Business and IT Governance Alignment

Simulation Essay on a Business Process and IT Service Model

Enrique Silva, PhD Student; Yves Chaix, Consultant on e-Government
esilva@cablenet.com.ni; ychaix@ibw.com.ni
Industrial Information and Control Systems
Royal Institute of Technology (KTH)
SE-100 44 Sweden

Abstract
One of the main concerns of IT governance is ITs
delivery of value to the business, which is driven by
strategic business and IT alignment (SBITA). How to
operationally assess the SBITA remains a great challenge
for the CIO. This paper treats this problem, taking as a
reference, the Henderson and Venkatraman strategic
alignment model and expanding from it, a new process
perspective of the business and IT governance alignment.
There are two main contributions presented in this paper:
first, a proposal of a business process and IT service
model for assessing the business and IT governance
alignment; and second, an illustrative simulation essay on
a business process and IT service model for
identifying and measuring the level of alignment between
the business and IT governance, by using the simulation
tool called Adoit.

1. Introduction
Studies have shown that misalignment, or a lack of
alignment, between business and IT strategies is one of
the main reasons why enterprises fail to exploit the full
potential of their IT investments. Some organizations that
have accomplished a high degree of alignment are often
associated with better business efficiency and IT Service
effectiveness performance. See Figure 1. As a
consequence, strategic business and IT alignment
(SBITA) has consistently been one of the top concerns of
the CIO and CEO for many years. For academics and IT
practitioners, the key question - how to accomplish
strategic alignment between business and IT in the
complex and dynamic environment of the real world -
remains a great unanswered challenge for the CIO and
CEO [2] [18] [21].

The problem of operationally identify, measure, improve
and maintain the alignment level between business and IT
governance has become increasingly important for the
CIO and CEO. Nevertheless, the topic still lacks good
decision-making support at the top-management level (i.e.
CIO and CEO level) [2] [18].

For effective assessment of business and IT governance
alignment, enterprises need to assess how well they are
currently performing and be able to identify where and
how improvements can be made. This applies to the
performance of both the business processes and IT
processes (IT Services)
1
. The interactions of IT processes,
business processes and IT resources over time can result
in a large number of scenarios and outcomes that the
author proposes to evaluate by running a process
simulation (PS) essay on business process and IT service
model. For instance, one of the elements for
implementing effective IT governance is performance
drivers which provide indicators on how IT governance is
achieving: system downtime, throughput and response
time, cost-efficiency of IT processes or services (costs vs
deliverables), utilization of IT infrastructure, staff
productivity, availability of IT services, service level
agreements, documents, etc [17] [18].
This paper presents the importance of applying the
process simulation for assessing business and IT
governance alignment (BITGA) as a sub-topic of SBITA
and taking the Henderson and Venkatraman strategic
alignment model (SAM) as a base. It is introduced a new
business process and IT service model perspective of the
business and IT governance alignment [6]. Another
contribution of this paper is the application of the process
simulation, as a cost-effective method, for identifying and
measuring the level of alignment between the business
and IT governance, by formulating an illustrative example
of a business process and IT service model. It is used
Adoit
2
, as the simulation tool.

1
A Service is a logical grouping of functionality that is made
available through the combination and specific configuration of
hardware and software.
2
A model based management tool for IT Services and Architectures.
BOC Information System GmbH. www.boc-eu.com
Proceedings of the 41st Hawaii International Conference on System Sciences - 2008
1530-1605/08 $25.00 2008 IEEE 1
Although IT business value and SBITA are often
analyzed as separate CIO concerns, it is argued that
organizations (public or private) must have a service level
agreement (SLA) between business processes and IT
services, as an important mean for assessing alignment
and, as a decision-making tool, for improving
management of the business and IT governance alignment
[24].

Figure 1: Iterative Relationship between SBITA, IT
Business Value and Business and IT Key Performance
Indicators (adapted from Tallon, 1998).
2. Outline
The next section presents the paper research background
defining SBITA, business and IT governance alignment
(BITGA), and business process and IT service alignment
view. Section 4 explains the importance of applying the
process simulation for assessing BITGA, and presents an
illustrative example of a business process and IT service
model. The summary section 5 presents the papers
relevant results and contributions. The main references
are presented in section 6.
3. Paper Research Background
3.1 Strategic Business and IT Alignment
For anyone interested in managing the strategic alignment
problem in an organization, it is of utmost importance to
have a clear picture of what alignment is and how it can
be concretely defined and assessed. In general, it is
conceived that SBITA has to do with the degree of
congruence or harmony between the IT strategy and IT
infrastructure and the business strategy and organizational
infrastructure [6].

