Why IT Governance is a powerful business tool. Evaluating the potential for value creation –
the Governance Scorecard. Using the Scorecard to improve IT integration.
Profitiviti Business Operations Intelligence Article
IT Governance Briefing
1. IT Governance
How to integrate IT into a mid-sized Enterprise
and ena e s perior a e rea on
The control of
IT Processes
IT Processes
which satisfy
Business
Business
Requirements
Requirements
is enabled by
Control
Control
Statements
Statements
considering
Best
Best
Practices
Practices
¦›Ä—ƒ
> Why IT Governance is a powerful business tool.
> valua n the poten al for value crea on –
the Governance Scorecard.
> sin the Scorecard to i prove IT inte ra on.
The Infology Group, Inc.
2. IT Governance
PAGE 2
owerful usiness Tool
In a u er onsor u survey of co pany failin to deliver benefits.
e ecu ves s ll re arded Infor a on Technolo y IT as a
necessary evil the IT depart ent purely as a cost center or IT G o v e r n a n c e. . .
worse. Provides the structure that links IT processes, IT
resources, and information to enterprise strategies and
To the other IT is already a source of benefits such
objectives.
as enhanced reputa on trust product leadership e-to-
ar et reduced costs and ul ately sta eholder value. Integrates optimal ways of planning and organizing,
acquiring and implementing, delivering and
These co panies re ard IT as an i portant value creator that supporting, and monitoring IT performance.
drives e ec veness increases e ciencies and elevates
Enables the enterprise to take full advantage of its
co pe veness.
information, thereby maximizing benefits capitalizing
on opportunities, and gaining competitive advantage.
This new state of a airs presents a fresh set of business IT Governance Institute
ana e ent challen es.
The IT depart ent has tradi onally been so ewhat The challen e is to inte rate the IT co unity and the
separated fro the rest of the business o en repor n to control of IT in eneral into the fabric of the whole business
the inancial func on. re uently the business and IT not just isolated areas and to e tend corporate overnance
co uni es e perience basic di culty in co unica n to IT processes and ac vi es.
and in aintainin produc ve dialo s. Thus IT beco es What has been lac in so far is a co prehensive
disconnected fro the ainstrea of corporate overnance. perspec ve on the control of IT that would
The price paid for this lac of inte ra on can be heavy
> rovide an a enda for evalua on prescrip on and
> Wea ened co pe ve posi on dissa sfied custo ers applica on of i proved ana e ent processes.
or business losses.
> stablish co on round between the various
> Lowered uality hi her costs and issed deadlines. co uni es in the enterprise en a ed in the use and
> ciency and processes ne a vely i pacted by poor delivery of IT.
uality of deliverables. > Yield ilestones and oals for the advance ent of IT
> usiness ini a ves inade uately supported by IT and inte ra on into the whole business.
> e a pla or for i proved IT overnance.
IT: Often Absent G v c P vid F c
Corporate executives asked:Which subjects are
included in your formal business strategy? IT Governance focuses ana e ent’s pursuit of cohesive
oals across the IT and business func ons of the or ani a on.
Good overnance endeavors to create har ony
Product Strategy 51%
between IT and the business ul ately leadin to a
E-Business strategy 49%
rela onship where IT and other business func ons adapt and
Sales / marketing 43%
collaborate in support of enterprise strate ies.
Customer service 43%
The ability to achieve and sustain this syner is c
Competitive position 38%
rela onship between the IT and other business func ons is
IT's role 35%
anythin but easy.
Source: Cutter Consortium, Arlington, Massachusetts We find in id-si ed or ani a ons that achievin ood
February 2002: Based on 75 Large Organizations
overnance is evolu onary and dyna ic. It re uires stron
The Infology Group, Inc.
3. IT Governance
PAGE 3
support fro senior ana e ent ood wor in the aps between business ris s control needs and
rela onships between func ons stron leadership technical issues. It provides ood prac ces across a
appropriate priori a on trust and e ec ve
co "We believe by 2002-03, more than 30-40 percent
unica on. ll based on a co prehensive understandin
of Global 2000 companies deploying new
of the underlyin business environ ent as well as deployed
and e er in technolo y capabili es. technologies and entering new markets with e-
products and services will have adopted a COBIT-
A w like risk assessment and balanced risk/reward
Despite the si e of invest ents and ris s associated reporting process,"
with IT control and overnance of the do ain has not
Al Passori, vice president, META Group.
enerally received the level of a en on it deserves. erhaps
this is because it re uires ore technical insi ht; has its own do ain and process fra ewor and presents ac vi es in
uni ue lan ua e; and is an inherently co ple subject a sound and lo ical structure.
