Lecture 1 - Introduction Flashcards
IT governance
- The framework for the leadership, organizational structures and business processes, standards and compliance with these standards, which ensures that the organization’s information systems support and enable the achievement of its strategies and objectives (Calder & Watkins, 2005)
- Specifying the framework for decision rights and accountabilities to encourage desirable behavior in the use of IT
- Systematically determining who makes each type of decision (decision rights), who has input to a decision (input rights) and how these people (groups) are held accountable for their role
- Simultaneously empowering (creative solutions) and controlling (compliancy)
- It influences the benefits received from IT investments
The 5 key IT decisions & archetypes
- IT principles: High-level statements about how IT is used in the business (e.g. single face of contact)
- IT architecture: An integrated set of technical choices to guide the organization in satisfying business needs. A set of policies and rules for the use of IT and plots a migration path to the way business will be done (data, technology and applications) (integration and standardization)
- IT infrastructure strategies: Strategies for the base foundation of budgeted-for IT capability (technical and human), shared throughout the firm as reliable services and centrally coordinated (e.g. network, helpdesk, shared data)
- Business application needs: Specifying the business need for purchased or internally developed IT applications
- IT investment and prioritization: Decisions about how much and where to invest in IT including project approvals and justification techniques
Business monarchy
- CxO level execs
A group of, or individual executives (CxOs). Includes committees comprised of senior business executives (may include CIO). Excludes IT executives acting independently
IT monarchy
- Corporate IT and/or business unit IT
Individuals or groups of IT executives
Feudal
- BU leaders or business process owners
Business unit leaders, key process owners or their delegates
Federal
- CxO level execs
- Corporate IT and/or business unit IT (optional)
- BU leaders or business process owners
C level executives and at least one other business group - IT executives may be an additional participant. Equivalent of a country and its states working together
Alignment is the key issue, but it is hard to conform to the interests of all groups
IT duopoly
- CxO level execs (optional)
- Corporate IT and/or business unit IT
- BU leaders or business process owners (optional)
IT executives and one other group
Anarchy
Each indivdual user
5 factors that dictate variations in governance patterns
- Strategic and performance goals: Governance designed to facilitate the enterprise’s strategic and performance goals
- Organizational structure: Governance designed to compensate for limitations of structure (e.g., require less change in structure as business needs change)
o Governance can overcome limitations of structure, not everyone has to have a say in a decision - Governance experience: IT governance tends to change and evolve with experience (many companies are still early in the IT governance learning curve)
- Size and diversity: IT governance often reflects changes in size and diversity (e.g., growth geographically and introduction of conflicting objectives)
- Industry and regional differences: Decision making cultures vary across the world, often complicating IT governance. Same goes for industries (e.g., not-for-profit are more heavy on business monarchies than for-profits)
These factors influence how organizations set up their IT governance
How top performers govern IT
IT Governance performance is a function of:
- Cost-effective use of IT
- Effective use of IT for asset utilization (business IT alignment)
- Effective use of IT for growth (IT-savvy business leaders, balancing operational unit and firm-wide goals)
- Effective use of IT for business flexibility
These 4 elements are rated by the CIO
This is often linked to financial performance (ROE, revenue growth, ROA)
8 critical IT governance success factors
- Transparency: Make each IT governance decision transparent to all managers
o What is desirable behavior and what is my specific role - Actively designed: Design IT governance around organization’s objectives and performance goals, creating a coherent design that can be widely communicated
- Infrequently redesigned: Should only be done when desirable behaviors change
o It is not just about making a matrix, you have to inform everyone and make sure everyone can have a say in it. You should only do it when there are major changes in the organizational strategy - Education about IT governance: Educated users are more likely to be accountable for the decisions they make and less likely to second-guess other decisions
- Simplicity: Effective governance mechanisms are simple and attempt to reach a small number of performance goals
- An exception-handling process: To support new opportunities, IT governance must include and exception-handling process – to bring issues out in the open, allow debate and foster organizational learning
- Governance designed at multiple organizational levels: Assembling governance arrangement at multiple levels makes explicit the connections, common mechanisms and pressure points
- Aligned incentives: Alignment between incentive and reward systems with the behaviors the IT governance arrangements are designed to encourage
o If people are punished for wrong decisions, they aren’t encouraged to actually make decisions
The position of Governance (board, senior executive team, asset)
The board has to:
- Ensure accountability
- Monitor & supervise
- Decide strategic directions
- Make policy
The senior executive team has to:
- Formulate & execute strategy
- Decide input & decision rights
- Nurture & reward desirable behaviors
- Enhance and manage key assets, such as IT
ROI of IT
Function of BPI, Governance and Matched IT investments.
The more you invest in IT, the more sophisticated BPI and Governance need to be (alignment)
Input and decision rights (who does what?)
IT principles
- Input: Federal
- Decision: IT duopoly
IT architecture
- Input: Federal/IT duopoly
- Decision: IT monarchy
IT infrastructure strategies:
- Input: Federal
- Decision: IT monarchy
Business application needs
- Input: Federal
- Decision: Federal/IT duopoly
IT investment & prioritization
- Input: Federal
- Decision: Business monarchy/Federal/IT duopoly
Patterns of IT governance
Successful governance performance associated with duopolies for IT principles/investments:
- Enable joint decision-making between business leaders and IT professionals
- Remain focused on the specific and often local issues of the business leaders
The poorer governance-performing enterprises typically use federal arrangement for decision-making:
- Takes longer as more people are involved and there is less agreement
- Long cycle times compound problems and continue until intervention occurs
- Worse still, when compromises are made to “keep everybody happy”, neither the business units nor the enterprise achieve what is really needed
Federal decision making predicted poorer performance in all decisions except application needs:
- Can work well if decision makers are rewarded for achieving both enterprise and business unit objectives
- Poorer governance-performing organizations use feudal models for deciding their business application needs
Federal is very slow, lots of misalignment
The compromises often lead to worse performance
Three effective IT governance patterns
Arrangement 1:
- Requires IT groups that are finely tuned to business needs
- Strong level of trust between business and IT required
- Federal model for application needs can capitalize on potential synergies (such as common customers) across business units
Arrangement 2:
- For enterprises with few synergies – duopoly works well for application needs as there is less need for coordination across business units
Arrangement 1 and 2:
- Both good starting points for organizations balancing growth and profitability as the tensions of business units seeking to meet their local customer needs are nicely balanced with senior managers governing the IT investments.
Arrangement 3:
- Very centralized, with business monarchies making all decisions except business application needs (which is federal).
- More centralized approaches are typically used in firms with single business units or where profitability or cost control is a predominant issue.
- Requires business leaders who are interested and well informed about IT issues.
- Also sensible when major changes are occurring (e.g., mergers, major cost cutting, crises etc.) and decision rights must be tightly held.
First 2 are more about alignment of business and IT, 3rd is more on the control and power side
