ICT622ICT622 11

Chapter 11Chapter 11IT GovernanceIT Governance

Managing the Information Managing the Information Technology ResourceTechnology Resource

Paula GouldingPaula Goulding

ICT622ICT622 22

Chapter OutlineChapter Outline Definition of IT governanceDefinition of IT governance IT governance as issue for organizationsIT governance as issue for organizations Need for formal IT governance mechanismsNeed for formal IT governance mechanisms IT governance alternativesIT governance alternatives Forms of governance and leadership roles in Forms of governance and leadership roles in

cross-functional initiativescross-functional initiatives Steering committeesSteering committees Prioritizing projects and assessing risksPrioritizing projects and assessing risks Global considerationsGlobal considerations

ICT622ICT622 33

IT GovernanceIT Governance

PowerPower– Who makes these decisionsWho makes these decisions

AlignmentAlignment– Why they make these decisionsWhy they make these decisions

Decision ProcessDecision Process– How they make these decisionsHow they make these decisions

ICT622ICT622 44

Symptoms of MisalignmentSymptoms of Misalignment

Poor business understanding and rapportPoor business understanding and rapport Competitive declineCompetitive decline Frequently fired IT managersFrequently fired IT managers High turnover of IT professionalsHigh turnover of IT professionals Inappropriate resourcesInappropriate resources Frequent IT reorganizationsFrequent IT reorganizations Lack of executive interest Lack of executive interest Lack of vision/strategyLack of vision/strategy No communication between IT and usersNo communication between IT and users

ICT622ICT622 55

Symptoms of MisalignmentSymptoms of Misalignment

Ongoing conflicts between business and ITOngoing conflicts between business and IT Unselective outsourcing of IT functionUnselective outsourcing of IT function Productivity decreaseProductivity decrease Projects not used, canceled, lateProjects not used, canceled, late Redundancies in systems developmentRedundancies in systems development Absent systematic competenciesAbsent systematic competencies Systems integration difficultSystems integration difficult Unhappy users/complaintsUnhappy users/complaints

ICT622ICT622 66

Definitions of IT GovernanceDefinitions of IT Governance

Operating model for how organization will make Operating model for how organization will make decisions about use of ITdecisions about use of IT

Involves external relationships for obtaining IT Involves external relationships for obtaining IT relationshipsrelationships

Involves authority, control, accountability, roles, Involves authority, control, accountability, roles, and responsibilitiesand responsibilities

Involves processes and methods for making Involves processes and methods for making decisionsdecisions

Involves judgments about how well use of IT Involves judgments about how well use of IT enables strategic directionenables strategic direction

ICT622ICT622 77

Business Case IssuesBusiness Case Issues

Balance all measurementsBalance all measurements Balance impact onBalance impact on

– Customers/clientsCustomers/clients– ProcessesProcesses– PeoplePeople– FinanceFinance

ICT622ICT622 88

Organizations Just Do ItOrganizations Just Do It

MaintenanceMaintenance– Fixing application problemsFixing application problems

Government legislation requirements to Government legislation requirements to ensure complianceensure compliance

CEO or senior executive idea receives top CEO or senior executive idea receives top prioritypriority

Competitor’s innovative application of ITCompetitor’s innovative application of IT

ICT622ICT622 99

Enablers to AlignmentEnablers to Alignment

Senior executive support for ITSenior executive support for IT IT involved in strategy developmentIT involved in strategy development IT understands the businessIT understands the business Business-IT partnershipBusiness-IT partnership Well-prioritized IT projectsWell-prioritized IT projects IT demonstrates leadershipIT demonstrates leadership

ICT622ICT622 1010

Inhibitors to AlignmentInhibitors to Alignment

IT/business lack close relationshipsIT/business lack close relationships IT does not prioritize wellIT does not prioritize well IT fails to meet commitmentsIT fails to meet commitments IT does not understand businessIT does not understand business Senior executives do not support ITSenior executives do not support IT IT management lacks leadershipIT management lacks leadership

ICT622ICT622 1111

Why Have GovernanceWhy Have Governance

Insufficient resources to meet commitmentsInsufficient resources to meet commitments Unreliable delivery schedulesUnreliable delivery schedules Lack of focus on daily operationsLack of focus on daily operations Reduced quality of delivered projectsReduced quality of delivered projects Potential for working on wrong thingsPotential for working on wrong things Business functions move in own IT direction to Business functions move in own IT direction to

satisfy own requirements satisfy own requirements Chaotic/nonstandard infrastructureChaotic/nonstandard infrastructure Poor communications and relationships with Poor communications and relationships with

