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Stakeholder management is about working with all the parties who are impacted by new IT solutions and that have important knowledge that should be included as input for the design process of a new solution.
What is the purpose here?
For IT to deliver successful solutions that fit the business, it needs to really understand what is expected of these in great detail.
How does it work, at a high level?
By working with stakeholders on the details of current and future systems and processes and how to best evolve them into new solutions, IT gains the insights to "build the right thing". They need to include any party that can help upfront in the analysis process to avoid surprises and problems later when the new IT solution gets implemented.
What else is good to know?
While this certainly includes internal business stakeholders who manage business processes that are impacted by a new IT solution, there can also be external stakeholders that need to be included in the business analysis process. For example, financial regulators or other companies with systems that the IT solution will interface with may also need to be active stakeholders in a project.
Big picture, Business Analysts are expected to successfully interact with a potentially wide-ranging group of stakeholders to bring the complete requirements picture into focus and document it, so IT can design successful technical solutions that make the plans a reality.