Gartner Research

Effective IT Governance. By Design

Published: 01 January 2003

ID: G00112709

Analyst(s): Marianne Broadbent, Peter Weill

Summary

Enterprises are increasingly challenged to manage and control IT to ensure value is created and benefits are realized. Leading enterprises have to cope with multiple levels of business governance and this makes responsibilities for IT decision-making more complex. Research evidence indicates that enterprises that actively design their IT governance arrangements make and implement better IT-related decisions. But both business and IT governance are poorly understood. IT governance just happens in most enterprises. IT governance is about the decision rights and accountability framework to encourage desirable behavior in the use of IT (Weill, 2001). It is not about how IT is managed, rather about the arrangements for who makes critical decisions and who is accountable for them. This reports explains the components of IT governance, when and where different types of IT governance arrangements are appropriate, and how you select the IT governance arrangements that are right for your enterprise.

Table Of Contents

Foreword

Executive summary

  • IT governance combines three components
  • Engage both business and IT executives
  • High performers share common traits
  • Link IT governance to enterprise goals
  • Assess your baseline IT governance, then move forward
  • Learn from the experiences of others

SECTION 1 IT governance: key to effective decision-making

  • IT governance and IT management are not the same
  • IT governance must be actively designed
  • Replacing anecdotes with research

SECTION 2 Understanding IT governance

  • IT governance spans five IT domains
    • 1. IT principles: how is IT going to create business value?
    • 2. IT infrastructure strategies: how will we build shared services?
    • 3. IT architecture: what technical guidelines and standards will we use?
    • 4. Business application needs: what applications do we need?
    • 5. IT investment and prioritization: how much and where will we invest?
  • Six IT governance styles define input and decision rights
  • Governance mechanisms implement IT governance styles
  • Using the IT Governance Arrangements Matrix
    • Example: IT Governance Arrangements Matrix – DBS

SECTION 3 Achieving effective IT governance

  • IT governance is not "one size fits all"
  • Effectiveness is gauged by impact on business goals
  • Effective IT governance engages both business and IT executives.
    • Federal input and business engagement yield higher performance
    • The not-for-profit sector has greater IT governance challenges
  • Four governance mechanisms have the greatest impact
  • Example: IT Governance Arrangements Matrix that works
  • High IT governance performers have distinctive characteristics
    • Characteristic 1 – strongly differentiated business strategies
    • Characteristic 2 – clear business objectives for IT investments
    • Characteristic 3 – high-level executive participation in IT governance
    • Characteristic 4 – stable IT governance, with few changes year-to-year
    • Characteristic 5 – well-functioning, formal exception processes
    • Characteristic 6 – formal communication methods

SECTION 4 Linking enterprise goals and IT governance

  • Map IT governance to enterprise goals
    • Case 1: DBS uses IT governance to enable enterprise change
    • Case 2: MPS uses IT governance to gain greater synergies

SECTION 5 Improving IT governance

  • Use three tools to assess where you stand today
    • Assess your IT governance effectiveness
    • Chart and analyze your current enterprise IT governance arrangements
    • Map and critically review your current IT governance congruence
  • From what you learn, design where you want to go
    • Focus on a few goals, desirable behaviors, and metrics
    • Design your future IT governance arrangements thoughtfully
    • Ensure your IT governance is harmonized with enterprise goals
  • Gain support for the effort and implement

SECTION 6 Case histories

  • Abbey National Group
    • Balancing autonomy with enterprisewide consistency and efficiency
    • Group Technology fosters IT principles
    • Abbey National uses a four-way investment process
    • Consolidation provides value
    • Architecture is enabling strategy not replacing it
  • DBS
    • DBS growth needs both localization and enterprisewide consistency
    • IT principles validated by the Corporate Office
    • DBS uses a three-tier investment process
    • The bank of the future is a network of relationships
    • Architecture renewal necessary to support the new vision
    • Architecture is enabling strategy not replacing it
  • ING
    • ING's governance structure fosters cooperation
    • ING's global IT governance model meshes with the corporate model
    • The IT dashboard helps focus management attention
    • Communication is key to effective governance
  • InterAuto
    • Divisions steer themselves; the holding company steers the group
    • IT oversight and coordination come from the top
    • IT has four tiers
    • Fostering synergies through IT governance
  • JPMorgan Chase
    • Shifting focus toward greater synergy and teamwork
    • Technology Council is at the center of IT governance
    • Multiple CIOs maximize benefits of scale, simplicity and integration
    • Engineering Board makes 'Buy, Hold, Sell' recommendations
    • Six sigma methodology helps deliver productivity and quality
    • Chargeback mechanism supports governance
    • Clear indicators of good governance and accountability are emerging
  • Metropolitan Police Service – Scotland Yard
    • Metropolitan Police Service works with a strong committee structure
    • Business sponsors must champion IT investments
    • IT infrastructure investments provide a base for the future
  • Old Mutual South Africa (OMSA)
    • OMSA's IT governance model follows its business governance model
    • OMSA's governance is exercised by councils
    • OMSA's IT principles support its governance process
  • SpecRetail
    • SpecRetail needed to shift to a lower cost base
    • New IT governance changed IT investment decisions
    • Proposals are prioritized as part of a portfolio using multiple criteria
  • Tennessee Valley Authority (TVA)
    • TVA's IT governance models its business governance
    • TVA uses a two-tier investment approval process
    • Architecture and Infrastructure have different governance
    • Relationship managers play an important governance role
    • Selective chargeback is another governance mechanism
    • Benchmarking measures progress
  • UNICEF
    • Global governance is a challenge
    • Initially, IT played a minor role
    • Corporate IT governance is evolving
    • First stage: Project-level governance
    • Second stage: Improving the IT infrastructure
    • Third stage: Project portfolio management
    • Managing information is key
    • IT governance continues to evolve

Further reading

  • Books and articles
  • Reports
  • Web Sites

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