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Chapter 8 Governance of the Information Systems Organization. Jason C. H. Chen, Ph.D. Professor of MIS School of Business Administration Gonzaga University Spokane, WA 99258 Today’s Business Environment.

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Chapter 8 Governance of the Information Systems Organization

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chapter 8 governance of the information systems organization

Chapter 8Governance of the Information Systems Organization

Jason C. H. Chen, Ph.D.

Professor of MIS

School of Business Administration

Gonzaga University

Spokane, WA 99258

today s business environment
Today’s Business Environment
  • We are all familiar with the rapid pace of change we are seeing now in large part due to the emergence of the e-business economy and Internet time. Business life cycles are getting shorter and shorter and we are all struggling to adapt our organizations and business process to cope with that change.
information organization and control
Information, Organization, and Control
  • “The important point is that technology neither encourages nor discourages centralized or decentralized structures and controls, but …

offers new possibilities.”


three necessary perspectives
Three Necessary Perspectives
  • Business Environment
  • Enterprises Environment
  • IT Environment



Dr. Chen, Information, Organization and Control

TM -4

simultaneous revolutions
Simultaneous Revolutions

New Competitors

New Rules of Competition



New Political Agendas

Industry structure Changes

New Technology

New regulatory Environment

New Employees and New Value

Increasing Customer Expectation

Dr. Chen, Information, Organization and Control

the organization and it infrastrcture

IT Architecture:

- Hardware

- Software

- Telecom Networks

Information System Specialists:



System Analysts

System Developers


Network Specialists

Database Administrators





it planning the relationship between business is and it strategies

Business Strategy

  • Business Decisions
  • Objectives and Direction
  • Change
IT Planning: The Relationship Between Business, IS,and IT Strategies





Where is the


going and


Direction for




IS Strategy



  • Business Based
  • Demand Orientated
  • Application Focused


And services

Needs and


How it

can be


IT Strategy

  • Activity Based
  • Supply Orientated
  • Technology Focused
learning objectives
Learning Objectives

Define the role of the CIO.

Understand what a manager should expect from the MIS organization.

Describe why a manager must know the organizations particular needs.

Define what a lean, competitive enterprise looks like and how IT plays a role.

Understand how decision rights are allocated.

List alternative structuring approaches.

Identify the risks of a global MIS organization.

real world examples
Real World Examples

When the new CEO of 3M came on board he broke up the Information Systems Steering Committee (ISSC) that decided on major IS directions and projects.

The CIO wanted corporate IT priorities decided at the highest business level, not just by IT.

Now 3M’s IT governance structure starts at the business process level.

Each division is responsible for documenting the productivity of its IT projects.

Must be in line with the divisions cost reduction targets.

Business unit leadership is responsible to top executives.

Business units are more motivated to devote resources to make sure that their IT projects are successful.

the mis organization an analogy
The MIS Organization (an Analogy)
  • Consider an analogy of a ship in a regatta to help explain the purpose of an IS organization and how it functions.
  • For both the IS organization and the ship, the key is to perform more capably than any competitors.
  • This means employing the right resources to propel the enterprise through the rough waters of business.

The CIO (Chief Information Officer) is at the helm of the IS organization.

CIO’s primary goal is to manage IT resources to implement enterprise strategy.

Provide technology vision and leadership for developing and implementing IT initiatives to help the enterprise maintain a competitive advantage.

As the importance of technology has increased so has the position of the CIO.

Reports directly to the CEO.

Must work effectively with ALL units of the company, not just IS.

chief information officer cio
Chief Information Officer (CIO)
  • Gartner group’s definition of the CIO’s role:

“To provide technology vision and leadership for developing and implementing IT initiatives that create and maintain leadership for the enterprise in a constantly changing and intensely competitive marketplace.”

