Maximizing Business Value Through Effective IT Governance

Transcription

1 Cognizant 0-0 Insights Maximizing Business Value Through Effective IT Implementing a holistic IT governance model not only helps IT deliver business value but also advances confidence with business. Executive Summary Business is getting only more IT intensive, and IT is getting more complex. Some of the factors contributing to this increased complexity include: expansion of business processes and models requiring greater IT involvement, adoption of emerging technologies such as the SMAC Stack TM (social-mobile-analytics-cloud) to drive business innovation, coordination with multiple business and technology partners across various geographies and a greater focus on regulatory and audit compliance to meet industry and corporate standards. Maximizing value from IT investments has always been an imperative for business. From our experience, more than 50% of today s IT investments are wasted or fail to deliver returns to the business. With the increase in complexity, the cost of IT failure has become all the more significant. For IT investments to deliver business value in today s complex landscape, IT must: Be more tightly aligned with business objectives than ever before. Carefully control risks, both strategic and operational. More effectively manage IT assets. Continuously improve IT performance. Therefore, effective IT governance must be a top item in the CIO agenda in order to maximize IT s contribution to business value. Based on our experience with one of the largest U.S. insurers (see sidebar), the key benefits of implementing an IT governance model include: Strategic alignment, resulting in increased business partner satisfaction in the order of 15% to 0%. Enhanced value delivery, driven by improved project prioritization, leading to reduction of IT budget by 8% to 10%. Improved performance and resource management, lowering the total cost of IT ownership by 10% to 15%. Better quality of IT output, resulting in a reduction in IT control issues by 50%. Our experience of working with Fortune 1000 clients suggests that CIOs need to focus on the following five key imperatives while implementing a successful IT governance model (see Figure 1): 1. Align IT governance with corporate governance and business objectives.. Define IT governance objectives 1 around strategic alignment, value delivery, risk management, resource management and performance management. cognizant 0-0 insights may 013

2 3. Establish holistic governance across disciplines spanning the entire IT value chain: IT strategy, architecture, project and portfolio, application lifecycle, infrastructure and data, vendor and sourcing, service lifecycle and modern SMAC technologies. 4. Identify the appropriate IT governance control practices to help achieve IT governance objectives. 5. Establish continuous tracking, monitoring and improvement of the IT governance model. Subsequently, this paper details the five key imperatives for designing an IT governance model. Designing an IT Model The five key imperatives that underscore an effective IT governance model include: 1 Align IT with Corporate and Business Objectives CIOs should focus on this to improve transparency for corporate management, and to ensure business objectives are realized. For example, aligning IT risk management with corporate risk management practices, and aligning IT security standards with corporate security policies, drive consistency and compliance across the organization. Similarly, IT governance aligned with business objectives, such as achieving greater return on investments and reducing business risks, helps deliver business benefits. Define IT Objectives Around Strategic Alignment, Value Delivery, Risk, Resource and Performance IT governance objectives should be defined along the following dimensions: Strategic alignment: Align IT strategy with business strategy, and ensure advancement of business priorities. Value delivery: Maximize value of IT investments. Risk management: Identify and mitigate IT risks in a timely manner. Resource management: Ensure availability of appropriate IT resources to meet current as well as projected business demand. Achieving Effective IT Business Strategies and Objectives Set Direction Risk and Compliance Office Corporate Information Security Office. Align Strategically 1 Align IT governance with corporate governance and business objectives. IT Define IT governance objectives around strategic alignment, value delivery, risk management, resource management and performance management. Strategic Alignment Value Delivery IT Objectives Risk Resource Performance 3 Establish holistic governance across governance disciplines spanning the entire IT value chain. Continuous Improvement IT Strategy Infrastructure & Data IT Disciplines Architecture Vendor and Sourcing Project and Portfolio Service Application New Age Technology 4 Identify the appropriate IT governance control practices to help achieve the IT governance objective. Committee/Body IT Control Practices Initiatives/ Meetings Documentation Controls/ Repositories Approvals/ Control Checks 5 Establish continuous tracking, monitoring and improvement of the IT governance model. Continuous Improvement Figure 1 cognizant 0-0 insights

