Everything You Need To Know about Business-IT Alignment

Laura Olle, senior business information officer for Falls Church, Va.-based Capital One Financial Group, answered readers’ questions on CIO.com about achieving business-IT alignment

Q: Business-IT alignment has always been driven by examining business needs and aligning IT to meet those needs. In this Internet age, where a number of business processes are driven by technology, how should businesses go about ensuring that they are taking advantage of the new technology in addition to ensuring that the technology meets business needs?

A: Capital One has a team of highly qualified, talented IT people who look at what technology is being developed (five to 10 years in the future). Within this team are various people who link to the business. It is their job to assess this technology and recommend to the business units how it can be integrated. The team has many links to research institutes and colleges. For example, the CTO is involved with the International Telecommunication Union, where he can influence decision making.

Q: My management feels that one of the most significant ways to make alignment happen is to have application developers become part of the client community. What is your feeling about this type of structure? Is there an alternative?

A: Capital One has actively developed a structure like this. By having developers reside with the customer team, a company can make sure that software programs are in line with the business objectives. Furthermore, subsequent upgrades are easier to facilitate because the customer understands more about the software and the developer has an intimate knowledge of how the business operates. Ideally, they should reside in the same location—solid and dotted lines shouldn’t matter.

Q: Is there a particular methodology you would recommend for aligning IT strategy with business-critical success factors (CSFs)? If so, where might we find documentation?

A: At Capital One, the COO and the CEO develop a plan stipulating what the CSFs for the company should be. It is circulated in the company. As a result, everyone knows that they must align all projects with these points. Furthermore, the CIO has developed four rules for all IT associates:

* Always align IT activities with the business—keep the company’s big-picture goals in mind.

* Use good economic judgment—spend money like it’s your own.

* Be flexible—don’t build yourself into one thought pattern.

* Have empathy.

As long as these rules are followed, IT ensures that alignment is achieved. About your request for documentation, two sources of information come to mind. First is the article on Capital One, “The Gulf Between,” in the Jan. 15, 2000, issue of CIO; the second is an article by Jim Donehey, former CIO of Capital One, “Listening to the Ants,” in the Feb. 1, 2000, edition of CIO. The only other advice I can give is read one of the many books on the market that extols the virtues of complexity theory.

Q: Who in their right mind would care about business-IT alignment? IT should be subordinated to the organizational objectives just like any other functional area (such as marketing, sales, operations, distribution and manufacturing). Why are we always hearing about the need to focus on IT? IT always whines, says it is important above all else, and never delivers.

A: If you are suggesting IT should be relegated to second place behind strategy and organizational priorities, then you obviously do not have a CEO or a CIO who understands the benefits of an IT group, and you will never reap the potential of a major part of your resource. It is like having a left hand and never using it because the right is stronger and deemed to be more useful.

Q: Perhaps you could share with us your previous business-IT alignment experiences? What alignment successes have you worked on or been responsible for?

A: I’ve worked at a range of organizations with different approaches to structure—centralized, decentralized, and where the IT infrastructure was centralized and the development was decentralized. So I’ve pretty much seen it all. From my experience, as long as the strategy is understood, communicated and internalized, any organizational structure can work. When I joined my last company, the IS staff was kept in a building 10 miles away from anyone else in the company. The IS department didn’t want to leave the building, and the business didn’t want to see them. So the business leader and I piloted a colocation scheme that increased two-way communication and did away with the old customer-supplier model. I implemented compensation that was partially based on understanding the business and customer feedback. A major educational program focusing on the responsibilities of business partners in IT development helped foster good relations between IT and the business. Five years later, all of systems development have been colocated and there isn’t any difference between a business person and an IT person.

Q: In the next one to two years, the government organization I work for will embark on a series of projects to improve IT processes based on the Capability Maturity Model. We hope to improve our projects by providing more accurate estimates and developing repeatable processes. If the repeated processes are continually improved, we know we will more efficiently deliver effective systems. However, while the new processes are being put into place our performance may slip slightly. How can we convince our business partners that developing repeatable and standard IT processes is worth the effort? How can we convince them to be active participants in this effort?

A: This question goes to the root of IT-business alignment. Let me break the answer down into two sections. First, convincing your customers of the process should not be an issue. Implementing this model should be based on a business argument. At Capital One, we tend to use net present value. I guess in the case of a government agency, you are planning to improve efficiency. Explaining this project to your customers is secondary—the bottom line is that they want their projects to achieve business goals while being on budget. Second, in the true spirit of alignment, you should be working with your customers to deliver what they want, on time and on budget. Managing expectations and working toward a common goal is the key. Ultimately, you need talented IT people who understand the business.