As IT becomes increasingly important to all aspects of running a modern business, organizations find themselves in need of frameworks that help set quality standards and measure success. IT governance frameworks can help in this regard by providing structures, frameworks and best practices that can demonstrate measurable results against wider business objectives.
What is IT governance?
IT governance is a facet of corporate governance. It is a formal framework, aimed at improving the overall management of IT, and helping a business derive more value from investments in technology. An effective IT governance policy helps a business achieve improved management of IT-related risks and alignment with business objectives.
A properly structured IT governance strategy also includes an IT Service Management (ITSM) governance policy to ensure all ITSM activities are in accordance with the organization’s goals, policies and standards. This would also involve monitoring, evaluating and reporting on ITSM processes and outcomes. In other words, IT governance sits on top of a company’s IT strategic hierarchy. It is supposed to deliver value to stakeholders and give the managerial staff their operational objectives. ITSM takes direction from the top of the pyramid, establishing service management objectives, while also managing services through various practices and procedures.
IT governance can also be defined as a set of formalized standards ensuring all IT investments are feasible, necessary and delivering bottom-line results. Their primary function is to reduce the likelihood of risks and losses from unethical or improper management of data, technology and business operations. An effective IT governance structure takes the team and other relevant stakeholders’ interests into account. When viewed in the larger context, IT governance is an integral part of the overall enterprise governance policy followed by an organization.
Typically, an IT governance framework includes four key components:
- Policies
- Procedures
- Controls
- Metrics and Key Performance Indicators(KPIs)
Why is IT governance important?
As technology has evolved, IT has become integral to almost every aspect of the workplace. This makes it impossible for an organization to ignore IT activities or leave them unchecked. It has become imperative that the IT policies and practices align with the business’s interest to achieve maximum operational efficiency.
This is where IT governance comes in — to ensure all IT systems are performing their assigned duties in alignment with each other. In other words, IT governance ensures that a company’s CEO, CIO and CFO are all pursuing the same goals, with their respective departments in complete synergy with each other. IT governance makes such an alignment easier to achieve by:
- Demonstrating assessable results against broader business strategies and objectives
- Meeting legal and regulatory obligations
- Giving stakeholders confidence in an organization’s IT services
- Improving the return on investment
- Improving compliance with certain corporate governance or public listing rules or requirements
How can IT governance help your organization?
A proper IT governance strategy helps a business achieve the following outcomes:
1. Improved risk detection and mitigation
IT departments can define rules and protocols for network monitoring, threat identification and breaches. These incidents can also be resolved more efficiently. The enforcement of these guidelines also helps the team learn how to minimize damage, help affected parties, and follow organizational guidelines to protect sensitive data.
2. Improved resource management
IT governance can reduce the costs associated with technology adoption projects. This is achieved through reviews of budgets, human resources, software asset management and security compliance procedures prior to the execution of such projects.
3. Alignment with business strategy and goals
An IT governance framework that connects overall implementation to tangible business outcomes helps teams create an outline for deliverables, timelines, quality standards and deployment steps while taking resource constraints into account.
4. Regulatory compliance
Businesses across all industries have to follow certain government regulations if they handle sensitive data. These include regulations related to risk management, oversight, documentation and continuous improvement. An effective IT governance framework gives a business the policies and procedures needed to align with these requirements.
5. Strong stakeholder relationships
Proper IT governance frameworks ensure there is proper protocol and relevant documentation. This gives stakeholders the transparency they need to prevent misunderstandings. It also facilitates collaboration, and creates an organized environment.
6. Consistent performance and decision making
Consistency is important in IT departments as it reduces the likelihood of costly implementation and better risk management. When IT teams are properly trained on IT governance standards, businesses have a clear route that shows them how to scale their digital transformation and adoption efforts, creating better chances for success in each project.
Which IT governance processes should your business employ?
The type of approach an organization takes to IT governance is completely dependent on its needs and priorities. In most cases its IT governance strategy revolves around a specific problem that adapts or evolves as its product, service or team matures. The different approaches that can be taken include:
1. Improved value delivery
Most organizations use technology to meet KPIs and improve business results. IT governance outlines clear roles, responsibilities and expectations that must be adhered to by employees that increase the likelihood of IT investments delivering value that stakeholders can see and tangibly measure.
