Board Level Technology Oversight

Background

Over the last 10 years, Information technology investments have grown tremendously. The chart below shows that the capital expenditure for equipment and software outpaced investments in structures by $200 Billion.

 

The following chart shows the breakdown of Information and Communication Technology expenditure by industry. In 2009, excluding the Information industry, Finance and Insurance, Manufacturing and Healthcare took the top 3 spots for technology related capital expenditures.



 

 

Discussion:

The advancements in technology are fueling hopes for new products, increasing productivity and creating market differentiators. National Association of Corporate Directors indicates that boards should get more involved and create oversight around strategy development, execution, course correction, and related information and control systems. Considering the amount of investments going into technology it is imperative that boards consider strategic oversight over technology to elevate performance, gain foresight and instill confidence. 

Just as audit, compensation, strategy and risk, technology are entrenched in every business, it is critical to showcase technology visibility to the board. Having a board with a deep understanding of technology and an appreciation for its strategic value can be huge, according to Rob Carter, FedEx CIO and executive vice president of FedEx Information Services.

As Wall Street Journal points out,

• Boards are starting to pay attention to “Tech Governance”
• Only 5.2% of public companies have tech committees (but trending upward)
• Morgan Stanley’s Tech Committee focuses on both offensive and defensive strategies 

 

What should board governance focus on?

1.      Technology Readiness - This will cater to the board's strategic vision of growing the business/service/offering and the associated technology readiness.

2.      Information Security Assessment - This is fast becoming a major hurdle. All industries are faced with it.

3.      Technology investments – Valuation of investment performance

Once the basics are covered the board governance can certainly focus on a 5 year technology roadmap that is business and market specific. The ultimate aspiration should be to have a technology "intensity score" as a dial that can be monitored by the entire board.