IT Governance.
The ambiguity in quantifying Information Technology's (IT's) business value, the lack of communication with the business side of the house, executives' limited understanding of and low respect for IT and IT staffers' inadequate business skills all contribute to an organization's inability to maximize their return on IT investments (Jeffery and Leliveld, 2004). IT management and governance is a discipline that is receiving lots of recent attention because it offers potential for removing many of these barriers to IT success. This paper discusses what IT management and governance is, why it is important, potential benefits, industry success rates, successful implementers, and vendor solutions. Despite potential pitfalls in organizations, surmounting these hurdles is necessary for companies to survive in an economically challenged and highly competitive environment. Just as companies manage all business processes via enterprise resource planning and other enterprise applications, businesses will begin to manage their IT operations and processes in the same disciplined manner.
IT Management and Governance Defined
IT Management is about the decisions an IT department makes (Nageshwar, 2004). Examples include deciding what IT project to invest in, which solutions and technologies to consider and which consultants and vendors to work with. Governance, on the other hand, is about the parameters within which management decisions are made. No matter how talented the management team or individuals, a good IT governance structure is required to achieve consistent results.
The major responsibilities of IT governance include (IT governance executive summary):
Taking stakeholder values into account when setting strategy
Giving direction to the processes that implement the strategy
Ensuring that processes provide measurable results
Being informed about the results and challenging them Ensuring that the results are acted upon The basic principles of IT value are delivery on time of projects that support, enable or enhance the business, within budget and with the benefits that were promised" (Williams, 2002). The value that IT adds to the business depends on whether the IT organization is aligned with the business and meets the expectations of the business. This requires constant attention, not only on the part of IT management, but also very specifically by board members and executive management in the discharge of their governance responsibilities.
Why IT Management and Governance is Important
While initially thought of as an essential productivity enhancing tool, the role of IT has become even more strategic for reducing costs, leveraging investments, enhancing products and services, enhancing executive decision making and reaching the consumer (McNurlin and Sprague, 2002). Increasingly, business goals cannot be achieved without successful IT implementations (IT governance executive summary). In most organizations the enterprise would cease to exist without IT. An enterprise's business models are based on IT for supply chain management, automation is necessary to support revenue streams and IT is required to comply with regulations and contractual service levels. And, information has become a valuable competitive asset that revolves around the use of IT to obtain and exploit it.
Firms are accustomed to using formalized approaches to manage many assets - people, money, plant and customer relationships, but information and the technologies that collect, store and disseminate information are often woefully under-managed assets (Weill and Ross, 2004). IT implementations involve both up-front and ongoing investments for outcomes that are highly uncertain. The Standish Group, an IT research firm, found that three out of ten projects fail outright, two of ten are seriously challenged, and five out of ten deliver below expectations (IT governance executive summary). In 2002, $780 billion was spent on IT in the United States alone (Jeffrey and Leliveld, 2004). During 2002 and 2003, $100 billion to $150 billion of IT projects in the United States failed.
Further, fifty percent of companies in a European survey reported that IT is just considered an operator or service supplier rather than a true business partner; sixty percent said that there was no strategy integration with the business and eighty percent believed there was no true strategic alignment (IT governance executive summary). In a research study of 130 Fortune 1000 chief information officers conducted by the Kellogg School of Management, forty-one percent of companies do not have central oversight of the IT budget, forty-six percent do not document their applications and infrastructure well, forty-seven percent do not track projects centrally, fifty-seven percent do not have criteria to define project success and sixty-eight percent do not track the benefits of projects (Jeffery and Leliveld, 2004).
The risks of bad information technology investments are just as high, if not higher, than bad financial investments (Beck and Conrad). Many experts believe that, information and decision making are more valuable than capital, which is becoming "just another commodity" in the international markets. Yet, senior management has largely turned decision making in information technology over to technologist who select and implement technology in a relative vacuum. This is a dangerous situation because these technologists are indirectly defining corporate policies. Unlike their financial counterparts, unfortunately, the impact of poor information management policies and investments isn't as observable or as measurable. This means that the damage done by inappropriate solutions can remain unrealized for years or decades, hampering organizational performance and competitiveness. CIO turnover, outsourcing, lost opportunities, and downsizing are...
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