Governing IT
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  • Conference Name Presenter Name Date Location City, State Presentation Title These materials can be reproduced only with Gartner's written approval. Such approvals must be requested via e-mail — vendor.relations@gartner.com.
  • What is IT governance and why is it critical? Enterprises achieving above average returns from IT investments deal with the increased complexity by clarifying who is able to make critical decisions and who is accountable. That is, they have thoughtfully designed their IT governance, rather than focusing only on how IT is managed. IT governance specifies the decision rights and accountability framework to encourage desirable behavior in the use of IT (Weill 2001; Broadbent & Weill, 1998). It is not about IT management and the detail of particular IT decisions and their implementation. Rather, it is about the arrangements for who makes critical decisions and who is accountable. IT governance applies principles similar to financial governance to IT, such as who is authorized to commit the enterprise to a contract or authorize a payment. However, business and IT governance are poorly understood. IT governance “just happens” in many enterprises. IT governance is not actively designed to achieve business objectives and desirable behaviors. Defining desirable behaviors and harmonizing IT governance with business objectives takes time, effort and a clear focus. To be effective, IT governance must be purposefully designed. Action Item: Business and IT executives need to take a thoughtful and deliberate approach to IT governance, understanding that its purpose is to encourage desirable behaviors in the use of IT. Source: MIT Sloan CISR and Gartner EXP Research IT governance should be thoughtfully designed to encourage desirable enterprise behaviors. But too often, business and IT governance just happen.
  • When and where are different types of IT governance arrangements effective? Enterprises with higher governance performance have more-focused strategies. They clearly differentiated between the three value disciplines – customer intimacy, product/service innovation or operational excellence – and were not trying to optimize on all three of these. On average, these enterprises had greater differentiation between different objectives for their IT investment. They were not expecting IT investments to excel in delivering on multiple objectives. Rather, they had specific focus on smaller number of objectives for their IT investment – whether it was lowering cost, supporting new ways of doing business, greater flexibility or facilitating customer communication. Senior business leaders were more heavily involved in IT governance and there was a higher level of impact from the CEO, COO, business unit leaders, business unit CIOs and the CFO. More managers in leadership positions could accurately describe governance arrangements and there were fewer changes in IT governance, year on year. Exception processes functioned more effectively in enterprises with higher governance performance. They were seen as more transparent and fair and there were fewer nonsanctioned exceptions. Source: MIT Sloan CISR and Gartner EXP Research High governance performance enterprises have both business strategies and IT investments strategies which were more focussed and differentiated.
  • What are the components of top-level IT governance? Governance processes involve decisions about major IT domains, that is, those areas, such as IT investment, IT principles or maxims. They balance decision rights between multiple constituencies, such as “C-level” executives (including the CIO), business unit leaders and IT executives. Their purpose is to encourage desirable behavior so the enterprise achieves its goals. IT governance is formed and enacted by multiple mechanisms – formal mechanisms, such as the executive committee and the IT council, and informal mechanisms, such as talking with colleagues. IT governance is going through a time of considerable change. Research from the MIT Sloan/Gartner EXP study shows that governance is dynamic with enterprises making regular changes. Source: MIT Sloan CISR Effective IT governance arrangements thoughtfully and purposefully combine decision making about major IT domains, by the right group of people, using appropriate mechanisms.
  • Government is largely driven by two fundamental elements: the political agenda and the resulting budget process. These are accepted everywhere as the key processes that drive government behavior and activity. However, government is very process-driven. To help put flesh on the skeleton of the political agenda and budget process, government has created a variety of processes to provide input into the decision making and execution processes. Although each process adds value, most are created independently of one another, thus creating a lot of unnecessary effort and resource requirements to satisfy the needs of these processes. If government were to link all of these processes together, then it would discover that they all require the collection of various bits of data and inputs that can be used to build on each other, thus reducing the amount of effort required for each process. To accomplish this, however, policy makers and process owners must explicitly seek to integrate these processes to form a coherent road map for government agencies to follow. Regrettably, this seldom occurs. Action item: Align key management processes of government. Link data collected and information generated to relevant decisions. And, while planning this alignment, be clear who the participants are in the process and that they understand the link they provide in the overall governance process. Tactical Guideline: Governments must create a process map for decision making and ensure that the various elements complement each other rather than act as stand-alone processes.
  • Governance processes involve decisions about major IT domains, that is, areas such as IT investment and principles. They balance decision rights between multiple constituencies, such as "C-level" executives (including the CIO), business unit leaders and IT executives. Their purpose is to encourage desirable behavior so the enterprise achieves its goals. IT governance is formed and enacted by multiple mechanisms: formal mechanisms such as the executive committee and the IT council, and informal mechanisms such as talking with colleagues. IT governance involves decisions about five major domains: 1) IT principles are high-level statements about how IT will be used to create business value. 2) IT infrastructure strategies describe the approach to building shared and standard services across the enterprise. 3) IT architecture is about the set of technical choices that guide the enterprise in satisfying business needs. 4) Business application needs refer to applications that need to be acquired or built. 5) IT investment and prioritization covers the process of IT investment, including where it should be focused and the procedures for progressing initiatives, their justification, approval and accountability. (Adapted from Weill and Woodham, 2002.) Action Item: Create a charter for IT governance that specifies how major decisions are made.
  • When and where are different types of IT governance arrangements effective? The governance mechanisms used by high governance performers are much more effective than those in the lower performing group. The top three mechanisms in terms of impact were heavily focused on the business-IT relationship. Executive committees (including business and technology executives) had the most positive impact followed by Formal tracking of the business value of IT and Business/IT relationship managers . Mechanisms around the IT organization itself were still effective, but less so generally than real interlocking of business and technology executives and managers, plus the discipline of tracking IT’s business value. Two mechanisms in particular were seen as ineffective by high governance performance respondents: Chargeback arrangements and Architecture committees . The message here is that it’s very difficult to implement these mechanisms effectively. Chargeback arrangements must be carefully linked back to desired behaviors. Architecture committees need business input but clear decision rights and transparent exception processes. Action Item: Ensure that IT governance mechanisms focus on the interlinking of business and IT and the discipline of tracking IT’s business value, projects and resources. Source: MIT Sloan CISR and Gartner EXP Research Enterprises need to carefully monitor the nature and effectiveness of their IT governance mechanisms.
