Professional Documents
Culture Documents
Ray M Kekwaletswe
Ray.Kekwaletswe@wits.ac.za
School of Economic and Business Sciences
University of the Witwatersrand
Johannesburg, South Africa
Abstract
Although literature shows that the alignment of information systems with business strategies is
important to organizational performance, there is no standardized framework to guide how this
alignment can be improved, notably in the context of a banking environment. South African banks
tend to have mixed realizations in terms of the expected value of information systems investments,
and this paper argues that this is primarily due to misalignment between the Information systems
strategy and the business strategy. Information systems projects appear to not deliver what they are
intended to; business and information systems managers seem to lack a clear understanding of each
others environments, and subsequently the required resources are allocated inappropriately. This
paper grapples with ways by which a South African bank may improve alignment of information
systems and business strategies. Following interpretive research paradigm, the strategic alignment
model was used as a theoretical framework for a case study conducted in one of South Africas leading
banks. Informed by the empirical evidence, this paper concludes with a conceptualized framework for
the improved alignment of information systems strategy and business strategy, in a banking
environment.
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The IS literature consistently highlights the communication and connectivity and, secondly,
importance of alignment if organizational for business process re-engineering. In view of
success is to be achieved. Varied studies, such the diverse scope of IS definition and use
as Chan (2002) and Almajali & Dahalin (2011), thereof, it is important to note that recently, due
have shown that alignment and performance are to a significant decline in the cost of information
connected. However, proper alignment and the technology and improved speed and processing
subsequent success is hardly achieved at the power of computers, IS have moved from their
bank studied, mostly because the unit traditional role of being a tool of back office
responsible for IS does not fully understand the support to one offering opportunities in the
business needs and, moreover, IS and the banking industry (Agarwal, 2012).
various business units seem to lack a close
relationship. This then means that they are not It is, thus, clear that there are a number of
communicating the goals of their respective different definitions regarding what signifies IS.
units to each other and do not discuss how they
can contribute to each others success in Defining IS Strategy
reaching those goals. Issa-Salwe and Aloufi (2011) define an IS
strategy as a plan to adopt information systems
For this reason, the study assessed the banks according to organizational demands in order for
business-IS strategic alignment, in order to the information and systems to support the
inform ways that the IS unit may support the overall business strategy. According to Peppard
goals and activities of the bank at all levels so and Ward (2002), an IS strategy helps to
that the business value of IT is realized. determine the organizations capabilities and
addresses the question of how it can support the
2. THEORETICAL FOUNDATIONS business goals and objectives.
In a later study by Khanna (2011), it was This is supported by Silvius (2007) who adds
suggested that IS in banking has been mainly that business strategy is the establishment of
used in two different ways. Firstly, for the businesss long-term goals and objectives
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and the adoption of actions and allocation of Defining Alignment
resources necessary for meeting those goals in Numerous definitions of alignment can be found
order to succeed in its market against in the literature. As a result, it is difficult to find
competition. a common definition of alignment. Luftman,
Papp and Brier (1999) define the concept of
Business-IS Strategies Relationship Model alignment in a simplistic manner and note that
There are several models that have been put alignment is simply doing the right things, i.e.
forward by researchers (e.g. Galliers, 1993; effectiveness, and doing things right, i.e.
Earl, 1989 & Alter, 2005) that show the efficiency. In a later study by Luftman (2005) he
relationship between the external business provides a practical definition of alignment by
environment in relation to the business and stating that alignment refers to basically using
IS/IT strategies in an organization. The IS in a way that is appropriate to support
literature also illustrate the different business needs, strategies and objectives.
relationships between the components with
some researchers providing details when The definition by Henderson and Venkatraman
demonstrating the relationships between IS and (1993) describe alignment as the degree of fit
business strategies. An example of such models and integration among the following four
is the IS strategy components model on Figure components: business and strategy, business
1. and IS infrastructure; while Chan, Sabherwal
and Thatcher (2006) simply describe alignment
as the fit between business and IS strategic
orientation. Reich and Benbasat (2000) brought
forward a practical definition by describing
alignment as the extent to which the IS goals
and objectives support and are supported by the
business goals and objectives. In support of the
preceding practical definition, Gartlan and
Shanks (2007) agree that alignment of business
and IS strategies involves the process of
formulating both the business and IS strategies
that are complementary to each other and also
cohesive.