a in the co unica on ap between IT and other
IT is desi ned to be the brea throu h IT
co uni es di cult to brid e.
overnance tool that helps in understandin and
owever the scale of the challen es and the poten al ana in the ris s and benefits associated with
rewards of success in dealin with the are drivin a reat infor a on and related IT. - SACA
deal of new research into the uni ue challen es of IT as a
In its full co ple ity IT addresses 34 hi h-level
ana e ent discipline. rofessional bodies lar er
process control objec ves robustly supported by an
enterprises do ain e perts and even acade ic ins tu ons
addi onal 3 detailed process control objec ves.
con nually research how to be er ana e IT adop on and
invest ent. IT is ore than just a delinea on of control
objec ves. It is a co plete fra ewor for the crea on and
So e es this involves the re-tar e n of eneral
aintenance of a syste of processes and controls
ana e ent techni ues. en it involves a confusin
appropriate to the business.
prolifera on of theories tools and techni ues tar e n the
any and varied ele ents of IT ac vity but rarely ta in a O App ch
holis c view of the proble . s a fir Infolo y has always sou ht to provide id-
O App ch S d O si ed co panies with the advanta es nor ally reserved for
the lar est and ost sophis cated enterprises. We adapt and
In a crowded field the wor done by The Infor a on
transfer the field tested e periences of lar e early adopter
Syste s udit and ontrol ssocia on IS stands out.
or ani a ons to the id-si ed ar etplace.
The IS is a reco ni ed leader in IT overnance control
and assurance o erin ori inal resources to assist enterprise or Governance wor we use IT as the underpinnin
leaders in their responsibility to a e IT successful in of fast-paced pra a c ini a ves a uned to the
suppor n the enterprise s ission and oals. or ani a onal and resource capabili es of our clients. We
scale the IT approach to the tas at hand usin its robust
COB T process base to ensure inte rity and best prac ce. We retain
The ontrol bjec ves for Infor a on and related all core a ributes to per it bench ar in between our
Technolo ies IT ra ewor is a se inal wor which we clients and other or ani a ons.
believe is a sound basis for a unified approach to IT
or e ec ve overnance to be i ple ented
perfor ance enhance ent. The IT ra ewor is bein
or ani a ons need to assess how well they are currently
for ally adopted by Global 2 co panies and is the
perfor in and iden fy where and how i prove ents can
inspira on of related e orts by fir s such as Infolo y who
be ade. This applies to both the overnance process itself
address the uni ue needs of id-si ed co panies.
and to all the processes that need to be ana ed within IT.
ontrol bjec ves for Infor a on and related
Technolo y helps eet ana e ent needs by brid in
The Infology Group, Inc.
4. IT Governance
PAGE 4
The Governance Scorecard
Control Process Maturity Levels
Categories 1. Without 2. Repeatable 3. Defined 4. Managed 5. Optimized
Business/IT Lack Limited Business/IT Good understand- Bonding, unified Informal, pervasive
1. Communication Understanding Understanding ing
Some technical Functional cost effi- Some cost effective- Cost effective; Extended to exter-
2. Metrics measurements ciency ness Some partner value nal partners
No formal process; Tactical at function- Relevant process Managed across Integrated across
3. Oversight reactive priorities al level across organization organization organization
Conflict; IT a cost of IT emerging as as- IT seen as asset; IT enables / drives IT & business
4. Partnership doing business set Process driver business strategy co-adaptive
Traditional office Transaction Integrated across Integrated with Evolve with partners
5. Technology support (e.g., ESS, DSS) the organization partners
IT takes risk, little Differs across func- Emerging as value Shared risk & re- Education/careers/
6. Human Resources reward; Technical tional organizations service provider; wards rewards across the
training Balanced Hiring organization
Figure 1.
The use of a scorecard reatly si plifies the tas of is chao c and there is only sporadic inconsistent
assess ent and i ple enta on. It provides a pra a c and co unica on on issues and responses to issues. There ay
structured approach for easurin how well developed your be so e ac nowled e ent of the need to capture the
processes are a ainst a consistent and easy-to-understand contribu on of IT to enterprise perfor ance. IT onitorin is
scale. sin a process aturity odel you can i ple ented reac vely to an incident that has caused so e
loss or e barrass ent to the or ani a on.
> uild a perspec ve of current prac ces that is shared
across internal and e ternal co uni es. Level or ani a ons are hi hly li ely to e perience
si nificant IT under-perfor ance but have no way of
> Set tar ets for future develop ents based on best
addressin the subject.
prac ces hi her up the scale.
