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IT BSC: A Comprehensive Framework for IT Evaluation, IT Management,

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 IT BSC: A Comprehensive framework for IT
Evaluation, IT Management, and IT Governance
Mohammad Ibraheem Ahmad
MSc, MAIS, Alexandria University
Alexandria, Egypt
Mohammad_ibraheem_77@yahoo.com
Abstract—This Paper aims to review extended use of Balanced
Scorecard (BSC) in Information Technology field. Since early
introduction of BSC in IT field, it was used for years as a
measurement tool. After maturity of IT BSC as an IT
performance evaluation framework, it was considered as
strategic management tool. Recently, IT BSC has been developed
to become IT Governance tool. The contribution of this paper is
to put the fragmented frameworks of IT Balanced Scorecard into
a comprehensive framework of IT Evaluation, IT Management,
and IT Governance.
Keywords-IT BSC; IT Evaluation; IT Management BSC; IT
Governance BSC; Green IT BSC.
I. INTRODUCTION
While organizations sought to meet the growing needs of
information, especially in the modern business environment,
which is characterized by risk and uncertainty, they adopt
information technology to enable them to meet their
information needs. Nowadays, the information technology is
not a competitive advantage in organization anymore [1]. The
use of IT has the potential to be the major driver of economic
wealth in the 21st century [2].
Recent surveys indicate that issues such as ‗measuring the
value of IT‘ and ‗evaluating IS performance‘ are of great
importance to managers [3]. In spite of this, it is difficult to
ascertain the benefits of developing software applications [4].
The nature and characteristics of IT projects investments
impose methods of evaluation and criteria that suit this special
nature [5], [6].
In this regard, there was a variety of information
technology evaluation models. Some of these models used
classical economic analysis (This includes productivity models,
economic welfare analysis) to evaluate information technology.
Others used profitability analysis to measure improvement in
performance and profitability as a result of the information
technology use. Others relied on strategic analysis and market
based models to evaluate information technology. Recently, a
trend of IT evaluation models, which relies on risk and
portfolio management, emerges. A widely acceptable
framework is the Balanced Scorecard (BSC), was introduced
by Kaplan and Norton in 1990s as a framework of performance
evaluation. Since early introduction of BSC in IT field, it was
used as a framework of IT Evaluation. Later on, it was used as
a framework of IT Management, and IT Governance.
In proceedings of Third International Conference on ICT in our lives 2013
―Information Systems Serving the Community” (ISSN 2314-8942), Information
Systems and Computer Science Department, Faculty of Commerce, Alexandria
University, Alexandria, Egypt, December 21-23, 2013.
This paper is organized as follows. Section II shows an
overview of IT Investments. Section III shows an overview of
BSC. Section IV reviews theoretical foundation of IT BSC.
Section V shows IT BSC development. Section VI reviews IT
BSC as an IT evaluation framework. Section VII reviews IT
BSC as an IT Management framework. Section VIII reviews IT
BSC as an IT Governance framework. Finally, Section IX
shows Conclusions.
II. AN OVERVIEW OF IT INVESTMENT EVALUATION
Many methods and techniques have been suggested over
the years to evaluate IT and IS investments. Traditional
methods focus on well-known financial measures [1], [3], such
as the Return On Investment (ROI) (in which total lifecycle of
investment is taken into account. While time value of money is
not taken into consideration, Risk can be entered into the
appraisal to a certain extent [7]), Net Present Value (NPV)
(which calculates the present value of the investment‘s money
flows, using a discount rate [7]), the Internal Rate of Return
(IRR), (which takes the time value of money into consideration
by introducing a discount factor, but risks are not accounted for
in mutual exclusive investment projects [7]), and the Payback
Period (PP) (in which Projects are judged on the period needed
to compensate the initial investment [7]).
On the other hand, methods derived from other disciplines
were used to evaluate IT Investments. These include classical
economic models like productivity models (which measure IT
productivity) [8], [9], [10], and economic welfare analysis
(which measure consumer welfare; value added to consumer as
a result of information technology use) [8], [11]. Others used
profitability analysis to measure improvement in performance
and profitability as a result of the information technology use
[8], [12], [13]. Others relied on strategic analysis [14], and
market based models [15], to evaluate information technology.
Emerging trends in information technology assessment include
Real Options Approach [16], [17], Portfolio Management
Approaches and Value at Risk [18], [19], as well as the
Balanced Scorecard (IT BSC).
It has been suggested that it may be appropriate to evaluate
IT using Balanced Scorecard (BSC) [3]. This arguments stem
from the fundamental assumption that an organizations‘
primary objective is that of maximizing profit/shareholders
wealth [3]. This assumption has led to an emphasis on financial
appraisal techniques that are consistent with these objectives
[7]. Therefore; financial scales must be complemented with
other factors [1]. Recently, results of an exploratory study
conducted in Egypt indicate that among all these former
measures and methods of IT evaluation, IT BSC was the most
considered one by participants [5].
Relying on such financial measures and data will not create
value in future, as they present an imperfect and limited view
of the business performance [1]. As [3] claims, these methods
are best-suited to measure the value of simple IT applications,
such as transaction processing and office automation systems.
Unfortunately, evaluation methods that rely on financial
measures are not as well-suited for newer generations of IT
applications [3].
All these factors account for an increasing need for a better
framework of IT evaluation. This results in a move towards IT
BSC framework.
III. BSC : AN OVERVIEW
In 1990s most of the corporations were measuring their
organizational performance through different financial
measures [20]. Kaplan and Norton have argued that traditional
financial accounting measures (like the ROI and Payback
Period) offer a narrow and incomplete picture of business
performance, and that a reliance on such data hinders the
creation of future business value [3]. Such financial measures
give misleading signal, leading to a need of tool that can
measure the performance of organization from multiple
dimensions [20].
Kaplan and Norton introduced the Balanced Scorecard
(BSC) in a 1992 Harvard Business Review article [21]. They
coined the term BSC in a series of articles for the Harvard
Business Review in the mid-1990s [22]. BSC is a mixture of
(traditional) Capital Investment Appraisal Techniques (CIATs)
and new evaluation methods [7]. According to 2GC Ltd
(2009), Balance scorecard is a tool used by the management to
keep a record of the activities and actions of the staff and to
control and monitor the results or consequences of those
actions [20].
Kaplan and Norton have introduced the balanced scorecard
at an enterprise level [23]. They believed that traditional
financial measures needed to be supplemented with the key
operational measures which determined financial success [24].
Kaplan & Norton's fundamental premise is that the evaluation
of a firm should not be restricted to a traditional financial
evaluation but should be supplemented with measures
concerning customer satisfaction, internal processes and the
ability to innovate [23]. In other words, Instead of focusing
solely on a company's financial goal, BSC requires decision-
makers to consider the impact of strategic decisions on staff,
customers and the organization's function [22]. This is to say
that, Kaplan and Norton proposed via BSC the development of
a set of measures that would give top managers a fast but
comprehensive view of the business [25]. These operational
measures were to add three perspectives: customer, internal
business and learning and innovation, thus creating a balance
of emphasis on the desired outcomes and the means of
achieving them [24]. On the other hand, BSC is designed to
complement financial measures of past performance with
measures of the drivers of future performance [3].
2
The BSC retains financial metrics as the ultimate outcome
measures for company success, but supplements these with
metrics from three additional perspectives proposed by Kaplan
and Norton as the drivers for creating long-term shareholder
value [21]. Thus BSC reflects an intent to keep score of a set of
items that maintain a balance ‗‗between short- and long-term
objectives, between financial and non-financial measures,
between lagging and leading indicators, and between internal
and external performance perspectives‘‘ [3].
The Balanced Scorecard measures the performance of the
firm from four different dimensions. (1) Customer perspective:
How do customers see us? (2) Internal Business Perspective:
What must we excel at? (3) Innovation and Learning
Perspective: Can we continue to improve and create value? (4)
Financial perspective: How do we look to shareholders? [25].
Kaplan and Norton proposed a three layer structure for each
of these four perspectives: mission, objectives, and measures
[26] from which targets are to be set and initiatives are to be
launched to reach a better rate [27]. To leverage the scorecard
as a management instrument, it should be enhanced with cause-
and-effect relationships among measures. These relationships
are articulated by two types of measures: outcome measures
and performance drivers [27].The BSC distinguishes between
outcomes (effects) and drivers (causes). Outcomes are lagging
indicators that show what has been accomplished. Usually,
outcome indicators are generic measures, meaning that
indicators are common for most companies. Leading indicators
are the drivers of performance, which are unique for a
particular firm. The driver is the cause and the outcome is the
effect. All but the financial perspective perspectives in the BSC
should include outcomes and drivers. The financial perspective
only includes outcome indicators [28].
The BSC approach has evolved from its early use as a
simple performance measurement framework to a full-fledged
strategic planning and management system [29]. Since early
introduction of BSC, Kaplan and Norton were interested in
measurement for driving performance improvements [21]. This
is to say that BSC was originated as a measurement tool. Later
on, Kaplan and Norton came to know that one common
problem faced by different organizations is to align their long
term strategies with the short term actions [20]. This belief was
based on results of an Interview conducted by Kaplan in 1993,
which show that it depends on the management whether to
consider BSC merely a record keeping instrument or a tool to
focus on the strategy for enhancing the organizational
performance [20].
Kaplan and Norton believed that the real value of the BSC
was as a strategic management system. In order to do so, their
balanced measurement framework should be used to clarify
vision and strategy, translate them into business planning and
resource allocation processes, align objectives down to the
individual level, and establish a results measurement and
feedback system [24]. So in another Harvard Business Review
article [30], they described these four new management
processes that separately and in combination with dimensions
of Balanced Scorecard link the organizational short term
actions with the long term strategies [20]. Then in [31], they
further explained the scorecard as a tool to clarify the vision for
future of corporation; creates the shared understanding; focuses
on the efforts of change and leads to learning at top
management level [20].
Since then, the purpose of BSC is to establish a link
between performance measures and company's strategic vision
[28]. Furthermore, due to its strategic linkages, the definition of
Balanced Scorecard changed from ―an improved measurement
system" to "core strategic management system" [20].
Nowadays, the balanced scorecard is a tool that serves several
different functions including that of a measurement system,
strategic management system, and communication tool [4].
IV. IT BSC : THEORETICAL FOUNDATION
BSC concepts have been applied to the IT function and its
processes. For IT as an internal service provider, the generic
perspectives should be changed accordingly [27]. In [3]
substantial modifications was suggested to the perspectives and
measures proposed by Kaplan and Norton. This stems from
their view [3] that IS department is typically an internal (rather
than external) service supplier; and projects are commonly
carried out for the benefit of both end-users and the
organization as a whole (rather than individual customers
within a large market) [3].
The following four perspectives for a Balanced IS
Scorecard (IT BSC) were suggested by [3]: User Orientation
(Modification of Kaplan and Norton's original BSC Customer
Perspective), Business Value (Modification of original BSC
Financial Perspective), Internal Processes (Modification of
original BSC Internal Business Perspective), and Future
Readiness (Modification of original BSC Innovation and
Learning Perspective). Other modifications to the framework
include the reanalysis of the internal business process
perspective such that it focuses on efficiency. Operational
effectiveness more naturally belongs to the user orientation
perspective [3].
The Corporate Contribution Perspective (Business Value as
suggested by [3]) evaluates the performance of the IT
organization from the viewpoint of executive management
[27], and captures the business value created from the IT
investments [23], [26]. The Customer Orientation Perspective
(User Orientation as suggested by [3]) evaluates the
performance of IT from the viewpoint of internal business
users [27], and represents the user evaluation of IT [23], [26].
The Operational Excellence perspective (Internal Processes as
suggested by [3]) provides the performance of the IT processes
from the viewpoint of IT management [27], and represents the
IT processes employed to develop and deliver the applications
[23], [26]. The Future Perspective (Future Readiness as
suggested by [3]) shows the readiness for future challenges of
the IT organization itself [27], and represents the human and
technology resources needed by IT to deliver its services [26],
[23]. Each of these perspectives has to be translated into
corresponding metrics and measures that assess the current
situation [23], [26].
Kaplan and Norton stress the importance of adhering to
three principles in order to develop a balanced scorecard that is
more than a group of isolated and eventually conflicting
strategies and measures [3]. These Principles are to build in
3
cause-and-effect relationships; include sufficient performance
drivers; provide a linkage to financial measures [31].
a) Cause-and-effect relationships: Essential components
of the IT BSC are the cause-and-effect relationships between
measures. It enables the connections between the measures to
be clarified in order to determine two key types of measures:
outcome measures and performance drivers [23], [26]. If cause-
and-effect relationships are not adequately reflected in the
balanced scorecard, it will not translate and communicate the
company‘s vision and strategy [3].
These cause-and-effect relationships exist as the enterprise
moves through various stages of its life cycle [29], and can
involve several or all four of the perspectives in the BSC
framework [3]. Improving performance in the objectives found
in future orientation (learning and growth) enables the
organization to improve its operational excellence (internal
business processes), which in turn enables the organization to
create desirable results in the customer and financial
perspectives [29]. For example, ―IF‖ IT employee‘s expertise is
improved (future orientation) ―THEN‖ this may result in a
better quality of developed systems (operational excellence)
―THEN‖ this may meet better user expectations (user
orientation) ―THEN‖ this may enhance the support of business
processes (business contribution) [26].
b) Performance drivers: A well-defined scorecard
should contain a good mix of outcome measures (or long-term
targets) along with performance drivers to track the progress in
the short term [22]. Outcome measures like programmers‘
productivity (number of function points per person per month)
without performance drivers like staff education (number of
educational days per person) do not communicate how the
outcomes are to be achieved [3]. Usually, outcome measures
are generic in nature (e.g., employee productivity, user
satisfaction) and are lagging indicators. In contrast,
performance drivers are usually company-specific measures
that reveal the effectiveness of the company strategy [22].
Furthermore, performance drivers without outcome measures
may enable the achievement of short-term operational
improvements, but will fail to reveal whether the operational
improvements have been translated into enhanced financial
performance [3], [23], [26].
c) Linkage to financial measures: The ultimate aim of
many balanced IS scorecards will be to support the
management of IS performance in a manner that improves the
overall financial outcomes of the enterprise. The balanced
scorecard is not only an operational tool, but it can also be the
foundation for a strategic management system [3]. IT
departments can apply the balanced scorecard to help keep
their business-focused initiatives on track with the overall
business plan of the enterprise [22]. The goals of an
information technology (IT) balanced scorecard are simplistic
in scope but complex to execute: (1) Align IT plans with
business goals and needs; (2) Establish appropriate measures
for evaluating the effectiveness of IT; (3) Align employees‘
efforts toward achieving IT objectives; (4) Stimulate and
improve IT performance; (5) Achieve balanced results across
stakeholder group [32]. In fact, leading-edge IT solutions in the production and usage of IT hardware, software and
e-commerce, customer relationship management (CRM), communication systems to effectively and efficiently use IT as
Supply Chain Management or Data Warehousing / Decision a tool in the business, with minimal effect on the environment
Support Software (DSS) areas will be accepted into the and promoting sustainability [35].
