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M Haglind, K H Cheong,
Summary - Based on case research, this paper 73% of the projects are cancelled at some point in the
highlights critical issues in achieving alignment development cycle. According to the study, the
between business and IT strategies in small and involved organizations' limited ability to manage the
medium-sized electric utilities. The paper investigates rapidly changing regulatory and business requirements
potential benefits of using well-establishedframeworks during the development process are the predominant
as tools for decision support in strategic IT cause of failed and challenged IT projects
management, and obstacles in implementing such
frameworks. Finally, the paper provides suggestions to A lot of Information Systems (IS) research has been
circumvent the obstacles by proposing an alternative, directed at identifying the causes of the failure and to
more pragmatic, approach for strategic planningfound develop models and techniques to enhance the success
to be suitable f o r small and medium-sized utilities rate of IT investments. One of the most written causes
where resources for strategic IT management are of IT investment failure is that too much attention is
scarce. placed on technology itself, rather than its links with
business operations, customer value, and management
INTRODUCTION decision making [5]. In other words, there is a lack of
alignment or harmony between IT and other
Electric utilities are undergoing tremendous changes organizational and business imperatives. Because
due to deregulation, rapid development in Information business success increasingly depends on IT enabled
TechnoZogv (IT), and the enormous growth of the processes, products, and services, it is important to link
Internet. While deregulation has brought about threats business goals and the potential IT contribution.
and opportunities, along with many uncertainties to Although the need to integrate business and IT strategy
. utilities, modem IT has been regarded as an important has been advocated, few practical frameworks exist [6].
tool in order to meet the challenges ahead. However, Moreover, most research in strategic IT management
the deployment of software systems in organizations is has been conducted in North America with very large-
seldom without problems [ 1,2,3]. Barring technical scale organizations in mind PI. IT management in
problems in implementation, the systems still often fail small and medium-sized enterprises (SMEs) is
to satisfy all stakeholders around the system, as the generally considered to be under-developed and under-
delivered set of functions does not match the actual researched [8].
needs of the business. In a recent study conducted by
the Standish Group International (a US-based market The purpose of this paper is to highlight critical issues
research and advisory firm) within the electricity and in achieving alignment between business and IT
gas utilities sector shows that only 8% of the IT strategies in small and medium sized electric utilities.
projects had actually succeeded to fulfill their initial Based on case research, this paper attempts to highlight
expectations [4], see Figure 1. potential benefits and obstacles in applying well -
established strategic alignment frameworks as tools for
Success decision support in strategic IT management. To
8%
circumvent some of the obstacles, the paper proposes
an alternative, more pragmatic, approach for strategic
planning found to be suitable for small and medium
sized utilities.
ClRED2001, 18-21 June 2001, Conference Publication No. 482 0IEE 2001
6.24
Outline. This paper is organized into six sections. implementation of recommended IT-deployment
Section 2 provides an introduction’ to the issue of projects), and finally alignment. Alignment is, in this
strategic alignment. Thereafter, the theoretical theory, the degree to which the planning process results
approaches are contrasted with the current practice of in strategic information systems. Here, alignment aims
strategic alignment in electric utilities. Section 4 at achieving a fit between implemented projects and the
presents experiences from a strategic IS planning organization s objectives. Thus the theory views
initiative in a medium’sized utility. Thereafter, an alignment as the product or the effect or outcome of the
alternative approach to strategic IS planning is SISP-process. This is in-line with Reich and Benbasat
presented. Finally, the paper ends with conclusions. who define alignment as “the degree to which the IT
mission, objectives, and plans support and are
STRATEGIC ALIGNMENT - A MATTER OF supported by the business mission, objectives, and
COORDINATION plans” [ 141.
I
x
InfamationPlan
of that process. Improving strategic planning, and
hereby strategic alignment, has been considered one of
the most important IS management issues during the
last decade. But benefits of using IT can be achieved Implementah
only after the applications are in use. Thus; the supply
side of the IT domain must also be managed properly.
