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Project Management and IT Governance

Submitted by: Prasad K. Patankar

A well-defined governance model is essential for project management to fulfill its role in

governing project management. Governance ensures clarity of purpose and sets forth

responsibilities. By exercising strict governance over the strategic direction and tactical

control of technology projects, we can maximize the business value of our technology

investments. Project technology management (PTM) principles and capabilities ensure

that technology executives maintain the same degree of control, accountability and

fiscal responsibility that is expected of projects. Some of the steps used in this process

are

1) Developing strategic and tactical governance

2) Understand government and regulatory requirements

3) Ensure that the top management has project management knowledge

4) Configuration of infrastructure for the organization

Developing strategic and tactical governance prepares an organization to address what

decisions must be made, who is responsible for making them and what process is used

to make those decisions. Enterprises should have ready answers that are ingrained and

automatic. This relates to the full range of project management governance including

investment decisions, standards, principles and target business and technology

architectures. Understanding government and regulatory requirements starts with the

compliance and risk management capability, which should be supported by the board

and disseminated to everyone involved in enabling project management methodologies

through the use of business technology. It is imperative that the board have an

understanding of project management. Some management boards have addressed this

issue by appointing outside board members, including CEO’s and CIO’s of well-

regarded IT companies or by establishing project management strategic committees.

Determining how the organization will configure its infrastructure to facilitate access to

financial information will enable the company to determine what control systems and

analytics are needed to detect vulnerabilities and fraud. This is because the enterprise

architecture of an organization is composed of the technical, data and application

architectures; which jointly enable the processing, sharing and management of data

resources across divisional and organizational boundaries.

IT Governance as a structure

IT governance has a direct impact on how IT is managed within the organization. The IT

Governance Institute has offered the following definition “IT Governance is the

responsibility of executives, board of directors and consists of the leadership,

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organizational structures, and processes that ensure that the enterprise’s IT sustains

and extends the organization’s strategies and objectives. IT governance structure

involves the existence of responsible functions for making IT decisions such as steering

committees. Staffed by both the business and IT executives, the IT steering committee

should be the primary governing body for ongoing IT operations and initiatives of the

organization, including IT investment projects. The IT steering committee is responsible

for translating business and strategic goals into actionable plans. Successful IT

governance requires effective communication among all parties based on constructive

relationships, a common language and a shared commitment to IT policies and

procedures.

IT Governance as a process

IT governance processes involve the implementation of IT management techniques and

procedures in compliance with established IT strategies and policies. Kaplan(2005)

defines IT governance as the set of processes used by the organization to manage IT,

aligning IT with business objectives, resourcing IT projects and monitoring IT

performance ( Vitale,2001).In particular IT investment processes involve the

identification, acquisition, implementation and ongoing operation and maintenance

activities of IT applications. As a continuous process, effective IT governance provides

transparent IT decision making, clear accountabilities and acceptable and actionable IT

measurements. That is, effective IT governance enables business and IT executives to

integrate business and IT decisions, implement IT solutions and monitor IT

effectiveness.

IT Outcome Metrics

For IT governance to be effective, organizations should monitor their IT

performance through appropriate measurement systems. Organizations need multiple

set of metrics to measure their IT operational performance and overall value to the

business. Recognizing that the business unit assessment of the value of IT may be

different across the organization, a structure must be in place to assess the ultimate

success of IT.

Different organizations have different meanings of the term “success” and use

different metrics to gauge the success of their IT activities. Many organizations have

progressed from using elementary cost-benefit analysis to an entrepreneurial approach

that encompasses the risk, uncertainty, and intangible elements of IT investments

including organizational changes facilitated by these investments. IT governance

encompasses three dimensions – IT governance structure, IT governance process and

IT metrics. The three dimensions are driven by business value. The first dimension, IT

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governance structure, strives to achieve strategic alignment of IT with business and

includes mechanisms for decision-making, direction setting and casting policies. The

second – IT governance process, is driven by embedding accountability into the

organization, i.e., establishing the policies and procedures used to implement the IT

investment projects. The third dimension, IT outcome metrics assesses both IT

governance structure and processes to ensure that the desired results were and are

being obtained.

IT governance starts by providing IT with direction which means setting business

strategies and performance goals. Second, IT investment projects that align with these

strategies are developed and resourced. Third, a continuous loop is established by

measuring performance and comparing these measurements to objectives, resulting

redirection of activities or changes to objectives, as appropriate. Implementing an

effective IT governance framework allows business value to be achieved through IT

(Kearns and Sabherwal, 2006/07). For effective IT value delivery, IT governance must

clearly articulate and implement IT governance arrangements for structure, process and

outcomes. To be successful, an organization needs to be aware that different strategic

contexts require different indicators of value. Implementing an effective IT governance

framework context requires different indicators of value. Also, implementing a effective

IT governance framework allows business value to be achieved through IT. For effective

IT value delivery, IT governance must clearly articulate and implement IT governance

arrangements for structure, process, and outcomes.

