I.T. Alignment No Silver Bullet; According to New Study of More Than 400 Companies

Business Wire, Oct 1, 2007

Newly Released Study by Bain & Company Finds a Focus on I.T. Effectiveness First - Then Alignment - Results in Both Lower Overall I.T. Spending and Higher Sales Growth

NEW YORK -- Bain & Company announced the release of its 'IT Effectiveness and Growth Study' today and finds no chicken-or-egg dilemma about what must come first - effective IT (information technology) operations or business alignment - to deliver increased sales growth and reduced IT spending:

The study of 453 publicly-traded companies concludes that IT companies must first focus on making IT operations effective before investments in alignment will pay dividends:

* Companies whose IT operations were judged to be effective and aligned with business priorities (7% of the survey group) grew 35% more than the survey average and spent 6% less on IT

* Companies whose IT operations were shown to be effective though not aligned with business priorities (8% of the survey group) still grew 11% more than the survey average and spent 15% less on IT

* Correspondingly, companies that were aligned with business priorities, but without effective IT operations (11% of the survey group) grew 14 % less than the survey average and spent 13 % more on IT

'Effectiveness' is defined as the ability to get things done as specified, on budget, and on schedule, in a way that achieves project objectives. Using those criteria, 85% of the IT and business executives surveyed for the study feel that their IT operations are ineffective.

One major problem, according to the study, is that technology and business executives misunderstand the concept of alignment. Instead of matching IT strategies to business needs, many companies tend to apportion IT resources to different business units and call that alignment. But the result is often not alignment, but increased complexity, which leads to further IT spending and ineffectiveness - and not targeted business outcomes.

"Too many companies are blinded by a well-intentioned but misguided zeal to align IT departments with business priorities," explained Rudy Puryear, head of Bain & Company's Global IT Practice and study author. "But the result is often counter to the expectation - less alignment, less effectiveness, and a group of disappointed business executives. It's truly a downward spiral."

Bain recommends three immediate actions that companies should take to improve IT effectiveness:

1. Focus rigorously on getting your IT house in order, even if it means temporarily sacrificing IT-business alignment initiatives

* Seek out the lowest levels of complexity by eradicating overlapping IT systems

* Simplify and centralize IT organizations and infrastructure when possible

* Continuously evaluate IT capabilities (internal, external and/or offshore) to ensure the optimal mix of insourced and outsourced capabilities

2. Invest sufficiently in growth-oriented IT initiatives

* In a related Bain 'IT and Growth Survey', Bain found that 70% of executives viewed IT as highly relevant to enabling growth

* Bain recommends that companies allocate a minimum of 20% of their IT budgets to growth initiatives

3. Tighten expectations of on-time, on-budget benefits delivery of IT projects

* Bain finds that nearly one-in-two IT projects are considered partial failures upon completion, having gone over budget, past deadline and/or with under-delivered features and functionality

* Underperformance remains an issue. In its 'IT and Growth Survey', Bain found that two-thirds of executives surveyed agreed that IT systems didn't deliver expected capabilities

"Top performing IT organizations are avoiding the alignment trap," said Sachin Shah, a Bain global IT practice partner based in London and study co-author. "IT organizations can alleviate more problems and help their companies achieve greater sales growth by investing in IT effectiveness first before pursuing alignment."

To receive more information about the Bain & Company IT Effectiveness and Growth Study, or to schedule an interview with Rudy Puryear or Sachin Shah, please contact: Cheryl Krauss, e-mail: cheryl.krauss@bain.com or ph.: 646-562-7863, or Frank Pinto, e-mail: frank.pinto@bain.com or ph: 917-309-1065.

About Bain & Company, Inc.

Bain & Company, a leading global business consulting firm, serves clients on issues of strategy, operations, technology, organization and mergers and acquisitions. The firm was founded in 1973 on the principle that Bain consultants must measure their success by their clients' financial results. Bain clients have outperformed the stock market 4 to 1. With 37 offices in 24 countries, Bain has worked with over 3,600 major multinational, private equity and other corporations across every economic sector. For more information visit: www.bain.com.

About the Bain 'IT Effectiveness and Growth Study'

Bain & Company's 'IT Effectiveness and Growth Study' is based upon the global business consulting firm's 2007 survey and analysis of 453 publicly traded companies; follow-up interviews that Bain has conducted with more than 30 senior business executives and CIOs; and the results of numerous IT case studies.