=Paper=
{{Paper
|id=Vol-237/paper-2
|storemode=property
|title=A Framework for Business/IT Alignment in Networked Value Constellations
|pdfUrl=https://ceur-ws.org/Vol-237/paper2.pdf
|volume=Vol-237
|dblpUrl=https://dblp.org/rec/conf/caise/DerzsiG06
}}
==A Framework for Business/IT Alignment in Networked Value Constellations==
https://ceur-ws.org/Vol-237/paper2.pdf
BUSITAL'06 219
A Framework for Business/IT Alignment in Networked
Value Constellations
Zsófia Derzsi, Jaap Gordijn
Computer Science, Business Informatics, Vrije Universiteit
De Boelelaan 1081, 1081 HV Amsterdam, The Netherlands
{zderzsi,gordijn}@few.vu.nl
Abstract. e-Services are just as commercial services; however e-services can be
fully ordered and provisioned via the Internet. Such e-services are often offered
by a constellation of enterprises rather than just one. A question is then how to
properly align these enterprises, such that they can provision e-services.
Additionally, because e-services rely so heavily on IT, aligning business
(essentially the service) with IT is also of importance. In this paper, we present
a framework that can be used to structure various alignment questions that pop-
up while designing value constellations for e-services. We illustrate the
framework by a small case study.
1 Introduction
In the past few years, e-commerce – trading and selling products via the Internet – has
mainly been about physical goods, being things that can be dropped onto the floor.
Nevertheless in most countries, services form a significant part of total economic
activity. Services are deeds and performances of a mostly intangible nature [3]. A
specific kind of services is e-services. They rely on a substantial amount of IT for
production and provisioning. e-Services are seldom offered fully by one enterprise.
Rather, they are often offered by networked value constellations [5], formed by
organizations that jointly work on the satisfaction of a complex customer need. For
instance, a managed domestic home network including Internet access requires among
others an ISP; a company that installs the hardware and repairs it if it is broken and a
company that manages and monitors the correct functioning of the domestic network.
Designing a networked value constellation offering e-services, e.g. for a managed
domestic network or a streaming music service is not an easy task. One of the reasons
for this is that many different perspectives (e.g. IT and business processes) of the
participating enterprises have to be internally properly aligned with each other, as
well as between organization themselves.
In this paper we propose a conceptual framework of alignment issues and
problems. Ultimately, this framework should assist in designing networked value
constellations for e-services, with automated tool support.
In this paper, section 2 introduces a case study that we use to explore and explain
our framework. In section 3, we present our framework. We illustrate the framework
using the case study (section 4). In section 5, we present our conclusions and discuss
potential directions of future research.
220 Business/IT Aligment and Interoperability
2 Case Study: Wireless Internet Access Provision in Hotels
Suppose a hotel would like to offer wireless connectivity to businessmen as an
additional service. Such a service can be provided as a joint service offering of the
hotel and of a Telecommunication Company (Telco). The hotel allows the Telco to
place WiFi access points (equipment used by the traveler to connect its laptop to), and
to place a router that connects the access points to the Internet. Alternatively, the hotel
can also buy and place WiFi access points itself, and obtain commodity Internet
access from an Internet Service Provider (ISP). How we can reason about these
alternatives from an alignment point of view?
3 Perspectives on Designing Networked Value Constellations
A networked value constellation offering e-services requires (1) alignment of the
participating organizations (e.g. enterprises and customers, or partners), and (2)
alignment of at least four separate perspectives (see Figure 1). The first perspective is
about understanding strategic business goals and objectives of the various enterprises
involved. We have proposed in [3] an approach for stating such goals, based on
notions as i* [4].The purpose of this strategy viewpoint is to arrive at a coherent goal
set of actors that can be used to motivate the value proposition perspective. This
perspective is used to represent what enterprises offer of economic value to each other
and what they request in return. Thus, partnering can be also shown. This perspective
can be modeled using e3-value [1]. Since the value proposition perspective captures
what is exchanged of value, but not how this is accomplished, we add two additional
perspectives. The business process perspective presents internal- and inter-
organizational business processes, e.g. represented by UML activity diagrams or the
BMPN (see http://www.bpmn.org/). The information system perspective represents
the software & hardware components that operationalize the value proposition
perspective. A broad range of modeling tools is available (e.g. UML).
Modeling the various perspectives is the necessary first step towards the design of
networked value constellations. First, various case studies it was shown that many
constellations are just too complex. They require thorough formal conceptualization
in order to be able to create a shared understanding of the constellation at hand by all
stakeholders involved. Additionally, tool support, relying on sound conceptualization,
can help to detect inconsistencies between the various perspectives taken, and can
provide traceability of design decisions taken.
Moreover, constellations that are formed to provide IT intensive services rely
heavily on IT. The technological and commercial aggregation involves decision
makers with different viewpoints from different disciplines. Business developers of
value constellations who focus on more commercial issues should be able to express
and explain the constellation to software engineers. On the other hand, engineers have
the responsibility to address clearly technological issues that influence the successful
implementation of the planned business idea. The language of modeling techniques
can thus successfully support the decision making by maintaining the shared and
common understanding.
BUSITAL'06 221
Fig. 1. Initial conceptual framework
The identified perspectives result in various types of alignment decisions:
− alignment decisions between perspectives on a same organization (e.g. internal
processes should contribute to realizing a value proposition of that organization)
called intra-organizational alignment of perspectives,
− alignment decisions per perspective between organizations (e.g. a multi-enterprise
value proposition should allow all organizations to make profit with it) called
inter-organizational alignment within a perspective,
− alignment decisions between perspectives between organizations (inter-
organizational processes should contribute to realizing a multi-enterprise value
proposition), called inter-organizational alignment between perspectives.
Since constellations have to operate in a competitive world, we first consider
alignment from a profitability/economic value point of view: each enterprise in the
constellation should be able to make a profit. The value proposition perspective
focuses on revenues and expenses; the process and IS viewpoint cause expenses.
Since an integrated view on these financials may help to reason about profitability, we
propose to use the notion of value activity to bring the perspectives together from a
financial point of view. Executing this activity generates revenues but also expenses.
In the following sections, we exemplify a few of the fore mentioned types of
alignment decisions. Additionally, we show how these can be integrated from a
financial point of view. We start with the value proposition viewpoint, and work our
way down to the information system viewpoint.
222 Business/IT Aligment and Interoperability
4 Forms of Alignment: A Case Study
4.1 Inter-organizational Alignment within the Value Proposition Perspective
The value proposition perspective is about understanding what organizations in a
value constellation offer each other of economic value. To do so, we use e3-value
(please consult [1] for more information). For the case at hand, there exist at least two
alternatives to arrive at a wireless access service: (1) the hotel offers the wireless
Internet access by itself (Figure 2) or (2) the hotel offers the wireless access jointly
with a Telco (Figure 3). If the hotel offers wireless connectivity by itself, it operates
the required WiFi access points by itself and uses an ISP to have Internet
connectivity. A traveler pays the hotel for both the room and the wireless access
service and the hotel determines the fee for the wireless service. Alternatively, the
hotel is only responsible for room renting; the wireless access provision is completely
done by a Telco. The traveler pays separately to the hotel and to the Telco for their
services. Additionally, the hotel pays the Telco a small fee for having a WiFi service
available for the traveler.
Fig. 2. Hotel does wireless access provisioning by itself and uses and ISP for Internet access
Fig. 3. Hotel and Telco form a partnership to provide wireless access
BUSITAL'06 223
Profitability sheets can be constructed, showing the net value flow, for each actor
and value activity involved. Since this construction process has been explained in
detail in [1], we only show a sample sheet in Table 1. This sheet shows (if attributed
with the right numbers) the net money flow for a specific value activity as performed
by a business actor. However, this sheet does not take into account additional money
out-flows, such as for IT-investments or operations to be performed. For that purpose,
we need to explore the other perspectives.
Table 1. Sample profitability sheet for the activity “Wireless access provisioning”
Value proposition perspective
Value activity: Wireless access provision (“WiFi access”)
Assigned to: Hotel
Value object in Value object out Number of Economic
times/timeframe value
Fee (Wireless) # times Euro …
(IP access) Fee (to ISP) # times Euro …
Total Euro …
The alignment activity from the value proposition perspective triggers the
following questions that influence partnering decisions:
− Which actors execute which value activities (e.g. the WiFi access activity is
differently assigned in the two alternatives)?
− Which value exchanges exist between actors (in the first alternative the traveler
pays to hotel, in the second alternative to the Telco)?
− How are expenses and revenues divided over actors (if the e3-value model is
quantified using profitability sheets (e.g. a result of who pays to whom and thus
can set prices))?
To be able to provide acceptable answers further investigation of perspectives is
needed.
4.2 Intra-organizational Alignment of Perspectives: Value Proposition and
Business Processes
We now focus on WiFi access provisioning activity only. The value proposition
already takes into account revenues and expenses but does not consider expenses for
business processes and IT yet. Tables 2 & 3 show for a value activity of the value
proposition perspective, the required operational activities on the business process
perspective1, as well as expenses that go with it. As such, a value activity forms the
linking pin to operational activities generating expenses and IT investments. Note that
1
In e3-value, a value activity is required to make profit, whereas an operational activity shows
how a value activity should be performed and just may incur costs and not necessarily profit.
