1. © 2004 Managing the Information Technology Resource, Jerry N. LuftmanChapter 11 - Slide 1 Chapter 11 IT Governance Managing the Information Technology Resource Jerry N. Luftman

2. © 2004 Managing the Information Technology Resource, Jerry N. LuftmanChapter 11 - Slide 2 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

3. © 2004 Managing the Information Technology Resource, Jerry N. LuftmanChapter 11 - Slide 3 IT Governance Power –Who makes these decisions Alignment –Why they make these decisions Decision Process –How they make these decisions

4. © 2004 Managing the Information Technology Resource, Jerry N. LuftmanChapter 11 - Slide 4 Symptoms of Misalignment Poor business understanding and rapport Competitive decline 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

5. © 2004 Managing the Information Technology Resource, Jerry N. LuftmanChapter 11 - Slide 5 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

6. © 2004 Managing the Information Technology Resource, Jerry N. LuftmanChapter 11 - Slide 6 Definitions of IT Governance Operating model for how organization will make decisions about use of IT Involves external relationships for obtaining IT relationships Involves authority, control, accountability, roles, and responsibilities Involves processes and methods for making decisions Involves judgments about how well use of IT enables strategic direction

7. © 2004 Managing the Information Technology Resource, Jerry N. LuftmanChapter 11 - Slide 7 Business Case Issues Balance all measurements Balance impact on –Customers/clients –Processes –People –Finance

8. © 2004 Managing the Information Technology Resource, Jerry N. LuftmanChapter 11 - Slide 8 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

9. © 2004 Managing the Information Technology Resource, Jerry N. LuftmanChapter 11 - Slide 9 Enablers to Alignment Senior executive support for IT IT involved in strategy development IT understands the business Business-IT partnership Well-prioritized IT projects IT demonstrates leadership

10. © 2004 Managing the Information Technology Resource, Jerry N. LuftmanChapter 11 - Slide 10 Inhibitors to Alignment 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

11. © 2004 Managing the Information Technology Resource, Jerry N. LuftmanChapter 11 - Slide 11 Why Have Governance Insufficient resources to meet commitments Unreliable delivery schedules Lack of focus on daily operations Reduced quality of delivered projects Potential for working on wrong things Business functions move in own IT direction to satisfy own requirements Chaotic/nonstandard infrastructure Poor communications and relationships with IT/Business

12. © 2004 Managing the Information Technology Resource, Jerry N. LuftmanChapter 11 - Slide 12 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

13. © 2004 Managing the Information Technology Resource, Jerry N. LuftmanChapter 11 - Slide 13 Governance Alternatives Budget Career crossover CIO-CEO Communicate/market/negotiate Competitive enabler/driver Education/cross-training Liaison Location

14. © 2004 Managing the Information Technology Resource, Jerry N. LuftmanChapter 11 - Slide 14 Governance Alternatives Organization –Centralized, Decentralized, Hybrid Partnership/Alliance management Process Shared risks, responsibilities, reward/penalties Steering committees Value Measurement

15. © 2004 Managing the Information Technology Resource, Jerry N. LuftmanChapter 11 - Slide 15 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

16. © 2004 Managing the Information Technology Resource, Jerry N. LuftmanChapter 11 - Slide 16 Categories of Governance Alternatives Governance based on organization structure Governance based on processes Governance based on human relationships

17. © 2004 Managing the Information Technology Resource, Jerry N. LuftmanChapter 11 - Slide 17 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,

18. © 2004 Managing the Information Technology Resource, Jerry N. LuftmanChapter 11 - Slide 18 Forms of Governance and Leadership Roles

19. © 2004 Managing the Information Technology Resource, Jerry N. LuftmanChapter 11 - Slide 19 Effective IT Steering Committee Business Executive Committee CIO Chief Technology Officer Divisional Business Heads Head of Information Systems/Networking

20. © 2004 Managing the Information Technology Resource, Jerry N. LuftmanChapter 11 - Slide 20 Considerations of Steering Committee Bureaucracy Career Building Communication Complex Decisions Influence/Empowerment Low-Hanging Fruit/Quick Hits Marketing Objectives/Measurements

21. © 2004 Managing the Information Technology Resource, Jerry N. LuftmanChapter 11 - Slide 21 Considerations of Steering Committee Ownership/Accountability Priorities Relationships Right Participants Share Risks Structure, Facilitator

22. © 2004 Managing the Information Technology Resource, Jerry N. LuftmanChapter 11 - Slide 22 Group Projects Based On: Necessity, Opportunity, Desirability Impact on organization Likelihood of occurrence Risk Resource demands Anticipated return

23. © 2004 Managing the Information Technology Resource, Jerry N. LuftmanChapter 11 - Slide 23 Priorities Highest impact on firm Highest likelihood of occurrence Lowest combined attributes of risk Least amount of resources demanded Highest anticipated return

24. © 2004 Managing the Information Technology Resource, Jerry N. LuftmanChapter 11 - Slide 24

25. © 2004 Managing the Information Technology Resource, Jerry N. LuftmanChapter 11 - Slide 25 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

26. © 2004 Managing the Information Technology Resource, Jerry N. LuftmanChapter 11 - Slide 26 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

27. © 2004 Managing the Information Technology Resource, Jerry N. LuftmanChapter 11 - Slide 27 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

28. © 2004 Managing the Information Technology Resource, Jerry N. LuftmanChapter 11 - Slide 28 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”

29. © 2004 Managing the Information Technology Resource, Jerry N. LuftmanChapter 11 - Slide 29 Global Considerations Global Exporter Multinational Multilocal Transnational or Metanational

30. © 2004 Managing the Information Technology Resource, Jerry N. LuftmanChapter 11 - Slide 30 Source: Daniels, J. and Caroline, N., in J. Luftman, ed., Competing in the Information Age: Strategic Alignment in Practice.” Oxford University Press (1996).

31. © 2004 Managing the Information Technology Resource, Jerry N. LuftmanChapter 11 - Slide 31 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

32. © 2004 Managing the Information Technology Resource, Jerry N. LuftmanChapter 11 - Slide 32 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

33. © 2004 Managing the Information Technology Resource, Jerry N. LuftmanChapter 11 - Slide 33 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

34. © 2004 Managing the Information Technology Resource, Jerry N. LuftmanChapter 11 - Slide 34 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

35. © 2004 Managing the Information Technology Resource, Jerry N. LuftmanChapter 11 - Slide 35 Outsourcing Considerations Don’t: –Buy on price alone –Overlook reference-checking process –Use price contract without consideration of long-term 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

36. © 2004 Managing the Information Technology Resource, Jerry N. LuftmanChapter 11 - Slide 36 Insource or Outsource?

37. © 2004 Managing the Information Technology Resource, Jerry N. LuftmanChapter 11 - Slide 37 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

38. © 2004 Managing the Information Technology Resource, Jerry N. LuftmanChapter 11 - Slide 38