With the cost, complexity and risk associated with IT systems, the approach to IT governance and service management in many organizations is to centralize and standardize. Often executives pursue a generic approach to the management of information technology, without consideration of their organizational context. This chapter examines the adaptation of IT governance arrangements through the lens of organizational theory. It uses concepts from systems theory, differentiation, value chains and structural contingency theory to give an appreciation of the factors that influence how IT can best support an organization’s business.
The Rise Of It Governance
Governance is concerned with the effective, efficient and acceptable use of an organization’s resources. Governance provides a means by which objectives, as well as the means of attaining those objectives and monitoring performance, are determined (OECD, 2004). The three key elements of governance are setting objectives and performance expectations, assigning those expectations to subordinates and ensuring they are being met (Carver, 2006). Whereas governance normally is associated with the apex of the organization (i.e., the activities of boards), there is no reason why this approach to systematic goal setting, delegation and control could not be applied throughout the hierarchy.
With the spate of corporate failures raising questions of executive management, the focus of the term governance has shifted to concern matters of corporate ethics, as evidenced in the Cadbury and Sarbanes-Oxley reports in the UK and US respectively. This common interpretation of governance thus relates to the accountability of the organizational executive to its owners or shareholders.
Similarly, whereas IT governance is concerned with the direction and control of current and future use of information technology (Standards Australia, 2005), it has come to be widely associated with ensuring accountability of investments in information technology to owners and shareholders. To some extent, efforts to implement IT governance mechanisms have suffered due to the definitional confusion (Keyes-Pearce, 2002; Webb, Pollard & Ridley, 2006). Critically, IT governance needs to be accountable not only to owners and shareholders, but to the business functions and users within the organization. Only then will IT governance be able to maximize business value through alignment of technology with business.