making the most of it: it governance and business-it alignment prof. dr. hans borgman, march 17,...

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

Prof. Dr. Hans Borgman, March 17, 2008

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ICT in Business Research Focus

ICT Strategy

ICT Infrastructure

Change Management

High-tech Entrepreneurship

Technology Adoption

Modeling & Software EngineeringVirtual Organizations

IT Governance

Knowledge Management

Open Innovation

Outsourcing

Global Software Development

Data Mining

eBusiness

(Emperical) Research Methodsfor Information Systems

Research

Herbert SimonThe Sciences of the Artificial

• Design• Simulation• Experiments• Quasi

Experiments• Questionnaires• Field Studies• Case Studies• Ethnography• Grounded Theory• Action Research

• Design• Simulation• Experiments• Quasi

Experiments• Questionnaires• Field Studies• Case Studies• Ethnography• Grounded Theory• Action Research

Rigor

Relevance

Rigor

Relevance

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

• Overall IT decision making and accountability

• Ensures value is delivered to shareholders through IT investments and actions • Creates business value through IT

• Manages IT budgets, resources, projects, operations, vendors

• Runs IT as a business

IT Management

Corporate Governance

IT Governance

Corporate Governance

IT Governance

IT Management

IT Governance in Context

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 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?

•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 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?

•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.

IT Governance Definition

Increasingly difficult for executives to delegate decision makingMounting number of strategic IT issues requires cross-functional

perspective

IT must accommodate audit trails and legislative compliance

Legislation like Sarbanes-Oxley Act requires business policies in IT to foster accountability

IT productivity paradox: IT investments failing to provide measurable business value, relates to unclear roles and responsibilities

Executives are required to prepare

for governing complex off shoring and

outsourcing arrangements

Mounting human and financial

consequences of IT put forward arguments for

improved control processes

Cost ControlCost Control

StrategicIT Sourcing

StrategicIT Sourcing ROI PressureROI Pressure

ComplianceRequirements

ComplianceRequirements

Increasing ITPervasiveness

Increasing ITPervasiveness

ITGovernance*

ITGovernance*

IT Governance Drivers

Norm: 77%Best Practice: 55-65%

discretionary

Norm: 23% Best practice: 35-45%(Forrester 2005)Non-

discretionary costs (“must have”)

Examples:•Computer Operations•Applications Maintenance•Planning and Administration•Euro-conversion, Y2K•KTLO: Keep The Lights On

Strategic

Tactical

Discretionary costs (“want to”)

Examples:• Customer Relationship Mgmt. (CRM)• eCommerce• Knowledge Management

IT Costs & Governance

non-

discretionary

IT governance applications

Functionalities of IT Governance Applications(Business Technology Optimization)

IT Governance Application Functionalities:

Workflow Management

ßAutomate and digitize ITgovernance processes, as wellas monitoring that agreed-uponsteps are followed

o

o

e

IT S ervice

S pe c she et

C o nf igura tion

Ma na geme nt

D ataba se

A MC

S ervice q uality pla n

Le ve l: 5

Leg al

C o ns traints ,

extern al po lic ie s

an d s tand ards

S erv ice

L ev el Man age r

AM C mandatory

A MC S ervice

impro veme nt plan

G lo bal s ervice

ca ta lo gue

Co rpora te / R eg io nal

se rvic e catalog ue

A MC S erv ic e

imp ro ve ment p lan

C reate or a da pt

co rpo ra te /

region al S erv ice

c atalo gu e con cep t

A MC

S e rvice qu ality p lan

S ecu rity, ris k,

qua lity an d oth er

interna l po lic ie s

a nd s tan dard s

S erv ic e lev el man age ment

a ctio n p la n

u pda te d

C o rp ora te / R egion al se rvice

ca talog ue co nce pt

Dra f t

Demand Management

ßEnsure that development ofstrategic initiatives is balancedwith efficient day-to-day ITservice delivery and routinechanges

Portfolio Management

ßSupport prioritization processesthrough clear responsibilitiesfor consolidating, evaluating,and approving collectedrequests

Project Management

ßManaging projects bysupporting funding decisions,creating delivery schedules,aligning individual project taskwith business objectives

Application ChangeManagement

ßEnable automatic deploymentand migration of softwarechanges across a firm’s systemlandscape

