A divestment framework for IT governance : case studies in the South African mining industry

Abstract

Business divestment tends to be the result of a change in the business strategy or due to changing economic circumstances that force a company to either close or demerge business units that are no longer profitable or do not fit the company’s profile. Business divestment strategy forms part of a company’s long-term business goals to ensure long-term viability, maximise return on investment and to maintain the company’s competitive advantage. Business divestment strategies are often a result of a company that needs to reposition itself with regard to its competitive position in the market. Divestments and closures are often described as strategy’s missing link. The South African coal mining industry is a mature industry spanning a number of decades; as a result, a large number of collieries have closed down and numerous others are approaching end of life and will cease production in the near future. Mine closure or divestment is an instrument of strategy to free up capital and resources and to assist the business to refocus on core activities and to reverse over-diversification. The business success of a divestiture is usually evaluated by the measure of success in achieving the underlying strategic goal that was set when the divestment strategy was adopted. Strategy decisions need to embody a sound governance foundation. Al internal departments and operations need to be aligned with the company’s goals and strategy and should persevere in focusing its actions on obtaining these goals. The goal of this study is to identify what the essence, content and characteristics of a divestment framework for IT governance should be. In order to achieve this goal, the research focused on the following objectives as reflected in the research question, sub-research questions and chapter divisions: • To create an understanding of the South African mining environment, but more specifically the coal mining industry by depicting and describing the impact of the macro and market environment in strategy formulation to align with a mine closure or divestment decision. • To establish the impact of a divestment strategy on the IT governance model and ITbusiness alignment and determine the steps that IT and business should take to ensure alignment in order to support a divestment strategy. • To determine if any of the existing IT governance frameworks and standards could be implemented or adopted to serve as a divestment framework for IT governance. • To establish what the content and logical steps for a divestment framework for IT governance should include and how it should be deployed. • To test the proposed divestment framework for IT governance for validity and soundness at the hand of three case studies. As a result of the literature review and study conducted for this thesis, the author determined the following specific dimensions pertaining to the fundamental building blocks of a divestment framework for IT governance to support company divestment, more specifically mine closure: • The IT department needs to understand the role it needs to fulfil in the company to support the achievement of the company’s business strategy. Information systems and infrastructure are deployed to influence unparalleled business proficiencies, merge and divest companies and business units, restructure industries, and expedite global competition. The company’s IT strategy needs to align itself with the business strategy in order to support the company when a divestment strategy is implemented. Because of the complexity and inter-relatedness of Information Technology systems and infrastructure with the rest of the business units business processes, a divestment initiative should include the steps that need to be taken to de-integrate or disentangle the IT infrastructure and IT portfolio from the rest of the company.