lecture 17 - governance of it
TRANSCRIPT
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Lecture 17
Chapter 9
Governance of the IT Function
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Final Module: IT Leadership
IT increasingly fundamental to business
Leadership of the IT function must change
Core leadership issues:
How to organize IT to support and enhance business activities?
How to govern IT to minimize risk and maximize value ofinformation assets?
What IT leadership approach best fits the role of IT in thecompany?
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Overview of Chapters
Chapter 9
Discusses themes and issues in IT governance
Chapters 10
Explores a way of defining and evaluating ITleadership
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IT and the Board of Directors
Increasing cost, complexity, and consequences of technology
Organizations vary
Operational dependence on information systems
Strategic influence of information technology
Board supervision of IT should fit companys use of IT What can we learn from this article
Why company boards should be involved in IT governance
How boards can start to shape IT decisions
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Volkswagen of America
Scarce IT resources
Implementation of IT project prioritization process
Aim to align IT activities with business strategy
Pressure from businesses to bypass prioritization process
Explore justifications for process Explore justifications for exceptions
Examine CIOs response
What can we learn from this case
Understand factors that affect project delivery and how IT leaderscan better manage them
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The AtekPC Project ManagementOffice
AtekPC Increasing price competition and consolidation in PC industry
Focus on cost-reduction and renewed growth
Formation of Strategic Planning Office
IT at AtekPC Operational and maintenance focus
Little cross-functional integration of applications or informationservices
Project Management Office
Goal of better and more coherent project delivery capability Possibility to leverage PM skill from IT projects to broader enterprise
What can we learn from this case How key factors influence the success of PMO implementations
Understand leaders role in shaping those factors
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Governance of the IT Function
Key Learning Objectives for Chapter 9
1. Understand the concepts of enterprise governance and ITgovernance, and the connection between the two
2. Understand the need for IT governance and the potentialbenefits of good IT governance
3. Recognize the primary domains of IT governance and learnabout effective approaches for developing an ITgovernance framework
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What is governance?
Governance is the process of structuring, operatingand controlling the organization with a view to
achieving its long-term strategic goals
Serving the interests of stakeholders
Complying with legal and regulatory requirements
Governance involves establishing chains ofresponsibility, authority, policies, standards,
measurements and control mechanisms Establishes expectations, allocate resources, manage
risk, verify performance
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IT Governance
Responsibilities
Increase effectiveness of organization through IT
Align with corporate goals
Protect investments Address IT-centric business issues
Overall effort to devise integrated approach, operatingperformance, strategic control, risk management,value alignment
Differs from project management in the strategic level offocus
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Essentials of Enterprise Governance
Enron example
Ensures employs act in a way that benefits thecompany
Set controls what variables need to bemonitored, how, and how to respond
Good governance gains credibility in
marketplace
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Impetus for Better IT Governance
Ensure that IT creates value by betteralignment of IT with business
Can you track where the IT money goes?
Can you identify the benefits and risks?
IT is an enabler of better governance
No formal government requirements
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Benefits of Effective IT Governance
Correlated to good business performance interms of cost reductions, customer satisfaction,security
Emphasis on quality of IT, reduction of risk Reduction in major IT delivery problems
Accurate understanding of support needs
Good electronic archiving and storageprocesses have benefits
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Scope and Practice of IT Governance
IT-business alignment
Investment Value
Project Delivery
Service delivery
Resource Management
Measurement of IT performance
Risk of IT performance
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Designing IT Governance
Intentional but minimalist design
Board-level leadership
Broad-based executive involvement
Clear ownership but broad participation
Enforce Execution but Accommodate Exception
Define benefits and target expectations
Aim for evolution not revolution inimplementation
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Managing IT Outsourcing
Focus on major projects rather than incremental Larger investments
Higher risk
Greater overall management complexity
8 to 10 years
Environment of change makes long term difficult toproject
Benefits to each party very different Path uncertainty can lead to conflict
Different from offshoring
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Key challenges
First year large capital spending from customer
Later profit expected
Incentives to meet contract change with
changing environment
Resolution of conflicts difficult and costly
Evolution of technology changes perspective
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History of outsourcing
A few early examples
1960s computer services for financialoperations
ADP started in 1949 as small punch cardpayroll company
Grew to $8.5b company in 2005
Large-volume standard transactions Accenture software contractor
Purchasing equipment and software steps
toward full outsourcing of IT
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Major early drivers toward outsourcing
Cost-effective access to specialized oroccasionally needed computing power/systemsdevelopment
Avoidance of building in-house skills Access to special functional capabilities
1990 Kodak decision to outsource IT legitimized
idea Mainframes
PC maintenance and service
Telecom
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Outsourcing Today
More and more functions outsourced
Acceptance of strategic alliances
Opportunity to complement strengths and
weaknesses Collaborative innovation
Changes in Technology
Most code development is outsourced Most IT departments integrate (select vendors,
code etc.) rather than develop
See table 9.1
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Drivers toward outsourcing today
Costs and Quality Tighter overhead cost control of fringe benefits
Aggressive use of low-cost labor
Tough standards
Effective builk purchasing and leasing arrangements Better management of excess hardware capacity
Better control of software licenses
More aggressive management of service and response time
Tighter inventory control Professional service at multiple levels
Leaner management structure
Higher level of IT staff skills
More realistic lease structures
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Drivers toward IT Outsourcing today(ctd)
Breakdown in IT performance Complexity led to problems led to new models
Intense Vendor Pressures Good sales and marketing teams plus positive results have lead to
confidence in outsourcing
Simplified General Management Agenda IT is messy!
Financial Factors Lower risk of cost fluctuations
Fixed (capital) cost business becomes variable cost business
Opportunity to move group into acquiring company
Corporate Culture IT team given clout to make major decisions
Eliminating Internal Irritation
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When to outsource
When do benefits outweigh risks?
1. Position on
strategic grid
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When to Outsource
2. Development Portfolio More maintenance/highly structured projects means more outsourcing
potential
High technology in specific field means more outsourcing potential
Large, low structured projects pose difficult coordination problems for
outsourcing3. Organizational Learning
Development work difficult to outsource
New areas mean company doesnt understand what is required letalone how to manage outsourcing
4. Market Position Large, well established firms are difficult to transition to new systems
without outsourcing
5. Current IT organization High structure easy to outsource
Contracts easy to write when know what is expected
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Structuring Alliance
Contract Flexibility May change radically over time
6 to 8 months to write contracts
Process of drafting more important than resulting document
Standards and Control
Should be explicitly written into contract
Vendors often able to provide better performance measures
Areas to Outsource All or nothing?
Coordination costs
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Structuring Alliance
Cost Savings
Supplier Stability and Quality
10 year contract is long time in high-tech!
Keeping open to other outsourcing options Managing conflicts of interest
Management Fit
People working with people Conversion problems
IT staff move leads to uncertainty
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Managing Alliance
Early results are key CIO Function
Partnership/contract management Architecture planning Emerging Technologies
Continuous learning Performance Measurement Some areas easier than others Cost savings vs. streamlining/simplification
Mix and Coordination of Tasks
Benefits can be overrun by management of complex project mix withmultiple vendors
Customer-Vendor Interface Final responsibility on both sides Who communicates what and when? Reporting expectations
Relationship managers and coordinating groups
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What about the contractor?
Business model for consulting/contractingcompanies
Risks