IT Infrastructure Capabilities and Business Process Improvements: Association with IT Governance Characteristics

Introduction

The last decades have seen generous investment in information technologies (IT) by companies around the world (Mitra, 2005; Strassman, 2002), and expenditures for IT infrastructure are estimated to account for almost 60% of a company’s IT budget (Byrd & Turner, 2000). As IT has increasingly been perceived as a critical business enabler, companies are eager to take advantage of IT to support their operational and strategic objectives. Despite the huge investments made in IT in recent decades, the effects of such investment are less than satisfactory in terms of organizational benefits (Dasgupta, Sarkis & Talluri, 1999; Hu & Plant, 2001). One of the reasons for this paradox is the mismanagement of IT projects, as shown in a number of notorious examples of IT failures (Grossman, 2003; Spitze, 2001). Against this background, a series of sensible questions can be asked. What are the factors that would favorably affect the outcomes of such investments in IT initiatives? What are the proper types and amounts of IT investment a company should make? The first one points to many aspects of IT planning, implementation and management while the second relates to the proper investment decisions that need to be made, perhaps jointly, by the senior IT and business leadership (Ein-Dor & Segev, 1978; Ross & Weill, 2002).

The IT literature has presented many organizational factors relevant to the successful adoption of IT, ranging from project management issues to user involvement, and senior management support (Caldeira & Ward, 2002; Chatterjee, Grewal & Sambamurthy, 2002). Ignoring or mismanaging these factors may subject the projects to the risk of failure (Sumner, 2000). Among the many organizational issues that are said to affect the investment, deployment and use of IT, are IT governance-related factors. As defined by Sambamurthy & Zmud (1999), “IT governance arrangements refers to the patterns of authority for key IT activities in business firms, including IT infrastructure, IT use, and project management” (p. 261). “The patterns of authority” could have many implications to the investment decisions, and running of the enterprise-wide IT initiatives. For instance, it may affect how much recognition and support an IT project could receive from the various levels of the organizations, and whether appropriate funding and resources would be allocated. In our article, the term “IT governance characteristics” focuses on the (a) reporting relationship between the chief executive and the IT leader, (b) the support and commitment of top management received by the IT projects, and (c) the support and commitment of top management on business process improvement. The former is used as a surrogate for the seniority of the IT leader as will be explained and discussed further in the next section. A review of the literature about enterprise IT and systems adoption indicates that many of the enterprise IT projects would not be successful unless the deployment of IT is accompanied by changes to business practices and processes (Davenport, 1998; Sumner, 2000; Wu, 2002). Thus, senior management’s attitudes and commitment on business process changes would also be critical to the success of enterprise IT projects.