  • What are the components of top-level IT governance? IT governance involves decisions about five major IT domains: 1) IT principles (or maxims ) are high-level statements about how IT will be used to create business value. They should be informed by the enterprise business maxims. 2) IT infrastructure strategies describes the approach to building shared and standard IT services across the enterprise. 3) IT architecture is about the set of technical choices that guide the enterprise in satisfying business needs. In case of J&J, this means development of some agreed components of data architecture so that customer information can be meaningfully shared, together with selected standards to support the agreed architectural approach. 4) Business applications needs refer to applications that need to be acquired or built. 5) IT investment and prioritization covers the process of IT investment, including where they should be focused and the procedures for progressing initiatives, their justification, approval and accountability. (Adapted from Weill and Woodham 2002.) Action Item: Articulate and clarify the five major IT domains that provide the foundation and guidance for IT-enablement across the enterprise. Source: MIT Sloan CISR IT governance is about clarifying the decision and input rights for five major IT domains.
  • Key Issue: What are best practices for IT governance implementation? IT principles and policies define the role of IT in the organization. Policies spell out what desirable behavior is in the usage of IT and policies are the rules required to be followed to reach a similar goal. They are the fundamental building blocks of IT governance. Organizations that can secure agreement about the role of IT generally require simpler and more efficient governance mechanisms. Principles and policies are not platitudes — such as IT being customer-centric, delivering reliable solutions, maintaining cost-effectiveness and so on. For a good test to determine if something is a principle or policy rather than a platitude, try turning it into a " not statement." If the " not statement" is not viable, then you have a platitude. For example, IT will deliver reliable applications has the untenable not statement of IT will not deliver reliable applications . Action Item: Principles and policies already exist, at least implicitly, in your organization. Document them and state their implications. Determine if your business leaders (and IT leaders) agree with them . Strategic Imperative: IT governance is not a substitute for leadership. Use principles to build agreement about the role of IT.
  • What are the components of top level IT governance? IT governance defines who has input and who makes the decisions. There are six styles of corporate governance and information politics: 1) Business monarchy where the executive leadership has decision rights. These are often exercised through an executive committee or IT Council comprising a combination of business and IT executives. 2) IT monarchy where IT executives have the decision rights. These are often exercised through an IT Leadership Council or CIO office. 3) Feudal where business unit leaders or their delegates have the decision rights and authority is localized. This style is found in enterprises with relatively autonomous business units and can be useful in delivering local responsiveness. 4) Federal where governance rights are shared by C level executives and at least one other group. Equivalent to the center and states working together. This style is often used for inputs to decisions rather than the group which actually takes the decisions. 5) Duopoly where rights are shared by IT executives and one other group (eg CXO or BU leaders) 6) Anarchy where individual process owners or end users have decision rights and there are usually no formal mechanisms for exercising rights. Decisions are made ad-hoc and locally. Different styles can be used for each of the five IT domains. (Adapted from Weill and Woodham 2002) Action Item: Use the lens of corporate governance and information politics to depict key governance styles and the locus of decision rights. Source: MIT Sloan CISR Corporate governance and the language of information politics are useful lenses for depicting the major players and approaches in enterprise IT governance.
  • How can enterprise IT governance patterns be represented? A matrix can be used to depict governance arrangements by listing the six governance styles on the vertical axis and mapping them to the five IT domains on the horizontal axis. The MIT Sloan CISR and Gartner EXP study identified how 250 enterprises made major decisions regarding who had decision rights and who had input about each of the five IT domains. Source: MIT Sloan CISR IT governance can be represented using an IT Governance Arrangements Matrix.
  • Key Issue: How do you make IT governance a more practical challenge to solve? Patterns of high IT governance performers can provide input into examples of effective IT governance arrangements and their structure. In the example used illustratively above, IT governance arrangements provide for federal input, joint decision rights between business and IT leadership in IT principles and business application needs, top-level business executive decision rights for IT investment and prioritization, and IT monarchy decision rights for IT infrastructure strategies and IT architecture. The graphic matrix illustrates these arrangements. Business and IT executives together hold the decisions rights for IT principles and business application needs. Top-level executives (including the CIO) hold decision rights for IT investment and prioritization. The IT leadership holds the decision rights for IT infrastructure strategies and IT architecture. Source: MIT Sloan CISR and Gartner EXP Research
  • When and where are different types of IT governance arrangements effective? IT governance performance was assessed by measuring its influence on four outcomes: cost effective use of IT; effective use of IT for asset utilization; effective use of IT for growth; effective use of IT for business flexibility. These outcomes were weighted according to their importance to each enterprise. On a scale of 20-100 (minimum to maximum), the average score was 69%. Seventeen percent of enterprises scored above 80%. Some IT governance arrangements are clearly more effective than others. These arrangements involve: Collaborative and tightly -controlled decision making ( duopoly or business monarchy ) between business and IT executives for IT principles and IT investment and prioritization IT executive leadership for making IT infrastructure strategies and IT architecture decisions High-level business unit involvement for determining business application needs Federal input to all domains Arrangements which don’t work well include: Federal decision rights for all but business application needs Feudal decision rights for business application needs Governance performance is higher in “for-profit” enterprises when compared to “not-for-profit” enterprises, partly because the latter use the federal style much more for decision rights. Source: MIT Sloan CISR and Gartner EXP Research Effective IT governance arrangements involve top level business and IT executives working closely together.
