effectiveness and ease of use were deduced from the element strategic use of IT. The criterion general applicability was added separately. After comparison of methods, IT governance matrix of Weill and Ross was selected to describe IT governance structures. IT governance mechanism of De Haes and Van Grembergen is selected to describe IT governance processes and relations. These two methods make up the component IT governance description of IT governance assessment method. Business/IT alignment measurement of Luftman is selected to measure IT governance effectiveness measurement. This method makes up the component IT governance effectiveness measurement. IT Governance assessment method is now filled with selected methods for the components IT governance description and IT governance effectiveness measurement (figure 6). These methods will further be improved and combined to develop the final IT governance assessment method in Chapter 4. Figure 6. IT governance assessment method with selected methods Improvement of methods for IT Governance assessment method Introduction In the previous chapter methods were selected that are used for the development of IT governance assessment method. In this chapter the methods IT governance matrix, IT governance mechanisms and business/IT alignment will be modified to improve IT governance description and IT governance effectiveness measurement. The improved methods will then be combined to form together the IT governance assessment method. Modification of IT governance matrix In this section IT governance matrix will be modified by including IT governance element of control identified in chapter 2. By incorporating the element of control, IT governance matrix can be improved. The improved IT governance matrix can describe IT governance of organizations more comprehensive. The matrix is also able to provide prescription about how IT governance should be organized. In order to incorporate control in the matrix, the concept of control in corporate governance is used. IT governance matrix without input
Name Description Reference Structure Organizational units and roles responsible for making IT decisions Weill & Ross, 2004 IT steering committee Steering committee at business C-level management responsible for determining business priorities in IT. Weill & Ross, 2004; De Haes & Van Grembergen, 2009 Architecture committee Committee composed of IT experts providing architecture guidelines and advising on their applications. Weill & Ross, 2004; De Haes & Van Grembergen, 2009 IT council decision council comprising of (senior) business managers and (senior) IT managers Weill & Ross, 2004; De Haes & Van Grembergen, 2009 IT leadership committee Committee comprising of only senior IT managers Weill & Ross, 2004 Process Formalization and institutionalization of strategic IT decision making or IT monitoring procedures De Haes & Van Grembergen, 2009 IT performance measurement Formally tracking business value of IT Weill & Ross, 2004; De Haes & Van Grembergen, 2009 Service level agreement Formal agreements between business and IT about IT development projects or IT operations Weill & Ross, 2004; De Haes & Van Grembergen, 2009 Chargeback arrangements Methodology to charge back IT costs to business units, to enable an understanding of the total cost of ownership Weill & Ross, 2004; De Haes & Van Grembergen, 2009 Portfolio management Prioritization process for IT investments in business and IT is involved (incl. business cases) Weill & Ross, 2004; De Haes & Van Grembergen, 2009 Project management Processes and methodologies to manage IT projects Weill & Ross, 2004; De Haes & Van Grembergen, 2009 Relation Relational mechanisms: active participation of, and collaborative relationships among, corporate executives, IT management, and business management; the strategic dialogues and shared De Haes & Van Grembergen, 2009
Review IT performance measurement (0~5) Service Level Agreement (0~5) IT portfolio management (0~5) IT management IT management Decision making IT performance measurement (0~5) Service Agreement (0~5) Service Level Agreement (0~5) Chargeback arrangements (0~5) Project manage ment (0~5) Project management (0~5) IT governance hierarchy matrix with IT governance relation mechanisms A little adaptation of IT governance hierarchy matrix is needed to relate IT governance relation mechanism to the matrix. IT governance relation mechanisms have primarily the function to communicate IT decisions. In table 12 the task review of top management; and the task make and review of senior IT management are complemented with the task communicate. The IT governance relation mechanisms are filled in IT governance hierarchy matrix in table 12. The mechanism knowledge management is a system (intranet) to share and distribute knowledge about IT governance. Top management and senior IT management use knowledge management to communicate IT strategy that is formulated and major IT investments that are decided. Senior IT management uses the mechanism to communicate policies and procedures on maintaining IT architecture and IT infrastructure decisions and on making and executing other IT investment and IT application decisions. Examples are exception to IT architecture, content of service level agreements, template for IT investment proposals and IT project tracking indicators. IT management in turn uses knowledge management to maintain IT architecture and IT infrastructure decisions and to make and execute other IT investment and IT application decisions. Knowledge management is categorized in
Top management Top management Decision making Review/ Communi cate Knowledge management (0~5) Knowledge management (0~5) CIO reporting directly to CEO (0~5) CIO reporting directly to CEO (0~5) Leadership (0~5) IT governance office (0~5) Senior IT management Senior IT management Decision making / Communi cates Knowledge management (0~5) Knowledge management (0~5) Leadership (0~5) IT governance office (0~5) Review/ Communi cate Knowledge management (0~5) Knowledge management (0~5) Knowledge management (0~5) Knowledge manage ment (0~5) IT management IT management Decision making Knowledge management (0~5) Knowledge management (0~5) Knowledge management (0~5) Knowledge manage ment
effectiveness of IT on business performance is measured. 7. Balanced metrics Business and IT measures are formally linked, reviewed and upon. 8. Formal IT investment assessment IT investments are formally and routinely assessed. Actions are taken on findings. Governance The choices organizations make when allocating decision rights for IT activities 9. Budgeting of IT IT is not seen as unpredictable cost, but treated as investment and profit generator 10. Rationale for IT investment IT investment is not only seen as cost reduction, but as process driver and strategy enabler 11. Project prioritization Instead of reaction to business or IT needs, projects are proactively prioritized by IT and business together Partnership Perception of IT and the business of the contribution of each other. 12. Relationship/Trust style Instead of conflict and mistrust, there is long term relationship between IT and business 13. Shared risk and rewards IT does not take all the risks of IT projects. Risks and rewards are shared by IT and business 14. Business perception of IT value Business does not perceive IT as cost of doing business, but as driver of business strategy and value creation Technology scope Assessment of IT and business alignment in technology practices 15. IT Standards articulation IT standards are defined and enforced across business functions 16. IT infrastructure integration IT infrastructure is integrated across business functions 17. Perception of IT infrastructure IT infrastructure is not seen as utility run at minimum cost. It is driven by business strategy and enables fast response to changing market. Skills Assessment of IT and business alignment in human resource practices 18. Change readiness culture Organization does not tend to resist change. is recognition of the need for change. Organization tends to be proactive and anticipates to change
