It is critical to a company’s success. It influences nearly every aspect of a company’s activities. It is reflected, amongst other things, in the amount of money being spent on IT investments – on average 50% of all investments and it is still increasing. For some companies IT enables productivity growth, for others it changes their business models and provides opportunities to obtain a competitive advantage. In the same time effectiveness of IT investments is very low. Other research shows that a clear majority of IT projects are unsuccessful: time limit and budget are exceeded, the established busiess effects are not delivered.
The IT area in the company is often incomprehensible for managers, sometimes it is understimated, and sometimes overstimated. However, very often it is wrongly managed. As a result, the majority of IT investments do not deliver the promised effects, and the IT maintenance costs too much. Yet, companies cannot afford poor management of such an important area, which absorbs over half of the total means designed for investmenets and which often determines whether the company will be able to develop further.
IT has two main functions: service and innovation. Service function allows the company to realize the strategy more effectively, for instance through automation, increase of processes, reduction of costs, etc. Innovation function gives the company new possibilities of development, impossible to achieve without IT. As an example, this may include attainment of a new clients’ section, launch of an innovative product or creation of a new competing model. In a principal way, these two functions influence the level of return on invested capital in the company and a possibility for a company’s growth. This in turn is translated into future cash flow, constituting the company’s value.
At the same time, there are still opinions that IT has lost its strategic importance. This is caused by relatively cheap and generally available resource, that everyone can have. Therefore, it may not ensure a competitive advantage. Model business processes and best practices are incorporated in standard software. It may be copied and it is available for all companies. Also the possibilities of innovation with the use of IT decrease on account of an easily copied and common standardization.
IT Governance is an element of company governance, parallel to governance of human, financial or physical resources. According to the IT Governanace Institute, IT Governance is the responsibility of the board of directors and consists of the leadership and organizational structures and processes that ensure that the organization’s IT sustains and extends and organization’s strategies and objectives. The role of IT governance is to integrate and institutionalize good practices providing IT support for realizing the company’s objectives. It gives the company the possibility to use information it possesses in the largest scope and maximize the benefits coming from it, leading to a competitive advantage.
The researches revealed that companies which have adapted advanced solutions for IT Governance have 20% higher profitability than companies from the same sector with similar strategies that have poor IT Governance.