IT/BusinessIT/Business

ICT622ICT622 1212

Fulfilling IT Promise to BusinessFulfilling IT Promise to Business

Decisions about IT use made jointlyDecisions about IT use made jointly Develop mutual and agreed-upon expectationsDevelop mutual and agreed-upon expectations Help senior business management understand Help senior business management understand

costs and riskscosts and risks Provide IT capabilities required to implement Provide IT capabilities required to implement

decisionsdecisions Monitor and measure value of IT investmentsMonitor and measure value of IT investments Help senior business management understand it is Help senior business management understand it is

ongoing processongoing process

ICT622ICT622 1313

Governance AlternativesGovernance Alternatives

BudgetBudget Career crossoverCareer crossover CIO-CEOCIO-CEO Communicate/market/negotiateCommunicate/market/negotiate Competitive enabler/driverCompetitive enabler/driver Education/cross-trainingEducation/cross-training LiaisonLiaison LocationLocation

ICT622ICT622 1414

Governance AlternativesGovernance Alternatives

OrganizationOrganization– Centralized, Decentralized, Hybrid Centralized, Decentralized, Hybrid

Partnership/Alliance managementPartnership/Alliance management ProcessProcess Shared risks, responsibilities, Shared risks, responsibilities,

reward/penaltiesreward/penalties Steering committeesSteering committees Value MeasurementValue Measurement

ICT622ICT622 1515

Steering Committees Steering Committees StrategicStrategic TacticalTactical OperationalOperational Clearly state business role of ITClearly state business role of IT Identify alignment between organization vision and Identify alignment between organization vision and

IT visionIT vision Establish principles for investing in ITEstablish principles for investing in IT Establish ethical guidelines and policiesEstablish ethical guidelines and policies Establish architectural principles and standardsEstablish architectural principles and standards Establish goals and measurements for assessmentEstablish goals and measurements for assessment

ICT622ICT622 1616

Categories of Categories of Governance AlternativesGovernance Alternatives

Governance based on organization structureGovernance based on organization structure Governance based on processesGovernance based on processes Governance based on human relationshipsGovernance based on human relationships

ICT622ICT622 1717

Forms of GovernanceForms of Governance

Govern cross-functional initiatives by:Govern cross-functional initiatives by:– Assembling matrixed project teamAssembling matrixed project team– Guidance and assistance provided by corporate Guidance and assistance provided by corporate

IT managementIT management– Recognizing human resources and intellectual Recognizing human resources and intellectual

capital are geographically dispersed, capital are geographically dispersed,

ICT622ICT622 1818

Forms of Governance and Forms of Governance and Leadership RolesLeadership Roles

ICT622ICT622 1919

Effective IT Steering Committee Effective IT Steering Committee

Business Executive CommitteeBusiness Executive Committee CIOCIO Chief Technology OfficerChief Technology Officer Divisional Business HeadsDivisional Business Heads Head of Information Systems/NetworkingHead of Information Systems/Networking

ICT622ICT622 2020

Considerations of Considerations of Steering CommitteeSteering Committee

BureaucracyBureaucracy Career BuildingCareer Building CommunicationCommunication Complex DecisionsComplex Decisions Influence/EmpowermentInfluence/Empowerment Low-Hanging Fruit/Quick HitsLow-Hanging Fruit/Quick Hits MarketingMarketing Objectives/MeasurementsObjectives/Measurements

ICT622ICT622 2121

Considerations of Considerations of Steering CommitteeSteering Committee

Ownership/AccountabilityOwnership/Accountability PrioritiesPriorities RelationshipsRelationships Right ParticipantsRight Participants Share RisksShare Risks Structure, FacilitatorStructure, Facilitator

ICT622ICT622 2222

Group Projects Based On:Group Projects Based On:

Necessity, Opportunity, DesirabilityNecessity, Opportunity, Desirability Impact on organizationImpact on organization Likelihood of occurrenceLikelihood of occurrence RiskRisk Resource demandsResource demands Anticipated returnAnticipated return

ICT622ICT622 2323

PrioritiesPriorities

Highest impact on firmHighest impact on firm Highest likelihood of occurrenceHighest likelihood of occurrence Lowest combined attributes of riskLowest combined attributes of risk Least amount of resources demandedLeast amount of resources demanded Highest anticipated returnHighest anticipated return

