Boards of Directors and Technology Governance: The Surprising State of the Practice

Abstract

Companies spend anywhere from 1 percent to 10 percent of their gross revenues on information technology; some financial services companies actually spend much more. For a company with revenue in the $5 billion range, this could mean an annual technology expenditure of $500 million. Do boards of directors “govern” technology investments? Are they involved in major technology decisions? What role should they have in the acquisition, deployment and support of technology? The analysis reported in this document is based on a survey and follow-up interviews to more than 50 senior business technology executives. The findings reported benchmark the state of the practice—and suggest how companies can improve business technology governance. The prescriptive literature suggests that it is time for boards to assume meaningful oversight of technology investments and strategies. The data we collected (and the interviews that we conducted) support the descriptive literature: there is relatively little board involvement in technology planning or oversight. The overall conclusion is that boards of directors do not participate nearly enough in major technology decisions, are surprisingly out of the technology loop on technology issues, and are therefore missing opportunities to optimize operational and strategic technology investments. The paper ends with recommendations about the role that boards of directors should play in technology decision-making.

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