© 2006 Jupitermedia Corporation Webcast TitleIT Governance: Sound Management Practices that Deliver Results November 29, 2006 2pm EST, 11am PST George.

© 2006 Jupitermedia Corporation

Webcast TitleIT Governance: Sound Management Practices that Deliver Results

IT Governance:Sound Management Practices that Deliver Results

November 29, 2006

2pm EST, 11am PST

George Spafford, Principal Consultant, Pepperweed Consulting


IT Governance: Sound Management Practices that Deliver Results

Housekeeping

• Submitting questions to speaker– Submit question at any time by using “Ask a question”

section located on lower left-hand side of your console.– Questions about presentation content will be answered

during 10 minute Q&A session at end of webcast.

• Technical difficulties?– Click on “Help” link– Use “Ask a question” interface



Main Presentation



Agenda

• What "IT Governance" entails • IT Mission Considerations

– Enablement – Risk Management

• Please email either George or Kendra for a copy of this [email protected]@jupitermedia.com



Why should we care?



Why Governance Gets Attention

• AT Kearney 2004-2005 Technology Innovation Study:– 72% of business leaders believe IT enabled their business strategy but

only 30% are “fully aligned”– 45% of respondents believe IT is primarily focused on day-to-day

requirements– 70% identify technology innovation as critical yet 80% of actual IT

investment is focused on infrastructure and core operation

• Projects– $600 billion spent on ill conceived or poor executed IT projects –

Gartner– 71% of IT projects fail or are challenged – Standish

• Operational Processes– 80% of availability problems caused by human error – IDC– 45% of operating expense budget consumed by unplanned work - ITPI



What is governance?



Corporate Governance Defined

• Governance derives from the Latin word “gubernare” relating to the rudder and steering of a ship

• "Corporate Governance is concerned with holding the balance between economic and social goals and between individual and communal goals. The corporate governance framework is there to encourage the efficient use of resources and equally to require accountability for the stewardship of those resources. The aim is to align as nearly as possible the interests of individuals, corporations and society." -- Adrian Cadbury in “Global Corporate Governance Forum”, World Bank

• “Corporate governance is the set of processes, customs, policies, laws and institutions affecting the way a corporation is directed, administered or controlled. Corporate governance also includes the relationships among the many players involved (the stakeholders) and the goals for which the corporation is governed. The principal players are the shareholders, management and the board of directors. Other stakeholders include employees, suppliers, customers, banks and other lenders, regulators, the environment and the community at large.” – Wikipedia



So what is IT Governance?



IT Governance

• “The overall objective of IT governance, therefore, is to understand the issues and the strategic importance of IT, so that the enterprise can sustain its operations and implement the strategies required to extend its activities into the future. IT governance aims at ensuring that expectations for IT are met and IT risks are mitigated.” – IT Governance Institute’s “Board Briefing on IT Governance”

• It arose from a lack of discussions about IT at the Board and strategy levels

– Often times IT is only discussed with capital is needed– Organizations that had strategic IT discussions at the Board level outperformed

competitors over the past five years – AT Kearney– The management of IT should be no different than any other functional area.

• In short, IT Governance outside of the Board level is really concerned about sound management and not governance per se



So, What’s the Goal?

Organizational Goal

Accounting Manufacturing

Sales Customer ServiceHuman Resources



To Maximize Sustainable Profits

Maximize Sustainable

Profits


Sales Customer ServicePayroll

And the business knows this best. Alignment problems arise when IT goes around the business and pushes solutions.



Theory of Constraints• Dr. Eliyahu Goldratt – Israeli Physicist• Organizations are systems of business units assembled to achieve a goal• If there isn’t a goal, there isn’t a system• Throughput accounting

– Inventory is money tied up in the system– Operating Expenses are monies consumed creating units of the goal– Throughput is the conversion of units of inventory into units of the goal– We want systems that improve throughput while driving down inventory and operating expenses

• Constraints are what inhibit attainment of the goal• We want to identify constraints and then act to drive them down to increases

systemic throughput• Need to recognize that we are dealing with a system and focus on system

throughput – not just local optimizations• If we can’t relate activities to the goal, then why are we performing the activities?