ICT622ICT622 2424

ICT622ICT622 2525

Technology Risk MitigationTechnology Risk Mitigation Subject matter experts availableSubject matter experts available Establish emerging technology scanning functionEstablish emerging technology scanning function Employ already known technologyEmploy already known technology Perform pilot projects studiesPerform pilot projects studies Attend conferences, read professional journalsAttend conferences, read professional journals Maintain professional membershipsMaintain professional memberships Implement professional certification/study Implement professional certification/study

programsprograms Participate in master’s degree/master’s Participate in master’s degree/master’s

certificationcertification

ICT622ICT622 2626

Development Risk MitigationDevelopment Risk Mitigation

Modularize projectsModularize projects Employ project management with prior Employ project management with prior

experienceexperience Establish development life cycle Establish development life cycle

methodologymethodology Reduce scope of projectsReduce scope of projects Follow “best practices” model for software Follow “best practices” model for software

engineering engineering

ICT622ICT622 2727

Organizational Risk MitigationOrganizational Risk Mitigation

Secure executive sponsorshipSecure executive sponsorship Joint accountability of business/IT managementJoint accountability of business/IT management Early and continuous involvement of stakeholdersEarly and continuous involvement of stakeholders Establish formal change management programEstablish formal change management program Establish formal communication channelsEstablish formal communication channels Establish formal and well-understood processesEstablish formal and well-understood processes Establish formal escalation processesEstablish formal escalation processes

ICT622ICT622 2828

Market Risk MitigationMarket Risk Mitigation

Reduce initial scope of geographic coverageReduce initial scope of geographic coverage Employ SME’ and consultants for expert Employ SME’ and consultants for expert

adviceadvice Documentation and formal sign-off on Documentation and formal sign-off on

customer requirementscustomer requirements Establish customer “knowledge base”Establish customer “knowledge base”

ICT622ICT622 2929

Global Considerations Global Considerations

Global ExporterGlobal Exporter MultinationalMultinational MultilocalMultilocal Transnational or MetanationalTransnational or Metanational

ICT622ICT622 3030

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

ICT622ICT622 3131

Do’s of Vendor ManagementDo’s of Vendor Management

Establish vendor management teamEstablish vendor management team Monitor service levels and end-user Monitor service levels and end-user

satisfactionsatisfaction Track service/product marketTrack service/product market Continually renegotiate contractContinually renegotiate contract Keep business units accountable and Keep business units accountable and

involvedinvolved Think ongoing relationshipThink ongoing relationship Use vendor’s expertise for solutionsUse vendor’s expertise for solutions

ICT622ICT622 3232

Don’ts of Vendor ManagementDon’ts of Vendor Management

Try to manage a vendor without adequate Try to manage a vendor without adequate expertise availableexpertise available

Ignore need to establish service level Ignore need to establish service level agreementsagreements

Fail to establish firm accountabilityFail to establish firm accountability Understaff vendor management functionUnderstaff vendor management function Rely solely on vendor’s expertiseRely solely on vendor’s expertise Forget to keep eye on vendor reputation and Forget to keep eye on vendor reputation and

profitabilityprofitability

ICT622ICT622 3333

Contract Renegotiation ProcessesContract Renegotiation Processes

Contract expirationContract expiration Material breach in contract by vendorMaterial breach in contract by vendor Major change in organization’s management Major change in organization’s management

or industryor industry Significant change in price for same Significant change in price for same

servicesservices New technologyNew technology

ICT622ICT622 3434

Outsourcing ConsiderationsOutsourcing Considerations

Do:Do:– Ask for and check referencesAsk for and check references– Assess culture of outsourcing partnerAssess culture of outsourcing partner– Evaluate multiple optionsEvaluate multiple options– Get it in writingGet it in writing– Metrics matterMetrics matter– Open kimonoOpen kimono– Pick outsourcing partner with strong partner Pick outsourcing partner with strong partner

networknetwork

ICT622ICT622 3535

Outsourcing Considerations Outsourcing Considerations Don’t:Don’t:

– Buy on price aloneBuy on price alone– Overlook reference-checking processOverlook reference-checking process– Use price contract without consideration of Use price contract without consideration of

long-term consequenceslong-term consequences– Forget to provide for contingenciesForget to provide for contingencies– Communicate via committeeCommunicate via committee– Hand over project managementHand over project management– Rely on marquee referencesRely on marquee references– Single-sourceSingle-source– Let head be turned by goodiesLet head be turned by goodies

ICT622ICT622 3636

Insource or Outsource?Insource or Outsource?

ICT622ICT622 3737

Outsourcing RFPOutsourcing RFP

Objectives and ScopeObjectives and Scope BackgroundBackground Technology VisionTechnology Vision Services RequestedServices Requested Transition/Migration ServicesTransition/Migration Services Performance RequirementsPerformance Requirements ResourcesResources Requirements for Vendor ProposalRequirements for Vendor Proposal General Terms and Conditions for ProposalGeneral Terms and Conditions for Proposal Proposal EvaluationProposal Evaluation

ICT622ICT622 3838