IT Governance

Instructor: Prof. Dr. Martin Knahl

knahl@hs-furtwangen.de

1
IT Governance – Quotes#1
• “The governance board, composed of the corporate controller,
eight domestic CIOs (the most seasoned and experienced) and
three regional CIOs (Asia, Europe, Latin America) – has been
meeting for a year, but anyone who has attended the meetings
views it as dysfunctional. No one pays attention or takes it
seriously.“ CIO, Global Manufacturing Firm
• “We have to rejustify our refresh strategy every year. What should
have been a ten minute pitch took fourty-five minutes... The
management committee turned into a team of volunteer architects
to redesign cheaper desktops.“ CIO, Telecommunications Firm
• “We were not making the best use of our opportunities... The
business case for an IT initiative included costs for the project itself,
with some infrastructure thrown in...so the first project needing a
particular piece of infrastrucure had to pay the entire cost of
creating it“. CIO, Government Agency

Source: Weill, Peter; Ross, Jeanne W.: IT-Governance. Harvard Business School Press, 2004, p 117. 2
IT Governance – Quotes#2
• „The governance procedures we developed
brought transparency and accountability into the
process.“ CIO, Financial Services Firm
• „There is a very highly disciplined project
management system, well defined, with totally
educated users, everybody knows the vocabulary
– all the chief executives of the company know
phases of project management. We all talk the
same language.“ CIO, National Police Force
(Europe)

Source: Weill, Peter; Ross, Jeanne W.: IT-Governance. Harvard Business School Press, 2004, p 117. 3
Agenda: IT Governance
• IT Alignment / IT Strategy
• Definition IT Governance
• IT Governance Principles (Weil & Ross)
• CobiT
• COSO, ISO 27000, ...
• IT Compliance
– SOX, Euro-SOX, ....

4
Definition Strategy
• Origin of term “strategy”?
• Meaning / application of term “strategy”?

Source: http://en.wikipedia.org/wiki/Strategy , last accessed on 13 December 1014

5
Definition Strategy
”Strategy (from Greek στρατηγία stratēgia), art
of troop leader) is a high level plan to achieve
one or more goals under conditions of
uncertainty.”

Source: http://en.wikipedia.org/wiki/Strategy , last accessed on 13 December 1014

6
Definition Strategy
”Strategy (from Greek στρατηγία stratēgia, "art of troop
leader) is a high level plan to achieve one or more goals under
conditions of uncertainty.
In the sense of the "art of the general", which included several
subsets of skills including "tactics", siegecraft, logistics etc.,
the term came into use in the 6th century C.E. in East Roman
terminology, and was translated into Western vernacular
languages only in the 18th century.
From then until the 20th century, the word "strategy" came to
denote "a comprehensive way to try to pursue political ends,
including the threat or actual use of force, in a dialectic of
wills" in a military conflict, in which both adversaries interact”

Source: http://en.wikipedia.org/wiki/Strategy , last accessed on 13 December 1014

7
Why is strategy important?

8
Why is strategy important?
….because resources are limited….

9
Strategy as a type of problem solving
(Rumelt)
• Professor Richard P. Rumelt described strategy
as a type of problem solving in 2011.
• He wrote that good strategy has an underlying
structure he called a kernel.
• The kernel in Operating Systems refers to…

10
Strategy as a type of problem solving
(Rumelt)
• Professor Richard P. Rumelt described strategy as a
type of problem solving in 2011.
• He wrote that good strategy has an underlying
structure he called a kernel.
• The kernel has three parts:
1) A diagnosis that defines or explains the nature of the
challenge;
2) A guiding policy for dealing with the challenge; and
3) Coherent actions designed to carry out the guiding
policy.

11
Strategy as a type of problem solving
(Rumelt)
• Rumelt wrote in 2011 that three important
aspects of strategy include "premeditation,
the anticipation of others' behavior, and the
purposeful design of coordinated actions."
• He described strategy as solving a design
problem, with trade-offs among various
elements that must be arranged, adjusted and
coordinated, rather than a plan or choice.

