The Role of IT Governance Practices in Creating Business Value in SMEs

The Role of IT Governance Practices in Creating Business Value in SMEs

Carla Wilkin (Monash University, Australia)
Copyright: © 2012 |Pages: 17
DOI: 10.4018/joeuc.2012040101
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Abstract

Much has been written about information technology governance (ITG) in larger organizations, wherein control of information technology (IT) is addressed with attention to three core elements, namely structures, processes, and relational mechanisms. These elements focus on governing the size of IT investment, the ubiquity of IT functionality to business processes and the demonstrated value from IT investment. For Small-to-Medium Enterprises (SMEs) it is less apparent how IT is or should be governed, how these core elements may contribute to ITG, and how this all contributes to the creation of business value. Through a survey of small SMEs in the Australian tourist accommodation industry regarding their use of and planning for IT investment to deliver business value, this paper delivers new understanding about SME practices related to governing IT. Findings revealed evidence of some sound practices but the opportunity to achieve greater strategic business value beyond the largely operational value already acquired. The paper concludes by proposing a redefined framework of the core elements of structures, processes, and relational mechanisms that is tailored to an SME context.
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Introduction

Studies that report on Information Technology (IT) use and practice typically focus on the experiences of large organizations (Wilkin & Chenhall, 2010). Herein strategic alignment is seen as pivotal in ensuring there is shared understanding of business/IT objectives, which can lead to better performance in IT governance (ITG) (Bowen, Cheung, & Rohde, 2007). In achieving this, organizations need to develop a unified vision of their business and IT (Bieberstein, Bose, Walker, & Lynch, 2005) and create relevant formal policies and directives (Vayghan, Garfinkle, Walenta, Healy, & Valentin, 2007). As ITG involves change management (Pan, Pan, & Devadoss, 2008), planning needs to take account of existing organizational cultures and contexts (Xue, Liang, & Boulton, 2008). It also requires a priori evaluation of IT investment that includes balanced representation of business and IT people (Bowen et al., 2007), often through an IT steering committee (Vayghan et al., 2007; Weill & Ross, 2005).

Whilst in large organizations these practices facilitate success and enhance IT investment, their uptake in Small-to-Medium Enterprises (SMEs) is less convincing (Walker, Bode, Burn, & Webster, 2003). Although effective investment in both contexts usually results in IT becoming ubiquitous in the underlying business processes, potentially creating business value and improved performance, there are points of difference between the two. Earlier studies have shown that SMEs tend to adopt a more operational than strategic view of business and tend to be more reactive to immediate demands than longer term goals and budget accountability (Brailsford, 1995; Rangone, 1999; Sexton & van Auken, 1982). Whilst both use IT and off-the-shelf software to facilitate business operations, SMEs often struggle to maximize their potential as this requires changes in the underlying processes in order to optimize business value (Rangone, 1999). Moreover, SMEs commonly function without dedicated IT specialists, which makes realizing the full potential from this experience challenging. These differences make investigation of this in SMEs a fruitful area of research. Thus, the research question was: what practices are apparent to manage IT investment and operationalization in SMEs and how is this different from ITG used by larger organizations?

Through a survey that explored the attitudes, experiences and challenges faced by 156 small independent Australian tourist accommodation providers in their pursuit to create business value through IT investment and operationalization, this paper seeks to deliver new understanding about how IT is governed in SMEs to facilitate this. Although research into governance has extended into SMEs (Huse, 2000), research into the application of ITG here is timely.

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