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You have been employed in a large organization which spends-(Answered)


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You have been employed in a large organization which spends millions of dollars in Information Technology and Systems.? The Chief Information Officer, Glenda Jackson, went to a conference and approached you after reading the article by Wilkin, Campbell, Moore and Van Grembergen (2013).? She says:

?I want you to write an essay to submit to a conference for Accounting Information Systems.? This makes our business look good and we show that we are leaders in value creation.? Our objective is to increase profits by either increasing revenues, decreasing costs or being more flexible and innovative.

?In your essay, critically evaluate Willkin et al (2013) and analyse the meaning of co-creation of value from IT, who or what creates value, the role of governance and control of IT in this co-creation of value.? In this essay, make an informed opinion IF and how co-creation of value occurs from the governance and control of IT.?


  • Write an essay of no more than 1000 words (excluding references) that meets the expectations of your CIO:



Vol. 27, No. 1


Spring 2013


pp. 283?306



American Accounting Association


DOI: 10.2308/isys-50355



Co-Creating Value from IT in a Contracted


Public Sector Service Environment:


Perspectives on COBIT and Val IT


Carla Wilkin


Monash University


John Campbell


Stephen Moore


University of Canberra


Wim Van Grembergen


University of Antwerp


ABSTRACT: Research that examines Information Technology (IT) value has called for


studies to explore the co-creation of value, including in multi-firm environments. This


study draws upon the practice of IT governance in a successful large-scale IT


deployment, wherein private and public firms were involved as customer service


providers with the principal, a large government department. Drawing on customercentric co-creation concepts from marketing research, through comparative analysis and


related application to our case study, we detail the merit of a service-oriented approach


to co-creating value from IT and the assistance COBIT and Val IT can provide.


Importantly, we identified determinates of co-created value in a multi-firm environment,


although our analysis reveals some need to evolve COBIT and Val IT to improve


guidance regarding the mechanisms required to achieve this in such environments.


Keywords: IT value; IT governance; case study; multi-?rm environment; public and


private sector; co-creation of value; COBIT 5; Val IT.









ased on the perspective that value from investment in Information Technology (IT) arises


from ??what the organization can do with IT rather than the technology itself?? (IT


Governance Institute [ITGI] 2009, 8), this paper explores co-creating value from IT in use


and reviews how well Val IT 2.0, COBIT 4.1,1 and the new COBIT 5 frameworks guide the


The authors express their sincere gratitude to Roger Debreceny and the reviewers for their insightful commentary during


the review process.


Editor?s note: Accepted by Roger S. Debreceny.



Published Online: November 2012






Control Objectives for Information and related Technology.









Wilkin, Campbell, Moore, and Van Grembergen



mechanisms for such an approach. In our case study, co-creating value was central to successful


deployment of IT that involved a major Australian government department known as the


Department of Education, Employment, and Workplace Relations (DEEWR), whose replacement


of its national IT Employment Services System (ESS) is widely acknowledged as having improved


performance (DEEWR 2009b). Such findings are interesting, as creating value from investment in


IT can be challenging (Simnet 2009), with ??20 to 70 percent of large-scale investments in


IT-enabled change [being] . . . wasted, challenged or fail to bring a return to the enterprise?? (ITGI


2009, 7).


IT investment is even more perplexing when such deployments relate to multiple firms (Kohli


and Grover 2008) or the provision of public sector services (Campbell et al. 2009; Irani and Love


2008). Examples of failure to create value include Belgacom, the leading telecommunications


company in Belgium, which found difficulties with its IS project selection process that aimed to


achieve value through investment in core projects that aligned with the company?s IS strategy. The


Finance Director (Bouckenooghe) found significant issues in ??that project risk and strategic value


were not brought into prioritization discussions in an informed, structured way?? (Viaene et al. 2007,


54). Similarly, in 2004, the U.K.?s National Audit Office criticized EDS regarding the IT system


that it was supplying to the U.K.?s Child Support Agency. Problems included the rollout being two


years late and failure to meet required outcomes when, following its introduction in March 2003,


the Child Support Agency had to write off ?1 billion in claims, while uncollected child support


payments amounted to ?750 million (BBC News 2004). In Australia, failures to create value from


IT investment are equally apparent. Examples include Queensland Health, where management


switched payroll systems without sufficient testing, leading to employees being significantly


overpaid or underpaid, and an additional AU $422 million being required to patch problems


(Fynes-Clinton 2012). Similarly, the Myki smartcard transport ticketing system in Victoria is an


??$850 million [IT] project [that is] . . . $350 million over budget, nearly three years overdue, and . . .


projected to cost $500 million to run over 10 years?? (Sheridan 2009, 1). All illustrate the need to


focus on value-in-use, rather than in an IT product.