12
Strategy as a type of problem solving
(Rumelt)
US President Kennedy illustrated these three elements of strategy in his
Cuban Missile Crisis Address to the Nation of 22 October 1962:
• Diagnosis: "This Government, as promised, has maintained the closest
surveillance of the Soviet military buildup on the island of Cuba. Within
the past week, unmistakable evidence has established the fact that a
series of offensive missile sites is now in preparation on that imprisoned
island. The purpose of these bases can be none other than to provide a
nuclear strike capability against the Western Hemisphere."
• Guiding Policy: "Our unswerving objective, therefore, must be to prevent
the use of these missiles against this or any other country, and to secure
their withdrawal or elimination from the Western Hemisphere."
• Action Plans: First among seven numbered steps was the following: "To
halt this offensive buildup a strict quarantine on all offensive military
equipment under shipment to Cuba is being initiated. All ships of any kind
bound for Cuba from whatever nation or port will, if found to contain
cargoes of offensive weapons, be turned back."

13
Strategy as a type of problem solving
The Case of Microsoft: Gates quoted in Book
“The Innovators” by Issaacson
“We were no Hardware gurus…. When Paul
[Allen] showed me that magazine [Popular
Electronics, January 1972, Announcing the Altair
as the “Arrival of the PC”], there was no such
thing as a software industry…We had the insight
that you could create one....That was the most
important idea I ever had.”

15
Strategy as a type of problem solving
The Case of Apple: See book “The Innovators”
by Issaacson pr the film “Steve Jobs” by Danny
Boyle (Based on the books of Walter Isaacson)
“People don’t know what they want…. You have
to give them the best product and they will like
it..... They think they want an open system...But
I want to give them a closed system [which
failed with Macintosh in 1980s, but was
successfull in 1990s/2000s].”

16
Rumelt: Strategy as a type of problem solving
(Case Study, groups of 3-4, preparation, then
presentation, then analysis, then Q&A)

Define a “Strategy as a type of problem solving for

Microsoft / Google / Amazon / Apple / VGU”
• Diagnosis: …
• Guiding Policy: …
• Action Plans: …

Work in groups, you have 15 minutes to prepare for

a 3 minute presentaion (use a poster to present
your results) 17
Definition Strategy
• Alfred Chandler (1962): "Strategy is the determination
of the basic long-term goals of an enterprise, and the
adoption of courses of action and the allocation of
resources necessary for carrying out these goals.”
• Michael Porter (1980):
1) "...broad formula for how a business is going to compete,
what its goals should be, and what policies will be
needed to carry out those goals" and the "...combination
of the ends (goals) for which the firm is striving and the
means (policies) by which it is seeking to get there.”
2) “The essence of formulating competitive strategy is
relating a company to its environment.”
Source: http://en.wikipedia.org/wiki/Strategy , last accessed on 13 December 1014 18
Definition Strategy
• Max McKeown (2011): "strategy is about
shaping the future" and is the human attempt
to get to "desirable ends with available
means”
• Vladimir Kvint: defines strategy as "a system of
finding, formulating, and developing a
doctrine that will ensure long-term success if
followed faithfully.”

Source: http://en.wikipedia.org/wiki/Strategy , last accessed on 13 December 1014 19

“Classic“ Strategy Approach
2 basic requirements:
(i) A plan must existt(intended strategy) that
(ii) Will be implemented / realised (realized
strategy)
Question: Is that realistic?

20
Definition Strategy
• Henry Mintzberg: Strategy is "a pattern in a
stream of decisions" [to contrast with a view
of strategy as planning]

Source: http://en.wikipedia.org/wiki/Strategy , last accessed on 13 December 1014 21

Mintzberg Strategy Approach

Source: Mintzberg, Henry and, Quinn, James Brian (1996). The Strategy
22
Process:Concepts, Contexts, Cases. Prentice Hall.
Henry Mintzberg – Strategy Definitions
• Strategy as plan – a directed course of action to achieve an
intended set of goals; similar to the strategic planning concept;
• Strategy as pattern – a consistent pattern of past behavior, with a
strategy realized over time rather than planned or intended. Where
the realized pattern was different from the intent, he referred to
the strategy as emergent;
• Strategy as position – locating brands, products, or companies
within the market, based on the conceptual framework of
consumers or other stakeholders; a strategy determined primarily
by factors outside the firm;
• Strategy as ploy – a specific maneuver intended to outwit a
competitor;
• Strategy as perspective – executing strategy based on a "theory of
the business" or natural extension of the mindset or ideological
perspective of the organization.