Monitoring Systems

ßInclude outcome and processcontrol features, as well asmonitoring of key performanceindicators

IT Governance Application Functionalities:

Workflow Management

ßAutomate and digitize ITgovernance processes, as wellas monitoring that agreed-uponsteps are followed

o

o

e

IT S ervice

S pe c she et

C o nf igura tion

Ma na geme nt

D ataba se

A MC

S ervice q uality pla n

Le ve l: 5

Leg al

C o ns traints ,

extern al po lic ie s

an d s tand ards

S erv ice

L ev el Man age r

AM C mandatory

A MC S ervice

impro veme nt plan

G lo bal s ervice

ca ta lo gue

Co rpora te / R eg io nal

se rvic e catalog ue

A MC S erv ic e

imp ro ve ment p lan

C reate or a da pt

co rpo ra te /

region al S erv ice

c atalo gu e con cep t

A MC

S e rvice qu ality p lan

S ecu rity, ris k,

qua lity an d oth er

interna l po lic ie s

a nd s tan dard s

S erv ic e lev el man age ment

a ctio n p la n

u pda te d

C o rp ora te / R egion al se rvice

ca talog ue co nce pt

Dra f t

Demand Management

ßEnsure that development ofstrategic initiatives is balancedwith efficient day-to-day ITservice delivery and routinechanges

Portfolio Management

ßSupport prioritization processesthrough clear responsibilitiesfor consolidating, evaluating,and approving collectedrequests

Project Management

ßManaging projects bysupporting funding decisions,creating delivery schedules,aligning individual project taskwith business objectives

Application ChangeManagement

ßEnable automatic deploymentand migration of softwarechanges across a firm’s systemlandscape

Monitoring Systems

ßInclude outcome and processcontrol features, as well asmonitoring of key performanceindicators

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.

Legend: In-scope; Ex-scope.

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 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

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

IT Governance Processes & Software Modules:

Demand management

Applic. change mgt.

Portfolio management

Program management

Performance monitor. & management

Research Aim & Framework

Outcome Factors Overview

Project Visibilityand Control:

Project Visibilityand Control:

•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

•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 alignment between business and IT

•Better executive communication and decision-making

•Monetary savings through revised investment decisions and repurposed capital investments

Portfolio ManagementOptimization:

Portfolio ManagementOptimization:

IT ServicesEfficiency:

IT ServicesEfficiency:

•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

•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

IT GovernanceStrategies & Structures:

ß Centralized,decentralized, federalgovernance mode

ß Small, large firms

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Implementation

Factors:

ß Project planning

ß Executive support

ß User involvement

ß User training

ß Commitment

ß Organizational intgr .

ß Metrics and feedback



Implementation

Success or Failure:

ß Portfolio

management

optimization

ß Project visibility &

control

ß IT service automation

Environmental

Contingencies:

ß Corporate governance

ß Economies of scope

ß Absorptive capacit ies

ß Organizational

culture



IT Governance

Processes & Software

Modules:

ß Demand management

ß Applic . change mgt.

ß Portfolio management

ß Program management

ß Performance monitor.

& management

Implementation Factors Overview (1/2)

Project Planning and Analysis (PPA):

Project Planning and Analysis (PPA):

Develop a detailed plan of the required steps in the implementation process, including all resource requirements

Check the firm’s strategic objectives and business needs upfront

Analyze and challenge the pre-implementation situation, current IT governance arrangements, and affected stakeholders

Develop a detailed plan of the required steps in the implementation process, including all resource requirements

Check the firm’s strategic objectives and business needs upfront

Analyze and challenge the pre-implementation situation, current IT governance arrangements, and affected stakeholders

Commitment(COM):

Commitment(COM):

“Commitment to change” - the willingness to accommodate changes in behavior, procedures, etc. which are necessary for IS to work

“Commitment to the project” - a more direct commitment of managers and users

Ensure a smooth systems requirements assessment at pre-design, followed by a post-implementation check

“Commitment to change” - the willingness to accommodate changes in behavior, procedures, etc. which are necessary for IS to work

“Commitment to the project” - a more direct commitment of managers and users

Ensure a smooth systems requirements assessment at pre-design, followed by a post-implementation check

Metrics and Feedback (MFE):

Metrics and Feedback (MFE):

Review the implementation status of the project regularly

Make suggestions and corrections through formal feedback channels or review meetings

