Taking It To 'The Board': Page 2

Posted September 27, 2006

Steve Andriole

Steve Andriole

(Page 2 of 2)

  • "Does the CIO, or another technology executive, communicate to the Board about technology matters between Board meetings?" is a question that exposes the depth of technology involvement the board has with technology executives and technology initiatives.

    The data suggested that between-meeting-communication about technology matters is very infrequent. Only 14% communicate between meetings and 51% rarely or never communicate between meetings. 10% often communicate and 25% sometimes do.

  • The next question asks "Do technology vendors present to the Board?" The data here is almost violent: More than 90% answered “rarely” or “no.”

    The data indicates that the preferred mechanisms for governing technology are Executive Review Boards and Project Management offices. Relatively few companies have Technology Committees of their Boards of Directors.

    We also know that there are several Fortune 1000 companies that have established Technology Committees of their Boards and that technology companies have do not focus on internal technology issues, challenges or opportunities.

    Given the data -– and in some cases in spite of the data -– there are several recommendations I’d like to make:

  • If you spend more than 5% (of gross revenue) on technology then you should consider a Technology Committee of the Board of Directors because technology is consuming significant resources and is obviously intertwined with corporate strategy …

  • If there are significant technology investments planned in the near-term – and the likelihood of continued significant investment is high -– then a Technology Committee should be established to track these initiatives …

  • If technology will become an integral part of your overall business strategy, then a Technology Committee should be formed …

  • If there are growing digital security, compliance, disaster recovery and capital budgeting risks then a Technology Committee should be formed …

  • If your company’s view of technology is strictly operational and tactical -– and not at all strategic -– and technology costs are below 5% of gross revenue -– then there’s no need for board level oversight of business technology …

    The prescriptive literature suggests that it’s time for boards to assume more meaningful oversight of technology investments and strategies. The descriptive literature suggests that there’s relatively little board involvement in technology planning or oversight. The survey data that I collected supports the descriptive literature: there is relatively little board involvement in technology planning or oversight.

    This is a pivotal time in the evolution of technology governance. Technology is simultaneously becoming commoditized and strategic. The cost keeps rising as well, with many companies now spending 5% or more of their annual gross revenue on technology.

    While the majority of companies still use Technology Review Boards and Project Management Offices to govern technology (that govern well below Boards of Directors), companies whose technology budgets are growing and whose perception of technology is more strategic than operational should consider moving technology up the governance hierarchy to the board level.

    What do you think? Should Boards of Directors get involved with technology -– or be kept at arms length (as they have for decades)?

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