Carnegie Mellon University © Robert T. Monroe Management Information Systems Information Systems Governance Management Information Systems Robert Monroe September 22, 2010

Carnegie Mellon University © Robert T. Monroe Management Information Systems Quiz Three T/F questions. For each, indicate whether it is True or False that the authors of ‘Ten Principles of IT Governance’ make these arguments: 1.It is a good idea to actively design an IT governance framework. 2.An effective IT governance framework forces managers to make choices 3.The most effective IT governance programs are run only with the input of highly skilled Information Technology specialists

Carnegie Mellon University © Robert T. Monroe Management Information Systems Goals For Today By the end of today's class you should be able to: –Explain what IT Governance and IT Management are, as well as the difference between the two. –List and explain five categories of decisions that an effective IT governance structure addresses. –Explain the concept of decision rights and how it relates to IT governance –Understand the importance of deliberately designing a governance structure for your company's IT decision making process.

Carnegie Mellon University © Robert T. Monroe Management Information Systems Some Definitions Governance provides the structure for determining organizational objectives and monitoring performance to ensure those objectives are attained. –OECD “Principles for Corporate Governance”, 1999 IT Governance specifies the decision rights and accountability framework to encourage desirable behavior in the use of IT. –[WR04] p. 8. “Governance determines who makes the decisions. Management is the process of making and implementing those decisions” –[WR04] p. 8.

Carnegie Mellon University © Robert T. Monroe Management Information Systems Decision Rights Decision Rights define who within an organization is authorized to make what decisions. Decision rights can be explicit –Example: The CFO of TepCo has the authority to commit the company to spend money up to 100,000 QAR without further review by the CEO … or implicit –Example: Hmmm, I’m not sure who decides when we are supposed to be in the office each morning. Most managers just set a schedule that works well for their team.

Carnegie Mellon University © Robert T. Monroe Management Information Systems Exercise: IT Governance or IT Management? Should we purchase Dell servers or HP servers? When we need to choose between purchasing many small inexpensive database servers instead of one large, expensive database server, how do we evaluate the decision, and who makes the final decision? Should we invest our money in a new ERP system, or upgrade our existing manufacturing and logistics systems? How should we evaluate the suggestions of our employees for making investments in innovative new information systems? That is, where do we invest our money?

Carnegie Mellon University © Robert T. Monroe Management Information Systems Exercise: IT Governance or IT Management? The VP of sales wants to buy a new salesforce automation system that is not compatible with our current customer database. Should we approve this exception to our normal IT standards? How do we handle requests to make exceptions to our IT standards? When deciding between different IT investment proposals, what are the roles of the business sponsor for each proposal and the IT organization in evaluating the alternatives? How do we decide on IT Architecture standards for our organization? How do we decide when and how those standards can evolve and change?

Carnegie Mellon University © Robert T. Monroe Management Information Systems Getting IT Governance Right Is Important IT is expensive IT is pervasive and critical to running many businesses New technologies present (many) new opportunities Getting value from IT investment requires more than just picking good technology Senior management has limited bandwidth Leading enterprises govern IT differently, but they have deliberate, well understood, IT governance structures Source: [WR04] pages 15-18

Carnegie Mellon University © Robert T. Monroe Management Information Systems Effective IT Governance Addresses 3 Questions: 1.What decisions must be made to ensure effective management and use of IT? 2.Who should make these decisions? 3.How will these decisions be made and monitored? Source: [WR04]

Carnegie Mellon University © Robert T. Monroe Management Information Systems Five Fundamental IT Decision Categories IT principles decisions High-level statements about how IT is used in the business IT architecture decisions Organizing logic for data, applications, and infrastructure captured in a set of policies, relationships, and technical choices to achieve desired business and technical standardization and integration IT infrastructure decisions Centrally coordinated, shared IT services that provide the foundation for the enterprise’s IT capability IT investment and prioritization decisions Decisions about how much and where to invest in IT, including project approvals and justification techniques Business application needs Specifying the business need for purchased or internally developed IT systems Source: [WR04], page 27

