IT governance in SMEs

1. IT Governance
in SMEs
Instructor: Prof. Dr. Martin Knahl
Group 4: Mai Nam Chuong
Nguyen Huu Quang

2. Agenda
 Introduction
 Four IT Governance important constructs
 Three case studies analysis
 Recommendations for IT Governance practices
 Summary
 Questions and answers
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3. 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.pdf
http://www.pwc.com/en_mt/mt/publications/assets/it-governance-in-practice-jan-2007.pdf
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4. 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.pdf
US International Trade Commission
http://www.usitc.gov/publications/332/pub4169.pdf
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5. Introduction
 SMEs in Vietnam
 2010: 250.000 SMEs
 2015: 600.000 (est.)
 32% of enterprises
65%
30%
2% 3%
Micro
Small
Medium
Large
Source:
General Statistics Office, Viet Nam’s Enterprises in the first 9 years of 21 century. Statistics Publishing House, Ha Noi, 2010
http://www.economica.vn/Portals/0/MauBieu/70c475bbbf81ecb8d32698a30924e978.pdf
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6. 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 Report
http://www.worldbank.org/projects/P079344/vietnam-ict-development?lang=en
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7. Introduction
How can SMEs optimize IT performance
through governance practices?
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Source: Rui Huang, Robert W. Zmud, R Leon Price
IT Governance Practices in Small and Medium-Sized Enterprises: Recommendations from an Empirical Study
http://ifipwg82.org/sites/ifipwg82.org/files/Ch12-19-IT%20Governance%20Practices%20in%20SME-formatted.pdf

8. Four IT Governance
important constructs
 Decision structure
 Senior management involvement in IT Governance Processes
 IT Governance Communication Practices
 IT Success
Source: Rui Huang, Robert W. Zmud, R Leon Price
IT Governance Practices in Small and Medium-Sized Enterprises: Recommendations from an Empirical Study
http://ifipwg82.org/sites/ifipwg82.org/files/Ch12-19-IT%20Governance%20Practices%20in%20SME-formatted.pdf
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9. Four IT Governance
important constructs
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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10. Four IT Governance
important constructs
2. Senior Management Involvement in IT Governance Processes:
Ensure the alignment b/w business and IT
Sub-Category Description
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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11. Four IT Governance
important constructs
3. IT Governance Communication Practices: Ensure members
behave correctly with IT-related actions
Sub-Category Description
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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12. Four IT Governance
important constructs
4. IT Success: How the company success in deploying IT?
Sub-Category Description
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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13. Coming up next!
 Introduction
 Four IT Governance important constructs
 Three case studies analysis
 Recommendations for SME Governance practices
 Summary
 Questions and answers
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14. 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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15. Three case studies analysis
HealthCare Agriculture Pharma
Firm size 182 300 360
IT Group size 12 14 10
Interviewees
CIO
4 Divisional VPs
CIO
2 Divisional
Directors
CIO
Controllers
Divisional
Director
Demographic Information on Research Sites
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16. Three case studies analysis
IT Governance Structure
HealthCare Agriculture Pharma
Structure Centralized Centralized Centralized
Key IT decision
CxOs
(CEO, CIO,..)
CIO CIO
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17. Three case studies analysis
Senior Management Involvement in IT Governance Processes
HealthCare Agriculture Pharma
Formal
Involvement
CIO
Corporate
Executives
N/A
CIO
Divisional
Executives
Informal
Involvement
Corporate
Executives
Divisional
Executives
Divisional
Executives
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18. Three case studies analysis
IT Governance Communication Practices
HealthCare Agriculture Pharma
Communication
channels
Email
Word of mouth
Paper docs
Formal meeting
Word of mouth
Intranet
Paper docs
Formal meeting
Word of mouth
Primary
communication
channel
Email Paper docs Intranet
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19. Three case studies analysis
IT Success
HealthCare Agriculture Pharma
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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20. 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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21. 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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22. 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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23. Questions and Answers
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