IT Governance - Core Concepts for Business Managers

IT Governance

Core Concepts

for

Business Managers

Walter Adamson

Principal, Digital Investor Pty Ltd

May 2005

www.itinsync.com

Context

IT Governance is not an IT issue It's a mechanism to deliver value, performance and to mitigate risk.

With a focus on where and how these decisions are made – who, what, where, why?

Therefore – a people, process, cultural issue.

A business issue .

What's the agenda?

IT Governance and Corporate Governance

IT Governance and IT Alignment

Achieving Business-IT Alignment

Core Concept #1

IT Governance is an inseparable segment of good Corporate Governance.

1. Business Performance

2. Top-down Engagement

3. Resource Allocation

4. Risk Management

5. Behaviour under Stress

These are all matters integral to overall governance.

ABOUT: Culture, Business, Strategy, People, Process, Commitment

The Issue?

For many companies understanding and integrating IT Governance with Corporate Governance has become a daunting and confusing duty for senior executives and board members:

Technology jargon and complexity

Inability to define or agree value delivered by IT

Core Concept #2

Achieving Business-IT alignment is a foundation for good IT Governance - because achieving alignment requires:

Clarity of strategy and business value

Agreement about projects and priorities

Mutual commitment and respect

Management of risk and change

All elements of effective IT Governance.

Better Alignment is Good Business

A 2003 study of 1600 companies by research group Governance Metrics International showed that businesses with strong governance structures outperformed those with weak ones – in terms of total shareholder return.

Alignment Model

Business-IT alignment can be achieved by success in managing three core elements:

AS8000 Risk & Regulation COBIT ITIL Our emphasis 1. Business Engagement 2. Delivering Value 3. Managing Change

Business IT-Alignment

Business Engagement: success means that IT and the organisation share a common vision and strategic intent and understand why customers value the services of the organisation .

Delivering Value: success means that IT has been able to achieve a dialogue and agreement of the business value that IT delivers .

Managing Change: success means that IT and the business are jointly being responsible for aligning people and for delivering services which work and reliably help people do their jobs better .

Core Concept #3

Achievement of IT-business alignment does not require the establishment of radical new Board—level oversight committees or processes.

The right forums are:

the Audit and Risk Committee;

a Quarterly Business Review of IT projects;

the Executive Working Group that oversees business change and major programs, whether they involve IT or not.

Three Actions

Getting started requires evaluation:

How well engaged is IT with the business and how well do we understand what current and future value is and can be delivered from IT?

How can we enhance the Audit and Risk Committee to measure and monitor business-IT engagement and delivery of business value?

What can the CIO do to learn how to cooperatively develop business-focused value propositions, in collaboration with the business?

Top-down for the CEO

Three key CEO initiatives are to:

Ensure and enable clarity of vision and strategy between the IT and business staff at all levels

Ensure consistency of execution on IT and business engagement, delivery of value, and change management

Ensure mutual commitment between IT and other parts of the organisation

CEO actions should include:

Ensuring the CIO is part of business planning cycle

Having the CIO/(or outsourcer) present to Audit and Risk Committee about how they engage with the business and the status of delivery and risk control methods e.g. ITIL, COBIT.

CIO actions should include:

Reviewing, with the business, important IT projects, and doing it regularly

Finding a mechanism to engage in regular discussions about the business value of IT e.g. helping business case preparation

What to Do For Smaller Organisations

For Larger Organisations

Consider adopting issue calendars and decision

protocols as part of a proactive process:

The issue calendar requires that the board address all major decision areas on an annual cycle e.g. the strategic plan in January, the annual budget in March, past performance in May , IT Governance in July, IT Alignment benchmark in April.

The decision protocol , sometimes termed a company’s “delegation of authority”, outlines decisions that the board must take or delegate to management, setting out a pre-established consensus among directors and executives for defining responsibilities (e.g. for IT Governance).

Summary

The three core concepts about IT Governance:

1. IT Governance is an inseparable segment of good Corporate Governance.

2. Achieving Business-IT alignment is a foundation for good IT Governance.

3. Achievement of IT-business alignment does not require the establishment of radical new Board—level oversight committees or processes ( in smaller organisations ).

Conclusion

Use business-IT alignment to:

1. Inform yourself about IT Governance and gain key insights about the hotspots.

2. Action and improve business-IT alignment to deliver improved IT Governance.

3. Deliver sustainable business benefits from IT.

Quotes

“ It’s no surprise that aligning IT and business goals is a top goal for 2005 for CIOs in the USA and Canada”, CIO Magazine: CIO Research Reports , The State of the CIO Around the World, May 2005.

“ Companies with effective IT governance have profits that are 20% higher than other companies pursuing similar strategies”, Weill, P. & Ross, J. How Top Performers Manage IT Decision Rights for Superior Results , Harvard Business School Press, 2004.

Contact

Walter Adamson

[email_address]

m: 0403 345 632

www.digitalinvestor.com.au

Developer of the ITinsync™ Diagnostic, the world's most effective business diagnostic of corporate and IT alignment, in conjunction with Ambit Insights