IT governance in SMEs
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This document discusses IT governance in small and medium enterprises (SMEs). It begins by introducing key constructs of IT governance including decision structure, senior management involvement, communication practices, and measures of IT success. It then analyzes three case studies of SMEs from different industries. The case studies examine the SMEs' IT governance structures and practices. Finally, the document provides recommendations for SMEs to improve senior management involvement in governance and strengthen communication of governance practices to enhance the performance and breadth of IT use.
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IT governance in SMEs
- 1. IT Governance in SMEs Instructor: Prof. Dr. Martin Knahl Group 4: Mai Nam Chuong Nguyen Huu Quang
- 2. Agenda Introduction Four IT Governance important constructs Three case studies analysis Recommendations for IT Governance practices Summary Questions and answers 2
- 3. Introduction Research in 2004 (*). Peter Weill – Jeanne W. Ross Plus sign: IT Governance helps company increase 20% profit Minus sign: Only 38% of senior managers know how IT is governed Study of 300 enterprises – Weill and Ross There is not a single best formula for governing IT 100% sure: effective ITG doesn‟t happen by accident Top performing enterprises carefully design governance Managers make daily decision putting design into practice PwC research Most interviewed organizations recognize the importance of IT Governance However, a „holistic‟ view that considers all dimensions of IT Governance is not widely found Source: http://www.researchgate.net/publication/228139751_IT_Governance_on_One_Page/file/e0b49518ae03e11409.pdf http://www.pwc.com/en_mt/mt/publications/assets/it-governance-in-practice-jan-2007.pdf 3
- 4. Introduction IT Governance “Specifying the decision rights and accountability framework to encourage desirable behavior in the use of IT”, Weill and Ross Align IT strategies/goals/objectives with other activities of the company to ensure that IT effectively supports the development of the company. Small and Medium sized Enterprise Workers: < 500 (US); < 300 (VN) Capital: < $50m (US); < $5m (VN) Source: White paper – SMEs in Vietnam http://www.economica.vn/Portals/0/MauBieu/70c475bbbf81ecb8d32698a30924e978.pdf US International Trade Commission http://www.usitc.gov/publications/332/pub4169.pdf 4
- 5. Introduction SMEs in Vietnam 2010: 250.000 SMEs 2015: 600.000 (est.) 32% of enterprises 65% 30% 2% 3% Micro Small Medium Large Source: General Statistics Office, Viet Nam’s Enterprises in the first 9 years of 21 century. Statistics Publishing House, Ha Noi, 2010 http://www.economica.vn/Portals/0/MauBieu/70c475bbbf81ecb8d32698a30924e978.pdf 5
- 6. Introduction Limitation of using IT in SMEs Financial constraints limit their abilities to invest in IT and to attract highly capable IT professionals Enterprise‟s owner/top manager lack IT expertise and experience Use of IT in SMEs in Vietnam Only 20% of SMEs use ICT Only 5% do so for business operations Source: [World Bank] Vietnam - ICT Development Report http://www.worldbank.org/projects/P079344/vietnam-ict-development?lang=en 6
- 7. Introduction How can SMEs optimize IT performance through governance practices? 7 Source: Rui Huang, Robert W. Zmud, R Leon Price IT Governance Practices in Small and Medium-Sized Enterprises: Recommendations from an Empirical Study http://ifipwg82.org/sites/ifipwg82.org/files/Ch12-19-IT%20Governance%20Practices%20in%20SME-formatted.pdf
- 8. Four IT Governance important constructs Decision structure Senior management involvement in IT Governance Processes IT Governance Communication Practices IT Success Source: Rui Huang, Robert W. Zmud, R Leon Price IT Governance Practices in Small and Medium-Sized Enterprises: Recommendations from an Empirical Study http://ifipwg82.org/sites/ifipwg82.org/files/Ch12-19-IT%20Governance%20Practices%20in%20SME-formatted.pdf 8
- 9. Four IT Governance important constructs 1. Decision structure: How IT decisions are made? Sub-Category Description Centralization Decisions made by corporate-level IT/business senior managers Hybrid Decisions jointly made by corporate and divisional senior managers Decentralization Decisions made by divisional senior managers 9
- 10. Four IT Governance important constructs 2. Senior Management Involvement in IT Governance Processes: Ensure the alignment b/w business and IT Sub-Category Description Formal Involvement Active participation of executive managers in formal IT steering committees Informal Involvement Senior managers, categorized as corporate senior managers, divisional senior managers or both, having regular interactions with the CIO 10
- 11. Four IT Governance important constructs 3. IT Governance Communication Practices: Ensure members behave correctly with IT-related actions Sub-Category Description Number of Channels Number (and types) of communication channels used to communicate IT governance policies, guidelines and practices throughout the SME. Primary Communication Channel The primary communication channel used to communicate IT policies, guidelines and procedures throughout the SME 11