L v l2– p bl p c
> lan projects to reach those tar ets by definin the
specific chan es re uired to i prove ana e ent. There is awareness of IT overnance issues. IT
overnance ac vi es and perfor ance indicators are under
> riori e project wor by iden fyin where the reatest
develop ent. Mana e ent has iden fied basic IT
i pact will be ade ost easily.
overnance easure ents and assess ent ethods and
i ure provides an overview of the adapted techni ues. owever the process has not been adopted
overnance scorecard that we have adopted. across the or ani a on. There is no for al trainin and
P c M i yL v l co unica on on overnance standards and responsibili es
are le to the individual. IT overnance ac vi es are
The rocess Maturity Levels reflect the followin
included in the or ani a on’s chan e ana e ent process
eneral states of IT overnance
with ac ve senior ana e ent involve ent and oversi ht.
L v l 1 – wi h p c
Level 2 or ani a ons can be characteri ed as be innin
rocesses are not applied at all or are ad hoc. The the overnance process. This ran in tends to reflect
or ani a on ay not even reco ni e that there is a a ributes reali ed at local units or func onal roups within
overnance issue to be addressed. Mana e ent’s approach
The Infology Group, Inc.
5. I Governan e
PAGE 5
the overall enterprise. However, overall enterprise pro ess etri s. All pro ess stakehol ers are aware of risks,
i prove ents re ain i lt to a hieve. he poten al the i portan e of I an the opport ni es it an o er. A on
opport nity is beginning to be re ognize . is taken in any, b t not all ases where pro esses appear
Level 3—defined process not to be working e e vely or e iently. Pro esses are
p ate an best internal pra es are enfor e . Root a se
he val e of I governan e is n erstoo an a epte .
analysis is being stan ar ize . on n o s i prove ent is
A baseline set of I governan e in i ators is se , where
beginning to be a resse . here is involve ent of all
linkages between o t o e eas res an perfor an e
re ire internal o ain e perts. I governan e evolves into
rivers are efine , o ente an integrate into strategi
an enterprise-wi e pro ess an is be o ing integrate with
an opera onal planning an onitoring pro esses.
enterprise governan e pro esses.
Pro e res are stan ar ize , o ente an i ple ente .
Manage ent has o ni ate stan ar ize pro e res evel organiza ons a vely anage I Governan e, to
an infor al training is establishe . Perfor an e in i ators reinfor e the on ept of I as a val e enter. evel
for all I governan e a vi es are being re or e an organiza ons leverage I assets on an enterprise-wi e basis
tra ke , lea ing to enterprise-wi e i prove ents. Altho gh an fo s appli a ons syste s on riving b siness pro ess
eas rable, pro e res are not sophis ate . is ng enhan e ents to obtain s stainable o pe ve a vantage.
pra es are for alize . ools are stan ar ize , sing A evel organiza on views I as an innova ve an
rrently available te hni es. It is, however, le to the i agina ve strategi ontrib tor to s ess.
in ivi al to get training, to follow the stan ar s an to apply Level 5 – op m ed process
the . Root a se analysis is o asionally applie . Most here is visionary n erstan ing of I governan e iss es
pro esses are onitore against so e baseline etri s, b t an sol ons. raining an o ni a on is s pporte by
any evia on, while ostly being a te pon by in ivi al lea ing e ge on epts an te hni es. Pro esses have been
ini a ve, wo l nlikely be ete te by anage ent. refine to the level of e ternal best pra es, base on
Nevertheless, overall a o ntability of key pro ess res lts of on n o s i prove ent an ben h arking with
perfor an e is lear an anage ent is rewar e base on other organiza ons. he i ple enta on of these prin iples
key perfor an e eas res. has le to an organiza on, people an pro esses that are
evel organiza ons an be hara terize as having i k to a apt an f lly s pport I governan e re ire ents.
establishe goo fo s on I Governan e. his level All proble s an evia ons are root a se analyze . I is
on entrates oversight, pro esses an o ni a ons on se in an e tensive, integrate an op ize anner to
spe ifi b siness ob e ves. I is be o ing e be e in the a to ate workflow an provi e tools to i prove ality an
b siness. evel leverages I assets on an enterprise-wi e e e veness. he risks an ret rns of the I pro esses are
basis an appli a ons syste s e onstrate planne , efine , balan e an o ni ate a ross the enterprise.
