Corporate Approaches to IT Governance(PPT 31)

MITICorporateApproachestoITGovernanceMarch1999MinistryofInternationalTradeandIndustryMITI-2-WhatisITgovernance?Govern：…tocontrolanddirectthemakingandadministrationofpolicy…（Webster'sDictionary）ITgovernance：TheorganizationalcapacitytocontroltheformulationandimplementationofIT(informationtechnology)strategyandguidetoproperdirectionforthepurposeofachievingcompetitiveadvantagesforthecorporation.MITI-3-ChangesofBusinessParadigmsbyIT(1):RearrangementoftheBusinessModelItself(ThecaseofAmazon.Com)SearchExampleofacompanythathasbeensuccessfulinusingITtochangebusinessparadigms.ThecustomeractionofpurchasingbooksConventionalbookstore:“SalesAgent”(Supplier-orientedconcept)Access“Customerrequiredtocometothebookstore.”“Bookstorecomestoyourhouse.”(On-lineaccess)Navigation“Customersearchesthroughshelves.”“Easytofindbooksthatyouwant.Systemknowsyourpreferencesandguidesyouaccordingly.”(Providescustomizedinformationbasedonpurchasinghistory.)Availability“Limitedstockofbooks.Thosebooksnotininventoryhavetobeordered,whichtakestime.”“Justaccesstheservicetogetanybookyouwant.”(3milliontitles)Purchasing“Soldatpublisher’ssuggestedretailprice.”“Evenbest-sellerssoldatadiscounttomarketprice.”(20-40%off)Bringinghome“Customercarries.”“Deliveredtoyourdoor.”(Next-dayshipping—)Amazon.Com:“PurchasingAgent”(Consumer-orientedconcept)OrdinaryInternetbookstore(automationofsalesactivities)On-lineaccessLikethe“newbooks”rackinaconventionalstore.Likesalesinaconventionalstore.Samepriceasaconventionalstore.Possibletobedelivered,butit’squickertocometothestoreandbuyityourself.MITI-4-ChangesofBusinessParadigmsbyIT(2):ReformingBusinessProcesses(TheGEprocurementsystem)Priorto19951996:CompanytocompanyEDIInquiryBidOrderDeliveryInquiryBidOrderDeliveryDeliveryProcurementtime/Procurementcosts:SlightlylowerProcurementtime:50%savingsProcurementprice:30%savingsSubstitutedInternettransmissionsforconventionalpaperandtelephone-basedorderingworkonly.Changetheinquiry/orderingprocessitself.GEhasopeneditssystemtoothercompanies,developingitintoaroyaltybusiness.Frominternalsystemtomarketmaker.PresentHistoryoftheGEprocurementsystem1997:Web-basedprocurementDeterminationofsupplierpriceWeb-basedprocurementMITI-5-TheexpansionofITapplicationrangehasmadethecontrol(governance)ofITaspartofcorporategovernanceanextremelyimportantmanagerialfactor.1960s-1970s1980s-1990sDecision-makingsupportRoleofITOperationalefficiencyLaborsavingsIntra-departmentInter-departmentInter-corporateSales&MarketingSystemsEISCustomerServiceGlobalProductDevelopmentEDIrderessingOProcManagementlevel(howtofitintostrategy,howtochangewaysofdoingbusiness)Operationallevel(easeofuse,developmentcosts)ScopeofITApplicationhasbeenexpandingfromSimpleOperationalImprovementstoChangesinBusinessParadigms(ConceptualDiagram)OperationalefficiencyLaborsavingsMgmt.ReportsPayrollAccountingManufacturingrderessingOProcMgmt.ReportsPayrollAccountingManufacturingITfocus:Decision-makingsupportIntra-departmentInter-departmentInter-corporateMITI-6-TheimportanceofCIO(ChiefInformationOfficer)hasbeenincreasingbothinUSAandJapanDirectsupervisor(directrecipientofreports)oftheCIOSource:CIOMagazine(USA),JapanCIOConsultativeCouncilUSAJapan（％）020406080100CEOCFOCOOOther（％）0204060801001995199719951996President(Chairman)VicePresidentExecutiveManagingDirectorManagingDirectororlowerOtherMITI-7-RealDistancebetweenCIOandTopManagementisstillWideinJapaneseCompanies(FromStudiesandResearchonInformationSystemsbytheJapanCIOConsultativeCouncil)3713717221322PositionofCIOComponentofCIO’sIT-relatedworkload（％）020406080100（％）020406080100President0Other78Director26ManagingDirector34ExecutiveManagingDirector24Concurrent63Fulltime（％）2040608010078（％）020406080100OtherthanpresidentRatioofdirectreportingtopresident(correctedforworkload)Lessthan10%10%-Lessthan20%20%-Lessthan40%40%-Lessthan60%60%-Lessthan80%Lessthan80%100％×＝52CEO48（％）020406080100OtherthanCEODirectreportingbyCIO(immediatesupervisor)JapanUSAAssumptions:1.WhentheCIO’spositionis“other,”itisassumedthatdirectreportingismadetosomeonebesidesthepresident;whenthepositionis“director”orabove,itisassumedthatdirectreportingismadetothepresident.2.ForCIOsconcurrentlyservinginotherpositions,theratioofdirectreportingtothepresidentisdiscountedfortheIT-relatedworkloadratio.Source:JapanCIOConsultativeCouncil,analysisbyBCG.ThereappeartobelargedifferencesbetweenJapanandUSAintheamountofIT-relatedinformationmakingitswaytothetopmanagement.Other8VicePresidentorabove8Director11ManagingDirector7ExecutiveManagingDirector4MITI-8-CIOhaslimitedauthority:Onlyresponsiblefor(expense)budgetandpersonnelofheadofficeinformationsystemsdepartment.Investmentauthorityrestswithdirectorinchargeofbusinessdivisionsordirectorinchargeofaccounting.TheordinaryCIOataJapanesecompanyisinchargeofmanaginginformation.RatherthanbeingresponsibleforformulatingITstrategy,hetendstomanagetheinformationsystemsorganization.Rangeofdirector’sresponsibility/authorityReportingsystemsoftheITdepartmentOfficerInformationsystemsdepartmentheadDirectorDirectorCIO/ManagingDirectorManagin