Professor T. Ravichandran: Do IT Purchases Need Board Approval?

By BTM Institute Staff Writer  |  Posted 2008-10-16 Print this article Print

T. Ravichandran, an associate professor at Rensselear Polytechnic Institute's Lally School of Management and Technology, has been studying what influences IT technology investment as a process in depth, along with teaching courses in IT value creation, IT strategy, and supply chain management. In fact, his latest paper, published by the Journal of Information Technology and Management, is called "A Comprehensive Investigation on the Relationship Between Information Technology Investments and Firm Diversification."

Q. Did you find in your research that many of the boards are involved in IT investment decisions?

If the investments are fairly larger or substantial, the board might give its approval and signoff, or the board at least gets the information via a board technology subcommittee.  I see this happening in many companies in relationship to IT investments. I also find the involvement of the board in a different way than just asking questions. If IT is considered to be a strategic driver for the organization or if it is considered to be a major expenditure, where an organization spends much of its resources, the board can become increasingly vocal about how the organization prioritizes those investment or how the organization does on that front with respect to investing and targeting their investments.

During the past five years, many IT systems have become more sophisticated to meet compliance requirements, such as Sarbanes Oxley. In these cases, boards have become more involved in making sure the organization complied with regulations. After all, there is significant risk for not doing so. To this end, boards ask the legitimate question:  Are our IT systems equipped to meet compliance needs.

Q. Are you finding many organizations automating the way they go make about making IT investments and monitoring those investments?

It is a mixed bag of things. Some companies do use sophisticated tools, such as some type of a scorecard, for trying to link higher-level goals with project- level IT investments, and subsequently for tracking those investments through dashboards or spreadsheets.

IT departments are at the forefront of streamlining their organization's processes and feeding decision-making information back to the rest of the organization. On the other hand, some IT organizations have a big disconnect between making investment decisions and the use of automation to do it. Some IT organizations have automated project management.

The BTM Institute (www.btminstitute.org) brings together the academic, corporate, government and thought-leadership communities as a multi-disciplinary research think tank to address the need to integrate business and technology.

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