Despite the fact that alignment is an issue of utmost
importance, no consensus among academics and
practitioners can be found on what alignment is, how it
should be defined or measured in the organization, or
what measures should be taken to maintain and improve it
[2] [18].
The author had proposed a theory diagram for SBITA
(TD-SBITA) in order to categorize and define the topic of
alignment more stringently given its current knowledge
base. The prioritized TD-SBITA thus shows in percentage
form the level of importance of different key alignment
topics or properties presented by the relevant information
sources reviewed. See Figure 2. In this framework, it is
introduced a new business and IT service process
perspective, in order to operationally assess the level of
alignment between business and IT governance.



Figure 2: Example of a Prioritized Theory Diagram
Based on SAM (adapted from Silva, 2006).
3.2 Business and IT Governance Alignment
Model
As an analogue model to the SAM, this paper proposes a
strategy and operational integration alignment model with
the main purpose of evaluating the level of alignment
between the business and IT governance. See Figure 3.

According to the authors, the most appropriate definitions
of IT governance (ITG), taking into account the purposes
of this paper, are the following:

1) IT governance is the organizational capacity
exercised by the board, executive management
and IT management to control the formulation
and implementation of IT strategy and in this
way ensure the fusion of business and IT [3].
2) IT governance is a board or senior
management responsibility in relation to IT to
ensure that:
IT is aligned with the business strategy: i.e.,
delivers the functionality and services.
These IT-related services and functionality are
delivered at the maximum economical value or in
the most efficient manner. In other words,
resources are used responsibly. ITGI
3
[23].

ITG faces the dual demand of 1) contributing to present
business operations and performance, and 2) transforming
and positioning IT for meeting future business challenges.
ITG is both, internally and externally oriented, spanning
both present and future time frames. Therefore, one of the
key challenges of ITG is how to simultaneously perform
and transform IT in order to meet the present and future
demands of the business and the business customers in a
satisfying manner [22].

3
IT Governance Institute, 2000.
Assessment of IT
Business Value
Business and IT
Key Performance
Indicators
Strategic
Business and
IT Alignment
feedback
feedback
Business and IT Strategic Alignment
Strategic Fit Functional
Integration
Strategic Integration Operational Integration Strategic IT Fit Strategic Business Fit
12.89% 16.58% 30.05% 40.48%
29.47% 70.53%
Proceedings of the 41st Hawaii International Conference on System Sciences - 2008
2
The model in Figure 3 presents one of the perspectives or
viewpoints for identifying and measuring the alignment
level between the Business and IT governance by means
of a more operationalized Business and IT Process Model,
including the key performance indicators (KPI)
4
for each
type of process. One of the advantages of the presented
perspective is that it could be developed in a top-down or
bottom-up way, depending on the needed level of details
or availability of information in the enterprise. If it is
possible to find and estimate the level of alignment in the
process level, then it is also possible to say something
important and reliable about the level of alignment at the
strategic level.


Figure 3: Conceptual Model for Assessing the BITGA

A number of benefits are associated with business and IT
process alignment model when the objective is to

4
KPI (key performance indicator) is a vital and measurable result to
track the efficiency, effectiveness, and/or predictability of a process.
operationalize the BITGA. First, processes are likely to
yield greater insights into where the organization is
misaligned or aligned, helping to identify and mitigate
bottlenecks in a dynamic relationship between IT and
business processes. When BITGA is evaluated at the top
level in an organization, the CIO and CEO might simply
know that their organization has certain level of
alignment, but would not have enough granularity of
information to find the causes and effects of the alignment
level. Second, if a process model is developed, the
strategic level could be operationalized and represented as
a set of business and IT processes (IT services), which at
the same time are composed of a set of inputs, activities
and sub-processes.

Finally, the identification of a set of key performance
indicators, resources, cycle time, etc. for each of the core
business and IT processes (IT services) facilitates a more
detailed evaluation of the level of alignment over time.

Process models have another advantage over other type of
models because processes work over time and produce
some type of output. It is possible to measure the cycle
times, costs, outputs, efficiency, effectiveness, quality and
customer satisfaction associated with processes by using a
process simulation technique. In process modeling, a
process object allows several sub-processes and activities
to be represented in multiple levels of detail.