  • Source: MIT Sloan CISR and Gartner EXP Research The ‘IT Governance Arrangement Matrix’ can be used to illustrate how governance styles, IT domains and governance mechanisms inter-relate.
  • Source: MIT Sloan CISR and Gartner EXP Research The ‘IT Governance Arrangement Matrix’ can be used to illustrate how governance styles, IT domains and governance mechanisms inter-relate.
  • Source: MIT Sloan CISR and Gartner EXP Research High governance performance enterprises have both business strategies and IT investments strategies which were more focussed and differentiated.
  • Source: MIT Sloan CISR and Gartner EXP Research High governance performance enterprises have both business strategies and IT investments strategies which were more focussed and differentiated.
  • Source: MIT Sloan CISR and Gartner EXP Research High governance performance enterprises have both business strategies and IT investments strategies which were more focussed and differentiated.
  • How can you improve your IT governance? You can assess your likely IT governance effectiveness using the IT Governance Self-Assessment. This is based on the six characteristics of high IT-governance performers. Executive management can also use this assessment to measure current status and to spot areas needing improvement. Scoring of the indicators is as follows: 6 or less No effective IT governance 7-9 Low level IT governance 10-13 Maturing IT governance 14 + Top performer, watch for complacency Action Item: Score your enterprise IT governance indicators. Identify and work on areas where you are currently weak. Source: Gartner EXP Research There are six leading indicators for effective IT governance and these provide the basis of a self-assessment to know where you stand today.
  • Gartner's self-assessment tool can be used effectively as the basis for an IT governance workshop. This facilitated workshop should include key stakeholders of IT governance, and its outcome should be a prioritized list of areas for improvement. As part of the workshop, assess where you are today using the statements in the assessment. Rate the degree of agreement on a scale from 1 = strongly disagree, to 5 = strongly agree. Get a broad range of stakeholders to make their own assessments, and then collate the results. Business and IT executives will have varying perceptions of the problem. An understanding of these issues will be enhanced by an evaluation, followed by a discussion. The benefit of the workshop resides in the discussion. Most groups will provide scores in the range of 2 to 4 for each area. Based on conversations with many organizations, Gartner believes that aggregate scores greater than 55 indicate robust and effective governance. Scores between 40 and 55 indicate that the basics of governance are in place but must be evolved to increase effectiveness. Scores below 40 indicate the need to "start over." Documenting the assessment results will enable the assessment to be revisited in six months to see if progress has been achieved. Reference: "Assessing the Effectiveness of IT Governance": G00136752
  • Source: MIT Sloan CISR and Gartner EXP Research High governance performance enterprises have both business strategies and IT investments strategies which were more focussed and differentiated.
  • Source: MIT Sloan CISR and Gartner EXP Research High governance performance enterprises have both business strategies and IT investments strategies which were more focussed and differentiated.
  • Key Issue: What are best practices for IT governance implementation? Principles/policies will change over time as the business changes — and as new challenges emerge for IT. Principles/policies do not need to cover the organization's corporate governance per se — they already are instituted as "rules." The principles/policies should represent the "guardrails" upon which decisions are made. However, the implications of the principles/policies must be clear enough so that clients understand what they are approving when they decide on the acceptability of a principle/policy. The "statement of implication" specificity will vary by target audience. Action Item: Determine where there are significant gaps in principles/policies in your organization. Begin crafting relevant principles/policies and securing approval for them .
  • Source: MIT Sloan CISR and Gartner EXP Research The ‘IT Governance Arrangement Matrix’ can be used to illustrate how governance styles, IT domains and governance mechanisms inter-relate.
  • Source: MIT Sloan CISR and Gartner EXP Research The ‘IT Governance Arrangement Matrix’ can be used to illustrate how governance styles, IT domains and governance mechanisms inter-relate.
  • Source: MIT Sloan CISR and Gartner EXP Research The ‘IT Governance Arrangement Matrix’ can be used to illustrate how governance styles, IT domains and governance mechanisms inter-relate.
  • Key Issue: How do you make IT governance a more practical challenge to solve? In the "Plan" cycle for IT Demand Governance (ITDG), business and IT strategic planning is used to determine the goals and strategies which will guide operational planning. Business and IT operational planning determines what IT has to deliver, and when, and the budgets for both the business and IT. In the "Implement" cycle, ITDG processes are designed to support the goals of ITDG consistent with the management style and decision-making culture of the organization. Financial control and oversight can be facilitated by using such tools as IT investment portfolio analysis. ITDG also establishes the policy for chargeback for the use of IT services and assets. The "Manage" cycle of ITDG focuses on the allocation of resources and the resolution of issues to support the business most effectively. (This is seen as an ITDG responsibility even though it "blurs the line" between "governance" and "management" in more conventional definitions of the two). The "Monitor" cycle ensures that approved investments yield the bottom-line benefits that were proposed; the IT organization provides IT services responsively and cost effectively; IT leverages its position as the organization's IT solutions provider by making contributions to optimize business opportunity from IT; the value and effectiveness of ITG are assessed and optimized. The behavior and practices of IT Supply Governance are governed by policies, practices, monitoring and enforcement across a wide range of IT responsibilities and disciplines. In "Planning," the policy to govern IT in the chosen area is determined or developed. Policy "Implementation" includes specific procedures and practices for compliance for each affected area. "Manage" and "Monitor" encompass the oversight, compliance enforcement and escalation/appeal process to deal with requests for waivers or other exceptions that might be allowable.
  • Viewing governance within the C/D Matrix enables CIOs to assure that the actions they are taking align with the relationship maturity within the business. Without the above listed stabilizing features, evolving IT shops will find progress difficult and possibly circular (1 step forwards, 1 step backwards).

