Aligning Information Technology and Business: The Differential Effects of Alignment During Investment Planning, Delivery, and Change

Abstract

Digital transformations often require firms to align and synchronize their information technology (IT) and business initiatives. In this context, one important question that managers face is where they should focus most when aligning IT and business for leveraging IT investment for firm performance. Authors argue that firms that focus on IT–business alignment at the later stages (i.e., IT delivery and IT change) are better able to translate their IT investment into revenue than firms that focus on IT–business alignment at the early stage (i.e., IT investment planning) of the IT lifecycle. They use archival data from more than 120 firms in India and find that the positive relationship between IT investment and firm revenue is stronger for firms that focus on IT delivery–business alignment or IT change–business alignment than for firms that focus on IT investment planning–business alignment. In addition, they find that at higher levels of IT investment, firms that focus on IT change–business alignment or IT delivery–business alignment have higher revenue than firms that focus on IT investment planning–business alignment, whereas at low levels of IT investment, firms that focus on IT investment planning–business alignment outperform firms that focus on IT delivery–business alignment or IT change–business alignment. Taken together, these findings can help managers to improve the success of their digital transformation efforts by tailoring their alignment efforts across planning, delivery, and change stages.