A Model for IT Governance

One of the greatest hindrances to global organizations today is that their business and IT strategies operate at cross-purposes when they should be directed toward the common goal of improving performance. When strategies aren't aligned, organizations risk spending money and effort on IT-related projects that won't deliver promised business results.

Clearly the disconnect must be fixed, but it's not easy. Several factors get in the way, chief among them internal politics and the struggle to control programs and budget dollars. It's not that organizations don't try to fix the problem; many firms are centralizing IT investment governance. But IT governance processes are anything but simple, and few executives have a viable framework for making consistent decisions on new investments, let alone reassessing existing ones.

Organizations are just beginning to understand how to link IT investments and business strategies. The lack of consistent metrics has been one stumbling block. Unfortunately, many organizations are unable to measure the potential benefit from one IT investment to the next. Even organizations that do have rigorous IT governance processes seldom consider the need to proactively assess existing investments so they can hold the IT organization accountable.

CIOs should be using IT governance processes to link IT assets, projects and resources to business strategies and outcomes across finance, HR, operations and even the contact center. This is what IT performance management is all about.

At a recent CIO summit attended by 45 top IT executives, I moderated a workshop on IT governance and discovered that the majority of those CIOs had not adopted centralized IT processes for assessing all investments consistently. Many of them said it was a challenge applying such processes to investments such as security, regulatory compliance, enterprise resource planning (ERP) and business intelligence (BI). Unfortunately, their success will be limited until they focus on IT governance.

Elsewhere on the C level, CFOs now appear to be more involved in IT investments, and they're demanding results. At a recent workshop for CFOs on applying performance management to business and IT, one participant said his firm had yet to see results from a major investment in Business Objects software and services for BI and performance management. Another participant said his firm had already spent $10 million on a project featuring Oracle e-Business Applications software and services that wasn't meeting management expectations. Encouragingly, in both cases the CFOs were taking action to reassess the projects. But it would be better to prevent these mistakes with good IT governance than having to fix them after the fact.

What is good IT governance? First, it establishes a consistent framework for assessing the potential benefits of major IT investments to the business on one hand and the costs of ownership and risks on the other. Second, IT governance must be carried forward by an oversight committee that reviews progress on major capital investments and holds internal constituents and suppliers responsible for the outcomes of their projects. Lastly, good governance helps support a sound IT performance management process.

It's time CIOs manage their assets, projects and resources more effectively, making it possible to allocate time not only to "keep the lights on" maintenance issues but also to help the business find new opportunities and protect against new threats. You can no longer count on these crucial needs to be met by one ERP or customer relationship management system.

Fortunately, new applications can make IT performance management easier. Vendors Blazent, ITM Software, PlanView, Provance and Troux, for example, provide IT governance and IT management applications that can help the CIO drive IT performance to meet business expectations.

It is dismaying to see that not a lot of progress has been made in managing IT to serve core business needs; our research shows that spreadsheets remain the most common tool used for managing IT organizations. Yet it's a heartening sign that CFOs are getting engaged in IT, assessing investments to ensure that capital is managed properly. Their actions can help businesses realize the long-promised potential of technology and, through working with their CIOs, can lead to a win-win business and IT partnership.

Mark Smith is CEO and Senior Vice President of Research at Ventana Research. Write to him at [email protected].