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Studies by Avison et al. (2004) and by Teo and and IS, which means that as the business
King (1997) have also highlighted that through strategy changes, the IS strategy must also
IS, a competitive advantage can be achieved as change in order to keep pace (Henderson &
a result of alignment. Further studies concur by Venkatraman, 1993).
noting that alignment ensures that the IS unit
supports the goals and activities of the
organization at all levels in order to get business
value from IS (Teo & King, 1997; Chan, 2002;
Simonsen, 1999). Moreover, Lederer and Sethi
(1996) note that when there is alignment,
critical applications needed for growth are
identified. Through that identification it is
ensured that sufficient resources are allocated to
those applications in order to provide direction
as well as flexibility to react to new opportunities
(Avison et al., 2004).
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The second linkage is functional integration. This choosing an interpretive research approach in
horizontal linkage is directly related to the information systems (IS) is the belief that
alignment of the IS unit to the business unit. knowledge about our reality is acquired through
This linkage indicates that as the business language, shared meaning ,what we perceive
changes, the information systems must also and consciousness. The mode on analysis
change in order to keep up. The functional guiding this interpretive research approach was
integration linkage also illustrates how business Hermeneutics. Sebastian and Dubravka(2010)
can successfully position itself in the external and Bontekoe (1996) state that hermeneutics
market by leveraging the use of the internal IS. examine how the understanding of parts relates
Studies by Ives, Jarvenpaa and Mason (1993) to the understanding of a larger whole and again
and Papp (2004) have found that functional how the understanding of larger whole relates to
integration can provide a competitive advantage the understanding of a parts as shown on Figure
in the external market and maximize the value 3.
of IS in an organization.
4. RESEARCH METHODOLOGY
Research Paradigm
In research, most researchers make a number of
assumptions and have different perspectives on
ways of viewing how things work (Voce, 2004).
This can be seen in the various ways in which
researchers conduct their studies. There are,
however, certain principles and rules that can be Figure 3: The basic form of the hermeneutic
followed in order to guide the actions and beliefs circle (Bontekoe, 1996)
of researchers in their research. These guiding
principles are referred to as a paradigm According to Bargiela-Chiappini (2010), using
(Gephart, 1999). According to Voce (2004), a the hermeneutic circle the researcher is able to
paradigm is a model on which research theories put their interpretation on the data being
are built. The three main research paradigms analysed as a foundation for further research
are positivism, interpretivism and critical theory. and in-depth understanding of a phenomenon
rather than concentrating on the determination
The interpretive paradigm was chosen as a of textual meaning such as semiotics and
philosophy informing this study. This paradigm narrative stories. Cole and Avison (2007) and
was followed because the current study aims to Hayles (2003) further state that, as result of this
report interpretations of individuals not based on approach, new research streams have emerged
facts but rather based on their beliefs, attitudes, and can be immediately studied in ways that
shared meaning and understanding of the would not be possible if other research
phenomenon. The aim was to conceptualize a approaches were used.
framework that may inform how alignment of IS
and business strategies can be improved in the The hermeneutics mode of analysis was followed
South African banking environment, not to test in the study since we were merely interpreting
or oppose a certain theory in the broader study and clarifying the meaning of texts collected,
field of strategic alignment. even if the texts were unclear, incomplete and
seemingly contradictory.
