lecture 17 - governance of it

8/3/2019 Lecture 17 - Governance of IT

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Lecture 17

Chapter 9

Governance of the IT Function


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Final Module: IT Leadership

IT increasingly fundamental to business

Leadership of the IT function must change

Core leadership issues:

How to organize IT to support and enhance business activities?

How to govern IT to minimize risk and maximize value ofinformation assets?

What IT leadership approach best fits the role of IT in thecompany?


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Overview of Chapters

Chapter 9

Discusses themes and issues in IT governance

Chapters 10

Explores a way of defining and evaluating ITleadership


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IT and the Board of Directors

Increasing cost, complexity, and consequences of technology

Organizations vary

Operational dependence on information systems

Strategic influence of information technology

Board supervision of IT should fit companys use of IT What can we learn from this article

Why company boards should be involved in IT governance

How boards can start to shape IT decisions


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Volkswagen of America

Scarce IT resources

Implementation of IT project prioritization process

Aim to align IT activities with business strategy

Pressure from businesses to bypass prioritization process

Explore justifications for process Explore justifications for exceptions

Examine CIOs response

What can we learn from this case

Understand factors that affect project delivery and how IT leaderscan better manage them


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The AtekPC Project ManagementOffice

AtekPC Increasing price competition and consolidation in PC industry

Focus on cost-reduction and renewed growth

Formation of Strategic Planning Office

IT at AtekPC Operational and maintenance focus

Little cross-functional integration of applications or informationservices

Project Management Office

Goal of better and more coherent project delivery capability Possibility to leverage PM skill from IT projects to broader enterprise

What can we learn from this case How key factors influence the success of PMO implementations

Understand leaders role in shaping those factors


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Governance of the IT Function

Key Learning Objectives for Chapter 9

1. Understand the concepts of enterprise governance and ITgovernance, and the connection between the two

2. Understand the need for IT governance and the potentialbenefits of good IT governance

3. Recognize the primary domains of IT governance and learnabout effective approaches for developing an ITgovernance framework


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What is governance?

Governance is the process of structuring, operatingand controlling the organization with a view to

achieving its long-term strategic goals

Serving the interests of stakeholders

Complying with legal and regulatory requirements

Governance involves establishing chains ofresponsibility, authority, policies, standards,

measurements and control mechanisms Establishes expectations, allocate resources, manage

risk, verify performance

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IT Governance

Responsibilities

Increase effectiveness of organization through IT

Align with corporate goals

Protect investments Address IT-centric business issues

Overall effort to devise integrated approach, operatingperformance, strategic control, risk management,value alignment

Differs from project management in the strategic level offocus

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Essentials of Enterprise Governance

Enron example

Ensures employs act in a way that benefits thecompany

Set controls what variables need to bemonitored, how, and how to respond

Good governance gains credibility in

marketplace

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Impetus for Better IT Governance

Ensure that IT creates value by betteralignment of IT with business

Can you track where the IT money goes?

Can you identify the benefits and risks?

IT is an enabler of better governance

No formal government requirements

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Benefits of Effective IT Governance

Correlated to good business performance interms of cost reductions, customer satisfaction,security

Emphasis on quality of IT, reduction of risk Reduction in major IT delivery problems

Accurate understanding of support needs

Good electronic archiving and storageprocesses have benefits

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Scope and Practice of IT Governance

IT-business alignment

Investment Value

Project Delivery

Service delivery

Resource Management

Measurement of IT performance

Risk of IT performance

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Designing IT Governance

Intentional but minimalist design

Board-level leadership

Broad-based executive involvement

Clear ownership but broad participation

Enforce Execution but Accommodate Exception

Define benefits and target expectations

Aim for evolution not revolution inimplementation

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Managing IT Outsourcing

Focus on major projects rather than incremental Larger investments

Higher risk

Greater overall management complexity

8 to 10 years

Environment of change makes long term difficult toproject

Benefits to each party very different Path uncertainty can lead to conflict

Different from offshoring


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Key challenges

First year large capital spending from customer

Later profit expected

Incentives to meet contract change with

changing environment

Resolution of conflicts difficult and costly

Evolution of technology changes perspective


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History of outsourcing

A few early examples

1960s computer services for financialoperations

ADP started in 1949 as small punch cardpayroll company

Grew to $8.5b company in 2005

Large-volume standard transactions Accenture software contractor

Purchasing equipment and software steps

toward full outsourcing of IT


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Major early drivers toward outsourcing

Cost-effective access to specialized oroccasionally needed computing power/systemsdevelopment

Avoidance of building in-house skills Access to special functional capabilities

1990 Kodak decision to outsource IT legitimized

idea Mainframes

PC maintenance and service

Telecom


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Outsourcing Today

More and more functions outsourced

Acceptance of strategic alliances

Opportunity to complement strengths and

weaknesses Collaborative innovation

Changes in Technology

Most code development is outsourced Most IT departments integrate (select vendors,

code etc.) rather than develop

See table 9.1


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Drivers toward outsourcing today

Costs and Quality Tighter overhead cost control of fringe benefits

Aggressive use of low-cost labor

Tough standards

Effective builk purchasing and leasing arrangements Better management of excess hardware capacity

Better control of software licenses

More aggressive management of service and response time

Tighter inventory control Professional service at multiple levels

Leaner management structure

Higher level of IT staff skills

More realistic lease structures


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Drivers toward IT Outsourcing today(ctd)

Breakdown in IT performance Complexity led to problems led to new models

Intense Vendor Pressures Good sales and marketing teams plus positive results have lead to

confidence in outsourcing

Simplified General Management Agenda IT is messy!

Financial Factors Lower risk of cost fluctuations

Fixed (capital) cost business becomes variable cost business

Opportunity to move group into acquiring company

Corporate Culture IT team given clout to make major decisions

Eliminating Internal Irritation


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When to outsource

When do benefits outweigh risks?

1. Position on

strategic grid


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When to Outsource

2. Development Portfolio More maintenance/highly structured projects means more outsourcing

potential

High technology in specific field means more outsourcing potential

Large, low structured projects pose difficult coordination problems for

outsourcing3. Organizational Learning

Development work difficult to outsource

New areas mean company doesnt understand what is required letalone how to manage outsourcing

4. Market Position Large, well established firms are difficult to transition to new systems

without outsourcing

5. Current IT organization High structure easy to outsource

Contracts easy to write when know what is expected


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Structuring Alliance

Contract Flexibility May change radically over time

6 to 8 months to write contracts

Process of drafting more important than resulting document

Standards and Control

Should be explicitly written into contract

Vendors often able to provide better performance measures

Areas to Outsource All or nothing?

Coordination costs


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Structuring Alliance

Cost Savings

Supplier Stability and Quality

10 year contract is long time in high-tech!

Keeping open to other outsourcing options Managing conflicts of interest

Management Fit

People working with people Conversion problems

IT staff move leads to uncertainty


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Managing Alliance

Early results are key CIO Function

Partnership/contract management Architecture planning Emerging Technologies

Continuous learning Performance Measurement Some areas easier than others Cost savings vs. streamlining/simplification

Mix and Coordination of Tasks

Benefits can be overrun by management of complex project mix withmultiple vendors

Customer-Vendor Interface Final responsibility on both sides Who communicates what and when? Reporting expectations

Relationship managers and coordinating groups


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What about the contractor?

Business model for consulting/contractingcompanies

Risks

lecture 17 - governance of it

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