IntegrationStrategiesandTacticsforInformationTechnologyGovernance37Copyright©2004,IdeaGroupInc.CopyingordistributinginprintorelectronicformswithoutwrittenpermissionofIdeaGroupInc.isprohibited.ChapterIIIntegrationStrategiesandTacticsforInformationTechnologyGovernanceRyanR.PetersonInformationManagementResearchCenter,InstitutodeEmpresa,SpainABSTRACTAmidstthechallengesandchangesofthe21stcentury,involvinghyper-competitivemarketspaces,electronically-enabledglobalnetworkbusinesses,andcorporategovernancereform,ITGovernancehasbecomeafundamentalbusinessimperative.ITGovernanceisatopmanagementpriority,andrightfullyso,becauseitisthesinglemostimportantdeterminantofITvaluerealization.ITGovernanceisthesystembywhichanorganizationsITportfolioisdirectedandcontrolled.ITGovernancedescribes(a)thedistributionofITdecision-makingrightsandresponsibilitiesamongdifferentstakeholdersintheorganization,and(b)therulesandproceduresformakingandmonitoringdecisionsonstrategicITconcerns.Theobjectiveofthischapteristhreefold.Firstofall,todescribepastdevelopmentsandcurrentchallengescomplexorganizationsarefacingingoverningtheITportfolioofITapplications,ITdevelopment,IToperationsandITplatforms.Baseduponthelessonswevelearnedfromthepast,oneofthekeyobjectivesistomovebeyonddescriptives,anddiscusshoworganizationscandiagnoseanddesignITGovernancearchitecturesforfutureperformanceimprovementandsustainedbusinessgrowth.ThefinalobjectiveofthischapteristoprovideathoroughunderstandingandholisticpictureofeffectiveITGovernancepractices,andpresentaneworganizinglogicforITGovernance.38PetersonCopyright©2004,IdeaGroupInc.CopyingordistributinginprintorelectronicformswithoutwrittenpermissionofIdeaGroupInc.isprohibited.INTRODUCTIONOnemorningin1997,RalphLarsen,CEOofJohnson&Johnson,calledhiscontroller,JoAnnHeisen,tohisofficeforameeting.Ralphhadjustlaunchedacorporate-widecost-cuttingcampaigntohelpfinanceadriveintohighlycompetitiveandcostlynewdrugmarkets.Thatmorning,RalphwantedJohnson&JohnsonsITorganizationtobeabiggerpartofallofthatandtogetsmarterabouthowthecompanywasusingIT.Johnson&JohnsonwasspendingmillionsannuallyonIT,yetbusinessexecutivesandcustomerswerentgettingthebusinessinformationtheyneeded,andthebusinessvaluetheywanted.Hospitals,forexample,wereaskingJohnson&Johnsontohelpthemcuttheirstashesofsupplies,butJohnson&JohnsondidnthavetheWeb-basedtrackingsystemsneededtodeliveronthatrequest.Theelectronicnetworksthatdidexistsufferedfrequentbreakdowns.JoAnnrecalls,Nobodywastalkingtoeachother.Andwhyshouldthey?Nobodyaskedthebusinessunitstotalkwitheachotherbefore,andnoonehadaskedIThowmuchwewerespendingonthebusiness.RalphtoldJoAnnhewantedtocutITcostsdramatically,buthealsowantedtooversightreform.ThatmorningJoAnnleftRalphsofficewithanewjobasCIOandamissiontostandardizesystems,cutITcosts,andaligntheITorganizationwithbusinessstrategies,whilesimultaneouslyacknowledgingthedecentralizedcultureofJohnson&Johnsonsnumerousbusinessdivisionsacrossdifferentcountries.DoestheJohnson&Johnsonchronicle(Alter,2001;Scheier,2001)seemfamiliartoyou?Thisreal-lifecaseillustratesmanyoftheproblemsandchallengeslargecomplexorganizationshavebeenfacingforoveradecade.ItsalmostclichéthatchiefexecutivesacrosstheboardhaveexperiencedmanyfailuresanddisappointmentswithIT-enabledbusinesstransformations.Expectingstrategicvalueinnovation,executiveshavefacedprojectcancellations,businessdisruptions,risingcustomerchurn,decreasingshare-holdervalue,andmanyotherdisappointments,includinglosingtheirjobs.Infact,executivestodayarelessconcernedaboutgettingAmazon-edthanaboutgettingEnron-ed.Corporateresponsibility,businesssustainabilityandgovernancereformarecurrentlyhighonthestrategicagendainmanycompanies.Thegrowingscrutinyovershareholderinterests,lingeringeconomicgrowthandcorporateperfor-mancehavenowalsopromptedrenewedsoul-searchingandinterestintothegovernanceofinformationandInternet-basedtechnologies.Amidstallthesechangesandchalleng-ingresponsibilities,governingITforsustainingbusinessvaluehasbecomeafundamen-talbusinessimperativeforthrivingintheoldneweconomy.Re:InformationTechnologyGovernanceBoardsandbusinessexecutiveshavecometorecognizethatwhereastraditionallytheycoulddelegate,avoid,orignoreITdecisions,todaytheycannotconductmarketing,R&DorHRwithoutdependingonITatsomepointintime.Metaphorically,aSpeak-See-HearNoEvilattitudetowardsITGovernanceisnolongerviableintodaysbusinesslandscape(Figure1).Withthedawningofthe21stcentury,organizationsareexperiencingaglobaldigitalrevolutionwithprofoundimpactsontheirbusinessmodelsandelectronicbusinessprocesses,whereintheinterdependencybetweenbusinessandITisintenselyrecipro-IntegrationStrategiesandTacticsforInformationTechnologyGovernance39Copyright©2004,IdeaGroupInc.CopyingordistributinginprintorelectronicformswithoutwrittenpermissionofIdeaGroupInc.isprohibited.cal.Thise-businessgenesiscoincideswithabusinesslandscape,inwhichtheintensity,unpredictabilityanddiversityofchangehasacceleratedtocreateaconditionofhyper-competition(DAveni,1994),inwhichthereisnostablecompetitiveposition,bu