Governing IT Governing IT Presentation Transcript

  • Governing IT Louis Boyle Vice President Gartner Executive Programs
  • Agenda
    • Definitions & context
    • IT Governance Framework
      • What – the decisions
      • Who – the deciders
      • How – the mechanisms
      • Implementation – change management/communications
    • Key Success Factors
    • Case Study
    • Q & A
  • Effective IT Governance Is Critical, But Difficult To Achieve
      • Smart IT governance helps enterprises deal with complexity
      • But both business and IT governance are poorly understood . . . top level IT governance just happens
      • IT governance is ‘the assignment of decision rights and the accountability framework to encourage desirable behavior in the use of IT’ (Weill, 2001; Broadbent & Weill, 1998)
      • Defining desirable behaviors takes time, effort, focus . . . cost savings, innovation, growth, reuse, sharing
      • Effective IT governance is not ‘one size fits all’ . . . differs by business objectives, behavior sought
      • IT business value directly results from effective IT governance . . .Firms with superior IT governance have at least 20% higher profits (ROA) than firms with poor governance given the same strategic objectives.
    © 2002 MIT Sloan Center for Information Systems Research (Weill) and Gartner, Inc.
  • High Governance Performers Have Sharper Strategies, Focus And Commitment*
    • Characteristics of High IT Governance Performers
      • More focused strategies
        • Greater differentiation between customer intimacy, product innovation, or operational excellence
      • Clearer business objectives for IT investment
        • Greater differentiation between supporting new ways of doing business, improving flexibility, or facilitating customer communication
      • High level executive participation in IT governance
        • Greater involvement, impact of CEO, COO, Business Heads, Business Unit CIOs and CFO
        • Who could accurately describe IT governance arrangements
      • Stable IT governance, fewer changes year to year
      • Well functioning formal exception processes
      • Formal communication methods
    *Statistically significant relationship with governance performance © 2002 MIT Sloan Center for Information Systems Research (Weill) and Gartner, Inc
  • What is IT Governance and what does it address within an organization?
    • Top Level IT Governance Addresses Three Major Components:
    • What decisions need to be made? . . . decisions about major IT domains
          • IT Principles
          • IT Infrastructure Strategies
          • IT Architecture
          • Business Application Needs
          • IT Investment and Prioritization
          • External Relationships
    • Who has decision and input rights? . . . Rights are exercised in different governance styles
          • Monarchy, Feudal, Federal, Duopoly, Anarchy
    • How are the decisions formed and enacted? . . . Multiple mechanisms make governance work
          • Decision Making Councils (e.g., Office of CIO)
          • Business/IT Relationship Managers
          • Process Teams
          • Service-Level Agreements
          • Chargeback Arrangements
    IT governance specifies decision rights and creates an accountability framework that encourages desirable behavior in the use of IT Governance approaches should be based on the degree of enterprise commonality that exists, the urgency of required responses and the frenzy (and pressure) to perform. Consequently, Gartner recommends tailoring and balancing general-purpose management models to meet unique organizational needs. Balancing the IT Management Triad Vision and Business Alignment Funding, Budgeting and Pricing Staffing and Organization • Reinvestment? • Application prioritization? • Continuous migration? • Outside suppliers? • Roles and responsibilities? • Process? • Compensation? • Retention? • IT policy? • IT strategy? • Governance? • Shared services? IT as a back- office utility overhead IT as a business enabler and competitive weapon
  • Administrative Process Map: IT Governance Aligns these Processes Political Agenda IT Strategic Plan Budget Desires Decisions Tactical Execution Cross-Agency Budget Cutting Service Delivery Project Management Human Resources Acquisition Strategic Sourcing Corporate Performance Management Investment Prioritization Business Strategic Plan
    • Business Case Inputs
    • Organizational Capacity
    • Cost
    • Time
    • Risk
    • Procurement
    • Portfolio Performance
  • IT Governance and Management Are Not the Same
    • What IT Governance Is:
    • Collective decisions and guidance about:
      • How IT should be used in the business (policies, principles)
      • Who makes What decisions How (clear accountabilities)
      • Business cases and investments (priorities, ownership and benefits realization)
    • What IT Governance Is Not:
      • Internal IT operations
      • IT people management
      • IT contract management
      • Internal IT organization
      • Project management
      • System testing
      • Audits
      • Procurement of hardware
      • Facilities management
      • Documentation and training
      • Client satisfaction
      • Benchmarking
      • Capacity planning
      • Resource management
  • What Are the Key Components that Make Up IT Governance?
    • An IT Governance framework usually comprises the following components:
      • Structural Model
        • Mission - Purpose and approach to managing the IT organization
        • IT Organization - Structure, reporting relations and connections between resources and their counterparts across the IT organization
        • Roles & Responsibilities - Definition of work requirements and the groups/individuals to perform them
      • Operational Model
        • Processes - Pre-defined activity flow for necessary actions and creation of outcomes
        • Measures - Accountability mechanisms at all levels
        • Policies - Pre-defined decision on boundaries, standards, latitude
        • Information and analysis to inform decisions
    Customer / End User Help Desk and Local/Peer Support Shared Services Infrastructure and Production Support Systems - Network - Data - Applications Asset Management - Operations CIO BU Managers Functional Management Relationship Manager Office of Integration BU CIO Competency Centers Network and Data Design Change Management “ Exotics” (Multimedia, Intranet) Support Maintain Proposal Requirements Test Build/Buy Design Specification Assessment Project Manager Project Office Project Manager Functional AD team Development Services BU AD team Process Office of Architecture, Standards & Planning Office of the CIO
  • Top IT Governance Mechanisms Focus On Business And IT Relationships Not Effectiveness Very © 2002 MIT Sloan Center for Information Systems Research (Weill) and Gartner, Inc. 1 2 3 4 5 Chargeback arrangements Web-based portals, intranets for IT Formally tracking IT’s business value Architecture committee Capital approval committee Service level agreements Tracking of IT projects and resources Process teams with IT members Executive committee IT council of business and IT executives IT leadership committee Business/IT relationship managers IT Governance Mechanism Effectiveness % respondents using 85 87 71 89 86 96 89 56 67 62 79 62
  • The Three Components of IT Governance
    • What decisions need to be made?
