IS/IT Governance

by the University of Minnesota ( knowledge Source: Gautam Ray)

The IS/IT Governance address this basic question,

how to make good IT investment decisions and realize the value of these investments?

Why Learn IS/IT Governance :

• Ensuring that a given IT investment that your firm makes is aligned with the goals and strategy of the organization.
• Designing appropriate governance mechanisms to realize the value of the investment.
• Evaluating individual IT investment.
• Incorporating risk in IT investment analysis.
• Evaluating the fit of the IT investment with the overall IT investment portfolio of the firm.
• Designing appropriate mechanisms to charge for IT investment.
• Finally, Designing a change management strategy to implement the proposed system

IT Alignment is about making sure that IT investments are aligned with business goals and strategies. This is an issue of IT Governance that is leadership, organizational structures, and processes that ensure that the enterprise’s information technology supports the organization’s strategies and objectives.
A very important concept in aligning IT with business goals and strategies is the concept of the operating model.

The operating model is how standardized the processes of a firm are across the different divisions or business units of the firm, and how much data is shared across the different business units of a form.

The operating model influences enterprise architecture.

The Enterprise Architecture is the definition of how the organization performs different activities and what is the standardization of applications, data, and infrastructure services across the different divisions or business units of the organization.

The maturity of the enterprise architecture determines what IT investments, what capabilities are appropriate in each stage, and what governance mechanisms are appropriate in each stage to make sure that the IT investments are aligned with the goals and strategies of the organization.

In individual IT investments, there are three broad categories of estimates.

Order of magnitude, budget, and definitive estimates.

These estimates are appropriate at different stages in the IT Investment process. the budget estimate is made before an IT Investment is approved.IT Investments have operational, tactical, and strategic benefits. Operational and tactical benefits are tangible and quite easy to estimate. However, the strategic benefits of an IT system are intangible.

Large IT projects have risks associated with them. An IT project may have development organizational or market risk. The options approach can be used to incorporate the risk in IT Investment decisions. The appropriate way to evaluate an IT Investment based on the strategic objective of the investment and technology that is involved in the investment.

How to make sure that a firm’s IT Investment portfolio is aligned with the goals and strategies of the organization. IT organizations develop projects, they develop new systems and once a new system has been developed, they operate and maintain the new system.

IT chargeback deals with how to allocate IT costs back to the user. There are three basic models of IT chargeback.

Cost centers, service center, and profit center

How to make sure that the users invest in IT that is worth the investment. Similarly, how to make sure that the IT organization provides services, and it provides services in a very efficient manner. Basically, IT chargeback is about how to provide incentives to the users to consume prudently and how to provide incentives to the IT organization so that the IT organization runs as efficiently as possible.

The new system does not provide any value if the new system is not used. This is about how to make sure that the new system that is developed and implements are actually used by the users so that the organization derives the value it is expecting.
If a system threatens users in any way, such as, if the users feel that the new system will lead to loss of status, power, or revenue, they will resist. If we understand why users resist, we will be able to implement strategies so that resistance is reduced and users use the system. There are two models of adoption of innovation.

• Demand-Driven Model of adoption: If the benefits of the new system are higher than the cost of using the system, then users will adopt. So, if the users believe that the new system is useful and it is going to help them be more productive, then they are more likely to adopt the system. However, if they believe that the new system is going to be very difficult to use, it’s going to be very costly to learn to use and adopt the new system, then they are less likely to adopt the new system.
• Supply-Driven Model of adoption: Here the idea is that users want to use the new system. However, they faced knowledge barriers. So, any mechanism, tools, or methods, that can be used to reduce the knowledge barriers, will help improve the adoption of a new system.

Managers have five levers to affect the adoption of innovation. Which are,

1. Business Vision and Top Management Support
2. Communication and Employee Involvement
3. Peer Support
4. Training and Change Management Support
5. Adequate Use of External Consultants or External Resources.

Different systems require different strategies and all systems should not be implemented in the same way. Such as,

1. Evolutionary change is the change that complies with the current values, norms, skills, structures, and incentive systems. The evolutionary system is a system where the company is doing well but it wants to implement a new system to improve processes.
2. Revolutionary change is the change that is designed to fundamentally change the values, norms, and work practices. Revolutionary systems are systems that are designed to radically change how a company operates.

Although, an organization may take a project management approach (which is thinking that a new system is a project) to implement a new system. That is, it is a one-time effort with a beginning and an end.

When they think of a new system as a project, their approach to implementing the new system will be very different compared to an organization that has a learning approach to implementing a new system.