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IT balanced scorecard (IT BSC) based strategic framework for assessing

the impacts of Business Strategic-IT alignment
To cite this article: S Balafif and T Haryanti 2020 IOP Conf. Ser.: Mater. Sci. Eng. 821 012033

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2019 3rd International Conference on Engineering and Applied Technology (ICEAT) IOP Publishing
IOP Conf. Series: Materials Science and Engineering 821 (2020) 012033 doi:10.1088/1757-899X/821/1/012033

IT balanced scorecard (IT BSC) based strategic framework

for assessing the impacts of Business Strategic-IT alignment

S Balafif * and T Haryanti

Department of Computer Science, Universitas Muhammadiyah Surabaya, Surabaya,
Indonesia

*Email: [email protected]

Abstract. Alignment of IT strategy with business strategy to optimize the achievement of

organizational goals. In general, there is a paradox between the application of information
technology to the productivity directly. This paper aims to determine the suitability of the IT
strategy with business strategy on company X by measuring IT Balanced Scorecard. The
strategy implemented over a period of five (5) years. The study was conducted in the year to
three (3). The results showed a low maturity level of application of IT for IT investment has
not been implemented in accordance with the IT strategy. Anticipated funding has gradually
become the cause of IT investments cannot be done thoroughly. The study presents
recommendations for improvements every perspective ITBSC to achieve the expected level of
maturity in the fifth year.

1. Introduction
Many studies have shown discrepancies in Strategic Business-IT alignment is the main reason for the
failure to realize the full potential of IT investments [1], Organization alignment with Information
Technology Strategy needs to be done to improve the organization's productivity [2], In general, there
is a paradox between the application of information technology with the productivity directly [3]
.Ward and Peppard [4] explained that the problem occurred because the productivity paradox of IT
investment / IS still has not managed to make a real contribution expected by the organization. In
some cases, not all of the work program ICT department supports the business processes and aligned
with the organization's vision and mission. IT usage and sometimes impede the operations in an effort
to trap binding.
There is a very important system in some parts of the business, but difficult for another section [5],
Example Usability and Security in User Interface Design, obstacles often encountered is the
application of multiple layers of security, such as the Multi-Factor Authentication, which affects the
user-friendly experience [6], The gap occurs between the use of IT and finance. In terms of the
financial department, the contribution of ICT adoption and utilization sometimes only judged Tangible
value, which represents the only measured the benefits from Increased Sales, Reduced Operating
Costs, and Reduced Interest Costs, whereas the IT investment which is necessary not directly visible
in the form of profits [7].
This study is held in one of private manufacturing industry in Indonesia. Measurement of the
weight of the fit between IT strategy IT organizations use a combination of Balanced Score Card and
SWOT analysis. The study was conducted in Mining Equipment and Machinery Company with the

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2019 3rd International Conference on Engineering and Applied Technology (ICEAT) IOP Publishing
IOP Conf. Series: Materials Science and Engineering 821 (2020) 012033 doi:10.1088/1757-899X/821/1/012033

goal of increasing productivity and optimizing production between consistency and reliability in the
life circle of lead time. Shorter lead-time have been the key challenges for a manufacturing industry
Findings Based on study investigates by Woosang Hwang in the role of ERP in the supply chain [8],
The results of the research will provide insights for companies to see the maturity of IT
implementation in harmony and synergy with the organizational strategy.

2. Literature review
The Mining equipment manufacturing company in the field of a company that sells products that are
directly usable by the mining company. Utilization of IT becomes imperative for companies to be able
to achieve optimal organizational goals. IT Investment financing used by companies where the study
was conducted using the method of financing gradually. Management of IT resources in the company,
faced with an alternative choice to develop its own infrastructure with considerable investment value
(in-house resource) or services contract Information Systems (IS) with a third party (outsourcing).
Overview Re-Engineering as in Figure 1.

Figure 1. Re-engineering IT

2.1. IT Balanced Score Card (BSC-IT)

Measurement of the specific IT needs to be done to develop into the IT-BSC BSC [9]. Perspective
ITBSC in this study was supported objectives specifically match the needs of the organization in
which to do research.