• Resource– Domenico Lepore and Oded Cohen. “Deming and Goldratt – The Theory of Constraints and the

System of Profound Knowledge”. North River Press. 1999.– Eliyahu Goldratt. “Beyond the Goal: Eliyahu Goldratt Speaks on the Theory of Constraints”. Coach

Series [Audio Book on CD]. 2005.



What Is Constraining the Goal?


Profits



Poor schedule is costing the firm $200,000/day through

lost production and/or expediting of orders

Customer Service reps are inefficient and it is estimated that $150,000/year could be

saved by putting in a new system

The order entry website crashes once a week and

the firm loses about $5,000 in sales from

opportunistic buyers and incurs $500 in unplanned

labor costs

When properly designed and implemented, IT is a force multiplier that empowers functional areas to attain their objectives in support of the Goal.



Improving the Organization

Where do we want to be?

Where are we now?

How do we get to where we want to be?

How do we monitorProgress?

Vision and Objectives

Audits / Assessments

Process Improvement(Leverage Best Practices)

Metrics and Critical Success Factors

* Adapted from ITIL Service Support Graphic



Value Enablement

Positive Force Multiplication

vs.

Negative Force Multiplication



Quality Management

• Quality means conformance to requirements – Phil Cosby

• This means– IT must understand the customer’s requirements– IT must meet the customer’s requirements– This assumes that the customer and IT understand the goals

of the organization and how functional area objectives support them

• After WWII in Japan, Ishikawa used to tell the people on the manufacturing line that the people in the next step were their customer



Business IT Alignment (BITA)

• Need the business engaged with IT and not just IT in a vacuum• “Technology Pull” vs. “Technology Push”• IT Service Management – services that meet customer

requirements both today and in the future• Primus inter pares

– “First among equals” – IT and other managers working together– IT may know the technology but the business knows the business even

better– IT and the business must leverage each others’ strengths and

compensate for each others’ weaknesses– Requires dialogue, regular meetings, … and lots of hard work!– Roles & responsibilities must be understood

• It can’t just be IT – this is an organizational culture issue• Who better than logistics to argue for a new IT logistics service with IT

playing a supporting role?



Communication Barrier

• Need to speak in terms of enabling objectives and goals while managing risks– Focus on business and customer needs, technology is secondary

• Need to focus on terms that are mutually understood• IT must avoid “geekinese” and understand what

management needs– For example discussing requirements for a two page summary

report vs. a forty page report that serves up lots of content but little information

• Communication must be on a regular schedule in a venue and format that maximizes senior management’s attention



Tone At The Top

• Senior management must support IT in deeds as well as words

• “Just get it done” can destroy all the organizational change work done to date

• Recognize that IT must be engaged the same as any other technical group



Strategic Planning

• IT and the business must work together to accomplish objectives

• IT needs to understand strategic plans in order to support the business and the business must understand IT’s capabilities

• IT projects and resulting services are costly and can impact the quality of business services rendered – they need proper planning– No different than planning for new production plants

• Recognition of IT value, not just cost• Board level IT strategy committee



Steering Committee

• Visibility and involvement into the direction of IT• Set within context of strategy• Steering committee defines

– Priorities– Tracks status of projects



Service Development Lifecycle

• Quality standards around development projects– Requirements definition– Coding standards– Testing– Identification of best practices– Migration to production– Documentation– Evidentiary requirements– Roles and responsibilities

• Resource– Carnegie Mellon’s Capability Maturing Model Integrated (CMMI)– Google



Project Management

• 29% of projects delivered on-time with expected features, 53% were challenged and 18% outright failed1

• The majority of the causal factors are non-technical including:– Lack of project planning– Poor requirements definition– Correct stakeholders not involved, or not involved early enough– Poor communications– Insufficient management oversight

• Resources– PMI’s Project Management Body of Knowledge (PM-BOK)– Projects in Controlled Environments Version Two (PRINCE2)– Google

1. “Third Quarter 2004 CHAOS Report”. The Standish Group.



IT Service Management (ITSM)

• Three objectives– Align IT Services with the current and future needs of the business

– To improve the quality of IT services delivered

– To manage long-term costs of services

• This is a change in mindset away from technology to one of enabling services and quality

• People, Processes and Technology• Resources

– Information Technology Infrastructure Library (ITIL)

– IT Service Management Forum (itSMF)



Internal Audit

• Dr. Deming eschewed the Shewhart cycle of Plan-Do-Check-Act

• Audit plays an important role in organizations by performing a facet of the “check” function– Ethics– Regulatory Compliance– Process Compliance– Control and Process Improvement Opportunities

• Resources– The Institute of Internal Auditors (The IIA)– Information Systems Audit and Control Association (ISACA)



Risk Management

Safeguarding The Goal



Why Is Risk Management So Important?

Limited Resources and Seemingly Unlimited Risks!

Companies need to understand and prioritize risks in order to safeguard functional area objectives and organizational goals



Safeguard the Goal


Profits



IT must reasonably safeguard the Goal by reducing residual risk to an acceptable level.



What Is a Risk?

• The probability of a negative event impacting the realization of functional area objectives and/or organizational goals

• Does a risk matter if it doesn’t impact a functional area objective or organizational goal?

– NO

• Information Technologies are a threat vector• In the end there is only business risk

– It isn’t IT that goes out of business!

• IT should be a stakeholder in a larger Enterprise Risk Management (ERM) effort

• Resource– COSO Enterprise Risk Management (ERM)– NIST



Use Controls to Manage Risk

• Risks cause variation around the achievement of objectives and goals

• Some variation is always present and inevitable

• By implementing processes with adequate controls, we strive to create a reasonable assurance that we can attain our objective

• Controls are found in– The services IT maintains and

provisions– Within the applications users access

• Resource– Information Systems Audit and

Control Association (ISACA) – Control Objectives for IT and Related Technologies (COBIT)

ME

AS

UR

EM

EN

T

TIME

Mean

LCL

UCL



Don’t Try to Eliminate Risk!

Lev

el o

f A

ssu

ran

ceLevel of Investment

100%

• You can spend a fortune and you will never truly hit a 100% level of assurance – it’s not possible

• The objective is to lower risk to an acceptable level, not eliminate it because that is not possible!

• Work with senior management and Internal Audit to define what level of residual risk is acceptable

• There is no prize for overly controlled processes – only costs, frustration and lost agility



Change Management

• Change Management is a risk management function and a foundation control

• 78-80% of unavailability is tied to human error• The result: Delayed projects and the perception that IT can not get

anything done• As the levels of complexity and integration increase, so to does the

need for effective change management otherwise forward momentum will stop and even reverse

• Properly designed Change Management can facilitate agility because productive work can actually be accomplished

• There is a huge difference between total changes and net successful changes

– Being able to deploy 10,000 patches overnight can crash thousands of systems overnight!

• Need a company specific change management process that balances off risks to the organization with the business’ need to change

• Resources– ITIL Service Support volume– ITPI’s Visible Ops methodology



Continuous Improvement

PLAN

DO

ACT

CHECK




• What is needed today will be different than what is needed later

• Objectives, Risks, resources, and so on will all change over time

• Continuous Improvement is a necessity




Where do we want to be?

Where are we now?

How do we get to where we want to be?

How do we monitorProgress?

Vision and Objectives

Audits / Assessments

Process Improvement(Leverage Best Practices)

Metrics and Critical Success Factors

* Adapted from ITIL Service Support Graphic



If something doesn’t map to objectives and goals, then should it be done?

Organizational Goal





If something doesn’t map to objectives and goals, then should it be done?

Organizational Goal



NO



Thank you for the privilege of facilitating this webcast

George [email protected] http://www.pepperweed.com

Daily News Archive and Subscription Instructionshttp://www.spaffordconsulting.com/dailynews.html

Please email either George or Kendra for a copy of this [email protected]@jupitermedia.com



Questions?



Thank you for attendingIf you have any further questions, e-mail

[email protected]

© 2006 Jupitermedia Corporation Webcast TitleIT Governance: Sound Management Practices that Deliver Results November 29, 2006 2pm EST, 11am PST George.

Documents

results corporate governance

sound management practices

corporate governance

ship corporate governance

results housekeeping

results agenda

se slide

wikipedia slide