Making the most of IT: IT governance and Business-IT alignment

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Making the most of IT IT governance and
Business-IT alignment
Prof. Dr. Hans Borgman, March 17, 2008
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(No Transcript)
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ICT in Business Research Focus
Global Software Development
eBusiness
ICT Strategy
ICT Infrastructure
Knowledge Management
Technology Adoption
Change Management
Open Innovation
Data Mining
Outsourcing
IT Governance
High-tech Entrepreneurship
Modeling Software Engineering
Virtual Organizations
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(Emperical) Research Methodsfor Information
Systems Research

• Design
• Simulation
• Experiments
• Quasi Experiments
• Questionnaires
• Field Studies
• Case Studies
• Ethnography
• Grounded Theory
• Action Research

Herbert SimonThe Sciences of the Artificial
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IT Governance in Context
IT governance and associated governance
mechanisms provide the linkage between
responsible corporate governance and effective IT
management.

• Overall decision making and accountability
  structure
• Establish goals, measures, policies
• Ensures shareholders interests are respected

Corporate Governance
Corporate Governance

• Overall IT decision making and accountability
• Ensures value is delivered to shareholders
  through IT investments and actions

IT Governance
IT Governance
IT Management

• Creates business value through IT
• Manages IT budgets, resources, projects,
  operations, vendors
• Runs IT as a business

IT Management
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IT Governance Definition
IT governance is the set of enabling mechanisms
to make prioritize fund sponsor monitor
enforce appropriate IT investment decisions

• How are decisions made?
• Who plays what role in the decision making?
• What processes are used?
• How are investments prioritised?

• How does leadership work for the business and IT?
• Who is the evangelist for technology?
• How are investments authorized?
• How is joint ownership secured?

• What is measured and by whom?
• How does the executive retain oversight and
  control
• What incentive system is used?
• What accountabilities and authorities exist?
• How are investments managed?

• What is the strategic business context, how is it
  refreshed and clarified?
• What knowledge is required to decide between
  operational and strategic priorities?
• How is a fresh view injected?
• How do we learn continuously?

Foundation for business value from IT
investments Firms with better than average IT
governance performance have superior profits as
measured by return on assets (ROA) - more than
twice compared to firms with poorer IT governance.
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IT Governance Drivers
Increasingly difficult for executives to delegate
decision makingMounting number of strategic IT
issues requires cross-functional perspective
Increasing ITPervasiveness
IT must accommodate audit trails and legislative
compliance Legislation like Sarbanes-Oxley Act
requires business policies in IT to foster
accountability
Mounting human and financial consequences of IT
put forward arguments for improved control
processes
Cost Control
ComplianceRequirements
ITGovernance
IT productivity paradox IT investments failing
to provide measurable business value, relates to
unclear roles and responsibilities
StrategicIT Sourcing
ROI Pressure
Executives are required to prepare for governing
complex off shoring and outsourcing arrangements
Footnote Source Source
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IT Costs Governance

• Discretionary costs (want to)
• Examples
• Customer Relationship Mgmt. (CRM)
• eCommerce
• Knowledge Management

Strategic
Tactical
Norm 23 Best practice 35-45(Forrester 2005)
discretionary

• Non-discretionary costs (must have)
• Examples
• Computer Operations
• Applications Maintenance
• Planning and Administration
• Euro-conversion, Y2K
• KTLO Keep The Lights On

non- discretionary
Norm 77Best Practice 55-65
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IT governance applications
Functionalities of IT Governance
Applications(Business Technology Optimization)
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Aim of this study is to provide a better
understanding of IT governance software
implementation projects and to explore
thefactors which influence the success and
failure of IT governance tool implementations.
Research Aim Framework

• IT Governance Strategies Structures
• Centralized, decentralized, federal governance
  mode
• Small, large firms

• Implementation Factors
• Project planning
• Executive support
• User involvement
• User training
• Commitment
• Organizational intgr.
• Metrics and feedback

• Implementation Success or Failure
• Portfolio management optimization
• Project visibility control
• IT service automation

• Environmental Contingencies
• Corporate governance
• Economies of scope
• Absorptive capacities
• Organizational culture

• IT Governance Processes Software Modules
• Demand management
• Applic. change mgt.
• Portfolio management
• Program management
• Performance monitor. management

Legend In-scope Ex-scope.
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Outcome Factors Overview
Project Visibility and Control
Portfolio Management Optimization
IT Services Efficiency

• Higher capability maturity level (CMM)
• Increased project sponsor satisfaction
• Percentage increase in healthy projects (better
  on-budget and on-time)
• Reduced project management costs as percentage of
  project costs

• Improved alignment between business and IT
• Better executive communication and
  decision-making
• Monetary savings through revised investment
  decisions and repurposed capital investments

• Improved quality of audit and regulatory
  compliance
• Reduction of overall operational IT spending as a
  percentage of revenues
• Higher productivity and lower IT personnel costs
• Faster incident handling and deployment of
  application changes
• Enforced compliance with architectural standards

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Implementation Factors Overview (1/2)
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Implementation FactorsOverview (2/2)
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The Case Study as Research Method

• A case study is an empirical inquiry that
• investigates a contemporary phenomenon within its
  real-life context, especially when the boundaries
  between phenomenon and context are not clearly
  evident. 1)
• refers to the collection and presentation of
  detailed information about a particular
  participant or small group. Researchers do
  not focus on the discovery of a universal,
  generalizable truth, nor do they typically look
  for cause-effect relationships instead, emphasis
  is placed on exploration and description. 2)

1) Yin, R. K. Case Study Research, Design and
Methods, 3rd ed. Newbury Park, Sage
Publications, 2003. 2) Colorado State Writing
Guide, http//writing.colostate.edu/guides/researc
h/casestudy/
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(The Anatomy of a Case Study Research Paper

• Title conceptual question the case of
• Intro - Method - Research - and - Discussion
  (IMRaD)
• Typically focus on understanding the relationship
  between factors that are inter-releated and
  contextual and cannot be separated for study in
  lab experiments

General research question Method rationale
General answer Discussion, limitations
Case study data Case study analysis
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Four Case Studies
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Outcome Factors Results
Gas Other Services Combined
Health Allied Services

• 2 reduction in project defect rates
• 5 increase in projects on budget
• 10 improvement in the timing and scheduling of
  resources
• 20-25 time reduction in processing change
  requests (contact- and data center)

• Implementation was in an early stage and in a
  rather turbulent environment with diverse
  stakeholder expectations
• The case illustrates that successful
  implementation of IT governance applications
  requires clearly-designed IT governance processes
• At this stage the case is inconclusive in terms
  of business outcomes

Management Services
Sporting Athletic Goods

• 20 workforce reduction due to automated and
  standardized IT request lifecycles
• 35 of workforce relocated to low-cost countries
• 10 increase in projects on budget
• 20 decrease in delays
• 15 decrease of average project costs (due to
  more efficient project mgmt. and automated
  reporting)

• 5 decrease of operational IT costs
• 5 decline in time to market for approved
  initiatives
• 10-20 increase in projects meeting quality
  criteria
• 1-5 project management cost decrease
• Recovery of implementation costs (1.5m)
  after1.5 years

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Implementation FactorsResults (1/2)
Gas Other Services Combined
Health Allied Services

• Some of the projects received a high level of ESU
• High user COM already in early project stages
• High levels of PPA and UIN - the project was
  tracked and users were involved
• Little information regarding MFE
• Emphasis was placed on UTR
• Strong evidence for OIN - detailed process
  definitions

• Limited ESU - no process owners for ppm modules
• Very little general COM during the rollout
• Insufficient degree of PPA
• UTR followed different approaches - mixed success
• Limited information regarding MFE
• No evidence of UIN during implementation
• Limited evidence of OIN - the tool was just
  screwed in

ESU
OIN
COM
PPA
UIN
MFE
UTR
ESU
OIN
COM
PPA
UIN
MFE
UTR
S
S
M
M
W
W
Legend strong evidence, moderate
evidence, weak evidence
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Implementation FactorsResults (2/2)
Management Services
Sporting Athletic Goods

• Major evidence for ESU - tool received full
  support
• PPA was highlighted - processes were defined
• Several occurrences of UIN became visible
• Little evidence for MFE
• High COM - staff users believed in the product
• High UTR - conducted in multiple user groups
• Strong evidence of OIN - workflows built into tool

• Low ESU - marketing-driven company
• Little COM evidence from the designated tool
  users
• Poor PPA and limited MFE - the tool was selected
  rather on motivation than evaluation
• No instances of UIN - the advantages of the tool
  were not articulated to users
• Medium OIN - limited process design and mapping

ESU
OIN
COM
PPA
UIN
MFE
UTR
ESU
OIN
COM
PPA
UIN
MFE
UTR
H
H
M
M
L
L
Legend strong evidence, moderate
evidence, weak evidence
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Conclusions and Further Research
Support for relation between six out of seven
implementation factors To implementation success
or failure

• Cases 2 and 4 show major deficiencies -
  implementation failed to some extent Cases 1 and
  3 show careful attention to most implementation
  factors - implementation was regarded successful

Comparing the findings
MFE

• Little evidence was found for the implementation
  factor MFE
• Should not be included in further research

• UIN, UTR, and COM may serve as a priori
  explanations of implementation success or failure.

UIN, UTR, and COM

• PPA, ESU, and OIN are powerful measures to
  overcome common failure points
• A correlation between PPA and OIN was found -
  effort spent on PPA may translate into improved
  OIN

PPA, ESU, and OIN

• A questionnaire-based quantitative survey with a
  larger cross-sectional sample will be conducted
• A better understanding of the cause and effect
  relationships between implementation factors and
  rollout success or failure would be valuable to
  academic and practitioner communities

Further Research
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Making the most of IT IT governance and
Business-IT alignment
Prof. Dr. Hans Borgman, March 17, 2008