Do Boards Need a Technology Audit Committee?

How much does FedEx, Pfizer, Wachovia, 3Com, Mellon Financial, Shurgard Storage space, Sempra Energy and Proctor & Gamble have in common? What board panel exists for only 10% of public companies but generates 6. 5% higher returns for those companies? What is the only major budget item after salaries and manufacturing equipment? buy ripple with credit card

Technology decisions will outlive the tenure of the management team making those decisions. While the current speed of technological change means that corporate technology decisions are frequent and far-reaching, the outcomes of the decisions-both good and bad-will stay with the organization for a long time. Usually technology decisions are made unilaterally within the Information Technology (IT) group, over which senior management decided to have no insight or oversight. For the Board of the business to perform its duty to exercise business judgment over key decisions, the Plank must have a device for reviewing and helping technology decisions. 

A recent example where this type of oversight might have helped was the Enterprise Reference Planning (ERP) mania of the mid-1990’s. At the time, many businesses were investing tens of huge amount of money (and sometimes hundreds of millions) on ERP systems from SYSTEMS APPLICATIONS AND PRODUCTS (SAP) and Oracle. Often these purchases were justified by executives in Finance, HUMAN RESOURCES, or Operations strongly in favor of their purchase as a method of keeping up with their competitors, who were also installing such systems. CIO’s and line executives often did not give enough thought to the condition exhibiting how to make a successful transition to very complex systems. Alignment of corporate resources and management of organizational change helped bring by these new systems was overlooked, often causing in a crisis. Various billions of dollars were spent on systems that either should not have been purchased at all or were bought ahead of the consumer companies were prepared.

Undoubtedly, no successful medium or large business can be run today without personal computers and the software which enables them useful. Technology also represents one of the only major capital and operating line item for business expenditures, outside of labor and manufacturing equipment. For both of these reasons, Board-level oversight of technology is appropriate at some level.

Can your Board of Directors always leave these fundamental decisions solely to the current management team? Most large technology decisions are innately risky (studies have shown less than half deliver on promises), while poor decisions take years to be repaired or changed. Over half the technology investments are not coming back anticipated gains in business performance; Boards are as a result becoming involved in technology decisions. It truly is surprising that only ten percent of the publicly traded organizations contain it Audit Committees as part of their planks. However, those companies enjoy a clear competitive benefit in the form of a compounded twelve-monthly go back 6. 5% higher than their competitors.

Tectonic shifts are under way in how technology is being provided, which the Board needs to understand. IT industry consolidation seriously decreases ideal overall flexibility by undercutting management’s ability to consider competitive options, and it creates potentially dangerous reliance on only a few key suppliers.

The core property of flourishing and enduring business is the capacity to respond or even anticipate the impact of outdoor forces. Technology has become a barrier to organizational agility for several reasons:

o Core musical legacy systems have calcified
u IT infrastructure has failed to come up with changes in the business
o Inflexible IT structure results in a top ratio of IT expenditure on maintenance of existing systems but not enough on new functions
o Short term operational decisions infringe on business’s permanent capability to remain competitive

Traditional Planks lack the skills might the right questions to ensure that technology is considered in the situation of regulatory requirements, associated risk and agility. This is because technology is a comparatively new and fast-growing job. CEOs have been around since god knows when, and financial counselors have been evolving over the past century. But technology is so new, and its cost to release changes dramatically, that the technology profession continues to be ageing. Technologists have worked how the systems are designed and used to solve problems facing the business. Recently, they recognized a need to understand and be mixed up in business strategy. The business leader and the financial leader none have history nor experience utilizing technology and making key technology decisions. The Board needs to be engaged with the management making technology decisions, just as the technology head needs Board support and guidance to make those decisions.