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IT Governance vs. Corporate Governance vs. IT Management

June 1, 2008

The definition of IT governance as proposed by the IT Governance Institute (table) 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.” The term “enterprise governance” is somewhat broader than “corporate governance” and refers not only to businesses, but also to other organizations such as government agencies. Throughout this blog, the more common term “corporate governance” will be used.

Corporate governance is the system by which organizations are directed and controlled. The business dependency on information technology has resulted in the fact that corporate governance issues can no longer be solved without considering information technology. Corporate 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 information, and can be seen as a driver for corporate governance. IT governance and corporate governance can therefore not be considered as pure distinct disciplines and IT governance needs to be integrated into the overall governance structure.

The close relationship between corporate and IT governance can also be a definition of corporate governance: corporate governance “deals with the ways in which suppliers of finance assure themselves of getting a return on investment.

Typical corporate governance questions are:
(1) How do suppliers of finance get managers to return some of the profits to them?
(2) How do suppliers of finance make sure that managers do not steal the capital they supply or invest it in bad projects?
(3) How do suppliers of finance control managers? The business dependency on IT means that the corporate governance issues can not be solved without considering information technology. This relationship can be made more eloquent by translating the corporate governance questions into specific IT governance questions, which discloses that corporate governance issues can not be addressed, without considering IT governance issues.

corporate governance questions


IT governance questions

How do suppliers of finance get managers to return some of the profits to them?

How do the board and executive management get their CIO and IT organization to return some business value to them?

How do suppliers of finance make sure that managers do not steal the capital they supply or invest it in bad projects?

How do the board and executive management make sure that their CIO and IT organizations do not steal the capital they supply or invest it in bad projects?

How do suppliers of finance control managers?

How do the board and executive management control their CIO and IT organization?

An important and implicit concern in the provided IT governance definitions is certainly the link between information technology and the present and future business objectives. There is not always a clear distinction between IT governance and IT management, which is visualized below

IT management is focused on the effective and efficient internal 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 business customers (external focus).

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 organization specific, and direction and control over IT can not be delegated to the market.

differentiate between the concept of governance and the concept of management as illustrated in Figure . In doing so, insights that governance has a wider time dimension and looks further than the organization as such.

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2 Comments leave one →
  1. June 1, 2008 10:34 pm

    Nice writing. You are on my RSS reader now so I can read more from you down the road.

    Allen Taylor

Trackbacks

  1. IT Governance vs. Corporate Governance vs. IT Management (via ServiceXen Thoughts about Software Strategy, Marketing and Management) « IT Leverage Blog

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