IT Governance in Organizations Experiencing Decentralization. Jelena Zdravkovic

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1 IT Governance in Organizations Experiencing Decentralization Jelena Zdravkovic Department of Computer & Systems Sciences (DSV), Stockholm University, Sweden Giannoulis

2 About the Speaker Title: Associate Professor, Head of the IS unit at DSV/SU Accomplishments: Research and industrial experience in informa?on systems engineering Research focus: Business/IT alignment, Enterprise Modeling, Requirements Engineering, Sorbonne, RE 2005

3 Outline Background Challenge Concepts for reasoning about decentraliza?on Current EA frameworks/em techniques Guidelines for IT Governance From Guidelines to PaOerns Conclusions and future work

4 Background Enterprises have tradi?onally implemented formal, centralized forms of organiza?onal structure, such as hierarchical. This allows for management to have a high degree of control as well to enforce compliance with standards, procedures and policies which results in a highly stable enterprise. However, this comes at the expense of agility - is difficult for these organiza?ons to quickly adapt to a changing environment. The objec?ve of EA frameworks created in early 1990s was to align IT capabili?es with business needs via IT centraliza?on. The main price to pay was the loss of flexibility and the iner?a in decision making for IT. By that?me, this was much less cri?cal than to make the IT "disciplined" and to jus?fy the investments in IT.

5 Background Common aspects of modern business environments include changing business ac?vi?es and agile processes, transparent boundaries, loose business en??es, coopera?on with different organiza?ons, and rapidly changing compe??ve landscapes. Flexibility in IT becomes more and more strategic, and it is impossible to centralize it. On the other hand, it is s?ll important to maintain a "disciplined" approach in IT evolu?on using appropriate IT governance principles so that organiza?onal en??es not only remain independent but could also efficiently work together as a whole.

6 Background

7 (De)centralized OrganizaBons Property Centralized Decentralized Single loca?on Geographical dispersion Geographically distributed with a reliance on IS to work together CoordinaBon: authority, decision rights, and regulabons CommunicaBon paierns Ver?cal coordina?on: decision rights are strictly defined and act down from the top; strict governance and control by the upper management; rigid structuring of accounta- bility, roles and responsibili?es; standardized methods and proce- dures; homogeneous goals set by high- level authori?es Communica?on paoerns follow the hierarchy; direct interac?ons and communica-?ons are not prac?ced Lateral coordina?on: authority and decision making rights are pushed down to the level of business units, groups, or even individuals who can define their own roles and responsibili?es; heterogeneous goals; these en??es in the organiza?on are collab- ora?vely working towards some common or complemen?ng goals Lateral communica?on lines, flexible, constantly changing; project- oriented teams.

8 Challenge IT Governance is a subset discipline of corporate governance that ensure that the organiza?on s IT sustains and extends the organiza?on s business (strategy) and objec?ves. The role of EA is to provide the organiza?ons with a roadmap for crea?on and evolu?on of their informa?on systems. IT Governance EA designed upon > Organizational Structure The three concepts in focus interrelate - EA should be compliant with IT governance by including its principles or correlaeng with them, and designed to reflect a given OrganizaEonal Structure.

9 Current EA Component EA Method EA DescripBon EA Engine ExisBng support for centralized organizabons Approval process is based on hierarchy; architecture development is coordinated, supervised and evaluated by well- defined roles in a company; EA teams coordinate work and communicate results; results are controlled and evaluated centrally. Hierarchy of architecture principles; a common set of reference models; hierarchical organiza?on of EA ar?facts with explicitly defined roles and domains. ExisBng support for decentralized organizabons Federated architectures; possibility to adapt ADM for specific organiza?ons; architecture development process involves mul?ple stakeholders. Architecture par??ons; architecture reference models; segment architecture; the concept of shared vision. Architecture board; formal governance Integra?on of various framework; common principles for (segment) architectures is en?re organiza?on (global commitment assured by (centralized) is taken for granted); centrally managed management and governance. architecture repository.

10 Current EM

11 CoordinaBon and communicabon CENTRALIZED FEDERATED DECENTRALIZED Problem 1: IT ini?a?ves are inefficient when a federated/ decentralized organiza?on uses EA/EM principles relying on centralized coordina?on and communica?on. Problem 2: IT ini?a?ves are inefficient when a decentralized organiza?on uses EA/EM principles relying on federated/ centralized coordina?on and communica?on.

12 Peer- to- Peer Principles OrganizaEons are seen as composed of peers - a peer is an organiza?on en?ty at any level Peer Produc?on: produc?on of artefacts that is self- selected and decentralized, rather than hierarchically assigned. Peers act according to their own will rather than being directed by a central figure, and willingly coordina?ng with other peers by expressing their own views while understanding the views of others. Instead of a central board responsible for making decisions, a model based on the principle of peer produc?on for relevance/accredita?on could be used instead. This would beoer support decentraliza?on as decision making would then be distributed amongst the peers that make the organiza?on. Peer Trust Management: As peers are able to operate in a completely independent manner, there exists the problem of knowing whether a contribu?on is trustworthy or not. Instead of an approval process in the presence of a centralized authority, whether some content proposed by a peer is of a sufficient quality to be included in the overall architecture, is evaluated by other peers (reviewing)

13 Guidelines for IT Governance for Decentralized OrganizaBons - Based on IT governance principles defined by Weill and Ross - AcBvely design governance Know when to redesign Make choices Provide the right incenbves Design governance at mulbple organizabonal levels Provide transparency and educabon