corporate world only when viewed as enablers of the overall
Green IT Balanced Scorecard model can aid in creating
business plan of the traditional enterprise [22].
clear and balanced goals for a company implementing Green
IT Balanced Scorecard. The envisioned end result will be a
V. IT BSC DEVELOPMENT Balanced Scorecard that looks at objectives to improve IT
Since early Introduction of BSC by Kaplan and Norton, it functionalities supporting business, with an overall goal to
has been linked to IT in two different ways. First, IT has been improve the environmental impact of the firm and promote
pointed out as a support tool for the BSC reporting process. sustainability [35]. The four original perspectives are used in
Second IT performance can be assessed through the BSC [28]. the Green IT Balanced Scorecard (as shown in table (I)).
In the decade since the IT BSC emergence, the tool has Perspectives questions were adapted by [35] to fit a Green IT
experienced a significant evolution, driven by a series of strategy. Additional perspective was not needed because all of
external factors [33]. drivers, which are related to Green IT, could be linked to the
original perspectives [35].
IT BSC advancements can be characterized into three
distinct stages [33]:
a) Introduction: Early development of the IT BSC TABLE I. GREEN IT BSC PERSPECTIVESA
concept focused on the challenges of IT evaluation techniques Perspectives
and the potential benefits that the new scorecard tool could
Financial Perspective Customer Perspective
provide. Introductory publications aligned closely with
Kaplan‘s and Norton‘s BSC techniques, including the original Key To succeed financially, how To achieve our vision, how
four perspectives. Due to the lack of practical IT BSC Question can we ensure financial pay- should we appear to our
off through Green IT customers?
implementation experience during the introduction phase, investments?
much of the early research concentrated on the theory and Mission Ensures that the Defines who the customers
concepts of the tool. organization is getting a are and what they demand
positive effect financially from the organization.
b) Refinement: As experience with the IT BSC through its business strategy
increased, practitioners and academics began to refine the tool investments.
based on contemporary ideas relating to IT and business Objectives -Reduce energy cost -Improve company‘s
-Reduce operational cost environmental image
integration, measurement and strategy. During this time,
-Manage social pressures
Modifications of the traditional perspectives were proposed.
Internal Processes Employee Learning and
Additionally, publications on the IT BSC were becoming Perspective Growth Perspective
increasingly implementation oriented, including more practical Key To reduce our To achieve our vision of
results on the study of the design, operation and management Question environmental impact, what sustainability, how can we
of an IT-specific scorecard. processes must we excel at? change and improve?
Mission Deals with improving and Ensures that the
c) Specialization: Most recently, the content of IT BSCs reengineering business organization can respond to
has become increasingly specific, to track individual processes according to the changes in business
components of IT management issues. These BSCs cover business strategy requirements in the future.
Objectives -Reduce data center -Make IT sustainable
topics such as IT governance, service level management, environmental impact -Improve employee
enterprise resource planning, knowledge management and IT -Reduce energy awareness of Green IT
audit. Additionally, the increasing publication of management- consumption -Implement environmental
targeted articles began to emerge during this phase, expanding -Reduce resource management system
consumption
the literature beyond the previously academic-dominated -Improve IT asset life-cycle
environment. a. as proposed by [35]
Nowadays, BSC is introduced to use for IT measurement
and other management in various companies [34]. As shown in Current Drivers of Today‘s IT BSC are Demonstration of
[26], a methodology such as the Balanced Scorecard can IT value; IT governance; and Cost cutting and efficiency [33].
provide a measurement and management system that supports Also [1] indicate that The Balanced Scorecard is a performance
the IT governance process and the IT / Business alignment measurement system, a strategic management system and a
process. [26]. communicational tool. Thus the following sections will deal
with IT BSC as a framework to IT Evaluation, Management,
On the other hand, substantial development of IT BSC and Governance consequently.
occurred due to changes in the environment. Most important
one of these is Climate Change, which has become a widely VI. IT BSC : A FRAMEWORK OF IT EVALUATION
discussed topic in many regions of the society. Green IT can be
seen as part of the solution to this problem and can be defined The Balanced Scorecard (BS) is a powerful framework to
as practices that work to improve the phases of design, assess IT performance [28].The evaluation could be concluded

4
as the process of interpreting the measurement‘s value for A. Business Value Perspective (Management’s View)
decision making on ICT Performance management, which As claimed by [3] that IS / IT benefits have traditionally
would be an evaluation for the four perspectives of BSC in been measured by quite simple (at least in theory) financial
organization [34]. measures like the Return On Investment and or the Payback
Period. However, these types of financial measures limit
Since early introduction of BSC in IT field, it was used for
themselves to the financial benefits rather than the broader
years for IT evaluation purpose. Balanced scorecard was
concept of business value. Information economics has sought
suggested by [3] as a proper approach for performance
to address such deficiency [32]. However, principles of
evaluation and managing the information systems and IT.
information economics fail to account for other perspectives
Relevant balanced scorecard measures were identified and that are also important to IS measurement and evaluation.
