IS/IT GOVERNANCE PROJECT

HOWFENTY BEAUTY CAN MAXIMISE CUSTOMER INFORMATION

TO TAP INTO NEW REGIONS
Kenosi Mosiane | IT/IS GOVERNANCE | 
 1. Introduction
Information Technology governance (IT governance) is the collective tools,
processes and methodologies that enable an organization to align business
strategy and goals with IT services, infrastructure or the environment. IT projects
also have warning signs and patterns of failure or success that most
organizations miss because they do not have the ability to make sense of the
data. These warnings are buried not just in project plans, budgets, and demand
plans, but more importantly in the numerous everyday interactions and
exchanges between clients, managers, developers, operations teams, and
everyone involved in the process of delivering IT. Here is where the real risks lie.
The key to effective governance is defining a system to tap into that data and
hand it to people who can most effectively make decisions based on it. It will first
describe what IT governance is, address how the company can align its business
strategy with the IT strategy to address the aforementioned, how IT investment
can be done and it will test whether the IT investment is reasonable. It will also
recommend how change can be managed while introducing this new system.

Business Case
Fenty beauty is a fairly new line of products in the beauty industry yet it has
gained a significant amount of market share across the Americas and Europe,
with demand for the products surging in untapped countries like South Africa,
Nigeria and India. This proposal aims to address challenges of the product
entering into new emerging markets like in Africa, India and Brazil by
implementing a supply chain information system that will allow customers to buy
products through their local retailers and e-commerce business to cut the cost if
the customers having to pay import duties on the products.

2. IT Governance
IT governance is about the ways in which leadership is expressed in an
enterprise for meeting its IT strategy, goals, and objectives. Governance is also
about gaining IT alignment between the goals and objectives of the business and
the utilization of its IT resources (leadership, organizational structures and
processes) to effectively achieve those goals. It addresses key questions during
the decision making process i.e. what decisions need to be made, who makes
those decisions and how they make those decision. The important concept of
aligning business goals and strategies is the concept of the operating model. An
operating model is how “standardized the process of a firm are across different
divisions or business units of the firm, and how much data is shared across the
different business units of a firm”. It has four pillars which are: coordination,

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unification, diversification and replication. Below the details of each of the above
mentioned is discussed in detail.

 Coordination: the firm has shared customers, products, suppliers etc.

The business unit has control over process design. The need for data
integration is high and business process standardization is low.
 Unification: just like in coordination, the firm has shared customers,
products, suppliers etc. High level process owners design the standard
processes. The need for data integration is high and business process
standardization is high as well.
 Diversification: the firm has few shared customers, products, suppliers
etc. The business unit has control over business process design. The
need for data integration is low as well as business process
standardization.
 Replication: the firm has few shared customers, products, suppliers etc.
just like in the previous one. Data is locally owned therefore the need for
data integration is low and business processes are shared across
business units, thus business process standardization is high.
The operating model influences the enterprise architecture( the organizing of
logic for business processes, applications, data and infrastructure
technologies that enable the company’s business strategy).

3. Six Key Questions About IT

3.1 How will IT change the basis of competition in the industry?
Fenty Beauty’s biggest competitor is Kylie Cosmetics followed by KKW Beauty.
By expanding to these regions, Fenty Beauty will be tapping into markets that the
competitors are not tapping into. Fenty Beauty’s competitive advantage has
always been catering for variety of skin tones and shades, and these regions
have more people of color therefore this will drive the profits up for the brand.
The company will make use of regional websites to help cater for these markets
and drive the sales up while collaborating with retailers in those regions to make
sure that products are always available as and when customers demand them.
3.2 Do the business plans reflect the full potential of IT to improve
performance?
The business plans do reflect the full potential of the company as the website is
accessible worldwide. The solution now is to make the products available to the
consumers in countries that only have access to the website but not the product.

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 3.3 Does the business have the capabilities required to deliver value from IT?
The IT team and executive have done an incredible job in putting the product into
market and gaining market share in a short period of time. The team is more than
capable.
3.4 Is the investment portfolio aligned with opportunities and threats?
Yes the company understands that there is a growing demand for beauty
products in these regions and since they are the leaders in providing diverse
make up, they will be able to gain new customers in these regions that mainly
have people of color.
3.5 Who is accountable for IT and how are they held accountable?
The IT department and the executives are accountable for this project.
3.6 Is the company comfortable with the level of IT risk?
Yes the company makes comfortable profits in other regions.