14 AcBvely Design Governance Involving senior corporate execueves taking the lead and allocaeng resources, aueneon, and support to the process. Due to management decentraliza?on senior execu?ves do not play the leading role in the design process. R1 R2 With a lack of centralized coordina?on, this ac?vity has to be grounded on the principles such as distributed content (peer) produc?on, and group decision- making by peer reviewing/ranking. Mechanisms suppor?ng lateral communica?on paoerns (informal social exchange, semi- formal discussions, peer- reviewing) have to be encouraged replacing ver?cal (hierarchy- based) communica?on paoerns. IT governance should encourage collabora?ve design, where each unit can easily benefit from, and contribute to a common organiza?onal knowledge, by for instance adop?on of IT- based knowledge management and social tools. FO/R IT governance needs to support the synergy of units at the corporate level, and units autonomy at the unit level, by combining hierarchical as well as lateral communica?on and coordina?on paoerns.

15 Know When to Redesign Rethinking the whole governance structure requires that individuals learn new roles and relaeonships. Learning takes Eme. Thus, governance redesign should be infrequent. En??es in decentralized organiza?ons can redesign the IT governance locally. Thus, on the smaller scale, the organiza?onal learning takes less?me and changes can be made more frequently. R1 R2 IT governance needs to encourage shorter cycles of organiza?onal learning for more flexibility and agility. Systema?c sharing of prac?ce and lessons learned has to be an integrated part of any governance redesign - communi?es of prac?ce, social networks, and document libraries are the examples of tools facilita?ng knowledge sharing. FO/R IT governance needs to support short cycles of organiza?onal learning at the unit level and long cycles at the corporate level.

16 Make Choices Governance can and should highlight confliceng goals for debate. As the number of tradeoffs increases, governance becomes more complex. Top- performing enterprises handle goal conflicts with a few clear business principles. Having autonomy, units can have different (and conflic?ng) goals. Peer mechanisms should be adopted for communica?ng and coordina?ng conflict- solving and decision- making. R1 IT governance needs to support local en??es goals suppor?ng group decision making. Peer trust management through peer s history, peer reviewing, peer ranking are the mechanisms that can support democra?c choice in decentralized organiza?ons. FO/R IT governance needs to support both centralized and decentralized mechanisms for decision making: democra?c choice on the unit level, and compliance with few high level business principles.

17 Provide the Right IncenBves To be effeceve, IT governance should be designed in the alignment with the organizaeonal inceneves and awards. In decentralized organiza?ons units can produce collec?vely by synergy, or individually. The challenge is to encourage units synergy at the organiza?on level to reach typically higher benefits. R1 IT governance should encourage peer- produc?on based on collabora?on among business units who cooperate without relying on either market pricing or managerial hierarchies, but rather on non- market incen?ves such as innova?on, organiza?on's reputa?on, etc.. FO/R Encourage units synergy at the corporate level and units autonomy - locally. To do so, the organiza?on has to promote the culture of collabora?on rather than compe??on.

18 Design Governance at Different Levels In large organizaeons, it is necessary to consider IT governance at several levels. The stareng point is enterprise- wide IT governance driven by a small number of enterprise- wide strategies and goals. Governance arrangements for decentralized organiza?ons can vary from a set of autonomous silos to a single, distributed IT governance resulted from collabora?ve efforts of individual en??es. R1 Distributed IT governance can be encouraged in the organiza?ons with coopera?ve culture. IT governance in silos can be supported in highly compe??ve environments. In both cases, only one governance level exists. FO IT governance needs to be defined at (at least) two levels: corporate and unit.

19 Provide Transparency and EducaBon The more transparency&educaeon of governance processes, the more confidence in the governance. The less transparent the governance processes are, the less people follow them. CommunicaEng and supporeng IT governance is the single most important IT role of senior leaders. Communica?ng and coordina?ng IT governance is the role of organiza?ons en??es. R1 R2 IT governance needs to ensure employees involvement into the IT governance design process. Distributed content produc?on and management, using social sogware. To foster the educa?on and organiza?onal learning, IT governance needs to extensively use lateral communica?on paoerns. FO The role of senior leaders is to setup learning objec?ves, to supervise the educa?on process, and to evaluate its outcomes.

20 Guidelines for IT Governance for Decentralized OrganizaBons - The COBIT framework - Manage Third- party Services Manage Performance and Capacity Ensure Con?nuous Service Ensure Systems Security Iden?fy and Allocate Costs Educate and Train Users Manage Service Desk and Incidents Manage the Configura?on Manage Problems Manage Data etc.

21 PaIerns For example, Transparency and Educa?on for Federated Organiza?on (W&R), or Manage Data in Decentralized Organiza?on (COBIT) Why paoerns? For packaging non- trivial solu?ons, for sharing best- prac?ces, for automa?on through models, etc.

22 Conclusions&Future Work EA&EM principles have to be designed upon an evolving organiza?onal structure by acknowledging novel modes of coordina?on and communica?on. EA&EM has to be aligned with established IT governance principles and processes; in par?cular, it has to adequately support decentraliza?on and to ensure efficient coordina?on and communica?on between organiza?onal center and its sub- en??es. Applicability and further elabora?on of paoerns.

23 Merci / Thank you Contacts: Jelena Zdravkovic, Irina Rychkova, paris1.fr

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