically speaking, given the level of effort required to align these separate strategies, a reasonable conclusion is that alignments occur periodically based upon corporate milestones.  This is where the model breaks down because effective alignment must be a daily activity.  Every business request from strategic initiatives to daily support tickets is an opportunity to reinforce alignment.  Another possible concern implied in this model is that the majority of alignment effort happens at the enterprise level.  Sustainable alignment must happen at every level within the organization.

A results-oriented alignment strategy must address the inhibitors of alignment.  Consider the following relationship between alignment and communication:

Alignment and Communication Inhibitors

Alignment and Communication Inhibitors

Success alignment requires successful communication.  Successful communication requires the effective use of all the key communication skills

Key Communication Skills

Key Communication Skills

Process is important but the soft skills like communications, emotional intelligence (empathy), and knowledge transfer will have the greatest import on long-term alignment success.

Practical Steps to encourage Alignment

Before you can start implementing practical steps you need to assess the level of alignment within your organization.  The Strategic Alignment Maturity model referenced below was developed by Dr. Jerry Luftman and is based upon the Capability Maturity Model Integration (CMMI).

CMMI - Strategic Alignment

Strategic Alignment Maturity

Once you have identified your current maturity level then you can devise realistic, increment steps to move forward to the next maturity level.  It is also important to periodically assess your organization’s alignment.  What gets measured gets done!

Summary

Why is Business to IT Alignment so hard? Consider the following statements to highlight  the key challenge with alignment.

Business vs IT Value Perspective

Business vs IT Value Drivers

Is Business to IT alignment an impossible goal? No, as long as a practical, measured approach is taken to achieve tangible results.  Business to IT alignment is a strategic goal that can only be reached by taking tactical steps to bring Business and IT closer together to generate mutual understanding and trust. When alignment is achieved communication is effective resulting in valued partnership.

IT Should Move Up the ERP Value Chain

A key challenge in my role as an IT ERP Director was to maximize business value with a shrinking budget.  It was quite an education for a person with the majority of his experience in Tier I ERP Consulting.  There are many options competing against IT organizations in providing ERP services (SaaS, Cloud, Off-shore and Near-Shore support models).  Two key battlegrounds are ERP software development for customizations and ERP support.

Show me an IT organization whose key competitive advantage is that they are internal and I will show you a shrinking IT department!  There must be a major shift in IT’s value proposition for ERP support.  In the next sections we will discuss some of the shifts IT ERP shops need to make to stay competitive and relevant.

IT ERP Support Can Be Done Cheaper

For the purpose of this blog discussion let’s broadly assume that there are three tiers of ERP support.

ERP System Support Model

Levels of ERP Support

There has been much discussion regarding outsourcing IT support along with noted advantages and disadvantages.  I will not join the debate on one side or the other but I do consider myself a realist.  Generally speaking, you are looking between 30% to 50% reduction in costs (depending on the study) which just can’t be ignored.  Instead of fighting the change I prefer to control the change in such a manner as to enable my ERP IT support team to generate greater value for our customers. 

Also, consider that there are just some activities you should not outsource.  Referring to above model I have been very cautious with outsourcing Tier I support.  Nothing is more reassuring to a business user with a critical issue than to see their IT support partner face to face and have a real-time discussion.  Cost cannot be the only consideration – just like Dell learned the hard way.    If the activity is not strategic and highly valued by your customer then look for a cheap and competent (not world-class) option that will free your IT resources for greater value-add activities.

Trend:  Competitive Advantage for ERP is Configuration over Customization

With the initial release of ERP, one of the key “game changers” was the ability of business users to access data and generate reports without direct IT involvement.  This empowerment of the business user had a significant impact on business agility.  Today, we continue to see ERP vendors focus on providing business-friendly tools for reporting and analysis.

Yet, I can see a new evolution brewing in the ERP industry what I like to call “Adaptive ERP” where business users will be able to perform on-demand configurations to meet business changes real-time.  This would go way beyond simple user preference configurations.  Adaptive ERP would enable business users to configure, simulate, test, and implement business technology changes with limited traditional IT services (ex. software development).    Today, some Tier I ERP vendors provide some limited capabilities of Configurable ERP but these capabilities are spread across multiple software products and OS platforms.  It’s a great topic for discussion (and future blog) but not what I would consider a sustainable, viable solution for today. 

Key Evolutions of ERP

Major ERP Development Milestones

 

Advice for ERP IT Departments – Focus on Moving up the Value Chain

In my previous experience, I had an opportunity to work for a Tier I ERP vendor developing new service offerings and consulting practices.  A key lesson I learned the hard way was when a service offering is facing significant commodity pressures either you can (a) reduce the cost or (b) move up the value chain where you can generate a strategic competitive advantage. 

Service Categories for ERP Support

ERP Service Categories

In order to move up the value chain not only will include training but more importantly a fundamental change in what IT considers their strategic business value. Remember that a key value proposition for ERP is to reduce software development.  Therefore, software development should not be the key IT value proposition for the IT ERP team.  Many perceptions and expectations must be carefully managed through this organizational transition.  The goal is to evolve IT software developers into IT business technology advisors.  One only needs to look at the ERP professional services industry to observe what the market will bear for software development roles versus technology advisory roles to confirm the above recommendation.  With this move, internal IT organizations will be able to support more advisory and consultative roles once reserved for external consulting organizations.  Just think of the potential cost savings and knowledge retention to your business.

Summary

Is this the end for internal IT support for ERP?  Hardly! However, more will be asked of internal ERP support teams with limited resources.  This may result in a more challenging and stressful work environment.  What use to be considered valuable has become generally accepted and expected from business users.   To remain a strategic partner, IT ERP support teams should look for opportunities to free up their staff to focus higher up the value chain.       

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