In Part 1 of this series, I suggested that the implications of Enterprise 2.0 for the IT organization are dramatic. I also suggested that the ways of designing and executing an IT Operating Model in a Web 2.0 context are quite different from traditional approaches. In Part 2, I outlined the major elements of an IT Operating Model as being:
- Processes – how we perform activities that deliver predictable and repeatable business results through competent people using the right tools.
- Governance – how we make and sustain important decisions about IT.
- Sourcing – how we select and manage the sourcing of our IT products and services.
- Services – our portfolio of IT products and services.
- Measurement – how we measure and monitor our performance.
- Organization – how we structure and organize our IT capabilities.
In Part 3 we looked at how Web 2.0 approaches could transform the way IT processes are defined and managed. I now want to look at IT governance, and the implications of Web 2.0 for this ever important aspect of IT operating models. Due to the depth of this topic, I will discuss the facets and domains of IT governance in this post, then deal with the Web 2.0 implications in a subsequent post.
Facets of IT Governance
There are many definitions and descriptions of IT Governance, and frameworks such as COBIT that attempt to bring ‘best practices and processes’ to the domain. The two definitions I have landed on in my years of research and consulting in this space, are:
- A framework of decision rights and accountabilities to encourage desired behavior to realize maximum value from information technology.
- Aligning IT decision-making with enterprise governance and business unit objectives through an interrelated set of processes, policies and decision-making structures with clear goals, roles and functions, sponsored by the CEO, with clear consequences for compliance or lack thereof.
I like the first definition for its simplicity, getting to the heart of both ‘decision rights’ and ‘accountabilities’ through the lens of ‘behaviors’ all focused on maximizing the value realized through IT. This is pragmatic – you can define the types of behaviors you would like to see (e.g., business takes ownership for the business outcomes to be enabled by IT initiatives), or behaviors you are seeing but would like to eliminate (e.g., people see IT as a ‘free’ resource, and therefore use it with little or no regard as to its cost or value.)
I like the second definition in contrast for its recognition that IT governance is an extension of enterprise governance, and for its reference to ‘processes’, ‘policies’, and ‘decision-making structures.’ I also like the emphasis on CEO sponsorship and consequence management – i.e., governance with ‘teeth’.
I’ve come to view IT governance as a means to achieve balance between the competing forces of innovation versus standardization and business unit autonomy versus collaboration. I also see IT governance as a way to manage IT investments and assets as a resource that is shared by the enterprise. Finally, good IT governance provides a “transmission chain” for the highest level enterprise strategy, from senior executives on down through the organization. As such, IT governance is a critical alignment mechanism.
IT Governance Domains
Peter Weill and Jeanne W. Ross, in their excellent book, IT Governance: How Top Performers Manage IT Decision Rights for Superior Results, call out five decision domains of IT governance:
- IT Principles (strategic choices between competing perspectives. For example, ‘We will optimize IT investments for the enterprise rather than for individual business units.’)
- IT Architecture (“the organizing logic for data, applications, and infrastructure captured in a set of policies, relationships and technical choices.”)
- IT Infrastructure (“Centrally coordinated, shared IT services that provide the foundation for the enterprise’s IT capability.”)
- IT Investments and Prioritization (“How much and where to invest in IT, including project approvals and justification techniques.”)
- Business Application Needs (“Specifying the business need for purchased or internally developed IT applications.”)
While these domains may each be handled by different processes, policies and decision-making structures, all of these domains must be covered in ways that support a coherent strategy and set of beliefs about IT.
IT Governance, In Other Words…
IT governance deals with how the business makes decisions about the deployment and delivery of IT. When sound IT Governance is in place, senior executives not only know their organization’s IT plans and policies, they also know how they are made. IT governance is about the specification of decision rights and responsibilities required to ensure effective and efficient use of IT. As such, it deals with organizational power and influence, and therefore must be approached with care!
IT Governance 2.0
The implications of Web 2.0 on IT Governance are dramatic and far reaching! On the one hand, with ‘transparency’ a watchword of good governance, 2.0 capabilities offer several important mechanisms to bring transparency both to the design of effective IT governance processes and structures, and to their ongoing execution and management. On the other hand, dealing with decision rights and accountabilities in the types of highly diverse, distributed and fluid information environment enabled by social networking tools can become quite complex. We will dig deeper into the implications of Web 2.0 for IT governance in a subsequent post.
Image courtesy of The ERM Current