2.1.1. Corporate objective perspective

 Strategic Business-IT alignment (CSF-1), IT utilization is used in accordance with the technology
and market development needs of users [10],The Open Group Architecture Framework (TOGAF)
[11] a framework the use of IT to meet the development needs of the user. Business success
depends on the relationship business strategy, information technology strategy, infrastructure and
enterpriseal processes, and IT infrastructure and processes [12],
 IT Service Management (CSF-2) is the craft of implementing, managing, and delivering IT services
to meet the needs of an enterprise. In this paper, the main focus in IT management is to optimize IT
initiatives to achieve maturity process in the manufacturing automation systems.

2.1.2. Customer perspective objective

 Satisfaction Service Performance (CSF-3). The relationship between employee satisfaction,
customer satisfaction and organisational performance very tightly. Competition is getting tougher

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2019 3rd International Conference on Engineering and Applied Technology (ICEAT) IOP Publishing
IOP Conf. Series: Materials Science and Engineering 821 (2020) 012033 doi:10.1088/1757-899X/821/1/012033

between service companies because many aspects support accelerated change, but consumers are
getting smarter. so that progressive improvement and development must periodically be explored in
order to achieve the enterprise's vision
 Interactive Support Service (CSF-4) is an important initiative to maintain the perception gap of
quality between the services provided and user expectations.

2.1.3. Operational excellence objective

 Reduce Complexity (CSF-5) , Complexity Reduction helps reveal hidden costs and allows
companies to determine which products are making money, what customers really value and which
enterpriseal or process bottlenecks are getting in the way of effective actions, setting the stage for
greater growth and increased profits.
 Technology capability (CSF-6) is the ability of the enterprise to execute any relevant technical
function, including the ability of technological knowledge in order to Reduce Complexity and
develop new processes for efficiency [13]
 Maturity process (CSF-7) In order to continuously improve performance, enterprises need to
control their processes. To do this it is assumed that enterprises need a high level of business
process management maturity and employees need a high level of knowledge and experience.
Proof of this hypothesis has been found in many empirical studies.

2.1.4. Future perspective objective

 Effective Cost Management (CSF-8)
The best way to achieve effective is using cost control. it mean concerned with measuring
variances from the cost baseline and taking necessary actions to achieve minimum costs possible.
Because Effective Cost Management is one of the main measures of business accountability
 Employees Job Satisfaction (CSF-9)
Job satisfaction contributors in this study were built on two aspects, namely opportunities to use
skills and abilities, and trust between employees and senior management.

3. Methods
Methodology of this research is the empirical investigation against a particular phenomenon. The
phenomenon in question is Convergence and Integration Strategy in Business-IT Alignment, aligned
Reviews. These types of companies have increased the efficiency of technology investments and
significantly reduced the financial and operational risks associated with business and technical change.
Questionnaire with linker scale will be processed in accordance with the weighting matrix and SWOT
IT-BSC. Weighting calculation performed using Analytical Hierarchy Process (AHP) and scoring
system using the Key Performance Indicators (KPI).

4. Results and discussion

Respondents to the study were 30. Respondents were selected based on length of employment and job-
related fields of research. Corporate strategy plan period 2019 - 2021 are presented in Tables 1 and 2.

Table 1. Strength and weakness mapping company

Code Conditions map Weight rating Thickness x Rating
S1 Good corporate governance and sustainability .1035 3 .3105
S2 Focus on the tastes and needs of customers .1035 3 .3105
S3 Strategic business location and spread .1293 4 .5172
S4 Product quality trustworthy wider community .1293 4 .5172
S5 supply chain Effective (lead time <3 days) .1035 3 .3105
S6 A healthy financial ratios .0603 2 .1206
S7 SI Existing web-based secure connection .0605 2 .1210
S8 Already using ERP .1118 3 .1118

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2019 3rd International Conference on Engineering and Applied Technology (ICEAT) IOP Publishing
IOP Conf. Series: Materials Science and Engineering 821 (2020) 012033 doi:10.1088/1757-899X/821/1/012033

Total 2.3193
W1 HR productivity is not optimal .1293 3 .3879
Investments in the field of IS / IT is not
W2 .0344 2 .0688
managed optimally
Implementation of the solution / IT not yet
W3 .0346 4 .1384
have a framework
Total .5951
Grand Total (SW) 1.7242

Table 2. Mapping opportunities and threats

Weight
Code Conditions map rating Thickness x Rating
O1 Has a positive image in the community .1305 4 .5218
O2 Target marketing is more than 25% can be achieved .0261 3 .0783
O3 The growing potential new lovers .1044 3 .3131
The products have already become a tradition in the
O4 .1044 3 .3131
community
Support rapid technological developments social
O5 .1044 3 .4175
media
Utilizing the technology trends of cloud, mobile
O6 .1044 4 .4175
app
Total 2.0612
Regulation limiting the number of product
T1 .1305 3 .3914
circulation
The issue of the negative impact on the result of
T2 .1044 4 .4175
product consumption
T3 Dependency of raw materials .1044 4 .4175
T4 Consumers easily replace other brands .0607 3 .1822
T5 Market share is still dominated by a competitor .0261 2 .0522
Total 1.4606
Grand Total (OT) .6005

SWOT quantitative data above represents the conversion of an assessment by calculation SWOT
Analysis developed by Pearce and Robinson in order to know exactly the position of the actual
organization.
Figure 2 presents a SWOT coordinates are at 2, 0625 in progressive quadrant focused on strategic
SO, which is a strategy to maximize the organization's internal strengths to seize opportunities. Table
3 and 4 present the strategy of SWOT adapted to IT.

Figure 2. Coordinates SWOT

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2019 3rd International Conference on Engineering and Applied Technology (ICEAT) IOP Publishing
IOP Conf. Series: Materials Science and Engineering 821 (2020) 012033 doi:10.1088/1757-899X/821/1/012033

Table 3. The relationship between IT and business requirements initiative

Originally BR
Code IT Initiative Business Requirements (BR)
code code
Integrating and Online Supply
SO1 S4, O2, O3 Continuously grow in markets BR 1
Chain systems
Support continuous updates directly
SO2 to the apps without re-downloading S6, O5, O6 Great user experience BR 2

Manufacturing Automation Systems S6, S8, O5,

SO3 Cutting lead times in processes 3 BR
O6
SO4 High Availability IT Architecture S6, S7, O6 Business continuity BR 4
Protection of privacy in information S4, S8, O5, Protecting information from falling
SO5 systems BR 5
O6 into the wrong hands

Table 4. Results weighting objective KPI measurements of IT-BSC

Perspectives Objective KPI Measurements Weight Total

Corporate Strategic Business-IT Tangible and intangible benefits in

0154 0.247
Contribution alignment CBA
IT Service Management Service Level Management 0093
Satisfaction Service
User satisfaction and loyalty index 0124
Customer Performance 0.248
Orientation
Interactive Support Service Support Availability 0124
Reduce Complexity Process Velocity 0062
Operational Technology capability IT capability and business performance 0062 0.255
Excellence
process maturity Process Complexity 0124

Effective Cost Management Traceability cost in IT investment 0166

Future
0.250
Orientation
Job Satisfaction Employees Total factor productivity (TFP) 0166

Figure 3 illustrates the strategy and KPI targets are mapped in the hierarchy priority using AHP.
Figure 4 illustrates the relationship of objectivity conduction in ITBSC.

Figure 3. Structure Hierarchy on KPI

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2019 3rd International Conference on Engineering and Applied Technology (ICEAT) IOP Publishing
IOP Conf. Series: Materials Science and Engineering 821 (2020) 012033 doi:10.1088/1757-899X/821/1/012033

Figure 4. The relationship between Objectives in IT BSC

IT application maturity calculation is based KPIs are presented in Table 5.