For a process model, an analyst will initially focus on
what activities are performed in the process (functional
perspective), such as receiving an IT service order,
forwarding it to the maintenance area and so on. The next
step may be to investigate the sequence that these
activities follow and how they are performed, and then
develop a graphic picture of the process (behavioral
perspective). Finally, the analyst may study where these
activities take place and which resources (human, tools,
electronic, etc) are used [19] [25].

For example, purchasing or product development can be
modeled as hierarchical processes, with the actual process
behaviors defined at lower levels. For instance, the
process model allows an analyst to: determine any
bottlenecks or wasted effort, devise revisions to the
process to correct performance or security problems,
select process designs that give the best results, provide
cost justification to planned alternatives and establish
performance targets in the new process implementation.

In the presented process model, the analyst should select a
list of business processes and IT services with their
respective groups of key performance indicators, which
could be, for example, time, costs and resources. The
described procedure is an indicative and flexible one,
Proceedings of the 41st Hawaii International Conference on System Sciences - 2008
3
which could be used by the CIO or CEO depending on
their concrete situation, priorities, information availability
and level of process documentation. The next step in this
analysis procedure is the establishment of the desired
reference values of the KPI (those considered good values
for the company or selected from the credible literature)
at the possible level of details for such selected business
processes and IT services.

To assure a good level of credibility in this selection
procedure, the list of IT services and their corresponding
KPI (ITS-KPI) can be selected from the COBIT
5
or ITIL
6

frameworks and the list of business processes and their
corresponding KPI (B-KPI) are selected from the well
known and specific business literature in accordance with
the specific organization or business case.

The total number of B-KPI and ITS-KPI and the multiple
possible combinations of them, could be very high and the
relationship analysis extremely complex to be managed
by the CIO or CEO without using an appropriate
assessment method. This situation justifies the use of the
process simulation as a scenario-based technique which
allows the representation of KPI, business processes, IT
services, people, and technology in a dynamic alignment
model. By applying simulation will be possible to answer
the what if questions and it will facilitate the decision-
making process at any level of details in the BITGA
model. See Figure 3.

The simulation essays at KPI level allow the analyst to
find the proper measures for estimating a partial or a total
level of alignment between business and IT process
governance, going from the bottom to the top level in the
analysis procedure. By doing performance measurement,
the analyst can identify potential areas of improvement.
Through a collaborative approach, IT managers and staff
can see why change is needed and some of the areas for
change. These map the systems into the processes as well
as business factors. They can assist the analyst in
determining which IT services are causing the most
negative/positive impacts on the business processes.
Additionally, they can aid in determining the technology
gaps and holes as well as technology issues. See Figure 3.
3.3 Business Process and IT Service Alignment
View (BP-ITS)
This paper introduces the business process and IT service
alignment view as an operational strategy for identifying
and measuring the level of alignment between the
business and IT governance.

5
COBIT (control objectives for IT). www.isaca.org
6
ITIL (IT infrastructure library). www.tso.co.uk
The foundation of the BP-ITS view is the ITIL standard
of IT service quality that customers should demand and
providers should seek to supply. The ITIL has achieved
increasing sophistication around the delivery of IT
services within the organization. IT governance actively
supports IT services delivery as a critical set of IT
processes and a component of the technology foundation
for business. The value derived from IT today is based on
the assurance that business efficiency and effectiveness
performance improves continuously, is measurable and
can be delivered at acceptable levels [24]. The IT Service
is defined as a logical grouping of functionality that is
made available through the combination and specific
configuration of hardware and software. An IT service
has three main components or elements: people, IT and
processes. See Figure 4.

Figure 4: IT Infrastructure Library (ITIL) [24].

The service model consists of a combination of those IT
services the customers need and are willing to pay for
(direct services), along with those needed by the
organization to provide direct services to the customers
(indirect services). Each of the service models should
have associated a tree diagram to systematically map out
increasing levels of detail for related goals, tasks, and IT
services, a resource and a cost model [20].

The service model provides a framework for the
development of metrics, against which the business
processes are rated. This documents a clear understanding
for both the customer and supplier of expectation levels in
key business areas. When the service model is taken to
the next step, a tier support level document is developed
that shows not only what services are provided by the
Proceedings of the 41st Hawaii International Conference on System Sciences - 2008
4
organization, but also outlines all the services required by
the customers and shows the service provider for each
service.

