IT Governance Navigating for Value Michael Vitale 6 May 2003 CIO Conference Steering the Enterprise Through Stormy Seas Image source: Access2000

Michael Vitale 6 May 2003 Why IT Governance is no fad e-challenges IT value creation, capture, and return on investment Permanent shift in the role of IT in organisations cost, supplier and buyer pressure, opportunities Changes in industry competition and regulation disintermediation of traditional value chains Continuing battle between IT and the rest of the business Public trust Ensuring IT value in the competitive landscape

Michael Vitale 6 May 2003 What underlies interest in IT Governance? 5. IT–based business innovation 4. The changing business environment driven by technology development, its pervasiveness, and organisational globalisation 2. Capture and execution of power and influence around IT decisions and use in the firm. 3. Identifying risk around IT and increasing control over IT in the firm CIO Magazine July15, Increased pressure to see ROI

Michael Vitale 6 May 2003 IT management architecture IT governance mode (centralised, decentralised and federal) IT governance style (business or IT monarchy, feudal, federal, duopoly, anarchy) A structure with administrative or control mechanisms and focussed on traditions in accounting, control, security and audit. Also expects IT governance to be a major responsibility of the board A structure with coordinating or integrating mechanisms and dependent on tools and relationships e.g. IT councils, service level agreements, process teams with IT membership, investment approval and architecture committees A process centred on sustainable capabilities (rather than IT tasks to be managed). The capability for integrating the IS/IT effort with business purpose and activity. IT value management is a capability of the IT governance mechanism A process centred on a continuous activity such as decision-making with specialist processes. Outcomes drive the whole process centred on transparent IT decision making, clear accountabilities, and acceptable and actionable IT measurements There are a range of perspectives of IT Governance StructureControl Coordination Capability Process

Michael Vitale 6 May 2003 What is your IT Governance reality?  What are the expectations of ‘doing’ IT Governance for your managers? Your firm?  What do they understand to be IT Governance?  How would management know the degree to which your organisation has IT Governance?  How would you know how well it’s ‘working?  How do they approach it?

Michael Vitale 6 May 2003 Research shows IT Governance is an ‘unsettled’ concept 1.Perceptions of IT Governance vary considerably 2.Little attention is explicitly focussed on IT Governance outside the domains of IT financing and IT control 3.How well approaches to IT Governance are perceived to work is variable - and not related to specific governance structures or mechanisms 4.The process of decision-making around IT is largely not transparent. 5.Accountability for the decision-making process and outcomes is still a ‘moving target’

Michael Vitale 6 May 2003 Understanding the role of IT in the organisation is fundamental to appropriate IT Governance Competitive Strategy Appropriate IT Governance Role of IT Business Model Environment & Rivalry

Michael Vitale 6 May 2003 … and therefore for getting value from IT Achieving IT Value for the business Appropriate IT Governance Investment decisions for the future Ensuring IT delivers value ‘in use’ Ensuring infrastructure aligns with use Accounting for intangibles Justification of investment decisions for the future Proof of ROI in retrospect - justification of past decisions Accounting for capital investments and costs Responding to changing business contexts Role of IT

Michael Vitale 6 May 2003 Importance of defining Goals of IT Governance Role of IT Goals of IT Governance Appropriate IT Governance Regulatory environment Health of the business

Michael Vitale 6 May 2003 How mature is your IT Governance? Decision Making Outcome Results Outcome Monitoring Role of IT Governance  some transparency  unclear accountability for decision outcomes  not transparent  limited clarity of accountability  not transparent  limited clarity of accountability some transparency possible confusion about decision outcomes possible lack of clear accountability &/or experiencing poor IT-business relationships transparent clear accountability for decision outcomes transparent clear accountability transparent clear accountability MatureEmergingAdolescent Not explicitly addressed Some explicit goals Goals fully understood and explicit

Michael Vitale 6 May 2003 Financial Management Assessing (proving?) the Financial and Economic Value of IT Where do managers focus on the detail? Valuation Evaluation How IT delivers value through its outputs Measures and metrics for costs and estimated or identified benefits Quantitative metrics preferred Identification Techniques for IT Value Static IT Value Assessment Techniques Fixed points in time; comparative; needs to be adjusted as specific changes in the environment are seen as influential Used for: Justification of investment decisions for the future Proof of ROI in retrospect - justification of past decisions Accounting for capital investments and costs Where do managers focus on the detail? Business strategic outcomes kept in sight Where and how IT enables the business Processes and relationships within the business Begin by establishing outcomes and principles for IT value management Measures and metrics for creation and capture of value Understanding and responding to contingencies of IT value such as changes in business strategy Creation and Capture Activities for IT Value Dynamic IT Value Assessment Techniques Continuous; Comparative; incorporates changes in environment Used for: Investment decisions for the future Ensuring IT delivers value ‘in use’ Ensuring infrastructure aligns with use Accounting for intangibles Management of IT Value Focus of IT Value Assessment Managerial Motivation about IT Focus of Most Interest and Activity around IT Value Source: Research by S.Keyes-Pearce University of Sydney 2003 Impact Management Ensuring IT is leveraged for maximum Business Value

Michael Vitale 6 May 2003 IT Governance drives IT value management DYNAMIC OUTCOMES based on continuous processes Ensuring value from IT STATIC OUTCOMES based on snapshots of fixed points in time and on variance Measuring value from IT IT value - CREATION - CAPTURE Addresses HOW IT value occurs IT value - IDENTIFICATION - ASSESSMENT Addresses WHAT IT value is of interest Relationships Communication Behaviours Incentives Responses ROI Options Real ROI Impact Investment Decisions ROI Potential Checklists Measurement Tools Reporting Benchmarks Goals of IT GovernanceApproach to IT Governance Source: Adapted from research by S.Keyes- Pearce University of Sydney 2003

Michael Vitale 6 May 2003 Issues arising about the Direction of Developments in IT Governance Practice  Does there have to be a right definition? Can ‘good’ IT Governance  be based on expected and targeted outcomes  involve a variety of processes and structures which are based on the culture of the organisation rather than a ‘standard’  Does the foundation or purpose for IT Governance need to be the same for all organisations? Control of Resources and/or Creation of Value  Accounting, audit, and risk control  Leveraging IT for better business value and business innovation

Michael Vitale 6 May 2003 What is your IT Governance reality?  What are the expectations of ‘doing’ IT Governance for your managers? Your firm?  What do they understand to be IT Governance?  How would management know the degree to which your organisation has IT Governance?  How would you know how well it’s ‘working?  How would you know how much value the organisation’s IT Governance is creating?  How do they approach it?

IT Governance Navigating for Value Michael Vitale 6 May 2003 CIO Conference Steering the Enterprise Through Stormy Seas Image source: Access2000