anage ire on away fro tra i onal transa on ternal e perts are leverage an ben h arks are se for
pro essing to syste s that se infor a on to ake b siness g i an e. Monitoring, an o ni a on abo t I
e isions. he inter-organiza onal te hnology infrastr t re Governan e e pe ta ons are pervasive an there is op al
evolves in partnership fashion. se of te hnology to s pport eas re ent, analysis,
Level 4 – managed process o ni a on an training. nterprise an I governan e
are strategi ally linke , leveraging te hnology an h an an
here is f ll n erstan ing of I governan e iss es at all
finan ial reso r es.
levels, s pporte by for al training. here is a lear
n erstan ing of who the I sto er is . Responsibili es evel organiza ons en oy op al I Governan e.
are efine an onitore thro gh servi e level agree ents. S staine governan e pro esses integrate the I strategi
I pro esses are aligne with the b siness an with the I planning pro ess with the strategi b siness pro ess. evel
strategy. I prove ent in I pro esses is base pri arily organiza ons leverage I assets on an enterprise-wi e basis
pon a an ta ve n erstan ing an it is possible to to e ten the rea h of the available inter-organiza onal
onitor an eas re o plian e with pro e res an infrastr t re into the s pply hains of sto ers an
The Infology Group, Inc.
6. I Governan e
PAGE 6
Control Categor es organiza ons, in l ing I 's involve ent in efining b siness
strategies, the egree of tr st between the two
here are si ontrol ategories, s pporte by thirty-
organiza ons, an how ea h per eives the ontrib on of
eight riteria, that a ress I Governan e perfor an e.
the other. Giving the I f n on the opport nity to have an
Comm n ca on e al role in efining b siness strategies is obvio sly
he e hange of i eas, knowle ge an infor a on i portant. How ea h organiza on per eives the ontrib on
a ong the I an b siness organiza ons, enabling both to of the other, the tr st that evelops a ong the par ipants,
have a lear n erstan ing of the o pany's strategies, ens ring appropriate b siness sponsors an ha pions of I
b siness an I environ ents, priori es an what st be en eavors, an the sharing of risks an rewar s are all a or
one to a hieve the . e ve e hange of i eas an a lear ontrib tors to at re governan e. his partnership sho l
n erstan ing of what it takes to ens re s essf l strategies evolve to a point where I both enables an rives hanges to
are high on the list of enablers an inhibitors to align ent. both b siness pro esses an strategies.
oo o en there is li le b siness awareness within I or li le 5 Technology
I appre ia on by the b siness. Given the yna i
he e tent to whi h I provi es appropriate an
environ ent in whi h ost organiza ons fin the selves,
a aptable syste s an servi es in s pport of the evolving
ens ring ongoing knowle ge sharing a ross organiza ons is
nee s of the b siness. his set of riteria ten s to assess
para o nt. Many fir s hoose to raw on liaisons to
infor a on te hnology at rity. he e tent to whi h I is
fa ilitate this knowle ge sharing.
able to:
2 Metr cs
> Go beyon the ba k o e an the front o e of the
he se of eas res that e onstrate the ontrib on
organiza on
of I reso r es to the b siness, in ter s that the b siness
> Ass e a role s ppor ng a fle ible infrastr t re that is
n erstan s an a epts. oo any I organiza ons annot
transparent to all b siness partners an sto ers
e onstrate their val e to the b siness in fa iliar ter s.
> val ate an apply e erging te hnologies e e vely
Fre ently b siness an I val e etri s i er. Servi e levels
> nable or rive b siness pro esses an strategies as a
that assess I 's o it ents to the b siness have to be
tr e stan ar an
e presse in ter s that the b siness n erstan s an
> Provi e sol ons sto izable to sto er an ven or
a epts. he servi e levels sho l be e to riteria that
nee s.
learly efine the rewar s an penal es for s rpassing or
issing the ob e ves. Fre ently organiza ons evote 6 H man Reso rces
signifi ant reso r es to eas ring perfor an e fa tors. his in l es pra es s h as training, perfor an e
However, they spen h less of their reso r es on taking fee ba k, en o raging innova on an provi ing areer
a on base on these eas re ents. opport ni es, as well as the I organiza on's rea iness for
3 Overs ght hange, apability for learning an ability to leverage new
i eas. Skills in l e all of the h an reso r e onsi era ons
he egree to whi h the a thority for aking I
for the organiza on. Going beyon the tra i onal
e isions is efine an share a ong anage ent, an the
onsi era ons s h as training, salary, perfor an e
pro esses anagers, in both I an b siness organiza ons,
fee ba k, an areer opport ni es, are fa tors that in l e
apply in se ng I priori es an the allo a on of I reso r es.
the organiza on's lt ral an so ial environ ent. Is the
ns ring that the appropriate b siness an I par ipants
organiza on rea y for hange in this yna i environ ent
for ally is ss an review the priori es an allo a on of I
Do in ivi als feel personally responsible for b siness
reso r es is a ong the ost i portant enablers/inhibitors of
innova on an in ivi als an organiza ons learn i kly
align ent. his e ision- aking a thority nee s to be learly
fro their e perien e Does the organiza on leverage
efine .
innova ve i eas an the spirit of entreprene rship hese
4 Partnersh p are so e of the i portant on i ons of op ize
he rela onship between the b siness an I organiza ons.