Business manager as a customer of IT services wants the
most cost-effective solution that best meets his
requirements regardless of who delivers them. IT provider
of services wants to maximize customer satisfaction by
optimizing the level of service and optimizing cost. As a
result, there is an ever increasing need for applications
and associated infrastructure to be up and available when
the customer requires them, and to keep the critical supply
of information flowing. It is for this reason that the
business needs to have the delivery of its IT services
organized and resourced to meet the current business
requirements, and at the same time be flexible enough to
be able to change with the same frequency and velocity
that business does. This is the operational perspective the
author is proposing in the business and IT service
alignment view.

Since services do not exist in a static state, the logical
flow of the services is the model that must be addressed if
the BP-ITS view is to be successfully executed. Linking
all enterprise activities, especially services, to a single or
complex business process provides a very powerful
synergistic effect. The logical linkage of services and
business processes takes the form of a flow of processes
that begins with the request for service and is fulfilled in a
complete cycle of service delivery, validation of
completion, completeness, quality, and an examination
for service improvement opportunities.

This very simplified process flow represents a logical
sequence of events that occur when a service is requested
and is delivered to the business process. The ability to
link the activities that comprise services to the business
enterprise horizontally, vertically, and logically, will
directly affect the value the enterprise will derive from
their investment in IT. The value of the services IT
provides is derived from the users perception and may
not have a clear relationship with cost. The bottom line on
the subject of value is that building credibility by
delivering quality services repeatedly will ensure the IT
organization is creating enterprise level value.

The BP-ITS view proposes the relationship between
business processes and IT services described above must
be formalized by means of a service level agreement
(SLA), which is part of the ITIL standard. See Figure 4.

In constructing the service model, an understanding of
what the customer expects to be delivered will be
negotiated, agreed to, and ultimately documented in a
SLA. A key element of the SLA is defining the measures
that will determine satisfaction of the agreements terms.
In fact, there may be layer of metrics that are not visible
to the user, but support an overall measure of success. The
metrics must not only be constructed to measure the
success relative to a specific service and systems SLA, it
must also be supportive of the overall business need that
the IT service is supporting/enabling.

An initial step in establishing a set of metrics to measure
and actually ensure success is to determine the level of
service that must be provided by the functional service
offering. Each service offering should have some method
of being measured. Once the level of services for the
system to be supported has been determined, a specific set
of metrics can be established for the functional service to
be offered.

Service level agreements (SLAs) are the most effective
way to identify and measure the level of alignment
between business and IT governance, i.e. what
expectations are and what will be delivered to meet those
expectations. An SLA should be in place before a
business application is run in the production data center. It
will detail the administrative services, supporting
configurations (hardware and software), and supporting
practices necessary to meet the applications business
requirements. Achieving success should not be a one-time
or periodic milestone to be checked off the proverbial to-
do list, but a dynamic, ongoing effort. In constructing an
alignment model CIO and CEO must realize that the
target is always moving and adjustments must be made
accordingly. Regular reviews of SLA, internal processes,
staff skills, expertise, and leverageable technology will be
required. See Figure 4 [20].

According to Harris Kern, et al., [20] the objective of the
SLA is to define a framework for managing the quality
and quantity of delivered services, in the face of changing
business needs and user requirements, at a price the
business is able to afford. Specifically, this document
intends to:

Synchronize IT services with the business needs of
the customers
Set the correct level of services expectations and
responsibilities for both IT and the customer
Enable IT to be an effective and flexible partner to
the business unit, aiding rapid response to the
changing business environment
Enable IT to plan for the delivery of required services
at the lowest cost to the customer
Enable IT to maintain quality and visibility of the
services that they can provide, and thus demonstrate
value for money.

Proceedings of the 41st Hawaii International Conference on System Sciences - 2008
5
As it was described above, the SLA is a mean, among
others, that can be used in order to formalize the
relationship between the business processes and IT
services. Taking the generated metrics as a quantitative
and qualitative source of information, then it is possible to
develop a bottom up assessment of the business and IT
governance alignment, going from the bottom to the top.
As another tool for assessing the relationship between
business processes and IT services, the author has
proposed in a previous paper, the balance scorecard for
business and for IT. See Figure 3 and 4.
4. The Process Simulation Essay
4.1 The Importance of Applying Process Simulation
for Assessing Business and IT Governance Alignment
Simulation is a means for experimenting with a detailed
process model of business and IT governance alignment,
to determine how the organization will respond to
changes in its structure, environment, technology or any
other strategic decision. Process Simulation allows for
experimenting with a process model of BITGA to better
understand business and IT processes (IT services,
operations, functions, resource use, costs, cycle time, etc)
to improve performance, solve bottlenecks, minimize risk,
evaluate performance, increase productivity and quality of
services.