Source: http://en.wikipedia.org/wiki/Strategy , last accessed on 13 December 1014 24

Henry
Mintzberg –
Strategy
Definitions

Source: http://images.flatworldknowledge.com/ketchen/ketchen-fig01_001.jpg101426
Chamberlain's Theory of Strategy
(2010)
• Based on Alfred D. Chandler, Jr., Kenneth R.
Andrews, Henry Mintzbergand James Brian Quinn
• Aims to cover all the main areas
• Chamberlain analyzes the strategy construct by
treating it as a combination of four factors.
– Factor 1. What strategy is.
– Factor 2. The forces that shape strategy.
– Factor 3. The processes that form strategy.
– Factor 4. The mechanisms by which strategy can take
effect.

27
Chamberlain's Theory of Strategy -
Factor 1. What strategy is
• Interpretation of the strategy construct.
• Chamberlain argues that it is not possible either to analyze or compare
strategies if we cannot clearly describe and categorize what we are looking
at.
• Factor 1 is summarized in seven propositions:
– Proposition 1: Strategy operates in a bounded domain (i.e., separate from the
policy, tactical and operational domains).
– Proposition 2: A strategy has a single, coherent focus.
– Proposition 3: A strategy consists of a basic direction and a broad path.
– Proposition 4: A strategy can be deconstructed into elements.
– Proposition 5: Each of the individual components of a strategy’s broad path
(i.e., each of its essential thrusts) is a single coherent concept directly
addressing the delivery of the basic direction.
– Proposition 6: A strategy’s essential thrusts each imply a specific channel of
influence.
– Proposition 7: A strategy’s constituent elements are each formed either
deliberately or emergently..

28
 Situation Analysis: McKinsey‘s
7-S-Modell
Strategie – Situationsanalyse - 7-S-Modell (McKinsey)

„hard factors“
- cold
triangle

„soft factors“
– warm
square)

Source:
de.wikipedia.org

Example Instrument for Situation Analysis: /wiki/7-S-

Modell, 22

SWOT Analysis March 2010 31

• What is meant by IT Alignment?
• What is the aim of an IT Strategy?

32
Definition IT Alignment
“Business-IT alignment is a dynamic state in
which a business organization is able to use
information technology (IT) effectively to
achieve business objectives”

Source: http://en.wikipedia.org/wiki/Strategy , last accessed on 13 December 1014

33
IT Strategy (Information Technology
Strategy) Definition
• IT strategy is a comprehensive plan that information technology
management professionals use to guide their organizations.
• An IT strategy should cover all facets of technology management,
including cost management, human capital management, hardware
and software management, vendor management, risk management
and all other considerations in the enterprise IT environment.
• Executing an IT strategy requires IT leadership
• Many organizations choose to formalize their information
technology strategy in a written document or balanced scorecard
strategy map.
• The plan and its documentation should be flexible enough to
change in response to new organizational circumstances and
business priorities, budgetary constraints, available skill sets and
core competencies, new technologies and a growing understanding
of user needs and business objectives.
Source: http://searchcio.techtarget.com/definition/IT-strategy-information-
technology-strategy, last accessed on 13 July 2015 34
• What can we learn from management (or
design, or strategy) patterns?
• Why might it be useful to study and analyse
management (or design, or strategy) patterns
and the context and shortcomings of thhe
decision making process?

35
Overconfidence- or Overoptimistic Bias
• Survey of youth (Germany) : Self-assessment
of leadership qualities
– 70% above average, 2% below average
– 60% consider themselves to be among the top
10%
– 25% consider themselves to be among the top 1%
• Can you imagine another group / profession
to score even higher on the Overconfidence-
or Overoptimistic Bias?

