Lack of IT governance is putting business value at risk

Leveraging the value of IT investments and governance goes hand in hand, but formal adoption continues to lag.

“There’s been a lot of publicity given to IT governance over the last few years, yet the understanding and penetration of formal IT governance processes among organizations of all sizes is much lower than I would have expected,” says Tim Jennings, research director at Butler Group , a research and advisory group based in Birmingham, U.K, and the lead author of Butler’s IT Governance report.

The report defines IT governance as “the creation of a management framework by which an organization maximizes the value that it derives from IT in support of its strategic objective.”

Organizational strategies for IT investments typically fall into one of three general categories, each with different governance orientations:

Run the organization governance focuses on availability, reliability, and deploying IT at the lowest cost;

Change the organization governance focuses on customer satisfaction, productivity improvements, competitive insight, and cost advantage; and

Innovation “takes advantage of technology to create new products and services, or to take the company into new markets,” the report states.

Butler based the report on assessments of ongoing work with its clients. Jennings says the group employs a five-level IT organizational maturity model in evaluating the status of application of IT governance.

Proprietary solutions of IT and consultancy providers —whether based on public standards or not—are recognized as IT governance solution providers by 40 percent of respondents to a recent IT Governance Institute survey. The larger, well-known strategy consultancies such as McKinsey and Boston Consulting Group are recognized by 13 percent and 7 percent, respectively.

“We tend to characterize level two as being under the auspices of one or two individuals in the organization—chiefly the CIO,” he explains. “Level three involves introduction of formal processes or programs. There seems to be a glass ceiling between level three and moving to level four,” which is where organizations begin to focus on maximizing the investment of IT and what it delivers in terms of value to the business. There’s quite a substantial gap between these two positions.”

The slow adoption rate of IT governance and project & portfolio management (PPM) solutions is especially surprising given higher executive accountability surrounding financial statements and Sarbanes-Oxley compliance.

“We’re asking executives to sign off on various aspects of the organization as being accurately represented,” explains Jennings, adding that a lot of that falls within the scope of IT systems, and visibility to processes. “How can an executive feel confident that things have been done right, have been tested, and the results are satisfactory without formal IT governance processes,” he asks.

Large enterprises are further along, especially in terms of deploying sophisticated PPM tools—something other than spreadsheets—than small to midsize businesses.

“In larger organizations, where there are many more complex projects and business transformations under way, formal IT governance processes and portfolio management tools need to be put in place to get visibility into how the processes are delivering,” says Jennings. Leading vendors in this space include CA, Primavera, Compuware, IBM, and Hewlett-Packard, according to Butler Group.

“Typically, we see about 70 percent of the organizations using IT to run the business. Perhaps 20 percent are using it to change the business, and if you’re lucky, 10 percent are using it for innovation,” says Jennings.

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