Lesson 5 - IT Governace

According to Gartner IT glossary:

"IT governance (ITG) is defined as the processes that ensure the effective and efficient use of IT in enabling an organization to achieve its goals. IT demand governance (ITDG—what IT should work on) is the process by which organizations ensure the effective evaluation, selection, prioritization, and funding of competing IT investments; oversee their implementation; and extract (measurable) business benefits. ITDG is a business investment decision-making and oversight process, and it is a business management responsibility. IT supply-side governance (ITSG—how IT should do what it does) is concerned with ensuring that the IT organization operates in an effective, efficient and compliant fashion, and it is primarily a CIO responsibility."

The textbook defines it as "specifying the decision rights & accountability framework to encourage desirable behavior in using IT.”  


IT governance must answer the following:

• What are the IT decisions that need to be made?
• Who will make those decisions?
• How will the decisions be made & monitored?

5  interrelated IT decisions that IT governance answer 

• IT principles--clarify the biz role of IT.
• IT architecture--define IT integration & st&ardization requirements.
• IT infrastructure--determine shared & enabling services.
• Biz application needs--specify the biz need for purchased or internally developed IT applications.
• IT investment & prioritization--choose which initiatives to fund & how much to spend.

6 archetypes of the sets of people involved in making IT decisions.

• Biz monarchy--top managers are involved in IT decision making.

• IT monarchy--IT specialists make the IT decisions.

• Feudal--each biz unit is responsible for their own IT decisions.

• Federal--IT decisions are made by a combination of the corporation head office & the biz units, with or without IT involvement.

• IT duopoly--IT & one other group makes the IT decisions.

• Anarchy--IT decisions are made by individuals or small groups acting independently.

Importance of IT governance:

• There is evidence that IT governance is associated with a higher return on assets.

• IT investment is high & increasing, making it critical that these investments be well considered & managed.

• Managing IT investments centrally is increasingly difficult. Clarifying how decisions will be made must therefore be carefully considered.

• IT is changing rapidly, creating new opportunities to gain strategic advantage through new technologies; at the same time, old information assets are decaying. It is important to manage this change rationally.

• IT governance creates mechanisms through which IT value gains attention.

• Strong IT governance makes sure that the right people are involved in decision making, creating a stronger chance for IT projects to succeed.

• Senior management cannot make all decisions themselves; there are simply too many decisions to be made.

• Top performing firms have IT governance mechanisms that are well aligned with a firm’s distinctive behaviours.

 

Important to have the CIO attend board meetings regularly.

By having the CIO attend regular board meetings, the CIO will underst& what the board is thinking on various biz & IT issues while also providing the board a direct connection to IT management expertise.

10 leadership principles for IT governance.

1.Actively design governance: Senior executives should take an active role in explicitly designing governance structures & ensuring these structures undergo regular review.

2. Know when to redesign: it is time to redesign when a change in desirable behaviour is required. This might be in response to a change in environment, a change in org.al or IT strategy, or just a recognition that existing behaviours are not appropriate for achieving the existing strategy.

3. Involve senior managers: IT governance is not an IT decision; it is a strategic one. IT governance is about how to organize so technology best contributes to org.al strategy. Therefore, it is critical that senior managers throughout the biz are involved in IT governance.

4. Make choices: Governance cannot meet every goal. Org's must be able to prioritize the goals they intend to meet through their IT governance structure & make choices accord.ly.  

5. Clarify the exception h&ling process: Exceptions to IT st&ards, policies, & procedures are to be expected. this is how org's learn. However, this puts pressure on the org. to consider how these exceptions will be h&led.

6. Provide the right incentives: It is critical that incentives be aligned with the behaviours IT governance is designed to encourage. Financial incentives & disincentives should be considered as should non-financial rewards.

7. Assign ownership & accountability for IT governance: The goal of IT governance is to assign decision rights & accountability for IT decisions. Similarly, someone needs to be responsible for the decision rights & accountability for IT governance. Ultimately the board is responsible for this, but the board will generally delegate accountability to a senior executive--likely the CEO or CIO. argue that the best arrangement is generally to hold the CIO accountable for IT governance, ensuring that the CIO is given clear measures of success.

8. Design governance at multiple org.al levels: IT governance in large multi-biz org's needs to be set up at multiple levels. There will be an overall enterprise IT governance structure which then drives the IT governance in divisions & units with separate IT functions.

9. Provide transparency & education: People throughout the org. must know & underst& the IT governance structure. Without this transparency & underst&ing, people will not follow the procedures set out (& may even undermine them).

10. Implement common mechanisms across all of the firm’s six key assets: governance mechanisms should be as similar as possible across all of the firm’s key assets (of which IT is one). These assets must be well integrated if synergies can be achieved. Such integration is undermined if governance is not also integrated.

References

Austin. R.D., Nolan, R.L. & O'Donnell, S. (2009). The Adventures of an IT Leader. Boston: Harvard Business School Publishing Corporation. 

IT Governance (ITG) - Gartner IT Glossary. (2012). Retrieved April 23, 2016, from http://www.gartner.com/it-glossary/it-governance/

McKeen, J.D. & Smith, H.A. (2012). IT Strategy: Issues and Practices (2nd ed.). New Jersey: Pearson Education, Inc.