Integration of Business and IT

Contact person: Christian Grawe

Problem

In the age of digitalization technological innovations keep influencing processes, products or services and business models significantly (Fitzgerald et al. 2013; Weill/Woerner 2018). The increase of new business models reveals the important role of information technologies (IT) and in consequence of IT management within organizations. One example for this enhancement of business models is the German premium manufacturer of household appliances Miele. Miele continues to produce physical products, but supplements them with digital components. As part of the Miele@home project, different household appliances can be controlled via smartphones or other devices like “Amazon Alexa” (Miele 2019). Organizations need to enhance their products, services and internal processes, e.g. production or logistics processes to generate value through digital innovations (Amitt/Zott 2012; Horlach et al. 2016). Next to larger companies which already recognized the significance of using IT for their value creation organizations move closer into consideration which have further potential to reinforce the value creating role of IT. This may apply to smaller or medium-size companies or public institutions, which still scarcely use digital innovations (Tate et al. 2018, p. 186). Additionally, practitioners are often hesitant to integrate digital innovations into their operational infrastructure (Badr 2018).

In accordance with digitalization and the need for digital innovations in processes, products or services, the role of IT within organizations is changing significantly. Currently, the IT takes usually a more technically embossed role. IT departments act rather as supporters of processes and systems than as enablers of digital innovations. They are primarily responsible for maintaining the technical infrastructure as well as the continuous operation of the systems (Baumöl/Grawe 2017). As a result organizations are often inflexible and unable to meet the requirements of digitalization (Horlach et al. 2016).

For this reason, the role of IT within organizations should be rediscussed. These thoughts constitute the core of the thesis which proposes a merger by considering IT as fully integrated into the business of organizations.

The approach of business/IT alignment or even strategic alignment has been under discussion since the early 1990s (Luftman et al. 2015; van Grembergen/DeHaes 2009). The idea of “aligning” means to use IT in accordance with the organization’s needs, targets and competitive advantages (Alaeddini et al. 2017). The increasing strategic importance of IT for the success of organizations let to the development of different alignment-models during the 1990’s, e.g. the strategic alignment model of Henderson and Venkatraman (1993) as one of the most popular. But in times of digitalization the relationship between business and IT in organizations should be rethought. Even a strong alignment of the two worlds would mean that business and IT continue to exist separately. This thesis assumes that such separation, which is reflected in many business/IT alignment-models, cannot sufficiently meet the requirements of digitalization.

This is the starting point of the thesis which discusses business/IT integration as a further development of the former business/IT alignment. In this context a complete union of business and IT along a common strategy should be proposed in order to achieve the individual goals of digitalization. As a result, it should be discussed whether resolution of functional separation into different departments, including IT departments, still makes sense.

In the next step, performance management (controlling) comes into consideration. While maintaining separate existence of business and IT a separate function of IT performance management is widespread. IT performance management functions within organizations are often limited to financial monitoring and monitoring the achievement of technical goals (Baumöl/Grawe 2017). Key performance indicators which primarily reflect financial and quantitative measurable facts of IT-usage in organizations do not appear to be effective in the context of digitalization and changed demand. Thus the socio-technical understanding of digitalization should be taken more into account. An useful IT performance management should increase the understanding about value creation and achievement of business goals through IT-usage (Pajic et al. 2014). Analogous to the reorientation of IT in organizations in the sense of business/IT integration, IT performance management should also be defined along the value chain. The following research framework illustrates the idea of further developing business/IT alignment to business/IT integration and the adaption of IT-performance management:

Goals and research questions

The central objective of the thesis is developing a performance management approach which can manage IT as fully integrated into business. This approach should be directed to organizational objectives characterized by digital innovations in products, services or processes. In this context, a separate IT performance management is dispensed with and a comprehensive consideration of an integrated IT is sought. In order to achieve this central goal the following research questions must be answered:

RQ1: Which objects must be defined to manage the performance of an integrated IT?

RQ2: How can instruments and key performance indicators be designed to measure and manage the identified objects?

RQ3: How can a comprehensive performance management approach be designed that considers IT and business as united along a common strategy?

Before the performance management effects of an integrated IT can be considered, it is necessary to understand the business/IT integration idea as a further development of business/IT alignment. Therefore, a sub-goal of the thesis is to develop a business/IT integration framework which provides recommendations for a successful integration of IT into business within organizations. The following research questions must be answered:

RQ4: How must the role of IT within organizations change to meet the requirements of digitalization?

RQ5: To what extent is it necessary to develop the approach of business/IT alignment to the new approach of business/IT integration?