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ABC: An Introduction to IT Governance

Solid IT governance—from regulatory compliance to financial and technological accountability—ensures that companies achieve their strategies and goals.

By Karen D. Schwartz

May 22, 2007 — CIO —

• What is IT governance?
• Is it something every organization needs?
• What are the drivers that motivate organizations to implement IT governance infrastructures?
• What’s the business case? That is, how can I convince top management that we need to do this?
• What are the major focus areas that make up IT governance?
• This appears pretty complicated; how do you actually implement everything involved in IT governance?
• There are a lot of framework choices. How do I choose?
• Can we do this alone, or should we get some outside help?
• What can go wrong if it’s not implemented effectively?
• What are some tips for making sure it goes smoothly and delivers positive results?

From relative obscurity a few years ago, several factors have come together to make the concept of formal IT governance a good idea for virtually every company, both public and private. Key motivators include the need to comply with a growing list of regulations related to financial and technological accountability, and pressure from shareholders and customers. Here’s a quick primer on the basics of IT governance:

What is IT governance?
Simply put, it’s putting structure around how organizations align IT strategy with business strategy, ensuring that companies stay on track to achieve their strategies and goals, and implementing good ways to measure IT’s performance. It makes sure that all stakeholders’ interests are taken into account and that processes provide measurable results. An IT governance framework should answer some key questions, such as how the IT department is functioning overall, what key metrics management needs and what return IT is giving back to the business from the investment it’s making.

Is it something every organization needs?
Every organization—large and small, public and private—needs a way to ensure that the IT function sustains the organization’s strategies and objectives. The level of sophistication you apply to IT governance, however, may vary according to size, industry or applicable regulations. In general, the larger and more regulated the organization, the more detailed the IT governance structure should be.

What are the drivers that motivate organizations to implement IT governance infrastructures?
Organizations today are subject to many regulations governing data retention, confidential information, financial accountability and recovery from disasters. While none of these regulations requires an IT governance framework, many have found it to be an excellent way to ensure regulatory compliance. By implementing IT governance, you’ll have the internal controls you need to meet the core guidelines of many of these regulations, such as the Sarbanes-Oxley Act of 2002.

What’s the business case? That is, how can I convince top management that we need to do this?
Make sure the right people are selling the concept; if IT is selling it, you’re in trouble. It’s much more effective if a cross-functional team consisting of IT and line-of-business managers makes the case to the board of directors that effective IT management is an important part of the company’s success. The team must be able to explain that the company needs a road map—something to tell decision-makers where the company is, where it needs to be and how best to get there. And of course, talk about the benefits—greater efficiency and accountability, along with reduced risk. Be careful, however, when talking about ROI: A lot of the cost of implementing an IT governance framework can be chalked up to what management should be doing anyway. Simply put, companies have to accept the cost, but they don’t like to hear that.

What are the major focus areas that make up IT governance?
According to the IT Governance Institute, there are five areas of focus:

• Strategic alignment: Linking business and IT so they work well together. Typically, the lightning rod is the planning process, and true alignment can occur only when the corporate side of the business communicates effectively with line-of-business leaders and IT leaders about costs, reporting and impacts.

• Value delivery: Making sure that the IT department does what’s necessary to deliver the benefits promised at the beginning of a project or investment. The best way to get a handle on everything is by developing a process to ensure that certain functions are accelerated when the value proposition is growing, and eliminating functions when the value decreases.

• Resource management: One way to manage resources more effectively is to organize your staff more efficiently—for example, by skills instead of by line of business. This allows organizations to deploy employees to various lines of business on a demand basis.

• Risk management: Instituting a formal risk framework that puts some rigor around how IT measures, accepts and manages risk, as well as reporting on what IT is managing in terms of risk.

• Performance measures: Putting structure around measuring business performance. One popular method involves instituting an IT Balanced Scorecard, which examines where IT makes a contribution in terms of achieving business goals, being a responsible user of resources and developing people. It uses both qualitative and quantitative measures to get those answers.

 

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