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Why Governance Matters

Good IT governance is the secret weapon of effective CIOs
and agile organizations—but it has to be done right.
/\
WHAT IS I,T, GOVERNANCE? WHILE THE SUBJECT tions of successful completion. But that's changed
continues to be a hot topic, everyone seems to dramatically. A difficult aspect of business life
have a different notion about what it is. Too today is that business strategy and IT strategy,
many clOs {and conference organizers) treat it by necessity, move at much faster rhythms, and
as a catchall phrase covering how the IT group is in different cycles. So do the various inputs to
organized and led. That doesn't make any sense those strategies, such as your competitive envi-
to me—and, besides, there are other names for ronment as wel! as wider economic issues such
those things, I prefer to focus on the original con- as the current price of oil. As business cycles have
cept of governance as it's defined in the non-IT sped up, there are virtually no static three-year
world: decision rights and accountabilities be- plans left. More and more often, planning and ,
tween groups of people. When you put "IT" in execution happen simultaneously, if you are in
front of "governance," it's about how decision
rights and accountabilities are distributed and The ability to integrate business and
shared between business and IT executives.
In this view, IT governance concerns some-
IT can exist only when clear and
thing very basic, and important: how IT-related robust systems of IT governance also
business decisions are made, who gets to make
them, who has input and who's accountable
exist—systems that will allow you to
for what. Governance is not about bureaucratic make well-informed decisions faster.
rules and regulations, and it's not a synonym for
management, either. It's about how you bring a well-run organization, there might be a big-
together—and keep together—top-level busi- picture corporate intent for your enterprise and
ness and IT executives for better and faster deci- a small number of business principles or maxims
sion-making around information and technology that live in the hearts and heads of all employees.
choices, deployment and use. However, the business strategy that determines
That's what makes governance the glue that how you deliver on that intent now tends to be :
links an executable business strategy with an continually emerging, and smart businesses are
executable IT strategy. To establish that link suc- able to rapidly sense and respond.
cessfully, you need the right people providing That's where the need for strong systems of
input—and the right people making decisions governance comes in. The ability to integrate
and being held accountable. And nowadays, you business and IT can exist only when clear and
need to have a clear line of sight on who can robust systems of IT governance also exist^sys-
make those decisions quickly. tems that will allow your organization to make
As recently as the early 1990s, "official" busi- well-informed decisions, and make them faster.
ness strategy was developed through an extensive It's about being agile. Nothing can reduce action
planning process that resulted in a documented to a crawl as quickly as uncertainty about who
three- to five-year plan. In that environment, IT decides what and who's responsible for what.
projects that lasted one, two, or even three years With good IT governance—transparency and the
could be undertaken with reasonable expecta- right people making decisions—the enterprise is i
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o
z more effective at synchronizing IT strategy with
business context.
But decisions about what? For starters, what
_: I is the role of IT in your enterprise? What are the
underlying principles? How do you use IT com-
pared with competitors? Whether your answers
to those questions are thoughtfully constructed
or simply implied through action, every organi-
zation acts on the basis of a set of maxims for IT
that should be well thought-out, argued about
and then acted on. At UNICEF, the maxim is "We
use IT to drive a world-class supply chain," At
Singapore-based DBS Bank, the maxim is "We
leverage technology for maximum customer
intimacy and to minimize business costs," At
both enterprises, these principles are set by the
top-level executive committee and become the
basis for driving decision-making throughout
the organization.
Who gets to decide what business n
applications will be purchased? | of the corporate executive group for 12 months,
Does this decision belong with each '
business—^provided they can afford
it? Or is it better to consolidate
L these decisions? J
i Second, how are priorities for IT-related in-
vestments created and who sets those priorities?
Are they made on the same basis as other pri-
orities, so that, above a certain level, they always
go to the same spending committee? Or is the
decision-making based on the ad hoc "squeaky-
wheel" principle, a procedure that rarely leads to
the best business decisions being made?
Third, how are decisions involving infrastruc-
ture strategies and shared services made? Who
decides how "thick" or "thin" the layer of enter-
prise infrastructure services needs to be? What
should be done centrally and what is done by
business units?
IT architecture, the fourth domain, is often a
mystery to both business and IT people. But IT
architecture can constrain or enhance business
decisions. Who decides how the architecture is
to evolve? Can business or regional groups, or
specific product managers, decide on their own
that the firm's architecture principles don't make
sense, that they constrain what the business
wants to do, and then work around them? It is
very useful—but difficult^for business execu-
tives to try to understand how important IT ar-
chitecture is for the business, JP Morgan Chase,
for instance, has two different groups involved
m this process^one deciding on architectural
guidelines, and another deciding on the tech-
nologies that meet those guidelines. The first has
strong business participation, whereas most of
the members of the second are from IT,
Finally, who gets to decide what business ap-
plications will be purchased and embedded in
the enterprise? Does this decision belong with
each business—provided they can afford it? Or
is it better to consolidate, or at least coordinate,
these decisions? This is often one ofthe most con-
tentious areas in IT governance. At one large U,S,-
based retailer I have worked with, the CEO and CiO
agreed that the executives in the different busi-
ness units were too inexperienced to make those
decisions. The evidence was the large number of
failed investments to date. Decision rights were
reassigned from these executives to a subgroup
while the business-unit executives and manag-
ers were given more education and allowed more
experience in making decisions about, and then
executing, successful IT-related projects. At the
end ofthe year, decision rights were returned to
the business-unit executives and managers.
It takes time to get IT governance right, and
the process can be frustrating, CIOs need to be
very sensitive to how the business is organized
and how decision-making really works. The best
place to start is to clarify how your IT governance
is structured now, and to get the perspectives
of your executive colleagues as to what would
be best. In studies Gartner has undertaken with
MIT's Sloan School of Management, the ability
of business executives to explain their organiza-
tions' IT governance was a key predictor of effec-
tive IT governance {which in turn correlated to
better financial performance).
Effective IT governance is the secret weapon
for successful CIOs, Initially, many CIOs think that
spending time on governance will make their
lives more complex. They soon realize that the
opposite is true: Done right, it reduces complexity
and makes life much simpler. O
MARIANNE BROADBENT i£ Senior Vice President at Gartner
responsible for Gartner's global research business strategy,
and a Gartner Fellow. Her next column will appear in Feb-
ruary. Please send comments and questions on this column
toeditors@cioinsight-ziffdavis,com.