developing effective it governance to unleash business value · developing effective ... should the...

Developing Effective IT Governance to Unleash Business Value

© Accenture Copyright © 2012 - All Rights Reserved. Accenture, its logo, and High Performance Delivered are trademarks of Accenture.

Is IT Governance just a buzz word and

fashion theme ?

Why does IT Governance remain an on-going issue?

Why is it so difficult to implement effective IT Governance?

How do I get started implementing effective IT Governance?

How much should senior leadership of the business be involved in IT

Governance?

What do IT Governance committees need to be effective?

Should the CIO lead IT Governance?

How do I determine the effectiveness of IT Governance?

Most frequently asked questions about IT Governance…


IT Governance is all about direction, leadership

and decision making to deliver business value

The ability to make sponsor and enforce the right IT decisions

• How are decisions

made?

• Who plays what role

in the decision

making?

• What processes are

used?

• How are investments

authorized?

• How does leadership

work for IT?

• Who is the

“evangelist” for IT?

• How is joint

ownership secured?

• What is measured

and by whom?

• What incentive

system is used?

• What accountabilities

and authorities exist?

• How are investments

managed?

• What knowledge is

required?

• How is a fresh view

injected?

• How do we learn

continuously?

= Foundation for Business Value from IT investments

Tool enabled end-to-end processes providing transparency and control


Most top executives have realised that IT-Governance is

essential to realise the business value from IT

- Example of IT-Governance

elements typically in place -

Common processes and standards published

Annual plans & processes in place

Business-side active part in IT prioritization

IT strategy is in place

Business case is established for all projects

IT balanced scorecard / metrics implemented

Roles and responsibilities established for the

entire organization

Reward system in place

Value Creation Reduce

Cost

Increase Revenue

Improve Capital

Efficiency

Business Value Levers


• Do I get value from my IT?

• Is IT a help or a hindrance?

• How can I get more control over my IT spend?

• Why are we spending our IT money in this area?

• How can I get this key initiative prioritised?

• What should be the development spend this year?

• How much should we be spending on IT maintenance?

• When are we going to stop investing in this old system?

• Who owns this IT asset?

• How do I get funding for this new project?

• Who needs to approve this project?

• Who is accountable for this service outage?

• What happens when my IT budget runs out?

• Why buy globally when I can buy it cheaper here?

• What do l want IT to focus on?

• What service levels should I expect from IT?

• What areas of IT governance should I approve?

But “typically in place” very rarely means that IT

Governance practices are effectively used…

Questions that should (..will inevitably) be asked by CFOs and CXOs…


Many fail in implementing IT Governance, leading to a

substantial shortfall of business value from IT investments

• Poor alignment of the IT strategy with

business objectives

• IT investment and delivery not driven by

corporate priorities

• Business not part of or accountable

for IT prioritization

• KPI's and balanced scorecard are defined,

but performance is not measured and there

is a lack of follow-up

• Architecture is defined, but redundant

projects are allowed

• Standards are in place, but are not followed

- What do we typically find -

Shortfall of business

value from IT investments


7

The shortfall is even wider if compared to IT ‘s true business

value generation (ITBVA)

Overview of Accenture’s IT Business Value Added (ITBVA) :

Business value of IT

IT Internal Efficiency

IT Services

Strategic Change Agility

1

2

3

Business value produced by IT can be structured and measured consistently –

and managed with effective IT Governance

Value of IT Services: Value of key IT outputs.

1. The IT based end-products and services

2. Business processes that are supported and automated by IT.

3. Personal efficiency of each corporate employee with the use of IT and communications technology.

Value of Strategic Change Agility: Value created when IT is responsive in enabling and actively driving

strategic corporate change.

Value of IT Internal Efficiency: Value created by effective and cost efficient IT operations.



















Often the challenge is to recognize IT Governance issues

and how to solve them effectively.

Questions to be asked… … relate directly to IT Governance

How is IT aligned to the business?

How should IT decisions be made?

How do we manage IT investments?

What controls do we need in place?

How do we measure and reward?



















IT Governance need effective mechanisms that need to

implemented to address the issues

Questions…. relate directly to IT Governance… and mechanisms

• IT Governance Principles and Enablers

• IT Governance Process Model

• IT Governance Maturity

Model

• IT Responsibility Matrix

• IT Performance Metrics

• IT Balanced Score Card

How is IT aligned to the

business?

How should IT decisions be

made?

How do we manage IT

investments?

What controls do we need in

place?

How do we measure and

reward?


The Truth about IT Governance Practices…

… as many companies are struggling to adopt the right IT Governance

practices.

