Why you need to align IT policy to needs of your organisation

As the forces of globalisation continue to define the ways in which the global economy shapes itself, senior IT executives like chief information officers, IT directors and chief technology officers should take the lead in explaining how IT infrastructure creates business value, especially in challenging times.
Saddiq Mwai
Saddiq Mwai

As the forces of globalisation continue to define the ways in which the global economy shapes itself, senior IT executives like chief information officers, IT directors and chief technology officers should take the lead in explaining how IT infrastructure creates business value, especially in challenging times. Any organisation that fails to define its business objectives and align its IT strategy in these challenging times will struggle to thrive.

Successfully aligning your IT strategy with the needs of the enterprises typically means collaborating with the business in ways that add value rather than reacting to the demands of the business. IT investments have been shown to be most fruitful when they match technology strategy with business strategy, implement systems in a closely controlled way and balance value creation with increased IT capabilities.

The reason for this is simple; no organisation wants to engage in wasteful spending. If, at the end of the budget year, the organisation has failed to realise a value creation demonstrated in aligning its business objectives and IT strategy, then the so-called increase in IT capabilities will not give the organisation a competitive edge. In particular, proper management and excellent governance of IT have a larger impact on performance than many other factors conventionally deemed important. This includes the extent of IT operations, the age of the IT platform, its customer base and the amount of money spent on executing the IT strategy.

Organisations that conventionally perform best on a normal IT scale for governance have higher profit-to-earnings ratios. This can largely be attributed to sound fiscal policy, transparency and proper leadership and may signify that well-run organisations do a good job of managing their information technology. Some of these top-performing organisations tend to shape their IT strategies in close collaboration with the business functions by means of formal governance processes and engaging the business to focus on value-creation and building blocks that are influenced by IT. What is more, high-performing organisations see IT as more strategic than tactical, and they drive more of their IT agenda directly - that is, they outsource less.

Research and surveys on IT organisations have shown that some conventional wisdom is not so wise after all. Why? Because merely spending more money on IT strategy and functions, for instance, does not automatically convert into higher profitability and abundance. Cases have also shown that organisations with above-average IT expenditures have higher cost-to-income ratios and, in places where growth was measured, a below-average increase in revenues was experienced. One reason is that many of these organisations spend too much on running their daily operations and too little on innovations that would set them apart from competitors in the same industry sector. Also, many organisations have difficulty translating their IT investments into real business value; they may invest in new technology like a business intelligence solution, an enterprise resource planning application, and an enhanced customer-relationship management system that the business doesn’t adopt.

There must be a better alignment between business strategy and objectives with IT strategy. If these two do not align and collaborate with one another, the organisation will suffer dire consequences. Top-performing organisations have a tendency to invest more in innovation and do a better job of getting the business to engage with IT investments. This is conventional wisdom at its best. Scale and size does not guarantee and ensure cost benefits, rather ‘smart sourcing’ is a preferred strategy. Cautiously selecting services, for example, outsourcing the help desk rather than IT operations by and large, adding capacity and competence as considered necessary and adopting innovative, supplementary scalable technologies, that permit companies to scale up or down more flexibly provides the desired cost benefits and operational efficiencies.

Again, this does not require conventional wisdom. The most essential thing is awareness and commitment from the utmost position of the organisation. Direction comes from the top, and the governance framework prioritises and should encourage alignment with the business objectives. IT leaders have the business know-how to understand the way things are typically done, earning and extenuating their influences at the boardroom where IT confident senior executives make strategic decisions for the organisation.

This is my twist on conventional wisdom, with regard to IT spending: organisations that are heavy IT transformers or organisations with specific reasons for high spending on IT may be able to cut back spending without losing efficiency. However, organisations that invest heavily in IT but have not yet realised returns for the business could reduce IT spending, selectively invest to improve business and achieve better alignment with business objectives. At the same time, organisations that maintain a low level of IT spending, but successfully put what they do spend to work for the business could further optimise to become best in class.

Organisations that are efficient IT executors and do not invest heavily in IT spending, but also have succeeded in achieving high level of operational efficiency could use current IT spending more on operational improvement efficiency. These are some of the tactical initiatives that organisations could execute as they align their business objectives to their IT strategy and embark on the next growth frontier.

The writer is a director in technology advisory services at PwC Rwanda

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