Galliers argues that the key to successful SISP lies in Aliinment
tightly as customer interaction usually cuts through the the organization. A study into several IS strategies
traditional functional organizations. formulated by utilities has however revealed that most
of the strategies formulated focus only on parts of the
Increased focus on cross-functional as well as inter- ESS [20]. Furthermore, in a recent survey conducted by
organizational information exchange in support of the authors, the results show that only about 45% of the
business processes, have fundamentally reshaped the Swedish utilities had an IS strategy in place Ell]. The
requirements concerning IT within a utility. In the research shows that, as many as about 70% of these
same time, the information intensity of the industry has companies were not satisfied with the impact of the
grown and it is several orders of magnitude greater strategy on their business activities. One of the main
today than before deregulation. Today, access to reasons for this dissatisfaction was a lack of alignment
accurate and timely information are not only a between the IT and business domains. This is reflected
prerequisite for an open, competitive market but also in the survey results that, so far, existing IS strategy has
considered to greatly impact the capability of a utility not had any significant impact on the utility s business
to maintain its service excellence while increasing its functions, for example, in reshaping its business
competitive edge [ 17. strategy, in redefining its taskdprocesses, roles and
responsibilities of its people, and relationship with its
In order to meet the changing business requirements customers. There is even less impact on the
conceming information management, there is a need organization s structure and the relationship with its
for completely new functionality, but also effective suppliers. Similar results are found in other studies in
integration of existing software systems in most which the existing IS strategies were found to provide
utilities. Today, an overall Enterprise Software System very little or no assistance at all to the different IT
(ESS) in a mediumsized utility may comprise of deployment projects carried out in the studied
hundreds of interconnected systems with different organizations [221.
degree of interaction, some of them not even within the
organization. However, the traditional management CASE STUDY: SISP IN AN ELECTRIC UTILITY
strategy for automation of tasks within utilities has
been a bottomup approach, in which functional areas In order to further explore the issue of strategic
were automated on an application-by-application basis, alignment between IT and business domains, a case
without consideration for integration and optimization study investigating SISP practices has been conducted.
at the firm level [18]. Thus, the inflexibility of existing The company under study was a mid-sized Swedish
legacy systems is still a major obstacle for achieving electricity retailer formed by a merger of the previous
system integration. As a result of the increased level of electricity sales operations of five municipally owned
dependency between different systems, Enterprise electric utilities. The company was established in 1996
Sofiare Architecture (ESA) has become a key issue. and during the first years, management had been
focused on consolidation issues such as establishment
In the process of adapting their ESS to the new of organizational structure, management team, and
business requirements, several utilities have started to working routines, rather than aggressive business
deploy a new wpply strategy. Traditionally, systems strategies. In 1998, management had started to review
have been developed and customized from scratch in the strategies of the company in order to prepare for
order to fulfill the specific requirements for one forth-coming changes in the market. Management was
organization, This is however changing as the cost for forecasting that the sales and marketing strategy had to
tailor-made software systems is arduous to bear for be more aggressive and customer-focused, and that the
most organizations. The trend for enterprise software cooperation with other companies to facilitate bundling
systems is thus an increased use of COTS - of products and services had to be enhanced. Also, the
Commercial OffThe Shelf- software. The COTS lowered margins on electricity sales urged for better
components used vary in size, but are often fairly large control of ’the company s business processes, more
grained and might even comprise complete systems, effective risk management in the electricity trading,
e.g. Customer Information Systems. By using COTS- and reduced administrative costs in the handling of
software, utilities are able to bring down the effort of small customers.
developing “bread and butter” functionality, but in
retum the use of COTS increases the total system Early in the strategy review, management concluded
complexity and introduces a complete new plethora of that most problems identified were related to
problems that must be tackled [ 191. shortcomings of the existing legacy ESS to support the
business operations sufficiently. The existing ESS was
As a result of the increased complexity of IT and its a heritage from the mother companies and consisted of
potential business impacts, there is a need for an a wide-array of legacy systems and components. The
effective strategy to fully exploit its benefits [12]. ESS lacked functionality in several critical areas and
Many utilities have recognized this, and planning and provided on the other hand, over-lapping functionality
development of an IS strategy have become the in several others. The company experienced problems
accepted way to identify those areas in which to merge information for analysis and effective
investment in IS will provide the greatest benefit for reporting purposes as several of the mission critical
6.24
systems lacked capabilities for interoperability. components, nor they provided guidance concerning
Furthermore, the limitations in interoperability made it the trade-offs between for example, change impact on
difficult to introduce multi-channel customr processes versus software systems, solution flexibility
interaction, or conduct effective electricity trading and versus versatility, solution simplicity versus
risk management. integration, implementation time & costs versus
operational costs, for the different alternatives.
In order to start the process of introducing a more Therefore, management found it difficult to’ sort out
appropriate ESS, the management team decided to and prioritize the most important parameters of a
undertake a systematic and formal IS planning process. successful ESS for their specific situation.
A major management consultant firm was contracted to
apply their methods and frameworks to help the utility After a few months of intensive work, management
to develop a migration strategy for the major part of concluded that the applied method could not help them
their legacy ESS. In the process of collecting in their mission and the SISP initiative was canceled.
information, a comprehensive set of activities was Instead, the company decided, due to shortage of time
carried out by consultants, activities that were mainly and resources, to launch a pre-study with the purpose
directed toward the top management team and of preparing the procurement of an ESS suitable for
comprised elicitation of business strategies, objectives, their business operations. However, the method did not
and priorities. As the business operation had started fail completely. As a result of the exercise, the
just a few years earlier, there were no long established, management team increased their awareness of the
documented working routines or processes. Also, the problems with the existing legacy ESS and it showed
business strategy was mainly held informally within the need for explicit business strategies.
the top management team. This is a characteristic for
SMEs, which tend to be organic with informal Analysis of the SISP initiative
management structures built around small management
teams [8]. Due to this fuzziness, the consultants found Based on the results from the case study, one can
it difficult to document the business objectives, conclude that implementation of a formal SISP
structure, processes, etc., an important and integrated initiative in a SME is not an easy undertaking. It is
part of the applied framework. found that the planning framework applied was useful
in increasing the awareness of the top management in
The management team on the other hand, had an terms of interdependencies between different elements
opposite view of the fizziness of the business domain; of the organization. However, several obstacles arose
they rather saw it as an opportunity. Management had, in trying to fully implement the.framework.
based on the company s limited supply of skills and
resources, understood the need to extensively use Firstly, during the process it became clear that the
COTS-components in order to limit the risks coupled applied method was designed primarily with big
to extensive software development and integration. By organizations in mind. Thus, the amount of resources
searching for a vendor with extensive knowledge needed both in terms of personnel, money, and time,
concerning the business conditions in which the was found to be a major problem for the studied
systems should be installed and with a system based on company. Neither, did the method take advantage of
large grained COTS-components, management saw an the informality of the business strategy, nor did it
opportunity to find not only a system but also key address the supply strategy based on COTS
business processes that were matched and aligned to components properly. Thus, the results highlight the
the system and suitable for an electricity retailer active dangers of assuming that current SISP methods are of
in the deregulated Swedish electricity market. “one size fits all” variety. Similar shortcomings of
present SISP methodologies have also been reported in
Rather early in the process, the scope of the applied several other studies [23,24].
method became large and difficult to grasp. Also,
activities and outcomes failed to win the support or Secondly, the method was found to be based on an
involvement of the organization ‘at large. Furthermore, underlying assumption that strategic planning is a
when the conclusions were presented, they were found rational process and as such it assumes that managers
to be on a too abstract level. Also, as the consultant involved in the process are perfect, rational and
firm was the driver of the SISP exercise, they had a purposive beings who are technological experts,, and
substantial influence on the recommendations, and the also that the adoption and implementation of various
objectivity of some of the recommendations became changes in processes, structures, and systems are a
questioned. Although different design alternatives were straightforward and predictable process where the
presented, the results did not provide information about means to specific ends are known, and where the
the complexity of the proposed solutions or the outcomes of the organizational actions are in line with
resources needed for implementation and training. the involved actors’ intentions [25]. However, the
Neither, did the conclusions take enough notice of the research shows that a strategic alignment initiative is
specific characteristics of the organizational settings, not primary a rational, analytical, and certainly not only
e.g. the need to extensively use well-proven COTS- a technical activity. Potential success is highly
6.24
dependent on the communication skills of all involved. objectives). The second perspective is business process.
During the SISP process, business managers and IS This focuses on understanding the work processes to
planners did show that they were unable to express appreciate whether information flows inhibit business
themselves in a common language, necessary to cope activities, and also to identify changes that might be
with the absence of rationality and analyzability. made as a result of introduction of IS. Finally, the
strategic content embodies the vision for change and
STRATEGIC ALIGNMENT - A PRAGMATIC the practicality of its introduction given organizational
APPROACH circumstances.
appropriate technological opportunities are considered, circumvent some of the obstacles with the present
and that other perspectives of the framework are strategic alignment methodologies, a pragmatic project-
properly aligned (business context, business process, based approach is proposed based on the special
and strategic content). Here, functional mapping characteristics of SMEs. In the approach, business
combined with the quality attributes of the ESA strategies, processes, and actions concerning the ESS
provides a conceptual yet structured, and analyzable are defined and aligned concurrently within an IT
view of the complexity of different solutions. project. The approach have been tested in the case
study and proved to be more appropriate and more
4. Architectural modification aims at deciding acceptable by the management compared to a previous
whether to conclude the analysis and proceed with more formal SISP initiative.
implementation or to refine the architecture by
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