In delivering value from IT investment, lessons from the private sector focus sharply upon IT


governance (ITG) to direct and control IT within a firm (Cadbury 1992; Organisation for Economic


Co-operation and Development [OECD] 1999). Here, a survey of 800 business and IT respondents


reported that ITG practices generated lower IT costs (38 percent) and improved return on


investments (27.1 percent) (ITGI 2011). Related research has shown that ??companies with better


than average IT governance earn at least 20 percent higher return on assets?? (Weill and Ross 2004,


1). Furthermore, public sector government reports ascribe problems of poor returns to a lack of ITG


(Gershon 2008).


ITG is regarded as integral to achieving improved returns through its role in ensuring a focus


on the alignment of business and IT strategies, on risk and resource management, on delivery of


value, and on measurement of performance (ITGI 2006). Frameworks such as Val IT and COBIT


claim to provide comprehensive, practice-based structures for ITG that include guidance in making


IT investment decisions and using IT to create enterprise value (ITGI 2006). Nonetheless, there are


challenges in applying these frameworks, and most studies that have reviewed them usually


examine private sector and/or single firms (De Haes and Van Grembergen 2010; Higgins and


Sinclair 2008). Consequently, their application in the public sector is less known. This is a concern,


as systemic differences exist between public and private sector firms and their operating


environments. Further, there is complexity in co-creating value when it must encompass the needs


and values of multiple stakeholders and firms. Given the increasing focus on inter- and


intra-organizational scenarios, research that examines co-creating value through business/IT


strategies in such contexts offers much-needed fresh insights (Wilkin and Chenhall 2010).


Journal of Information Systems


Spring 2013



Value from IT in a Contracted Public Sector Environment: Perspectives on COBIT and Val IT






Thus, the aim of our study is two-fold. First, by exploring the efficacy of an alternative


approach to understanding how value may be delivered by ITG in a multi-firm environment with


public and private sector participants, we address an identified need, namely, that value delivery is


under-researched in the context of practice (Wilkin and Chenhall 2010). Second, we review the


extent to which Val IT and COBIT guide the processes and metrics required to co-create IT value in


this practical setting. In doing so, our study addresses another identified research gap, namely, that


very little research has investigated ITG as a whole (Wilkin and Chenhall 2010). While the


frameworks provided by the IT Governance Institute (ITGI) are widely respected for their practical


guidance concerning ITG, their merit in delivering co-created value2 (particularly for ITGI?s newly


released COBIT 5) has not been comparatively explored (De Haes and Van Grembergen 2010).


Thus, this is our focus.


We begin with a review of the literature about IT value, alignment, and governance, and related


frameworks. Next, we outline factors that impact these in the public and private sectors. We then


examine marketing research?s mechanisms for co-creating value and evaluate the relevance of their


service-dominant approach. The next section details the research method, namely, use of a case


study to test the relevance of the chosen service-dominant framework to co-creating value from IT


investment, the study?s context, and documents analyzed. Through comparative analysis, we


investigate the effectiveness of Val IT and COBIT 4.1 and comment upon the potential of COBIT 5


for the same purpose. Our findings demonstrate some need to evolve these frameworks to better


acknowledge the strategies and processes required to ensure value creation for customer and


principal stakeholders alike. We conclude by outlining the limitations of our study and related


opportunities for future research.




IT and Accounting Information System (AIS) research have long recognized the importance of


research into IT value. The foci here include IT productivity, organizational impact of IS


(Information Systems) on economic performance, and assessing IS value through IT capability


(Lim et al. 2011), as well as performance metrics like ROI and the Balanced Scorecard (Masli et al.