Process simulation, by definition, allows for
experimenting with a model of the system to better
understand processes, with the goal of improving
performance. The strength of simulation is that it allows
the following aspects to be evaluated, redesigned and
measured: a) customer satisfaction with the new process
or system; b) resource utilization in the new process or
system; c) processes, in order to streamline them; d) time,
in order to minimize it [5].

One of the main objectives of process modeling and
simulation in the field of alignment is to bridge the
communication gap between the CEO and CIO by using
shared process models, IT service model, and methods as
a means for understanding and aligning business and IT
governance.

Process Simulation allows representation of business
processes, IT services, people and technology in a
dynamic model and consists mainly of four steps:
building a model, running the model, analyzing the
performance measurements, and evaluating cost-effective
alternative scenarios. It mimics the operations of the
enterprise and can accurately account for the realities of
modern IT and business processes such as variability,
uncertainty and resources interdependencies [17] [18].
It has already been shown in previews sections of this
paper that information technology can have a large impact
on business processes, and that predicting what effects
changes to the information technology infrastructure will
have on the organization as a whole can be difficult. IT
should be viewed as more than an automating or
mechanizing force, rather as an enabler of fundamental
changes in the way business is done. Process Simulation
would appear to be the ideal tool to assist with this kind of
problem. Such a broad perspective has a profound effect
on the approach presented in this paper in relation to the
BITGA.

For instance, the interactions of resources with processes,
business KPI and KPI for IT services over time result in a
large number of scenarios and outcomes that it is
impossible to comprehend and evaluate without the
simulation technique. By using Process Simulation,
statistical reports about the Activities, Entities, Cycle
Time, Costs, and Resources of an organization can be
generated. These statistics can be used to determine where
any of the defined processes need to be improved and
what changes are necessary for evaluating different
management policies and each set of alternatives. For
example, in the case of business and IT governance
alignment, PS allows the evaluation of the governance
maturity level in an organization [17].
4.2 The Business and IT Service Model Example
This paper presents one of the operational business
process and IT service alignment view. The ultimate goal
of this approach is to identify and measure the level of
alignment between the business and IT governance by
using process simulation technique. One of the
advantages of the presented approach is that it could be
developed in a top down or bottom-up way, depending on
the needed level of details or availability of information
and data in the organization.

The illustrative example of a conceptual business and IT
service model is presented in Figure 3, and the practical
model is presented in Figure 5.

The selected IT process from COBIT framework is:
manage problems and incidents (sub-processes of the key
process called change management in the ITIL
framework). The KPI for this process could be: time, cost
of services and resource utilization percentage. For the
presented example in figure 5 there were defined the
following KPI: time interval for detection, time interval
for answer, time interval to repair, time interval for
recovery and time in good condition [3] [24].

Proceedings of the 41st Hawaii International Conference on System Sciences - 2008
6
The selected key business process from the business
literature is: sale process. The KPI for this process are:
inventory verification time and invoice elaboration time.
The similar KPI could be defined for costs and resource
utilization percentage. See Figure 5.

Lets assume that there is a signed SLA between CEO and
CIO, as well as a reference numerical value for each of
the defined IT and business KPI in the presented example.
After that, it is possible to generate different types of
scenarios by correlating the B-KPI and ITS-KPI. In this
example, it is assumed that the KPI of IT processes are
playing the role of the independent variable and the KPI
of business processes are the dependent variables. The
correlation analysis between many different IT-KPI and
B-KPI could generate multiple types of correlation (cause
and effect) and alignment scenarios. Some of the possible
scenarios are: what if it is decreased cycle time or cost of
an IT service? What if it is increased resource utilization
in an IT service? What if it is introduced a new IT
service? What if IT service stop working?

Figure 5: An illustrative example of correlation between
business processes and IT services with their respective
KPI.

After calculating the level of correlations between the
different perspectives, it is possible to calculate the level
of alignment between the KPI, IT and business processes
and IT and business governance. The procedure presented
is repeated for the rest of the perspectives and after that it
is necessary to calculate the total level of alignment
between the IT and business processes or between IT and
business governance. This is only an indicative and
illustrative calculation procedure because the presented
approach is not considering a standard recipe for doing
these calculations.
Another example of how to generate scenarios consists of
selecting a key IT service process, as the change
management, which is kind of link between service
delivery and service support management according to
ITIL framework. See Figure 4 and 6. [24].