Table 14. IT governance hierarchy matrix of organization A Hierarchy Task IT decisions IT governance IT Strategy major IT Investment other IT Investment IT Architecture IT Infrastructure IT Application Top management Top management Decision making Review ! major IT Investment -Senior business unit management -Senior IT management Senior business unit management & Senior IT management Decision making IT Strategy IT Investment Review other IT Investment IT Architecture Senior IT management Decision making IT Infrastructure Review IT Investment -Business unit management -IT management Business unit management & IT management Decision making other IT Investment IT Application
management [3] IT performance management [3/4] Knowledge management [3] -Business unit management -IT management Business unit management & IT management Decision making Business/IT relationship managers [3/4] Business/IT relationship managers [3/4] IT management Decision making Architecture committee [3] Service Agreement [3] Service Level Agreement [3] Knowledge management [3] Knowledge manage ment [3] Project management [3/4] Project manage ment [3/4] Work with managers who don’t follow the rules [3/4]
& Senior business unit management Review other IT Investment Senior IT management Decision making IT Strategy Review IT Architecture IT Infrastructure -Business unit management -IT management Business unit management & IT management Decision making IT Investment IT Application IT management Decision making IT Architecture IT Infrastructure IT governance mechanisms 18 shows by which IT governance mechanisms IT decisions of organization B are supported. Major IT investment decision is made by top management. However top management is assisted by senior business unit management & senior IT management in making major IT investments. Therefore IT governance mechanisms supporting major IT investment decision are categorized in the hierarchy group senior business unit management & senior IT management. All IT governance mechanisms of IT governance assessment method are present in organization A. It can be seen that all IT decisions of organization B are well supported by IT governance mechanisms. are at least one or more mechanisms that support each IT decision. IT decisions with the most support are major IT investment and IT infrastructure and IT decision with the least support is IT architecture. Most of IT governance mechanisms have a maturity level of 3 or higher and are above average. However there are two mechanisms that have a low maturity level of 1 which are IT performance management (supports 3 IT decisions) and ‘Work with managers who don’t follow the rules’ (supports 2 IT decisions).
Table 18. IT governance hierarchy matrix with IT governance mechanisms of organization B Hierarchy Task IT decisions IT governance IT Strategy major IT Investment other IT Investment IT Architecture IT Infrastructure IT Application Top management Top management Decision making IT steering committee [4] Review Leadership [3] -Senior business unit management -Senior IT management Senior IT management & Senior business unit management Decision making IT council [4] IT portfolio management [3] IT performance management [1] Knowledge management [3] Review IT council [4] IT portfolio management [3]
IT performance management [1] Knowledge management [3] Senior IT management Decision making IT leadership committee [4] CIO reporting directly to CEO [4] IT performance management [1] Knowledge management [3] IT governance office [4] Leadership [3] Review IT leadership committee [4] -Business unit management -IT management
Business unit management & IT management Decision making IT council [4] Business/IT relationship managers [3] Business/IT relationship managers [3] IT management Decision making Architecture committee (architectuur team) [3] Service Agreement [5] Service Level Agreement [5] Knowledge management [3] Project management [5] Project manage ment [5] Knowledge management [3] Knowledge manage ment [3] Chargeback arrangement [4] Work with managers who don’t follow the rules [1] Work with managers who don’t follow the rules [1] Number of IT governance mechanisms (the same mechanisms are counted as one) 5 6 4 3 6 5 Business/IT alignment Table 19 shows business/IT alignment of organization B. At organization B, 3 of 19 business/IT
sized organizations. Large scale empirical research It is the purpose that IT governance assessment method is used in large scale empirical research on IT governance. As was done by Weill and Ross, it will be interesting to study a large number of organizations again with the improved IT governance assessment method. This time more knowledge and insight can be gained of IT governance of organizations, which could not have been found in previous research. It will be interesting to find out how organizations with high IT governance effectiveness have organized their IT governance. The specific features of these successful organizations can be identified which can be prescribed to other organizations in general and in specific conditions. This prescription of IT governance deduced from practice will be better than theoretical IT governance prescription. The relationship between types of competitive strategy of organizations and IT governance can be investigated. Weill and Ross have categorized the strategies of the studied organizations in their research in three types of competitive strategy: operational excellence, customer intimacy and product leadership. They tried to find out relations between types of competitive strategy of organizations and the distribution of IT decision making rights in organizations. An enhanced understanding of the relationship between types of competitive strategy and IT governance can be gained by also studying the relations between types of competitive strategy and distribution of IT decision control in addition to IT decision making rights. List of figures and tables Figures Figure 1. Research approach 9 Figure 2. IT governance main elements 17 Figure 3. IT governance assessment method 18 Figure 4. Strategic alignment model (Henderson & Venkatraman, 1993) 29 Figure 5. Balanced scorecard (Kaplan & Norton, 1992) 32 Figure 6. IT governance investigation method with selected methods 34 Figure 7. Corporate Governance Hierarchy 38 Figure 8. IT Governance Hierarchy 40 Tables Tabel 1. Common elements among IT governance definitions 16