4. Enterprise Architecture
Enterprise Architecture has four stages i.e. application silo(the architecture of an
individual application); standardized technology(enterprise wide standards);
optimized core(enterprise wide standards including standardization of data and
processes); and modular architecture(Builds on enterprise wide standards with
loosely coupled standards for applications, data and infrastructure to enable
local differentiation). For Fenty Beauty the appropriate enterprise architecture is
modular architecture. As they have done the first two stages excellent.
4.1 The key features, benefits and risks for Modular Architecture Stage
Modular Architecture is appropriate for Fenty Beauty because it allows for
dividing the system into smaller parts, which can be created independently,
modified or replaced with other modules or different system, this allows for
strategic agility. Customization and experimentation is designed to meet local
needs. Which is what the Supply Chain Information System that is proposed will
be able to cater for. The successful implementation of this system will then be
available to others so that everyone benefits.
The benefits of this stage of architecture is the opportunity for strategic agility,
innovation and customer responsiveness. The risk is that flexibility without
rationalized data and optimized core may lead to application silos and
redundancy. How this issue can be solved is through defining boundaries for
experiments and funding components and approval processes.

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 5. IT Investment Evaluation
Why should one invest in technology?
(i) The supply chain information systems can provide competitive advantage to
the firm.(ii) This information systems is essential for the expansion of the
company.
Importance of IT Investment Portfolio
For the Fenty Beauty company as a whole, the IT investment represents about
30% of all capital investment. Having invested such a huge amount in IT, it
becomes obvious to analyze the out come of the same. The foremost question
comes to one’s mind, is to see whether the firm is receiving a good return on its
investment (ROI) in IT or not.
A good R.O.I. can be reflected through various factors, such as:
(i) Cost saving: The foremost impact will be felt through the cost reduction of the
products of the firm. This is a clear indication of good return on investment. (ii)
Improved productivity: The productivity of the employees will increase
dramatically and enhance their efficiency. This results into better employer and
employee relations. (iii) Improved Quality: There will be appreciable improvement
is the quality of the products, thus the products will have decisive edge over other
such products available in the market. Due to this factor more and more
customers will be attracted towards the products of this firm, which has invested
in technology. (iv) Able to provide better customer services: Presently having
been equipped with better technology than earlier, the firm is in a position to
render much better services to the customers. This will help in creating good will
of the firm in the market.
Investment vs Return:
Now the key question is , the benefits due to the implementation of IT are
achieved at what cost ? Has the firm spent too much or too little as compared to
other competitors in the field? This is very essential information to know, because
this will decide the viability of the firm.
The nature of the benefits may be short-term financial returns, or term strategic
positioning, or market share.
A second and altogether different challenge understands precisely how the firm’s
strategic position is affected by the IT investment.
Many firms recognize that it may be necessary to accept a low financial return on
investment for initial few years in order to establish a market dominating strategic
position.
The Right Choice:

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The key issue, that decides the success of investment in IT, lies on the fact,
whether the firm has made the right choice regarding purchase of processor
hardware, software, telecommunication and last but not the least the human
resources from the various supply markets. Another point is, does the firm have
the capability to achieve the business’s strategic objectives?
It is obvious that if poor choices are made, there will be very low return on the IT
portfolio.
Right choices generally mean being reliable, cost efficient, extendable, and
supportable. But right choices also suggest that the infrastructure must support
the strategic business interests of the firm. The challenge in addressing these
issues is that there are no simple quantitative measures of right choices.
The Evaluation: The evaluation of the firm investing in IT can be done broadly on
the basis of following two types of benefits: (a) Tangible Benefits (b) Intangible
Benefit
(a) Tangible Benefits: Tangible benefits are those benefits which can be seen
clearly and physically felt, such as: 1) Cost Savings 2) Increased Productivity 3)
Low operational costs 4) Reduction in work force 5) Lower computer expenses 6)
Lower out side vendor cost 7) Lower Electrical and professional costs 8)
Reduction in expenses 9) Reduction in facility costs.
(b) Intangible Benefits: Intangible benefits are those benefits which cannot be
seen and have no physical existence but the effects of these benefits can be
realized qualitatively, such as: 1) Improved resource control & utilization 2)
Improved planning 3) Increased flexibility 4) Timely information 5) More
information 6) Increased learning 7) Less legal requirements 8) Enhanced good
will of the firm 9) Increased job satisfaction 10) Improved employer – employee
relation 11) Improved decision making 12) Improved operations 13) Higher client
satisfaction 14) Better corporate image.

