IT Governance Principles & Key Metrics

Transcription

1 IT Governance Principes & Key Metrics Smawood Maike & Associates, Inc W. 110th Street 51 Corporate Woods, Suite 500 Overand Park, KS Office:

2 Good governance processes that moves decision making from IT to the business forces business to make strategic decisions Governance and Organizationa Opportunities Refine Resource Aocation Deveop comprehensive Staffing Pan/Resource Load to manage resources Strategic Top-Down Approach to Budget Panning; deveop preiminary pans for Maintenance, Enhancement, New Deveopment Deveop Performance and Business Metrics for I/T Make business accountabe for technoogy pans; impement ROI Process to articuate business vaue of project Expore performance management metrics: exampe Baanced Scorecard Refine Organization mode Tweak governance process to provide ownership business users Project Management Impement SDLC to manage project ifecyce Create reease schedue for enhancement and maintenance; better manage change Process November 08 PROPRIETARY AND CONFIDENTIAL Smawood Maike & Associates. A rights reserved. 2

3 Three evers can be used to optimize an IT Organization s Governance system - structure, enabers, and process Structure: consists of the actua design of the organization units, the reporting reationships, roes, accountabiities, and poicies that define work for the units, the resources aotted to them and the forma definitions of the inkages among units Enabers: consists of organization programs, practices, systems or toos which make the structure work as intended and promote the desired types of behavior; exampes incude training and performance management Behavior: consists of how peope communicate and share information, how decisions are made, how confict is resoved, etc.; incudes vaues and cuture Designed to Accommodate Desired B Structure Designed to Accommodate Desired Behavior Faciitate Structura Performance Faciitate Achievement of Desired Behavior Structura Enabers Behavior Behavior is Consistent with Structura Goas November 08 PROPRIETARY AND CONFIDENTIAL Smawood Maike & Associates. A rights reserved. 3

4 An organization's on the roe of IT couped with the maturity of Business Environment New Market Entrant IT Roe: Tactica/ Utiity The Buter: "IT provides support services but is not strategicay important" Minimized governance Anticipate business needs Portfoios for focus Low governance overhead The Grinder IT is a cost of doing business Governance as sef- protection Principes for focus Benefits reaization for vaue The Entrepreneur "IT is the driver of our business mode No time for IT governance Principes for speed/quaity baance Cost usuay not a factor The Team Payer "We are dependent on IT systems in our business operations Forma coaborative governance Cear decision rights Focus on benefits reaization Agie governance processes Strong ROI criteria IT Roe: Strategic/ Transformationa Mature Market November 08 PROPRIETARY AND CONFIDENTIAL Smawood Maike & Associates. A rights reserved. 4

5 A critica component for successfu decision making is defining a business case process that accuratey baances business unit priorities with enterprise strategies and objectives. The foowing types of measures are suggested for consideration in defining the business case process: Quantitative Return on investment Return of portfoio (of projects) Customer portfoio New customer acquisition Customer retention Investment for future returns Project risk eve Project hurde rate Project break-even term Discount rate Economic benefit (NPV $) Initia Investment Assumptions Risk Quaitative Competitive Advantage Opportunity Costs Customer Satisfaction Brand equity Compeing customer experience Dependency Project dependencies on other organization entities invovement Other organization entities project dependencies on current projects Risk Company Reputation Execution Personne Deveopment Brand Vaue Business Case Management Measures performance Deveops accountabiity Manages projects as a portfoio Manages variabiity November 08 PROPRIETARY AND CONFIDENTIAL Smawood Maike & Associates. A rights reserved. 5

6 The foowing process is an exampe of the decision making process for a Governance Process IT Governance Board approves IT Pan They ratify the Steering Committee decisions on project prioritization changes They authorize or decine additiona funding requests Business Unit Identifies a New Project Business Steering committee discusses project with IT Steering Committee Reviews Project Proposa Deveops Business Case Assesses project tradeoffs with approved projects IT and business work together considering tradeoffs between proposed project and enterprise impications Business prioritizes project in project ist based on business case They confirm the positioning of the project in their project portfoio If the business unit wants to deactivate a current project to activate proposed project, can authorize it If the proposed project requires additiona funding, the Steering committee wi present the request to the IT Governance Board November 08 PROPRIETARY AND CONFIDENTIAL Smawood Maike & Associates. A rights reserved. 6