twelve main responsibilities
Twelve Main Responsibilities
  • The following responsibilities often define the role of the CIO:
    • Championing the organization.
    • Architecture management.
    • Business strategy consultant.
    • Business technology planning.
    • Application development.
    • IT infrastructure management.
    • Sourcing.
    • Partnership developer.
    • Technology transfer agent.
    • Customer satisfaction management.
    • Training.
    • Business discontinuity/disaster recovery planning.
  • Must have both technical and business skills.
  • Must see the business vision and how IT can help facilitate that vision.
  • Is both a strategist and operations manager.
  • Some organizations do not have a CIO.
    • They hire someone to “run” their computer systems and do not give them much decision making authority.
nine essential cio skills
Nine Essential CIO Skills:
  • Strong business orientation
  • Ability to realize benefits & manage costs and risks associated with IT
  • Ability to bridge gaps between available technologies and business needs
  • Familiarity with client’s needs
  • Strong organizational skills
  • Ability to conceive and build multiple IT projects
  • Ability to articulate and advocate for a mgmt IT vision
  • Ability to mesh with existing mgmt structure
  • Strategic enterprise vision extending beyond IT
related job titles
Related Job Titles
  • CKO: Chief Knowledge Officer
  • CTO: Chief Technology Officer
  • CTO: Chief Telecommunications Officer
  • CNO: Chief Network Officer
  • CRO: Chief Resource Officer
  • CPO: Chief Privacy Officier
  • Divisional CIOs/Corporate CIO
  • … (Figure 9-1)
  • CCO: Chief ? Officer
cto cpo and other roles
CTO, CPO, and Other Roles

The CIO, particularly in larger organizations, cannot guide the enterprise toward the future alone.

Other strategic areas require more focused guidance.

The CTO is a critical role.

Works alongside the CIO.

Needs business savvy and communication skills.

Must be able to create an organizational vision.

New positions created to deal with this growing need.

Figure 8.1 shows a list of other IT managers and their responsibilities.

eight core activities
Eight Core Activities

1. Anticipating new technologies.

IT must keep an eye on emerging technologies.

Work closely with management on decisions.

Weigh risks and benefits of new technologies.

2. Participating in setting strategic direction.

IS can act as consultants to management.

Educate managers about current technologies/trends.

3. Innovating current processes.

Review business processes to innovate.

Survey best practices.

4. Developing and maintaining systems.

Build or buy software.

eight core activities continued
Eight Core Activities(continued)

5. Supplier management.

Carefully manage outsourced IT.

6. Architecture and standards.

Be aware of incompatibilities.

Inconsistent data undermines integrity.

7. Enterprise Security

Important to all general managers.

Much more than a technical problem.

8. Business continuity planning

Disaster recovery.

“What if” scenarios.

other five activities with total of 13 activities continued
Other Five Activities (with total of 13 activities)(continued)

9. Managing Data, Information, and Knowledge

10. Managing Internet and Network Services

11. Managing Human Resource

12. Operating Data Center

13. Providing General Support

business continuity plan
Business Continuity Plan
  • Approved set of preparations and sufficient procedures for responding to a variety of disaster events.
    • What do we do in case of an emergency such as 9/11?
  • Three major stages of BCP:
    • Pre-planning - management’s responsibility is defined, possible risks are evaluated, and a business impact analysis is performed.
    • Planning - alternative business recovery operating strategies are determined.
    • Post-planning - familiarizes employees with the plan through awareness and training programs.
managing data information and knowledge
Managing Data, Information and Knowledge
  • Managing information and knowledge in the enterprise is of particular concern to IS.
  • Database administration.
    • Includes the collecting and storing the actual data created, developed, or discovered.
    • Deciding on format, location, and indexing of stored data.
  • Knowledge management is covered in detail in chapter 12.
managing internet and network services
Managing Internet and Network Services

Intranets, extranets, Web pages, and e-mail are becoming essential in most business environments.

General managers must interact with the Web master, Web designers, and Web developers.

Networking groups design, build, maintain, and manage the network architecture.

Managers must be concerned with telecommunications and their costs.

managing human resources
Managing Human Resources

IS must manage its own resources.

Provide business and technical training.

Hiring and firing of staff.

Tracking time, managing budgets, etc.

Maintain skills inventory.

Individual managers are responsible.

operating data center
Operating Data Center

Houses large mainframe computers or rows of servers on which the company’s data and business applications reside.

Managers rarely have direct contact with data center staff.

Many organizations outsource data center operations.

providing general support
Providing General Support
  • Providing support for users of IS.
  • Support requests are normally centralized.
  • Centralized help desk – first contact point.
    • Forward requests to knowledgeable staff.
  • Many companies outsource this function.
    • Not uncommon to call support and speak to someone in another country.
  • Figure 8.2 provides a framework for traditional and newer IS activities that are considered the responsibility of the IS organization.
what is does not do
What IS Does Not Do
  • Does not perform core business functions such as:
    • Selling
    • Manufacturing
    • Accounting.
  • Does not set business strategy.
    • General managers must not delegate critical technology decisions.
centralized vs decentralized organizational structures
Centralized vs. Decentralized Organizational Structures
  • Centralized: reduces duplication since resources under one control and, often, in one location.
  • Decentralized: creates flexibility because resources not in the same location or control
  • “Federalism” combines centralization with decentralization (Figure 8.3 shows the continuum of where these structures fall.)
  • For example:
    • Bethlehem Steel allows major business units (plants) to decentralize and operate independently
    • Levi-Strauss centralized to minimize the duplication of resources and save on costs.

