How can a company establish the right IT governance process, guest blog by Tom Pettibone of Transition Partners.

Guest blog by Tom Pettibone, Founder and Managing Partner at Transition Partners, a management consultantcy. Tom served as SVP and CIO at several large corporations, including Philip Morris and New York Life.

Tom Pettibone, Transition PartnersResponsible companies spend wisely on Information Technology (IT). Whether focused on getting the most bang for the buck or battening down the hatches, proper management and oversight of IT expenditures is critical to business success. One of the biggest challenges is ensuring that capital allocation to new IT initiatives is aligned with the business objectives.

Successful companies effectively manage IT capital expenditures by establishing a proper structure and process to allocate funds – a Governance program. If the program is too casual, decision-making cannot be supported with adequate rigor. Conversely, a draconian Governance approach leads to unnecessary bureaucracy that paralyzes progress. Even in times of flat or shrinking budgets, effective IT Governance yields optimal resource allocation.

In addition, effective IT Governance is a big benefit to the CIO. It facilitates structured dialog, externally with top management and internally with the IT staff. It ensures that all arrows point towards achieving the business objectives by shifting “ownership” and priority-setting to the user and aligning responsibility with authority. No longer is the CIO the “judge and jury”, tasked with setting priorities single-handedly.

IT Governance ensures that all arrows point towards achieving the business objectives by shifting ownership to the user and aligning responsibility with authority.


How can a company establish the right governance process? Consider:

How are decisions made at the company? Review existing user decision-making processes and tools for applicability to IT governance. Determine how business cases are prepared and used. Discover if there are decision trees, hurdle rates or processes that are already used to make investment decisions. Evaluate the adaptability and adoptability of existing processes. Using existing processes can be an efficient way to launch an IT governance program.

How is IT work currently being performed? Review the organization structure and how IT communicates with management and the users. Review how IT currently carries out its duties including managing service requests. Understand how IT supports the business strategy and how IT manages and supports the application assets. Finally, identify the current backlog and the mix of support versus new work.

Also critical to effective Governance is the information used for project prioritization. User developed business cases include a project summary, cost-benefit summary, opportunity definition, alternatives considered, recommendations, justification, and implementation plan.

Several financial measures can be used for the cost-benefit analysis. All choices carry risks if they are not properly applied.

Financial Measures to Consider:

  • Return on Investment (ROI)
  • Economic Value Added (EVA)
  • Weighted Return on Investment (WROI)
  • Return on Assets (ROA)
  • Total Cost of Ownership (TCO)
  • Internal Rate of Return (IRR)
  • Return on Objective/Opportunity (ROO)
  • Payback
  • Net Present Value (NPV)
  • Net Assets Employed

There are also problems with indirect and intangible “soft” benefits such as:

  • Is “time saved” a benefit or only when there is a staff reduction?
  • Are better customer relationships a benefit or only when they result in increased sales?
  • How is increased productivity measured?
  • Is “cost avoidance” legitimate? Can it be quantified?
  • Should soft benefits be included and if so, how?

Several factors are important for efficiently and effectively deploying IT Governance. They include:
  • Active top management support.
  • One or more decision-making bodies with clear charters, processes and authority.
  • An approach to service request segmentation that focuses top management on the most important matters.
  • A business case process that ensures adequate user participation.
  • Accurate cost estimating of all activities, whether using internal or external resources.
  • A method for allocating project costs to users to align responsibility with authority.
  • Data collection processes that enable clear and accurate reporting of key activities.
  • Comprehensive reporting of key IT delivery metrics, including resource utilization and project status.
  • Processes for developing and maintaining IT strategy, business plans and budgets, project progress, and post-implementation reviews.

Management and users must be disciplined and buy in to the governance process. Changing corporate priorities and a reluctance by IT to say "no" can lead to dysfunction.

A successful governance process:
  1. Is simple yet effective,
  2. Meets the needs of the organization, and
  3. Secures user buy-in and ownership.


Finally, developing and implementing an effective IT Governance process is a major cultural shift and expert assistance may be required. IT Governance involves the entire company and effective processes must be carefully implemented to ensure user acceptance and ownership.

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