3 Performance management: Monitor IT performance effectively. In our experience, the above-mentioned objectives are relevant for all IT functions and disciplines. 3 Establish Holistic Across Disciplines Spanning the Entire IT Value Chain The IT governance model should focus on establishing oversight and control across all key IT governance disciplines. Figure illustrates the typical benefits and impacts we have seen when implementing IT governance for clients across various industry sectors. Identify the Appropriate IT 4 Control Practices to Help Achieve IT Objectives Based on our experience, in order to establish the right level of governance, organizations should define measurable IT governance control practices aligned with the IT governance Eight Disciplines for Effective IT IT Discipline 1 IT Strategy : Ensure alignment of IT investments with business priorities, and tracking, monitoring and improvement of business-it engagement. Architecture : Promote standardization in the application and technology portfolio and drive alignment of solution architecture to overall technology and reference architecture. 3 Project & Portfolio : Govern sequencing of the project portfolio to maximize operating efficiency, and enable identification and mitigation of project portfolio risks. 4 Application : Control key facets of introduction, management and sunsetting of applications. 5 Infrastructure and Data : Optimize technology infrastructure costs and establish controls over organizational information assets. 6 Vendor and Sourcing : Ensure services provided by vendors deliver adequate business value, and reduce the business risk associated with nonperforming vendors. 7 Service : Minimize or eliminate unauthorized changes into production environments, and maintain service and operational levels that promote business-it alignment. 8 New Age Technology : Improve IT operating efficiency by adopting new age technologies, and minimize any risks associated with the same. Typical Benefits and Impacts Strategic Alignment: 10% to 15% improvement based on enhanced perception of value from IT. Value Delivery: Enhancement in overall value from IT through better management of IT investments. Performance and Resource : 15% to 0% increase in level of architecture reuse. Risk : 5% to 10% fewer risks through reuse of timetested architectural components. Strategic Alignment: 10% to 15% improvement based on enhanced value from the project portfolio. Performance and Resource :»» 10% to 15% improvement in project quality through peer reviews, phase reviews and project review board governance.»» 15% to 0% improvement in on-budget delivery of projects. Performance and Resource : 10% to 15% cost avoidance through maintenance of an optimal application portfolio. Performance and Resource : Reduction in overall infrastructure costs and data/information security costs through improved controls. Risk : 5% to 10% fewer risks through leverage of standardized infrastructure components. Performance : Improvement in quality of vendor services through better measurement, tracking and driving uplift of vendor performance. Resource : 0% to 5% reduction in average vendor onboarding time and effort. Risk : 10% to 0% reduction in vendor-related risks. Performance : 0% to 35% reduction in number of unauthorized changes in the production environment. Performance and Resource : 0% to 5% improvement in operating efficiency post steady state. Note: Indicated impacts are based on our experience with clients with a moderate level of organizational maturity. Figure cognizant 0-0 insights 3

4 objectives for each of the eight IT governance disciplines (see Figure 3). They include: bodies/committees: Control body or committee to help mandate compliance with IT governance objectives (e.g., an architecture review board). meetings and surveys: Formal meetings/established surveys to monitor and track compliance with IT governance objectives (e.g., business satisfaction survey). Documentation controls and repositories: Mandating documentation or storage in central repositories for establishing IT governance controls (e.g., a vendor information repository). Approvals and control checks: Adequate approvals and process checks to ensure compliance with IT governance objectives (e.g., UAT signoff before production implementation). 5 Establish Continuous Tracking, Monitoring and Improvement of the IT Model In order to derive maximum benefits from IT governance, organizations should treat it as an ongoing priority (i.e., ensure continuous improve- Illustrative IT Model IT Discipline Strategic Alignment Value Delivery IT Model Risk Resource Performance IT Strategy Architecture Project and Portfolio Application Infrastructure and Data Vendor and Sourcing Service New Age Technology Committee/Body Periodic business partner review. Annual application portfolio planning and technology roadmap definition. Project change control board to review and approve all changes. Business requirements document reviewed and signed-off by customer. Annual infrastructure planning. Annual site visits for strategic vendors. Service Office to track and improve SLA adherence. Independent cloud risk council. Investment prioritization committee. Promote architectural component reuse. Periodic portfolio sequencing. tailoring criteria for various work effort types. Data quality management center of excellence. Semiannual vendor satisfaction survey. Incident resolution trend Tool-based social media policy. Meeting/Survey Formal business case for funding. Architecture Review Board (project-wise review of the solution architecture). Independent project risk review. Project Review Board to approve phase exits. Periodic capacity and availability Quarterly business review with strategic vendors. Change Advisory Board authorization of production releases. Mobility security audits. Documentation Control/Repository Annual headcount planning. Periodic technology roadmap refresh leading to application rationalization. Weekly resource change control meetings. Project team to support operations team during warranty support phase for all projects. Capacity plans fed into the annual budget. Contracted staff policies and procedures. Periodic and planned baselines/ checkpoints established for configuration items. Application-centric cloud resource accounting. Formal business case to measure project success. Total cost of ownership Periodic project metrics tracking and Peer review efficiency Tool-based infrastructure monitoring. Semiannual vendor performance reviews. Measure and report customer satisfaction with service desk. Big data performance analytics. Approvals/Control Checks Figure 3 cognizant 0-0 insights 4

