When an organization works towards improving its “IT system performance” or “IT risk management”, is it IT that benefits from such initiatives?
The short answer is no.
IT is not an end in itself!
The “IT-related’ projects are always aimed at improving the business value of the organization.
IT Governance dismantles the notion of IT as a stand-alone function that works for itself and formalizes the impact of IT decisions on the overall business value.
This blog post answers the following questions about IT governance:
1. What is IT governance?
Information Technology governance or IT governance can be defined as a process for ensuring that IT investments support business objectives. An IT governance framework provides a structure for monitoring and controlling key information technology decisions to ensure the delivery of value to stakeholders and the overall organization.
In simple terms, IT governance provides a framework for aligning IT strategy with business strategy. The formal process provided by IT governance enables organizations to effectively and efficiently use IT to produce measurable results toward achieving strategies and business goals.
IT governance is a part of the overall corporate or enterprise governance, which was necessitated by the enactment of laws and regulations such as the Gramm–Leach–Bliley Act (GLBA) and the Sarbanes-Oxley (SOX) Act in the late 1990s and early 2000s.
2. What is the role of IT governance?
The role of IT governance is to ensure that IT initiatives and projects move the organization closer to its business goals. So, IT governance seeks to fulfill the following roles and objectives:
Align IT strategy with business objectives by ensuring that the IT projects and initiatives deliver the functionalities and services necessary to achieve business goals.
Use technology to facilitate the organization to deliver new products and services, improve efficiency, and reduce costs.
Deliver the maximum economic value on all IT services, projects, and initiatives.
Implement robust methods to measure IT’s performance.
Ensure that all stakeholders’ interests are taken into account, and
Ensure that processes provide measurable results.
IT governance processes take a long-term view on technology and how technology can enable the organization to operate more efficiently and competitively. It goes beyond problem-solving from a “band-aid solution” perspective, preventing the accumulation of technical debt.
3. Relevance Of IT Governance For Small Businesses
IT governance is usually perceived as only relevant to large organizations. For smaller businesses. organizational sustainability and growth are the primary objectives, consequently, governance doesn’t get its due importance. But IT governance is a key element for all modern organizations.
As we have seen already, IT governance is all about using technology to create value for the business, ensuring greater returns while minimizing risk. This is something that small and medium businesses should focus on more because they also need to create value by applying technology. In fact, it is the efficient and nimble use of technology that can enable small businesses to compete effectively with larger enterprises.
The majority of startups and small businesses are led by people who either do not have experience in governance or haven’t had the opportunity to learn about governance. While it is true that in the early stages of a business, governance is low on the priority list, the importance of good governance increases with the size of the organization and the number of shareholders.
In addition, as the organization grows the importance of regulations, compliance, and fiduciary responsibility also increases. So, small and medium-sized businesses have a lot to gain from good governance.
But, that does not mean every small business has to invest in implementing extensive IT governance frameworks. Small and medium businesses can start with simpler versions or sections of existing standard IT governance frameworks and build on that foundation as they grow.
4. What Are The Benefits Of IT Governance?
Here are some of the benefits of IT governance:
Enables IT to better support the organization's strategy and goals.
Facilitates informed decision-making that positively impacts business value.
Facilitates efficient use of investments with trackable and measurable results.
Helps convert strategic goals into IT projects.
Defines roles and responsibilities, processes, policies, and criteria to foster accountability.
Assists in IT risk management.
Aids in achieving regulatory compliance.
5. What Are The Focus Areas Of IT Governance?
The five focus areas of IT governance are:
1. Strategic Alignment
Strategic alignment ensures that IT and business operations are aligned. It involves understanding the business needs, developing IT strategy and objectives, demand management, and resource allocation.
2. Value Delivery
Value delivery ensures that investments in information technology deliver the promised benefits. It involves managing the complete project lifecycle including selecting the right projects, cost management, ensuring delivery on time and within budget, and determining the return on investment (ROI).
3. Risk Management
Risk management ensures operational continuity by mitigating significant business risks. It includes the security of IT assets, disaster recovery and business continuity, and mitigation of regulatory compliance risks.
4. Resource Management
Resource management ensures the optimal utilization of critical IT resources. It includes financial management, asset management, and outsourced services management. Resource management is the most critical focus area since it lays the foundation for the other four focus areas.
5. Performance Management
Performance management is concerned with the tracking and monitoring of IT projects, the use of resources, the performance of processes, and the delivery of services. The goal is to translate business strategies into actions with measurable goals.
6. What Are IT Governance Policies?
IT governance policy documents establish the principles and standards for the governance of IT within the organization. It starts from the premise that IT needs to aid the organization in achieving its business objectives.
An IT governance policy should describe the following:
Purpose of the document
Key principles that guide governance
IT governance framework
Roles and responsibilities
Implementation of policy
7. IT Governance Frameworks And Standards
IT governance framework provides guidelines and methods that organizations can implement to effectively utilize IT resources and processes. It defines the principles, rules, and processes for effective decision-making and helps organizations evaluate the performance and effectiveness of their IT governance processes.
An IT Governance Framework consists of three major elements:
Structure - defines the roles and responsibilities
Process - defines the decision-making process for proposing, reviewing, prioritizing, and approving investments
Communication - defines how the processes and decisions will be monitored, measured, and communicated to stakeholders.
Thankfully, we don’t need to build governance frameworks from scratch. A lot of time and resources can be saved by adopting standard IT governance frameworks that are tried and tested.
Here are the commonly used IT governance frameworks:
8. How Do You Establish IT Governance?
The purpose of IT governance is to standardize the decision-making process so that success is repeatable and people can be held accountable for their roles and responsibilities.
Before you can begin establishing an IT governance program, consider your answers to the following questions:
What are the desired outcomes?
What decisions need to be made for the effective use and management of IT resources?
Who is responsible and accountable for those decisions?
How will the decisions be made and how will they be monitored?
Answers to the above questions will drive the development of the governance structure and processes.
9. IT Governance Best Practices
Here are some best practices that help in making IT governance more effective:
Identify the right people who will make the tough decisions and be held accountable for those decisions.
Clearly define roles and responsibilities to match the decision-making needs and the authorities and level of accountability.
Ensure that the processes, policies, and criteria for decision-making reflect the culture and decision-making style of the organization.
Ensure the availability of sufficient and reliable information for decision-making.
Ensure that the team members and stakeholders are adequately engaged.
Revisit the policies and processes regularly and update them if necessary.
Communicate frequently with the stakeholders to keep them informed and engaged.
Regularly report on how the governance program is contributing to defined goals.
Conclusion
IT governance plays an important role in the sustainability and growth of an organization. It provides the structure and processes to ensure that IT and business goals are aligned, IT risks are mitigated, and IT delivers the promised value. In addition, the IT governance framework improves IT project efficiency and delivery by enabling organizations to effectively assess progress and track metrics and ROI.
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About The Author
Hari SubediMarketing Manager at Jones IT
Hari is an online marketing professional with a focus on content marketing. He writes on topics related to IT, Security, Small Business, and Mindfulness. He is also the founder and managing director of Girivar Kft., a business services company located in Budapest, Hungary.