IT Governance Highly imperative in a down economy Date:   Monday , November 02, 2009 Today's business is faced with unprecedented and unique challenges, which, if not addressed by swift and decisive actions, could quickly compromise strategic competitiveness. Corporations manage many assets like money, facilities, customers, employees etc, but technologies that collect, store and disseminate information are the assets that are most complex to manage. For many years, organizations could succeed despite weak IT management practices. Over the years, research has shown that top-performing companies generate up to 40 percent more returns on their IT investments than their competitors. Deriving optimal value from IT is continuously increasing as an important organizational competency. IT governance could be broadly defined as an accountability framework of corporate governance principles on the use of IT to achieve corporate performance goals. All enterprises have some degree of IT governance, but the better organized companies have a well defined structure consistent with the organization's mission, strategy, values and culture. In such organizations, IT is part of their competitive strategy. Good corporate governance is increasingly being perceived by stakeholders and investors as a key parameter in evaluating investment decisions. A McKinsey study even found that investors are professional investors are willing to pay a premium for companies with high governance standards. However, lot of time and effort of senior management is involved in putting together a good IT governance framework. If these decisions are left to chance, or neglected, then companies could seriously jeopardize their strategic competitiveness. Investment in IT is typically around 5 percent of annual revenues and continuously increasing. This actually accounts for more than the average capital investments in most companies. Therefore senior management is under increasingly more pressure and challenged to manage these investments to ensure that value is created. CXOs need to constantly keep looking at the past, present and keep a tab on the future trends. Especially when Web 2.0, Mobile and Collaborative technologies are constantly changing the landscape, companies could very quickly lose competitive advantage if they don't move quickly. Leveraging IT successfully to transform the enterprise and create value-added products and services has become a critical business competency. IT governance is the difference between success and failure in today's high technology environment. Good governance requires operational clarity, choices and constant feedback loop for exceptions and learning. Old Mutual South Africa's (OMSA) six IT principles, or "non-negotiables," as they are called, provide a useful framework or how to use IT. The processes need to be clearly defined and understood by all. Also when exceptions occur, there has to be clear ways on how to convert them into valuable learning. Pressure usually starts mounting on middle management when they are not sure on how to implement something that they feel is right for the organization. There has to be channels to move issues and information quickly up to senior management to facilitate swift decision cycles. The value that IT adds to the business depends upon its relationship and alignment with the business strategy and its ability to help the business meet and exceed corporate vision and goals. Often organizations can get lost trying to implement overly complex processes that only make things cumbersome and in the end contribute little value to the organization. Instead, IT Governance should be aimed at balancing the sustainment of operations and the delivery of the new initiatives required to move the business strategically forward. IT Governance framework should provide visibility and transparency into the initiatives set forth by the organization. The most successful IT Governance implementations focus on key business drivers that support a targeted and optimized IT initiative. These are: Strategy and Alignment, Sustaining Operations, Strategic Initiatives, and Measuring IT Performance. An effective IT organization should drive business alignment by: * Ensuring that IT strategy is driven by business strategy, * Ensuring that IT delivers on time, within budget and with the desired benefits and * Balancing investments between systems that support and those that transform the enterprise For IT to effectively demonstrate its value, it must first align with the business' strategic direction and then measure performance towards that direction. As strategic direction is set, budgets are created, resources are assigned, plans are established, and execution begins. IT governance must have a clear structure of owners with accountabilities. Ultimately, though the board is responsible for all governance, the CIO owns IT governance in the majority of sizable firms today. CIOs need to create a group of senior business and IT managers to help design and implement IT governance. Additionally the CIO must also make it clear that all managers are expected to contribute as they would contribute to the governance of any other key asset. Establishing the governance arrangements matrixes for the multiple levels in an enterprise enables the connections and reinforces the organizational focus. It's also critical to continuously measure IT performance and communicate to the senior management on where IT stands against the plan by reporting on various key parameters such as: * Overall IT budget versus actual spend by category * IT costs by staff numbers and by activity * IT related operational risk incidents * Planned versus actual resource allocation * Outsourcing ratios and cost savings achieved * Process and standards compliance Without adequate IT governance, business process transformation gets very difficult. Wise management of IT has emerged as an essential element for corporate success. The benefits of IT governance are manifold and some of them are summarized below: * Alignment of IT with the organizational goals and strategy. * Embedding IT into the organization’s culture. * Enabling organization’s strategic competitiveness * Optimizing IT operations. * Aid in compliance. * Reducing IT risk. Leading organizations are going by these truths to introspect and strategize on how they are headed. The principles behind good IT governance provide the guidance to quickly map all IT activities, apply methodologies, formulate a winning plan, and report on the successes!