Strong governance yields savings for federal CIOs

CIOs in both the private and public sector are under the gun to do more with less. Agency CIOs, especially, must reduce costs, as directed by the Office of Management and Budget (OMB) in August 2011. The OMB, for its part, expected agency heads to submit budgets that cut at least 5 percent from this year’s spending.

Reducing storage costs with data archiving solutions can be a quick win for the bottom line. But after picking the low-hanging fruit, CIOs can really start to bring costs in line—and deliver more value—by establishing a strong IT governance practice.

Defining IT governance

IT governance suffers from a common misconception. People hear governance and they think it’s only related to standards and compliance. But at the highest level, governance is really about establishing policy. It’s about putting in place standard operating procedures for how to run your business to assure you achieve qualitative and quantitative outcomes.

IT governance is a system in which defined roles, processes and metrics enable strategic decision making that drive business value. It requires real-time visibility into the health of IT.

Why IT governance matters today

Why is governance so critical? Seismic shifts are happening in IT right now. At the same time, agency budgets are shrinking. With operations and maintenance eating up the lion’s share of any IT budget, there’s little room for error. Large-scale technology projects must be undertaken as federal IT pursues its policies of Cloud-First and IT Reform. This puts many federal agencies in the position of kicking off large-scale IT projects without the capability of adequately managing them: a recipe for disaster.

We’ve seen some high-profile failures in the federal space where agencies have outsourced their IT, and ended up outsourcing their governance as well (see my blog post U.S. Federal Agencies, IT Governance and the Cloud for more on this). Without knowing details about how their services are being provided, these agencies can’t easily recomplete those bids. The bottom line is that you must be able to measure your IT so that you can make decisions that benefit the business. That’s why governance represents a major section in the 25-point IT Reform Plan.

The ROI of IT governance

IT governance allows you to take proactive steps to avoid costs down the road. Preventative measures may not be sexy, but – just as you brush your teeth, exercise and eat right to avoid bigger health problems later – these changes translate into huge cost avoidance in the future.

According to the IT Reform Plan document, assessing the performance of IT investments – a big component in good IT governance – has already shaved off $3 billion in underperforming IT. And according to a Gantry Group study, implementing IT governance, on average, provided an ROI of 6.5% within the first year alone and within three years, more than 45.2% of projects were completed early.

Best practices for establishing IT governance

So how can you get started? Here are some next steps toward establishing good IT governance:

• Assess: You must determine where you are before you can begin to improve. TechStat reviews are one way to ascertain the health of major programs but don’t help much with the health of your processes and procedures required for good governance. A quick COBIT assessment to map your organization to a known capability model will help with understanding major areas that require improvement.
• Establish roles and oversight: Part of good governance is mapping out clear roles and responsibilities. (See my previous post on the changing role of the federal CIO for recommendations on how agency CIOs can become true portfolio managers.) Establish a steering committee for portfolio management and project selection will help assure that the right projects are funded and well planned/executed.
• Measure performance: You can’t make strategic decisions without knowledge and you can’t get knowledge without information. Application performance management as well as project and portfolio management tools give you insight into opportunities for rationalization and improvement of the overall IT health.

Optimize for value: The right IT governance gives you transparency and visibility into the details of IT, the people, processes and technology or materials required to deliver value. This helps you explain the value of IT to the business in financial terms. When you’re able to tell the business what a particular service costs and why, then you’re able to make strategic decisions that optimize value and reduce risk.