When I talk about IT in a corporate context, I believe there are two types of IT investments: operational investments and strategic investments. Operational investments are the types of things that fall into best practices in an operational context, commonly seen as improvements in infrastructure. Strategic investments are those that allow the organization to offer new products and services or deliver products and services in ways that are significant improvements over past methods. In higher education, we can look at IT investment in the same way, in a way that demands that we make sure our infrastructure measures up to best practice.

This post is going to be somewhat of an open response to Ingbert's comment to my post on the IT@Illinois launch, and it will segue a bit into talking a bit about some aspects of a concept I've been working on with an amazing group of IT people from around campus.

Jason Hiner has posted a blog entry talking about business-IT alignment as being a concept behind the times. He argues that if a company is working on business-IT alignment they have already lost the battle. The main thrust of his entry is that business-IT alignment carries a certain implied separation of IT from the rest of the business. If two things are thought of as being one, then there is nothing to align. He believes that integration of IT into the business is separate from business-IT alignment.

The problem, I believe, is that his assessment of business-IT alignment is only a disagreement in nomenclature. If "alignment" were not part of the phrase and was instead "business-IT integration," then I think Jason would have no problem with its use. His three tips for improving integration are almost perfectly aligned (Ha!) with Luftman, Papp, and Brier's enablers and inhibitors of business-IT alignment. If an organization is needing to work on these things, I would argue that they do not have the best business-IT alignment.

I originally wrote this for my column at bMighty.com, and so I am reposting it here because it is an important issue for IT management.

Who do you think holds more sway over a business's strategy and planning -- someone who reports to the CEO or someone who reports to the director of operations? The obvious answer here is the person who reports to the CEO, but in many organizations where IT plays a strategic role, the person in charge of IT isn't part of the leadership team. Historically, IT leaders have often reported to the CFO or whoever is in charge of the financial operations due to the financial area being one of the biggest customers of IT. As a business grows and matures, that may not always be the best choice.

The first part of determining where IT fits on the organizational chart is to examine the role of IT within the business. In a business where IT merely provides employees with computers for e-mail and servers for file storage, it doesn't make sense to have the person in charge of IT reporting to the CEO. The same goes for when IT is focused on providing services internally to improve the basic efficiency of the business's operations. In the former case, IT might report to a person like the lead accountant or an assistant vice president to keep some of the management burden off the higher-level executive management. In the case of the latter, it would make sense for the IT manager to report to the chief operating officer or director of operations.

In my critique of Nicholas Carr's "IT Doesn't Matter," I made mention of choosing whether or not IT is strategic for an organization. In a sense, this choice is between strategic IT and operational IT. Strategic IT is the use of information technology to play a vital role in an organization's business plan by creating opportunities, interacting with customers and vendors, and improving efficiency. Operational IT is the use of information technology to support the functioning of the business with such things as accounting software, email systems, and electronic file storage. In a small organization that uses IT as an operational tool, there will be times that new IT capabilities need to be implemented to stay in the game. For example, just about every business has at least a basic website with information about the company, how to contact them, and the products or services they offer. For some of those organizations with an operational IT approach, they talked to people they know are IT savvy to find out what they needed to do and how to get it done as quickly and cheaply as possible. What about the others who use IT in an operational capacity but know they want to have a website that is more than just an electronic brochure? How do they go about a project like that where that type of IT expertise is needed but is not in-house?

In small businesses and organizations with either internal or outsourced IT services, there are three approaches or states of dealing with IT. In the first state, only basic IT service is done to maintain the status quo. The second state consists of looking at business processes and finding ways to make them more efficient or effective using information technology. The highest level state of IT management looks at the business and comes up opportunities to offer real competitive advantage through new ideas, new services, and new products.

Following the concept of the Capability Maturity Model (Wikipedia) for software development, I am going to give a label to each of these stages. In the simplest IT service state, things are very much in a Basic management state. If a printer breaks, it gets fixed. If someone needs an update made to the website, IT makes the change. In general if something is broken, it gets fixed, and that's about the only time something is done. When IT management is done to improve the operations of the business, the IT services are Optimizing the functioning of the organization to improve efficiency or sometimes to increase automation. When IT is able to be utilized at a higher level, it is able to see business opportunities and capitalize on them. At that point, IT becomes Innovating and can bring new possibilities and competitive advantage to the organization.