Improving business-IT alignment and demonstrating the value of IT are top priorities for CIOs, with many of them chronically relegated to playing catch-up to the businesses expectations and struggling to justify IT costs.
Part of the problem is the lack of clarity about the ownership of the IT governance process. This sounds like it's the responsibility of IT. In too many cases, business executives make the mistake of delegating their responsibilities to IT, leaving it up to IT to determine which projects to work on and in what order. The lack of business leadership triggers a so called vicious circle of alignment leading to IT’s gradual marginalisation, characterised by:
• The business doesn't feel comfortable making IT decisions.
In the absence of a coherent picture of the existing and planned technology investments, many business executives delegate key technology decisions to IT.
• IT makes decisions it shouldn't make.
Without a clear mandate and strategic directions, IT executives, often acting from inside technology silos, make decisions they shouldn't make, for example, which investments should be shared enterprise-wide, how good IT needs to be, or whom to blame when IT does not deliver.
• IT doesn't deliver the expected business value.
IT services delivered from technology silos that act without a clear business mandate can rarely provide a coherent picture of the use of technology in the enterprise. And in the absence of such a picture, the business will not feel comfortable with IT.
IT Governance begins and ends with business leadership
The increasing pervasiveness of IT, whether processing transactions in the back office, enabling e-commerce or providing competitive differentiation, has made IT an integral part of the business. Firms thinking in these terms recast IT governance as the business governance of IT. They:
• Put IT and its governance on the agenda of board of directors meetings.
Because of the important role that IT plays today as well as the potential risks ranging from data theft to huge project failures, IT governance becomes an integral part of enterprise governance. CIOs in these organisations look to the board to provide objectives for the enterprise's IT and regularly report to the board on the status of IT. The board expects that IT:
1: will deliver the necessary solutions on time, on budget, and of sufficient quality;
2: will exploit IT to deliver business value;
3: will leverage IT to increase the overall efficiency and productivity of the firm.
If your organisation is not there yet, consider:
The first step is to enlist the board of directors by educating them about the critical role that IT plays in the enterprise strategy and in today's environment. The goal should be the formation of an IT strategy committee as a regular standing committee of the board that will be responsible for overseeing IT’s performance.
Establish IT steering committees to make decisions about IT. While the board sets overall strategic objectives for the enterprise, IT steering committees make the important decisions relating to investments in IT. These steering committees may be chaired by the CIO, but their membership is comprised of executives representing an organisation's major business units.
Steering committees initially decide which IT investments to pursue and then prioritise them based on business need and resource availability. The steering committee also monitors the IT investment portfolio on a regular basis and makes further decisions should circumstances dictate, for example, whether to terminate an investment initiative that was no longer expected to meet its benefit goals.
Once the board of directors is up to speed, it's time to educate the senior business leadership team and form an executive IT steering committee. Initially, the steering committee should focus on clarifying the business strategy and the role that IT will play. Over time, an investment management process must be developed that includes standardised business case templates.
Require senior business executive sponsorship for key programs.
Most IT investments today are more than just technology; they are almost always better described as IT-enabled business change, since their success relies on more than just an IT solution. Often they will require business process changes, behaviour changes in workers, and training in the use of a new system, all of which are beyond the control of IT. Consequently, they need to be managed as programs, a collection of projects, some of which may be owned by IT and some by the business sponsor. By requiring senior business executives to sponsor key programs, organisations place accountability and responsibility for success directly on the shoulders of the person who will reap the benefits. Senior executives have the vision to ensure alignment and the ability to commit the necessary resources.
Not there yet? Use the IT steering committee to evangelise program management as opposed to project management. Each proposed IT-enabled business change investment must include the entire range of activities required to attain the benefits as part of the business case. Business ownership must accept accountability for benefits realisation and therefore sponsorship. The Val IT framework provides a detailed road map for education and implementation.
IT value measurement shifts from IT to the business When the business becomes engaged through IT governance, it becomes apparent that what were once thought of as IT projects are really IT-enabled business change programs. With the benefits accruing to the business, it is only natural that the business should be accountable for attaining the value. When this happens:
• IT and the business become more aligned.
With the business actively engaged in governance, there is a tighter linkage between business strategy and the IT portfolio because the business is now calling the shots and being accountable for the outcomes.
• Program success rates go up.
The ratio of projects and programs that meet or exceed their expected returns improves as a result of executive involvement, performance measurement, and accountability.
• Business results improve.
Research has been able to demonstrate that organisations that practice good IT governance have better overall financial results than similar companies practicing similar strategies.
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About The Authors
Alex Peters and Craig Symons are Principal Analysts at Forrester Research writing specifically for CIO professionals. Alex is a leading expert on IT executives' challenges, such as the development of IT strategies, the consolidation and streamlining of IT, as well as IT and business technology trends and directions. Craig is a leading expert on deriving business value from IT. Forrester Research, is an independent research company that provides pragmatic and forward-thinking advice to global leaders in business and technology. Forrester works with professionals in 19 key roles at major companies providing proprietary research, consumer insight, consulting, events, and peer-to-peer executive programs. For more than 25 years, Forrester has been making IT, marketing, and technology industry leaders successful every day.