Carnegie Mellon University © Robert T. Monroe Management Information Systems Effective IT Governance Addresses 3 Questions: 1.What decisions must be made to ensure effective management and use of IT? 2.Who should make these decisions? 3.How will these decisions be made and monitored? Source: [WR04]

Carnegie Mellon University © Robert T. Monroe Management Information Systems IT Stakeholders Include… Shareholders Corporate executives and enterprise-level managers Business unit heads and managers IT Managers IT staff (business-unit or corporate level) End-users (employees, customers, suppliers, etc)

Carnegie Mellon University © Robert T. Monroe Management Information Systems Who Controls IT Governance: Different Models Business Monarchy – a group of senior executives with corporate, or enterprise-wide authority IT Monarchy – IT management controls IT decisions Feudal – each business unit, or sub-org controls their own Federal – shared governance between corp. and business-units Duopoly – shared governance between IT and one other group Anarchy – non-existent, poorly defined and/or non- enforced governance model

Carnegie Mellon University © Robert T. Monroe Management Information Systems Weill and Ross Governance Arrangements Matrix IT Principles IT Architecture IT Infrastructure Business Application Needs IT Investment Business Monarchy IT Monarchy Feudal Federal Duopoly Anarchy Source: [WR04]

Carnegie Mellon University © Robert T. Monroe Management Information Systems Class Exercise – MobileToGO! Congratulations on opening your new mobile phone retail store – MobilesToGO! You have a single retail outlet in a Doha mall, but have been so successful that you are now in the process of expanding to five new locations in Doha, Wakra, and Al Khor. You started out as the sole owner of the store but to finance your expansion you have partnered with an investment company who is funding the expansion. When you are done with the expansion you will have 50 employees and be selling 10,000+ handsets per year.

Carnegie Mellon University © Robert T. Monroe Management Information Systems MobilesToGO! Task 1 Form groups of 3-4 people and answer these questions: What are the kinds of IT decisions you need to make while doing this expansion? How might you structure IT governance in the new 5- store business? –Which questions will you focus on? –Which model will you likely use? Why? Are you focusing on different IT decisions now than you did when you were a sole-proprietorship with one store?

Carnegie Mellon University © Robert T. Monroe Management Information Systems MobilesToGO! Task 2: Congratulations! Your business has taken off. Now you want to expand from Qatar to open twenty new stores throughout the GCC. Will the kind of IT decisions you need to make change as you pursue this expansion? What will you need to focus on to make this expansion succeed? Do you need to change how you have allocated decision rights? Should you change other parts of your IT governance (model, emphasis, etc.)?

Carnegie Mellon University © Robert T. Monroe Management Information Systems MobilesToGO! Task 3: You’ve recently decided to move into the higher-value, higher-marging ICT Systems Integration Business. You will no longer just sell mobile handsets, you will also help small business customers put together complete communication systems for their businesses Will the kind of IT decisions you need to make change as you pursue this expansion? How so? What will you need to focus on to make this expansion succeed? Do you need to change how you have allocated decision rights? Should you change other parts of your IT governance (model, emphasis, etc.)?

Carnegie Mellon University © Robert T. Monroe Management Information Systems Recap: Goals For Today By the end of today's class you should be able to: –Explain what IT Governance and IT Management are, as well as the difference between the two. –List and explain five categories of decisions that an effective IT governance structure addresses. –Explain the concept of decision rights and how it relates to IT governance –Understand the importance of deliberately designing a governance structure for your company's IT decision making process.

Carnegie Mellon University © Robert T. Monroe Management Information Systems References The framework for this discussion of IT Governance, as well as much of the material comes from the book: [WR04] Peter Weill and Jeanne W. Ross, IT Governance, Harvard Business School Press, ISBN: [WR04-note] Peter Weill and Jeanne W. Ross, Ten Principles of IT Governance, Harvard Business School Press, Working Knowledge Note.