THE ALIGNMENT OF BUSINESS AND INFORMATION …

Proceedings of The IRES 23rd International Conference, Dubai, UAE, 29th December 2015, ISBN: 978-93-85832-92-5

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THE ALIGNMENT OF BUSINESS AND INFORMATION TECHNOLOGY STRATEGY AT A PUBLIC SECTOR ORGANISATION

IN SOUTH AFRICA

1XOLA LINGANI, 2AJAY K GARG

1TUT Business School, 159 Skinner Street, Pretoria 2Prof., Associate professor, TUT Business School, 159 Skinner Street, Pretoria

E-mail: [email protected], [email protected]

Abstract— This study established the perceptions of senior managers and executives regarding the alignment of IT strategy and the business strategy in a public sector organisation. 140 questionnaires were distributed to senior management from all business units of the organisation and 56 completed questionnaires were received back (40% response rate). Descriptive, multiple regression and Chi square were performed. Results revealed that there is management involvement in the strategy formulation process, alignment of IT and business strategy is important in the organisation, the level of strategy formulation and alignment is good and alignment is achieving the desired results. All the constructs of process, people and organisational factors were found to be important; however only organisational factors were founds to be successfully implemented. Keywords— Information technology, IT Strategy, Business strategy, Strategic alignment I. INTRODUCTION Leveraging information technology (IT) is important to maximise business value. For this to be possible, companies must ensure that IT objectives are supportive of business objective. The literature suggests that the purpose of IT and business strategy alignment is to ensure that IT is used to increase business efficiencies, exploit opportunities, manage business risk and increased accountability. For this alignment to happen variables such as people, process and organisational factors need to be achieved. Although all variables are equally important for alignment, it is evident from the literature that the key dependency is the people, particularly the knowledge of leaders about IT, firm-wide active involvement of IT decision makers and business decision makers. This ensures that IT and Business managers agree on the IT strategy and activities undertaken by IT to fulfil the business strategy. Organisational variables such as culture and process variables such as communication are also very important. Although they are not categorised as under people variables, they can have a significant influence on people behaviour and are related to the people. Effective alignment of IT and business strategy does not happen automatically. Organisations need to continuously evaluate themselves and minimise the activities that inhibit alignment and maximise the activities that increase alignment. Organisations also need to invest resources in creating the capability for alignment especially in the area of people. II. OBJECTIVES: Accordingly the objectives of this study were:

1. To measure the perception of senior managers and executives of the organisation on the importance of IT and business strategy alignment; and

2. To determine which of the alignment constructs were most important for strategic alignment and how successfully they have been implemented.

III. RESEARCH METHODOLOGY The strategy alignment model by Henderson and Venkatraman [6] was used as a basis to determine alignment. In this model the factors of people, processes and organisational infrastructure are identified as key for strategic alignment. The organisation had two hundred and eighty one (281) senior managers and executives. Only senior managers and executives were surveyed as they are responsible for strategy and alignment. Random sampling was used. Fifty per cent (140) were contacted and 56 respondents were secured, resulting in a response rate of forty per cent (40%). The questionnaires by Chao and Chandra [3], and Makhathini [8] were found to be inadequate and inefficient for this study because they were in a small to medium sized firm context. The best suited questionnaire for this study was found to be from Gartland and Shanks [4]. Permission to use the questionnaire was requested from the authors. This questionnaire was initially used in a similar study in Australia and the financial sector in South Africa. The survey questionnaire for this study comprised of three sections together with a covering letter that explained the purpose of the research study and also offered a copy of the results and their interpretation to those who responded.

The Alignment of Business and Information Technology Strategy at a Public Sector Organisation in South Africa

Proceedings of The IRES 23rd International Conference, Dubai, UAE, 29th December 2015, ISBN: 978-93-85832-92-5

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IV. DATA ANALYSIS 83% of respondents were senior managers and 17% were executives. The respondents indicated that they are involved in business strategy formulation and IT strategy formulation. Perception of senior managers and executives on the importance of IT and business strategy alignment: Six questions from part 2 of the questionnaire were used to measure the Perception of senior managers and executives on the importance of IT and business strategy alignment. Table 1 below show the results.

Table 1: Perception of senior managers and executives on the importance of IT and business

strategy alignment

As indicated in the table above all the constructs regarding the perception of IT and business strategy alignment had a mean score of more than 2.0 (on a scale of 4).This suggests that the respondents perceive that they were involved in the strategy formation and alignment process and the AGSA also realised the benefits of IT strategy alignment. The perception of the respondents also indicates that alignment is important, and was achieving desired results, while business and IT strategy were well formulated. The importance of people processes and organisational factors on business and IT strategic alignment. Three questions from part 3 of the questionnaire were used to measure the importance of people, processes and organisational factors on alignment. The list below is grouped into three constructs, namely; people, process and organisation. The questions were asked from the perspective of how important are they in achieving alignment between business and IT strategy. The table below indicates the mean scores per construct and per variable within the construct.

Table 2: Importance of people factors

Table 3: Importance of Process factors

Table 4: Importance of Organisational factors

All three factors namely people, process and organisational factors have a mean score of above 2. This indicates that the respondents feel that all the variables were important for the achievement of alignment. The success of people, processes and organisational factors in the implementation of business and IT strategic alignment Three questions from part 3 of the questionnaire were used to measure the success of people, processes and organisational factors on the implementation of alignment constructs. The questions were asked from the perspective of how successfully implemented were these constructs in the organisation. The table below indicates the means scores.

