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It is clear that even though information technology (I/T) has evolved from its traditional orientation of administrative support toward a more strategic role within an organization, there is still a glaring lack of fundamental frameworks within which to understand the potential of I/T for tomorrow's organizations. In this paper, we develop a mode) for conceptualizing and directing the emerging area of strategic management of information technology. This model, termed the Strategic Alignment Model, is defined in terms or four fundamental domains of strategic choice: business strategy, information technology strategy, organizational infrastructure and processes, and information technology infrastructure and processes--each with its own underlying dimensions. We illustrate the power of this model in terms of two fundamental characteristics of strategic management: strategic fit (the interrelationships between external and internal components) and functional integration (integration between business and functional domains(1). More specifically, we derive four perspectives of alignment with specific implications for guiding management practice in this important area.
It is perhaps a truism that the role and impact of information technology (I/T) on today's organizations has significantly changed over the last decade. Across a wide spectrum of markets and countries, I/T is transcending its traditional "back office" role and is evolving toward a "strategic" role with the potential not only to support chosen business strategies, but also to shape new business strategies.(1-4) Yet, there is increasing concern that the anticipated value of the investment in I/T is not being achieved.(5) How do we reconcile the dramatic increase in the role of I/T in organizations and markets with the evidence of minimal productivity gains at an aggregate level of the economy?
We argue that the inability to realize value from I/T investments is, in part, due to the lack of alignment between the business and I/T strategies of organizations. We view strategy as involving both formulation (decisions pertaining to competitive, product-market choices) and implementation (choices that pertain to the structure and capabilities of the firm to execute its product-market choices). Our concept of strategic alignment is based on two fundamental assumptions: One, economic performance is directly related to the ability of management to create a strategic between the position of an organization in the competitive product-market arena and the design of an appropriate administrative structure to...