2. Better IT strategic alignment
While value delivery is meant to measure actual results, strategic alignment supports those efforts by ensuring IT objectives are in sync with business objectives. This approach is particularly focused on fortifying cross-functional collaboration, allowing technology to integrate seamlessly across all business departments to enable better IT strategic planning. This approach to IT governance usually involves building better feedback loops and accelerating decision making between stakeholders, optimizing all forms of resource expenditure, and shortening ramp-up times and learning curves for employees.
3. Enhanced performance management
This refers to managing the quality and effectiveness of all technology processes within an organization. Its facets would include IT efficiency, service quality, digital adoption, as well as data security and privacy.
4. Better resource management
This refers to the management of backend operations that will impact the practicality of an IT initiative. It calls for planning that is both firm and forward-looking. Poor IT resource management can be catastrophic for smaller organizations working with limited resources, tight roadmaps and high stakeholder expectations.
5. Improved risk management
The global shift towards cloud-based apps and services has created new risks. Globally, the number of cyberattacks increased by 38% in 2022. This requires organizations to have an IT governance approach emphasizing risk management protocols for all technology-driven initiatives. This would involve risk identification, risk assessment, risk mitigation, crisis management and disaster recovery.
IT governance frameworks
Today, companies can work with IT governance frameworks developed by different organizations and groups over the years. These can be leveraged instead of building new protocols to integrate best practices into their work culture. They include:
1. COBIT
COBIT is an acronym for Control Objectives for Information and Related Technologies. It’s IT governance processes are useful for businesses that need to meet challenges in meeting regulatory compliance, risk management and lining up IT strategy with the organization’s goals. Its latest iteration is COBIT 5, which was released in 2012.
2. ITIL
ITIL (IT Infrastructure Library) standardizes the selection, planning, delivery, maintenance and complete lifecycle of IT services within a business. Its objective is to improve efficiency and reliably give predictable service delivery.
3. COSO
COSO(Committee of Sponsoring Organizations) is primarily used by accounting firms, financial organizations and publicly traded companies. Its purpose is to establish internal controls to be integrated into business practices. These controls provide assurance that an entity is operating ethically, transparently and in accordance with industry standards. Its five components consist of control environment, risk assessment and management, control activities, information and communication, along with monitoring.
4. CMMI
CMMI (Capability Maturity Model Integration) is a process and behavioral model meant to help organizations streamline process improvement and encourage productive behaviors in order to decrease risks in software, product and service development. It functions by providing businesses with what they need to consistently develop improved products and services. It can be used to tackle the logistics of improving performance by developing tangible benchmarks, while also encouraging efficient behavior throughout an organization.
5. FAIR
FAIR(Factor Analysis of Information Risk) is a quantitative risk analysis model. It defines the required building blocks needed to implement functional cyber risk management programs. Its primary focus is to quantify cyber risk. It is the only international standard quantitative model framework that offers operational risk and information security.
6. ISO/IEC 38500
ISO/IEC 38500 is an international standard in principles, guidelines and practices for IT governance. It places great emphasis on legal and ethical considerations regarding a company’s use of IT.
7. NIST Cybersecurity Framework
The NIST Cybersecurity Framework was developed by the National Institute of Standards and Technology. Its IT governance framework gives crucial guidance on managing and minimizing cybersecurity risks through IT protocols and strategies.
How to choose the right IT governance framework for your business?
In most cases, IT governance frameworks are focused on helping businesses monitor the overall functionality of their IT departments and infrastructure. They also help management figure out what key metrics they should focus on and the return the business is receiving from investments in the IT department.
When considering the above mentioned IT governance frameworks, it should be taken into account that COBIT and COSO mainly deal with risk assessment, ITIL primarily helps with streamlining different departments and FAIR is mainly related to cyber risk assessment. CMMI was initially exclusively used in software engineering but has evolved to be able to deal with hardware development, service delivery and purchasing.
As such, an organization has to take its goals into account when making a choice between these frameworks. It is also important to consider the kind of corporate culture in your business and what framework would be a natural fit for it.
Additionally, a business doesn’t have to restrict itself to only one IT governance framework. In some cases two frameworks can complement each other. For example, COBIT can show IT teams the reason something needs to be done, and ITIL can tell them how. Some businesses have also used COBIT and COSO together.
Other factors that need to be considered include:
1. Your clients’ needs
It is necessary to consider your clients industry, regulatory environment, and what they hope to achieve through their IT governance policy. It is necessary to conduct client discussions and risk assessments to determine the key pain points and best outcomes prior to making this choice.
