IT Alignment

IT Value

IT investments are to improve the financial performance of an enterprise. Value from IT investments can have direct or indirect effects on enterprise performance.

IT value consists of two complementary facets:

  • Customer value from cash inflows has direct effects on enterprise performance.
  • Organizational value is non-monetary and has indirect effects on enterprise performance.

Organizational value is needed for production and is a precondition for generating customer value. IT infrastructure, IT platforms, internal IT applications, and data provide organizational value. External IT applications and data provide customer value.

IT value model

Categories of customer value (Treacy & Wiersema, 1995):

  • Product leadership provides functional benefits characterized by superior products and services, high quality, novel features, innovative functions, and early market launches.
  • Customer intimacy provides benefits from relationships characterized by specific solutions to customer problems, responsiveness to customers, and customization.
  • Operational excellence provides economic benefits characterized by the lowest costs, process efficiency, organizational effectiveness, and high productivity.

Categories of organizational value:

  • Strategic planning and informed decision-making: data and process flows for strategic planning and informed decision-making, including business development (i.e., growth opportunities), artificial intelligence, and IT alignment.
  • Flexibility and agility: ability to quickly adapt the business architecture to change the product offering, e.g., as a response to changes in the environment (flexibility) or modification of the competitive position (agility).
  • Strategic alliances and supplier relationships: business linkages to other firms that are part of the value chain (inbound and outbound).
  • Enhanced skills and capabilities: increased skills among human resources or improvement of organizational capabilities.