Has IT governance suddenly become passé? In a world where IT executives view ‘agile’ as critical to the success of digital transformation, governance can get unfairly categorized as process overhead, counterproductive to an agile approach where people trump process. The reality is that good IT governance is needed now more than ever as IT struggles to keep up with increasing business demand while, at the same time, maintaining control over costs and staying aligned to the business.
IT governance defined
Governance as a term often gets a bad rap, in part, because the word itself connotes control, process, and compliance. By that definition governance becomes the “anti-agile.” Governance also carries with it a stigma of being a reactive response put in place by IT to address complaints from the business:
- “We’re not getting enough value from IT.”
- “Our IT costs are too high.”
- “Projects are not completed on time.”
But while the term itself may come with baggage, at its very core, the goal of IT governance is about making sure IT dollars are spent on the right things and that those things get done right (meaning they net the highest return to the business). In fact, modern definitions of IT governance focus on business value and benefits versus what IT is or is not delivering.
In other words, governance today is about alignment, shared priorities, and coordination with the business – and that means people, not process, must be at the center of good governance. People-first governance must be built on transparency in order to create shared context and establish mutual trust and understanding.
“Good governance is about control, while great governance is about guidance and competitive advantage,” says Tina Nunno, vice president and distinguished analyst at Gartner. “One of the most important functions of governance is to provide controls that prevent chaotic or reckless behavior on the part of the organization and its people. Organizations with good IT governance enjoy benefits such as increased business value of IT-related assets. Strongly governed organizations receive 20 percent higher return on assets.”
Four IT governance success factors
Four overlapping factors make up a successful IT governance program: transparency, accountability, measurement, and alignment.
Transparency starts with the ability to understand costs in the right context. Exposing the true cost structure, drivers, and trends of IT services and projects helps the business begin to understand the full implications of IT investments and future decisions based on fact versus emotion. Transparency helps establish greater trust with business partners. It is arguably the most important factor in any successful IT governance initiative and provides a foundation for the following three factors.
Failure to deliver value to the business can have a serious impact on enterprise performance and competitiveness. But it’s hard to be accountable when you aren’t able to measure your investment against the value it generates. Improved cost transparency helps teams plot, execute, and report on value derived from IT initiatives. Having measurement capabilities in place is key and promotes shared ownership for IT services and projects.
Clarity of responsibilities is also critical to establishing good IT governance. Who’s in charge? Who are the stakeholders in the organization from the top on down? Who takes ownership and responsibility for business outcomes? Not everything is nor should be on IT's shoulders, says the IT Governance Institute (IGI).
Alignment with the business is critical today given a) the high-demand for IT's services and b) the vast array of choices the business has with regards to where they get those services (cloud, SaaS, and etc.). Yes, this is the same IT/business alignment catch phrase you've heard for years but if you think about critically, it makes sense: HR aligns with the business to hire the right people to move the strategy forward. Marketing doesn't just launch any old campaign, but focuses its resources on the markets and buyers the corporate strategy dictates, and so on. IT is no different—it shares the same objective to serve the needs of the business. Period.
Aligning with the business is a never-ending exercise that, if anything, needs more touchpoints these days, not less. IT governance helps businesses and IT coordinate their activities and resources in order to make the outcomes of these efforts successful.
"IT alignment is important," writes Richard Roth in NetworkWorld, "but it's nothing without IT governance. Instituting effective IT governance means sharing ownership of IT initiatives with other CxOs—without that, your program will fail."
Measurement looks at how well IT has delivered against expectations and stated business goals, as well as providing crucial guidance on what to do next. Measurement and transparency are linked because you can't achieve transparency without measuring performance. In other words, you have to some empirical evidence that what you are doing is working (or not working, as the case may be).
"Performance management is important because it verifies the achievement of strategic IT objectives and provides for a review of IT performance and the contribution of IT to the business (i.e., delivery of promised business value)," says IGI.
Measurement and transparency are also linked through the communication that must go on between the business and IT so that other IT governance efforts like alignment can be course-corrected as needed.
"For performance measurement to be successful, it is important to understand who the stakeholders are and what their specific requirements and drivers are so that the performance measurements will be meaningful to them," says IGI.
IT governance builds executive confidence
This shift in the way we think about IT governance is about inspiring versus commanding cooperation. Having processes in place that measure and help calibrate key functions—functions that are accelerating or decreasing the value proposition—will always be critical, but how you position and manage those functions today depends on how well you embrace transparency, accountability, measurement, and alignment.
As businesses rely more and more on IT for their success, the way IT is governed will make a big impact. Ultimately, it isn’t about the framework you use—it's about making sure that IT is returning value to the business that justifies the spend. Having the right controls and reporting in place builds executive confidence that IT teams are asking for the right things and investing in the right places.