Method
Mode of Analysis In the study, a qualitative research approach
According to Klein and Myers(1999), the main was chosen because it generates rich, detailed
motivation that informs researchers decision for
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and applicable data that contributes to an in- Limitations of the data collection
depth understanding of a study (Anderson, During the data collection, the following
2006). Ragin, Nagel and White (2004), further limitations were encountered:
add that it is both interpretive and subjective
and enables the researcher to study a social Some participants questionnaire responses
phenomenon. The qualitative research approach looked like the participants may have
was helpful in this study because we are aware consulted literature or other resources while
of the fact that people can perceive or view the giving responses. This may have been as a
same phenomenon, improving alignment, in result of participants reluctance to provide
different ways. information that they may have perceived to
expose their lack of knowledge on a
For the purpose of this study, a case study was particular subject. That is, the participants
utilized because case studies are useful when responses were mostly somehow similar.
researching a specific field where the problem During the interviews we could sense that
occurs. This strategy was useful because data some participants were merely providing
was collected specifically from a bank. desirable answers to questions because
when the researcher probed more, they
The selection of participants was informed by were not able to support their statements.
Onwuegbuzie and Collins (2007) purposive This may have been as a result of
sampling method. According to Onwuegbuzie participants reluctance to reveal information
and Leech (2005) with this sampling method, that they may have perceived as sensitive or
the participants are chosen carefully to provide even seen to undermine their seniors or
the best results for the research. The their co-workers.
participants selection for this study represented Due to time and financial constraints, we
the various divisions and different ranks, i.e., opted not to interview participants that have
management, specialists and general positions fully completed their questionnaire.
within the bank. The divisions included were IS,
finance and human resources, innovation and Given the limitations above and the fact that
marketing, and data center operations. The data collection was restricted to one bank, the
above mentioned divisions were selected study findings should be considered as indicative
because the IS unit interacts mostly with them, rather than conclusive and should not be
thus we opted to include them in order to get generalised to other banks as they may not yield
their views. We also chose participants from the same results.
different ranks because, although alignment is
generally a management function, the carrying 5. DATA ANALYSIS AND DISCUSSION OF
out thereof is usually an operational activity by FINDINGS
middle and junior ranking employees.
The data collected was analysed per research
An open-ended questionnaire was sent out to 15 theme (see Figure 4), guided by the research
participants in order to obtain diverse views objectives and presented in Tables. The analysis
from the bank population. The questionnaires of the questionnaire and interviews consisted of
were filled in by participants from various three parts: what we wanted to know,
backgrounds in terms of age, gender, length of participants responses and the brief comments.
service, job rank and occupational field, thus Similar responses were grouped and presented
representing the diversity of the bank as one. Each table (representing a theme or
population. Out of the 15 questionnaires e- sub-theme) was followed by a discussion of the
mailed, a total of nine (9) questionnaires were findings, using hermeneutics as mode of
returned partially or fully completed. The analyzing the text, and the strategic alignment
remaining six (6) were not returned. Semi- model was used as a lens.
structured interviews were then conducted with
three (3) participants who partially completed
their questionnaires so that the questions that
were not fully answered could be responded to,
as well as to seek further clarity on the
responses given.
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technology and information systems, systemic
competencies and the governance of IS in the
bank. The findings revealed that the business
strategy is guided by the environment in which
the bank operates; competition; and customer
demands. The findings indicated that the IS
strategy is guided by organizational demands for
the information and systems to support the
overall business strategy, which is in turn guided
by the external environment The findings also
indicate that the bank has systemic and
distinctive competencies that differentiate them
from their competitors, which they leverage to
direct both their business and IS strategies.
Lastly, governance plays an important role in the
banks strategy because whatever direction the
bank chooses, they have to ensure that they
comply with South African government
regulations.
