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... Historically, IT governance did not receive a lot of attention. With the speed of globalizatio…
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Historically, IT governance did not receive a lot of attention. With the speed of globalization and rapid changes in technology, IT governance has become a crucial and necessary aspect of business management and strategy. The main areas of governance include the management of central and support IT functions, project management, budget allocation, outsourcing, and strategic planning. We discuss each of these areas in detail throughout the paper.
Today, most organizations separate IT into 3 areas: infrastructure, applications, and special (or departmental) projects. In general, the IT organization is split between a central IT group and a support IT group, which works closely with a specific department. The support groups report directly to the IT, but also report dotted-line to their functional area. Outsourcing is often used for infrastructure management, software development, and administration functions (i.e. payroll, accounts payable, etc.) Contractors are also used as needed. IT is an extremely cross-functional unit as it must support specific areas while also leading company-wide initiatives .
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processes . OneOne successful way
One key takeaway found from our research is that the management of IT is always evolving. IT governance, like technology, must constantly be reassessed and adapted to new business needs. Cisco provides a great example of the progression of IT governance. Over a 10 year period, Cisco has adapted its governance from one end of the spectrum to the other. When Peter Solvik, CIO from 1993-2001, joined the company, IT was an internally oriented cost center, where decisions and funding were highly centralized. During his time, Solvik disbanded the IT organization to get away from the perception of IT being “overhead”. This resulted in the successful implementation of the Oracle ERP system and improvements in technological capabilities, but it also lead to the creation of over 200 functional projects. When Brad Boston joined as CIO in 2001, the direction of IT had been lost and disjointed. The lack of centralized planning actually had a negative effect on the company. So, Boston revamped the group again, re-centralizing IT planning and spending of major projects. He also created a Business Process Operating Committee (BPOC), a cross-functional team that oversaw IT planning and prioritized projects. Cisco evolved its governance to come up with the right model of managing IT .
Every business must adapt IT governance to its culture, processes, and goals. As this case and our research show, there is no one right model of IT governance, but by following the key factors noted above, a company is much more likely to successful.
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V. Project Management
Project management can be a daunting task for even the most competent managers. Projects are typically aimed at resolving a major issue, within a predetermined and often hurried period of time, with a team made up of individuals across all functions or departments of the business. Several projects, due to the magnitude of the undertaking, can take anywhere from several months to a couple of years and typically require significant capital outlays. Furthermore, the risk of failure always exists. Companies can contribute huge sums of money, resources and time to a problem with no guarantee that a reasonable solution will be generated. At times, as seen at Zara’s multinational retail business, the success of a project is not just imperative for maintaining the current position within the industry but for ensuring the company’s survival in the future . In any case, it is clear that project management is of extreme importance to all team members involved as well as the company as a whole.
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face . FromFrom the start,
VI. Key IT Issues
Below we outline the key issues faced by IT in the 21st century, as well as strategies to make IT more effective and contribute to the growth of the business.
Final Report
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... IT budgeting requires a company to spend wisely on the best IT system for your business. There…
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IT budgeting requires a company to spend wisely on the best IT system for your business. There is no one size fits all for an IT system and it is critical that you find the best fit. Integrated systems are the best if properly implemented. Band aiding old systems together may be a short term, less expensive fix but a long term expensive correction may be needed later. IT security is another area that must be considered seriously, even outside of budgetary limitations at times, as money saved in the short term can lead to system malfunctions that may be catastrophic later.
IT budgeting is extremely important, as a vast amount of companies are spending greatly on IT investments, but not generating the value to their business as they should be. Companies that are managing IT successfully generate returns that are as much as 40% higher than their underperforming competitors. Successful companies will define the strategic role that IT will play and then determine the level of funding needed to achieve that objective. Senior managers need to be able to recognize which projects will have a significant impact on the company’s success and those that provide some benefits but are not essential . Managers must also ensure that all affected parties are involved in the decision-making process. The highest levels of management should be analyzing the costs, benefits, and risks of all IT projects .
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are then disputeddistributed for the
Information technology is a very costly support function to run and managers are often very critical of the overhead allocation of IT. Non-executives are unhappy with IT overhead because all they generally see is the high cost with a return on investment that is hard to measure. The school of thought to combat this is to align IT with the business strategy and have a commitment to cost management. Managers should not only think of cost cutting, but also determine overall measurements, assessments, and decisions involving budgets and capital investments. Communication between non-IT executives and IT executives are critical throughout the IT budgeting, as companies in the US typically spend anywhere from 50% to 75% of their annual equipment budgets for IT . In an example from our interviews, one company invested $300K to attach RFID chips on parts and boxes. They later found the chips did not make part tracking easier, as the boxes did not always move with the parts, making this investment a waste of money.
