Understanding the dynamics of it governance using system dynamics modeling

Business success of organizations became highly dependent on the success of information technologies (IT). But, alignment of IT strategies and objectives with business strategies and objectives has always been challenging for organizations. IT governance, which is mainly concentrated on alignment of business and IT, has very a dynamic and complex structure. System dynamics is a suitable tool to understand the dynamics of this relationship between IT and business. It is powerful, because it emphasizes the multi-loop, multi-state and non-linear character of the IT governance. The aim of this study is, to develop a system dynamics simulation tool that could be used organizations to understand the dynamic characteristics of IT governance from risk management perspective. In this study, literature-based modeling was applied and causalities were extracted from scientific journals. A comprehensive literature review was made on environmental dynamism, business performance and four domains of IT governance. Based on the increasing importance of the subject, IT risk management is selected for modeling. Initially, a causal loop diagram for IT risk management was drawn. Based on this, a stock-flow diagram was constructed with seven stocks. Simulations and multivariate sensitivity analyses were performed to observe the effect of different variables. It is believed that, the models constructed in this study will help top management of the organizations in decision making and inspire other researchers. In the future, researchers may focus on the other domains of IT governance which are not modeled in the scope of this study.