Change management ensures that the IT organization uses
standard methods and procedures for handling all
production environment changes in order to minimize the
impact of change-related problems on service quality.
This process logs all significant changes to the enterprise
environment, coordinates change-related work orders,
prioritizes change requests, authorizes production
changes, schedules resources, and assesses the risk and
impact of all changes to the IT environment. Given the
scope of this process, it is easy to see why it interacts with
every other process in the ITIL framework. As processes
are performed, they inevitably impact the IT environment.
Change management is the single IT process that
regulates these changes and, as a result, plays a vital role
in reducing infrastructure instability. See Figure 4 and 6.

The following activities are part of change management:

Request for Change (RFC) processing
Impact assessment
Change approval
Scheduling and coordinating changes
Coordinating recovery from change failures
Managing urgent change

Experiments are designed to determine the effects of
changing the input configuration on one or more output
statistics. A scenario is a specification of the input
configuration, i.e. the input values used for a single
simulation run. Scenarios can be created one at a time or
en masse. Sometimes the objective of an experiment is to
find the best system configuration from a number of
configurations.

A very important aspect of the process simulation
approach is Scenario Analysis. This is what allows the
assessment of What-If scenarios. Adoit provides
functionality for comparing metrics from multiple
scenarios in a statistically sound way. Scenario analysis is
a statistical analysis of model output for a given
performance measure under different sets of input data. A
simple dynamic process model contains a very large
number of possible situations when it is executed.
Experiments are designed to determine the effects of
changing the input configuration on one or more output
statistics. A scenario is a specification of the input
configuration, i.e. the input values used for a single
simulation run. Scenarios can be created one at a time or
en masse.
ITS: Managment Problems and Incidents
BP: Sale process
TIME INTERVAL
FOR DETECTION
Incident
D
etectio
n
D
iagnostic
R
epair
R
ecovery
R
e
storatio
n
Incident
.
.
.
TIME INTERVAL TO
REPAIR
TIME INTERVAL
FOR ANSWER
TIME INTERVAL
FOR RECOVERY
T,$,R
TIME OUT
OF
SERVICE
TIME IN
GOOD
CONDITION
T
I
M
E
B
E
T
W
E
E
N
I
N
C
I
D
E
N
T
S
P
r
o
d
u
c
ts
R
e
q
u
e
s
t
.
.
.
In
v
e
n
to
ry
v
e
rifie
d

In
v
o
ic
e
s
v
e
rifie
d
M
e
rc
h
a
n
d
is
e
d
e
le
v
e
rie
d
T,$,R
INVENTORY
VERIFICATION
TIME
INVOICE
ELABORATION
TIME
T
I
M
E
B
E
T
W
E
E
N
R
E
Q
U
E
S
T
S
Key Performance Indicators
(Time = T, Money= $, Resource = R)
Proceedings of the 41st Hawaii International Conference on System Sciences - 2008
7
Scenario analysis is a technique that has proved
consistently effective for dealing with strategic
uncertainty in numerous companies in diverse industries.
Rather than determining a single correct view of the
future and the implicit strategic response, scenario
planning embraces uncertainty and devises a range of
views of an uncertain future. Preparing for each scenario
in a timely, cost-effective manner and developing the
appropriate strategy, procedures and infrastructure
provide the necessary link between scenario planning,
business reengineering, and Information Systems
Investment Evaluation [5].

Scenario A: How to determine the total cost of an IT
service: Identifying, allocating, and charging for services
are a critical element in the overall communication
package. Other factors, such as hours of operation
(24x7x365) and help desk and system response time
(level of service) must be taken into consideration when
developing the correlation. Once the number of hours
required is determined for each service, a standard loaded
cost-per resource type can be applied to determine the
staffing cost. Staffing costs can then be added to
infrastructure costs such as hardware, software, network,
maintenance, and facilities to arrive at a total cost of
services [20].

Scenario B: Users must understand how to receive the
services they desire and what level of responsiveness
should be expected. A central source to initiate request for
services is necessary to ensure that all requests are
recorded, responded to by the appropriate service
provider, and tracked to completion (call center). The
service menu described earlier should describe the
availability of the service, whether it is available on a
7x24x365 basis, or only during business hours five days a
week, and how to expect it to be delivered [20].