Theme 1: Analysis of the business and IS Analysis of how alignment is enabled in the
strategies banking environment was performed. The
theoretical framework indicates that alignment is
The aim was to understand the scope of the impacted by aspects such as how business and
business, distinctive competencies and IS management support each others goals and
governance of the business. The questions asked objectives, and how the IS unit is involved in
were designed to assist us to understand what business strategy development. The study
business the studied bank is in, how competitors findings revealed that Business-IS unit
affect the business environment, how the bank partnerships are evident in the bank, although
distinguishes itself from competitors and to also IS managers do not get consulted enough in
understand if the bank is subject to government business strategy development; they mainly get
regulations. Also, to understand the scope of the involved when they have to provide guidance on
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technology and systems. The findings further and the IS managers that have been established
revealed that Business managers also get and those are well maintained. Continuous
involved in IS strategy development but mainly communication and close partnerships between
to provide business-specific information and business and IS managers is also evident. The
input on finances. Overall, the alignment findings above indicate that continuous
enablers are evident in The bankalthough there communication (process) and close partnerships
is a room for improvement. (structure) are apparent and seen as important
in the bank because they facilitate a common
Theme 4: Analysis of how alignment is inhibited understanding of the organizations vision by
in the banking environment both business and IS managers. Thus, there is
an understanding of their contribution towards
those goals.
An analysis of how alignment is inhibited in the
banking environment was carried out. The Theme 6: Improving alignment between IS and
framework indicates that the management of the business strategies
following aspects has an impact on alignment:
the IS units failure to meet its commitments,
failure of business to commit a budget for IS The analysis on factors that could affect the
investments and lack of leadership by IS improvement of alignment between IS and
management. These factors are among the main business objectives was guided by the elements
inhibitors to alignment. The questions asked of the strategic alignment model. First, the
were intended to reveal how these factors are integration between external and internal
managed in the bank. domains (strategic fit) was analysed and,
secondly, the connection (functional integration)
The study revealed that, the business unit does between the business and IS domains was
allocate budgets for IS investments; however, examined. Literature shows that that alignment
sometimes business fails to commit budgets if occurs when business goals, processes and
the business cases that are presented by the IS activities are in harmony with the information
unit are not strong enough. Also, the IS unit systems that supports them. The framework
generally meets its commitments by delivering indicates how aspects such as IS plans which are
quality projects within the allocated budget. implemented in the organization have an impact
Moreover, IS management generally alignment, how the IS structure and skills
demonstrates leadership but it was found that IS support business plans, how the business
management was not accountable all the time. administrative structure supports IS plans and
Based on the findings above there is an also how the business structure evolves to fit
indication that the IS and business new business opportunities enabled by new
administrative structures and processes are technologies. The questions asked were
integrated and there are also leadership skills designed to assist the researcher to understand
evident within The bankwhich indicate that the how those factors are managed at the bank. The
inhibitors are well managed. findings revealed that, most IS and business
plans are carried through to implementation,
An analysis of the influence of communications with the exception of some IS plans that are
between IS and business managers on halted, often due to lack financial resources. It
alignment was carried out to aid the researcher was also revealed that the business structure
understand the integration of the business and supports the IS plans and when required the IS
IS units (internal domains), guided by the structure is also able to change in order to
strategic alignment model. The questions were support the business plans. Moreover, the
aimed to uncover established communication banks IS unit has adequate skills that ensure
structures and whether they are maintained that the plans of the business are well
between the business and the IS units. It was supported. The business structure is also flexible
found that the relationship between IS managers and able to evolve in order to accommodate
and business managers and continuous opportunities enabled by new technologies
communication and close partnerships between
business and IS managers could lead to a Summary of Findings
mutual understanding of the business goals. The This section concludes the analysis of data from
findings also revealed that, there are formal both the qualitative questionnaire and semi-
communication structures between the business structured interviews. The data collection and
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analysis were carried out ultimately to framework is the informed recommendations
understand how an alignment of IS and business based on the empirical evidence and what we
strategies could improve the banking interpret as ways to improve the alignment of IS
environment. strategy with the business strategy.
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7. CONCLUSIONS Almajali, D., & Dahalin, Z. (2011). Factors
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