Effective information technology (IT) governance mechanisms: An IT outsourcing perspective Yuen Ka Chun Jason Shiu Fu Cheong Joson Ngai Chi Lung Kyle

Introduction author: Sysaiful Ai and Peter Green the effective of IT governance vs performance of IT resources Effective IT governance can ensure target between IT and business goals references: IT governance, Information system management or outsourcing 2

Definition of IT Governance According to the IT Governance Institute (2003b): IT governance is defined as: “A structure of relationships and processes to control the enterprise in order to achieve the enterprise’s goals by adding value while balancing risk 3 3

Concepts of IT governance (Refer to Vaswani 2003 & Weill 2004) is crucial for an organization to achieve its corporate performance goals to implement IT governance effectively a set of IT governance mechanisms o IT steering committee o IT organizational structure 4

Concepts of IT governance (Refer to Vaswani 2003 & Weill 2004) to encorages behaviors with the organization’s o mission o strategy o values o norms o culture 5

Research objective – what and why This study empirically examines the relationship between effective IT governance and the level of IT outsourcing decisions. 6

Research objective – what What individual IT governance mechanisms impact significantly a higher perceived level of overall effective IT governance? 1) What extent does IT Intensity influence effective IT Governance? Ali and Green (2012) said that it extends the examination of individual IT governance mechanisms to include a wider number of mechanisms. 2) What extent are effective IT governance and IT outsourcing decisions correlated? Ali and Green (2012) stated effective IT governance on IT outsourcing decisions while controlling for the level of IT Intensity in the organization 7

Research objective – why to do it Ali and Green (2012) stated this study seeks to examine empirically the individual IT governance mechanisms that influence the overall effectiveness of IT governance. Furthermore, this study examines the relationship of effective IT governance, the extent of IT outsourcing decisions within the organizations, and the level of IT Intensity in the organizations. 8

Research Model Conducted by 1. General theories 2. Pervious studies Hypothesized to contribute to effective IT governance 9

Research Model e.g., H1: The existence of an IT strategy committee will positively influence the perceived level of effective IT governance. The below argument from pervious research paper leads to the hypothesis: - A recent study by Ali & Green (2007) in publicsector organizations in Australia expressed that an IT strategy committee has a positive significant correlation with the level of effectiveness of overall IT governance. 10

Questionnarie - Never conduct a self-made question e.g., Ask about the aspect of IT Strategy Committee Question: To what extent does IT strategy committee provide strategic direction and the alignment of IT and the business issue? - Take reference from IT Governance Institute 11

Questionnarie 12

Sampling Technique & Statistical Methods Why? Suitable target -- Reason 1: Adequate professional qualifications and experience of IS Reason 2: Up-to-date information and knowledge in IT governance mechanisms How? invitaions to participate in the web-based survey *ISACA = Information Systems and Audit Control Association 13

Sampling Technique & Statistical Methods Why? Suitable target -- Reason 1: Adequate professional qualifications and experience of IS Reason 2: Up-to-date information and knowledge in IT governance mechanisms How? invitaions to participate in the web-based survey *ISACA = Information Systems and Audit Control Association 14

Sampling Technique & Statistical Methods Check that the sample is representative - One of goals: the relationship between effective IT governance and IT outsourcing decisions → Remove non-outsourcing members from the sample 15

Sampling Technique & Statistical Methods Statistical Techique: - Structural equation modeling analysis - Testing causal relations using a combination of statistical data and hypothesis 4 types of Sampling Techniques 1. Simple random Sampling 2. Systematic Sampling 3. Stratified Sampling 4. Quota Sampling I think it chose “Simple random Sampling” 16

Finding & Results Sample Size = 110 ->76 internal auditors(69%) ->34 external auditors (30.7%) 17

Reliability of the chosen Sample 18

Overall model fit This study examined 1. Absolute fit measures 2. Incremental fit measures 3. Parsimonious fit measures using AMOS. 19

Absolute fit measures The chi-square value = >> 0.05 a probability value = Since the probability value of the chi-square test is far greater than the.05 level, this study suggests that the model fits the observed data. 20

GFI = (above the required threshold) The goodness of fit index (GFI) is a measure of fit between the hypothesized model and the observed covariance matrix. RMSR = 0.07 (acceptable) Root Mean Square Residual (RMSR) is an absolute measure of fit and is defined as the standardized difference between the observed correlation and the predicted correlation. 21

Incremental Fit Measures *All of the three incremental fit measures exceeded the recommended level of Therefore, it is an indication of good model fit. 22

Parsimonious fit measures AGFI = > 0.90 (above the minimum recommended) Adjusted Goodness of Fit Index (AGFI) 23

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Limitation a proxy for measuring IT intensity factor within each organization. that the approach used of asking respondents to give values of the four items (total PCs, total employment, total IT employment and the last year’s IT budget) has difficulties. 25

Summary of the Findings (1) the existence of ethics and a culture of compliance in IT is positively correlated with the overall effectiveness of IT governance (2) the existence of corporate communication systems support greatly enhances the overall effectiveness of IT governance (3) involvement of senior management on a regular basis is crucial to high levels of effective IT governance (4) a corporate performance measurement system significantly impacts the level of effective IT governance however this impact may be negative if the measurement system is not used appropriately. 26