IT Governance : Managing the Information Technology Resource

1. IT Governance:Managing the Information Technology Resource Jason C. H. Chen, Ph.D. Professor of MIS School of Business Administration Gonzaga University Spokane, WA 99223 chen@gonzaga.edu Source: Managing the IT Resource – J. N. Luftman

2. Chapter Outline • Definition of IT governance • IT governance as issue for organizations • Need for formal IT governance mechanisms • IT governance alternatives • Forms of governance and leadership roles in cross-functional initiatives • Steering committees • Prioritizing projects and assessing risks • Global considerations

3. Why invest IT? • improvement in the delivery of service to its customers/clients • reduce the cost to manufacture or deliver some product or service to its customers/clients • shorten the cycle time required to develop and produce some new product or service

4. IT Governance • Power • Who makes these decisions • Alignment • Why they make these decisions • Decision Process • How they make these decisions

5. What is IT Governance? • IT governance is the term used to describe the selection and use of organizational process to make decision about how to obtain and deploy IT resources and competencies. • In short, IT governance is about: • Who makes these decision (power) • Why they make them (alignment) • How they make them (decision process)

6. Symptoms of Misalignment • Poor business understanding and rapport • Competitive advantage declines • Frequently fired IT managers • High turnover of IT professionals • Inappropriate resources • Frequent IT reorganizations • Lack of executive interest • Lack of vision/strategy • No communication between IT and users

7. Symptoms of Misalignment • Ongoing conflicts between business and IT • Unselective outsourcing of IT function • Productivity decrease • Projects not used, canceled, late • Redundancies in systems development • Absent systematic competencies • Systems integration difficult • Unhappy users/complaints

8. Definitions and Implications of IT Governance • 1. Operating model for how organization will make decisions about use of IT • 2. Involves external relationships for obtaining IT relationships • 3. Involves authority, control, accountability, roles, and responsibilities • 4. Involves processes and methods for making decisions • 5. Involves judgments about how well use of IT enables strategic direction

9. Why is IT Governance an Issue? • Why despite the growing evidence that IT has become an integral part of business, IT governance is still an issue for many organizations? • While the governance models for marketing or finance are rarely discussed, the governance of IT for many organizations is still neither well understood nor well executed, and becomes a topic of debate. Why?

10. Business Case Issues • Balance all measurements • Balance impact on • Customers/clients • Processes • People • Finance

11. Organizations Just Do It • Maintenance • Fixing application problems • Government legislation requirements to ensure compliance • CEO or senior executive idea receives top priority • Competitor’s innovative application of IT

12. Enablers Inhibitors Table: Enablers and Inhibitors to Alignment • Senior executive support for IT • IT involved in strategy development • IT understands the business • Business-IT partnership • Well-prioritized IT projects • IT demonstrates leadership • IT/business lack close relationships • IT does not prioritize well • IT fails to meet commitments • IT does not understand business • Senior executives do not support IT • IT management lacks leadership

13. Diagnosing Poor or “Broken” IT Governance • “We have too many people and organizations making decisions about technology.” • “Business units aren’t accountable to corporate IT for any technologies they decide to employ.” • “We heave no enterprise architecture because we cannot agree on how it will be established or maintained.” • “We spend too much on hardware and software because we cannot agree on a common sourcing policy.” • “We are measuring our performance, but the business doesn’t understand what our measures mean.” • “We do not measure the success of IT. I would not know where to begin.”

14. Why Have Governance • 1. Insufficient resources to meet commitments • 2. Unreliable delivery schedules • 3. Lack of focus on daily operations • 4. Reduced quality of delivered projects • 5. Potential for working on wrong things • 6. Business functions move in their own IT direction to satisfy own requirements • 7. Chaotic/nonstandard infrastructure • 8. Poor communications and relationships with IT/Business

15. How Critical is IT Governance for E-Business? • Who makes decisions about which e-business initiatives to fund? • Who has accountability for e-business IT architecture? • Who drives e-business initiatives? • How are e-business initiatives funded? • How will we measure the business value of e-business initiatives? • How will we allocate resources to e-business initiatives? • Will we outsource any of our e-business operations? • How will we leverage our strategic alliance, if at all?

