Matakuliah
Tahun
: Pengantar IT Governance
: Feb - 2010
What IT Governance Works Best
Pertemuan ke-15 & 18
The Governance procedures we developed
brought transparency and accountability into the
process
CIO, National Police Force
of a European Country
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3 Questions best capture these insights :
• How can we assess governance ?
• What governance arrangements work best ?
• How do leading Enterprises govern /
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How to assess IT Governance
1.
2.
3.
4.
5.
Enterprise setting
Governance arrangements
Governance awareness
Governance performance
Financial performance
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Assessing Performance
Setting
Governance
arrangements
Governance
awareness
Governance
performance
Financial
performance
Strategy
•Operational Excellence
•Customer intimacy
•Product leadership
Key IT decisions and
archetypes
Percent of managers in
leadership positions who
can describe firm
governance
Average of four
performance measures
weighted by importance –
score out of 100
Profit
•Percent margin
•ROE
•ROI
Communication
approaches
•Meetings
•Documents
•Portal
Effective use of IT for:
•Cost Control
•Growth
•Asset Utilization
•Business flexibility
Size: Number of BUs
Synergy and/or
autonomy of Bus
IT intensity
•Money
•People
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Mechanisms
•Councils
•SLAs
•IT organization
•Chargeback
•Arch Committee
Exceptions: Percent of
projects
Asset utilization:
ROA
Growth: percent of
change in revenue
Data measured using:
3-year average, industry
adjusted percent change
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Governance Performance assesses the effectiveness of IT
Governance in delivering 4 objectives weighted :
1. Cost-effective use of IT
2. Effective use of IT for asset utilization
3. Effective use of IT for growth
4. Effective use of IT for business flexibility
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3 Dimensions of financial performance :
• Profit
ROE, ROI, % profit margin
• Asset Utilization
ROA
• Growth
% change in revenue per annum
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How Governance varies Across Enterprises
30
25
20
15
10
5
0
20-29
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30-39
40-49
50-59
60-69
70-79
80-89
90-100
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• The average governance performance score was 69 out
of 100
• The minimum score was 20 and the top third performing
firms had scores over 74
• Only 17% of enterprises scored 80 or above and only
7% scored 90 or over.
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• Achieving high governance performance meant that the
enterprise’s IT governance succeeded in influencing the
desired measures of success.
• How does your enterprise compare ?
• Firms with above-average IT governance following a
specific strategy had a 20% higher ROA than firms with
poorer governance following the same strategy
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Seven characteristics of
Top governance performers
• More managers in leadership positions could describe
IT Governance.
• Engage, Engage, Engage
• More Direct Involvement of the senior leaders in IT
Governance.
• Clearer business objectives for IT investment
• More differentiated business strategies
• Fewer renegade and more formally approved
exceptions.
• Fewer changes in governance from year to year
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More managers in leadership positions
could describe IT governance
• The most important predictor of top governance
performance was the percentage of managers in
leadership positions who could accurately describe their
enterprise’s IT governance.
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Engage, Engage, Engage
• Top governance performers achieved a higher
percentage of senior management knowledge about
governance simply by engaging more often and more
efectively.
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More Direct Involvement of the senior leaders in IT
Governance.
• Top management involvement is such an old chestnut
that we often forget its importance.
• Senior managers in top governance performers were
more directly involved in IT governance.
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Clearer business objectives for IT investment
• Top governance performers had cleared objectives for IT
investment – a few important objectives, not a long,
undifferentiated list.
• The most common objectives were a subset of three or
four of the following :
–
–
–
–
–
–
–
Reduce cost
Improve customer service
Provide information to management
Enhance customer communition
Support new ways of doing business
Enable a complete view of the customer
Improve product quality
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More differentiated business strategies
• Top governance performers had more differentiated
business strategies based on value disciplines such as
customer intimacy or product innovation.
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Fewer renegade and more formally
approved exceptions
• Top governance performing enterprises have fewer
renegade exceptions and more exceptions that occure
through a formal approval process.
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Fewer changes in governance
from year to year
• The process of changing governance arrangements,
communicating the changes, and institutionalizing the
new governance is lengthy.
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What governance arrangements work best
•
Providing Input
1. Enterprises with higher governance performance
used federal input models for IT principles and
business application needs.
2. Enterprises with lower governance performance had
duopoly input for IT principles and business
application needs.
3. The best approach depended on the specific needs
of the enterprises.
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• Making Decisions
– Why federal models struggle
Enterprises using federal decision-making arrangements often
scored poorly on governance performance.
Factor : Less speed, a tendency to overly compromiseand trade
away effectiveness.
– Why duopolies work for decision making
Duopoly approach enables joint decision making between the
business leaders and IT professionals, allows for creative
busines solutions within agreed-upon constraints.
