Do Boards Require a Technology Audit Committee?

Technology

Exactly what does FedEx, Pfizer, Wachovia, 3Com, Mellon Financial, Shurgard Storage, Sempra Energy and Proctor & Gamble share? What board committee are available for only 10% of openly traded companies but generates 6.5% greater returns for individuals companies? What’s the single largest budget item after salaries and manufacturing equipment?

Technology decisions will outlive the tenure from the management team making individuals decisions. As the current fast pace of technological change implies that corporate technology decisions are frequent and-reaching, the effects from the decisions-both negative and positive-will remain using the firm for any lengthy time. Usually technology decisions are created unilaterally inside the It (IT) group, that senior management made a decision to don’t have any input or oversight. For that Board of the business to do its duty to workout business judgment over key decisions, the Board should have a mechanism for reviewing and guiding technology decisions.

A current example where this type of oversight might have helped was the Enterprise Resource Planning (ERP) mania from the mid-1990’s. At that time, a lot of companies were investing millions of dollars (and often vast sums) on ERP systems from SAP and Oracle. Frequently these purchases were justified by executives in Finance, HR, or Operations strongly promoting their purchase as a means of checking up on their competitors, who have been also installing such systems. CIO’s and line executives frequently didn’t give enough considered to the issue of steps to make a effective transition to those very complex systems. Alignment of corporate sources and control over business change introduced by these new systems was overlooked, frequently producing a crisis. Many vast amounts of dollars were allocated to systems that either shouldn’t happen to be purchased at any were bought prior to the client companies were prepared.

Certainly, no effective medium or large business could be run today without computers and also the software which makes them helpful. Technology also represents among the single largest capital and operating line item for business expenses, outdoors at work and manufacturing equipment. For these two reasons, Board-level oversight of technologies are appropriate at some level.

Can the Board of Company directors still leave these fundamental decisions exclusively to the present management team? Most large technology decisions are inherently dangerous (research has proven under half deliver on promises), while poor decisions take many years to be repaired or replaced. Over 1 / 2 of we’ve got the technology investments aren’t coming back anticipated gains running a business performance Boards are consequently becoming involved with technology decisions. It’s surprising that just 10 % from the openly traded corporations get it Audit Committees in their boards. However, individuals companies have a obvious competitive advantage by means of a compounded annual return 6.5% more than their competitors.

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