IT Governance:
Managing the Information Technology
Resource
Jason C. H. Chen, Ph.D.
Professor of MIS
School of Business Administration
Gonzaga University
Spokane, WA 99223
chen@gonzaga.edu
Source: Managing the IT Resource – J. N. Luftman
John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices
Chapter Outline
•
•
•
•
•
Definition of IT governance
IT governance as issue for organizations
Need for formal IT governance mechanisms
IT governance alternatives
Forms of governance and leadership roles in
cross-functional initiatives
• Steering committees
• Prioritizing projects and assessing risks
• Global considerations
John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices
Why invest IT?
• improvement in the delivery of service to its
customers/clients
• reduce the cost to manufacture or deliver
some product or service to its
customers/clients
• shorten the cycle time required to develop
and produce some new product or service
John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices
IT Governance
• Power
– Who makes these decisions
• Alignment
– Why they make these decisions
• Decision Process
– How they make these decisions
John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices
What is IT Governance?
• IT governance is the term used to describe the
selection and use of organizational process to
make decision about how to obtain and deploy IT
resources and competencies.
• In short, IT governance is about:
– Who makes these decision (power)
– Why they make them (alignment)
– How they make them (decision process)
John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices
Symptoms of Misalignment
•
•
•
•
•
•
•
•
•
Poor business understanding and rapport
Competitive advantage declines
Frequently fired IT managers
High turnover of IT professionals
Inappropriate resources
Frequent IT reorganizations
Lack of executive interest
Lack of vision/strategy
No communication between IT and users
John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices
Symptoms of Misalignment
•
•
•
•
•
•
•
•
Ongoing conflicts between business and IT
Unselective outsourcing of IT function
Productivity decrease
Projects not used, canceled, late
Redundancies in systems development
Absent systematic competencies
Systems integration difficult
Unhappy users/complaints
John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices
Definitions and Implications of
IT Governance
• 1. Operating model for how organization will
make decisions about use of IT
• 2. Involves external relationships for obtaining IT
relationships
• 3. Involves authority, control, accountability,
roles, and responsibilities
• 4. Involves processes and methods for making
decisions
• 5. Involves judgments about how well use of IT
enables strategic direction
John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices
Why is IT Governance an
Issue?
• Why despite the growing evidence that IT has
become an integral part of business, IT
governance is still an issue for many
organizations?
• While the governance models for marketing or
finance are rarely discussed, the governance of IT
for many organizations is still neither well
understood nor well executed, and becomes a
topic of debate. Why?
John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices
Business Case Issues
• Balance all measurements
• Balance impact on
–
–
–
–
Customers/clients
Processes
People
Finance
John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices
Organizations Just Do It
• Maintenance
– Fixing application problems
• Government legislation requirements to
ensure compliance
• CEO or senior executive idea receives top
priority
• Competitor’s innovative application of IT
John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices
Table: Enablers and Inhibitors to Alignment
Enablers
•Senior executive support for IT
•IT involved in strategy
development
•IT understands the business
•Business-IT partnership
•Well-prioritized IT projects
•IT demonstrates leadership
John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices
Inhibitors
•IT/business lack close relationships
•IT does not prioritize well
•IT fails to meet commitments
•IT does not understand business
•Senior executives do not support IT
•IT management lacks leadership
Diagnosing Poor or “Broken” IT
Governance
• “We have too many people and organizations making
decisions about technology.”
• “Business units aren’t accountable to corporate IT for any
technologies they decide to employ.”
• “We heave no enterprise architecture because we cannot
agree on how it will be established or maintained.”
• “We spend too much on hardware and software because
we cannot agree on a common sourcing policy.”
• “We are measuring our performance, but the business
doesn’t understand what our measures mean.”
• “We do not measure the success of IT. I would not know
where to begin.”
John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices
Why Have Governance
•
•
•
•
•
•
1. Insufficient resources to meet commitments
2. Unreliable delivery schedules
3. Lack of focus on daily operations
4. Reduced quality of delivered projects
5. Potential for working on wrong things
6. Business functions move in their own IT
direction to satisfy own requirements
• 7. Chaotic/nonstandard infrastructure
• 8. Poor communications and relationships with
IT/Business
John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices
How Critical is IT Governance for
E-Business?
• Who makes decisions about which e-business
initiatives to fund?
• Who has accountability for e-business IT architecture?
• Who drives e-business initiatives?
• How are e-business initiatives funded?
• How will we measure the business value of e-business
initiatives?
• How will we allocate resources to e-business
initiatives?
• Will we outsource any of our e-business operations?
• How will we leverage our strategic alliance, if at all?
