IT governance focuses on how leadership can be effective and efficient in guiding an organisation's use of technology to meet business needs. A collaborative business model of IT shared services provision is a complicated endeavour as it often involves multiple stakeholders having different objectives, resources, and capabilities. Over the past decade, numerous studies have shown that not all organisations achieve the full benefits they expect from shared services. A robust IT governance of shared services focuses not only internally, but also incorporates the viewpoints and guidance of its customers. Hence, the following research questions were explored. First, given a particular type of shared IT services delivery arrangement, what should be the IT governance structure (decision rights) adopted within an organisation? Second, are the decision rights and accountability allocated effectively? How does an organisation leverage IT governance practices to ensure desired business outcomes in a shared services environment? Accordingly, the goal of this research is to identify significant factors influencing the IT governance mechanisms.
Based on the resource-based theory and agency theory, seven hypotheses are derived. The hypotheses were empirically examined using data obtained via an online survey. A survey methodology was used to collect data from top management and senior business managers of varying industries and organisation sizes. Two hundred and five valid responses from both shared services clients and providers were obtained.
Contrary to expectations, the IT decision framework has a much-business centralised IT governance structure. The results indicate organisations govern IT differently in five decision areas depending on their shared services delivery arrangements. Organisations adopting limited shared services options centralise more of their IT decision rights. Organisations forming a joint service agreement with more business units utilise a federal approach. Those setting up a separate ‘special purpose vehicle’ employ a mixed IT governance model. Senior business leaders make the major IT decisions when external customer access is allowed. The findings also suggest that the business value generated from IT is characterised by an organisation’s ability to effectively align the IT decision rights and accountability structures. The formal and regular assessment of IT governance, however, has no significant association with the business value of IT. The use of monitoring mechanisms has positive impact on organisational performance, including independent review of shared IT operation, profession-wide oversight and joint working on shared IT products. The results of the study will be of interest to managers involved in IT shared services who wish to create IT governance mechanisms that support business goals, protect business investments in technology, and appropriately manage IT-related opportunities and risks.