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First rule of IT governance: To cut costs, align business and IT

Alan Joch

IT governance springs from the simple and common desire to align IT departments more closely with an organization’s most important business needs. Done right,

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the process unites IT and the business side in a partnership that helps companies leverage technologies not simply for their “wow factor,” but to capitalize on opportunities to save costs, improve business processes and edge out less innovative competitors.

But recent surveys show the dream remains elusive. Chief financial officers -- the executives who typically oversee both business and IT operations -- often take a dim view of their IT department’s ability to serve business goals, according to a new study by Gartner Inc., a research firm based in Stamford, Conn. How dim? Only about 25% of CFOs say their IT shops adequately address changing business priorities, while less than a quarter say IT can provide the technology innovation their companies need, Gartner reports.

The reasons for the gap sound all too familiar. IT departments still focus too much on technology, while business managers see IT as a means to an end, namely, controlling costs and achieving other concrete business benefits, according to Gartner.

While these numbers may be discouraging, hope is growing in some circles that disciplined management and technologies designed for flexibility can bring IT and business departments closer together. At the top of the list is IT governance, a management structure that establishes processes to ensure IT sustains and extends the organization's objectives, according to ISACA (Rolling Meadows, Ill.), an industry association that runs the IT Governance Institute (ITGI).

“IT governance is a framework that focuses on value delivery and ensures that my IT-enabled investments are managed throughout their full economic lifecycle,” said Ken Vander Wal, ISACA international president.

IT governance: help during tough times
While technologies like service-oriented architecture (SOA) and cloud computing are part of the larger efficiency puzzle, IT governance provides the scaffolding that brings everything together in a cohesive whole. Its role as a cost-saving tool is especially important during economic downtimes and when budgets are tight, the ITGI said.

IT governance’s emphasis on business value and oversight by senior executives are keys to avoiding investments in technology for technology’s sake. For example, a manufacturer’s IT manager wouldn’t propose an initiative in a hot area like cloud computing. Instead, the pitch would start as a plan for forging closer collaboration with customers to increase sales and gain insights into future demand. Only afterward would the chief information officer discuss a new customer relationship management application and the advantages of running it on a cloud platform.

“First you determine the business value of what you want to achieve, and then you determine the most effective way to do it,” Vander Wal explained.

But IT governance goes beyond just getting IT and business to speak a common language. One way to do this is with Val IT, ISACA’s framework for defining IT and business relationships and managing business investments that have an IT component.

Follow the money

It’s also important to maintain strict controls over the funding process to keep priorities on track. “Funding requests need to be reviewed by senior technical people. That’s the first step on the way to better IT business alignment,” said Charlie Betz, research director for IT portfolio management at Enterprise Management Associates and the author of Architecture and Patterns for IT Service Management, Resource Planning and Governance: Making Shoes for the Cobbler's Children.

In large organizations, an approver may hold the title of enterprise architect, although organizations of all sizes typically have someone doing the job even if it goes by a different name, Betz said. The goal is having someone act as an alignment gatekeeper to validate the need for any new technology.

Portfolio management tools, a subset of implementation frameworks like Val IT, are another important IT governance tool for prioritizing investments. Portfolio management practitioners create an inventory of hardware, software and IT services to give business and IT managers a starting point when thinking about new investments. “It’s very difficult to count everything but so valuable when you do,” Betz said.

The value comes when the two groups talk about new projects. For example, the head of a business department may seek a larger social media presence because competitors are using Twitter to win new customers. The IT staff in turn would identify available IT resources and ways to expand or customize them for the business’ specific needs.

Identifying IT cost-cutting opportunities
Forming a clear picture of current IT resources and the needs of business departments also has a direct impact on day-to-day concerns, such as cost reduction. One way is for organizations to quickly identify wasteful spending in the form of outdated or redundant hardware and software that continues to be licensed, supported and maintained.

Similar IT cost-cutting opportunities are available from software asset management, another component of portfolio management. “That’s a huge train wreck right now,” Betz said.

The problem is that organizations frequently overbuy software licenses for some programs to assure they’re meeting contractual obligations, while mistakenly under-licensing others, which risks heavy fines. “Implementing a software asset management program is a no-brainer—you can save between 10 and 30% on licensing fees,” Betz said.

But first, organizations need an accurate view of their IT environments and a formal process in place to ensure that ad hoc and misguided decisions about new investments aren’t standing in the way of business goals.

ABOUT THE AUTHOR

Alan Joch is a New Hampshire-based freelance writer who specializes in enterprise applications and cloud computing.


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