Based on the analysis, for example, of the cycle-time and
resource-utilization reports, it is possible to determine the
bottleneck activities, the capacity of the resources, costs,
etc. So, changing parameters in the model to see how it
affects performance for measuring efficiency can test a
what-if scenario. It is very simple to change the number
of resources or costs. Then the simulation can be run
again, the new model saved, reports generated, and
statistics compared. Then it is possible to compare results
and see the potential process improvements and the costs
associated with the what-if scenario. For example, adding
one more resource could imply reducing cycle time by
10% and reducing waiting time by 15%.

Scenario C: Many IT organizations focus their IT service
model initiative on improving change management
because they are struggling with, for example, serious
production problems caused by unplanned changes. In
many cases, these organizations do not have a fully
realized change management process, or personnel may
not be following a process that is in place. A high
percentage of reported incidents can sometimes be
tracked to a few unscheduled or improperly executed
changes. Without a solid change management process, the
IT environment cannot be stabilized, and IT cannot make
any serious commitments to service levels. See Figure 6.

Some of the key reports that could be generated by
process simulation are: a) Entity-Count and Cycle-Time
Reports: From this type of statistical report it is possible
to obtain, for example, the following numerical results:
527 entities were generated over the 48-hour simulation
period. Of that total, 500 were processed and shipped; 27
were still in process at the end of the simulation period.

The cycle-time statistics are reported in terms of hours.
For example, on average, it took about 59.22 minutes to
process an entity, even though the average cycle-time was
approximately one hour; b) Resource-Utilization Reports:
The resource state reports indicate the percentage of the
time that staff was busy. To illustrate by a numerical
example, it is possible to obtain the following statistics:
resource #1 was busy 92.43% of the time. This means that
entity A waited in queue for service. Resources #2 and
#3 were used 75.77% and 80.91% of the time,
respectively. This means that staffing of these positions
was adequate. The utilization of resource #4 was 50%,
meaning that this resource is available to perform
administrative tasks. The same analysis could be
developed on the basis of Activity, Entity, and Resource
Cost Reports: capacity-based costing and absorption-
based costing calculation, and resource and activity cost
evaluation.
5. Summary
Strategic business and IT alignment is an essential piece
in the effective exploitation of IT investments in an
enterprise. It implies the need for both a clearer
conceptual definition and operational implementation of
the alignment theories.

By using process simulation, the evaluation of business
and IT governance alignment can be either qualitative or
quantitative. However, the best evaluations employ a
combination of both qualitative and quantitative
information that compare and contrast converging and
possibly conflicting evidence. The most effective
evaluations occur when goals and objectives are explicitly
stated, are measurable and are agreed to by all parties
involved. Evaluation should be considered an integral part
of the project development process and be considered in
Proceedings of the 41st Hawaii International Conference on System Sciences - 2008
8
each phase: strategy formulation, detailed planning,
system design, system implementation, data collection,
data analysis and reporting of results.

The process simulation introduces a new way of thinking,
merging business and information technology into a
single activity. Instead of managers posing problems for
technologists to solve by creating new applications, the
two groups work together to create business process
descriptions of the organization.

The presented process perspective for evaluating BITGA
provides a solid yet flexible structure for which
alternative governance solutions can be proposed and
evaluated. The process simulation can be used to guide
the business and IT governance alignment evaluation as a
decision-making tool by identifying which organizational
capabilities to be supported by the technology are more
crucial to the firms performance in a particular
competitive environment. By utilizing the process
simulation, it is possible to view current business or IT
activities and procedures, and describe the activities and
procedures involved and the information flows in and out.
Once the business and IT processes are visualized, it is
possible to explore alternatives (what if scenarios) that
may improve performance measures for those processes.

The process simulation and the SLA document could be
essential tools for the CIO and CEO to make the best
decisions; to visualize how business and IT services might
behave, to measure its performance and to test what if
scenarios in a computer model.
As a general conclusion, it was confirmed that the use of
the process modeling and simulation approach could
offers some advantages to the CIO and CEO in making
decisions related to evaluating performance measures,
defining an IT investment strategy, and selecting the
optimal scenario for business and IT governance
alignment.

