IT-Enabled Governance Structures in Health Care: Minitrack Introduction

In many organisations, Information Technology (IT) has become crucial in the support, the sustainability and the growth of the business. This pervasive use of technology has created a critical dependency on IT that calls for a specific focus on IT Governance. IT Governance consists of the leadership and organisational structures and processes that ensure that the organisation’s IT sustains and extends the organisation’s strategy and objectives. This introductory chapter records and interprets some important existing theories, models and practices in the IT Governance domain and aims to contribute to the understanding of IT Governance and its structures, processes and relational mechanisms. 2 Van Grembergen, De Haes & Guldentops Copyright © 2004, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. INTRODUCTION Information Technology (IT) has become pervasive in current dynamic and often turbulent business environments. While in the past, business executives could delegate, ignore or avoid IT decisions, this is now impossible in most sectors and industries (Peterson, 2003; Duffy, 2002; Van Der Zee & De Jong, 1999). To emphasise this pervasiveness, Broadbent and Weill (1998) refer to three layers of the ‘new infrastructure’: local IT for business processes, firm IT infrastructure and public IT infrastructures (Figure 1). The Public Infrastructure (Figure 1) is the foundation of the New Infrastructure, which is in turn linked to external industry infrastructures such as Internet, EDI networks, etc. This enables the business to communicate and do business with customers, suppliers, partners, etc. Together with the Firm Information Technology Infrastructure, such as e-mail, customer databases, etc., these infrastructures make up the New Infrastructure. The New Infrastructure, plus the local IT needed to perform business processes, can be defined as the Firm Information Technology Portfolio. The Information Technology Portfolio not only has the potential to support existing business strategies, but also to shape new strategies (Henderson, Venkatraman, & Oldach, 1993; Henderson & Venkatraman, 1993; Guldentops, 2003). In this mindset, IT becomes not only a success factor for survival and prosperity, but also an opportunity to differentiate and to achieve competitive advantage. IT also offers a means for increasing productivity. Leveraging IT successfully to transform the enterprise and create products and services with added value has become a universal business competency (Guldentops, 2003). In this viewpoint, the IT department moves from a commodity service provider to a strategic partner, as illustrated by Venkatraman (1999) (Table 1). Broadbent, M. & Weill, P. (1998). Leveraging the new infrastructure – How market leaders capitalize on Information Technology. Harvard Business School Press. Figure 1. The New Infrastructure Public infrastructure (e.g. internet, vendors, industry networks) Firm Information Technology Infrastructure (e.g. home page, customer database, e-mail) Local IT for Business Processes Local IT for Business Processes Local IT for Business Processes Structures, Processes and Relational Mechanisms for IT Governance 3 Copyright © 2004, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. The dependency on IT becomes even more imperative in our knowledge-based economy, where organisations are using technology in managing, developing and communicating intangible assets such as information and knowledge (Patel, 2003). Corporate success can of course only be attained when information and knowledge, very often provided and sustained by technology, is secure, accurate, and reliable, and provided to the right person, at the right time, at the right place (ITGI, 2000; Kakabadse & Kakabadse, 2001). This major IT dependency also implies a huge vulnerability that is inherently present in certain complex IT environments (ITGI, 2001; Duffy, 2002). System and network downtime has become far too costly for any organisation in these days of doing business globally around the clock. Take for example the impact of downtime in the banking sector or in a medical environment. The risk factor is accompanied by a wide spectrum of external threats, such as errors and omissions, abuse, cybercrime and fraud. Information Technology often entails large capital investments in organisations while companies are faced with multiple shareholders that are demanding the creation of business value through these investments. The question of the ‘productivity paradox’, why Information Technologies have not provided a measurable value to the business world, has puzzled many practitioners and researchers (Kakabadse & Kakabadse, 2001; ITGI, 2000, 2001; Lie, 2001; Henderson & Venkatraman, 1993; Duffy, 2002; Strassman, 1990; Brynjolfsson, 1993; Brynjolfsson & Hitt, 1998). All the issues described above point out that the critical dependency on IT calls for a specific focus on IT Governance. This is needed to ensure that the investments in IT will generate the required business value and that risks associated with IT are mitigated. This chapter records and interprets some important existing theories, models and practices on IT Governance and its structures, processes and relational mechanisms. The chapter is based on relevant academic and professional publications and integrates also the main contributions of the other chapters in this book (whenever the text references to one of the other chapters, the reference is printed in bold). The first section provides a definition of IT Governance and draws a link with the Corporate Governance principles. The second part elaborates on the core issues in the IT Governance domain: strategic alignment, value delivery, risk management and performance management. The third part delivers an overview of some important structures, processes and relational mechanisms that can be helpful when designing and implementing an IT Governance framework. The final section describes a model for assessing and diagnosing IT Governance implementations. Table 1. IT as Service Provider or as Strategic Partner Venkatraman, N. (1999). Valuing the IS contribution to the business. Computer Sciences Corporation. Service provider Strategic partner IT is for efficiency Budgets are driven by external benchmarks IT is separable from the business IT is seen as an expense to control IT managers are technical experts IT for business growth Budgets are driven by business strategy IT is inseparable from the business IT is seen as an investment to manage IT managers are business problem solvers 4 Van Grembergen, De Haes & Guldentops Copyright © 2004, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. IT GOVERNANCE AND CORPORATE GOVERNANCE IT Governance Definitions IT, and its use in business environments, has experienced a fundamental transformation in the past decades. Since the introduction of IT in organisations, academics and practitioners conducted research and developed theories and best practices in this emerging knowledge domain (Peterson, 2003). This resulted in a variety of IT Governance definitions, some of which are formulated in Table 2. Although the definitions in Table 2 differ on some aspects, they are all mainly focused to the same issues, such as the link between business and IT. The definition of the IT Governance Institute (ITGI), however, also explicitly states that IT Governance is an integral part of enterprise governance, which is in our opinion a very important premise. The IT Governance definition of ITGI will therefore be used as the reference in this chapter, even though it should be recognised that the link with enterprise governance is implicitly present in Van Grembergen’s definitions as well. IT Governance vs. IT Management An important (implicit) common concern in the definitions of Table 2 is certainly the link of IT with the present and future business objectives. This goes back to the not always that clear difference between IT Governance and IT Management, which is visualised in Figure 2. IT Management is focused on the internal effective supply of IT services and products and the management of present IT operations. IT Governance in turn is much broader, and concentrates on performing and transforming IT to meet present and future demands of the business (internal focus) and the business’ customers (external focus) (Peterson, 2003). “This does not undermine the importance and complexity of IT management, ..., but whereas elements of IT Management and the supply of (commodity) IT services and products can be commissioned to an external provider, IT Governance is organisation specific, and direction and control over IT can not be delegated to the market” (Peterson, 2003). IT Governance vs. Corporate Governance and the Board The definition of IT Governance as proposed by the IT Governance Institute (Table 2) expresses that “IT Governance is the responsibility of the Board and Executive Management and that IT Governance should be an integral part of enterprise governance.” How can we explain this relationship between IT Governance, Corporate Governance (or Enterprise Governance) and the Board? Enterprise Governance is the system by which entities are directed and controlled. The business dependency on information technology has made it so that the enterprise governance issues cannot be solved without considering Information Technology. As shown in the first part of Figure 3, enterprise governance should therefore drive and set IT Governance. Information Technology in its turn can influence strategic opportunities as outlined by the enterprise and can provide critical input to strategic plans. In this way, IT Governance enables the enterprise to take full advantage of its info

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