2011; Hirscheim and Klein 2012). Although the concept of IS as a service has evolved (DeLone


and McLean 2003), the enabler of value creation is often conceptualized as strategic business/IT


alignment to take advantage of arising business opportunities. Conversely, research into stakeholder


participation, technology acceptance, and system use/perceived usefulness often considers IT


effectiveness or efficiency. Of particular significance are calls in the literature that ??the next


generation of IT value studies should focus on the co-creation of value through IT rather than on IT


value alone . . . [Herein c]o-creation represents the idea that (a) IT value is increasingly being


created and realized through actions of multiple parties, (b) value emanates from robust


collaborative relationships among firms, and (c) structures and incentives for parties to partake in


and equitably share emergent value are necessary to sustain co-creation?? (Kohli and Grover 2008,




While marketing research has demonstrated that successful outcomes can be achieved from a


service-dominant approach for value co-creation, related research in IT is still lacking. Our


application of this alternative approach offers a fresh perspective, for AIS research has been


identified as being too dependent upon the use of contingency theory, agency theory, and


transaction cost economics (Granlund 2011). Our contribution is strengthened in that Granlund?s


(2011, 8) review indicates the need for AIS research to use methods beyond quantitative





Value created that is of benefit to all stakeholders, both internal and external to the firm.



Journal of Information Systems


Spring 2013






Wilkin, Campbell, Moore, and Van Grembergen



measurements that ??can hardly capture the multifaceted organizational life anywhere near to a


comprehensive picture.??


ITG aims to capture all elements related to maximizing benefits from IT investment through


focusing on strategic business/IT alignment, risk management, resource management, as well as


value delivery and performance measurement (ITGI 2006). Nevertheless, aspects of ITG are yet to


be fully appreciated, for ??just as all complex organizational initiatives require time to discover and


capture the interactional scope of their identity, so too [does] . . . ITG,?? with little research into the


mechanisms for value creation and delivery (Wilkin and Chenhall 2010, 137).


Given that IT is increasingly regarded as a facilitator rather than a source of competitive


advantage (Santhanam and Hartono 2003), it is increasingly perceived as being a service, wherein


to be successful, the ??services provided must be perceived by the customer to deliver sufficient


value in the form of outcomes that the customer wants to achieve?? (Cartlidge et al. 2007, 12). This


concept of value being derived in terms of value-in-use is relevant to ITG in both an intra- and


inter-organizational context. Herein, marketing research has established the importance of a focus


that defines value creation in terms of how customers create it through use, with firms as joint


value-facilitators with customers (Gronroos 2008). In an ITG context, such customers


(stakeholders) may, of course, be internal or external. These relationships are even more complex


in an inter-organizational ITG context, as financial and strategic imperatives may create scenarios


where the principal has considerable power over its customer counterparts (including mandating


systems). This has implications for value-creating investment choices, processes, and performance




IT Value, Alignment, and Governance


Value has been defined ??as the total life-cycle benefits net of related costs, adjusted for risk and


(in the case of financial value) for the time value of money?? (ITGI 2009, 10). It is described in


terms of the direct and indirect economic impacts on a firm or network of firms (Kohli and Grover


2008), and achieved through the consumption of labor and expenditure to adapt firms, their IT


architectures, processes, and people, so that IT provides beneficial outcomes. Like its predecessors


(Val IT 2.0 and COBIT 4.1), COBIT 5 aspires to achieve a firm?s ??value creation through effective


and innovative use of enterprise IT?? (International Systems Audit and Control Association


[ISACA] 2012, 15).


The Information Technology Infrastructure Library (ITIL), a widely adopted guide for IT


service management, recognizes issues regarding delivery of value from IT. ITIL notes that ??often


this value is not realized. For an IT investment to provide benefit, the resulting IT service must be


well planned, well designed, well managed and well delivered,?? so that it is well received by all


stakeholders (Kneller 2010, 3). This understanding, that value from IT investment is realized in its


use as a service, is readily apparent in the previously noted failures where Myki, Queensland


Health, and ITGI (2009) all reported heavy losses when IT investment failed to deliver usable


services. Similarly, marketing research would argue that there is no value in product, only value-inuse (Vargo and Lusch 2008; Gronroos 2008) through the exchange of service (Kotler 1977). In


heralding this service-dominant understanding of value, economist Penrose (1959) formulated the


theory that resources are not the inputs to production; rather, inputs are the services that resources


can supply. As such, it is through exchange that the potential services of resources are released and


value arises (Ha?kansson and Prenkert 2004). Furthermore, ??the importance of physical products . . .


