Slide 1 of 17 IT Governance Title: IT Governance Introduction to IT Governance Vendor Selection Contracting for Services Contract Monitoring Contract Renegotiation IT Governance and Vendor Management

Slide 2 of 17 IT Governance – What is it? The governance of the organisational processes/activities Decisions to be made –Shall we perform the activity in-house –Shall we outsource the activity?

Slide 3 of 17 Why Have Governance? Organisations that cannot structure their IT governance model waste precious resources – capital, time and human in an era where time is of the essence, capital is in short supply and truly qualified IT people are always hard to find

Slide 4 of 17 What is Outsourcing? Outsourcing is the delegation through a contractual arrangement, of all or part of the technical resources, the human resources and the management responsibilities associated with providing IT services, to an external vendor Clark et al.

Slide 5 of 17 Why Outsource? Cost and quality concerns Breakdown in IT performance Intense vendor pressures Simplified general management agenda Financial factors Corporate Culture Eliminate internal irritant Other Factors

Slide 6 of 17 Outsourcing Advantages Financial Technical Management Human Resources Quality Flexibility

Slide 7 of 17 What IT Functions Could be Outsourced [Survey Results] IT FUNCTIONCURRENTFUTURE Web Development/Hosting27%69% E-Commerce7%54% Website Admin/Management8%53% IT Services(hardware maintenance)27%44% Security Services2%40% Network Management11%37% Helpdesk4%34% ERP Implementation1%25% Application Management3%22% Other9% No Plans to Outsource9% None/Dont Know41%3%

Slide 8 of 17 Vendor Selection Large orgs may employ a management consulting firm for this task A Request for Proposal (RFP) is used as a governance mechanism to solicit and compare contract bids from qualified vendors Final vendor selection performed by committee Vendors assessed on a number of criteria e.g. –Skills, references, reputation, support, flexibility

Slide 9 of 17 What should a Request For Proposal(RFP) for an Outsourcing Vendor contain? 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

Slide 10 of 17 Main Reasons for Past Outsourcing Failures Failure to establish performance metrics Poor vendor assessment Insufficient detail in contract Poor vendor monitoring when outsourcing is seen as a failure may need to backsource

Slide 11 of 17 Outsourcing Considerations [Dos] Ask for and check references and exercise due diligence Assess the culture of your outsourcing partner Evaluate multiple options – both suppliers and approaches GET IT IN WRITING! Metrics matters – use them Open the kimono as much as possible Pick an outsourcing partner with a strong partner network

Slide 12 of 17 Outsourcing Considerations [Donts] Buy on price alone Overlook the reference-checking process Use a price contract without considering the long-term consequences Forget to provide for contingencies Communicate via committee Ever hand over project management Rely on marquee references Single-source Let your head be turned by goodies

Slide 13 of 17 Contracting for Services The contract is the principle governance mechanism of vendor management Typically done by specialists in the IT organisation with a legal dept assistant Case Study : Contract Elements

Slide 14 of 17 Contract Montitoring Monitoring the vendors performance against accepted industry benchmarks of quality and service levels and preparing periodic reports to IT management on the performance of vendors against these metrics Service level agreements along with incentives and penalties provide an excellent vehicle for managing these criteria

Slide 15 of 17 Contract Renegotiation Contract expiration A material breach in contract by the vendor that may result in contract termination or renegotiation (e.g. poor performance, security lapses, criminal activity) A major change in the organisations management or industry (e.g. bankruptcy or merger on the part of the organisation of the vendor) A significant change in the price for the same vendor services New technology

Slide 16 of 17 IT Governance and Vendor Management [Dos] Establish a vendor management team Monitor service levels and end-user satisfaction Track the service/product market and the vendors place in it Continually renegotiate contracts Keep business units accountable and involved Think ongoing relationship – not just one-time transaction Use the vendors expertise to suggest solutions

Slide 17 of 17 IT Governance and Vendor Management [Donts] Try to manage a vendor without adequate expertise available Ignore the need to establish service level agreements (SLAs) Fail to establsh firm accountability and metrics for performance Understaff the vendor management function Rely solely on the vendors expertise Forget to keep an eye on vendor reputation and profitability