Tuesday, January 30, 2007

IT Governance!!! (Now, doesn't that sound fun?)

CEOs, CFOs, and Boards often say they need better "governance" when they refer to their IT investments; the term causes IT leaders nausea and engenders much eye-rolling. However, the root cause of those comments is almost always related to a failing of IT leaders to align IT capabilities with business strategies. This mis-alignment prompts questions of value around IT and leads to comments like, "What are we getting for our spend in IT?", "Why does this new system X cost so much?", and, "Those IT guys never deliver what they said they would". This situation results in a slowing of investment in IT over the long term, a general view that IT fails to deliver on it's promises, and will ultimately slow the overall growth of the company.

IT leaders who succeed, teach and inform their business colleagues of the need for IT investment and share the "big picture". If IT and business leaders were aligned on how IT investments were to be made and more visibility provided to ensure value and follow-through on both IT and business commitments, "governance" wouldn't be a concept that senior business leaders would feel a need to apply to IT.

The "smoke and mirrors" nature of IT investments, combined with the size of spend in IT, (ranging from 1% to as much as 15% of revenues depending on size, industry, growth strategies, etc), makes the business feel that IT is complex, "out-of-control" and therefore in need of better "governance". The truth is that IT investment is seldom vastly out of line at the "total spend" level. The sense of "out-of-control" usually has 2 contributing factors that are really alignment issues:

1. Most businesses don't have a solid relationship with IT leaders (no blame here, just fact). They don't spend time understanding how IT works outside their business area. And, IT leaders have failed to build relationships that would more easily facilitate that exchange of valuable perspective.

2. Most businesses don't have a meaningful mechanism or process for measuring the value of an IT investment, neither during business case construction nor after completion of the project; this factor would lead any business leader to question whether value was delivered associated with an investment. IT doesn't stand alone is this area; most capital projects are funded based on compelling business case delivery and championship/sponsorship by a vocal senior leader, then the "value realization" effort is seen as rehashing history and often not worth the effort."Hey, let's just focus on how we're going to make the next big idea work".

The "punch line" is that we as IT-savvy leaders need to better educate CEOs and Boards to foster environments where business leaders, (SBU leaders), are challenged to compete on who delivers the most value using IT. John Chambers, CEO of Cisco, brings his SBU leaders together to report on "IT Value Accomplishment" every quarter. He, and select Board members, hear from each SBU leader on how they've aligned with IT leaders to deliver shareholder value and true competitive advantage with new and emerging technologies. Wow! This forum creates intense competition around IT business case delivery.

Focusing the spotlight on the Business/IT relationship in this type of forum is a HUGE catalyst for alignment between IT capabilities and business strategies. You just don't hear the magnitude of questions and complaints related to technology value at Cisco you hear at other companies.


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