36
Overconfidence- or Overoptimistic Bias
• 94% of all professors consider their own
performance to be above average in the peer
group

37
 Case Study: Management of Strategy
and Investments #1

Who decides upon the IT Budget....

CIO/CTO 23 53 43 38 30 29 30 62
Vorstand 26 3 6 0 15 10 13 0
Komitees/
52 44 51 63 55 51 58 38
Gremien
Welt Klassen-
beste

Survey Accenture 2008: Survey of 260 CIOs globally (all results in percentage points). 39
Source: Wirtschaftswoche Nr. 10, 26.03.2008
 Case Study: Management of Strategy
and Investments #2

How often the IT departments decide upon the IT project budget...

81 47 26 50 50 50 40 54
Welt Klassen-
beste

Survey Accenture 2008: Survey of 260 CIOs globally (all results in percentage points). 40
Source: Wirtschaftswoche Nr. 10, 26.03.2008
 Case Study: Management of Strategy
and Investments#3

How often the affected Business Units decide upon the budget of IT Projects...

7 16 51 25 30 27 31 31
Welt Klassen-
beste

Survey Accenture 2008: Survey of 260 CIOs globally (all results in percentage points). 41
Source: Wirtschaftswoche Nr. 10, 26.03.2008
 Strategie Raster (Gartner Group)
IT-Strategie
Anwendungen Integration Infrastruktur Service Beschaffung
§ Regionen? § nur in Geschäftseinheit? § Regionen?
§ Netz? § Grad der
§ Sprachen? § extern? Zentralisierung? § Kulturen?
Geografische § über § Ausbreitung? § Sprachen?
Verteilung § Gesetze? Unternehmensgrenzen? § Prozesse?

§ Strategie?
§ funktionale Silos? § Zentral oder dezentral?
§ Fokussierung? § Wer entscheidet? § Strategie?
§ Integrationsarchitektur? § Je Geschäftseinheit oder
§ mögliche gemeinsam?
IT-Governance
Informationen aus Geschäftsstrategie

Änderungen?

§ Plan?
§ Architektur? § Trends?
§ Unternehmensarchitektur § Wie soll Service § Eigene Kompetenzen
Zukunftsbezug § Ablösung der § Grids? aussehen? in der Zukunft?
Legacies?
§ On demand?

§ Änderungshäufigkeit? § Kosten? § Intern oder extern

Legacy- § Umbau? § SLAs für Legacies? betreiben?
Anwendungen § Wartung? § Änderungsrate?

§ Innen oder außen? § Architektur? § Welche Services werden §

§ Architektur? virtualisiert? Strategie?
Virtualisierung § Priorität? § Koordination?

§ Änderungen der § Sicht für den Kunden? § Grenzen der Infrastruktur? § SLAs?
Interaktion? § Wer kontrolliert die
§ Anpassung? § Was wird gebraucht? § Kundenmanagement? IT-Beschaffung?
Kundensicht § Priorität?

§ Finanzierung der § Kosten vs. Werte?

§ Finanzierung von Integrations-Infrastruktur? § Finanzierung des § SLAs?
§ Training?
Budget und Veränderungen? laufenden Betriebs? § Prioritäten?
Finanzierung § Managementunterstützung § Einstellungspolitik?

Quelle: Keller: IT-Unternehmensarchitektur. dpunkt.verlag, 2007, S.78. 42

 CIO strategies reflect the need to reduce cost
and improve performance

* Item not included this year

© 2009 Gartner, Inc. All Rights Reserved. 44
 Source: http://info.advsyscon.com/it-automation-blog/gartner-reveals-top-10-
45 2015
strategic-technology-trends-for-2015 , last accessed on 3 February
© 2009 Gartner, Inc. All Rights Reserved.
 Top Strategic Technology Trends for 2018

§ :

http://www.gartner.com/technology/research/top-
10-technology-trends/
46
© 2009 Gartner, Inc. All Rights Reserved.
 Top Strategic Technology Trends for 2018

