IT Infrastructure - Importance of IT to Business

IT Infrastructure

Chapter 2
Importance of Information
Technology to Business

Get Most from IT in your Business
As it becomes an increasingly important business
tool for organization of all sizes,it is vital to ensure
that your business gets the most out of any system
it introduces
In order to ensure that this is the case ,you need to
make sure that the IT system supports your
business and adds value to it

Enterprise IT governance - The obvious step
Technology is so embedded in internal functions and in the
external value propositions of most modern organizations,
that it has assumed a strategic role. When we recognize that
IT is getting an equal level of importance as any other
business process, the need to 'govern' IT becomes obvious.
by MSV Rao
Moore's law will continue to outdo itself; Arun Netravali's
(former president of Bell Labs) predictions that, intelligent
devices worldwide will 'talk' to each other and bandwidth
will be a commodity free like air, may soon prove to be
true.

Such unbounded explosion of technology involving major
transformation of the Internet into a mega High-IQ net will
influence the very nature by which IT is used in many
enterprises.
In recent years the world has been witnessing a phenomenal
change in the way IT is used in enterprises. It has graduated
at a fast pace, from a mere supportive role to an enabling
role, and in some business areas, to a critical success factor
interwoven with the other business processes of the
enterprise. Technology has become so embedded in the
internal functions and the external value propositions of a
modern organization, at least in some sectors, that it has
assumed a strategic role.

Many organizations have begun to use IT-based processes
like Intranets, Extranets, ERP, and SCM. IT has thus
become truly all-pervasive. The moment we recognize that
IT is getting an equal level of importance as any other
business process, the need to 'govern' IT becomes obvious.
Enterprise governance
Effective enterprise governance focuses individual and
group expertise and experience in specific areas where its
benefits can be felt the most. The governance initiative can
then measure performance and provide assurance to the
critical issues.

The importance of enterprise governance is being accorded
the deserved significance. Worldwide, investors are willing
to pay up to 20 percent premium on the shares of companies
that have a corporate governance framework in place. In
India too, companies have begun to subject themselves to a
rating process on corporate governance abilities
The Investment and Credit Rating Agency (ICRA) has
developed a product called Corporate Governance Ratings
(CGR). The CGR can provide a relative index of corporate
governance abilities of an enterprise. The index can
essentially indicate the company's adherence to good
practices and code of ethics in corporate governance.

The CGR tends to focus on the statutory requirements of the
regulators and the financial interests of the stakeholders.
One can soon expect to hear of enterprises achieving level 1
CGR or level 2 CGR ratings, just like the CMM levels of
software organizations.
Strategic alignment
Since IT plays a critical role by interlinking various
business processes, the act of strategic alignment between
IT and the enterprise objectives becomes a Critical Success
Factor (CSF). Effective IT governance should help achieve
this CSF.

ISACA
According to Information Systems Audit and Control
Association (ISACA), IT governance is an inclusive term
which encompasses information systems, technology and
connectivity, business, legal and other issues, all concerned
stakeholders, directors, senior management, process owners,
IT suppliers, users, and auditors. Once enterprises recognize
that it relies on IT significantly and also relies on the IT
processes which are interwoven with the business
processes, the enterprise has to provide the same level of
commitment it devotes to financial supervision and overall
enterprise governance.

Information is power
The dependence of enterprises on IT has naturally made
information an indispensable asset. Information is created
and maintained by IT. It has often been said that
information is power. However the actual value of
information has been largely underestimated. In the opinion
of some consultants, only 15 percent of the market value of
an enterprise resides in its tangible assets. And the larger
part of the remaining 85 percent is in its information base.
This establishes the need to develop standards for recording
intangible assets—Information Systems Auditing.

Impact of IT governance
IT governance, control and assurance can impact an
enterprise's effectiveness by:
•Addressing business issues like e-commerce and
ERP
•Assuring security, reliability, and integrity of
strategic information
•Protecting the enterprise's investments in IT
including systems and network
•Ensuring appropriate management of the
enterprise's information assets

The four questions
IT governance can be illustrated with the help of
four questions:
1. Is the enterprise doing the right things?
2. Is it doing the right way?
3. Is the use of IT efficient?
4. Are the desired goals achieved?

These concerns about IT governance have to be
addressed naturally at the highest level or the
board level. IT deployment is very capital-
intensive and logically involves high risks. At the
same time, IT can present enormous
opportunities and benefits to the enterprise in
terms of reduced costs, increased revenues, and
more importantly, improved customer services.
In view of this the board should take active
interest and assert that IT is delivering the
benefits after being deployed with a complete
understanding of the costs and risks.

The management needs to react to the board's
requirements by aligning the IT strategy and
goals to the enterprise's business strategy and
goals. They must ensure cooperative cross-
departmental responsibility for the success of IT
and undertake an appropriate risk analysis,
identifying vulnerabilities, and reviewing
regularly the performance of IT assets.

Critical function
IT functions have increasingly assumed a critical
status in many enterprises. Businesses like
telecom companies, banks, mass media, and
airlines cannot exist without IT. Businesses like
travel agencies depend on IT for their SCM
initiative. Some may have to deploy IT due to
guidelines from regulatory bodies.
Some industries like the health sector invest in IT
more than the industry average. However, the
attention to IT in some of these enterprises is still
confined to the IT department.

The main reasons are:
• a. IT continues to be treated as an entity separate
from the business
• b. The complexity of IT is increasing with the
advent of networks and the Internet
• c. Not many boards have members with
extensive IT knowledge

IS audits and COBIT
IS audit can play an important role in bringing out the
need for IT governance. IS auditors can achieve this by
first understanding IT governance, convince the board
and the management to focus on relevant issues,
recommend a suitable control frame work, and measure
the performance regularly.
Control Objectives for Information and related Technologies
(COBIT) is perhaps the most widely adopted and
accepted framework for IT governance. Its adoption in
the US and other countries with a very high degree of IT
usage is quite widespread.

Indian organizations also have begun to appreciate
the comprehensive nature of the model and have
started adopting it.
The basic premise of COBIT is that IT is required to
create, process, and deliver the information that
the enterprise needs to achieve its goals. COBIT
divides IT into four domains namely planning,
acquisition and implementing, delivery and
support, and monitoring. These basically cover
the important phases of an IT process.


Total number of 34 processes are defined and
grouped under the above four domains. Each
process has a high-level control objective
associated with the process, and several detailed
lower-level control procedures. The COBIT
model allows the business process owner to
define its information process requirements
through information criteria needed by him.

There are seven such criteria: effectiveness,
efficiency, availability, integrity, confidentiality,
and compliance. In order to provide the required
information, the IT management approaches the
framework by looking at the resources to be
considered for the control.
The resources are data, application systems,
technology, facilities, and people. COBIT
provides a very effective tool to all levels of
management to achieve good IT governance
leading to good corporate governance.


End of Chapter 2

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