An illustrative numerical example is presented, showing a
possible way to implement the proposed approach. It is of
crucial importance to develop all possible perspectives for
evaluating the level of alignment between business and IT
governance in order to have a complete picture about the
total level of alignment between them, and to assure the
credibility of measuring results.
6. References
[1] Bidgoli Hossein, Handbook of Management Information
Systems: A Managerial Perspective, School of business and
public administration, CA University, Academic press, 1999.
[2] Ekstedt, M. et al (2004) Consistent Enterprise Software System
Architecture for the CIO: A Utility-Cost Based Approach,
Conference Proceedings, HICSS-37 conference, Hawaii, USA.
[3] Grembergen W. Van, The balanced scorecard and IT
governance, Information Systems Control Journal (previously IS
Audit & Control Journal), Volume 2, pp. 40-41, 2000.
[4] Grembergen W. V., R. Saull, S. De Haes; Linking the IT
Balanced Scorecard to the Business Objectives at a Major
Canadian Financial Group, forthcoming in the Journal of
Information Technology Cases and Applications (JITCA), 2003.
[5] Harrington, H. and Tumay, K. (2000) Simulation Modeling
Methods, New York, USA: McGraw Hill.
[6] Henderson J., and N. Venkatraman, Strategic alignment:
Leveraging information technology for transforming
organizations, IBM Systems Journal, 1993.
[7] Information Systems Audit and Control Foundation (ISACF) and
the IT Governance Institute (ITGI), COBIT 3rd Edition
Framework, 2000.
[8] Kaplan R., D. Norton. The Balanced Scorecard Translating
Strategy into Action, Harvard Business School Press, 1996, pp.
322.
[9] Luftman J., R. Papp, & T.Brier, (1999). Enablers and inhibitors of
business-IT alignment. Communications of the Association for
Information Systems, 1, Retrieved November 16, 2002, from
http://cais.isworld.org/articles/1-11/article.htm
[10] Luftman J. Managing the Information Technology Resource
Leadership in the Information Age, PHH, 2004.
[11] Maes R., D. Rijsenbrij, O. Tuuijens, & H. Goedvolk. Redefining
business-IT alignment through a unified framework. Primavera
Working Paper Series 2000-19, Universiteit van Amsterdam, 2000.
[12] Mahmood Mo Adam, Edgard J. Szewczak. Measuring
Information Technology Investment Payoff: A Contemporary
Approach, Idea group publishing, 1999.
[13] Nils-Gran, J. Roy, and M. Wetter, Performance Drivers, [A
practical Guide to using The Balanced Scorecard], Fourth Edition,
1999.
[14] Office Governance Commerce, Service Support, Series ITIL,
2000.
[15] Office Governance Commerce, Service Delivery, Series ITIL,
2000.
[16] Saull R., The IT Balanced Scorecard - A roadmap to effective
governance of a shared services IT organization, Information
Systems Control Journal (previously IS Audit and Control
Journal), Volume 2, pp. 32-38, 2000.
[17] Silva Molina E., Evaluating IT Investments: A Business Process
Simulation Approach, Licentiate Thesis, Stockholm, May 2003.
[18] Silva, E. and Plazaola, L. (2006) Strategic Business and IT
Alignment, A Prioritized Theory Diagram, to be published in
proceedings of PICMET06, Istambul, Turkey.
[19] Scholz-Reiter, B. et al (1999) Process Modeling, Berlin: Springer
Verlag Heidelberg.
[20] Tardugno A., IT Services: Cost, Metrics, Benchmarking and
Marketing, Harris Kerns Enterprise Computing Institute, PHH,
2000.
[21] Tallon, P. et al (1998) A Process-oriented Assessment of the
Alignment of Information Systems and Business Strategy:
Implications for IT Business Value, Conference Proceedings, The
Association for Information Systems Americas Conference,
Baltimore, Maryland, USA.
[22] Van der Zee J., Alignment is not enough: integrating business and
IT management with the balanced scorecard, Proceedings of the
1
st
Conference on the IT Balanced Scorecard, Antewerp, pp. 1-21,
1999.
[23] http://www.isaca.org
[24] http://www.tso.co.uk/ITIL
[25] Weill, P. and Ross, J. (2004) IT Governance, How Top Performers
Manage IT Decisions Rights for Superior Results, Boston,
Massachusetts, USA: HBS Press.

Proceedings of the 41st Hawaii International Conference on System Sciences - 2008
9
F
i
g
u
r
e

6
:

I
T

S
e
r
v
i
c
e

P
r
o
c
e
s
s

(
C
h
a
n
g
e

P
r
o
c
e
s
s
)
.

P
a
r
t

A
.

Proceedings of the 41st Hawaii International Conference on System Sciences - 2008
10
F
i
g
u
r
e

6
:

I
T

S
e
r
v
i
c
e

P
r
o
c
e
s
s

(
C
h
a
n
g
e

P
r
o
c
e
s
s
)
.

P
a
r
t

B
.

Proceedings of the 41st Hawaii International Conference on System Sciences - 2008
11