§ Trend No. 1: AI Foundation

- Today's AI Is Narrow AI
§ Trend No. 2: Intelligent Apps and Analytics
- Augmented Analytics Will Enable Users to Spend More Time Acting on Insights
§ Trend No. 3: Intelligent Things
- Swarms of Intelligent Things Will Work Together
§ Trend No. 4: Digital Twins
- Digital Twins Will Be Linked to Other Digital Entities
§ Trend No. 5: Cloud to the Edge
- Edge Computing Brings Distributed Computing Into the Cloud Style
§ Trend No. 6: Conversational Platforms
- Integration With Third-Party Services Will Further Increase Usefulness
§ Trend No. 7: Immersive Experience
- VR and AR Can Help Increase Productivity
§ Trend No. 8: Blockchain
- Blockchain Offers Significant Potential Long-Term Benefits Despite Its Challenges
§ Trend No. 9: Event-Driven Model
- Events Will Become More Important in the Intelligent Digital Mesh
§ Trend No. 10: Continuous Adaptive Risk and Trust
- Barriers Must Come Down Between Security and Application Teams
http://www.gartner.com/technology/research/top-10-technology-trends/ 47
© 2009 Gartner, Inc. All Rights Reserved.
IT Governance in the Context of
Corporate Governance#1

54
IT Governance in the Context of
Corporate Governance#2
Corporate Governance

IT Governance
Strategy

IT Alignment

IT
IT Service Management
Architecture
IT Service
Compli- IT Compliance IT Service IT Service
Opera-
Infrastructure
Strategy Planning Management
ance tions
Strategy

55
IT Governance in the Context of
Corporate Governance#3
Organizational Governance

Enterprise Risk
Management

Internal Control

IT Control

56
IT Governance in the Context of
Corporate Governance#4
Corporate governance

Shareholders Other stakeholders

Board
Monitoring Disclosure

Senior executive team

Strategy Desirable behavior

Key assets
Human Finacial Physical IP Information Relationship
assets assets assets assets and IT assets assets

Financial governance IT governance mechanisms IT governance

mechanisms mechanisms
(committees, budgets, etc.) (committees, budgets, etc.)

Key asset governance

57
Source Weill, Peter; Ross, Jeanne W.: IT-Governance. Harvard Business School Press, 2004, S.5.
Definitions: IT Governance
• Weill and Ross focus on "Specifying the decision rights and accountability
framework to encourage desirable behaviour in the use of IT.“
• In contrast, the IT Governance Institute expands the definition to include
foundational mechanisms: "… the leadership and organisational structures
and processes that ensure that the organisation’s IT sustains and extends
the organisation’s strategies and objectives.“
• AS8015 (Australian Standard for Corporate Governance of ICT): "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. It
includes the strategy and policies for using ICT within an organisation.“
• Related Topics:
IT-Architectures; IT-Strategy; Project Portfolio Management; Network,
System & Service Management; ....
Sources:
Weill, P. & Ross, J. W., 2004, IT Governance: How Top Performers Manage IT Decision Rights for Superior Results", Harvard Business School Press, Boston.
IT Governance Institute 2003, "Board Briefing on IT Governance, 2nd Edition".
IT-Governance für Geschäftsführer und Vorstände, zweite Ausgabe, IT-Governance Institut, P.11,

58
IT Governance - Motivation
• IT Strategy
– Enterprises are more dependent than ever on IT
– Tendency of IT to focus on itself
– Historically poor performance of IT (eg SW Development
Projects)
• IT Alignment
– Increased variety of service delivery models (cloud computing,
incremental outsourcing, etc.) creates complexity
– IT viewed as “strategic partner” vs. “order taker”
• IT Financials
– Enterprises need to maximize the business value from their [often]
large investment in IT
– Centralised versus decentralised (eg Business Units) IT
spending
• IT Compliance
– Regulatory focus in post-Enron era, e.g., Sarbanes Oxley
59
IT Governance vs. IT (Service)
Management

60
IT Governance: Definition
• The operating model for how the organization makes
and enacts decisions about the use of IT
• What is meant by “operating model”?

