eccf 2012 jdv v.3.0

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 (IT Governance Institute, 2003)

Is to direct IT endeavors, to ensure IT’s performance meets the following objectives:- For IT to be aligned with the enterprise and realize

the promised benefits- For IT to enable the enterprise by exploiting

opportunities and maximizing benefits- For IT resources to be used responsibly- For IT related risks to be managed appropriately


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


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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? The good news

• IT is a competitive weapon (Porter,1989)

• IT is an enabler for innovation• IT transforms businesses (Laudon, 2011)

• Cloud, BYOD, Mobile, Emergent Collectives (Facebook, Twitter, LinkedIN), Big Data, Business Analytics…



Information technology investment, defined as hardware, software, and communications equipment, grew from 32% to 51% between 1980 and 2008. Source: Based on data in U.S. Department of Commerce, Bureau of Economic Analysis, National Income and Product Accounts, 2008.

Why bring IT on the agenda of the board? The bad news…

• 1980s: IT Failures (Lyytinen, 1987)

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

‘The Squandered Computer’ (Strassman, 1997)

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


Why bring IT on the agenda of the board? The bad news…

• 2006:"Computers can land people on Mars, why can't they get them to work in a hospital?" - Implementation of an Electronic Patient Record System in a UK Hospital (Jones, 2006)

• 2012: 70% of all IT projects do not deliver on time, on budget or with all defined

requirements…(Standish, 2011)


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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“The perfectly bureaucratic giant industrial unit not only outsets the small- or medium-sized firm and expropriates its owners, but in the end it also ousts the entrepreneur and expropriates the bourgeoisie as a class which in the process stands to lose not only its income but also, what is infinitely more important, its functions.”

(Schumpeter, 1942)

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 (Eisenhardt, 1989)

Alignment of interests

- Transaction Cost Economics (Coase, 1937)

- Agency Theory (Jensen & Meckling, 1976)

Moral Hazard / Adverse Selection

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

→ Corporates

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)


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Independency • Not owned by a larger firm; family firms, start-ups • Not depended for decision-making• Weak concept of Corporate Governance • Entrepreneurial risk ≠ Risk Management


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

• Influence and personal beliefs of CEO is paramount for success

• Does the CEO believe in IT as an enabler for innovativeness?


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Flexibility and Innovation • 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 & transition - Findings will be published in 2013 by Springer


New Findings - IT driver for innovation? Yes but not always- Is IT important? Yes but SMEs are slow adopters- 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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Thank you


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eccf 2012 jdv v.3.0

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