Relevance of Value Creation to IT Governance

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Small and Medium Enterprises

Small and medium enterprises or small and medium-sized are firms whose revenue falls short of certain limits or have a certain profile that is demarcated in terms of number of employees/financial profile. SMEs lead to a more favorable balance of economic power, mutually beneficial small/large firm relations, and a significant source of employment (Rothwell & Zegveld, 2009). The European standard states the three general parameters which state the different SMEs in Europe. The smallest in size are the micro-entities which are the companies with up to 10 employees. Companies that employ up to 50 workers are termed as small, while the ones that employ up to 250 employees are medium-sized (European Commission, 2003). Besides this we can also define SMEs in terms of their financial profiles for instance if the turnover is of €10-50 million or a balance sheet total of €10-43 million, the company would be considered SME.

Case study

The strategy that is used in this research is a case study with a cross-sectional time horizon due to the time available to undertake the research. Selected SMEs in Småland province of Sweden were contacted and used as cases. The number of participants was expected to between five to ten SMEs but only four participants were used for various reasons. Therefore the research strategy used was a multiple case study. Robson (2002, p. 178) defines case study as a strategy for doing research which involves an empirical investigation of a particular contemporary phenomenon within its real life context using multiple sources of evidence. Also, multiple case studies help to come about more general findings (Eisenhardt, 1989). A case study was chosen over the other available strategies because the authors had in mind the reliability of the research outcome and using a case study allows for an indepth understanding of issues where a face to face interview and discussion were held with experts in the study area. One technique of the case study was the interview technique which provided us the opportunity to further ask follow up questions related to the research topic. Saunders et al.(2009) claims that case studies are often used in explanatory and exploratory research because of the considerable ability of the case study to provide answers to the „why‟, „what‟ and „how‟ questions.

Choice of Method

The method we have employed in this research is strictly informed by the nature of our research questions. Firstly, we restate that the research objective is to see how IT governance can create value and IT performance be measured in SMEs and we have also discussed in the problem discussion section that most research in this area have been carried out in large companies therefore we consult figure 2-1 for guidance on the most suitable perspective on which we should approach the topic from the view of SMEs. Also, it was discussed in section 2.1 that a research philosophy guides the way we view events happening in the 12 world around and after carefully observing the meanings of the numerous philosophies, we decide to adhere to an interpretive perspective. Orlikowski and Baroudi (1991) noted that the criteria adopted in classifying interpretive studies were evidence of a nondeterministic perspective where the intent of the research was to increase understanding of the phenomenon within cultural and contextual situations; where the phenomenon of interest was examined in its natural settings and from the perspective of the participants; and where researchers did not impose their outsiders‟ priori understanding on the situation.

Validity

The validity of a research is judged by checking that the results of a research are actually what they should be. Validity is concerned about the relationship between variables and whether it is a causal relationship (Saunders et al., 2007). The methodology in this thesis paper was designed to capture answers to the research questions, and empirical data were collected as accurate as possible while the data analysis geared towards the interpretation of the data. Therefore, the results are simply a reflection of the analysed data. The authors used the external validity and construct validity test to validate this research. The construct validity as supposed by Ghauri and Gronhaug (2005) requires the researcher to develop satisfactory measures intended to capture what the authors intend to capture. The frame of reference in this paper was structured to serve exactly this purpose and according to Yin (1988), it is possible to obtain external validity by using replication logic in multiple-case studies. This was the situation in this research as four cases were used during the empirical finding, this type of selection helps to envisage similar results. For these reasons, the authors are certain that this study satisfy the validity mentioned.

Generalization

This research could not be considered for generalisation even though the authors have used multiple case studies and several factors contribute to this fact of generalization. Kolberg (2008) discusses the issue of case study approaches in relation to complexity and generality and noted that solving the complexity that engulfs case studies is more valued than its generality. In the course of the research which is limited to SMEs, it has been noticed that SMEs vary a lot, in terms of size, annual turn-over, business area of concentration etc. It was observed also that experiences and abilities of IT managers vary in SMEs, while some SMEs have IT managers other do not. Same applies while some heavily depend on IT resources, some outsource their IT and others don‟t subscribe to anything mentioned above. Hence, this thesis paper is not aim towards generalisation outside the study scope.

Table of Contents :

• 1 Introduction
  • 1.1 Background
    • 1.1.1 IT Governance
    • 1.1.2 Value Creation
    • 1.1.3 Performance Measurement
    • 1.1.4 Small and Medium Enterprises
  • 1.2 Problem discussion
  • 1.3 Research Objective
  • 1.4 Perspective
  • 1.5 Delimitation
  • 1.6 Definitions
• 2 Methodology
  • 2.1 Research philosophy
  • 2.1.1 Interpretive philosophy
  • 2.2 Research Approach
    • 2.2.1 Use of the Inductive Approach
    • 2.2.2 Combined Approaches
  • 2.3 Research design and data collection
    • 2.3.1 Exploratory Studies
    • 2.3.2 Research Strategy
  • 2.4 Choice of Method
  • 2.5 Research Credibility
    • 2.5.1 Reliability
    • 2.5.2 Validity
    • 2.5.3 Generalization

• 3 Frame of Reference
  • 3.1 IT Governance
    • 3.1.1 Different definitions of IT governance
    • 3.1.2 Essential domains of IT Governance
    • 3.1.3 Choice of domains
  • 3.2 Value creation
    • 3.2.1 Relevance of Value Creation to IT Governance
    • 3.2.2 Deriving business value from IT
    • 3.2.3 Challenges of IT Value Creation
    • 3.2.4 Summary Value Creation
  • 3.3 Performance measurement
    • 3.3.1 What is performance measurement?
    • 3.3.2 Why use performance measurement?
    • 3.3.3 Process steps for measuring performance
    • 3.3.4 Summary performance measurement
  • 3.4 IT Governance framework
• 4 Empirical findings
  • 4.1 Gislaved Folie AB
  • 4.2 Flintab AB
  • 4.3 Uppåkra Mekaniska AB
  • 4.4 Pallco AB
• 5 Analysis
  • 5.1 Value creation in SMEs
  • 5.2 Performance measurement in SMEs
  • 5.3 Examining a plausible framework for SMEs using COBIT
• 6 Conclusion
  • 6.1 Suggestions for further work
  • 6.2 Contribution to the field of informatics

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Exploring the governance of IT in SMEs in Småland