[resides] not so much in owning them as in obtaining the services they render?? (Kotler 1977, 8).


With service defined as ??the application of one?s resources for the benefit of another entity??


and ??the application of specialized competences (operant resources?knowledge and skills),


through deeds, processes, and performances for the benefit of another entity or the entity itself??


Journal of Information Systems


Spring 2013



Value from IT in a Contracted Public Sector Environment: Perspectives on COBIT and Val IT






(Vargo and Lusch 2008, 28, 26), such understanding is pertinent to IT investment across firms.


Herein, the core to co-creating value is active collaboration, where customers must do more than


customize, they must ??collaborate with vendors to create unique value?? (Schrage 1995, 154).


Marketing researchers view this interactive mechanism as critical. They argue that in determining


how to maximize service outcomes, the value foundation is not achieved without customers


contributing knowledge through use or through adding resources or associated skills (Gronroos


2008). Further, without their input, value-in-use is minimized or unrealized. Thus, marketing


research views the role of firms as being to provide customers with the necessary resources and the


value foundation. Hence, firms are value facilitators that attain better results by actively facilitating


and influencing value fulfillment, thereby becoming value co-creators (Gronroos 2008; Vargo and


Lusch 2008).


In this study, we extend the idea of achieving co-created value through service delivery to the


less well explored multi-firm environment, where principal and customer firms must exchange/


create mutually acceptable processes and results in order to achieve mutually beneficial outcomes


from the IT product in use. In retail, the more customers buy and use products (like grocery items),


the more a firm achieves value. Alternatively, in an inter-organizational ITG context, both the


principal firm and its customer stakeholders must beneficially use the IT product for value to be


generated. Despite the powerful influence of multi-firms on economies and international relations,


this complexity does not diminish the need for further research, with current literature demonstrably


scant on how to optimize IT investment value in these environments.


Some recognition of value residing in use as an outcome of services exchanged is evident in the


difficulty involved in articulating IT value (Goldstein et al. 2003). For example, timeliness and IT


complexity are difficult to capture in single return-on-investment (ROI) formulas. There are similar


problems in applying Activity-Based Costing (ABC), where IT investment costs are allocated to


where the IT activity takes place, which may be different from where benefits arise (Peacock and


Tanniru 2005). Equally, lagging value creation, which is captured by the Productivity Paradox


(Brynjolfsson and Hitt 1998), relates to optimal use lagging initial implementation. Similar


difficulties in understanding IT value are apparent in a survey of 1,217 IT professionals, in which


two-thirds of firms are reported as failing to fully measure IT value (Strassmann 2004; Information


Technology Newsweekly 2009), with 62 percent using ROI and 49 percent using payback period


(ITGI 2005).


For marketing research, a central mechanism for value co-creation is interactivity in active


collaboration. Such an approach accords with the ITIL?s view that value resides in utility and


warranty or reliability of delivery (Cartlidge et al. 2007). IT research has established that in a multifirm environment, performance appraisal requires mechanisms that facilitate sharing emergent value


in ways that sustain collaboration and relational value. Accordingly, there is need for research that


expands economic value to ??include indirect and intangible value such as agility, flexibility, and


first-to-market?? (Kohli and Grover 2008, 33). The next section provides an overview of the ITGI


frameworks whose relevance to value co-creation will subsequently be appraised by referencing our


case study.


Val IT 2.0, COBIT 4.1, and COBIT 5


In response to business needs, the ITGI developed Val IT to ??unambiguously measure, monitor


and optimize the realization of business value from investment in IT?? (ITGI 2006, 6). It advises that


Val IT should be used in conjunction with COBIT 4.1, which sets ??best practice for the means of


contributing to the process of value creation?? (ITGI 2006, 8). Accordingly, studies are needed that


examine the required interactivity between these frameworks and their applicability in a multi-firm


environment (De Haes and Van Grembergen 2010; Wilkin and Chenhall 2010).


Journal of Information Systems


Spring 2013






Wilkin, Campbell, Moore, and Van Grembergen



Before evaluating their effectiveness in directing strategies and processes for co-creating value


in a multi-firm environment, we provide a brief overview of their structures. Val IT assists with ITG


by providing firms with guidelines that address assumptions, costs, risks, and outcomes related to


IT investment portfolios. In doing so, it focuses on two fundamental questions, namely, whether (1)


strategically, the right things are being done, and (2) the benefits (value) are being gained. COBIT


4.1 provides an internal control framework for IT by requiring firms to define their motivation for


IT investment, the stakeholders, and the desired outcomes (ITGI 2007, 9). Its four interrelated


domains (plan and organize, acquire and implement, deliver and support, and monitor and evaluate)


provide detailed direction for processes and controls.


In 2012, building on the expertise acquired through prior frameworks, the International


Systems Audit and Control Association (ISACA) released COBIT 5. Unlike COBIT 4.1, with its


interrelated domains, COBIT 5?s framework is built upon five basic principles: Meeting


Stakeholder Needs; Covering the Enterprise End-to-End; Applying a Single, Integrated


Framework; Enabling a Holistic Approach; and Separating Governance from Management.


Further, the organizational resources for governance are called Enablers, and include Principles,


Policies and Frameworks; Processes; Organisational Structures; Culture, Ethics and Behavior;


Information; Services, Infrastructure and Applications; and People, Skills and Competencies


(ISACA 2012). Insertion of these principles into COBIT 5 juxtapositions it between ISO/IEC


38500:2008 (International Standards Organization [ISO] 2008) and prior ITGI frameworks


(COBIT 4.1, Val IT 2.0, and RISKIT). Similarities between these two include that Evaluate,


Direct, and Monitor are the governance imperatives in COBIT 5, which closely relate to ISO/IEC


38500:2008?s tasks of the same name, and that the six principles in ISO/IEC 38500:2008 and the


five in COBIT 5 also show considerable commonality. However, COBIT 5?s principles appear to


afford a more process view in comparison to the avowedly guiding principles of ISO/IEC


38500:2008. Further, COBIT 5 extends guidance beyond governance with the additional


management domains of Align, Plan and Organize; Build, Acquire and Implement; and Deliver,


Service and Support. These purportedly relate to the governance imperatives via the five principles


and seven enablers that are defined as factors that ??individually and collectively, influence whether


something will work?in this case, governance and management over enterprise IT?? (ISACA


2012, 27).


COBIT 5 makes two claims that are relevant to this study, namely, (1) ??to provide a


comprehensive framework that assists enterprises in achieving their objectives for the governance


and management of enterprise IT,?? and (2) ??to help enterprises create optimal value from IT . . . [by


governance that encompasses] considering the IT-related interests of internal and external


stakeholders?? (ISACA 2012, 13). In recognizing the merit of these, we now explore what is meant


by co-created value and whether Val IT and/or COBIT provide the necessary guiding mechanisms.


Co-Creation of IT Value and Factors that Impact this in the Public and Private Sectors


Prior research into creating business value from IT has almost exclusively focused on the


private sector (Irani and Love 2008). Yet, significant differences are apparent between public and


private sector firms regarding specific issues, like control implementations (i.e., Wallace et al.


2011), and generic issues, like complexity, lack of integration of IT strategies, attitude to decisionmaking, propensity to learn from experience, and risk foci (see Table 1).


While the public and private sectors face similar managerial-level IT issues and challenges,


systemic differences suggest the importance of exploring value co-creation in public-private


partnerships. In public sector environments, IT investment and value issues must contend with a


range of influences both economic and societal. These include government agendas (including


reducing unemployment and the provision of education), political cycles and influence, multiple?


Journal of Information Systems


Spring 2013



Value from IT in a Contracted Public Sector Environment: Perspectives on COBIT and Val IT








Systemic Differences between Public and Private Sector Firms Regarding Issues for IT




Significant Issues


for IT Initiatives



Characteristic Focus in the Public





Characteristic Focus in the Private








4? dimensional world (government,


citizens, political imperatives, and


the media) increasing demand for


??joined up?? projects.






Emphasis on announcements and


initiatives can proliferate with little


or no integration and prioritization.


??Make decisions correctly?? versus


??make the right decisions.??



3-dimensional world (shareholders,


the organization, and regulatory


bodies). Projects require consistent


ICT infrastructure but, generally,


the scope of access is more




Market responses drive value: related


to integration and prioritization of


initiatives, i.e., strategic planning.


Focus on decision-making related to


strategic planning, not a political




Financial accountability and demands


of regulatory compliance


encourage organizational learning.


Focus on operational and financial








Learning from Experience



Weak institutionalized learning as


accountabilities are ill-de...


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