2. Industry standards and regulations
Overall industry standards and regulations are also important to consider when deciding on an IT governance approach. For example entities in the finance sector tend to prefer COBIT due to its alignment with industry regulations.
3. Size of the organization
While some IT governance frameworks are better suited for larger enterprises, others are designed for small-to-medium sized companies.
4. Scalability
It is important to consider scalability because an organization’s size can change over time. An IT governance framework should be able to adapt if an organization grows over time. Change in growth rates should also be taken into account.
5. Trainability and support
The availability of training materials and community support should be reviewed once an IT governance framework has been decided on. In some scenarios clients may take the responsibility for taking the lead on parts of the framework, while in other cases the team may have to oversee things themselves. This makes it important for training and support materials to be available for both clients and the organization.
IT governance best practices
Certain IT governance best practices need to be followed to ensure the delivery of specific projects, manage change and correctly execute processes. These include:
1. Make IT an integral part of business strategy
Businesses have become increasingly technology driven, with most – if not all – business activities being shifted online in a large number of cases. Research conducted by SEMRush(a MarTech SaaS platform) shows that 84% of small enterprises use a digital platform to showcase their products. Moreover, 79% use digital tools in their business processes and 55% use technology to facilitate customer interactions.
2. Build the right team
Effective IT governance requires the relevant expertise and knowledge. An IT team will not be able to carry out their responsibilities without the right qualifications and a sufficient level of competency. Most IT governance failures are a consequence of human error, and the likelihood of such an incident occurring is significantly reduced if the right team is hired for the job. Employee training and education can also be a great help in this regard.
3. Define roles and responsibilities
Properly defining roles and responsibilities is essential for making decisions, providing oversight and determining accountability. Each member of an IT team should understand their responsibilities and how to collaborate to efficiently achieve objectives.
4. Monitor IT performance
A company’s IT infrastructure must be designed for compatibility with its IT governance strategy. This can be accomplished by monitoring the functionality of your systems and fine-tuning them for better results. It should be assessed how well they fit with the company’s current strategy and the amount of resources they consume. This will allow the organization to choose the best technology solution for its goals.
5. Continuously evaluate IT practices
IT requirements are constantly evolving. This means best practices, rules and structures are subject to constant change. This means frequent reviews and consistent monitoring of procedures are necessary.
6. Clearly define business goals and objectives
An organization’s business goals and objectives should be clearly defined prior to implementation of any IT governance frameworks. This would involve identifying key priorities, determining desired outcomes, and selecting a way to measure success.
7. Involve key stakeholders
Clients’ key stakeholders should be engaged during both the development and implementation of the IT governance framework. It should be ensured that this framework captures all requirements and gains buy-in from the impacted parties.
8. Recognize one size does not fit all
Implementation and planning processes should be approached with an open-minded and innovative attitude to determine the best solution for each client’s individual needs.
9. Set KPIs
Relevant KPIs should be defined and established to reliably measure and monitor any IT governance framework. It should be ensured that the set KPIs are in alignment with the company’s overall business goals and objectives.
10. Review and update
The building of an IT governance framework and approach is a process that evolves. The framework should also have the agility to shift as a company grows and changes. For best results, time should be set for regular reviews and updates of the framework on a yearly basis to ensure alignment with new innovations in technology, business requirements, and industry standards.
As mentioned above, modern IT systems are increasingly complex and involved in all aspects of running a business. Without an IT governance framework, managing the interconnected networks this creates in a modern business is difficult to manage in a manner that is cohesive and aligned with the organization’s objectives. As such, IT governance is needed to minimize risk of inefficiencies, security breaches and compliance violations.
Frequently Asked Questions
What is the value of IT governance?
IT governance processes give an organization the direction and frameworks needed to manage risks related to data privacy, compliance and information security. Implementing effective IT governance policies improve transparency, fortify customer trust, drive innovation and increase operational efficiency.
What is the difference between IT management and IT governance?
IT management refers to a set of practices related to planning, designing , transitioning and continually improving IT services. IT governance refers to the structure, leadership practices, and processes that support the business and keep IT policies in line with the business and stakeholders’ goals and objectives.
How is IT governance implemented?
The first step to implementing IT governance is to define the IT governance policy’s scopes and objectives. This is followed by developing comprehensive IT processes and procedures that outline expected behaviors, standards and practices to be followed in the company’s IT environment. Now the company can establish robust risk management processes within its IT governance program. The final step is to define performance metrics and key performance indicators used to monitor and assess the performance of IT services and projects.
