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  • April 24, 2008

  • Education Series - IT Governance

    By: Jody Jankovsky, Owner and Managing Member 

    November 2007


     

    Black|Line Consulting is proud to bring you the November issue of our Education Series.  We’ve focused this month’s installment on the importance of IT Governance, a seldom discussed and little understood aspect of information technology services.  It is our hope that November’s educational publication will strengthen your understanding of IT Governance, as well as help to solidify and improve upon the way in which you view both your IT investment and your relationship with us, Black|Line Consulting.

    What is IT Governance?

    Although everyone would agree that information technologies are necessary for the success of any business, many executives at small-to mid-sized companies regard IT as one of the most obstinate and fickle components of their organizations.  By viewing IT as a cost to be minimized, executives fail to recognize the true value that IT can bring to an organization.  And as a result, the ability to harness technology for increased productivity remains untapped.  By treating IT as an investment, effective governance ensures that information technologies are leveraged at their greatest potential, which equates to greater production and profitability for the core business.

    IT Governance = the road to understanding your investment in information technologies.   Governance takes the mystery out of IT, because there should be no guess work involved: increasing productivity through technology is as much as guaranteed with a well-governed IT strategy.  Enabling businesses to manage technology as they would any other aspect of their companies, IT governance explains why, how, and what you are doing with your investment in technology.

    What does it mean for my organization?

    A recent study performed by Weill and Broadbentfound that top-performing enterprises surpass their competition through IT governance which firmly supports their business strategies and goals.  According to the results of the study, firms with above-average IT governance had more than 20% higher profits than firms without such strongly defined IT strategies.  Furthermore, those same companies also saw a striking 40% return on their technological assets alone.  Statistics like these clearly indicate how sturdy IT governance ensures a profitable return on your IT investment, and in more ways than just one.

    How does IT Governance work?

    Along with Weill and Broadbent’s study, our experience with clients and IT services has continually exposed the significance of even the most basic function of governance, which is to align the management and implementation of technologies with the overall goals and objectives of a client’s business.  However, because governance is a process of definition and systematization, it is not always the easiest to comprehensively describe.  As a result, we have decided to focus our discussion on what we consider to be the three most considerable aspects of governance: IT Principles, IT Investments, and IT Decisions.

    • IT Principles – As mentioned above, IT governance aligns information technology with the goals of your business. This alignment process ultimately takes place at the level of principles.  The goals and objectives of a client’s business are first shared to determine the most pertinent operational goals, and IT principles are then specifically identified from within the context of these client-defined strategic goals.  This process is essential, because different organizations will undoubtedly have different needs when it comes to IT.

    Example: A bank would likely have an operational principle of ensuring the highest security on client information, whereas a convenience store would have a much lower standard of security for customer data.  This contrast is extremely important, because each business organization will focus a completely different level of capital at the level of this single aspect of technology.

    Through this intensive alignment of principles, IT governance defines the process of generating, implementing, and maintaining IT strategies that are specifically geared to assist each client on an individual basis.  As a result of governance, clients are assured that their most vital functions and goals are addressed through their IT.

    • IT Investments – In order for information technologies to incite growth for clients, IT must first and foremost be treated and managed as a strategic investment. One of the greatest challenges of IT consultants is to encourage clients to acknowledge their IT as an investment.  Often times, clients have had previous experience with poorly governed IT, and hold the opinion that it is simply an unpredictable and often unmanageable operational cost.  With strong governance, however, information technologies operate as they should, as an investment that will drive the growth of a client’s organization.  IT governance lays the necessary foundation for properly managing IT investments and ensures a profitable use of capital.
    • IT Decisions – Because the successful operation of an IT strategy depends largely on the relationship between the client company and the many technology organizations supporting it, a good number of people are involved in the process. With so many different roles and responsibilities, decision making can become the most complex aspect of strategic IT management.  Making the correct decisions in the right situations is crucial, so IT governance defines the roles of those involved in decision making, on both the ‘technologies provider’ and ‘client’ sides.  As a business owner, you already know that when the right people are put in the right positions, the right decisions are made – both increasing revenue and saving valuable time.  IT governance identifies the roles of those involved in making decisions so there is no guessing when it comes to your IT investment.  The goal is to ensure that the right people with the right knowledge and expertise are making decisions in every situation that involves your company’s IT.

    IT governance demystifies information technologies by taking the guess work out of managing IT.  Because technology is itself constantly changing and thereby eminently confusing, it is only natural for business owners to feel they are in uncharted territory when it comes to managing their information technologies.  And consequently, many view IT as an unmanageable cost, rather than the investment that it is.  With a strong system of management as defined by governance, businesses will undoubtedly experience the ways in which an investment in technology leads the way to greater production and efficiency.  The key is to start with a well-defined IT strategic plan, which is the sole purpose of governance when it comes to managing your IT investments.

    1. Peter Weill and Jeanne W. Ross, IT Governance: How Top Performers Manage IT Decision Rights for Superior Results (Boston: Harvard Business School Press, 2004) 2.

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