Establish a set of project-related KPIs for continuous progress, issue, and risk monitoring

Make metric data frequently available to project management

Review the implementation status of the project regularly

Make suggestions and corrections through formal feedback channels or review meetings

Establish a set of project-related KPIs for continuous progress, issue, and risk monitoring

Make metric data frequently available to project management






Implementation

Factors:

ß Project planning


ß User involvement

ß User training

ß Commitment





Implementation

Success or Failure:


optimization


control


Environmental

Contingencies:




ß Organizational

culture



IT Governance


Modules:






& management

User Training

(UTR):

User Training

(UTR):

Explain the scope of the IT governance initiative and its relation to the organization, as well as to the environmental contingencies

Facilitate formal and informal training, practice fields, as well as support groups of people experiencing similar difficulties

Explain the scope of the IT governance initiative and its relation to the organization, as well as to the environmental contingencies

Facilitate formal and informal training, practice fields, as well as support groups of people experiencing similar difficulties

User Involvement

(UIN):

User Involvement

(UIN):

Configure and participative customize the selected software and rollout approach

Involve users so that they can form realistic expectations about the IS

Foster a sense of ownership and increase the assessment of system requirements’ quality

Configure and participative customize the selected software and rollout approach

Involve users so that they can form realistic expectations about the IS

Foster a sense of ownership and increase the assessment of system requirements’ quality

Organizational Integration (OIN):

Organizational Integration (OIN):

Align IT governance software rollouts with the organization’s strategic focus and business drivers

Embed the tool in the organizational context (i.e. structures and processes)

Drive users to assume ownership and responsibility for the tool’s maintenance and evolution

Align IT governance software rollouts with the organization’s strategic focus and business drivers

Embed the tool in the organizational context (i.e. structures and processes)

Drive users to assume ownership and responsibility for the tool’s maintenance and evolution

Executive Support

(ESU):

Executive Support

(ESU):

Ensure executive participation and involvement

Facilitate high degree of cross-stakeholder collaboration and power reallocations

Communicate a compelling vision for the IT governance initiative and allocate non-routine resources

Ensure executive participation and involvement

Facilitate high degree of cross-stakeholder collaboration and power reallocations

Communicate a compelling vision for the IT governance initiative and allocate non-routine resources

Implementation FactorsOverview (2/2)






Implementation

Factors:

ß Project planning


ß User involvement

ß User training

ß Commitment





Implementation

Success or Failure:


optimization


control


Environmental

Contingencies:




ß Organizational

culture



IT Governance


Modules:






& management

“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/research/casestudy/

The Case Study as Research Method

• 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 questionMethod & rationale

General ‘answer’Discussion, limitations

Case study dataCase study analysis

(The Anatomy of a Case Study Research Paper

Four Case Studies

Company: Organization Size: Application Modules: Impl. Status:* Interviewees:

Gas and OtherServices CombinedSIC 4932(Germany)

ßRevenue: $10bnßEmployees: 41,000

ßDemand managementßApplication changemanagement

50%

ßManager change management datacenter

ßProject manager IT governanceßSenior manager customer center SAPßHead of global applications

Health and AlliedServicesSIC 8099(U.S.)


ßPortfolio managementßProgram managementßPerformance monitoring

75%

ßSenior VP business managementßDirectors IT pharmaceutical distr. 1 &2

ßConsulting senior executives 1 & 2ßConsulting executives 1 & 2

ManagementServicesSIC 8741(U.S.)

ßRevenue: $16bnßEmployees:130,000

ßProgram managementßDemand managementßApplication change mgt.ßPerformance monitoring 50%

ßService management leadßSupport leadßService delivery leadßClient relationship managerßClient unit lead

Sporting andAthletic GoodsSIC 3949(Germany)


ßProgram managementßDemand managementßPerformance monitoring

50%

ßBusiness analyst IT strategyßSenior manager processes global ITßIT manager area centralßManager project office

Note: *) Implementation status/completeness of governance tools during research.

Company: Organization Size: Application Modules: Impl. Status:* Interviewees:

Gas and OtherServices CombinedSIC 4932(Germany)


ßDemand managementßApplication changemanagement

50%

ßManager change management datacenter

ßProject manager IT governanceßSenior manager customer center SAPßHead of global applications

Health and AlliedServicesSIC 8099(U.S.)