As an example of budgeting with shortfalls, VW experienced difficulties in their budgeting process in 2004. Many executives were furious that high priorities for their areas of the company had not been funded. There were 10 business units that proposed more than 40 projects, $210 million worth, with only a budget of $60 million. Of the roughly $60 million available overall, $16 million was set aside to fund stay in business initiatives, most of them infrastructure projects under the discretion of the IT Lead, another $30 million would fund enterprise projects, and the remaining $14 million was left for the highest-priority projects. With little money left for the business units’ IT projects, a critical project was only partially funded. It was a multiyear SAP implementation that really needed VW’s full funding to stay on track. But it was a large project that would have wiped out a significant portion of the IT budget for 2004. It did not get funded, as its value would be recognized at the global level, not at the VW importer level. Although it promised savings, the big impact was global integration, which was sometimes a tough sell locally. To further complicate budget issues, there was little IT investment in the 1990s that created a need in the early 2000s for substantial IT investment. This caused many of the executives to view IT as an expensive item that usually fell short of what they needed from it. A goal of the IT Lead was to turn around the idea that IT is an obstacle .
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Interview Checklist
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Type in IT Interview Checklist
1. Governance.
a. Identify the content organizational struc…
Type inIT Interview Checklist
1. Governance.
a. Identify the contentorganizational structure of your page here.the company.
b. Does the CIO (or CTO) report to the CFO? COO? Directly to CEO?
c. How do they govern IT? Is there a steering committee?
d. What do you like/dislike about how IT is governed?
2. Budget Management.
a. Who manages the IT budget? (e.g. IT dept? Business units? Another enterprise entity?).
b. How is the budget allocated (what is the allocation criteria)?
c. How/who makes the decision about IT projects?
3. Outsourcing.
a. Do they outsource IT functions? Which ones?
b. What are the pros and cons of outsourcing these function?
4. Implementation of Past Projects.
a. Brief overview about successful IT projects.
b. Any IT projects that failed (did not meet expectations)?
c. Why did they fail (what should have been done differently)?
5. Forecast of Future Projects.
a. What are the IT projects that are planned for the next 2 years.
b. Are these projects implemented out of necessity or to provide strategic advantage?
6. Key Issues.
a. What are the 5 most important IT issues currently facing the company?
i. First, have manager rank 5 based on the list below.
ii. Second, are there any unique issues to this organization that are not on this list?
Attachment:
ONLINE FILE W2.11
THE CHANGING ROLE OF THE INFORMATION SYSTEMS DEPARTMENT
Traditional Major IS Functions
Managing systems development and systems project management
Managing computer operations, including the computer center
Staffing, training, and developing IS skills
Providing technical services
Managing Security
Educating the non-IS managers about IT
Educating the IS staff about the business
Supporting end-user computing
New (Additional) Major IS Functions
Initiating and designing specific strategic information systems
Infrastructure planning, development, and control
Incorporating the Internet and electronic commerce into the business
Managing system integration including the Internet, intranets, and extranets
Partnering with the executive level that runs the business
Managing outsourcing
Proactively using business and technical knowledge to “seed” innovative ideas about IT
Creating business alliances with vendors and IS departments in other organizations
Providing new computing environments (e.g., wireless)
Internal control to meet compliance requirements
Source: Wiley Additional Text Materials
http://bcs.wiley.com/he-bcs/Books?action=resource&bcsId=3689&itemId=0471787124&resourceId=10395
Final Report
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... a. Case Analysis of Cisco (See Wiki page or click here)
b. Case Analysis of VW (See Wiki pag…
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a. Case Analysis of Cisco (See Wiki page or click here)
b. Case Analysis of VW (See Wiki page or click here)
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Interview Checklist (See Wiki page or click(click here)
d.
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(See Wiki page or click here)page)
e. Summary of Articles (See Wiki page or click here)
Information Technology for Management: Transforming Organizations in the Digital Ecomony, 6th Edition, Turban, Leidner, McLean, and Weatherbe, 2008.