- 12. Four IT Governance important constructs 4. IT Success: How the company success in deploying IT? Sub-Category Description Efficiency of IT Use How efficient the firm has been in its use of IT (a 5-point scale with 5 representing the highest efficiency; averaged by number of respondents) Breadth of current IT use The number of distinct areas identified, aggregated across interviewees, where IT is being appropriately used Breadth of potential IT use The number of distinct work processes identified, by any interviewees, as being actively considered or planned for future IT use 12
- 13. Coming up next! Introduction Four IT Governance important constructs Three case studies analysis Recommendations for SME Governance practices Summary Questions and answers 13
- 14. Three case studies analysis * HealthCare: Health care management organization Multiple offices in US Agriculture: Provide consultation services in agriculture techniques Non-profit research foundation Pharma: Manufacture subsidiary of an international pharmaceutical company Businesses in Asia Pacific, North American, and Europe (*) Data getting from IT Governance Practices in Small and Medium-Sized Enterprise paper 14
- 15. Three case studies analysis HealthCare Agriculture Pharma Firm size 182 300 360 IT Group size 12 14 10 Interviewees CIO 4 Divisional VPs CIO 2 Divisional Directors CIO Controllers Divisional Director Demographic Information on Research Sites 15
- 16. Three case studies analysis IT Governance Structure HealthCare Agriculture Pharma Structure Centralized Centralized Centralized Key IT decision CxOs (CEO, CIO,..) CIO CIO 16
- 17. Three case studies analysis Senior Management Involvement in IT Governance Processes HealthCare Agriculture Pharma Formal Involvement CIO Corporate Executives N/A CIO Divisional Executives Informal Involvement Corporate Executives Divisional Executives Divisional Executives 17
- 18. Three case studies analysis IT Governance Communication Practices HealthCare Agriculture Pharma Communication channels Email Word of mouth Paper docs Formal meeting Word of mouth Intranet Paper docs Formal meeting Word of mouth Primary communication channel Email Paper docs Intranet 18
- 19. Three case studies analysis IT Success HealthCare Agriculture Pharma Efficiency of IT use 3.2 (moderate) 3.3 (moderate) 4.3 (high) Breadth of current IT use 3 (moderate) 2 (limited) 5 (high) Breadth of potential IT use 3 (moderate) 1 (limited) 1 (limited) 19
- 20. Recommendations for SMEs Senior Management Involvement in IT Governance Processes Recommendation 1: In order to enhance performance of IT use (as indicated by efficiency and breadth of IT use) in SMEs, senior management should be involved through joint formal and informal IT governance interactions Recommendation 2: In order to improve the breadth of potential IT use in SMEs, corporate executives should be involved in IT governance processes Recommendation 3: In order to improve the breadth of current IT use in SMEs, operational executives should be involved in IT governance processes. 20
- 21. Recommendations for SMEs IT Governance Communication Practices Recommendation 4: In order to improve the performance of IT use (as indicated by efficiency and breadth of IT use) in SMEs, IT governance policies, guidelines and practices should be communicated through a number of channels Recommendation 5: In order to improve the performance of IT use (as indicated by efficiency and breadth of IT use) in SMEs, IT governance policies, guidelines and practices should be communicated through accessible channels 21
- 22. Summary Theme Theory Case studies Recommendations Why ITG in SMEs is important? What is ITG, SMEs? Examine ITG practices in SMEs Give recommendations for ITG practices in SMEs 22
Editor's Notes
- (*) IT Governance on One page.- Companies with effective IT governance have profits that are 20% higher than other companies pursuing similar strategies. One explanation for this differential is that IT governance helps companies align their IT investments with their business priorities.
- “IT governance is the set of processes that specify decision rights and accountability to encourage desirable behavior in the use of IT.Effective IT governance encourages and leverages the ingenuity of all the enterprise's people in using IT, not just the leaders, while ensuring compliance with the enterprise's overall vision and principles” (Source: Weill, P.)At its core, governance is about alignment and value. For IT governance, we want to align the strategies, goals and objectives of IT with those of the enterprise to ensure that IT effectively supports and drives the entity.Number of workers is diff in countries: German = 255, 200, 100.
- http://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/SDN/2013/01/04/090224b081856516/1_0/Rendered/PDF/Vietnam000Viet0Report000Sequence010.pdf