This article discusses the importance of having the board of directors abreast of the IT strategy that the company is taking. Many boards have been increasingly nervous about corporate dependence on information technology since the Y2K scare. Yet most are complacent about IT spending and strategy and this can make up as much as 50% of the company’s assets. Directors should understand the framework to develop IT policies that fit the companies they oversee. The company should not encourage the CIO to take direction alone with no restrictions or second opinions. Doing so will establish a risk that is similar to the risk of not having your books audited.
So how should the board get involved in these IT decisions? The correct IT approach should be addressed based upon company history, industry, competitive situation, financial position, and quality of IT management. There are four modes that the board can structure the governance in order to improve the company’s competitive position. Two of these modes are on the defensive side, support and factory, and two are on the offensive side, turnaround and strategic. Support mode is used when companies have a low need for reliability and a low need for strategic IT. The technology fundamentally exists to support employees’ activities. Factory mode is for companies that have high reliability on IT but don’t require state-of-art computing. The turnaround mode is for companies that rely heavily on their IT technology. The strategic mode is used for companies that rely on new technology to approach the marketplace and carry out their daily operations. The board should identify which mode their company fits into and collaborate with IT management to assure completeness, quality, security, reliability, and maintenance of existing IT investments that support day-to-day business processes.
So how should the board get involved in these IT decisions? The correct IT approach should be addressed based upon company history, industry, competitive situation, financial position, and quality of IT management. There are four modes that the board can structure the governance in order to improve the company’s competitive position. Two of these modes are on the defensive side, support and factory, and two are on the offensive side, turnaround and strategic. Support mode is used when companies have a low need for reliability and a low need for strategic IT. The technology fundamentally exists to support employees’ activities. Factory mode is for companies that have high reliability on IT but don’t require state-of-art computing. The turnaround mode is for companies that rely heavily on their IT technology. The strategic mode is used for companies that rely on new technology to approach the marketplace and carry out their daily operations. The board should identify which mode their company fits into and collaborate with IT management to assure completeness, quality, security, reliability, and maintenance of existing IT investments that support day-to-day business processes.