Concepts of Strategic Alignment of IT and Business

This chapter begins by explaining the purpose of strategic information systems planning, which is followed by describing three commonly adopted methodologies. They are known as “business systems planning,” “strategic systems planning,” and “information engineering.” In addition, the six broad process dimensions that characterize the activity of strategic information systems planning are discussed. In order to provide an understanding of what is meant by alignment, the basic concepts are presented and some established principles discussed. In essence, the primary and secondary functions in alignment for a business are explained, including the purpose it serves, how optimum alignment occurs, and when. Some proposed models for strategic alignment are reviewed to provide an understanding of the different types of strategic activities that are involved, and their flow and relationships with each other for interaction. By demonstrating how each model works based on a given set of conditions, the key to achieving strategic alignment for a business is established. The strengths and limitations of each of the models are stated. In particular, the model proposed by Henderson and Venkatraman (1990), the Strategic Alignment Model (SAM), is described in detail to explain how it works. It is explained in the context of four fundamental domains of strategic choice, with each having its own underlying dimensions. In essence, SAM has been developed for conceptualizing and directing the emerging area of strategic management of IT in terms of two fundamental characteristics of strategic management. They are strategic fit (the interrelationships between external and internal components) and functional integration (integration between business and functional domains). These fundamental characteristics are defined with respect to four different perspectives of alignment. Further, three dominant domain types are introduced together with appropriate illustrations of their application. Finally, case studies are presented to show how companies with a technology vision can achieve enormous business success through applying strategic IT alignment and indeed become global players. The chapter concludes with a summary of the main points covered on the concepts of strategic alignment of IT and business.