Ask Before You Spend: Is Your Corporate IT Strategy Aligned to Achieve Business Objectives?
Research organization Gartner forecasts that worldwide IT spending will grow just 0.6 percent to $3.54 trillion in 2016.1 With this modest increase in technology investment comes a renewed need for companies to make sure they are maximizing their return on investment. To reduce the risk of investing in technology that will either be obsolete in a short time or will not support future growth, companies need to make sure their IT strategy is aligned with their organization’s current and long-term business strategies and that their IT enterprise applications are capable of supporting any planned growth and changes to the business model.
To be sure, technology and the way it is implemented can either enable or hinder the achievement of a corporation’s strategic objectives. Understanding the key business drivers, whether to enable competitive advantages or internal efficiencies, is the foundation for developing a sound IT strategy. Looking forward to the next three to five years is critical as business needs will likely shift, and technology solutions can take many months or even years to successfully implement.
Far too often, this critical alignment between the business strategy and IT strategy doesn’t occur. In turn, this limits an organization’s ability to react in time to the changing needs of the business, and can cause a company to fall behind its competition. For example, the executive in charge of IT may not clearly understand the organization’s operational and long-term growth objectives, while corporate leadership does not fully grasp how technology can advance–or deter–the execution of its strategies. This misalignment becomes painfully obvious in years further out. The organization’s business model changes to accommodate strategic objectives, and only then is it discovered that the IT applications cannot support growth because the underlying IT strategy was never put in place.
It is therefore essential to establish a corporate mindset that closely links the strategies of IT with that of the business. Embedding such a culture and mindset will dramatically improve the company’s flexibility and agility to proactively address various business scenarios and mitigate the consequences of being unprepared.
A Real-World Application: How Alignment Occurs
In a recent situation, one of our clients proactively sought to avoid this potential risk and disconnect between the business direction and its IT strategy. The client, a leading provider of industrial and commercial services, planned to add new business offerings to its customers. Recognizing that their business model would be expanding, and that the IT capabilities they had to support their old business model might not readily support new business requirements, the client asked CohnReznick to assess the current state of its IT function, organization, business applications, and infrastructure, with a specific focus on the capability of existing systems to support an expansion and diversification of services. The client also asked that we recommend a short-term tactical IT plan based on the findings of the assessment and a longer-term IT “road map” to get them where they needed to go in the future.
The assessment was comprehensive, examining the IT function as a whole to determine whether the client had the right people, processes, infrastructure and applications in place to support the goals of their business. We leveraged our Technology Effectiveness methodology to quickly identify gaps, improvement opportunities, and risk areas. Our review focused on process efficiencies, data integrity, and the ability for management to obtain the information they needed to effectively manage the business. Finally, we looked at the IT organization itself—personnel, roles and responsibilities, and reporting structure—to determine how to realign and enable a more proactive and project-driven organization.
At the conclusion of our assessment, we provided management with a comprehensive set of findings and recommendations, with a time-phased technology road map that supported the clients' business strategy. Key initiatives that resulted from our assessment included a selection for a new financial system with an integrated procurement solution, and a business-process design project. Major customer benefits expected to be realized include improved responsiveness, accuracy, and consistency.
Proper Implementation Is Critical to Realizing Expected Benefits
To paraphrase poet Robert Burns, even the best-laid plans can go awry. The ultimate success of any strategic IT plan will depend largely on how carefully its rollout is implemented. For this reason, the implementation plan should be viewed as a critical extension of any strategic IT plan.
Often, it is the implementation of the IT plan that trips up the organization. A company might have an IT strategy in place, and perhaps a project or a series of projects slated for implementation. But now the internal IT team is managing multiple work streams, often with the same people involved. Couple that with the fact that many organizations struggle with basic project management skills, add into the mix a complex, multi-year IT implementation, and it is easy to see where the train can go off the rails.
To get past these hurdles, the answer is to assign a dedicated project manager whose sole mission is to steer implementation of the plan. Project managers should not be confused with project administrators–individuals whose function it is to manage a sort of punch list. A true project manager is a change agent with the ability and real power within the organization to drive the implementation across multiple disciplines and multiple departments. In conjunction with this, there needs to be a strong program governance structure in place–whether it is a project steering committee or the corporate operating committee–encompassing a body that can make decisions and resolve issues, especially issues that relate to conflicting or competing goals or resource conflicts that inevitably will arise. In larger or complex projects, a separate organizational change-management leader may be necessary to drive acceptance and adoption of new roles and responsibilities that inevitably will result from new technologies and processes.
What Does CohnReznick Think?
It is essential to understand that the work of aligning the IT function with both the operations and finance function of a corporation is an ongoing endeavor and one that should be ingrained in the company’s culture. All three functions must share a seat at the table when day-to-day operating decisions are made. The functions must be integrated, intertwined, and constantly communicating with each other to achieve one common goal: the ultimate success of the organization.
1 Worldwide IT spending is forecast to total $3.54 trillion in 2016, just a 0.6 percent increase over 2015 spending of $3.52 trillion dollars. 2015 saw the largest U.S. dollar drop in IT spending since Gartner began tracking IT spending. $216 billion dollars less was spent on IT in 2015 than in 2014 and 2014 spending levels won’t be surpassed until 2019.
© 2016 CohnReznick LLP
Any advice contained in this communication, including attachments and enclosures, is not intended as a thorough, in-depth analysis of specific issues. Nor is it sufficient to avoid tax-related penalties. This has been prepared for information purposes and general guidance only and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is made as to the accuracy or completeness of the information contained in this publication, and CohnReznick LLP, its members, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.
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