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Question

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.?

Requirements

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

JOURNAL OF INFORMATION SYSTEMS

 

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.

 


 

I. INTRODUCTION

 


 

B

 


 

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

 


 

1

 


 

Control Objectives for Information and related Technology.

 


 

283

 


 

284

 


 

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

 


 

285

 


 

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.

 

II. LITERATURE REVIEW

 

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,

 

28).

 

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

 

2

 


 

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

 


 

Journal of Information Systems

 

Spring 2013

 


 

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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

 

outcomes.

 

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

 


 

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(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).

 

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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

 


 

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TABLE 1

 

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

 

Initiativesa

 

Significant Issues

 

for IT Initiatives

 


 

Characteristic Focus in the Public

 

Sectorb

 


 

Characteristic Focus in the Private

 

Sectorc

 


 

Complexity

 


 

4? dimensional world (government,

 

citizens, political imperatives, and

 

the media) increasing demand for

 

??joined up?? projects.

 


 

Initiatives

 


 

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

 

restricted.

 

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

 

audience.

 

Financial accountability and demands

 

of regulatory compliance

 

encourage organizational learning.

 

Focus on operational and financial

 

risk.

 


 

Culture

 


 

Learning from Experience

 


 

Weak institutionalized learning as

 

accountabilities are ill-de...

 

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