Summary IT Governance & Strategic Sourcing
Week 1 – HC 1
What is It Governance?
IT Governance concepts
IT governance is “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”.
We define IT governance as: specifying the framework for decision rights and
accountabilities to encourage desirable behavior in the use of IT,
o IT governance is not about what specific decisions are made.
o It is about systematically determining who makes each type of decision (decision
rights), who has input to a decision (input right) and how these people (or groups) are
held accountable for their role.
o Good IT governance can result in a paradox: simultaneously empowering and
controlling
Corporate and Key Asset Governance
Why is IT Governance Important?
IT governance matters because it
influences the benefits received from
IT investments.
o Investing blindly will not bring
benefits
o Extracting value from IT
requires innovations in
business practices.
, o IT spending rarely correlates with superior financial results
o Need to change practices and exploit new capabilities
o Link it to innovation
ROIIT = f(BPI, Governance, matched IT investments)
IT governance mechanisms influence the organizational performance of a firm through
information systems strategic alignment.
Key IT Decisions & Archetypes
Large enterprises have 5 major IT decisions to make:
There can be multiple combinations of people who have decision/input rights to IT decisions:
The study found little variation in input rights but some interesting findings in decision rights:
, Week 1 – WC 1
Patters of IT governance
Five factors dictate variations in governance patterns:
o Strategic and performance goals: Governance designed to facilitate the enterprise’s
strategic and performance goals
o Organizational structure: Governance designed to compensate for limitations of
structure (e.g., require less change in structure as business needs change)
o Governance experience: IT governance tends to change and evolve with experience
(many companies are still early in the IT governance learning curve)
o Size and diversity: IT governance often reflect changes in size and diversity (e.g.,
growth geographically and introduction of conflicting objectives)
o 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
heavier on business monarchies than for-profits)
How top performers govern IT
IT governance performance is a function of:
o Cost-effective use of IT
o Effective use of IT for asset utilization
o Effective use of IT for growth
o Effective use of IT for business flexibility
Financial performance is assessed by comparing three-year averages of industry-adjusted
measures of profit (ROE), growth (% change in revenue), and asset utilization (ROA)
Successful governance performance associated with duopolies for IT principles/investments:
o Enable joint decision-making between business leaders and IT professionals
o Remain focused on the specific and often local issues of the business leaders
The poorer governance-performing enterprises typically use federal arrangements for
decision-making:
o Takes longer as more people are involved and there is less agreement
o Long cycle times compound problems and continue until intervention occurs
o 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.
o Can work well if decision makers are rewarded for achieving both enterprise and
business unit objectives.
o Poorer governance-performing organizations use feudal models for deciding their
business application needs
Week 1 – HC 1
What is It Governance?
IT Governance concepts
IT governance is “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”.
We define IT governance as: specifying the framework for decision rights and
accountabilities to encourage desirable behavior in the use of IT,
o IT governance is not about what specific decisions are made.
o It is about systematically determining who makes each type of decision (decision
rights), who has input to a decision (input right) and how these people (or groups) are
held accountable for their role.
o Good IT governance can result in a paradox: simultaneously empowering and
controlling
Corporate and Key Asset Governance
Why is IT Governance Important?
IT governance matters because it
influences the benefits received from
IT investments.
o Investing blindly will not bring
benefits
o Extracting value from IT
requires innovations in
business practices.
, o IT spending rarely correlates with superior financial results
o Need to change practices and exploit new capabilities
o Link it to innovation
ROIIT = f(BPI, Governance, matched IT investments)
IT governance mechanisms influence the organizational performance of a firm through
information systems strategic alignment.
Key IT Decisions & Archetypes
Large enterprises have 5 major IT decisions to make:
There can be multiple combinations of people who have decision/input rights to IT decisions:
The study found little variation in input rights but some interesting findings in decision rights:
, Week 1 – WC 1
Patters of IT governance
Five factors dictate variations in governance patterns:
o Strategic and performance goals: Governance designed to facilitate the enterprise’s
strategic and performance goals
o Organizational structure: Governance designed to compensate for limitations of
structure (e.g., require less change in structure as business needs change)
o Governance experience: IT governance tends to change and evolve with experience
(many companies are still early in the IT governance learning curve)
o Size and diversity: IT governance often reflect changes in size and diversity (e.g.,
growth geographically and introduction of conflicting objectives)
o 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
heavier on business monarchies than for-profits)
How top performers govern IT
IT governance performance is a function of:
o Cost-effective use of IT
o Effective use of IT for asset utilization
o Effective use of IT for growth
o Effective use of IT for business flexibility
Financial performance is assessed by comparing three-year averages of industry-adjusted
measures of profit (ROE), growth (% change in revenue), and asset utilization (ROA)
Successful governance performance associated with duopolies for IT principles/investments:
o Enable joint decision-making between business leaders and IT professionals
o Remain focused on the specific and often local issues of the business leaders
The poorer governance-performing enterprises typically use federal arrangements for
decision-making:
o Takes longer as more people are involved and there is less agreement
o Long cycle times compound problems and continue until intervention occurs
o 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.
o Can work well if decision makers are rewarded for achieving both enterprise and
business unit objectives.
o Poorer governance-performing organizations use feudal models for deciding their
business application needs