Table 5. Results of measurement

KPI Target Target Realization
Perspectives Objective Weight Score
Measurements in -5th Score in-3th
Tangible and
Strategic
intangible benefits
Corporate Business-IT 0154 > 80% 3 80% 3
in cost benefit
Contribution alignment
analysis
IT Service Service Level
0093 > 95% 5 70% 2
Management Management
Satisfaction
User satisfaction
Service 0124 > 90% 4 80% 3
Customer and loyalty index
Performance
Orientation
Interactive Support
0124 90% 4 70% 2
Support Service Availability
Reduce
Process Velocity 0062 > 90% 4 75% 2
Complexity
The relationship
between IT
Technology
Operational capability and 0062 > 95% 5 70% 2
capability
Excellence business
performance
Process Complexity
process maturity Versus Process 0124 > 90% 4 78% 2
Capability
Effective Cost Traceability cost in 0166 > 95% 5 85% 3
Future Management IT investment
Orientation Job Satisfaction Total factor
0166 > 90% 4 70% 2
Employees productivity

Weighting Procedure for Criteria and Measurement of Success of IT-BSC. Weighting calculations
are carried out using the Analytical Hierarchy Process (AHP) method and scoring system using the
Objective-Key Performance Indicator Matrix. In these calculations can provide a performance
achievement score of each Objective based on the Key Performance Indicator (KPI) and know how to
achieve it, so that action can be carried out according to the conditions of achievement. As illustrated
in Table 6.

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2019 3rd International Conference on Engineering and Applied Technology (ICEAT) IOP Publishing
IOP Conf. Series: Materials Science and Engineering 821 (2020) 012033 doi:10.1088/1757-899X/821/1/012033

Table 6. Scoring Table based on traffic light

Score Progress Status Action Recommendation
1 <60%
Warning Evaluation and control
2 60% - 79%
3 80% - 89%
Progressive Evaluation and improvement
4 90% - 94%
5 ≥95% Excellent Maintained and followed

Based on the four perspectives that were examined, namely the company's contribution, customer
orientation, excellent operations, future orientation each had each criterion with a score of 3 and 2 so
that it entered into the Progressive and Warning status. The perspectives activated by Progressive
status are Company Contribution with the Strategic Business-IT alignment objective, Customer
Orientation with Service Satisfaction Objectives and Future Orientation objectives with an Effective
Cost Management objective. As for the Warning status, the Company's Contribution with Objective IT
Service Management, Customer Orientation with Interactive Support Service objectives, Operational
Excellence objectively Reducing Complexity, Technology capability and process maturity, and Future
Orientation with Employee Job Satisfaction objectives.

5. Conclusion
The position of the company based on SWOT mapping obtained on progressive quadrant. This means
that the organization is in good shape and healthy. Low achievement of Operational Excellence in the
year to -3 allegedly caused by the pattern of corporate financing gradually so that the benefits of IT
cannot be measured before the 5th year. Further research needs to be done for proving suitability
financing pattern with IT strategy and business strategy of the company. Perspective Operational
Excellence has an impact on the other perspective. Further evidence needs to be done to determine the
relationship between the degrees of perspective on the IT-BSC. The results of this study are practically
is that external and internal ICT capabilities are important drivers of firm performance, while merely
having integrated IS do not lead to better firm performance.
In addition, a moderating effect of the IS integration in the relationship between ICT capabilities
and business performance is found, although this integration contributes to firm performance only
when it is directed to connect with suppliers or customers rather than when integrating the whole
supply chain. In general the achievement of KPI based perspective weighting on ITBSC not yet
reached a level of maturity that is expected. Score each KPI parameters on ITBSC can be used as
reference improvements to achieve the expected level of maturity. Operational Excellence perspective
had the lowest scores on the achievement of KPI which at maturity level 2. Lead time is part of the
Process Velocity is measured on Operational Excellence Reduce Complexity Perspective. Currently
Score 70% of the target of more than 90%, acceleration batch-process lead time is expected to
improve Operational Excellence. Future Orientation Perspective is necessary to increase in accordance
with the parameters measured in the KPI that is Effective Cost Management and Job Satisfaction
Employees

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2019 3rd International Conference on Engineering and Applied Technology (ICEAT) IOP Publishing
IOP Conf. Series: Materials Science and Engineering 821 (2020) 012033 doi:10.1088/1757-899X/821/1/012033

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