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What is IT Governance?

July 26, 2008

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 . To emphasize this pervasiveness of IT, Refer to three layers of the New Infrastructure: local IT for business processes, firm IT infrastructure, and public IT infrastructures (Figure ).

The Public Infrastructure and the Firm Information Technology Infrastructure are the foundations of the firm’s Information Technology Portfolio. The Public Infrastructure links the firm to external industry infrastructures, such as the Internet, EDI networks, and so forth, which enables the firm to communicate and do business with customers, suppliers, partners, and so forth. Together with the Firm Information Technology Infrastructure, such as e-mail, customer databases, and so forth, the New Infrastructure is constructed. The New Infrastructure plus the local IT needed to perform business processes are the firm’s Information Technology Portfolio.

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 . Corporate success can of course only be attained when information and knowledge, very often provided and sustained by technology, is secure, accurate, reliable, and provided to the right person, at the right time, at the right place .

This major IT dependency implies a huge vulnerability that is inherently present in IT environments . System and network downtime has become far too costly for any organisation these days as doing business globally around the clock has become the standard. 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, cyber crime, and fraud.

IT of course not only has the potential to support existing business strategies, but also to shape new strategies . 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. Information technology also offers a means for increasing productivity. Leveraging IT successfully to transform the enterprise and to create products and services with added value has become a universal business competency . In this viewpoint, the IT department moves from a commodity service provider to a strategic partner (Figure 2).

IT as a service provider


IT as a strategic partner

IT is for efficiency

IT is for business growth

Budgets are driven by external benchmarks

Budgets are driven by business strategy

IT is separable from the business

IT is inseparable from the business

IT is seen as an expense to control

IT is seen as an investment to manage

IT managers are technical experts

IT managers are business problem solvers

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