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Issue of June 2004 

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When business and IT are in sync

Aligning IT to business goals is of strategic importance when it comes to delivering the true value of IT. by Sandeep Ajgaonkar

Aligning technology and business objectives is the first step in seeking value from an IT initiative. The IS 2004 survey reveals that close to 80 percent of India's CIOs are convinced that their

IT and business goals are in close alignment. C N Ram, Head-Information Technology at HDFC Bank says, "Business and IT goals are now so inter-dependent that alignment can be nothing but natural."

Last year it was a different story, at that time the alignment was strongest only in the tech-savvy verticals of BFSI and Telecom/IT/ITES. This year CIOs across industry verticals are focused on seeking a stronger bonding between IT and business. So much so that a whopping 96 percent in Telecom/IT/ITES claim to have attained this Holy Grail of IT-business alignment.

The IT-business relationship

The top three business priorities (from a CEO's perspective) for FY 2004-05 are to decrease costs, gain customer loyalty, and raise revenues. These are more or less the same as the Indian CIO's objectives—increase profitability, decrease costs, and provide better quality of service.

The above fact indicates the CIO is in sync with the business objectives defined by their CEO, and his tuning of the IT strategy to attain that objective—an important first step towards alignment.

Lack of alignment

When CIOs (whose business goals and IT were not closely aligned) were questioned about the lack of alignment between IT and business, the most common reasons were: 'Business goals are considered more important,' 'IT is not the main objective of the company,' and that 'IT is considered to be a support/cost center'.

Nearly 44 percent of these CIOs realize the need to sync IT with business and are already working towards that goal.

Step by step

The natural first step towards alignment is to involve users and business leaders from the various departments. This involvement is very crucial at each and every stage of IT deployment in the organization.

For instance, an ERP initiative will fail or deliver sub-optimal results unless user departments are consulted. The initiative can succeed only if the fine points of each department’s work is ascertained.

User representatives and business heads are playing an increasingly proactive role in various stages of IT initiatives. Over 50 percent of CIOs claim that their business heads are involved during project initiation or authorization and planning.

Research Snapshots
  • Four out of five CIOs believe their organization's IT and business goals are closely aligned. In another survey, almost an equivalent number of CEOs had views that closely mirrored this finding of IS 2004.
  • Alignment between IT and business is closest in Telecom/IT/ITES.
  • However, unlike last year where only tech-driven verticals such as BFSI and Telecom/IT/ITES displayed strong IT-business alignment, this year almost all verticals seem to be focused upon attaining alignment.
  • When alignment is lacking, the reason is usually the fact that business goals are given top priority sidelining IT objectives.
  • Two-fifths of the organizations where IT is unaligned with business goals are working on the problem.

NM Suggests
  • The involvement of the top management is a must for a firm alignment of IT and business objectives. CIOs must work towards this involvement.
  • CIOs should get business heads to articulate their unit's goals and try to mirror the same in the IT department's objectives.
  • Every IT deployment should have a clear-cut objective. This may not always be measurable but it should be possible to say whether the said objective has been attained or not.
  • Technology deployments have to be accompanied by a change in business processes or else they are doomed to fail.

'Now IT is driving business'

The alignment of IT goals may have been overlooked in the past, but now technology and business initiatives are no longer separate watertight compartments. IT is fast becoming the means to do business, particularly in the case of The Stock Exchange. S.B. Patankar, Director - IS, The Stock Exchange, shares his views with Anil Patrick and Deepali Gupta on the need and process of IT and business alignment.

Why must the CIO and Business Heads align IT with business needs?

In the corporate scenario IT plays a critical role since a majority of products and services are delivered through it. An example being our online trading system that is centralized with over 10,000 terminals (spread across 400 cities). So we have to understand the business to ensure proper delivery.

Another example is the Banking sector. ATMs have largely replaced bank branching, thereby introducing efficiency and reduced cost. Banks are also adopting online options for providing 24x7 transfers and customer support. You are in scenario where all services are required online. The Stock Exchange is no different. People would like prices online and orders to get executed instantaneously. They would like immediate feedback.

Earlier if one wanted to sell shares there was a time lag between your request and the final sale. Now the contract note reaches you in the evening.

Also using BSE Webex, a software available on the Internet, one can log on, see the prices, and based on limits placed by the broker, can make the transaction. It is the online services that are driving the business now.

How much of business operations and processes should a CIO understand?

The translation of business into technology is the CIO's job. Services and business concepts need to be delivered. So the CIO needs to understand both the business and the technological part of it, to ensure all services are delivered.

What is your role in the IT-business alignment process in your organization?

I am part of both functions actively, where the business and IT strategies are worked out. There is a two-pronged approach to this. Earlier business was driving IT. Now in some cases IT is driving business. Thanks to the communication infrastructure available, there are newer ways of doing business. So the business strategy and IT strategy are working together now. Previously, the two would be executed separately.