The Infology Group, Inc.
7. I Governan e
PAGE 7
Using he S ore ar
We have a opte a seven-step approa h that fo ses on at rity level of the organiza on's governan e an how the
n erstan ing eval a on riteria, a i izing pro ess organiza on an best pro ee .
enablers, an ini izing inhibitors. 4 naly e and pr or e gaps
Set the goals and establ sh a team he tea st re e ber that the p rpose of this step is
ns re that there is an e e ve b siness sponsor an to i en fy a vi es that will i prove siness-I integra on.
ha pion for the assess ent. Ne t, assign a tea of both On e it is n erstoo that the i erent opinions hel by the
b siness an I lea ers. Obtaining appropriate par ipants refle t the opport ni es for i prove ent, the
representa ves fro the a or b siness f n onal gro p agrees on ranking. he gaps between where the
organiza ons: Marke ng, Finan e, R D, Man fa t ring an organiza on is to ay an where the tea believes it sho l
Distrib on is ri al to the s ess of the assess ent. he be in the f t re are priori ze a er onsi era on of val e to
p rpose of the tea is to fairly s ore the I Governan e the b siness an ease of o ple on.
ranking. On e the pro ess is n erstoo , the tea is 5 Spec y ac ons
e pe te to efine opport ni es for enhan ing the
he priori ze list of gaps will rive fo s on spe ifi
har onio s rela onship of b siness an I .
a ons. il a governan e roa ap with learly efine
2 Understand the b s ness-IT l nkage eliverables, ownership, efra es, reso r es, risks, an
he I Governan e S ore ar is an i portant tool in eas re ents for ea h of the priori ze gaps.
n erstan ing the b siness-I linkage. he tea eval ates 6 Choose and eval ate s ccess cr ter a
ea h of the si riteria. A traine fa ilitator an be val able in
his step ne essitates revisi ng the goals an reg larly
g i ing the i portant is ssions.
is ssing the eas re ent riteria se to eval ate the
3 Complete the scorecard i ple enta on of the roa ap pro e ts. he review of the
he e ort epen s on the n ber of par ipants, the eas re ents sho l serve as a learning vehi le to
presen e of an e perien e fa ilitator, the egree of n erstan how an why the ob e ves are or are not being
onsens s re ire , an the level of etail of the et.
re o en a ons. a h of the riteria is assesse in ivi ally 7 S sta n mprovement
by a tea of I an b siness nit e e ves to eter ine the
So e proble s st won't go away. Why are so any of
ranking. he s ore ar per its any riterion to be allo ate
the inhibitors I relate his last step in the pro ess is o en
to two or ore rankings if there is an overall re ogni on that
the ost i lt. o s stain the benefit fro I , a "S staine
the organiza on tr ly has an neven perfor an e. While the
I prove ent ehavior" st be evelope an l vate .
s ore ar an ipates ea h riterion, within a ontrol
y a op ng s h behavior, o panies an in rease the
ategory, will be e ally weighte , the tea an agree to
poten al for a ore appropriate level of I Governan e an
o ify the weigh ng. he overall ranking is al late sing
reinfor e their ability to gain b siness val e fro I
the ategory weigh ngs. hese have been preset sing
invest ents. Hen e, on n o sly i proving I governan e
fee ba k fro any sers of the s ore ar , b t an be
stan ar s to i prove I integra on is key.
o ifie . Generally, it is the is ssions that ens e ring
the pro ess that pro ote n erstan ing of both the rrent
The o om L ne
Fo s on I Governan e an raise the val e of I to a higher level. We believe i -size o panies sho l strive to a ain
an overall s ore ar ranking in the range of 2.8 to . with so e perfor an e riteria rea hing evel perfor an e. Infology
oes not believe that i -size o panies an erive s ient benefit fro an overall evel or ranking to s fy the
invest ent re ire to a hieve the res lt. O r prag a approa h provi es signifi ant i prove ent with ely ret rn on
invest ent, while working in a fra ework g i ing the strategi ire on for f t re i prove ents.
The Infology Group, Inc.