mapped to the three dimensions of IT benefit by [4]: strategic, Measuring and evaluating IS from multiple perspectives and in
informational, and transactional. These mappings will help IT assorted ways is helpful to assess its efficiency, effectiveness
executives, managers, and researchers determine how their IT and transformative potential, both at present and in the future
applications provide benefit and then how to measure their [3].
value, either at the time a project is initiated or at the time the
In [3] a discrimination between two categories of IT / IS
project is operational [4]. Most internal process measures map
performance evaluation were performed: the short-term cost-
to business efficiency in the transactional benefits dimension.
benefit evaluation that is commonly applied to individual
Most customer measures map to the customer relations in the
projects, and the longer-term perspective relevant to both IT
strategic benefits dimension. The set of measures are obtained
applications and the IS department or function as a whole.
from the balanced scorecard process, where they are currently
Many of the business value measures fall into the latter
used to measure employee and project productivity [4].
category, many of the measures within the ‗Business value‘
dimensions will require an extended evaluation time frame [3].
TABLE II. IT BSC PERSPECTIVESA
Value is a much broader concept than benefits, and IS projects
Perspectives can generate business value in many ways, notwithstanding
Business Value Perspective User Orientation Perspective such benefits, value also implies risk [3].
(Management’s View) (End-user View)
Key How do we look to Are we satisfying user
For IT evaluation purpose, financial measures were
Question management? needs? proposed by [4], which are related to growth, profitability, and
Mission Contribute to the value of the Deliver value-adding value creation, within Business Value Perspective.
business products and services to
end users
Objectives -Establish and maintain a good - Establish and maintain a
B. User Orientation Perspective (End-user View)
image and reputation with good image and reputation The end-user of an IS may be an internal customer or a user
management with end users in another company that is utilizing an inter-organizational
-Ensure that IT projects - Exploit IT opportunities
provide business value - Establish good relationships
system. The satisfaction of existing customers will be much
-Control IT costs with the user community more important than building up market share or acquiring new
-Sell appropriate IT products - Satisfy end-user customers [3]. As a result, [3] suggest that the metrics for the
and services to third party requirements user perspective focus on three areas: being the preferred
- Be perceived as the
preferred supplier of IT
supplier for applications and operations; establishing and
products and services maintaining relationships with the user community; and
Internal Processes Perspective
Future Readiness Perspective satisfying end-user needs [3].
(Innovation and Learning
(Operations-based View)
View) In [3] it was stressed that User Satisfaction should play an
Key Are we working efficiently? What technologies and important role in the overall evaluation of the IS department or
Question business opportunities /
challenges are emerging?
function. From the end-user‘s perspective, the value of IS will
Mission Deliver IT products and Deliver continuous be based largely on the extent to which it helps them do their
services in an efficient and improvement and prepare jobs more efficiently and effectively.
effective manner for future challenges
Objectives - Anticipate and influence - Anticipate and prepare for Another aspect In Customer (User) Orientation perspective
requests from end users and IT problems that could arise was addressed by [24] which is the IT / Business partnership
management - Continuously upgrade IT area; the degree of mutual influence in key areas. In particular,
- Be efficient in planning and skills through training and
developing IT applications development the degree of influence IT staff have in the key investment
- Be efficient in operating and - Regularly upgrade IT decisions concerning the use of information technology in the
maintaining IT applications applications portfolio business (strategic applications) and the degree of business
- Be efficient in acquiring and - Regularly upgrade involvement in developing new applications. In [6] importance
testing new hardware and hardware and software
software - Conduct cost-effective of user evaluation of IT was stressed by exploring
- Provide cost-effective training research into emerging incorporation of Technology Acceptance into IT investment
that satisfies end users technologies and their decisions in Egypt
- Effectively manage IS-related suitability for the business
problems that arise For IT evaluation purpose, customer measures were
a. as proposed by [3] proposed by [4], which address accessibility, timeliness, and
functionality, within User Orientation Perspective
Kaplan and Norton's BSC perspectives were adapted by [3]
to fit IT evaluation as shown in table (II).

5
C. Internal Processes Perspective (Operations-based View)
The IS department or function should aim to deliver high-
quality services to its users at the lowest possible cost. This can
only be achieved by managing its processes in a cost-efficient
manner [3].
According to [36] this perspective proposes objectives that
lead to excellence in the IT operation. It is responsible for
controlling the deployment of strategy in the IT processes,
irrespective of the ownership of resources (internal or external)
[36]. Some authors consider outsourcing in the customer
perspective, but [36] think it fits much better in the operations
perspective. If, for example, design is outsourced, it is also
outsourced within the operations perspective, and even
supported and maintained in the BSC of another organization
and integrated into our organization's BSC [36].
Internal operations may be assessed by measuring and
evaluating three of the basic processes performed by the IS
department: the planning and prioritization of IS projects; the
development of new IT applications; and the operation and
maintenance of current IT applications [3]. Other processes
may also be considered, such as hardware and software supply
and support, problem management, user education, the
management of IS personnel, and their usage of efficient
communication channels [3].
For IT evaluation purpose, internal process measures were
proposed by [4], which focus on the enterprise‘s own
environment with respect to productivity, within Internal
Processes Perspective
D. Future Readiness Perspective (Innovation and Learning
View)
In addition to managing current performance, there is also a
need to measure and evaluate the readiness of the IS
department or function for the future. The future readiness
perspective is concerned with: continually improving the skill
set of IS specialists in order to prepare them for potential
changes and challenges in the future; regularly updating the
applications portfolio; and putting effort into researching
emerging technologies and their potential value to the
organization [3].
The two distinct objectives of the future orientation
perspective are: skills and knowledge and IT / Business
partnership [27].
Quality and innovation are two areas where performance
can be measured. Employee learning and growth is important
and enables ―motivated‖ employees to obtain the right mix of
skills and tools for improving financial, customer, and process
objectives [4].
In an attempt to provide a balanced approach to IT
performance evaluation, a study recently developed and
empirically validated an IT performance evaluation BSC
framework [37]. This frame is a polyhedral model that contains
five perspectives: Operational perspective; Benefits
perspective; User orientation perspective; Strategic
competitiveness perspective; Technology / system perspective
[37]. Actually, this proposed framework presents a
6
modification not only to each perspective of original BSC, but
also to the structure of BSC perspectives.
VII. IT BSC : A FRAMEWORK OF IT MANAGEMENT
The BSC is not only a performance management system
but also, at the same time, a management system when causal
relationships between metrics are properly implemented [27].
Future-oriented, process-based metrics are seen as a key
element in a strategic management system that drives
performance improvement and enables the top management
team to make well-informed decisions that prepare their
organization for the future [3]. The strategic planning for ICT
is also a mechanism of strategic management of ICT so that
such a plan would be actually beneficial to the organization
[34]. In addition, strategy formulating of information systems
based on the results of information systems performance causes
to always-up-to-date strategies [38].
The strategic management of information systems is needed
to make a strategic advantages of information systems and the
alignment of investments on IT and organization strategy [38].
Such a strategic management system should include the
following major elements: mission: that gives a sense of
purpose to their organization (e.g., ‗be a supplier of
information management training and consulting services in
Vancouver‘); Vision: an image of what the organization will
look like and do in the future; strategic objectives: the mission
and vision are translated into strategic objectives (e.g., ‗to
provide innovative seminars to senior managers in the retail
industry‘); performance measures: the objectives can be
measured through well-chosen indicators (e.g., ‗number of
senior managers from the retail industry enrolled in seminars‘,
‗client satisfaction with the seminars‘) [3].
Essentially, the IT department should consider itself an IT
utility for the purposes of aligning itself to the organization‘s
business process objectives. In this way, IT can more
effectively track performance using a balanced scorecard and
make appropriate performance improvements as a result [32].
During the capital budgeting process, IT managers should use
the IT Management Scorecard as a key mechanism for tracking
progress on strategic initiatives. IT portfolio planning should
also include corrective steps identified from the IT
Management Scorecard to ensure alignment of future
investments and discretionary spending plans with company-
wide priorities [22].
To study and analyze IS strategic management based on the
balanced scorecard, the maturity model of IT balanced
scorecard should be used [38]. In [23] IT BSC Maturity Model
was developed, which highlights five maturity levels with the
following characteristics: Level 1, Initial: Organization has
recognized there is a need for a measurement system for its
information technology division; Level 2, Repeatable
Management is aware of the concept of the IT balanced
scorecard and has communicated its intent to define
appropriate measures; Level 3, Defined: Management has
standardized, documented and communicated the IT BSC
through formal training (Management understands and accepts
the need to integrate the IT BSC within the alignment process
of business and IT); Level 4, Managed: The IT BSC is fully
integrated into the strategic and operational planning and aggregated into the IT balanced scorecard. This, in turn, is fed
review systems of the business and IT (A business scorecard into and evaluated against the business balanced scorecard
and a cascade of IT scorecards are in place and are [26].
communicated to all employees); Level 5, Optimized: The IT
BSC is fully aligned with the business strategic management The existence of an IT balanced scorecard and a business
framework and vision is frequently reviewed, updated and balanced scorecard is very supportive for achieving a link
improved [23]. between IT and business objectives. Establishing such a
cascade of scorecards with rolling up and aggregating metrics
IT Management BSC was introduced as framework of IT of the IT scorecard in the business balanced scorecard may
management. Modifications of IT BSC perspectives were help to realize the ultimate link between IT and business. This
suggested to fit IT management purpose as shown in table (III). cascade mechanism can also be used between the IT scorecard
and scorecards on a lower level for the different IT processes
TABLE III. IT MANAGEMENT BSC PERSPECTIVESA [27].
Perspectives
Financial Contribution
Customer Focus Perspective
Perspective
Mission To obtain measurable To be preferred supplier of
Financial Contribution from information systems that
investment in IT portfolio help customers maximize
business opportunities
through IT.
Objectives -Reduce IT department -Become preferred supplier
expenses of IT applications
-Sell IT products / services -Become preferred service
to third parties provider of IT infrastructure
-Maximize business value of and operations
new and existing IT -Build reliable partnership
projects with IT customers / users
-Maximize business value of -Ensure customer / user
overall IT infrastructure. satisfaction wit IT services
received.