Active involvement of the CTO is required in the whole process of business strategy and IT deployment. I am involved with both the business strategy and the translation of business strategy into IT strategy.

How do you measure the success of technology initiatives in your organization?

I don't think that business and technology initiatives are different any more. The success of the IT initiative will reflect in the success of the business initiative. For instance, take the stock-lending scheme. It has a certain number of participants in several cities. This is delivered through IT. So, we say this initiative will have a certain turnover and usually the projections are the same as the actuals.

So you just have to show the ROI?

That is only when are not sure whether something will get returns or not. Here the delivery is IT. If stock trading has to take place in 400 cities over 10,000 terminals, can you do it without IT? The answer is no. So questions like should we invest do not arise. IT is not an option.

The question then, is how much to invest. And that depends on the cost, which in turn depends upon the service level required. The driving force is the service level the business expects. The cost is based on the service.

What is the latest initiative you are working on?

We are currently rolling out the Integrated Surveillance System. The system will monitor both the equity and derivatives markets to capture online data and monitor the integrity of transactions. In case of any lapses it will give an online alert. This will essentially ensure the safety of the market by taking proactive measures.

'Business should be able to exploit IT'

Over 70 percent of CIOs from the Banking and Financial Services sector believe that IT and business goals need to be firmly aligned. C N Ram, Head-Information Technology at HDFC Bank, tells Anil Patrick and Deepali Gupta, that business and IT goals are now so inter-dependent that alignment can be nothing but natural.

Why should the CIO and business heads align IT with business needs?

If there is no alignment what are we here for? Without it what is IT suppose to do? We are supposed to serve the business community.

How much of business operations and processes should a CIO understand?

The CEO is a strategist; he has to know which business will be profitable and suitable for the organization. He should know the future plan of action and how to be prepared.

At the CIO level we have to turn those strategies in to action. Support functions like IT have to align themselves to produce results the business heads aim for. Therefore, a CIO has to understand everything.

IT is required to do the business faster (so that business is conducted more efficiently) with less errors, and for information management. It's also used to check whether a business is profitable or not. Eventually, instantaneous data helps reduce reaction time.

What is your role in the IT-business alignment process in your organization?

There are several examples of successful alignment. Take a look at the Stock Exchange system. Earlier you bought stocks and the settlement was conducted on a weekly basis. Brokers borrowed money from the exchange. Thereafter the exchange would follow up with everyone who owed them money during the following week. To enable all this, the brokers had to open a bank account with nationalized banks.

The bank compiled all the brokers' balances onto a floppy and sent it to the exchange. Then the exchange ran the balance against how much each broker owed them and if there were a shortfall, they'd call and ask them to fund the account. Settlement took time because the broker was not always a local. Initially, brokers were given a week to pay up. But then the settlement time was shortened, and that's where problems began.

We offered the exchange a solution where it could query our system on an online real-time basis. So there was no need for floppies, and therefore no delays in carrying the floppy from one place to another. As long as brokers banked with us, we'd enable them to fund the account on an online real-time basis, and it could be credited in a matter of seconds. This way 70 percent of these weekly settlements happened through us. We are talking about Rs.1,300 Crore approximately.

Another example is that of Supply Chain Management. As corporates implementing their SAP systems, they brought in a lot of automation. But for payment they were still using cheques. So, if the payment would be due in 45 days, the cheques would be signed and sent on the 46th day. It would take a week or two to be encashed. In the mean time the supplier had to ensure he would not run out of funds during the delay period. So he added the interest cost to the material; input costs went up and the customer paid a much higher amount.

We offered to do the entire transaction electronically. The manufacturers gave us their credit file, and we would credit the supplier instantaneously. As the suppliers became confident that the money would reach them on time, they reduced their cost. If they didn't they were walking away with a much bigger margin.

Another area was to get corporate salary accounts by offering to credit employee accounts based on a corporate file. This was a fairly major effort for us.What is the role of IT governance in an organization?

Techies tend to get carried away with technology. It's imperative that Business Heads, the Financial Control office and the MD keep tabs on what is happening.

Our job is to increase the levels of awareness. People don't need to understand TCP/IP or databases. They need to understand that with the appropriate set of technologies they can get what they want. They need to intuitively feel they got value for money. They need to set goals for everybody. They need to specify what expense needs to result in what reward. And the entire process needs to be monitored. We tend to be careful about what we spend. We put out measurement parameters right up front so it's easy to see the investment made and the returns gained.

How do you measure the success of technology initiatives in your organization?

Automation helps reduce errors and to manage transactions without increasing headcount. It also keeps track of transactions. So we can ensure investment and transaction ratios are right.

There is a planning phase where we estimate the likely benefits from an IT project. Post production we actually measure the benefits and map them back to what we expected. It's an on going process. You have to be alert all the time.

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