    • Who makes them?
    • How are they made?
  • 1. What Decisions Need To Be Made? . . Clarify Five Major IT Decision Domains IT Infrastructure Strategies IT Principles IT Architecture Business Application Needs IT Investment and Prioritization Strategies for the base foundation of budgeted-for IT capability (both technical and human), shared throughout the firm as reliable services, and centrally coordinated (e.g., network, help desk, shared data) High level statements about how IT is used in the business An integrated set of technical choices to guide the organization in satisfying business needs. The architecture is a set of policies and rules that govern the use of IT and plot a migration path to the way business will be done (includes data, technology, and applications) Business applications to be acquired or built Decisions about how much and where to invest in IT including project approvals and justification techniques © 2002 MIT Sloan Center for Information Systems Research (CISR). This material is adapted from Weill & Woodham's work originally published and copyrighted by the MIT Sloan CISR as Working Paper No. 326, "Don't Just Lead, Govern: Implementing Effective IT Governance," April 2002, and is used by Gartner with permission.
  • Defining IT Principles/Policies
    • Characteristics of effective principles/policies
      • Actionable — facilitate decision making
      • Succinct — express a focused point of view
      • Appropriate specificity: not too general ("Motherhood and Apple Pie "); there must be a compelling alternative
      • Clear implications — adhering or not adhering to the principle/policy should have consequences
      • Relevant — address the specific business context of an enterprise (business trends, IT trends, corporate culture and values)
    • Components of principles/policies
      • Principle statement
      • Rationale
      • Implications
  • 2. Who Has Decision Rights And Inputs? . . Rights Exercised In Six Governance Styles Note: Some Governance styles were inspired by Davenport, 1997. C-level executives, as a group or individuals, including the CIO (but not acting independently) C-level executives and at least one other group. (Equivalent to the center and states working together) IT executives and one other group (eg CXO or BU leaders) Business unit leaders or their delegates Individuals or groups of IT executives Each individual business process owner or end user Business Monarchy Federal Duopoly Feudal IT Monarchy Anarchy © 2002 MIT Sloan Center for Information Systems Research (CISR). This material is adapted from Weill & Woodham's work originally published and copyrighted by the MIT Sloan CISR as Working Paper No. 326, "Don't Just Lead, Govern: Implementing Effective IT Governance," April 2002, and is used by Gartner with permission. Style Who Makes The Decisions?
  • 3. How Can IT Governance Arrangements Be Represented? IT Principles IT Infra- structure Strategies IT Architecture Business Application Needs IT Investment Business Monarchy IT Monarchy Feudal Federal Duopoly Domain Style Anarchy Don’t Know © 2002 MIT Sloan Center for Information Systems Research (CISR). This framework is adapted from Weill & Woodham's work originally published and copyrighted by the MIT Sloan CISR as Working Paper No. 326, "Don't Just Lead, Govern: Implementing Effective IT Governance," April 2002, and is used by Gartner with permission. ?
  • IT Governance — Example of Domains, Decision Rights and Styles © 2002 MIT Sloan Center for Information Systems Research (Weill) and Gartner, Inc. drawing on the framework of Weill and Woodham, 2002. Exec comm Biz leaders Exec comm IT leadership CIO IT leadership Exec comm Biz leaders CIO IT leadership Biz leaders Biz pro own Biz/IT rel mgs Exec comm Biz leaders Biz leaders Biz pro own Cap appr comm Biz leaders Biz pro own
    • Business/IT relationship managers
    • Biz/IT rel mgs
    • CIO, CIO's office and biz unit CIOs
    • IT leadership
    • Business process owners
    • Biz pro own
    • Business unit heads/presidents
    • Biz leaders
    • Exec comm subgroup, includes CIO
    • Cap appr comm
    • Executive committee ("C" levels )
    • Exec comm
    Input Decision IT Principles Input Decision IT Infrastructure Strategies Input Decision IT Architecture Input Decision Business Application Needs Input Decision IT Investment and Prioritization Business Monarchy IT Monarchy Feudal Federal Duopoly Governance Mechanisms Domain Style Input rights Decision rights
  • Business And IT Executive Collaboration Mark High IT Governance Performers © 2002 MIT Sloan Center for Information Systems Research (Weill) and Gartner, Inc, drawing on the framework of Weill and Woodham, 2002. IT Principles IT Infrastructure Strategies IT Architecture Business Application Needs IT Investment and Prioritization Business Monarchy IT Monarchy Feudal Federal Duopoly Anarchy Domain Style Top three patterns of high IT governance performers 1 2 3
  • Six Guiding IT Principles
    • IT will enable and provide strategic value to the business.
    • IT architecture & standards shall be governed at the enterprise level to ensure integrity, planned evolution, and periodic refresh in light of new technologies and business strategies.
    • Information is our business, so data is one of our most valuable assets. It must be accessible, managed and protected accordingly.
    • IT will reuse before it buys and buy before it builds.
    • As new applications are developed, we will strive to create reusable components and processes (in line with the architecture) to facilitate business reuse where appropriate.
    • IT will strive to reduce complexity in the the technology environment.
    What IT decisions are made
    • Rationale
      • IT Services and Solutions must meet business needs and help drive value.
    • Implications
      • IT will be “students” of the business – to provide appropriate technical solutions and support, IT must understand the business
      • IT will manage appropriately within established budget
      • IT will make provisions to ensure Business is an educated consumer of IT Products and Services
      • IT Application Leadership will engage with Business in business strategy, planning, and management
      • IT will partner with Business Unit leadership to support enterprise requirements and business solutions
      • Business processes need to be optimized to obtain full benefits of technological solutions
      • IT Business Relationship Managers will represent all facets of the IT function to the Business Units
      • IT will provide business “consulting” services (alternatives, pros, cons, recommendations) as a partner to its business clients
      • IT will evaluate alternative technological and sourcing approaches to provide business solutions
      • IT must be “easy to do business with” - make IT easy to navigate for business colleagues
    IT Will Enable and Provide Strategic Value to the Business
  • IT Governance Mechanisms Input Decision Business App Needs IT Monarchy Feudal Federal Duopoly Domain Style Business Application Needs
      • Major Decisions Addressed
        • Rule of 7
        • Only those decisions that the governing entity reserves clearly and completely for itself, with no delegation
      • Mechanism
        • Input Forum
        • Decision Forum
        • Trigger: Regularly scheduled at xxx interval, or reactive based on yyy
        • Sponsor
      • Metrics
        • Minimum metrics to ensure successful operation and compliance
      • Compliance
        • “ Loop-closing” mechanism
        • MUST fit the culture
      • Refer to Exception process for more information
    How the Decisions Get Made Business Monarchy Anarchy Input rights Decision rights
  • Sample IT Governance Mechanisms Exception Process Exceptions to the IT Governance processes should be very rare and well-justified. In cases where an involved party has significant issues or concerns regarding a decision reached via the IT Governance processes, the following process should be followed:
      • For Senior Management Team decisions
        • CEO makes final decision
      • For Senior Management Team, CIO & ITLC decisions
        • Sr. Leader (or designee) approaches appropriate ITLC member with specific circumstances
        • CIO & Sr. Leader formally approve exception
        • Escalate to CEO, if necessary
      • For Business Unit Leaders decisions
        • Sr. Leader approaches Application Head with specific circumstances
        • CIO & Sr. Leader must formally approve exception
        • Escalate to CEO, if necessary
    How the Decisions Get Made
  • Implementing IT Governance Communications/Change Management Components
    • Executive (CEO leadership team meetings, COO leadership team meetings) socialization presentations, discussions
    • Executive announcement ‘Elevator speech’ (COO to CEO & CEO direct reports)
    • Executive summary slide deck
    • BRM (business relationship manager) communication tools
      • Slide deck
      • Suggested talk track
      • Suggested email announcement
      • FAQs
    • Core team continued availability during above
  • Key Success Factors for IT Governance
    • The full buy-in of the CEO & direct reports is required
    • Clear participation of the business (it’s all about governing IT)
      • A willingness between Corporate and the business units as well as across business units to cooperate and to develop a solution that is supported by all is essential
    • Existing organizational and decision making structures can’t be sacred cows as they will be questioned and likely modified
    • The project can’t be treated as an IT project
    • Formal change management needs to be part of the work
    • Communicate, communicate, communicate
    • Minimal “loop closing“ is required to ensure compliance
  • Typical Benefits of Implementing an IT Governance Framework
    • Enhanced alignment between the Business and IT
    • Improved IT decision-making & communications
      • Overall clearer
      • More efficient as decisions and communications are quicker and more cost-effective
      • More effective as the right decisions get made
    • Improved perception of value of IT
    • More focused strategies
    • Clearer business objectives for IT investment
    • High level executive participation in IT governance
    • Stable IT governance, fewer changes year to year
    • Well functioning formal exception processes
    • Formal communication methods
  • Typical Project Timeline
    • The following presents a more or less typical timeline for projects of this nature:
    • Depending on the specifics of the project, a more detailed timeline will have to be developed
    Milestones Project Planning Governance Requirements Identification Governance Design Transition Month 1 Month 2 Month 3
  • Example
    • Summary of Case Study
  • Assess Your IT Governance Effectiveness Short Form Self-Assessment 6 or less (no effective IT governance) 10-13 (maturing IT governance) IT Governance Effectiveness Indicators Disagree Strongly (Score 0) Disagree Somewhat (Score 1) Agree Somewhat (Score 2) Agree Strongly (Score 3) Total 2. We have clear business objectives for evaluating every type of IT investment 3. Executives are engaged in IT governance and can describe these arrangements 1. We have strongly differentiated business strategies 5. We use well-defined, formal IT exception processes 4. Our IT governance is stable, with few major changes year-to-year 6. We use multiple formal communication methods to engage business leaders 7-9 (low-level IT governance) 14+ (top performer, guard against complacency) 1 1 1 1 1 1 0 0 0 0 0 0 2 2 2 2 2 2 3 3 3 3 3 3 © 2002 Gartner, Inc. and MIT Sloan Center for Information Systems Research (Weill)
  • Assess Your IT Governance Effectiveness Long Form Self-Assessment Assess your current position on a journey into the future. For each area, rate these factors, where 1 means strongly disagree, 5 means strongly agree.
    • Decisions
    • Clarity about decision rights
    • Consistency
    • Strong business cases
    • Business roles clear
    • Appropriate committees
    • Optimized budgets
    • Architecture plan
    • Directions
    • Aligned strategies
    • IT strategy known
    • Defined IT principles
    • Risks assessed & managed
    • Business value understood
    • Performance metrics clear
    • Relationships
    • Clear links to corporate governance
    • Strong and trusted teamwork between business and IT
    • Strong and trusted teamwork within IT
  • Implementing IT Governance – General Project Approach
    • Plan it, work it!
      • Game plan, self-assessment, project plan
    • Establish IT Governance Principles based on overall IT strategy
    • Evaluate effectiveness of current IT Governance-like mechanisms, if any do exist either within Corporate or the business units
    • Develop Governance processes as appropriate (structural and operational model)
    • Establish clear relationship between the various IT Governance components
    • Validate IT Governance framework and processes with Business Owners
    • Implement new IT Governance framework
      • Roll out to all of IT & Business
      • Thorough communications & PR campaign
    • Establish IT Governance oversight role to monitor processes, effectiveness, and compliance
  • Q & A
    • ?
    • !
  • Appendix – Sample Deliverables
  • Example Topics for IT Principles/Policies
    • Governance
    • Investment Evaluation Criteria
    • Investment Decision Making
    • Funding
    • Cost Allocation
    • Benefits Realization
    • Architecture
    • Project Management
    • Privacy
    • Procurement
    • Operational Risk
    • Business Continuity
    • Security
    • Organizational Development
  • Summary of Case Study
    • List of 6 guiding principles
    • Details - principle 1
    • Details - principle 2
    • Governance arrangements matrix
    • Details for one IT governance mechanism
    • Exception process
    • Communications process
  • Sample of Six Guiding IT Principles
    • IT will enable and provide strategic value to the business.
    • IT architecture & standards shall be governed at the enterprise level to ensure integrity, planned evolution, and periodic refresh in light of new technologies and business strategies.
    • Information is our business, so data is one of our most valuable assets. It must be accessible, managed and protected accordingly.
    • IT will reuse before it buys and buy before it builds.
    • As new applications are developed, we will strive to create reusable components and processes (in line with the architecture) to facilitate business reuse where appropriate.
    • IT will strive to reduce complexity in the the technology environment.
    What IT decisions are made
    • IT will enable and provide strategic value to the business
      • Rationale
        • IT Services and Solutions must meet business needs and help drive value
      • Implications
        • IT will be “students” of the business – to provide appropriate technical solutions and support, IT must understand the business
        • IT will manage appropriately within established budget
        • IT will make provisions to ensure Business is an educated consumer of IT Products and Services
        • IT Application Leadership will engage with Business in business strategy, planning, and management
        • IT will partner with Business Unit leadership to support enterprise requirements and business solutions
        • Business processes need to be optimized to obtain full benefits of technological solutions
        • IT Business Relationship Managers will represent all facets of the IT function to the Business Units
        • IT will provide business “consulting” services (alternatives, pros, cons, recommendations) as a partner to its business clients
        • IT will evaluate alternative technological and sourcing approaches to provide business solutions
        • IT must be “easy to do business with” - make IT easy to navigate for business colleagues
    Sample IT Principles - 1 What IT decisions are made
    • IT architecture & standards shall be governed at the enterprise level to ensure integrity, planned evolution, and, periodic refresh in light of new technologies and business strategies
      • Rationale
        • A satisfactory control environment is dependent on meeting enterprise architecture and standards with the aim of reducing permutations of technology and enforcing change management
        • Research and development into new technologies is a costly investment. Sharing the cost among enterprise activities may permit more technology exploration and further the exploitation of promising technologies. Economies of scale can be realized by sharing architecture and standards as guidelines
        • Only through local unit compliance with enterprise architecture and standards will we achieve the required integrity planned evolution and refresh of our technology base
      • Implications
        • The creation of and adherence to standards are the joint responsibility of all IT organizations
        • We will strive for consistent and single standard IT processes including: change management, IT security standards, disaster recovery, ID management, development methodology
        • Business specific architecture and IT architecture shall align with the Enterprise Architecture (EA). EA shall be our architecture
        • Changes or modifications to the EA architecture will be governed at the greater enterprise-level
        • Enterprise views toward an architectural design or standard such as those effecting compliance and regulatory needs (e.g., SOX, Privacy) must be considered when designing a technology solution
        • Only one IT project methodology shall exist
        • Continuing investment must be made to keep our infrastructure environment current
        • Infrastructure services are managed at an enterprise level
    Sample IT Principles - 2 What IT decisions are made
  • Sample IT Governance Arrangements Matrix © 2002 Gartner, Inc. and MIT Sloan Center for Information Systems Research (Weill) drawing on the framework of Weill and Woodham, 2002. Who makes the decisions Input Decision Overall IT Principles Input Decision IT Infrastructure Strategies Input Decision IT Architecture Input Decision Business App Needs Input Decision IT Investment / Prioritization Senior Mgmt. Team CIO / Ent IT BU Leaders ITLC Senior Mgmt. CIO & ITLC Domain Style IT Leadership Council (includes App Head) ITLC Leaders from the Business Units BU Leaders CIO / Ent IT Combined Corp Office and IT Leadership Senior Mgmt & ITLC Corporate office (CEO and Staff) Senior Mgmt Team Input rights Decision rights External Relationship Input Decision CIO office and Enterprise IT * CIO has “Veto” rights *
  • Sample IT Governance Mechanisms Input Decision Business App Needs CIO / Ent IT BU Leaders ITLC Senior Mgmt. CIO & ITLC Domain Style Input rights Decision rights
    • Business Application Needs
    • (Governed by each Business Unit / Function independently)
      • Major Decisions Addressed *
        • Approve application strategy and direction
        • Determine appropriate application resource allocation; resolve major resource conflicts
        • Propose significant application initiatives and projects
        • Approve and prioritize application initiatives and projects (within parameters established by Prioritization process)
        • Sponsor major projects to the Prioritization process
        • Provide oversight for significant initiatives and projects
        • Approve business risk mitigation tactics and strategies (with app impact)
      • Mechanism
        • Input Forum: ITLC meetings or CIO staff meeting
        • Decision Forum: Regularly scheduled business unit leadership meetings (one per Business Unit / Function)
        • Trigger: Regularly scheduled (no less than quarterly)
        • Sponsor: Application Head
    * * CIO has “Veto” rights
      • Refer to Exception process for more information
    How the Decisions Get Made Senior Mgmt. Team
