Canadian business perspectives on the governance of entrerprise IT and Company size matters

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Canadian business perspectives on the governance of entrerprise IT and Company size matters

Vanessa Iarocci
Gert du Preez

Episode 50: Canadian business perspectives on the governance of entrerprise IT and Company size matters

Release date: June 13, 2012
Host: Vanessa Iarocci
Guests: Gert du Preez 
Running time: 14:42 minutes

Large scale IT projects planned by Canadian organizations will require significant business-IT interaction where IT governance mechanisms will be critical. PwC found that Canadian organizations need to focus on two areas of IT governance: enterprise architecture and cost reduction.

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Episode 50 transcript:

Voiceover: Welcome to Strategy Talks, the business podcast series from PwC Canada. This interview series featuring new topics and guest every episode is designed to give you valuable insight into some of today’s hottest issues affecting your business.

Vanessa: I am Vanessa Iarocci, your host for today’s episode of Strategy Talks. Large scale IT projects planned by Canadian organizations will require significant business IT interactions where IT governance mechanisms will be critical. PwC found that Canadian organizations need to focus on two areas of IT governance; enterprise architecture and cost reduction. Here to discuss this further and what it means to your organization is Gert du Preez, Director of PwC’s Technology Consulting practice, who is joining us today via telephone from our Calgary office.

Welcome. Gert, there are two reports we are here to discuss today; the first one is called Canadian Business Perspectives on the Governance of Enterprise IT. What were the objectives of the study?

Gert: So, this really all started with research which we conducted for the fourth edition of the IT Governance Institute Global Status Report on IT governance, and the object for that study were really three fold. First we need to understand the degree to which this concept of IT governance is understood and accepted by the “C” suite, including both business and IT stakeholders and that included their perceptions on the importance of IT in the organizations; the current contribution of IT to the business; accountability for IT governance and it’s integration of overall enterprise governance. The second objective was to determine what level of IT governance currently exists out there. So what are the maturity levels of organizations in IT governance; what are the frame works that they use and also their perceptions on certifications. A third objective was to look at the impact of a couple of topics of current special interest and how they relate to IT governance. So for this round of the survey, and that included the impact of the economic crisis, innovation and also the governance of enterprise architecture, we then took the data from the survey for 41 Canadian organizations that had participated and did a comparison with the global respondent base and we then further broke that down to look at the responses of small vs. large organizations.

Vanessa: So you did the study... now, what were the most interesting differences between Canadian and global respondents?

Gert: I maybe talk through three of them... The first one we asked respondents to characterize the current role of IT in the organization as either proactive or reactive and it was very good to see that a higher percentage of Canadian respondents described their role as proactive compared to the global respondents base. This might be explained by looking at another question; more Canadian then global respondents cited that the head of IT is a member of the senior management team, and that makes senses. In that position as a member of the senior management team, the head of IT has early insight into business developments, he or she is part of defining the business direction and planning and can really ensure that IT is playing a proactive role in driving business opportunities. A second difference between Canadian and global respondents were in response to the question about IT issues experienced in the past 12 months. We saw that Canadian respondents were more likely to suffer from increasing IT costs, and also they cited problems implementing new systems as well as IT disaster recovery issues more frequently compared to the global base. However on the plus side, they had fought fewer serious operational IT issues.

The fact that increasing IT cost are being experienced, might be related to the initiatives that Canadian respondents were planning, which was another question. So higher percentages of Canadian than global respondents are planning; daytime information initiatives, major system implementation or upgrades and major infrastructure initiatives. Now if you think about those, they are all very cost intensive initiatives, typically payback periods might be quite long so that might be why the Canadian respondents are suffering more from increasing IT costs. If we delve down a bit into the lower incidents of serious IT operational issues, it’s very much reflective of what we find with many of the organizations that we work with, and that is that Canadian organizations typically do have a higher level of maturity in that IT operational space.

The third interesting difference was when we ask respondents about the most significant challenges implementing IT governance, and something mentioned more frequently by Canadian respondents was, trying to do too much at once. It’s very important that the implementation of IT governance projects should be viewed and managed as any other project; so care should be taken to make sure that it’s properly scoped and that the objectives actually are obtainable and that the base of change can be absorbed by the organization.

Vanessa: Why has the role that IT governance can play in cost reduction... why has that been overlooked by many organizations?

Gert: Indeed IT governance can play a very significant role in managing IT costs and it becomes even more critical for organizations with global operations or if they have a very complex operating model. So if we think a little bit about having the right decision making structures that involve all the right business and IT stakeholders from different parts of the organization. Through that, you can ensure that you reduce duplications or overlap between initiatives in different territories or different business units; you can also help increase re-use which can lower both implementation and maintenance costs. However, you don’t only need to have these mechanisms, but they need to be operating well as well and be mature. So it’s typically organizations that are at a high level of IT governance maturity before they are going to start seeing these benefits accruing.

Vanessa: So certainly this is a really big and important issue, now why is governance of enterprise architecture become so important?

Gert: So if we look at enterprise architecture, we see that it’s becoming more and more important in organizations and I think there is a range of factors. If we think of shortening business cycles, the very high degrees of change in the internal and external environments, all of that really drives a need for agility and flexibility in the IT environment and that typically comes through your enterprise architecture. Also, if you think of an IT environment sort of in its natural state, they will always tend to migrate towards increased complexity. So enterprise architecture is a way to manage that complexity and drive simplification. So if you have the right IT governance mechanisms for enterprise architecture, you can ensure there is focus on agility and flexibility which will enable more rapid business change and also better managing complexity. Another thought there is that if you think of enterprise architecture, it’s often described as being the bridge between business and technology walls and therefore it’s really critical to have the right business and IT stakeholders involved in the governance of enterprise architecture.

