IT Governance: Sound Management Practices that Deliver Result

IT Governance: Sound Management Practices that Deliver ResultIT governance is the decision rights and accountabilities that encourage desirable behaviour in the use of IT. IT governance is embedded in formal structures that allocate rights and responsibilities for decisions in certain IT domains. An IT governance arrangement describes how an enterprise’s decisions related to IT are made and enforced.

Agenda

What "IT Governance" entails IT Mission Considerations

Enablement Risk Management

Why should we care?•By deploying today’s robust IT governance solutions, organizations can enhance existing IT management capabilities to achieve unprecedented efficiencies and improved visibility into the complete organizational state of IT and its relations to all significant underlying business processes.

•With an IT governance solution, the IT organization can enhance control over IT resources and risks so that they can offer the entire enterprise much more than just basic management of networks, systems, applications, data and personnel.

•IT governance solutions deliver a contextual framework for determining how IT infrastructure can be leveraged and optimized to achieve strategic business objectives without significantly increasing administrative costs or risk.

•A robust IT governance solution permits organizations to manage important IT performance impacts on business processes.

Why should we care?

When implemented, an effective IT governance solution should deliver the following key benefits:

Visibility: an IT governance solution enables effective management and visibility of risk across the four pillars of risk:1.Operational2.Compliance3.Technology.4.Strategic

•Flexibility: An IT Governance solution delivers flexibility by supporting required variations in methodology according to requirements across business units, geographies.

•Efficiency: An effective IT governance solution provides efficiency by allowing organizations to synchronize a risk program acrsos the organization, business processes and down into IT services, thus helping to define risk interdependencies and manage risk holistically.

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

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

IT Governance: Objectives and Challenges

So, IT Governance: a contextual frameworkha the Goal?

Organizational Goal

Accounting Manufacturing

Sales Customer ServiceHuman Resources

To Maximize Sustainable Profits

Maximize Sustainable

Profits

Accounting Manufacturing

Sales Customer ServicePayroll

Theory of Constraints

Dr. Eliyahu Goldratt – Israeli PhysicistOrganizations are systems of business units assembled to achieve a goalIf there isn’t a goal, there isn’t a systemThroughput accounting

Inventory is money tied up in the systemOperating Expenses are monies consumed creating units of the goalThroughput is the conversion of units of inventory into units of the goalWe want systems that improve throughput while driving down inventory and operating expenses

Constraints are what inhibit attainment of the goalWe want to identify constraints and then act to drive them down to increases systemic throughputNeed to recognize that we are dealing with a system and focus on system throughput – not just local optimizationsIf we can’t relate activities to the goal, then why are we performing the activities?

ResourceDomenico 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?

Maximize Sustainable

Profits

Accounting Manufacturing

Sales Customer ServicePayroll

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

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

Value Enablement

Positive Force Multiplication vs.

Negative Force Multiplication

Quality Management

Quality means conformance to requirements – Phil CosbyThis means:IT must understand the customer’s requirementsIT must meet the customer’s requirements

This assumes that the customer and IT understand the goals f the organization and how functional area objectives support themAfter 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 risk

Focus on business and customer needs, technology is secondary

Need to focus on terms that are mutually understoodIT 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 dateRecognize 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 planningNo 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

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

Audit plays an important role in organizations by performing a facet of the “check” functionEthicsRegulatory ComplianceProcess ComplianceControl and Process Improvement

Opportunities

Risk ManagementWhy 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

Maximize Sustainable

Profits

Accounting Manufacturing

Sales Customer ServicePayroll

What Is a Risk?

The probability of a negative event impacting the realization of functional area objectives and/or organizational goalsDoes a risk matter if it doesn’t impact a functional area objective or organizational goal?

NOInformation Technologies are a threat vectorIn 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) effortResource

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 – Control Objectives for IT and Related Technologies

ME

AS

UR

EM

EN

T

TIME

Mean

LCL

UCL

Don’t Try to Eliminate Risk!

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

Lev

el o

f A

ssu

ran

ceLevel of Investment

100%

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

ResourcesITIL Service Support volumeITPI’s Visible Ops methodology

Continuous Improvement

PLAN

DO

ACT

CHECK

Continuous Improvement

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

The building blocks of an IT Governance strategy help companies

make strategic choices and carry them through to operational reality. Continuous Improvement

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

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

Organizational Goal

Accounting Manufacturing

Sales Customer ServiceHuman Resources

In SumImplementing an IT governance solution can deliver immediate benefits to the entire organization. These key benefits include:

Ability to map IT and technology risks into business orocesses.Better visibility and decision support around IT risks.Improved efficiency.IT risk reduction