0% 100%

28% Tie IT investments to business strategy and goals

12% Accurately measure business impact of IT

investments

Proper governance structures to deliver IT value 20%

21% Prioritize and manage technology investments

60% Actively and regularly collect and use IT metrics

IT Governance Practices for

IT Value Creation

Adoption Rate by Companies

Source: Mainstay Partners, Standish Group 2005 and Accenture survey 9/2011

78%

38%

21%

28%

2005 2011

43%


So what should CIOs actually do to guard their IT

investments and optimize the return?

Getting the right governance

model in place?

Contradiction?

OR

Focus on governance processes & execution?


The answer is simple … focus on both!

High-performing businesses are successful in both - adoption of the right

governance structure and rigorous execution of good IT value practices

1 – Establish an overarching IT Governance framework Focus on

Structure

2 – Focus on tight business & IT alignment

3 – Make IT a business driven activity

4 – Plan IT demand professionally

5 – Bridge the skill gap between business & IT

6 – Run IT as a business

Focus on

Process &

Execution

Source: Accenture Analysis

Simple Success Factors for IT Governance


Feedback Loop

Monitoring of projects

Benchmark against external

Benchmark against internal

Feedback-Loop to Alignment

Project Definition

Business Case Development

Investment Prioritization

Portfolio Decision

Business/IT Capabilities Assessment

Objectives Alignment

Investment Alignment

1 - Establish an overarching IT Governance

framework

Simple IT Governance & Demand Management Framework

Business

IT

Source: Accenture IT Governance & Demand Management Framework

Business/ IT

Alignment

IT Value

Review

IT Governance

IT Demand

Planning

IT Supply

Control


Lack of IT alignment with business objectives impedes value return

of IT investments

2 - Focus on tight business & IT alignment

Top 3 Business Unit

objectives received only 24%

of that business line‘s IT

investment spending

Objective Category Priority % I/T

Exp.

% Top

Three

Improve Customer Service 1 17% 17%

Innovation in Products 2 0% 0%

Improve sales force 2 7% 7%

Improved work capital use 3 0% 0%

Increase employee output 4 31%

Improve Product Delivery 5 7%

Develop human resources 5 0%

Dev. External Knowledge 6%

Increase use of asset 17%

Increase asset capacity 7%

Improve admin effective 8%

TOTAL ALIGNED IT Spend 100% 24%

L M H

Focus on Business Objectives

Client Case

•Download a Comp

Business Unit A Business Unit B

http://i.istockimg.com/file_thumbview_approve/559397/2/stock-photo-559397-xl-quick-circle-with-a-red-marker.jpg


Business Process Owner/ Sponsor

IT Project Mgr.

BU

SIN

ES

S

DE

MA

ND

IT

SU

PP

LY

Business Unit

Information Manager

(IM)

IT

DE

MA

ND

3 - Make IT a business driven activity

Overall responsibilities for driving IT investments have to be

clearly anchored on the business side

IT support either through

(a) Shared Service Provider

or

(b) External SP, sub-contracted under BU management

ILLUSTRATIVE

Functional IT

specification

IT Business Case

Request for Proposal

Project Prioritization

Capital Request

Objective

Description

Approach

Benefit calculation

Functional Bus.

Requirements to IT

Responsibilities Key Tasks


Applic.&

Systems

Investment

Benefits

Maintenance

Benefits & Costs

Project Definition

By Internal Customer

Project Cost/Benefit

Assessment via

Business Case

Portfolio Decision

Approval

Investment

Prioritization

4 - Plan IT demand professionally

Urgency

Economic Contribution

Strategy & Operation

Business Case

Development

Risk Assessment

Budget Planning

Capital Investment

Request

Only end-to-end process model, tightly managed and supported by adequate methods and tools ensures consistent outcomes

Master Plan

Project Description

Functional

Requirements

Definition

Risks


‚Missing Link‘ – Skill and

organizational gap

between business and IT

Business skills

Skill Ranges

IT skills

The typical skill and organizational gap between a company’s business units and the IT

provider hamper real success of IT value delivery

5 - Bridge the skill gap between business & IT and

break the traditional cultural boundaries

ILLUSTRATIVE

IT Provider Business Units


Avg. in the

Industry

Trend

4

5,1%

4,4%

4,1%

4,5%

5,4%5,0%

4,8%

3,9%

4,6%4,8%

11,5bn

12,4bn

9,5bn

10,4bn

10,8bn

11,8bn

13,0bn

4%

5%

6%

7%

end of

FY 95

end of

FY 96

end of

FY 97

end of

FY 98

end of

FY 99

end of

FY 00

end of

FY 01

7

9

11

13

IT costs (w /o savings) as % of revenue

IT costs (w / savings) as % of revenue

Industry average IT cost / revenue ratio

KLM revenue

IT s

pend

ing

in p

ropo

rtion

to c

ompa

ny re

venu

e

FY 98 FY 99 FY 00 FY 01 FY 02 FY 03

projectedretrospective


ABC revenue

IT costs (w/ savings % of revenue)

