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BPO Journal

Friday, July 22, 2005

Effective IT Governance

This article by Peter Weill and Jeanne Ross of MIT's Center for Information Systems Research discusses different IT governance strategies and provides an overview of their relative merits in specific business contexts. The study states that IT governance reflects "broader corporate governance principles while focusing on management and the use of IT to achieve corporate performance goals". The figure below, which summaries governance arrangements of top-performing firms, indicates that companies focused on profitability are supported well by centralized governance structures that focus on business process costs. On the other hand, decentralized governance supports innovation and rapid growth, and those seeking to maximize asset utilization adopted hybrid models.

The study also points to some interesting tradeoffs that firms make in their choice of governance structure and objectives. An aligned thought - I am surprised that the study does not discuss the network governance form popularized by the growth in IT outsourcing which mitigates the strength of tradeoffs referred to by the study. As coordination and communication technologies become increasingly sophisticated, IT outsourcing will enable firms to concurrently pursue growth objectives and innovation while reducing costs of ownership of organizational systems and technology.

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