Figure 8.3 Organizational continuum




figure 8 4 advantages and disadvantages of organization approaches
Figure 8.4 Advantages and disadvantages of organization approaches






Global standards and common data

Technology may not meet local needs



“One voice” when negotiating supplier contracts

Slow support for strategic initiatives


Schism between business and IT organization

Greater leverage in deploying strategic IT initiatives

Us versus them mentality when technology problems occur

Economies of scale and a shared cost of structure

Lack of business unit control over overhead costs

Access to large capacity

Better recruitment and training of IT professionals

Consistent with centralized enterprise structure


Technology customized to local business needs

Difficulty maintaining global standards and consistent data

Bethlehem Steel


Closer partnership between IT and business units

Higher infrastructure costs

Difficulty negotiating preferential supplier agreements

Greater Flexibility

Reduce telecommunication costs

Loss of control

Consistency with decentralized enterprise structure

Duplication of staff and data

Business unit control over overhead costs

the 5 eras of information usage
The 5 Eras of Information Usage
  • 1960s - mainframes dictated a centralized approach.
  • 1970s - remained centralized due in part to the constraints of mainframe computing
  • 1980s - advent of the PC and decentralization
  • 1990s - the Web, with its ubiquitous presence and fast network speeds, shifted some businesses back to a more centralized approach
  • 2000+ - the increasingly global nature of many businesses makes complete centralization impossible
eras of information usage in organization extra

Era I 1960s

Era II 1970s

Era III 1990’s

Era IV 1990s

Era V 2000+

Eras of information usage in organization (Extra)

Primary Role of IT

Efficiency Automate existing paper-based processes

Effectiveness Solve problems and create opportunities

Strategic Increase individual and group effectiveness

Strategic Transformation industry/ organization

Value creation Create collaborative partnerships

Justify IT Expenditures

Increasing productivity and decision quality

Competitive position

Competitive position


Adding value

Target of Systems

Organization/ Group

Individual manager/group

Business processes

Customer, supplier, ecosystem


Information Models

Application specific





Mainframe “centralized intelligence”

Minicomputer, mostly “centralized intelligence”

Networked, microcomputers “decentralized intelligence”

Client/Server, global “distributed intelligence”

Dominant Technology

Internet, global “ubiquitous intelligence”

Basis of Value






Economics of information bundled with economics of things

Economic of information bundled with economics of things

Economic of Information bundled with economics of things

Economics of information separated from economic of things

Economics of information separated from economics of things

Underlying Economics

  • Most companies would like to achieve the advantages derived from both centralized and decentralized organizational paradigms.
  • This leads to federalism – a structuring approach which distributes, power, hardware, software, data and personnel between a central IS group and IS in business units.
figure 8 5 federal it

The federal IT attempts to capture the benefits of centralized and decentralized organizations while eliminating the drawbacks of each

Figure 8.5 - Federal IT

Federal IT

IT Vision and Leadership

Groupwide IT Strategy and Architecture


Excessive Overall Costs to Group

Users Control IT Priorities

No Business Unit Ownership of Systems

Scale Economies

Variable Standards of IS Competence

Business Units Have Ownership

No Business Unit Control of Central Overhead Costs

Control of Standards

Reinvention of Wheels

Critical Mass of Skills

Responsive to Business Unit’s Needs

Doesn’t Meet Every Business Unit’s Needs

No Synergy and Integration

Strategic control


Centralized IT

Decentralized IT

another perspective on it governance
Another Perspective on IT Governance
  • Weill and his colleagues define IT governance as “specifying the decision rights and accountability framework to encourage desirable behavior in using IT.”
  • The focus is not what, but who.
  • Good IT governance provides a structure to make good decisions.
    • The assignment of decision-making authority and responsibility (e.g., IT principle, architecture, infrastructure, business application needs and investment and priority)
    • The decision-making mechanisms (e.g., policy and steering committee, IT governance council, etc.)
decision making mechanisms
Decision-Making Mechanisms
  • Policies may be used.
  • The steering committee is common and works well in the federal archetype.
  • IT Governance Council – steering committee at the highest level.
    • Reports to board or CEO.
    • Comprised of top-level executives.
    • Provides strategic direction and funding authority.
  • Lower level steering committees are responsible for effectively allocating scarce resources.
    • Companies usually have one or the other.
managing the global considerations
Managing the Global Considerations

Large global MIS organizations face many of the same organizational issues as any other global department.

