IT Infrastructure - Importance of IT to Business


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In this presentation, we will discuss in depth about the importance of technology in business, what IT governance is and its impact. To know more about Welingkar School’s Distance Learning Program and courses offered, visit:
  • 1. IT InfrastructureChapter 2Importance of InformationTechnology to Business
  • 2. Importance of Information Technology to BusinessGet Most from IT in your BusinessAs it becomes an increasingly important businesstool for organization of all sizes,it is vital to ensurethat your business gets the most out of any systemit introducesIn order to ensure that this is the case ,you need tomake sure that the IT system supports yourbusiness and adds value to it
  • 3. Importance of Information Technology to BusinessEnterprise IT governance - The obvious stepTechnology is so embedded in internal functions and in theexternal value propositions of most modern organizations,that it has assumed a strategic role. When we recognize thatIT is getting an equal level of importance as any otherbusiness process, the need to govern IT becomes MSV RaoMoores law will continue to outdo itself; Arun Netravalis(former president of Bell Labs) predictions that, intelligentdevices worldwide will talk to each other and bandwidthwill be a commodity free like air, may soon prove to betrue.
  • 4. Importance of Information Technology to BusinessSuch unbounded explosion of technology involving majortransformation of the Internet into a mega High-IQ net willinfluence the very nature by which IT is used in manyenterprises.In recent years the world has been witnessing a phenomenalchange in the way IT is used in enterprises. It has graduatedat a fast pace, from a mere supportive role to an enablingrole, and in some business areas, to a critical success factorinterwoven with the other business processes of theenterprise. Technology has become so embedded in theinternal functions and the external value propositions of amodern organization, at least in some sectors, that it hasassumed a strategic role.
  • 5. Importance of Information Technology to BusinessMany organizations have begun to use IT-based processeslike Intranets, Extranets, ERP, and SCM. IT has thusbecome truly all-pervasive. The moment we recognize thatIT is getting an equal level of importance as any otherbusiness process, the need to govern IT becomes obvious.Enterprise governanceEffective enterprise governance focuses individual andgroup expertise and experience in specific areas where itsbenefits can be felt the most. The governance initiative canthen measure performance and provide assurance to thecritical issues.
  • 6. Importance of Information Technology to BusinessThe importance of enterprise governance is being accordedthe deserved significance. Worldwide, investors are willingto pay up to 20 percent premium on the shares of companiesthat have a corporate governance framework in place. InIndia too, companies have begun to subject themselves to arating process on corporate governance abilitiesThe Investment and Credit Rating Agency (ICRA) hasdeveloped a product called Corporate Governance Ratings(CGR). The CGR can provide a relative index of corporategovernance abilities of an enterprise. The index canessentially indicate the companys adherence to goodpractices and code of ethics in corporate governance.
  • 7. Importance of Information Technology to BusinessThe CGR tends to focus on the statutory requirements of theregulators and the financial interests of the stakeholders.One can soon expect to hear of enterprises achieving level 1CGR or level 2 CGR ratings, just like the CMM levels ofsoftware organizations.Strategic alignmentSince IT plays a critical role by interlinking variousbusiness processes, the act of strategic alignment betweenIT and the enterprise objectives becomes a Critical SuccessFactor (CSF). Effective IT governance should help achievethis CSF.
  • 8. Importance of Information Technology to BusinessISACAAccording to Information Systems Audit and ControlAssociation (ISACA), IT governance is an inclusive termwhich encompasses information systems, technology andconnectivity, business, legal and other issues, all concernedstakeholders, directors, senior management, process owners,IT suppliers, users, and auditors. Once enterprises recognizethat it relies on IT significantly and also relies on the ITprocesses which are interwoven with the businessprocesses, the enterprise has to provide the same level ofcommitment it devotes to financial supervision and overallenterprise governance.
  • 9. Importance of Information Technology to BusinessInformation is powerThe dependence of enterprises on IT has naturally madeinformation an indispensable asset. Information is createdand maintained by IT. It has often been said thatinformation is power. However the actual value ofinformation has been largely underestimated. In the opinionof some consultants, only 15 percent of the market value ofan enterprise resides in its tangible assets. And the largerpart of the remaining 85 percent is in its information base.This establishes the need to develop standards for recordingintangible assets—Information Systems Auditing.
  • 10. Importance of Information Technology to BusinessImpact of IT governanceIT governance, control and assurance can impact anenterprises effectiveness by:•Addressing business issues like e-commerce andERP•Assuring security, reliability, and integrity ofstrategic information•Protecting the enterprises investments in ITincluding systems and network•Ensuring appropriate management of theenterprises information assets
  • 11. Importance of Information Technology to BusinessThe 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?
  • 12. Importance of Information Technology to BusinessThese 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.
  • 13. Importance of Information Technology to BusinessThe management needs to react to the boards requirements by aligning the IT strategy and goals to the enterprises 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.
  • 14. Importance of Information Technology to BusinessCritical 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.
  • 15. Importance of Information Technology to BusinessThe 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
  • 16. Importance of Information Technology to BusinessIS 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.
  • 17. Importance of Information Technology to BusinessIndian 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.
  • 18. Importance of Information Technology to BusinessTotal 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.
  • 19. Importance of Information Technology to BusinessThere 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.
  • 20. Importance of Information Technology to Business End of Chapter 2
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