18 th Australasian Conference on Information Systems Evaluating the Alignment of IT 5-7 Dec 2007, Toowoomba Cragg Evaluating the Alignment of IT with Business Processes in SMEs Paul Cragg Department of Accountancy, Finance and Information Systems University of Canterbury Christchurch, New Zealand Email: paul.cragg@canterbury.ac.nz Marco Tagliavini Cattaneo University Castellanza, Italy Annette Mills Department of Accountancy, Finance and Information Systems University of Canterbury Christchurch, New Zealand Email: annette.mills@canterbury.ac.nz Abstract This paper takes a new approach to IT alignment by focusing on the alignment of IT with business processes. Thus the paper focuses on operational alignment rather than strategic alignment. The paper proposes a new instrument for measuring IT alignment, based on the process view of firms. The Process Classification Framework (PCF) (APQC 2006) was used to create a 24 item instrument that formed part of a questionnaire for structured interviews with managers in 66 SMEs. Analysis using partial least squares indicated a positive relationship between IT alignment and IT Success. In addition, IT alignment was found to be low in many firms, and low for many business processes. The typical SME had about 5 business processes with insufficient IS support. However, IT alignment was at an acceptable level for the most important business processes. The study also indicates that the business process view could provide an efficient measure of IT alignment. Opportunities for further research are outlined. Keywords Information systems, IT alignment, functional integration, business processes, SMEs. Introduction The fit or alignment between IT and the business has received considerable attention during the last ten years because many argue that, to be successful, organisations need a good fit between IT and the business (Luftman 2000). It seems that IT alignment may help us understand the elusive relationship between IT use and organisational performance (Chan et al. 1997). Furthermore, there is evidence that many firms struggle to achieve alignment (Reich & Benbasat 1996). As a result, IT fit has been viewed as a problem of considerable practical significance. Many studies of IT alignment have used the framework of Henderson and Venkatraman (1993). An important contribution of Henderson and Venkatraman (1993) was their recognition of many types of alignment, in particular, the concepts of alignment at the strategic level and alignment at the functional level. They termed the two types of alignment as strategic alignment, that is, the fit between business strategy and IT strategy, and functional alignment, that is, the fit between Business Infrastructure and IT Infrastructure. While a growing number of studies have examined IT alignment, most have focused on strategic alignment. There have been relatively few studies of IT alignment at the functional or operational level. Another bias of prior work is the focus on large firms. Very few studies of SME alignment have examined alignment at the operational level. This is a significant gap in our current understanding of IT in SMEs as there is strong evidence that SMEs are more operationally oriented rather than strategically oriented (Levy, Powell & Yetton 2001; Ravarini, Tagliavini & Buonanno 2002). This suggests that operational alignment in SMEs could be at least as important as strategic alignment, and possibly of greater importance. Yet operational alignment in SMEs is poorly understood and an under-researched topic. This project is therefore aimed at extending current frameworks of IT alignment in SMEs by examining alignment at the operational level. Theoretical arguments for the proposed study and research model are grounded in the widely accepted IT alignment model (Henderson and Venkatraman 1993), 38