5. IT Chargeback
IT chargeback is a method of charging internal consumers (e.g., departments,
functional units) for the IT services they used. Instead of bundling all IT costs
under the IT department, a chargeback program allocates the various costs of
delivering IT (e.g., services, hardware, software, maintenance) to the business
units that consume them.

In an IT chargeback situation, instead of simply charging all IT costs to one

central department, the company charges individual costs to the user groups or
centres that most directly consume the goods or services that were purchased.
This principle can make things clearer for administrators who have to manage
costs and can also help to provide a clearer contrast for various options, such as
outsourcing.

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The Purpose of IT Chargeback
The need to understand the components of the costs of IT, and to fund the IT
organization in the face of unexpected demands from user departments, led to
the development of chargeback mechanisms, in which a requesting department
gets an internal bill (or "cross-charge") for the costs that are directly associated to
the infrastructure, data transfer, application licenses, training, etc., which they
generate. The purpose of chargeback includes:

 Making departments responsible in their usage, e.g., refrain from asking

for resources they are not going to use
 Providing visibility to the head of IT and to senior management on the
reasons behind the costs of IT
 Allowing the IT department to respond to unexpected customer demand
by saying "yes, we can do it, but you will have to pay for it" instead of saying
"no, we cannot do this because it's not in the budget."
As of 2011, the chargeback mechanisms are often controversial in organizations.
Departments rarely pay directly for their own electricity bill, janitorial services, etc.
-- these are allocated to departments on the basis of the number of employees or
the square footage they occupy. Similarly, departments may expect to pay a
fixed allocation for IT and get a flexible set of services that meet their needs in
return. While the discussion on such an allocation are always difficult, seeing
actual variable charges arrive on a monthly basis for specific levels of usage can
create conflict both between IT and its internal customers, and between a
department manager and the users who caused resource consumption to
increase and therefore costs to rise. The rise of subscription-based computing
services (cloud computing) may make chargeback mechanisms more palatable.

Chargeback Methods
1. Cost Center Approach
IT is seen as a corporate overhead, the costs are charged to divisions on
some ad hoc basis. The advantages is that it is very simple to implement
and easily understood by users. The disadvantages are that there’s little
incentive for the IT business unit to be efficient, there is also no incentive
for users to consume the IT services prudently and there is a politization of
prioritization.

2. Service Center Approach

The IT unit offers services for a price and business units pay for the
consumptions. Prices are set to recover IT unit costs. The advantage is
that there is a price mechanism for users to consume the services
prudently. The disadvantage is that there is little incentive for the IT unit to
be efficient.

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 3. Profit Center Approach
Just like in the Service Center Approach, the IT unit offers services for a
price and business units pay for the consumption. The difference is that
prices are set based on market prices, therefore influenced by external
forces. The advantages are that there is incentive for the IT unit to be
efficient and incentive for users to be prudent when they consume the
services. The disadvantage is that it is complex to implement.

The impact of IT chargeback is that it helps develop IT partnerships. The

business units help IT understand priorities and IT helps business units
understand the costs involved. This results in better investment decisions.