61
IT Governance: Definition
• The operating model for how the organization makes
and enacts decisions about the use of IT
• What is meant by “operating model”?
– Organizational units involved
– Division of roles, responsibilities, and accountabilities
– Processes, standards, policies
– Measurements
• What types of decisions are we talking about?

62
IT Governance: Definition
• The operating model for how the organization makes
and enacts decisions about the use of IT
• What is meant by “operating model”?
– Organizational units involved
– Division of roles, responsibilities, and accountabilities
– Processes, standards, policies
– Measurements
• What types of decisions are we talking about?
– What IT goals and priorities will enable the organization and maximize
benefits
– How to obtain and deploy IT resources
– How to appropriately mitigate and control risk
Topics: IT Architecture; IT Strategy; Project Portfolio Management, IT
63
Compliance
IT Governance: Example
• Proposal:
Replace various proprietary and local reporting systems
with a single, global management reporting system
èHard to justify on purely economic grounds
èLocal units will be resistant, but their cooperation is
essential to the success of the initiative
• IT Governance Issues:
Who decides? Who is accountable for the
implementation of the decision? How will the results of
the decision be measured and monitored?
64
Aufbauorganisation in einem kleinen
Unternehmen

65
Aufbauorganisation: Idealtypischer
Aufbau innerhalb der IT Abteilung
(Muster)

66
Aufbauorganisation – Ressortinstanz
bzw. Linieninstanz einer Abteilung
Unternehmens-
leitung

Einkauf Produktion Marketing Verwaltung

Produkt A Produkt A Produkt A RW

Stabsfunktionen:
"Dienen allen"
Produkt B Produkt B Produkt B Personal
Produkt C Produkt C Produkt C IW

IW: Informationswesen
67
Aufbauorganisation – Hauptabteilung

Unternehmens-
leitung

Einkauf Produktion Marketing Verwaltung IW

IW: Informationswesen
68
Aufbauorganisation – Stabstelle

Unternehmens-
leitung

IW

Beschaffung Produktion Marketing Verwaltung

IW: Informationswesen
69
 Aufbauorganisation – Matrix /
Querschnittsfunktion (Dezentral)

Unternehmens-
leitung

Bereich 1 Bereich 2 Bereich 3 Bereich 4

Einkauf
Produktion
Informations-
Wesen (IT)
... ...
dezentrale IV (IM) dezentrale IV dezentrale IV dezentrale IV

IW: Informationswesen
70
 Aufbauorganisation – Divisional /
Dezentral
AUFBAUORGANISATION - DIVISIONAL/DEZENTRAL

Unter- Unternehmens-
nehmens- leitung
stab

IW

SGE 1 SGE 2 SGE 3 SGE 4

Einkauf Einkauf Einkauf Einkauf

Produktion Produktion Produktion Produktion

Marketing Marketing Marketing Marketing

Verwaltung Verwaltung Verwaltung Verwaltung

IW IW IW IW

IW: Informationswesen; SGE: Strategischen Geschäfteinheit (Division)

71
Aufbauorganisation:
Zusammenfassung
Unternehmensleitung
Unternehmensleitung

IW

IW

als Linieninstanz einer Abteilung als Hauptbereich

Unternehmensleitung

Unternehmensleitung
IW
IW

dez. IW dez. IW dez. IW

als Querschnittsfunktion in der

als Stabsabteilung der UN-Leitung Matrix
72
Aufbauorganisation:
Zusammenfassung

Linieninstanz Eigene Abteilung

Rolle der IT als unterstützende Funktion wird
betont
Hoher Stellenwert der IV im
Geringes Ansehen Im Unternehmen
Unternehmen
Zuordnung zu einer Abteilung
nicht sinnvoll

Stabsabteilung Matrixorganisation
Hoher Stellenwert der IV im Kurze Instanzwege zu den
Unternehmen Fachbereichen und UL
Dienstleistungsfunktion der IV
IV-Abteilung hat guten
Wird betont
Überblick über die gesamte IV
Keine Weisungsbefugnis Hohes Konfliktpotential
73
Operating Model (OM) - Context
• Business Model
• Operating Model
• Capability Model

74
Operating Model (OM) - Context
• Business Model
– Describes how an organization creates, delivers, and captures
economic, social, or other forms of value.
– Business Model design is part of business strategy.
• Operating Model
– Describes the necessary level of business process integration
– Standardization for delivering goods and services to customers
– Guides the underlying business and technical architecture to
effectively and efficiently realize its business model.
– Operating Model design is part of business strategy.
• Capability Model
– Describes the capabilities necessary to execute the Operating Model.
– Capability Model design is part of operations planning.

