Information systems in the corporate world
The corporate world has wholly embraced information systems but many businesses lack proper governance thus failing to effectively use these systems to realize significant benefits (problem).
This is important because information systems form a vital component of every business thus effective measures should be applied to create a solid integration with the existing organizational structure. Garr (2004) argues that information systems tend to support almost the entire business operations thus an incident that disrupts the software functionality can potentially bring a business to a halt (why select it).
Abramowicz & Flejter (2009) asserted that with effective information systems governance, businesses can adequately exploit the large pool of information system resources at disposal to allow them deliver improved services, profitability, and economic stability, operate more efficiently, reduce costs, enhance employee productivity, improve customer experience and thus gain competitiveness over their rivals (why it is important to solve it).
Owing to challenges facing businesses in exploitation of information systems to derive substantial benefits, many studies that seek to determine why businesses fail in effective use of information systems have been done. Different studies have shown that there is an increased use of information systems in businesses around the world, but due to lack of effective governance, many businesses have failed to reap benefits from these systems (Brynjolfsson & Hitt, 2000; Curtis & Cobham, 2005). The most successful businesses have adopted effective information systems governance incorporating managerial, organizational and social elements of a business (Brynjolfsson & Hitt, 2000). Variables here are the measure of contribution of managerial, organizational and social factors to business exploitation of information systems. Brynjolfsson and Hitt (2000) goes further to study how effective information systems governance create a sustainable development by researching on the said variables:
- Managerial: Include dedicated strategic management support for business change, incentives that result to innovation, improved flexibility, teamwork, collaboration, and a culture that emphasize on value for knowledge.
- Organizational: Supportive organizational culture that seeks effectiveness and efficiency, proper business model, decentralization of power in order to distribute decision rights, overwhelming support by stakeholders, and a solid information systems development team.
- Social: These are elements made by the surrounding society, such as governments, other businesses, and key market players, such as laws and regulations, computing standards, internet, and technology. Effective governance must devise means of balancing information systems and social benefits to reap maximum benefits.
These findings are relevant for thus study as they show that effective governance is a necessity for valuable information systems.
Taft (2013) did a related research but sought to commoditize effective governance for it to appear like an asset that is needed to derive value from information systems by aligning them to appropriate variables namely communication networks, technology, organizational policies, and market demands. In addition, Taft (2013) showed that information systems investments tend to produce more returns than those of other investments but there are significant variations across firms. The study claims that these variations can be attributed to different levels of dedication to information systems governance thus this work is vital in that it perceives governance as an asset that can be managed to derive competitiveness just like any other asset.
Another study by Rapp and Nilsson (2005) on 60 Fortune 500 corporations found that 25% of these firms acknowledged that they experienced decreased performance immediately their information systems went live mainly. The research measured performance by variables such as user acceptance, error rate, rate of support requests, and rate of completion of tasks. The research also covers indirect variables including the: degree of systems integration with existing business models, systems implementation plan, communication breakdown issues, user training, and change and technology management. These variables were found to have contributed to the challenges faced by the 60 companies. The study also explored the risky variable of information systems investments whereby they discovered that such investments are risky efforts therefore proper information systems governance should be applied for businesses to fully exploit the systems in order to reap maximum benefits. It is only through effective governance that companies can achieve the real benefits of information systems (Rapp & Nilsson, 2005). Despite the invaluable information presented in these studies, there is no clear indication of the degree of governance that can be termed as effective. However, they have shown that companies derive different benefits yet they use similar information systems. This work is therefore important as it campaigns for adoption of effective information systems governance in attempts to drive business performance.
A related research by Tallon, Ramirez & Short (2013) revealed a strong connection between effective information systems governance and improved benefits from information systems. Tallon et al. (2013) has shown that businesses that failed to employ effective information systems governance by properly managing change, integrating the systems with business models among other actions have faced considerable difficulties and costs in implementation of information systems leading to losses or insignificant benefits. These studies have been phenomenal in exemplifying the role of effective information systems governance in improved business performance.
Abramowicz and Flejter (2009) carried out a related research that examined challenges that arise due to underestimation of necessary variables including proper planning, development, implementation, change and risk management, legal and ethical concerns, network and communications technology, and user training, and reengineering business process in order to achieve a platform that adequately accommodates new information systems. Despite the study that without effective governance, information systems cannot make derive tangible benefits to a businesses, the findings are not enough to prove that they cover all elements of effective information systems governance as they failed to show the need to integrate these functions together in order to enhance their interaction and derive perceived benefits.
Another research sought to explore the role of organizational management in overseeing information system governance by studying the following variables: role in integrating information systems with existing organizational structure, recommending priorities for initiatives, standards and policies, assessing level of suitability of information systems, and assessing benefits realized from information systems (Keller & Price, 2011; Olugbode, Elbeltagi, Simmons & Biss, 2008). Similar research by Bider and Jalali (2014) showed that sound decisions from senior management plays an integral role in effective information systems governance. The studies show that management must be wholly involved in information systems governance for it to be effective and successful. However, the research does not detail the benefits of effective information systems governance.
Similarly, Garr (2004) cemented previous studies that effective information systems governance allows a business to leverage underlying benefits by showing that it leads to increased return on investment, and improved responsiveness to remain upfront in the market, reduce operational costs, and realize economies of scale, remain competitive and increased profits. From this research, it is apparent that businesses have exploited information systems to gain competitive advantage over their market rivals. By showing that some businesses have derived more benefits than others while using similar information systems, the importance of effective governance is further cemented.
These studies have magnified the need for effective information systems governance to allow for proper integration with business processes and realize superior returns.
From a business perspective, there is the question: Which major actions have successful businesses undertaken in order to reap maximum benefits from information systems and surpass their rivals who are using the same systems? This leads to the question: What would happen if effective governance is practiced in integration of information systems with the managerial, organizational and social elements of an organization? The ultimate question is: What is the role of effective information systems governance in increasing a firm’s performance and profitability?
Implementing an information system does not directly lead to improved business performance.
Curtis & Cobham (2005) cements this statement by arguing that introduction of an information system may lead to even more challenges and potentially destroy a business even further. How can a business gain maximum benefits from implementing an information system? According to Abramowicz & Flejter (2009), a company must first dismantle the perceived benefits into actionable activities in order to align each one of them with existing business structures and achieve a relative position to build a business wide oriented platform that is within the set objectives and vision.
Information systems governance is focused on creating a collection of continuous processes that outline roles and responsibilities of various stakeholders and an actionable and practical approach to organization decision making (Tallon et al., 2013). Taft (2013) claims that effective governance is the one that allows information systems supported decisions to be aligned with the business’s future vision, enables smooth coexistence between an information system and existing organizational culture and mandates, and optimize exploitation of information systems assets. It is beyond cost savings but an end-to-end process that yearns to develop an efficient, highly dynamic and effective business infrastructure to achieve optimal value.
According to Olugbode et al. (2008) business perspectives demand attention from the managerial and information nature of business information systems. Therefore, despite the promising nature of information systems, there are variations in derived benefits because businesses have different capacities to challenge problems posed by social, management and organizational elements. However, with effective means to overcome these challenges, every business that invests in an information system is capable of gaining significant benefits (Garr, 2004).
It is evident that organizations that employ a well-planned implementation of information systems with close attention to surrounding factors: managerial, organizational and social factors benefit most from their investment. Apparently, businesses that fail to appropriately align their information systems with the correct business model are destined for derive insignificant benefits (Curtis & Cobham, 2005). Therefore, it is important to ensure that implementation of an information system is accompanied by tangible controls and procedures to eliminate instances of broken communication and uncoordinated operations thus hindering managers from making better decisions.
Businesses are becoming more demanding calling for more complex information systems to handle business processes, decision making, drive innovation, coordinate business with partners and other actors spread geographically and meet industry laws, regulations and standards (Bider & Jalali, 2014). Therefore, without proper coordination, it is impossible for businesses to realize substantial benefits from merely implementing information systems.
With effective information systems governance, business management is helped to make better decisions aimed at improving the efficiency of business processes and boost profitability (Abramowicz & Flejter, 2009). Effective governance enables an organization to regulate and control its processes in order to avoid conflicts related to different business elements including shareholders, employees, assets, operations and organizational structures (Keller & Price, 2011). Therefore, since information systems governance entails management of proposed and implemented information systems to gain set objectives, it forms an integral component of corporate governance.
An information system investment is a source of competitive advantage but also amounts to a challenge because it is a cost like any other. Rapp & Nilsson (2005) notes that information systems investments amounts to a risk that need to be mitigated so as to achieve the desired results and this is where governance comes in to fundamentally shift information systems investments into the organizational infrastructure.
Managers can adequately determine necessary elements that enable information systems achieve desired business objectives. Managers that employ effective information systems governance are more likely to reap more benefits than those that simply implement information systems and wait for a bolstered business performance. This implies that managers must devise effective governance mechanisms to ensure that their information systems incorporate all business internal and external factors in order to exploit the power of these systems.
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