Operational Excellence Organization Maturity
Perspective Perspective
Figure 1. Cascade of Balanced Scorecards, Source [26]

Mission To deliver high quality To develop opportunities to

In figure (1) illustrates how a cascade of scorecards can be
information products / position IT to answer future
services with efficiency challenges instrumental in the IT/business governance processes and how
Objectives -Establish quality software -Identify and ensure growth this hierarchy of scorecards can support the alignment of
development processes in strategic IT technology / business and IT strategy [26]. The IT Development BSC and
-Reduce IT application skills
the IT Operational BSC are introduced as enablers for the
development cycle -Build expertise of IT
-Provide flawless IT personnel with regular Strategic BSC that in turn is the enabler of the Business BSC
operations and training and education [26]. This cascade of scorecards becomes a linked set of
infrastructure programs measures that will be instrumental in aligning IT and business
implementation , Improve -Improve employee
strategy and that will help to determine how business value is
responsiveness to customer satisfaction and
requests productivity created through IT [23], [26].
-Promote cross-functional
synergies across IT
Recently, a modification was proposed by [36] to BSC by
-Better management of IT incorporating a new environment perspective. Suggested
personnel. perspective includes Information Technology Leaps
a. Source [22] (Computing, Content, Systems and Requirements, and
For IT management purposes, it was pointed out by [36] Connectivity and Communications); Macroeconomic
that it is necessary to design a BSC that Incorporates Framework (Competency, Macro economy, Clusters and public
environment in IT BSC; Improves measurement of value; collaboration, and Financial Capital); Social Framework
Integrate IT BSC with the business BSC; and Integrates the IT (Alliances and agreements, Innovation acceptance, Education,
area using the IT BSC [36]. On the other hand, to achieve long- and Financial capital). These changes in the ecosystem (leaps
term success, the IT Management Scorecard must be integrated in technology, macroeconomic variables, level of
with other management systems / monitoring mechanisms in interconnectivity, agreement maturity, etc.) are a trigger to the
the IT organization [22]. It was believed by [26] that the majority of IT strategies and, as a result, they have to be
relationship between IT and business can be more explicitly included in IT Management BSC [36].
expressed through a cascade (or waterfall as referred by [23])
of balanced scorecards (as shown in figure (1)); each set of VIII. IT BSC : A FRAMEWORK OF IT GOVERNANCE
scorecards is actually composed of one or more unit IT governance is part of corporate governance and has to
scorecards. The measures of each of these unit scorecards are provide mechanisms for IT councils, business alignment and

7
implementation processes [26]. IT governance can be defined
as: ―The organizational capacity (exercised by the board,
executive management and IT management [27]) to control the
formulation and implementation of IT strategy (and ensure the
fusion of business and IT [27]) and guide to proper direction
for the purpose of achieving competitive advantages for the
corporation." [26]. However, a clear difference must be made
between IT governance and IT management. IT management is
focused on the daily effective and efficient supply of IT
services and IT operations. IT governance, in turn, is much
broader and concentrates on performing and transforming IT to
meet present and future demands of the business and the
business‘ customers [27].
IT Governance is an integral part of organizational
governance and consists of the leadership, organizational
structures, and processes that ensure that the organization‘s IT
sustains and extends the organization‘s strategies and
objectives [2]. The definition of IT Governance must be
translated into concrete question [26]. The question of IT
Governance is whether IT structures, processes, relational
mechanisms and IT decisions are made in the interest of
shareholders and other stakeholders, or primarily in the
executives‘ interests [27]. Structures involve the existence of
responsible functions, such as IT executives and accounts, and
a diversity of IT committees. Processes refer to strategic IT
decision-making and monitoring such as strategic information
systems planning and the balanced scorecard. The relational
mechanisms include business/IT participation and partnerships,
strategic dialogue and shared learning [27].
IT governance considers two things: IT delivery of value to
the business and Mitigation of IT risks [2]. These issues
besides Strategic Alignment are seen by the IT Governance
Institute as main concerns of IT governance [27]. Value
represented by IT is actually a function of strategic alignment
of IT with the business. Accountability in organization is driver
of second aspect. This will cause to importance of five main
focus areas which have driven by stakeholder value. ―Value
delivery‖ and ―Risk management‖ are outcomes. Three other
areas of "Strategic alignment‖, ―resource management‖ and
―performance measurement‖ are drivers [2]. This is shown in
figure (2).
Figure 2. Focus Area of IT Governance, source [2]
Concerning stakeholders' value, it was indicated in [3] that
Business success with a balanced Scorecard approach requires
8
a substantial commitment from key stakeholders. Five Parties
involved in IT Investments were identified by [7], each with
their own objectives and expectations [7]:
- The first party is the parent organization. It is the owner of
the project and is represented by the management which is
primarily interested in the gains generated by the ICT
investment
- The second are the users. They will operate the new
technology to achieve benefits. They expect that the
implemented technology should meet their requirements.