IT costs (w/o savings % of revenue)

Cur

rent

Sta

tus

Avg. in the

Industry

Trend

4

5,1%

4,4%

4,1%

4,5%

5,4%5,0%

4,8%

3,9%

4,6%4,8%

11,5bn

12,4bn

9,5bn

10,4bn

10,8bn

11,8bn

13,0bn

4%

5%

6%

7%

end of

FY 95

end of

FY 96

end of

FY 97

end of

FY 98

end of

FY 99

end of

FY 00

end of

FY 01

7

9

11

13




KLM revenue

IT s

pend

ing

in p

ropo

rtion

to c

ompa

ny re

venu

e

FY 98 FY 99 FY 00 FY 01 FY 02 FY 03



ABC revenue



Avg. in the

Industry

Trend

4

5,1%

4,4%

4,1%

4,5%

5,4%5,0%

4,8%

3,9%

4,6%4,8%

11,5bn

12,4bn

9,5bn

10,4bn

10,8bn

11,8bn

13,0bn

4%

5%

6%

7%

end of

FY 95

end of

FY 96

end of

FY 97

end of

FY 98

end of

FY 99

end of

FY 00

end of

FY 01

7

9

11

13




KLM revenue

IT s

pend

ing

in p

ropo

rtion

to c

ompa

ny re

venu

e

FY 98 FY 99 FY 00 FY 01 FY 02 FY 03



ABC revenue



Cur

rent

Sta

tus

6 - Run IT as a Business !

Total IT Spending

New Capability Development

Operations Support

100%

0%

80%

60%

40%

20%

IT Spending in Percentage of a Company’s Revenue

Tight monitoring of IT initiatives and measuring outcomes against pre-

set targets is an important success factor in IT value creation CLIENT EXAMPLE

FY08 FY09 FY10 FY11 FY12 FY13


OPERATIONAL CHANGE PROGRAM MANAGEMENT OFFICE

Business Needs Applications, Services, Products

DEMAND MGMT

Enhancements • Upgrades • Defects • Industrialized IT

• Change and Configuration Management • Quality • Performance

Provisioning • Security Projects • Resources • Budgets • Risk

Strategic Initiatives & Projects

APPLICATION CHANGE

OPTIMIZE BUSINESS OUTCOMES - (ITBVA)

OPERATIONS

SLAs • Business

Availability • ITBVA

• Deploy and Monitor

Change

Operational Demand

PORTFOLIO MANAGEMENT

Ideas • Proposals • Projects • Assets

Excellent tools exist for automating and integrating key IT

processes to gain visibility, control and efficiency


In tool-enabled IT Governance, CIOs get real-time visibility

of IT operations with drill down metrics capabilities

Overall IT Visibility Portfolio Risk/Value

IT Driven Business Innovation

Service Management


IT Governance creates value through

improved business performance.

IT Governance Value Promise

• Firms with superior IT governance have more than 25% higher profits than

firms with poor governance given the same strategic objectives.*

• Firms with above average governance had average ROAs more than twice the

size of the firms with poorer IT Governance.*

• Accenture research shows that high-performance organizations, with mature

IT governance, attain better business returns for IT dollars spent. .**

• Selective, value creating IT spending makes a greater contribution to the

bottom line and has a positive impact on shareholder value.

Sources: * MIT Sloan School of Management, Center for Information Systems Research, Research Briefing “How Top Performers Govern IT”

** Accenture High Performance IT Survey; 2009, 2011


Accenture experience has also demonstrated the business

value of IT Governance.

• An Accenture CIO client stated publicly that improved IT Governance had

reduced IT costs by 8%, resulting from pooling investments across

business units

• At an Accenture client, improved IT demand management, including

investment prioritization and portfolio optimization resulted in cost

savings of 18% within IT and an additional 11% EBITA increase as

business value generation

• IT Governance focus on Application Portfolio Management has been

demonstrated to identify IT non-discretionary costs reduction by 30 - 40%,

freeing up IT budget for value-creating investments

IT Governance Value – Client Example…


For more information feel free to contact ...

Thank you for your participation!

Jouni Hakanen Executive Partner

Greater China Lead

Technology Consulting

[email protected] Mobile:(852) 9662 0380

developing effective it governance to unleash business value · developing effective ... should the...

Documents