  • Sample IT Governance Mechanisms Exception Process Exceptions to the IT Governance processes should be very rare and well-justified. In cases where an involved party has significant issues or concerns regarding a decision reached via the IT Governance processes, the following process should be followed:
      • For Senior Management Team decisions
        • CEO makes final decision
      • For Senior Management Team, CIO & ITLC decisions
        • Sr. Leader (or designee) approaches appropriate ITLC member with specific circumstances
        • CIO & Sr. Leader formally approve exception
        • Escalate to CEO, if necessary
      • For Business Unit Leaders decisions
        • Sr. Leader approaches Application Head with specific circumstances
        • CIO & Sr. Leader must formally approve exception
        • Escalate to CEO, if necessary
    How the Decisions Get Made
  • Sample IT Governance Communications Components
    • Executive (CEO leadership team meetings, COO leadership team meetings) socialization presentations, discussions
    • Executive announcement ‘Elevator speech’ (COO to CEO & CEO direct reports)
    • Executive summary slide deck
    • BRM (business relationship manager) communication tools
      • Slide deck
      • Suggested talk track
      • Suggested email announcement
      • FAQs
    • Core team continued availability during above
    Return
  • Sample IT Governance Design - Enterprise Architecture Example Mechanism, Roles, Process ILLUSTRATIVE
    • IT Architecture
    • Domain Teams
    • IT Architecture
    • IT Architecture
    • Domain Teams
    • Domain Teams
    • IC
    • CIOs
    • IC
    • CIOs
    • IT BOG
    • IT BOG
    • IT BOG
    • XYZ
    • Director
    • IC
    • Directors
    • IC
    • Directors
    • IC
    • Directors
    • FARB
    • FARB
    • FARB
    • Architecture
    • Review Board
    • Architecture
    • Architecture
    • Review Board
    • Review Board
    • IC
    • Directors
    • EA Updates for Approval
    • Exception
    • Evaluations-major
    • Technical Advice for
    • EA Funding or Appeals
    • Advice
    • Exception
    • Evaluations-minor
    • Exception Requests
    • Advice for EA Funding
    • Advice
    • Guidance
    • Office of the
    • Chief IT Architect
    • Office of the
    • Office of the
    • Chief IT Architect
    • Chief IT Architect
    • Leadership
    • Project
    • Teams
    • XYZ CIO
  • Sample IT Governance Design - Clarifying Roles & Responsibilities
    • RACI analysis clearly defines who is Responsible, Accountable, Consulted, Informed on all decisions, activities, etc.
    ILLUSTRATIVE
  • IT Governance Operations — Making It Work IT Governance
    • Goals
    • Domains
    • Principles
    • Decision Rights
    • Styles
    IT Governance Strategy IT Governance Operations Supply Governance (How Should IT Do What It Does?) IT Management Primary Responsibility Demand Governance (What Should IT Work On?) Business Management Primary Responsibility Biz/IT Strategy Validation Overall IT Investment & Expense Develop Demand Governance Processes Biz/IT Operational Planning IT Investment Portfolios (PPM) Investment Evaluation Criteria Intra-/Inter- Enterprise Prioritization Demand Governance Implementation Board IT Governance IT Gov Effectiveness (Metrics, etc.) IT Value Assessment IT Service Chargeback IT Service Funding Spending/Project Oversight Councils/ Committees Issue Escalation/ Resolution Business Benefits Realization Business Unit Prioritization Plan Implement Manage Monitor Architecture
    • Plan
    • Implement
    • Manage
    • Monitor Compliance
    Security
    • Plan
    • Implement
    • Manage
    • Monitor Compliance
    Corporate Compliance
    • Plan
    • Implement
    • Manage
    • Monitor Compliance
    Project Management
    • Plan
    • Implement
    • Manage
    • Monitor Compliance
    Sourcing
    • Plan
    • Implement
    • Manage
    • Monitor Compliance
    Procurement
    • Plan
    • Implement
    • Manage
    • Monitor Compliance
    Etc.
    • Plan
    • Implement
    • Manage
    • Monitor Compliance
    IT Supply Governance Domains
  • Best Practices for Governance When Governance Isn’t Governed
    • Use a stick: Threat of auditor, Sarbanes-Oxley, Basel II…
    • Use a club: How would CFO look at these actions? Do they insert more risk and lower ROI? Under FOIA (Freedom of Information Act), does this pass the newspaper test?
    • Use a carrot: Advertise the joint success of IT and SBU on a particular initiative and why it helped governance.
    • Use chocolate: Make the advertised success addictive, and this is what we are looking forward to later ...
    • Use secret sauce: CIOs can be slightly off-center (devious) by stating that service-level architecture or Web-based infrastructure requires greater transparency, much like FedEx allows customers to see where packages are and estimated times of arrival, which is why FedEx’s IT is bullet-proof.
  • More Symptoms of Good IT Governance
    • Decisions Score
    • Clarity There is clarity about who makes strategic decisions about IT —
    • Investment IT investments are evaluated and approved using consistent criteria —
    • Approval
    • Project IT projects deliver results consistently in accord with the business case —
    • Implementation
    • Business Business executives clearly understand their roles in IT decisions —
    • Roles
    • Committee Appropriate committees are in place, with clearly documented roles —
    • Structures
    • Budgets The IT budget process is aligned with business and IT strategies —
    • Enterprise Architecture exceptions have a defined process for approval —
    • Architecture
    • Directions
    • Alignment There is clear alignment between business and IT strategies —
    • IT Strategy The IT strategy is clear to all affected stakeholders —
    • IT Principles There is a clear set of IT principles underlying decisions that are clear to all —
    • Risk IT risks are understood by all stakeholders and managed effectively —
    • Management
    • Business The business value of IT is tracked, understood and communicated —
    • Value
    • IT Metrics IT metrics highlight critical success factors for performance management —
    • Relationships
    • Corporate IT governance is clearly linked to corporate governance —
    • Governance
    • Trust There are strong and trusted relationships between business and IT
  • IT Governance Maturity Checklist
    • World-class
      • Life-cycle PfM
      • Business architecture
      • Market agility
    • Advanced
      • Enterprise PMO
      • Project PfM
      • Info architecture
    • Good
      • Project prioritization
      • Asset portfolio management (PfM)
      • Independent audit
    • Basics
      • Review boards
      • Regular audits
      • Universal controls
      • Standards
    Do you plan, build, and run as one body? Business Perception of Its Dependency on IT Governance Effectiveness Efficiency Investment Cost Respect Transformation Credibility of IT Governance Trust