Productivity

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An ABC-based approach for operational Business – ICT Alignment

Guido Dedene1,2,3 (Guido.Dedene@econ.kuleuven.ac.be)

Stijn Viaene1,2 (Stijn.Viaene@econ.kuleuven.ac.be)

Bjorn Cumps1 (Bjorn.Cumps@econ.kuleuven.ac.be)

Manu De Backer1 (Manu.DeBacker@econ.kuleuven.ac.be)

1 Katholieke Universiteit Leuven, Department of Applied Economics

2 Vlerick Leuven Gent Management School

3 Universiteit Van Amsterdam, Business Studies Department

Abstract

This paper focusses on Business-ICT Alignment at the operations level by means of an Activity-Based Costing approach.

The Service and Technology Operations are defined as cost drivers for the Business and Service Activities by using

analytical production functions (so-called profiles). Service Level Agreements are the boundary conditions for determining

these profiles. Managing the profiles ensures operational Business – ICT Alignment, especially for Capacity Planning and

Cost Management purposes. Two Case Studies illustrate the methodology.

Keywords: Business - ICT Alignment – Service Level Agreements – Information Management – Capacity Planning – ICT

Cost Management

1. Introduction

Business – ICT Alignment is an ongoing concern in ICT Governance literature. Allthough a

lot has been published already on this subject, many research questions remain, such as:

• What is a workable definition of Business – ICT Alignment ?

• Can Alignment be demonstrated and/or measured in some way ?

• What methods and techniques exist to establish Business – ICT Alignment in practice ?

Most of the literature so far has focussed on the Alignment of Business strategy and ICT

strategy. It is clear that Alignment is needed for other Information Management Areas, such

as operational Alignment. This paper wants to contribute to the understanding of operational

Business – ICT Alignment and is organised as follows. First, Alignment is discussed in the

context of a generic framework for Information Management (Maes 1999, Maes 2003). In

particular the framework distinguishes different layers of Alignment, including strategic as

well as operational Alignment. Next, an analytic methodology for operational Alignment is

developed. This methodology is based on Activity-Based Costing (ABC) and relies on some

basic results from capacity planning and performance management of computer

configurations (Overweg 1993). The paper concludes by presenting two case studies and

discussing some other applications of this methodology.

2. Business – ICT Alignment and Information Management

‘Alignment' has become an important principle in managing the relationship between

Business and Information & Communication Technology (In this paper the term ‘ICT' is

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preferred over ‘IT' since Information & Communication are considered to belong together in

a dual atomic fashion). Some contradictory definitions have been developed in literature

(Maes 2000), relying mainly on synonyms such as ‘balance', ‘coordination', ‘fit'

(Venkatraman 1984), ‘linkage', ‘harmony', etc… Recent literature (Maes 2000, Benson

2004) tried to refine the notion of Alignment and makes the distinction between

• Strategic Alignment

• Structural (also called functional) Alignment

• Operational (also