John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices
Fulfilling IT Promise to
Business
• Decisions about IT use made jointly
• Develop mutual and agreed-upon expectations
• Help senior business management understand
costs and risks
• Provide IT capabilities required to implement
decisions
• Monitor and measure value of IT investments
• Help senior business management understand it is
ongoing process
John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices
Governance Alternatives
•
•
•
•
•
•
•
•
•
•
Budget
Career crossover
CIO-CEO
Communicate/market/negotiate
Competitive enabler/driver
Education/cross-training
Liaison
Location
Organization
Hybrid (or “Federated”)
John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices
Governance Alternatives
• Organization
– Centralized, Decentralized, Hybrid
•
•
•
•
•
Partnership/Alliance management
Process
Shared risks, responsibilities, reward/penalties
Steering committees
Value Measurement
John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices
Steering Committees
•
•
•
•
•
•
•
•
•
Strategic
Tactical
Operational
Clearly state business role of IT
Identify alignment between organization vision and IT
vision
Establish principles for investing in IT
Establish ethical guidelines and policies
Establish architectural principles and standards
Establish goals and measurements for assessment
John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices
Categories of
Governance Alternatives
• Governance based on organization structure
• Governance based on processes
• Governance based on human relationships
John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices
Forms of Governance
• Govern cross-functional initiatives by:
– Assembling matrixed project team
– Guidance and assistance provided by corporate
IT management
– Recognizing human resources and intellectual
capital are geographically dispersed,
John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices
Forms of Governance and
Leadership Roles
John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices
Effective IT Steering
Committee
•
•
•
•
•
Business Executive Committee
CIO
Chief Technology Officer
Divisional Business Heads
Head of Information Systems/Networking
John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices
Considerations of
Steering Committee
•
•
•
•
•
•
•
•
Bureaucracy
Career Building
Communication
Complex Decisions
Influence/Empowerment
Low-Hanging Fruit/Quick Hits
Marketing
Objectives/Measurements
John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices
Considerations of
Steering Committee
•
•
•
•
•
•
Ownership/Accountability
Priorities
Relationships
Right Participants
Share Risks
Structure, Facilitator
John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices
Group Projects Based On:
•
•
•
•
•
•
Necessity, Opportunity, Desirability
Impact on organization
Likelihood of occurrence
Risk
Resource demands
Anticipated return
John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices
Priorities
•
•
•
•
•
Highest impact on firm
Highest likelihood of occurrence
Lowest combined attributes of risk
Least amount of resources demanded
Highest anticipated return
John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices
John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices
•
•
•
•
•
•
•
•
Technology Risk Mitigation
Subject matter experts available
Establish emerging technology scanning function
Employ already known technology
Perform pilot projects studies
Attend conferences, read professional journals
Maintain professional memberships
Implement professional certification/study programs
Participate in master’s degree/master’s certification
John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices
Development Risk Mitigation
• Modularize projects
• Employ project management with prior
experience
• Establish development life cycle
methodology
• Reduce scope of projects
• Follow “best practices” model for software
engineering
John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices
Organizational Risk Mitigation
•
•
•
•
•
•
•
Secure executive sponsorship
Joint accountability of business/IT management
Early and continuous involvement of stakeholders
Establish formal change management program
Establish formal communication channels
Establish formal and well-understood processes
Establish formal escalation processes
John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices
Market Risk Mitigation
• Reduce initial scope of geographic coverage
• Employ SME’ and consultants for expert
advice
• Documentation and formal sign-off on
customer requirements
• Establish customer “knowledge base”
John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices
Global Considerations
•
•
•
•
Global Exporter
Multinational
Multilocal
Transnational or Metanational
John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices
Source: Daniels, J. and Caroline, N., in J. Luftman, ed., Competing in the Information Age: Strategic Alignment in Practice.” Oxford University Press (1996).
John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices
Do’s of Vendor Management
• Establish vendor management team
• Monitor service levels and end-user
satisfaction
• Track service/product market
• Continually renegotiate contract
• Keep business units accountable and involved
• Think ongoing relationship
• Use vendor’s expertise for solutions
John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices
Don’ts of Vendor Management
• Try to manage a vendor without adequate
expertise available
• Ignore need to establish service level agreements
• Fail to establish firm accountability
• Understaff vendor management function
• Rely solely on vendor’s expertise
• Forget to keep eye on vendor reputation and
profitability
John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices
Contract Renegotiation Processes
• Contract expiration
• Material breach in contract by vendor
• Major change in organization’s
management or industry
• Significant change in price for same
services
• New technology
John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices
Outsourcing Considerations
• Do:
–
–
–
–
–
–
–
Ask for and check references
Assess culture of outsourcing partner
Evaluate multiple options
Get it in writing
Metrics matter
Open kimono
Pick outsourcing partner with strong partner network
John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices
Outsourcing Considerations
• Don’t:
– Buy on price alone
– Overlook reference-checking process
– Use price contract without consideration of longterm consequences
– Forget to provide for contingencies
– Communicate via committee
– Hand over project management
– Rely on marquee references
– Single-source
– Let head be turned by goodies
John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices
Insource or Outsource?
John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices
Outsourcing RFP
•
•
•
•
•
•
•
•
•
•
Objectives and Scope
Background
Technology Vision
Services Requested
Transition/Migration Services
Performance Requirements
Resources
Requirements for Vendor Proposal
General Terms and Conditions for Proposal
Proposal Evaluation
John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices
John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices
John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices