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Anatomy of Agile Enterprise

Janne J. Korhonen

IT Governance is Contingent on the Strategic Context

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Peterson (2004) identifies three basic value drivers of IT governance: service infrastructure, solution integration and strategic innovation.

In service infrastructure, the value lies in IT operations and services that are delivered with maximum reliability and availability. It focuses on standardization and synergies across the enterprise.

Solution integration is about offering business with IT solutions in alignment with business needs. The focus is on timely and cost-effective delivery of IT applications, business-IT alignment and IT responsiveness.

Strategic innovation targets business value drivers and focuses on operational, product or customer excellence such as reduced transaction costs, improved time-to-market, improved customer satisfaction and retention, revenue growth, improved ROA, or profitability.

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Figure 1. IT governance architecture is contingent on the complexity of the strategic context.

As illustrated in Figure 1, the complexity of IT governance model is contingent on the value drivers (Peterson 2004), which, in turn, reflect the complexity of the strategic context. An organization that operates in a relatively static, simple, and predictable environment (i.e. stratum I-III complexity) has routine technology and a mechanistic structure (Volberda 1996). It is well off pursuing the service infrastructure value driver that, according to Peterson (2004), calls for a centralized IT governance model.

An organization that operates in a dynamic and/or complex but largely predictable environment (i.e. stratum III-V complexity) requires operational flexibility and more nonroutine technology (Volberda 1996). It needs to pursue both the service infrastructure and solution integration value drivers and adopt an IT-centric federal model to meet both enterprise-wide and business-specific demands (Peterson 2004). IT governance architectures tend to decentralize.

A fundamentally unpredictable environment, which may also be dynamic and complex (i.e. stratum V+ complexity), calls for broad flexibility, organic structure and nonroutine technology (Volberda 1996). All three value drivers need to be pursued: service infrastructure, solution integration, and strategic innovation. In this context, a business-centric federal model is required (Peterson 2004): IT decision-making authority over customer business applications is allocated to local business executives to address the demands for strategic innovation. Fragmentation due to increasing differentiation of IT decision-making must be counter-balanced with respective governance recentralization.

References

  • Peterson, R. (2004). "Crafting Information Technology Governance", EDPACS - The EDP Audit, Control, and Security Newsletter, December 2004, 2-24.
  • Volberda, H.W. (1996). "Toward the flexible form: How to remain vital in hypercompetitive environments", Organization Science, 7 (4), 359-374.


Janne J. Korhonen provides insights into how information technology can be applied strategically to catalyze organizational change and responsiveness. Drawing from both theory and practice, he discusses agile enterprise and its governance.

Janne J. Korhonen

Janne J. Korhonen is an independent business and IT consultant,specializing in enterprise architecture, business process management,service-oriented architecture and pertinent governance models. He has over ten years of experience as an architect and consultant in a variety of extensive and mission-critical IT projects. With strong theoretical underpinnings, his consulting encompasses systemic co-development of business, organization and information technology.

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