- The third are the people who implement the new
technology, referred to as the project team. They focus on
the short term criteria set by the sponsor because these will
be used to judge them.
- The fourth are the supporters. This is a heterogeneous group
of people that supply resources or services needed for the
implementation of the technology. They focus on short-term
criteria as well, since in most cases, the distance to the
general management is further than to the project manager.
- The last are the stakeholders. These are people or groups
whose lives or environment are affected by the investment,
but who receive no direct benefits from it, nor have direct
influence on it.
Each of these groups has conflicting objectives and
expectations with other groups.
Concerning Risk Management, it is carried out either
explicitly or implicitly at both the operational and strategic
levels of an enterprise. It is an essential constituent of sound
corporate governance [29]. Several risks in connection with
ICT investments identified by [7]: Assessment Risk: the failure
to build in adequate risk assessment of different ICT options at
the prioritization and feasibility stage of projects; Technical
Risk: the system and the envisioned capability are not feasible
with the current technology; Project risk: the ICT capability
that a firm seeks to develop is too large or too complex, or
overwhelms the staff‘s technical skills; Functional Risk: the
firm may get the system design or implementation according to
specification, but still fail to realize the anticipated benefits;
Internal Political Risk: an ICT investment can be undermined
by vested interests in the innovating organization; External
Environment Risk: the source of the risk are unanticipated
responses from competitors, customers or regulatory bodies;
Systemic Risk: the ICT investment may shift the environment
so dramatically that the expected advantages vanish [7]. Just as
the IT BSC can be deduced from the corporate BSC to better
align itself with corporate business objectives, a methodology
for technology risk management can be deduced from the
corporate BSC to facilitate effective IT risk management [29].
Concerning the three other areas of "Strategic alignment‖,
―resource management‖ and ―performance measurement‖, they
were discussed in previous sections.
How does the IT balanced scorecard answer IT governance
question? The cascade of balanced scorecards proposed by [26]
fuses business and IT and in this way supports the IT
governance process (see figure (1)). IT governance also means
that control mechanisms are to be provided to top management.
The scorecard provides the Board with crucial control governance process from the stakeholders‘ viewpoint including
measures on IT expenses, user satisfaction, efficiency of the board of directors, CEO and executive management, CIO
development and operations, expertise of IT staff and may and IT management, business and IT users, customers,
compare these measures with benchmarking figures [26]. shareholders and community. It is important to point out that
BSC concepts can be used to evaluate IT governance. BSC the scope of this stakeholders perspective is much broader than
supports the IT governance process and the IT / business the customer perspective as described in the IT balanced
alignment process through a cascade (as shown in figure (1)) of scorecard. The broader scope is derived from the board
a Business Balanced Scorecard and IT Balanced Scorecards for scorecard the operational excellence perspective identifies the
the major IT processes: defining IT strategy, developing key IT governance practices—structures and processes—to be
systems and operating systems [26]. This can help top IT implemented and their corresponding metrics [27].
managers, executive managers, and board of directors to have
supervision on governance processes, performance, and IX. CONCLUSIONS
expandability [2]. Improving IT governance performance is the
IT BSC is not an outdated management fad, but an
main reason for building and implementing an IT governance
scorecard. With an IT governance balanced scorecard, important component of modern organizations [33]. This paper
organizations can empower their board, CEO, CIO, executive reviewed the extended use of BSC in IT field. Not only has it
management, and the business and IT participants by providing become a powerfull tool to master IT, but also it fuses IT into
them the information that is needed to act and achieve a better ultimate organization processess which include, Performance
fusion between business and IT and, consequently, reach better evaluation, Strategic Management, and IT Governance. Its
results. In this sense, the IT Governance Scorecard can play an contribution as an IT management and control tool is clear, and
important role in an overall program that should be in place to the IT BSC is likely to continue as a valued tool in the years to
enhance corporate governance [27]. come [33]. The fusion of IT BSC into the ultimate organization
process led it to be a powerfull tool in hand. Development of
The ultimate goal of the development and implementation
IT BSC across time and contibution of reseach preformed in
of IT governance is to reach a fusion of business and IT, and
achieving better financial results [2]. Thus IT governance BSC this direction enriches body of literature in IT field. It is to say
process that starts with a corporate contribution perspective is a that IT BSC became a comprehensive framework for IT
logic process. The other three perspectives have a causal Evaluation, IT Management, and IT Governance.
relationship with corporate contribution and have cause-and-
effect relationships among each other. Overall, completed IT
governance education (future orientation) may enhance the ACKNOWLEDGMENT
level of IT/business planning (operational excellence), which in
turn may improve stakeholders‘ satisfaction (stakeholders The author would like to thank all those individuals who
orientation) and have a positive effect on the strategic match of assisted and reviewed this study, especially Marwa I. Rabie,
major IT projects (corporate contribution) [27]. and Reham M. Mortada (Both are assistant lecturers,
Accounting Department, Faculty of Commerce, Alexandria
University) and anonymous reviewers of an earlier draft of this
TABLE IV. IT GOVERNANCE BSC PERSPECTIVESA paper were also most helpful. The cooperation of all these
individuals is most appreciated
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