6. Change Management
The implementation of a new or upgraded system in distribution operations can
be a daunting task. Many things can lead a system project off track. To prevent
this, these key components that have proven effective in providing successful
outcomes to these implementations are considered.
1. Upper Management Support: Upper management is always involved in the
financial support of a systems project. Some executives focus only on the
financial justification and the payback of the project. However, the key to a
successful implementation is to also convince them of the business advantage of
a systems change.
Success of the project depends on the executive team believing that the new
system will provide the company with a new competitive advantage to service
customers better. When that belief is in place, executive sponsors can champion
the project when it hits its inevitable rough spots. They can effectively allocate
additional resources to shore up tasks falling behind, arbitrate differences in a
timely manner and reinforce expectations during conversion. They can spread
the energy and excitement about what this change will mean to all involved.
2. User Involvement: There should be a broad representation of groups in the
project to ensure that all perspectives are accounted for during the design and
implementation. However, operations staff should lead the project. Whether it is
the warehouse staff or shipping department, the project should be led by the
people who will actually use it to improve their job performance.
Two groups who tend to vie for project leadership are IT and finance. Although
these teams are critical to a successful project outcome, in the end, the changes
that are being made will most directly affect the people using the software on a
daily basis. If operations leads the project, the ownership will increase and so will
the project’s success.

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3. Training: After the system functionality passes operational testing, final training
can begin. Ideally, users have been given some overview classes prior to actual
hands-on training. The hands-on end user training is most effective when
delivered as close to the cutover as feasible, in order to achieve optimal
information retention. Again, the focus should be on key everyday functionality.
Operators should be comfortable performing everyday functions flawlessly.
Laminated ‘cheat sheets’ can be given to users, and will serve as a tremendous
memory refresher to use during conversion. During startup, the team members
responsible for troubleshooting should be focused on handling the inevitable
exceptions or scenarios missed during testing. If they have to perform on-the-job
training for everyday functions, errors will be made, frustration will increase and
overall risk increases. Information system innovations supporting interdependent
tasks face greater implementation challenges. Successful implementation
requires knowledge about interdependent work procedures that need users to
understand the collective consequences of their actions.

6.1. Evolutionary vs Revolutionary Learning

Evolutionary change is the change that is also called incremental change as
well as takes place progressively in over time. The Slow and gradual change
frequently takes place to make sure the endurance of the business organization.
It is incremental because it happens step by step. Business organizations
experiencing the evolutionary change that may have been encouraged by
pressure from outside, so keeping up with this technology and addressing the
proper needs of stakeholders more efficiently. On the other hand, changes in
evolutionary might be encouraged by competition.

By dissimilarity, revolutionary change is insightful. It is also called

transformational change. While we think change by revolutionary, we can
imagine a complete refurbish, restoration as well as reconstruction. So the
Change is dramatic, fundamental as well as irretrievable. as of an organizational
perspective, the change of revolutionary that reshapes as well as realigns
strategic objectives and leads to fundamental advance in beliefs and behaviours.
While an organization make a decision to engage in transformational change,
radical transformations to products and services sometimes follow. So the efforts
to stay to the lead of the camber and reach development, an outstanding
business organization often follow the revolutionary change. For this project the
company will take an evolutionary approach when implementing the system.

6.2 Project Management vs Learning Approach

Project Management Approach

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A project is a complex, non-routine, one-time effort, constrained by time, budget
and performance specifications that is designed to meet specific customer needs
resulting in a unique and well defined product or service or outcome. The
leadership will define clear scope and provide resources. Change management
does not affect the whole organization as the project can be managed outside
the organization. Success of this approach is due to excellent planning and
execution.
Learning Approach
The organization is continuously striving to learn and implement better ways of
performing its activities. The leadership creates a learning environment where
capabilities are developed and knowledge is shared. The change management
implementation is an endless learning process, with many small projects. Users
learn from actual use of the system, growth and adaptation. This knowledge is
then transferred to other users through social networks within the organization.
Success is due to osmosis, growth and adaptation. The learning approach is
more appropriate for the information system that is being proposed as it growth
focused.
Summary
Directors and executive managers need to be mindful of the implications of
blurred organizational boundaries that arise as a consequence of e-business,
and that this results in their governance responsibilities extending beyond the
traditional corporate boundaries. They need to ensure that the same levels of
governance are applied in the organizations with which they integrate along the
value chain. IT is integral to any organization and has become an imperative for
all strategic decision making. However, IT remains an area associated with great
costs and it is important that businesses fully utilize this investment asset to
sustain and grow the company. The IT environment is constantly evolving –
creating new opportunities, but also carrying some risks. If IT systems are not
functioning accurately or even when the systems are accessed without
authorization, it could lead to severe financial loss. For the company to be
relevant and able to continue the status quo or to expand globally through
innovation, it is important that the IT architecture and IT processes are governed
appropriately.

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