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IT Governance Important For ITSM Implementations

By Bill Powell IT Governance is necessary to achieve and realize the benefits from ITIL and IT Service Management implementations.
Jun 20, 2005

ITSM Watch Staff

By Bill Powell
IT Governance can be defined as specifying the decision rights and the decision-making mechanisms to foster the desired behavior in the use of IT. To help understand, design, and communicate effective IT governance, a decision rights and accountability framework can be constructed that answers the following questions:
  • What decisions must be made?
  • Who will be making the decision?
  • What information will the person possess?
  • Who is accountable for the decision made?
  • How is the decision outcome measured?
IT Governance should define and implement direction, control, execution, communication and guiding principles involved in the decisions rights framework (1).

The Importance of IT Governance
Historically, the industry has lacked innovative approaches to defining optimum IT and IT outsourcing governance frameworks. A major concern should be to enable business results through information technology as an enabler. Important governance lessons can be learned from companies that have achieved significant value through the effective use of commercial data centers or internal IT operations. Case studies have been written about in the book IT Governance by Jeanne W Ross of the Sloan School of Business Management.

Adam Smith raised the question as early as 1776 when he argued that the separation of ownership and control in large publicly listed corporations created poor incentives for professional managers to operate the firms efficiently:

    "The directors of such [public] companies, however, being the managers rather of other people's money than of their own, it cannot well be expected that they should watch over it with the same anxious vigilance with which the partners in a private copartnery frequently watch over their own. ...Negligence and profusion, therefore, must always prevail, more or less, in the management of the affairs of such a company." - The Wealth of Nations, 1776
If there is a difference with the past, it seems to be in the scale of the financial and economic consequences that have stemmed from the more recent episodes of misconduct.

Governance has always been an integral part of IT management. In addition to regulatory compliance, effective businesses have realized that focusing on technology, organizational structure and even process design itself does not deliver business results. Governance is required to implement the processes into the organization. Achieving business results has always been dependant on effective governance linked to effective and efficient execution. Effective Governance overcomes the limitations inherent in any organizational structure.

Every company should be concerned with governance, not only due to regulatory compliance and risk concerns, but because of the benefits that it brings.

The Advantages of IT Governance
Some of the advantages of effective governance include the following:

  1. Achieve business objectives by ensuring that each element of the mission and strategy are assigned and managed.
  2. Defining and encouraging desirable behavior in the use of IT and in the execution of IT outsourcing arrangements.
  3. Implementing and integrating the desired business processes into the organization.
  4. Providing stability and overcoming the limitations of organizational structure.
  5. Improving customer relationships and satisfaction, and reducing internal territorial strife by formally integrating the customers, business units, and external IT providers into a holistic IT governance framework with clarity and transparency.
The Benefits of IT Governance
Listed below are some of the management, stockholder, employee, customer and external IT provider and partner benefits.

Management - Management receives benefit from having clearly assigned roles and responsibilities for executing the strategy and a defined and improvable approach to encouraging desirable behavior. Overlapping or unclear governance results in internal friction, "territorial" strife and inefficient service operations.

Stockholders and other Stakeholders - Stockholders and other stakeholders receive benefit by having a clearly defined decision and accountability framework for achieving business objectives. Clarity in who makes decisions, what decisions they can make and how the decisions ought to be made reduces confusion and improves management effectives. According to one study of hundreds of corporations, the companies with effective governance produce more value than companies with ineffective governance. Improved margins can result from eliminating redundancy, overlap and lack of governance clarity.

Employees - Employees benefit by have a clarified decision rights and accountability framework. When there is no confusion regarding who is responsible for what decisions and how the decisions are made, they are happier and can focus their energies on their primary job responsibility. Overlapping or confusing governance can lead to intra company "poaching," competition, and attrition. Employee satisfaction and retention are produced by effective and clear governance. Governance transparency can improve employee retention as well as business results.

Customers - Effective governance enables the customer to influence the management decisions made by their service providers. Governance also enables more effective and efficient service delivery that is responsive to customer and business needs and concerns. Transparency in governance enables customers to know how to influence their service providers when they are dissatisfied or have a desire of a change to services.

External IT Providers and Partners - External IT providers and partners benefit from effective governance by receiving clear direction on the optimum use of IT enabling an effective, efficient and adaptable relationship. Without effective governance, external relationships are typically marked by low value and high "churn." These characteristics lead to high expenses and low returns on investment (2).

There is no one Governance framework that is best for all companies. A preferred approach to governance is to use a structured approach to define what the best framework would be based on the business and IT strategy and the current environment.

The best governance solution could then be defined based on an evaluation of all the potential governance approaches and a selection of the best approach to achieving the desired results given the current situation. Governance should include an approach to exception handling and continuous improvement. Static governance models only work well in stable environments with unchanging business conditions.

Governance in multi sourced environments is a critical success factor for today's complex IT environment. Other frameworks don't address outsourcing. Highly out-sourced or multi sourced environments characterize most companies today. Effective governance of these complex IT environments is vital to value delivery.

COBIT and ITIL are compatible frameworks that can provide contributions to effective governance. COBIT provides an audit framework for IT control objectives frequently leveraged by SOX and other IT auditors. It is an audit framework, written by auditors, for auditors.

The results of a typical audit include a list of control objectives that require remediation. ITIL describes service management best practices for the various IT management control objectives. The planning, design and implementation of service management best practices is a third discipline that typically will rely on inputs from COBIT, ITIL and other sources.

(1, 2) Source: IT Governance. Harvard Business School Press and IBM ITIL Design and Implementation Method.

Bill Powell is a senior consultant within IBM Global Services and a certified IT Service Manager. He serves on the itSMF USA management advisory board and in other capacities. He has developed and delivered a full spectrum of ITIL and Service Management education globally. He also coordinates a global ITIL community of practice within IBM Global Services and developed ITIL and service management related methods and intellectual capital used to speed the time to implementation for key service management best practices.