Vanessa: And moving along we’ve certainly see that Canadians have done a relatively good job in this area, but what are some of the key actions points or recommendations for Canadians going forward?

Gert: So maybe firstly, staying on the topic of enterprise architecture, we do see that as a specific focus area and specifically Canadian organizations should focus on the right decision making structures such as an architecture review board, enterprise architecture principles and using a frame work for the governance of enterprise architecture; such as TOGO the Open Group Architecture Frame Work. These are all areas in which the Canadian organizations typically had lower scores compared to the global ones. The second one we saw that the most common IT related issues experienced was increasing IT costs, but as you mentioned, it was not reported as the significant driver for IT governance activities. The right governance mechanisms can play a significant role in cost reduction initiatives, things like re-use, eliminating duplication, overlap and having optimal innovative preservation processes. So that should be a focus for Canadian organizations.

I’d say the last one, in view of the initiatives planned by Canadian respondents in the next 12 months; we were talking about the data information initiatives, the major system implementation or upgrades. These are all initiatives that require significant business and IT interactions, people from different parts of the business and that is where IT governance mechanisms really are critical.

Vanessa: Alright... and where should organizations start if they want to improve their IT governance?

Gert: So we normally help organizations to start by defining; what are the key IT related decisions that need to be made and we normally think they are of different domains. One of those might be the IT strategy and an example of the decision there is the approval of the IT strategy; who needs to be involved in the enterprise architecture space, a key decision might be, approving an architecture exception request and so we can go on through domains such as sourcing, security, applications, infrastructures etc . Once you have defined what these key decisions are, you need to think about, who are the different business and IT stakeholders that need to be involved in those decisions and you can then develop a decision model. So that brings clarity by identifying who is accountable, responsible, consulted or should be informed. When we think about stakeholders there, it could be individuals, so it could be their CIO or their Head of Applications Development or the CFO, but it could also be some of the current governance mechanisms that exist such as the IT Steering Committee, for example. So the decision model will enable the right governance structures to be defined and again there the outputs could be the design of new structures like the architecture review committee that we’ve spoken about or it could be changes to the mandate or roles of some the current structures. Once you have those governance structures defined, you can then look at processes, polices, standards, principles that need to be defined. Those all support the governance of IT structures and it can also guide the execution of decisions made within these structures. So there is an investment to be made by organizations in implementing the right IT governance. However, if we look at some of the outcomes that other organizations have experienced, for example around increased business competitiveness or reduced IT costs, it certainly is a worthwhile investment to make.

Vanessa: Now we are going to switch gears and talk about the second report called Company Size Matters, Perspectives on IT Governance. So are there any differences when you look at large vs. Small Canadian organization?

Gert: Vanessa we did indeed review the differences in how small Canadian businesses, (and we classify those as organization with less than 500 employees) approach IT governance compared to the larger firms; and that’s those with more than 500 employees. A couple of key differences; 86% of respondents from large organizations, said that they have at least some ad hoc IT governance mechanisms in place or a high level of maturity. The corresponding figures for small organizations and was only 37%, so generally a much lower level of maturity. A recommendation for small organizations, is to that they need to ensure they have the right level of governance in place for their unique environment, so they might not need all the committees or all of the structures that you find in a larger organization, but they do need to ensure that that minimum level is indeed covered.

A second difference was around the use of full outsourcing, and as is to be expected, that is more prevalent in smaller organizations compared to the larger ones. IT governance mechanism such as vendor management office or function, can really add significant value by ensuring that there is proper oversight in management of contracts, service level agreements and also that oversight over vendor performance, so that is something that smaller organizations can focus on.

A third difference would be around responses for the value contribution of IT. It is perceived lower in smaller organizations than in larger ones. We looked at a couple of sub-dimensions there and one of them was, IT enabling rapid change as a key area for improvement. So that is related to a lower level of maturity in the governance of enterprise architecture that we found in smaller organizations as well. So some specific governance mechanisms that are perhaps more applicable to smaller organizations which they could consider, could be enterprise architecture principles that all IT initiatives need to comply with, as well as define architecture

Vanessa: For more information, please visit pwc.com/ca/informationmanagement.

Voiceover: This concludes this episode of Strategy Talks. Thank you for listening, we hope you’ll join us again soon for another episode. To download or subscribe to this podcast series or to find more information, please visit pwc.com/ca/strategytalks.

The information in this podcast is provided with the understanding that the authors and publishers are not herein engaged in rendering legal accounting, tax or other professional advice or services. The audience should discuss with their professional advisors how the information may apply to their specific situation.

Copyright 2012 PricewaterhouseCoopers LLP. All rights reserved. PricewaterhouseCoopers refers to PricewaterhouseCoopers LLP an Ontario Limited Liability Partnership or as the context requires, the PricewaterhouseCoopers global network or other member firms of the network, each of which is a separate and independent legal entity.

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Strategy Talks is a series of audio podcasts that explore key issues affecting businesses in Canada, and share strategies that companies can use to help address them.
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