16. Fulfilling IT Promise to Business • Decisions about IT use made jointly • Develop mutual and agreed-upon expectations • Help senior business management understand costs and risks • Provide IT capabilities required to implement decisions • Monitor and measure value of IT investments • Help senior business management understand it is ongoing process

17. Governance Alternatives • Budget • Career crossover • CIO-CEO • Communicate/market/negotiate • Competitive enabler/driver • Education/cross-training • Liaison • Location • Organization • Hybrid (or “Federated”)

18. Governance Alternatives • Organization • Centralized, Decentralized, Hybrid • Partnership/Alliance management • Process • Shared risks, responsibilities, reward/penalties • Steering committees • Value Measurement

19. Steering Committees • Strategic • Tactical • Operational • Clearly state business role of IT • Identify alignment between organization vision and IT vision • Establish principles for investing in IT • Establish ethical guidelines and policies • Establish architectural principles and standards • Establish goals and measurements for assessment

20. Categories of Governance Alternatives • Governance based on organization structure • Governance based on processes • Governance based on human relationships

21. Forms of Governance • Govern cross-functional initiatives by: • Assembling matrixed project team • Guidance and assistance provided by corporate IT management • Recognizing human resources and intellectual capital are geographically dispersed,

22. Forms of Governance and Leadership Roles

23. Effective IT Steering Committee • Business Executive Committee • CIO • Chief Technology Officer • Divisional Business Heads • Head of Information Systems/Networking

24. Considerations of Steering Committee • Bureaucracy • Career Building • Communication • Complex Decisions • Influence/Empowerment • Low-Hanging Fruit/Quick Hits • Marketing • Objectives/Measurements

25. Considerations of Steering Committee • Ownership/Accountability • Priorities • Relationships • Right Participants • Share Risks • Structure, Facilitator

26. Group Projects Based On: • Necessity, Opportunity, Desirability • Impact on organization • Likelihood of occurrence • Risk • Resource demands • Anticipated return

27. Priorities • Highest impact on firm • Highest likelihood of occurrence • Lowest combined attributes of risk • Least amount of resources demanded • Highest anticipated return

29. Technology Risk Mitigation • Subject matter experts available • Establish emerging technology scanning function • Employ already known technology • Perform pilot projects studies • Attend conferences, read professional journals • Maintain professional memberships • Implement professional certification/study programs • Participate in master’s degree/master’s certification

30. Development Risk Mitigation • Modularize projects • Employ project management with prior experience • Establish development life cycle methodology • Reduce scope of projects • Follow “best practices” model for software engineering

31. Organizational Risk Mitigation • Secure executive sponsorship • Joint accountability of business/IT management • Early and continuous involvement of stakeholders • Establish formal change management program • Establish formal communication channels • Establish formal and well-understood processes • Establish formal escalation processes

32. Market Risk Mitigation • Reduce initial scope of geographic coverage • Employ SME’ and consultants for expert advice • Documentation and formal sign-off on customer requirements • Establish customer “knowledge base”

33. Global Considerations • Global Exporter • Multinational • Multilocal • Transnational or Metanational

34. Source: Daniels, J. and Caroline, N., in J. Luftman, ed., Competing in the Information Age: Strategic Alignment in Practice.” Oxford University Press (1996).

35. Do’s of Vendor Management • Establish vendor management team • Monitor service levels and end-user satisfaction • Track service/product market • Continually renegotiate contract • Keep business units accountable and involved • Think ongoing relationship • Use vendor’s expertise for solutions

36. Don’ts of Vendor Management • Try to manage a vendor without adequate expertise available • Ignore need to establish service level agreements • Fail to establish firm accountability • Understaff vendor management function • Rely solely on vendor’s expertise • Forget to keep eye on vendor reputation and profitability

37. Contract Renegotiation Processes • Contract expiration • Material breach in contract by vendor • Major change in organization’s management or industry • Significant change in price for same services • New technology

38. Outsourcing Considerations • Do: • Ask for and check references • Assess culture of outsourcing partner • Evaluate multiple options • Get it in writing • Metrics matter • Open kimono • Pick outsourcing partner with strong partner network

39. Outsourcing Considerations • Don’t: • Buy on price alone • Overlook reference-checking process • Use price contract without consideration of long-term consequences • Forget to provide for contingencies • Communicate via committee • Hand over project management • Rely on marquee references • Single-source • Let head be turned by goodies

40. Insource or Outsource?

41. Outsourcing RFP • Objectives and Scope • Background • Technology Vision • Services Requested • Transition/Migration Services • Performance Requirements • Resources • Requirements for Vendor Proposal • General Terms and Conditions for Proposal • Proposal Evaluation