ßPortfolio managementßProgram managementßPerformance monitoring

75%

ßSenior VP business managementßDirectors IT pharmaceutical distr. 1 &2

ßConsulting senior executives 1 & 2ßConsulting executives 1 & 2

ManagementServicesSIC 8741(U.S.)

ßRevenue: $16bnßEmployees:130,000

ßProgram managementßDemand managementßApplication change mgt.ßPerformance monitoring 50%

ßService management leadßSupport leadßService delivery leadßClient relationship managerßClient unit lead

Sporting andAthletic GoodsSIC 3949(Germany)


ßProgram managementßDemand managementßPerformance monitoring

50%

ßBusiness analyst IT strategyßSenior manager processes global ITßIT manager area centralßManager project office

Note: *) Implementation status/completeness of governance tools during research.

Outcome Factors Results






Implementation

Factors:

ß Project planning


ß User involvement

ß User training

ß Commitment





Implementation

Success or Failure:

ß Portfolio

management

optimization


control


Environmental

Contingencies:




ß Organizational

culture



IT Governance


Modules:






& management

Gas & Other Services Combined:Gas & Other Services Combined:

• 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)

• 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)

Management Services:Management Services:

• 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)

• 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)

Health & Allied Services:Health & Allied Services:

• 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

• 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

Sporting & Athletic Goods:Sporting & Athletic Goods:

• 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) after

1.5 years

• 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) after

1.5 years

Gas & Other Services Combined:

Gas & Other Services Combined:Some of the projects received a high level of

ESUHigh user COM already in early project stages

High levels of PPA and UIN - the project was tracked and users were involved

Little information regarding MFEEmphasis was placed on UTRStrong evidence for OIN - detailed process definitions

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 MFEEmphasis was placed on UTRStrong evidence for OIN - detailed process definitions

Health & Allied Services:Health & Allied Services:Limited ESU - no process owners for ppm modules

Very little general COM during the rollout Insufficient degree of PPAUTR followed different approaches - mixed success

Limited information regarding MFENo evidence of UIN during implementationLimited evidence of OIN - “the tool was just screwed in”

Limited ESU - no process owners for ppm modules

Very little general COM during the rollout Insufficient degree of PPAUTR followed different approaches - mixed success

Limited information regarding MFENo evidence of UIN during implementationLimited evidence of OIN - “the tool was just screwed in”

ESUESU OINOINCOMCOM PPAPPA UINUIN MFEMFE UTRUTR

SS

MM

WW


SS

MM

WW

Legend: strong evidence, moderate evidence, weak evidence

Implementation FactorsResults (1/2)






Implementation

Factors:

ß Project planning


ß User involvement

ß User training

ß Commitment





Implementation

Success or Failure:


optimization


control


Environmental

Contingencies:




ß Organizational

culture



IT Governance


Modules:






& management

Management Services:Management Services:

Major evidence for ESU - tool received full support

PPA was highlighted - processes were defined

Several occurrences of UIN became visibleLittle evidence for MFEHigh COM - staff & users believed in the product

High UTR - conducted in multiple user groups

Strong evidence of OIN - workflows built into tool

Major evidence for ESU - tool received full support

PPA was highlighted - processes were defined

Several occurrences of UIN became visibleLittle evidence for MFEHigh COM - staff & users believed in the product

High UTR - conducted in multiple user groups

Strong evidence of OIN - workflows built into tool

Sporting & Athletic Goods:Sporting & Athletic Goods:

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

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


HH

MM

LL


HH

MM

LL

Legend: strong evidence, moderate evidence, weak evidence

Implementation FactorsResults (2/2)






Implementation

Factors:

ß Project planning


ß User involvement

ß User training

ß Commitment





Implementation

Success or Failure:


optimization


control


Environmental

Contingencies:




ß Organizational

culture



IT Governance


Modules:






& management

Conclusions and Further Research

UIN, UTR, and COM

Comparing the findings

MFE

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 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.

PPA, ESU, and OIN

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

Further Research

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

Support for relation between six out of seven implementation factorsTo implementation success or failure

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

Prof. Dr. Hans Borgman, March 17, 2008

making the most of it: it governance and business-it alignment prof. dr. hans borgman, march 17,...

Documents

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governance defi

business value

strategic business context

context slide

decision making

overall decision

strategic priorities