The deployment of technology in an enterprise has evolved continuously with the growth of the information technology (IT) industry. This growth was started and driven by hardware vendors using technologies that were considered appropriate for business enterprises. The evolution led to a situation where the investments in technology and the return on investment for business began to be questioned as revenues and profits of enterprises. In other words, the financial measurements were being examined very carefully in a competitive environment.

Competition, too, has gone through an evolution. At one time it was based on cost and price; today it is based on enhanced customer experience, collaboration and innovation. Such a competitive market has been enabled as a result of information, which, in anticipating and serving customer needs, makes the aligning of technology strategy with business strategy an imperative for enterprises today.

Enterprise transformation components
Enterprise strategies are designed to maximise competitive advantage. IT is a key component of enterprise strategy, as a productivity enhancer as well as an enabler of new business models and processes. If the enterprise IT strategy is not aligned to the business objectives, symptoms like spiraling IT costs, low morale in the workforce, and loss of opportunity in the marketplace become very common.

Today technology is a fundamental requirement for any enterprise. It can be a strong enabler for ‘disintermediation’ or the removal of intermediate entities in a value chain. Inside an organisation it can help reduce layers and even entire business functions. Automated customer relationship management improves not only customer retention but also the cost of the entire customer-facing side of a business. In an insurance business, the empowerment of an intermediary (or agent) with the right IT tools can help improve the quality of ‘proposals’ and the cost of converting these proposals into policies.

Technological support, if well integrated with the business, becomes mission critical and mainstream. For example, in the processing of data, the use of email and the use of a common knowledge base to share representative designs, drawings, presentations or learning and upgrading the skill of professionals. These are all simple yet essential applications.

The multiples of technology
Technology deployment in an organisation has to be viewed in multiple ways. Applications that can improve the productivity of the workforce enhance learning and collaboration among employees. This is how you can institutionalise the knowledge in the organisation. The second phase of transformation involves putting in place the business process in the context of today and the future. Simultaneously, the IT strategy and the IT architecture team, whether from within the organisation or from external consultants, must dovetail into the business strategy. The combination, along with the IT strategy to support the business processes, can ensure productivity.

However, before devising an IT strategy, an organisation must have a very clearly articulated business model and strategy. The purpose of the business must be the driver for any technology deployment. The IT strategy must work with the business objectives, the business model of the corporation, the business processes that will drive the corporation, and the support systems necessary to drive the business processes. IT does not have to lead the business strategy; it has to support the business. For this reason, the strategy must be clear. The role of IT must be investment-defined in terms of business benefits. It must also help in decision-making.

The ideal enterprise IT strategy is one which aligns a company’s business objectives and does a reality check in terms of which ones can be achieved and which ones cannot. In many cases, business objectives are not clear in terms of what an organisation wants. Only when an organistion is clear about its business objectives can the IT strategy be aligned to it.

Once a company has a reasonably coherent business strategy, it can align the enterprise IT strategy to it. In such cases, IT can actually transform the way business is conducted.

Challenges for new-economy organisations
However, in practice, such a transformation is hard to come by. To start with, business models are getting modified. The business model of an enterprise has to be driven by a deep understanding of the marketplace, the customers of the enterprise, the transformational issues, and the strategic inputs that go into addressing the different market segments.

New-economy organisations have realised the importance of old-economy measures like profitability, return on capital, etc, while expanding market share. Sometimes this conflict becomes untenable and the organisation collapses.

In any case, new-economy organisations depend more on IT as a key enabler of the business model as well as business processes. The IT strategy becomes the centrepiece of the business strategy, and impacts the customers and employees, and the product and service process design. Unless the organisation lets IT align with operational processes, there is very little chance of success. Unfortunately, many new-economy organisations focus too much on the role of IT in the product or process innovation space, and not enough on equally critical dimensions like customer and operational processes.

Technology investment
Enterprises must recognise human capital as the fundamental driver of growth, innovation and value-added output. Human capital must be backed by an enormous amount of technology, to support their working and collaborative efforts, as well as for research and development. Another area is training for the purpose of maximising output. New and existing enterprises must invest in the upgrading of human capital.

Most new-economy enterprises have to balance speed and time to market with costs and quality of IT investments. Organisations will need to take decisions on the balance at different points in time. In the start-up phase, the innovation side of the business, which creates the core products and services of the organisation, needs attention. In the go-to-market phase, the customer and production processes will need increased attention. In the stability phase, operational efficiency will become the key driver. In all three phases, the quality of the people and the passion to succeed are the critical success factors. The best of plans will not succeed unless the right people and the right mindsets are put in place. Success also demands the right set of parameters for improvement.

All enterprise strategies start with key business drivers like people, clients, market, processes, information needs and leadership. The ability to create plans and strategies is important, but the energy and processes to implement them are crucial for success.

A CEO must know the fundamental drivers of the business, what the decision-making requirements are, from a financial as well as a non-financial perspective. Today company spending on IT are far more focused on value. The company’s methodology should quantify it in terms of actual business measures, which are revenue, cost and customer metrics, and show that this is an improvement in revenue per employee, customer and production unit. There must be a balanced scorecard in place, which says that there are ample, customer, people, financial and process measures. If you fail with regard to any of these, your IT strategy will fail.

Securing the complete picture
In a manufacturing environment, if an automated shop floor has to produce a certain number of cars per shift per day, or a services enterprise has to push so many transactions within a time window of 'x' number of hours, the CEO must get data in real time. The CEO must have a complete view of the enterprise in terms of deployment of people and assets to produce the manufacturing or service output. He should be able to see the quality and the productivity of its enterprise and people. Every business unit head must act on the information and give it to the next level of leadership, to enable them to act upon it in terms of a value add. The value-add chain is the business-process map.

Every IT investment must be driven by a set of business requirements. The measure of success would be how these requirements are met. For example, an IT investment may have been innovation led, and the core offering of the organisation would be a piece of technology. In such a case, benchmark measures against the competition, market reaction to the technology, customers gained, and market share would be good measures. For each kind of investment, it makes sense to keep the financial fundamentals in mind — has this resulted in financial benefit to the organisation?

Hence, the merits of aligning an IT strategy with the business objectives are many. The first one is that it makes a strong business case for IT. Most people find it very hard to quantify the return on capital. The second is that the chances of success of the IT strategy become higher. Experience shows us that one of the major failures of an IT strategy is unclear business objective. So, if the IT objectives and business objectives are aligned, there is a greater chance that both will succeed.

* Mr Ramdorai is the chief executive officer of Tata Consultancy Services. He spoke to Christabelle Noronha