Sources:
http://http://en.wikipedia.org/wiki/Operating_model (16 March2012) 75
Peter Weill, Jeanne W. Ross. IT Savvy. Harvard Business Press, Boston. 2009.
Operating Model (OM)
“An operating model is the necessary level of
business process integration and
standardization for delivering goods and
services to customers. By identifying
integration and standardization requirements
an operating model defines critical IT and
business process capabilities ... [and thus]
guides IT investment and enhances business
agility.“
Sources:
http://streamlinetraining.blogspot.com/2010/02/generating-business-value-from-it-i.html (16 March2012) 76
Peter Weill, Jeanne W. Ross. IT Savvy. Harvard Business Press, Boston. 2009.
Operating Model (OM) - Prerequisites
• Business Leader must decide
(i) How much to standardize business processes
(ii) How much to integrate business processes
• Small Organisations: Provide single digitised
process platform to support OM Model
• Big Organisations: Multiple OMs; 1 at each
organisation level (eg firmwide, business
units) where platform capabilities are shared

77
Operating Model – 4 Choices

Sources:
http://streamlinetraining.blogspot.com/2010/02/generating-business-value-from-it-i.html (16 March2012) 78
Peter Weill, Jeanne W. Ross. IT Savvy. Harvard Business Press, Boston. 2009.
Operating Model – 4 Choices
A company using the
• Coordination model operates unique business units with a need to know
each other's transactions. Its key IT capability is providing access to shared
data through standard technology interfaces (e.g. Pepsi Americas).
• Unification model operates as a single business with global process
standards and global data access. Its key IT capability is providing
enterprise systems that reinforce standard processes and provide global
data access (e.g. UPS)
• Diversification model operates independent business units with different
customers and expertise. Its key IT capability is providing economies of
scale without limiting independence (e.g. Procter & Gamble).
• Replication model operates independent but similar business units. Its key
IT capability is providing standard infrastructure and application
components for global efficiency. Marriott is an example (e.g. ING Direct).
Sources:
http://streamlinetraining.blogspot.com/2010/02/generating-business-value-from-it-i.html (16 March2012) 79
Peter Weill, Jeanne W. Ross. IT Savvy. Harvard Business Press, Boston. 2009.
Operating Model – Unification Model
Example UPS
• UPS Regional Head for Eastern Europe Proposal (around 2000)
– Aggressive expansion into Less mature market, thus fewer process
requirements
– Cheaper than standard UPS handheld devices would cost less and be
adequate to meet market requirements
• UPS decision making process
– Policy: Review all exception to standard Business Process & IT Service
provision
– Decision passed to senior level management who insisted that
Eastern Europe adopt standard UPS business processes and
technology
– UPS CEO Mike Eskew: “We are a network and we can‘t have some
warehouses managing with this system and others managing with that
system.... [Otherwise] you can‘t transfer people and you can‘t transfer
Sources: information.“ 80
Peter Weill, Jeanne W. Ross. IT Savvy. Harvard Business Press, Boston. 2009.
IT Operating Model: Roles
Plan
Head Process Owner Project Portf Mgr Controller

Appl Owner Enterprise Arch. Vendor Mgr

Account Mgr
Coordinator
Compliance Mgr System Owner

Build Run
Account Mgr Service Lvl Mgr Incident Mgr 1st level Support

Project Mgr Training Coord. 2nd level Support

Change Mgr Process Expert

Problem Mgr
Sub-Change Mgr Operations
Engineering Expert
Change Coord. Expert Config. Mgr

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IT Operating Model: Process Modell

Source: Arcondis
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