A lack of effective information technology (IT) governance in the majority of organizations is perpetuating the chronic failure rate of IT-enabled business projects, and seriously impairing the achievement of business value, according to a study by Butler Group, a UK-based subsidiary of Datamonitor. The research indicated that IT governance initiatives were most often deployed solely within the IT department, and did not take into account the broader requirements of alignment with business objectives. As a consequence, there is a lack of coordination between the IT-led elements of projects and management of the associated business change.

Tim Jennings, Research Director with Butler Group, and lead author of the report explained: "Many new business initiatives are reliant on information systems, so the impact of poor IT governance is not just an IT issue, but directly reduces the potential business benefits."

Butler Group notes that other effects of poor IT governance include increased costs due to the inefficiencies of short-term, tactical IT deployments, unproductive use of human resources and IT assets, and the potential risk of breaching data security and regulatory compliance requirements.

Jennings noted that, "Although the largest enterprises are paying closer attention to IT governance, medium- to large-sized organisations (up to 5,000 employees) are less likely to have the required disciplines in place, and are therefore particularly susceptible to poor returns on their IT investments."

Governance requirements and IT spend

Spend on IT can be split into three categories: Run-The-Organisation, Change-The-Organisation, and Innovate, each of which has distinct characteristics, and different governance requirements. For Run-The-Organisation spend, the emphasis is on availability, reliability, and running IT operations at lowest reasonable cost.

Change-The-Organisation spend represents work on new IT-enabled business projects, with drivers such as customer satisfaction, productivity improvements, competitive insight, or cost advantage. The role of governance in this category is therefore to formalise the process of collaboration between business and IT to deliver these objectives. This will involve specification of requirements, development of a business case, identification of appropriate business metrics, effective reporting on the status of the project during development, and ongoing tracking of the benefits. The use of a Project Management Office (PMO) to oversee this process offers a significant improvement in the management and governance of this type of spend, and has become a key interface between business and IT.

The role of IT in innovation involves taking advantage of technology to create new products and services, or to take the company into new markets. The emphasis of IT governance for this category of spend must be on strong planning, alignment with strategic objectives, effective risk assessment, and ensuring that there is early notification of potential issues.

Immature market for IT governance tools

Project Portfolio Management (PPM) solutions can support an IT governance initiative, but the market is still relatively immature, particularly in terms of customer adoption. Whilst the vast majority of organisations perceive IT governance as being important, the potential benefits of a PPM solution have only gained significant traction in large enterprise customers, where the requirement to manage competing investment and resource requirements for many hundreds and sometimes thousands of projects and proposals is a clear driver. For these organisations, CA Clarity and Primavera are the current market leaders.

For medium- to large-sized companies, IT governance and project management functionality has often been delivered by a series of point solutions, and the humble spreadsheet far outstrips any other packaged application in terms of deployment numbers. Butler Group believes that currently, the PPM vendors are failing to meet the needs of this market for affordable and easily-deployable solutions.

End-to-end view

The report concludes that an IT governance framework must take an end-to-end view of the IT value chain, including both business and IT perspectives.

Jennings says, “Whether an organisation views IT as a strategic capability involving significant investment, or purely as a support service to be delivered at minimal cost, the reality is that all are dependent on information systems as an integral part of many business processes. Effective IT governance is therefore essential to ensure that the delivery of IT services meets the requirements of the business."

About the market research report

The Butler Group report, "IT Governance: Managing Portfolios, Projects, Processes and People" (April 2007), provides readers with in-depth information and analysis on this topic. It discusses the purpose of IT governance within an organization and its key characteristics, considers the types of technology that can be used to support IT governance, and considers the practical aspects of implementing an IT governance initiative. It also includes a comparative evaluation of the leading Project Portfolio Management solutions.

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