ICT622 Information Technology

Strategy

Topic 10
IT Governance

ICT622 Information Technology Strategy

Learning Objectives

• What is an agency relationship?

• Conflicts between stakeholders and managers
• What is governance? IT governance?
• What makes for good IT governance?
• IT governance alternatives
• The role of IT steering committees
• Governance by measurement of IT Critical Success
Factors

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Problems with Management

An agency relationship exists when one or more

principals hire another person (manager) as a
decision-making specialist to perform a service
• The principals’ delegate decision-making responsibility
to the manager
• The agency relationship is related to how the firm’s
strategies are implemented

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An agency relationship

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Problems with Management

• The stakeholders and management may have different

interests

• Stakeholders lack direct control of large, publicly traded

corporations

• Problems arise when the management makes decisions

resulting in the pursuit of goals that conflict with those of the
stakeholders

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Problems with Management

While the stakeholders may establish governance and

control mechanisms;

It remains very difficult and/or expensive to verify that

the manager has behaved appropriately

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Manager Priority

What is a manager’s #1 Priority?

• A Manager’s #1 priority is to remain
employed!

• This is obviously not the #1 priority of

any enterprise 
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Manager Priority

History has shown that:

• There is nothing that a manager
won’t do to retain their position
• Witness:
• Enron
• Fake antibiotics
• Volkswagen - fake emission test

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Governance

We control this conflict of interest (stakeholders

versus Managers) with Governance:

The set of mechanisms used to:

• Manage the relationship among stakeholders
• Determine and control the strategic direction and
strategies of IT within the enterprise

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Governance Mechanisms

• External Governance
• Institutional control
• IT Standards
• Internal governance
• Role of the CIO
• IT Priorities
• IT Audits

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The ‘Golden Rule’ of IT Governance

He who has the gold, sets the rules

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What is IT Governance?

IT governance more specifically relates to:

• Power
• Who makes the decisions – staff, budget, project
priority

• Alignment
• Why do they make these decisions – strategic
alignment – how do you go about it?

• Decision Process
• How they make these decisions – in isolation, in
committee, by direction
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What is IT Governance?

AS8015, the Australian Standard for Corporate

Governance of ICT, defines Corporate Governance
of ICT as:
• The system by which the current and future use of ICT is directed and
controlled. It involves evaluating and directing the plans for the use of
ICT to support the organisation and monitoring this use to achieve
plans.

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Good Governance of IT

AS8015 provides six principles for good governance

of IT:
• Establish clearly understood responsibilities for ICT
• Plan ICT to best support the organisation
• Acquire ICT validly
• Ensure that ICT performs well, whenever required
• Ensure ICT conforms with formal rules
• Ensure ICT respects human factors

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Some Specific IT Governance Problems

Symptoms of poor IT governance include:

• Too many different people and departments making
decisions about IT
• Business units aren’t accountable to corporate IT for the
technology choices they make
• No enterprise architecture
• Too much spent on HW and SW due to lack of sourcing
policy
• IT performance either not measured or measures aren’t
meaningful to the business
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Successful IT governance

To be successful, IT governance must:

• Ensure decisions about IT are aligned with the enterprise

• Develop mutual and agreed-upon expectations
• Help senior business management understand the costs
and risks of IT decisions
• Monitor and measure the value of IT investments

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Governance Alternatives

There are a range of IT governance approaches that

can be used. They can be roughly grouped into the
following types of approaches:
• Governance based on organisational structure
• Governance based on processes
• Governance based on human relationships

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Governance Based on Organisational
Structure

These forms of governance are based on reporting

relationships and responsibilities.
• Organization
• Centralized – more control, but may be less effective
communication with business areas
• Decentralized – better communications, but IT architectures
may not be aligned with corporate objectives
• Hybrid – best of both worlds? Requires more coordination
• CIO-CEO reporting relationship
• Steering committees - a “best practice” governance
mechanism
• Liaison – providing primary point of contact to facilitate
IT/business relationship
• Location – physical placement of IT staff and business staff
together ICT622 Information Technology Strategy
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Governance Based on Processes

These forms of governance are based on formal

procedures and include:
• Budget – how and why resources are allocated
• Career crossover – IT staff working in the business unit,
and vice versa
• Partnership/alliance management – formal management
of the contractual aspects
• Value measurement – formal assessment and review of
IT contribution
• Project approval (IT investment) process
• Formal training

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Governance Based on Human Relationships

These forms of governance are based on

interpersonal relationships and include:
• Shared risks, responsibilities, reward/penalties –
business and IT perceive themselves as being in
partnership
• Partnership/alliance management – interpersonal aspect
important
• Communicate/market/negotiate – continually “marketing”
IT to organization

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IT Steering Committees

• Steering committees can be established at various

levels:
• Strategic – set long-term direction
• Tactical – middle management planning
• Operational – day-to-day decisions

• The role of IT steering committee should include:

• Identify alignment between organisation vision and IT
vision
• Establish principles and processes for investing in IT
• Establish ethical guidelines and policies
• Establish architectural principles and standards
• Establish goals and measurements for assessment
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IT Steering Committees

• Membership of the IT steering committee indicates

the value executive management places on IT

• If the committee lacks top-level executives, it will

not have the authority to make decisions about IT
that are enforceable across the organisation.

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IT Steering Committees

• Strategic level IT steering committee:

• CEO
• CFO
• COO
• CIO
• CTO

Tactical level IT steering committee:

• CIO
• CTO
• IT Operational head/s
• Divisional business heads
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Prioritising IT Projects

When prioritising IT projects, need process guidelines such as:

• Consider all projects
• Group projects based on the following:
• Necessity, opportunity, desirability, what business issues
project is to address
• Impact on organization
• Likelihood of occurrence – to permanently mitigate a risk
• Risk – consider market risk, technology risk and
organizational risk
• Resource demands – human, technology, logistical,
financial
• Anticipated return
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Prioritizing IT Projects

• Priority should be given to projects that have:

• Highest impact on firm
• Highest likelihood of occurrence
• Lowest combined attributes of risk
• Least amount of resources demanded
• Highest anticipated return

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Prioritizing IT Projects & Risk

Imminence:
The likelihood of something occurring

Imminent:
About to occur

Address the most imminent problem first

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Vendor Selection of 3rd Party Suppliers

• Transparent methodology of identifying and

selecting vendors

• Corporate policy/strategy (e.g. must be locally

owned, use anyone you like as long as it’s IBM)
• Consider using a neutral “informed buyer”
service

• Vendor selection committee

• Weighted score approach

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Tender vs. Request for Proposal

Tendering:
• Formal & legal bid for specified/defined works
• Controlled by the finance/supply department
• Financial rather than a technical basis
• Confidential

Request for proposal (RFP):

• Asks vendors to supply a solution
• Non-binding
• Non-confidential

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Outsourcing RFP

• Objectives and Scope

• Background
• Technology Vision
• Services Requested
• Transition/Migration Services
• Performance Requirements
• Resources
• Requirements for Vendor Proposal
• General Terms and Conditions for Proposal
• Proposal Evaluation
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