Lack of IT governance is putting business value at risk
A new report incorporating research conducted and models developed in South Africa - 'IT Governance' - has just been published by Butler Group, Europe's leading IT research and advisory organisation.
It has found that a lack of effective IT governance in the majority of organisations is perpetuating the chronic failure rate of IT-enabled business projects, and seriously impairing the achievement of business value.
Research for the report indicated that IT governance initiatives were most often deployed solely within the IT department, and did not take into account the broader requirements of alignment with business objectives.
As a consequence, there is a lack of co-ordination between the IT-led elements of projects and management of the associated business change.
Tim Jennings, Research Director with Butler Group, and lead author of the report, explained: "Many new business initiatives are reliant on information systems, so the impact of poor IT governance is not just an IT issue, but one that directly reduces the potential business benefits".
Butler Group notes other effects of poor IT governance include increased costs due to the inefficiencies of short-term, tactical IT deployments, unproductive use of human resources and IT assets, and the potential risk of breaching data security and regulatory compliance requirements.
Jennings noted: "Although the largest enterprises are paying closer attention to IT governance, medium to large-sized organisations (up to 5 000 employees) are less likely to have the required disciplines in place, and are therefore particularly susceptible to poor returns on their IT investments."
Governance requirements must be tailored to different aspects of IT spend.
Based on governance models developed by MarketWorks Advisory in South Africa, spend on IT can be split into three categories: Run-The-Organisation, Change-The-Organisation, and Innovate, each of which has distinct characteristics, and different governance requirements.
For Run-The-Organisation spend, the emphasis is on availability, reliability, and running IT operations at lowest reasonable cost.
Change-The-Organisation spend represents work on new IT-enabled business projects, with drivers such as customer satisfaction, productivity improvements, competitive insight, or cost advantage. The role of governance in this category is, therefore, to formalise the process of collaboration between business and IT to deliver these objectives. This will involve specification of requirements, development of a business case, identification of appropriate business metrics, effective reporting on the status of the project during development, and ongoing tracking of the benefits. The use of a project management office to oversee this process offers a significant improvement in the management and governance of this type of spend, and has become a key interface between business and IT.
The role of IT in innovation involves taking advantage of technology to create new products and services, or to take the company into new markets. The emphasis of IT governance for this category of spend must be on strong planning, and alignment with strategic objectives. Research in South Africa indicates that few organisations use IT strategically, possibly as a result of poor governance, communication of IT's potential value and lack of trust in IT's ability to operate at a strategic level.
The market for IT governance tools is still relatively immature.
Project portfolio management (PPM) solutions can support an IT governance initiative, but the market is still relatively immature, particularly in terms of customer adoption. While the vast majority of organisations perceive IT governance as being important, the potential benefits of a PPM solution have only gained significant traction in large enterprise customers, where the requirement to manage competing investment and resource requirements for many hundreds and sometimes thousands of projects and proposals is a clear driver. For these organisations, CA Clarity and Primavera are the current market leaders.
For medium to large-sized companies, IT governance and project management functionality has often been delivered by a series of point solutions, and the humble spreadsheet far outstrips any other packaged application in terms of deployment numbers. Butler Group believes that PPM vendors are failing to meet the needs of this market for affordable and easily-deployable solutions.
The report concludes that an IT governance framework must take an end-to-end view of the IT value chain, including both business and IT perspectives. Jennings says: "Whether an organisation views IT as a strategic capability, involving significant investment, or purely as a support service to be delivered at minimal cost, the reality is that all are dependent on information systems as an integral part of many business processes. Effective IT governance is, therefore, essential to ensure the delivery of IT services meets the requirements of the business."
For further information about the report, please contact MarketWorks.