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This chapter addresses the answers to these questions and provides insights on how to move ahead.
For many companies, the answer to most of the questions posed in the previous section is no. However, in many cases, key stakeholders believe the opposite is true. Perceptions are clearly not meeting reality. This situation is typically borne out once it becomes evident that IT investments are overschedule, overbudget, and not in alignment with business and strategic objectives.
Inadequate and in many cases ad hoc IT governance is one of the primary reasons why perceptions do not meet reality. IT governance requires a common understanding and taxonomy between business and IT. Due to the complexities associated with the nascent but rapidly maturing field of IT, IT governance traditionally has been isolated and disjointed from other governance areas, with limited board of director involvement. This must change for companies to realize real value from their IT strategy.
Executives within companies realize that much of the value of their company has migrated from tangible assets (equipment, inventory, land, etc.) to intangible ones (intellectual property, processes, patents, etc.) that are dependent on IT to deliver and fully realize their value. Another conundrum faced by companies is how to analyze and assess the value of intangible assets. Take, for example, some of the challenges CIOs face in gauging intangible assets such as information:
• What information do we (or do we not) have?
• How good is our information’s quality, and how can we measure and improve it?
THE NEW FOCUS FOR IT: BUSINESS 7 1
• How well do we manage and leverage information?
• How do our information management maladies affect our ability to achieve
• How much can our enterprise processes be improved through better/faster/ more accessible information?
• Insurers are now excluding information assets from property policies. . . . What is our exposure/risk?
• Can our information be marketed or bartered?
• How much should we be spending on acquiring, managing, and leveraging information?
• How can we gauge the financial value of our information assets?
• What policies, practices, and technologies should we put in place to
improve information’s value?
Understanding how to value intangible assets remains a difficult challenge that IT governance and accompanying policies and principles must address.
THE NEW FOCUS FOR IT: BUSINESS
It used to be so simple when IT was a staff function—a cost center that served primarily as a support-based entity. In the early days, IT was called data processing. Rudimentary information technologies introduced in the late 1940s were expensive and limited in functionality. In fact, the technology was so expensive that a conscious decision to have two-digit date fields was made to save two bytes of memory even though it was known that it would be problematic at the turn of the century. The core purpose of computing in business was to perform massive amounts of calculations, primarily tabulations. In government, computers were leveraged to enable basic calculations such as census tabulations with greater speed and accuracy. In the private sector, computers were leveraged in accounting departments, primarily to improve the speed and accuracy of bookkeeping. The introduction of computing hardware virtualized and commoditized calculation and tabulation, displacing the clerks in green visors.
As IT evolved with the emergence of second- and third-generation languages, the utility of the hardware expanded. Computers enabled decision support with advances in memory, storage, and processing capabilities as well as software. The distinction between data and information surfaced. Data equated to records; information equated to reports or processed records. Thus, the management
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information systems (MIS) department was born. The MIS department was a centralized unit, and the Chief Information Officer (CIO) reported to the Chief Financial Officer (CFO). IT was leveraged to generate massive quantities of reports to enable more effective decision making (at least in theory).
The CIO was typically not part of the executive leadership group and did not have input into the formation of, and alignment to, the strategic plan. The CIO served, at best, in an advisory role to executive management and was called upon to support mostly inward-facing systems delivery. As software capabilities expanded, hardware became commoditized, having to support initially standardized languages and subsequently standardized commercial off-the-shelf software applications. Traditional planning and budgeting processes were augmented by formalized IT planning approaches. Annual strategic information system plans (SISPs) were created. The trigger to the SISP was the completion of strategy development. As part of the SISP, the CIO was to: