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IT Governance

• Title: IT Governance

• Introduction to IT Governance• Vendor Selection• Contracting for Services• Contract Monitoring• Contract Renegotiation• IT Governance and Vendor Management

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IT Governance – What is it?

• The governance of the organisational processes/activities

• Decisions to be made– Shall we perform the activity in-house– Shall we outsource the activity?

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Why Have Governance?

• Organisations that cannot structure their IT governance model waste precious resources – capital, time and human in an era where time is of the essence, capital is in short supply and truly qualified IT people are always hard to find

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What is Outsourcing?

“Outsourcing is the delegation through a contractual arrangement, of all or part of

the technical resources, the human resources and the management responsibilities associated with

providing IT services, to an external vendor”

Clark et al.

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Why Outsource?

• Cost and quality concerns• Breakdown in IT performance• Intense vendor pressures• Simplified general management agenda• Financial factors• Corporate Culture• Eliminate internal irritant• Other Factors

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Outsourcing Advantages

• Financial

• Technical

• Management

• Human Resources

• Quality

• Flexibility

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What IT Functions Could be Outsourced [Survey Results]

IT FUNCTION CURRENT FUTURE

Web Development/Hosting 27% 69%

E-Commerce 7% 54%

Website Admin/Management 8% 53%

IT Services(hardware maintenance) 27% 44%

Security Services 2% 40%

Network Management 11% 37%

Helpdesk 4% 34%

ERP Implementation 1% 25%

Application Management 3% 22%

Other 9%

No Plans to Outsource 9%

None/Don’t Know 41% 3%

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Vendor Selection

• Large orgs may employ a management consulting firm for this task

• A Request for Proposal (RFP) is used as a governance mechanism to solicit and compare contract bids from qualified vendors

• Final vendor selection performed by committee

• Vendors assessed on a number of criteria e.g.– Skills, references, reputation, support, flexibility

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What should a Request For Proposal(RFP) for an Outsourcing Vendor contain?

• Objectives and scope• Background• Technology Vision• Services Requested• Transition\migration services• Performance requirements• Resources• Requirements for Vendor Proposal• General Terms and Conditions for Proposal• Proposal Evaluation

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Main Reasons for Past Outsourcing Failures

• Failure to establish performance metrics

• Poor vendor assessment

• Insufficient detail in contract

• Poor vendor monitoring

“when outsourcing is seen as a failure may need to backsource”

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Outsourcing Considerations[Do’s]

• Ask for and check references and exercise due diligence

• Assess the culture of your outsourcing partner• Evaluate multiple options – both suppliers and

approaches• GET IT IN WRITING!• Metrics matters – use them• Open the kimono as much as possible• Pick an outsourcing partner with a strong partner

network

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Outsourcing Considerations[Don’ts]

• Buy on price alone• Overlook the reference-checking process• Use a price contract without considering the long-term

consequences• Forget to provide for contingencies• Communicate via committee• Ever hand over project management• Rely on marquee references• Single-source• Let your head be turned by goodies

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Contracting for Services

• The contract is the principle governance mechanism of vendor management

• Typically done by specialists in the IT organisation with a legal dept assistant

• Case Study : Contract Elements

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Contract Montitoring

• Monitoring the vendor’s performance against accepted industry benchmarks of quality and service levels and preparing periodic reports to IT management on the performance of vendors against these metrics

• Service level agreements along with incentives and penalties provide an excellent vehicle for managing these criteria

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Contract Renegotiation

• Contract expiration• A material breach in contract by the vendor that may

result in contract termination or renegotiation (e.g. poor performance, security lapses, criminal activity)

• A major change in the organisation’s management or industry (e.g. bankruptcy or merger on the part of the organisation of the vendor)

• A significant change in the price for the same vendor services

• New technology

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IT Governance and Vendor Management[Do’s]

• Establish a vendor management team• Monitor service levels and end-user satisfaction• Track the service/product market and the

vendor’s place in it• Continually renegotiate contracts• Keep business units accountable and involved• Think ongoing relationship – not just one-time

transaction• Use the vendor’s expertise to suggest solutions

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IT Governance and Vendor Management [Don’ts]

• Try to manage a vendor without adequate expertise available

• Ignore the need to establish service level agreements (SLA’s)

• Fail to establsh firm accountability and metrics for performance

• Understaff the vendor management function• Rely solely on the vendor’s expertise• Forget to keep an eye on vendor reputation

and profitability