224 Business/IT Aligment and Interoperability
this perspective shows some revenues that can not directly be quantified directly in
terms of monetary units (e.g. ‘responsibility’). How to involve such effects in the
decision making needs to be further researched.
Table 2. Underlying operational activities of wireless access provision performed by the hotel,
and potential expenses/revenues of the hotel
Value proposition perspective
Value activity: Wireless access provision (“WiFi access”)
Assigned to: Hotel
Business process perspective
Operational activities Exec. Expenses Revenues
Maintenance of Third Maintenance No responsibility
connectivity party expenses
Maintenance of Third Maintenance No responsibility
infrastructure party expenses
Maintenance of Hotel Maintenance Hotel determines the price
access of guests expenses of the service
Maintenance of the Hotel Additional
physical replacement reorganization
Table 3. Underlying operational activities of wireless access provision performed by the
telecommunication company and potential expenses/revenues of the hotel
Value proposition perspective
Value activity: Wireless access provision (“WiFi access”)
Assigned to: Telecommunication company
Business process perspective
Operational activities Exec. Expenses Revenues
Maintenance of Telco No responsibility
connectivity
Maintenance of Telco Maintenance No responsibility
infrastructure /Hotel expenses
Maintenance of Telco H.R. expenses for No responsibility, hotel
access of guests contracting can expect revenue sharing
Maintenance of the Hotel Additional
physical replacement reorganization
Between the value proposition and business process perspective we have found the
following factors that indicate alignment activities:
− Value activities (value proposition viewpoint) require operational activities
(process viewpoint) as indicated for the WiFi access provisioning activity,
− Executing operational activities involve expenses but also additional benefits for a
specific organization not visible yet on the value proposition activity, and
BUSITAL'06 225
− The distribution of such expenses and benefits triggers for inter-organizational
alignment between value proposition and business process perspectives.
4.3 Intra-organizational Alignment of Perspectives: Value Proposition and
Information Systems
We also can relate value activities to the required investments and expenses in IT.
Table 4 and Table 5 show expenses and revenues for IT. Expenses can be quantified,
and there are intangible revenues (ownership).
Table 4. Information systems and investments of wireless access provision performed by the
hotel, and potential expenses/revenues of the hotel
Value proposition perspective
Value activity: Wireless access provision (“WiFi access”)
Assigned to: Hotel
Information system perspective
Infrastructure Owner Expenses Revenues
Wireless access points Hotel Invest. + maint. expenses Owned by the hotel
LAN infrastructure Hotel Invest. + maint. expenses Owned by the hotel
Router to the Internet Hotel Invest. + maint. expenses Owned by the hotel
Table 5. Information systems and investments of wireless access provision performed by the
telecommunication company, and potential expenses/revenues of the hotel
Value proposition perspective
Value activity: Wireless access provision (“WiFi access”)
Assigned to: Hotel
Information system perspective
Infrastructure Owner Expenses Revenues
Wireless access points Telco No responsibility
LAN infrastructure Telco/ Hotel might have Responsibility depends
Hotel invest. expenses on the ownership
Router to the Internet Telco No responsibility
Between the value proposition and information system perspective we have found
the following factors that indicate alignment activities:
− Value activities (value proposition viewpoint) require information system
components (both application and infrastructural driven) as indicated for the WiFi
access provisioning activity,
− These information system components involve expenses for a specific organization
that are not visible yet on the value proposition activity (namely investment costs
and reoccurring expenses, e.g. for maintenance), and
226 Business/IT Aligment and Interoperability
− The distribution of such expenses and benefits triggers for inter-organizational
alignment between value proposition and information system perspectives.
5 Conclusion and Further Research
In this paper, we have proposed a four-perspective (ranging from strategic goals to
IT) framework for discussing business/IT alignment in networked value
constellations. Alignment can be between perspectives within a same enterprise but
can also be between various enterprises in case of networked value constellations.
Moreover, as a third dimension, alignment can be between perspectives spanning
multiple enterprises. As a first criterion to align goals, value propositions, processes
and IT, we propose to use profitability for each actor involved in the constellation. To
that end, we need to collect financials (revenues and expenses) from each perspective,
to make a first assessment whether each actor can be profitable. In next steps, other
alignment criteria then can be considered. We will continue our research by exploring
an industrial strength case study in the field of energy supply. Here, we will study the
mentioned perspectives and use financial data to address alignment decisions.
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