A DIVESTMENT FRAMEWORK for IT GOVERANCE: Case Studies in a South African Mining Industry
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A DIVESTMENT FRAMEWORK FOR IT GOVERANCE: Case Studies in a South African mining industry by Annamaré Wolmarans Submitted in fulfilment of the requirements for the degree Philosophiae Doctor (INFORMATICS) in the Department of Informatics School of Information Technology in the Faculty of Economics and Management Sciences University of Pretoria Supervisor: Prof. C.J. Kruger Co-supervisor: Dr N. Croft June 2017 ACKNOWLEDGEMENTS I would firstly like to thank my Lord, God Almighty, for providing me with knowledge and the ability to use my gifts to honour and to worship Him in all I do. Secondly, I would like to thank my husband, Jaco, for always supporting me, for always being there when I need him and for taking part in my journey. My supervisors, Professor C.J. Kruger, for his guidance, patience and encouragement during my study, and for contributing to my final understanding of the subject matter presented in this thesis. My co-supervisor, Doctor N. Croft, for his words of encouragement and optimism, and for assisting me in focusing on the important factors in the compilation of this thesis. My friends and family for their ongoing support and interest in the progress of this thesis. Page 1 THESIS SUMMARY Title: A Divestment Framework for IT Governance: Case studies in the South African mining industry Author: Annamaré Wolmarans (28400124) Supervisor: Prof. C.J. Kruger Co-Supervisors: Dr N. Croft Department: Department of Informatics Economic and Management Sciences, University of Pretoria Degree: Ph.D. (Informatics) Keywords: Divestment, Mine Closure, IT Alignment, IT Governance, Closure Framework ABSTRACT Business divestment tends to be the result of a change in the business strategy or due to changing economic circumstances that force a company to either close or demerge business units that are no longer profitable or do not fit the company’s profile. Business divestment strategy forms part of a company’s long-term business goals to ensure long-term viability, maximise return on investment and to maintain the company’s competitive advantage. Business divestment strategies are often a result of a company that needs to reposition itself with regard to its competitive position in the market. Divestments and closures are often described as strategy’s missing link. The South African coal mining industry is a mature industry spanning a number of decades; as a result, a large number of collieries have closed down and numerous others are approaching end of life and will cease production in the near future. Mine closure or divestment is an instrument of strategy to free up capital and resources and to assist the business to refocus on core activities and to reverse over-diversification. The business success of a Page 2 divestiture is usually evaluated by the measure of success in achieving the underlying strategic goal that was set when the divestment strategy was adopted. Strategy decisions need to embody a sound governance foundation. Al internal departments and operations need to be aligned with the company’s goals and strategy and should persevere in focusing its actions on obtaining these goals. The goal of this study is to identify what the essence, content and characteristics of a divestment framework for IT governance should be. In order to achieve this goal, the research focused on the following objectives as reflected in the research question, sub-research questions and chapter divisions: • To create an understanding of the South African mining environment, but more specifically the coal mining industry by depicting and describing the impact of the macro and market environment in strategy formulation to align with a mine closure or divestment decision. • To establish the impact of a divestment strategy on the IT governance model and IT- business alignment and determine the steps that IT and business should take to ensure alignment in order to support a divestment strategy. • To determine if any of the existing IT governance frameworks and standards could be implemented or adopted to serve as a divestment framework for IT governance. • To establish what the content and logical steps for a divestment framework for IT governance should include and how it should be deployed. • To test the proposed divestment framework for IT governance for validity and soundness at the hand of three case studies. As a result of the literature review and study conducted for this thesis, the author determined the following specific dimensions pertaining to the fundamental building blocks of a divestment framework for IT governance to support company divestment, more specifically mine closure: • The IT department needs to understand the role it needs to fulfil in the company to support the achievement of the company’s business strategy. Information systems and infrastructure are deployed to influence unparalleled business proficiencies, merge and divest companies and business units, restructure industries, and expedite global competition. The company’s IT strategy needs to align itself with the business strategy in order to support the company when a divestment strategy is implemented. Because of the complexity and inter-relatedness of Information Technology systems and infrastructure with the rest of the business units business processes, a divestment initiative should include the steps that need to be taken to de-integrate or disentangle the IT infrastructure and IT portfolio from the rest of the company. Page 3 • Poor or misalignment of business and IT embodies itself in various ways, such as expensive IT investments generating low returns, the establishment of highly plausible applications that are neglected, the existence of avoidable inefficiencies, delays and redundancy. The augmentation of IT to company achievement is a sphere where the idea of fit of IT and business strategy is particularly relevant. No solitary activity will empower a company to attain and preserve alignment. There are no silver bullets. The technology and business biospheres are too progressive. Actualising alignment is metamorphic and necessitates concentrating on maximising the promotors and minimising the obstacles that ameliorate the integration of business and IT. It demands strong accords and leadership, compelling communication and pertinent prioritisation. • IT governance resides in the ambience of the company’s umbrella regulatory environment. Governance guarantees the evaluation of available options, that implementation is suitably supervised, and attainment is monitored, and these similar principles relate to IT governance. The alignment of company objectives and IT is primarily about governance and only occasionally related to technology. IT governance consists of defining the rules and constructing the proficiency to run IT to create value for stakeholders. The progression of IT governance occurs at the junction of and in reaction to corporate proceedings and an inconstant environment. The mixture of corporate practices that have evolved over time and the contemporary encumbrances spawned from a dynamic environment cater for the evolvement of IT governance. The evolvement of IT governance, in turn, envelopes the evolution of IT governance for a specific company and circumstances that impact IT governance. • A number of IT governance frameworks are available and postulate an IT governance model that consists of numerous definitions and foundations. These frameworks have a diverse variety of strengths and weaknesses. Companies might consider the deployment of particular components from a number of frameworks and standards to form the company’s unified and comprehensive IT governance framework. Despite the existence of a variety of protocols, such as IT control frameworks, models and standards, the persisting nature is theoretical. Control frameworks tend to be viewed in isolation from one another and implemented in an ad hoc approach that boils down to an inefficient IT governance system, focusing on either strategic or operational areas, but never on both simultaneously. All currently available IT governance frameworks are management frameworks, and most of them generally conform to the management processes for the provisioning and deployment of new IT infrastructure or governance mechanisms. These frameworks do not address the concerned areas in the IT environment when moving from the limited focus of the supply, maintenance and support of IT to consider the broader Page 4 question of how companies actually use, and ultimately dispose of IT when a divestment strategy is implemented. • Although some studies exist on the topic of IT integration and integration processes, and on decision making models during mergers and acquisitions, no studies could be found that provide guidelines on how to de-integrate IT software systems, infrastructure and architecture during a business unit divestment or mine closure process. A need exists for a decision support model or governance framework that is based on the characteristics of a business unit divestment or mine closure process. This model should outline and represent the variables that influence the untangling decisions and the relationship between them. The IT governance framework created to fit the operational model of the company exactly provides a number of benefits, such as identifying business opportunities, risks, benefits and impacts, establishing IT standards, policies and guidelines and guaranteeing uneventful transformation with regard to policy, employee productivity, transaction changes, efficient