IT governance in SMEs

IT Governance

in SMEsInstructor: Prof. Dr. Martin Knahl

Group 4: Mai Nam Chuong

Nguyen Huu Quang

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Agenda

Introduction

Four IT Governance important constructs

Three case studies analysis

Recommendations for IT Governance practices

Summary

Questions and answers

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Introduction Research in 2004 (*). Peter Weill – Jeanne W. Ross

Plus sign: IT Governance helps company increase 20% profit

Minus sign: Only 38% of senior managers know how IT is governed

Study of 300 enterprises – Weill and Ross There is not a single best formula for governing IT

100% sure: effective ITG doesn’t happen by accident

Top performing enterprises carefully design governance

Managers make daily decision putting design into practice

PwC research Most interviewed organizations recognize the importance of

IT Governance

However, a ‘holistic’ view that considers all dimensions of IT Governance is not widely found

Source: http://www.researchgate.net/publication/228139751_IT_Governance_on_One_Page/file/e0b49518ae03e11409.pdfhttp://www.pwc.com/en_mt/mt/publications/assets/it-governance-in-practice-jan-2007.pdf

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Introduction

IT Governance “Specifying the decision rights and accountability framework

to encourage desirable behavior in the use of IT”, Weill and Ross

Align IT strategies/goals/objectives with other activities of the company to ensure that IT effectively supports the development of the company.

Small and Medium sized Enterprise Workers: < 500 (US); < 300 (VN)

Capital: < $50m (US); < $5m (VN)

Source: White paper – SMEs in Vietnam http://www.economica.vn/Portals/0/MauBieu/70c475bbbf81ecb8d32698a30924e978.pdfUS International Trade Commissionhttp://www.usitc.gov/publications/332/pub4169.pdf

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Introduction

SMEs in Vietnam

2010: 250.000 SMEs

2015: 600.000 (est.)

32% of enterprises

65%

30%

2% 3%MicroSmallMediumLarge

Source: General Statistics Office, Viet Nam’s Enterprises in the first 9 years of 21 century. Statistics Publishing House, Ha Noi, 2010http://www.economica.vn/Portals/0/MauBieu/70c475bbbf81ecb8d32698a30924e978.pdf

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Introduction

Limitation of using IT in SMEs Financial constraints limit their abilities to invest in IT and to

attract highly capable IT professionals

Enterprise’s owner/top manager lack IT expertise and experience

Use of IT in SMEs in Vietnam Only 20% of SMEs use ICT

Only 5% do so for business operations

Source: [World Bank] Vietnam - ICT Development Reporthttp://www.worldbank.org/projects/P079344/vietnam-ict-development?lang=en

http://www.worldbank.org/projects/P079344/vietnam-ict-development?lang=en

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Introduction

How can SMEs optimize IT performance through governance practices?

Source: Rui Huang, Robert W. Zmud, R Leon PriceIT Governance Practices in Small and Medium-Sized Enterprises: Recommendations from an Empirical Studyhttp://ifipwg82.org/sites/ifipwg82.org/files/Ch12-19-IT%20Governance%20Practices%20in%20SME-formatted.pdf

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Decision structure

Senior management involvement in IT Governance Processes

IT Governance Communication Practices

IT Success

Source: Rui Huang, Robert W. Zmud, R Leon PriceIT Governance Practices in Small and Medium-Sized Enterprises: Recommendations from an Empirical Studyhttp://ifipwg82.org/sites/ifipwg82.org/files/Ch12-19-IT%20Governance%20Practices%20in%20SME-formatted.pdf

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1. Decision structure: How IT decisions are made?

Sub-Category Description

Centralization Decisions made by corporate-level IT/business senior managers

Hybrid Decisions jointly made by corporate and divisional senior managers

Decentralization Decisions made by divisional senior managers

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2. Senior Management Involvement in IT Governance Processes: Ensure the alignment b/w business and IT


Formal Involvement

Active participation of executive managers in formal IT steering committees

Informal Involvement

Senior managers, categorized as corporate senior managers, divisional senior managers or both, having regular interactions with the CIO

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3. IT Governance Communication Practices: Ensure members behave correctly with IT-related actions


Number of Channels

Number (and types) of communication channels used to communicate IT governance policies, guidelines and practices throughout the SME.

Primary Communication Channel

The primary communication channel used to communicate IT policies, guidelines and procedures throughout the SME

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4. IT Success: How the company success in deploying IT?


Efficiency of IT Use

How efficient the firm has been in its use of IT (a 5-point scale with 5 representing the highest efficiency; averaged by number of respondents)

Breadth of current IT use

The number of distinct areas identified, aggregated across interviewees, where IT is being appropriately used

Breadth of potential IT use

The number of distinct work processes identified, by any interviewees, as being actively considered or planned for future IT use

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Coming up next!

Introduction



Recommendations for SME Governance practices

Summary

Questions and answers

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Three case studies analysis *

HealthCare: Health care management organization

Multiple offices in US

Agriculture: Provide consultation services in agriculture

techniques

Non-profit research foundation

Pharma: Manufacture subsidiary of an international

pharmaceutical company

Businesses in Asia Pacific, North American, and Europe

(*) Data getting from IT Governance Practices in Small and Medium-Sized Enterprise paper

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HealthCare Agriculture Pharma

Firm size 182 300 360

IT Group size 12 14 10

IntervieweesCIO

4 Divisional VPs

CIO2 Divisional

Directors

CIOControllersDivisional

Director

Demographic Information on Research Sites

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IT Governance Structure


Structure Centralized Centralized Centralized

Key IT decision CxOs(CEO, CIO,..) CIO CIO

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Senior Management Involvement in IT Governance Processes


Formal Involvement

CIOCorporate

ExecutivesN/A

CIODivisional

ExecutivesInformal Involvement

Corporate Executives

Divisional Executives

Divisional Executives

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IT Governance Communication Practices


Communication channels

EmailWord of mouth

Paper docsFormal meetingWord of mouth

IntranetPaper docs

Formal meetingWord of mouth

Primary communication channel

Email Paper docs Intranet

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Three case studies analysisIT Success


Efficiency of IT use

3.2(moderate)

3.3(moderate)

4.3 (high)

Breadth of current IT use

3(moderate)

2 (limited)

5(high)

Breadth of potential IT use

3(moderate)

1(limited)

1(limited)

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Recommendations for SMEs

Senior Management Involvement in IT Governance Processes

Recommendation 1: In order to enhance performance of IT use (as indicated by efficiency and breadth of IT use) in SMEs, senior management should be involved through joint formal and informal IT governance interactions

Recommendation 2: In order to improve the breadth of potential IT use in SMEs, corporate executives should be involved in IT governance processes

Recommendation 3: In order to improve the breadth of current IT use in SMEs, operational executives should be involved in IT governance processes.

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Recommendations for SMEs

IT Governance Communication Practices Recommendation 4: In order to improve the performance

of IT use (as indicated by efficiency and breadth of IT use) in SMEs, IT governance policies, guidelines and practices should be communicated through a number of channels

Recommendation 5: In order to improve the performance of IT use (as indicated by efficiency and breadth of IT use) in SMEs, IT governance policies, guidelines and practices should be communicated through accessible channels

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Summary

Theme

Theory

Case studies

Recommendations

Why ITG in SMEs is important?

What is ITG, SMEs?

Examine ITG practices in SMEs

Give recommendations for ITG practices in SMEs

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Questions and Answers