5 ments in IT governance practices to adapt to changing business and IT environments). To ensure success of the implemented IT governance model, organizations should focus on continuous planning, monitoring and improvement of the IT governance model. In our experience, along with the CIO and senior IT leadership team, the IT audit and control team should drive continuous improvements to IT governance models with appropriate participation from IT area owners. Looking Ahead Implementing a successful IT governance model has never been easy. Typical challenges range from facilitating organizational change management for greater adoption, to developing processes and infrastructure to support the governance model. To realize benefits from implementing the IT governance model, the CIO and senior IT leadership team need to invest in instilling a deep-rooted IT governance culture through effective communication, training sessions for continuous reinforcement and appropriate incentives for better compliance. Additionally, CIOs should mandate IT functional owners to include IT governance as an integral element of their processes, and leverage governance controls in decision-making. Organizations also need to continuously invest in improving the IT governance model in response to ever-changing business and IT needs. Quick Take Implementing Effective IT for a Leading U.S. Insurer Challenge The IT group of one of the largest U.S.-based insurers was faced with several governance issues such as suboptimal technology planning, inadequate return on IT investment, increase in the external audit issues, etc. The new CIO wanted to establish an effective IT governance model to alleviate the aforementioned IT risks/issues. Toward this objective, the CIO, along with the corporate team, engaged our business consulting team to leverage our expertise in setting up an effective IT governance model. Model Our business consulting team engaged with the client s business and IT stakeholders to recommend an optimal IT governance model. It included: An IT governance framework that addressed various IT governance disciplines mentioned above. > > practices which called for a dedicated business relationship management (BRM) function to conduct business partner reviews. > > A three-year technology roadmap to align IT capabilities with business priorities. > > A project prioritization committee to help prioritize IT investments. > > An architecture review board to provide architecture guidance. > > A project review board to govern project phase exits. > > A service management office to track and improve SLA adherence. > > An IT audit and control team to lead the implementation of IT governance practices and also drive continuous improvement. Benefits The benefits achieved by implementing a best-inclass IT governance model included: Strategic alignment: Roughly a 15% to 0% increase in business partner satisfaction. Value delivery: Approximately 8% to 10% decrease in the IT budget through effective project prioritization, thereby increasing the overall value of IT investments. Performance management and resource management: About a 10% to 15% reduction in total cost of ownership through effective technology planning. Risk management: A 50% year-on-year reduction in IT control issues. cognizant 0-0 insights 5

6 Footnotes 1 IT governance objectives are the stated governance purposes to be achieved for an IT process. IT governance control practices are the actionable activities to achieve an IT governance objective. Reference About the Authors Philippe Dintrans is the Vice President and Practice Leader of Cognizant Business Consulting s Strategic Services Group for North America. He has led numerous consulting engagements on business transformation, IT transformation and change management for marquee clients at Cognizant. Philippe holds a master of science degree in engineering from the Massachusetts Institute of Technology (MIT) and an M.B.A. from INSEAD. He can be reached at [email protected]. Amit Anand is a Director with Cognizant Business Consulting s Strategic Services Practice. He has 1-plus years of experience in leading and managing large IT transformation and governance implementation initiatives for various clients. Amit holds a bachelor s degree from IIT Delhi and an M.B.A. from the Indian School of Business, Hyderabad. He can be reached at [email protected]. Madhusudan Ponnuveetil is an Engagement Manager with Cognizant Business Consulting s Strategic Services Practice. He has nine years of experience in leading IT performance and process improvement initiatives, IT governance framework definition and implementation and change management. Madhu holds an M.B.A. from Asian Institute of, Philippines, and a bachelor s degree in engineering from MSRIT, India. He can be reached at [email protected]. Jayadevan Vijayakrishnan is a Senior Consultant with Cognizant Business Consulting s Strategic Services Practice, with seven years of industry experience. His specific areas of expertise include IT performance and process improvements, IT organization and operating model redesign and IT strategy development. Jayadevan holds a bachelor s degree in computer science engineering and an M.B.A. from the Indian Institute of, Bangalore. He can be reached at [email protected]. About Cognizant Cognizant (NASDAQ: CTSH) is a leading provider of information technology, consulting, and business process outsourcing services, dedicated to helping the world s leading companies build stronger businesses. Headquartered in Teaneck, New Jersey (U.S.), Cognizant combines a passion for client satisfaction, technology innovation, deep industry and business process expertise, and a global, collaborative workforce that embodies the future of work. With over 50 delivery centers worldwide and approximately 156,700 employees as of December 31, 01, Cognizant is a member of the NASDAQ-100, the S&P 500, the Forbes Global 000, and the Fortune 500 and is ranked among the top performing and fastest growing companies in the world. Visit us online at or follow us on Twitter: Cognizant. World Headquarters 500 Frank W. Burr Blvd. Teaneck, NJ USA Phone: Fax: Toll Free: [email protected] European Headquarters 1 Kingdom Street Paddington Central London W 6BD Phone: +44 (0) Fax: +44 (0) [email protected] India Operations Headquarters #5/535, Old Mahabalipuram Road Okkiyam Pettai, Thoraipakkam Chennai, India Phone: +91 (0) Fax: +91 (0) [email protected] Copyright 013, Cognizant. All rights reserved. No part of this document may be reproduced, stored in a retrieval system, transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the express written permission from Cognizant. The information contained herein is subject to change without notice. All other trademarks mentioned herein are the property of their respective owners.