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Best and worst Governance Performers Use Different Arrangements
Domains
Styles
Principles
Input
Decision
Architecture
Input
Decision
Infrastructure
Input
Decision
Business
Applications
Input
Decision
Investment &
Priorities
Input
Decision
Business
Monarchy
IT
Monarchy
Feudal
Federal
Duopoly
+
-
-
+
-
-
+
-
-
+
Anarchy
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Three Successful Patterns of Governance Perfomance
IT
Principles
Business
Monarchy
IT
Architecture
3
IT
Infrastructure
3
IT
Monarchy
1
Business
Applications
3
2
2
IT Investment
and Priority
2
3
1
Feudal
Federal
Duopoly
1
1
2
2
3
1
Anarchy
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Governance Best Practices
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Who Makes Better IT Decisions ?
• Hsl scan
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• Business and IT professionals should collaborate on
business-oriented IT decisions.
• Business people should not make business-oriented IT
decisions alone.
• The best arrangement of decision rights for technical
decisions depends on other factors such as the
synergies between business units, the current IT
portfolio, strategic goals, industry differences, and so on.
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How leading financial performers govern
Business
Principles
Architecture
Infrastructure
Business
Investment &
Profit
Growth
Profit
Profit
Growth
Profit
Growth
IT Monarchy
Profit
Feudal
Growth
Profit
Federal
Duopoly
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ROA
ROA
ROA
ROA
ROA
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Leaders on Asset Utilization
• Set IT principles with a strong flavor of asset utilization
via duopoly of the CxOs and the IT group.
• Create an IT architecture committee of business and IT
people to design an enterprise architecture and manage
commitment to shared infrastructure.
• Assign business / IT relationship managers focused on
achieving business value from IT for their business units
and leveraging enterprisewide infrastructure.
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• Establish a technical core of infrastructure and
architecture providers who plan and implement the
enterprise’s technology platform and interact with the
business / IT relationship managers.
• Institute a regular review process that brings together
business unit and IT leaders to look for synergies, reuse,
and trends across operational units..
• Involve IT architects in business unit projects to facilitate
education and effective use of shared infrastrucute and
architecture standards.
• Develop a chargeback system to help business unit
leaders see the value of shared services and make
effective decisions on IT use.
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Leaders on Profit
• Staff an IT steering committee with capabble business
executives who take responsibility for enterprisewide IT
governance decisions and set IT principles with a strong
flavor of cost control.
• Carefully manage the firm’s IT and business architecture
to drive out business costs.
• Design rigorous architecture exception processes to
minimize costly exceptions and enable learning.
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• Create a centralized IT organization designed to manage
infrastructure, architecture and shared services.
• Use linked IT investment and business needs processes
that both make transparent and balance the needs of the
center and the operational units.
• Institute an IT investment process that requires
centralized coordination and approval of IT investments.
• Design a simple chargeback and service-level
agreement mechanism to clearly allocate IT expenses.
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Leaders on Growth
• Empower the business units to drive IT investment –
often achieved by setting IT principles with a strong
flavor of innovation and market responsiveness.
• Create a more decentralized IT organization with
structure and capabilities designed to focus on
immediate needs of critical business processes.
• Place IT professionals into operational units focused on
meeting their internal and external customers’ needs.
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• Create substantial operational unit-based IT
infrastructure capability tailored to local needs and linked
into an often less substantial enterprisewide
infrastructure.
• Enable a technical core of infrastructure and architecture
providers who plan and implement the enterprise’s
technology platform, identifying any critical integration
requirements.
• Implement a regular review process for formal tracking of
the business value of IT.
• Work with the operational units to provide education
about how to use IT to enable growth.
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Designing Governance :
Lessons from Leading Enterprises
• How do you compare to the leading governance
performers on the seven characteristics they have in
common ?
– Can more than 50% of managers in leadership positions
accurately describe IT governance ?
– Is IT governance effectively communicated across the enterprise
using a variety of approaches ?
– Are senior managers thoughtfully involved in IT governance ?
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– Are there clear business objectives for IT investment?
– Are differentiated business strategies clearly
articulated ?
– Are there fewer renegade and more formally
approved exceptions ?
– Is there only one (or fewer) major change in
governance from year to year ?
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• The following principles should be considered as the
default or starting point for governance arrangements.
– Use federal arrangements for input into all IT decisions.
– Use duopoly arrangements for IT principles and
investments decisions.
– Avoid federal decision making for all decisions if possible.
– Use joint decision making involving business and IT
decision makers for the business-oriented IT decisions of
investment, principles, and business application needs.
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• Moderate these general principles according to the
enterprise’s dominant performance goals.
– Top performers on asset utilization typically use duopoly
arrangements.
– Top performers on profit apply more centralized governance,
often using monarchies for decision making.
– Top performers on growth strive to balance the entrepreneurial
needs of the operational units with firmwide strategies and
principles.
– Further customize these principles with the enterprise’s unique
strategy and desirable behaviors.
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