IT Governance, Decision-Making and IT Capabilities

Organizations are increasingly dependent upon IT for competitive advantage through extensive use of information, effective operational control, rapid innovation, speed to market, and increased customer satisfaction. In order to succeed in planning, organizing, controlling, and directing the IT organization, top management needs to have an understanding of individual business and IT capabilities for current and future business needs. As IT has become crucial in supporting, sustaining and enabling business models, there is a need for better governance of related IT assets, competencies and capabilities. Recently, IT research has placed much emphasis on how resources and capabilities affect organizational performance. As an organization's performance is dependent on its IT capabilities, the strategic management of IT is about making informed choices based on an understanding of both the relative benefits of different options and the organization's ability to deliver those benefits. IT capability can be defined as the organization's ability to acquire, deploy and leverage IT-related resources in combination with other resources and capabilities that support the conduct of business in value-adding ways. In this paper, we review the literature on IT capabilities, how they are defined in different streams of research and discuss the findings of our review in the context of IT governance research and frameworks. We note that the notion of IT capability in the literature is prevalent, but what actually constitute IT capabilities and determines their roles in different strategic orientations and organizational settings remains unclear. From an IT governance perspective, the multifaceted, cross-organizational nature of IT capabilities increases the contingency factors to be considered when designing and implementing respective governance structures and arrangements. By recognizing the complexity of IT capabilities and their relationship to organizational performance, academics and practitioners alike can better understand the implications of different IT governance practices on IT capabilities and their development.