For IS, a number of issues arise that put the business at risk beyond the typical global considerations.

Table 8.9 summarizes how a global IT perspective affects six information management issues.

cio leadership profiles
CIO Leadership Profiles

The work of the CIO has grown in scope and complexity.

1/3 of CIOs manage an additional corporate function

¾ of the CIOs report to the CEO, president or COO

over ½ listed corporate strategy as a top responsibility

Recent study shows four profiles that characterize the CIOs leadership role:

IT Orchestrator (32%) – an effective IS leader involved in strategic decision making.

IT Advisor (18%) – possesses the strategic and IT skills to be effective, but not adequately funded.

IT Laggard (18%) – high-level of decision making authority but doesn’t have business or strategic skills.

IT Mechanic (32%) - low levels of strategic effectiveness, business skills and decision making authority.

operating processes
Operating Processes
  • Integrated, streamlined, and time-synchronized product/service delivery and new product development processes
  • Cycle time of operating processes equals cycle time in environment
  • Increased complexity of operating processes matches the inherent complexity in the environment
  • Efficient, yet flexible, management
  • Cross-functional and inter-organizational
  • Focus on continuous improvement and innovation
management processes
Management Processes
  • Integrated, streamlined, and time-synchronized management processes that manage operating processes
  • Cycle time of management processes matches cycle time of operating processes
  • Increased complexity of management processes matches the increased complexity of operations
  • Efficient, yet flexible, management
  • Cross-functional and inter-organizational
  • Increased vertical and lateral interaction
  • “Tight control” achieved through information vs. structure and supervision
streamlining the business cycle





Streamlining the Business Cycle

1. The business cycle is composed of two types of related processes:

(Core) Operating Processes: The primary activities through which an organization designs, produces, markets, delivers, and supports its products or services.

Management Processes: Set of activities through which an organization manages the design production, marketing, delivery, and support of its products or services .


streamlining the business cycle1





Organizational Dysfunction

Streamlining the Business Cycle

2. Many companies attempts to streamline the business cycle by streamlining operating processes without a corresponding streamlining of management processes

streamlining the business cycle2





Streamlining the Business Cycle

3. The key is to streamline, integrate and “time synchronize” both operating and management processes.


management vs leader








Establishing direction

Aligning people





  • Effective communication
  • Deep listening
  • Facilitating
  • Negotiating
  • Working with conflict
  • Relationship building
  • Understanding how to work
  • effectively in teams
  • Knowing when to say NO!
Management vs. Leader

“Soft” Interpersonal Skills

TM -55

Dr. Chen,Information, Organization, and Control

organizational structure
Organizational Structure
  • Flat hierarchy with broader spans of control
  • Downsized corporate headquarters; staff reassigned to the field
  • Strategic partnerships and alliances enable focus on core competencies
  • Networked coordinating mechanisms layered over hierarchical reporting mechanisms
  • Functional units remain as center of expertise and career development

TM -56

Dr. Chen,Information, Organization, and Control



  • The power of IS department now and the future will come fromleadership, influence and capability- and less from control.
  • The measure of success of the IS will no longer be numbers of people but contributions to the business - quality, speed, products/services, and innovation.
  • The roadblock to competitive advantage generally is not technology, but implementation - with people.
  • Successful implementation requires working closely with line people. Thus IS departments need to establish better relationships with outside organizations, senior management, and users.

TM -57

Dr. Chen,Information, Organization, and Control


The CIO is a high-level IS officer.

There are a variety of key job titles in the IS organization.

IS organizations can be expected to anticipate new technologies, set strategic direction, etc.

Managers must work with IT leaders to develop a lean, competitive enterprise, where IT acts as a strategic enabler.


Leverage IS/IT Competencies




Efficient Automation

Customer Service Quality




Quality management practice

Employee satisfaction




Cycle time reduction



JIT strategies

Human Resource
















(art of





(with ability)

End Users

What problems

Solutions and

and needs are

have courage to


being addressed