A New Perspective on IT Governance in SMEs

Jan Devos - 8/11/2012Faculty of Engineering and Architecture – Campus Kortrijk

A new perspective on IT Governance in SMEs

Dr. ir Jan Devos

ECCF 2012 Conference Skopje MK

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Outline of the presentation- Corporate Governance and IT Governance- Why IT Governance? - Is IT Governance a concept for SMEs?- New findings- Conclusions

pag. 2 Jan Devos - 8/11/2012Faculty of Engineering and Architecture – Campus Kortrijk


Corporate Governance

Strategic Information Systems

IT Governance

Weill, 2004; Van Grembergen, 2000

IT Governance • Separating Governance from Management• Meeting Stakeholders needs• IT-Business Alignment• Benefits Management• Risk Management• Compliance

GRC (Governance, Risk, Compliance)


IT Governance Separating Governance from Management

Governance: Board of directors under leadership of chairperson Evaluate, Direct and Monitor

Management: Executive management under leadership of CEO Plan, Build, Run and Monitor


IT Governance • Meeting Stakeholders needs• IT-Business Alignment• Benefits Management• Risk Management• Resource Management


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Outline of the presentation- Corporate Governance and IT Governance

- Why IT Governance? - Is IT Governance a concept for SMEs?- New findings- Conclusions


Why bring IT on the agenda of the board? • 1980s: IT Failures (Lyytinen, 1987)

• 1990s: IT productivity paradox (Brynjolfsson, 1998)

• 2000s: IT doesn’t matter (Carr, 2003)

• 2012: Cloud, BYOD, Mobile, Security, …

Still 70% of all IT projects do not deliver on time, on budget or with all defined requirements…


Outline of the presentation- Corporate Governance and IT Governance- Why IT Governance?

- Is IT Governance a concept for SMEs?- New findings- Conclusions



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Source: website Europe (http://ec.europa.eu/enterprise/policies/sme)

What usually gets lost is that more than 99% of all European businesses are, in fact, SMEs.

They provide two out of three of the private sector jobs and contribute to more than half of the total value-added created by businesses in the EU. Moreover, SMEs are the true back-bone of the European economy, being primarily responsible for wealth and economic growth, next to their key role in innovation and R&D.

What is even more intriguing is that nine out of ten SMEs are actually micro enterprises with less than 10 employees. Hence, the mainstays of Europe's economy are micro firms, each providing work for two persons, in average.

This is probably one of the EU's best kept secrets!


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Is IT Governance a concept for SMEs ? Theoretical Foundations of

IT Governance - Control Theory (Coase, 1937,

Eisenhardt, 1989)

Alignment of interests

- Agency Theory (Jensen & Meckling, 1976)

Moral Hazard / Adverse Selection

- Mistrust in human behavior (Ghoshal, 2005) - Amoral theories ?

→ Large organizations

Small and Medium-sized Enterprises

- Theory of the growth of the firm (Penrose, 1951)

- Resource Based Theory- Less separation between the

right of ownership and the right to control

- People centric (CEO): trust, empathy


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Independency • Not owned by a larger firm; family firms, start-ups • Not depended for decision-making• Entrepreneurial risk ≠ Risk Management • Less separation between the right of ownership

and the right to control• Weak concept of Corporate Governance


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Personal Influence of the CEO • Two arms, two legs and a giant ego (Levy, 2005)

• Influence of CEO is paramount for success• Personal beliefs• Does the CEO believe in IT as an enabler for

innovativeness?


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Flexibility and Innovation • Influence of CEO is paramount • Lack of innovativeness due to cost • Lack of managerial and technical capabilities due

to low maturity and resource poverty


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Outline of the presentation- Corporate Governance and IT Governance - Why IT Governance? - Is IT Governance a concept for SMEs?

- New findings- Conclusions


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New Findings - Call for chapters: ‘Information Systems and

Small and Medium-sized Enterprises – State of art of IS research in SMEs’

- Focus: IT Governance- 33 contributions from 22 countries- 16 developed / 17 developing - Findings will be published in 2013 by Springer


New Findings - IT driver for innovation? Yes but…- Is IT important? Yes but…- Where are the benefits of IT ? Hard to measure - Outsourcing is common in SMEs (constructs: trust, empathy, …)

- Government support for SMEs needed, but difficult- Idiographic nature of SMEs with respect to IT- Strategic thinking about IT ? or a bottom up approach?


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Outline of the presentation- Corporate Governance and IT Governance- Why IT Governance? - Is IT Governance a concept for SMEs?- New findings

- Conclusions


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Conclusions - Existing IT Governance principles too much grounded in a

mechanical view of an organization- An SME is not a cybernetic machine that can be controlled

accordingly - Is there a need for a formal control system for IT? - Is a top-down, linear approach appropriate? - IT Governance too generic and too much based on ‘What

must be done’ and too less on ‘How it should be done’- IT Governance for SMEs should focus more on people


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Questions?


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A New Perspective on IT Governance in SMEs

Technology

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