Table 5: Success of people factors

Table 6: Success of process factors

The Alignment of Business and Information Technology Strategy at a Public Sector Organisation in South Africa

Proceedings of The IRES 23rd International Conference, Dubai, UAE, 29th December 2015, ISBN: 978-93-85832-92-5

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Table 7: Success of organisational factors

From the success perspective, two of the constructs namely people and process had mean scores of 2. This indicates that the respondents feel that these constructs were not successfully implemented. The construct of organisational factors had a mean score of 2.1, which indicates that, the respondents this is successfully implemented in the organisation. All constructs were found to be important for strategy alignment, however only organisational factors were found to be successfully implemented in the organisation. Furthermore, the perception of the respondents is that there was management involvement in the strategy formation and alignment process and the organisation realised the benefits of IT strategy alignment. Also, the perception of the respondents indicates that alignment is important, while business and IT strategy were well formulated. The gap between importance and success of people factor is 1.4 (3.4 – 2), between importance and success of process 1.5 (3.5 – 2) and between importance and success of organisational factors 1.4 (3.5 – 2.1). This means that even though factors were found to be successfully implemented there is still a gap between the importance and its successful implementation Inferential Statistics Chi-squared was used to test the relationship between the business unit of the respondents and how the variables were rated and also the employment level of the respondent and how the variable was rated. When testing was done for associations between the variables all questions in the questionnaire were tested against the business unit where respondents worked, the only variable with a significant association with business unit was the importance of people factors. Further test of for associations between the variables and the current role of the respondents was conducted. The results suggested that the only variable with a significant association with current role was the involvement in business strategy formulation. There is an association between the business unit where the respondent worked and how the importance of people factors was rated. There is also an association between the current role of the

respondents and how they viewed management involvement in business strategy formulation. Regression Analysis The regression analysis was done to determine the impact of the independent variables on alignment. The coefficient, R-Squared and P-value was also analysed to determine the statistical significance of the data. There variables score was captured from the questionnaire (n = 56). Multiple regression was done in excel and the results are show in table 12 below (for importance of constructs on alignment) and table 13 below (for success of constructs on alignment). The importance of people processes and organisational factors on business and IT strategic alignment.

Table 8: Dependent variable (alignment) for importance

According to table 8, organisational factors are most important on business and IT strategy alignment compared to the other factors of people and process. Furthermore the relationship between the independent variables and the dependent variable was found to be weak. The success of people processes and organisational factors on the implementation of business and IT strategic alignment. Table 9: Dependent variable (alignment) for success

Table 9 means that process factors have the most impact on the current level of business and IT strategy alignment. Furthermore the relationship between the independent variables and the dependent variable was found to be weak. This means that in this case, people, process and organisational factors have a weak influence on alignment. V. DISCUSSION AND CONCLUSIONS This study found that the perception of the respondents is that alignment of IT and business

The Alignment of Business and Information Technology Strategy at a Public Sector Organisation in South Africa

Proceedings of The IRES 23rd International Conference, Dubai, UAE, 29th December 2015, ISBN: 978-93-85832-92-5

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strategy was important, the level of IT and business strategy formulation and alignment was good, and that IT alignment was achieving its desired goals in the organisation studied. This is a positive outcome because better business outcomes are achieved by better IT and business strategy alignment instead of more IT investment [1]. The perception of the involvement in business strategy formulation was also influenced by the role of the respondent. On aggregate, organisational factors were perceived to be the most important and successfully performed in the said organisation. Furthermore the organisational factors showed the highest co-efficient when regression analysis was conducted on data relating to the importance of factors on alignment. This importance agrees with Campbell, Kay and Avison [2] that the necessary relationship between IT and business is dependent of organisational factors such as culture, structure and how IT is viewed. Process factors were rated as important but not successfully achieved. Furthermore, process factors has the highest co-efficient when regression analysis was conducted on the successful implementation of this factors and its impact on alignment. This may lead to leadership teams being faces with a wide variety of different individual interpretation of what IT and Business strategy mean alignment mean [5]. People factors were perceived to be important but were not successfully achieved. The perception of the importance of people factors was influenced by the business unit in which the respondent worked. This can be negative for the organisation because, according to Okumus [9], overall success of corporate, business and IT strategies are dependent on the inclusion of people into the overall practices. Furthermore, Lee, Kim, Paulson & Park, [7], speak of the social dimension of business-IT alignment, which is the level of functional integration of human components in the business and IS process to achieve organization’s goal. Without this human integration achievement of business goals will be diminished. LIMITATIONS OF THE STUDY The study is limited on account of the following considerations:

The study was conducted in only one organisation, therefore the results could be limited in terms of how they are applied; and

The outcomes of the study may not be applicable to other public organisations, as the factors used in this study may not be relevant in those organisations.

ACKNOWLDEGEMENT We express our thanks to the anonymous referees for providing input that has improved the quality of this paper. Further thanks are to Mrs Eunice Mtshali and her team from library for proving all library support. REFERENCES

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