IT Steering Committee Composition

IT governance is concerned with the strategic alignment of IT with business. Effective

exchange of ideas and shared understanding of business and IT objectives allow the

organizational strategies to adopt harmoniously (Luftman et al., 1999; Johnson and

Lederer). Therefore IT governance requires significant input from stakeholders about

both strategic business needs and technological capabilities so that organizations can

build a clear and comprehensive picture of the connection between business and IT and

devise IT solutions that transcend functional boundaries.

The IT steering committee brings together stakeholders from diverse backgrounds and

organizational roles. The executive steering committee monitors IT management and

sets IT spending and cost allocations. The IT strategy committee provides direction and

assures that individual IT projects align with the overall business strategy. The IT

steering committee is responsible for project advocacy, and for the provision of

adequate resources for both planning and implementation of the IT investment

decisions (Parr and Shanks, 2000). Furthermore, compliance with external regulations

and internal guidelines should also be overseen by the IT steering committee (Ewusi-

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Mensah, 1997). If the IT steering committee does not understand these tasks

effectively, desired outcomes are unlikely to be achieved and, in extreme cases, the

organization may not comply with regulatory requirements such as SOX. For the IT

steering committee to be an effective team, they must have clear goals understood by

all members. Higher levels of IT governance effectiveness are associated with a shared

understanding of IT and business objectives by members of the steering committee.

Higher levels of IT governance effectiveness are associated with active participation of

the IT steering committee. Higher levels of IT governance effectiveness are also

associated with a balanced representation of senior business and IT management on

the steering committee.

Formulation and communication of IT strategies and policies

Rather than just focusing on purely technological issues, IT management must

understand the business, its critical success factors, and how to develop a synergistic

portfolio of IT capabilities (Bushell, 2003). Delivering effective IT governance requires

an integrative and comprehensive set of strategies to promote more universal views of

the value of information and the technology within the business. Critical to the success

of IT governance structures and processes is effective communication of IT strategies

and policies among all parties. The more effectively management communicates the IT

governance mechanisms, how they work, and what outcomes are expected, the more

effective are the IT governance processes(Weill and Ross,2004; Johnson and

Lederer,2005).

A priori evaluation and selection of IT investment projects

The objective of the IT investment approval process is to ensure that IT investments

generate significant returns to the organization relative to alternative investment

opportunities. The range of possible circumstances suggests that no one single

evaluation method or metric is likely to fit all cases( Scott Morton,1990 ).A complete

picture of the likely impact of an investment can only be given if a balance is achieved

between financial and non-financial impact assessments ( Renkema,2000).

Early in the system development life cycle, proposed IT investment projects can be

examined using a combination of financial, non-financial, and risk analysis. Projects

subjected to such scrutiny experience a more accurate and complete assessment than

projects examined using a less stringent combination of criteria. Obtaining a better

appreciation of the risks and returns improves the likelihood of success of these projects

relative to projects that experience less rigorous a priori evaluations.

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Interim evaluation of IT investment project implementation

During the system development stage, interim evaluations are needed so that projected

costs and benefits can be revised in the light of updated information about the project.

Frequent measurement and evaluation of project management metrics are critical to

effective IT governance. The metrics aid in tracking each project’s progress and, when

necessary, redirecting or terminating individual projects. Organizations use a variety of

indicators for assessing project behavior or process improvement, e.g., actual versus

planned task completions and actual versus planned resource consumption. Through a

comprehensive set of project management metrics, the organization can provide better

control of costs, greater reduction of risks, more substantial improvements in quality,

and greater assurance that the project objectives can be met. Hence, project

management metrics enhance the likelihood of implementation success.

The goal of the formalized decision making structure is to drive the project to

completion. Senior management involvement in or executive support of the structure is

a critical success factor to IT project implementation success. Individuals or committees

who take responsibilities for IT governance should also exercise important roles relative

to the project implementation activities. The activities include setting up an appropriate

IS development style, assessing project risk, ensuring adequate infrastructure, and

providing the project with adequate visibility and transparency. A very important

antecedent to a successful implementation of an information system is a “champion” for

the system (Ewusi-Mensah, 1997;Reich and Benbasat,1990;Beath,1991). Project

champions actively communicate their visions of the project with the project team and

obtain support from business stakeholders. They push the project over or around

approval and implementation hurdles. Therefore, the likelihood of success of IT

investment projects is substantially improved when one or more project champions are

involved .We can thus say that the success of IT project implementation is associated

with higher levels of involvement by the project champion during project development.

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