7 Looking at your IT spend in the context of a vaue chain can hep articuate the business vaue of the spend IT Vaue Chain Primary Processes Support Processes IT Infrastructure Funds Management Budgeting Financia Contro Resource Management Personne Panning IT Personne Training Technoogy Deveopment Panning Poicies and Procedures Standards Compiance Management Practices Competitive Benchmarks Governance Poicies Accounting Chargeback Performance Management Quaity Programs Skis and Competency Mgmt. Recruiting Compensation Poicy User Training Personne Management R&D Toos and Techniques Emerging Technoogy Research Standards and Specifications Technoogy Management Procurement Purchasing Vendor Negotiations Design IT Principes IT Architecture - Appications - Data - Technoogy - Information Directory Data Modeing Soution Aternatives Process Modeing Process and Information Specs Appication Specs Buid and Impement Buid vs. Buy vs. Outsource Custom Appication Deveopment Package Instaation Vendor Evauation and Management Contracts Operate Utiity (Data Center) Respond to Probems Provide Information Access Security, Backup, and Recovery Distributed Computing Desktop Instaation LANs Data Communication Voice Communication Sourcing Decisions Aiance/Partnership Management Maintain and Service Maintain IT Infrastructure Hep Desk Systems S/W Technica Support Appications S/W Technica Support Probem and Change Management EUC Hep Desk Workstations Service Leves User Liaison November 08 PROPRIETARY AND CONFIDENTIAL Smawood Maike & Associates. A rights reserved. 7

8 IT Metrics Key Metrics to Hep Manage Business

9 Key Metrics Provide insights and exampes of budgeting best practices. Introduce toos and techniques to aid in the coaboration of IT and business Discuss the importance of deveoping various scenario pans and introduce toos that can faciitate the creation and impementation of these pans Identify key IT Spending performance indicators for the business and for IT; provide tookit for coecting this data in your own organization. Use metrics that can be used a transators within organizations to enabe effective twoway understanding between Finance and IT We recommend specific governance processes and organizationa structures to faciitate process Appy portfoio management techniques to articuate business - provide tips on how to effectivey measure and communicate IT cost to deiverabes and vaue for new initiatives, incrementa enhancements, and the often overooked but necessary maintenance efforts November 08 PROPRIETARY AND CONFIDENTIAL Smawood Maike & Associates. A rights reserved. 9

10 Two type of IT Spending Metrics Spending Metrics for Management : Connected to business Outcomes (effectiveness metrics) which measure if you working on the right things quaitative Exampes: New products avaiabiity/market share, improved customer oyaty, combined ratio hard to quantify IT impact but needs to be attempted IT Cost per function (Poicy, caim, etc.) Accurate and timey and HONEST Forecasting being under-budget can be just as bad (sometimes worse) than over budget. Scenario Panning: Pan for downturns in the market be the first to the tabe to discuss cost reductions.... With exception of marketing, IT probaby has the most variabe spend. Discretionary cash spend. What amount of cash do I have for project and enhancements? IT Spend Management Metrics: Measure how we IT is operating (Efficiency metrics) highy quantitative Trend anaysis is key spot outiers/deviation from time periods Exampes TCO: How much per Unit Lights-on vs. Discretionary (great metric, but no context for business) Peope (FTE, Staff Augmentation), cost per hour metrics, staffing trends HWSW Services (biz continuity, outsourced function) November 08 PROPRIETARY AND CONFIDENTIAL Smawood Maike & Associates. A rights reserved. 10

11 Potting projects using a Portfoio approach can hep visuaize project spend Higher Revoutionary New Vaue Deivery Impact Same Lower Breakthrough New Off the shef Technoogica Innovation Lower Breakthrough Breakthrough/Frontier Appications - new patform and/or estabishes a new core customer soution Enabe significant change in the business mode from new markets, products and services, production capabiities and deivery channes, or by providing a sustainabe competitive advantage. Potentia exist to spearhead the entry of the firm into a new business. High risk & high return for these projects Patform Patform/Enhancement Appications - Required competency (ante to compete) Must do as cost effectivey as possibe with high reiabiity, suitabiity. Contributions to productivity, customer satisfaction, production and product and service access. Usuay provide transactiona and data support to operations or assist in operationa decision making. Incrementa Extending the ife of customer soutions. Exampes: Appications such as payro or genera edger that are necessary to the operation of the business but make itte or no competitive or financia operating contribution. Maintenance/Infrastructure Production support(7x24), break/fix: services supporting the execution of business and IT departmenta processes Exampes: data center operations, network operations and hep desk services November 08 PROPRIETARY AND CONFIDENTIAL Smawood Maike & Associates. A rights reserved. 11

12 Pease ook for other Smawood Maike 2009 IT Spend insights, research, pod casts & feature artices on ebizq.net November 08 PROPRIETARY AND CONFIDENTIAL Smawood Maike & Associates. A rights reserved. 12