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Governing IT Decisions: Who’s in Charge?

Joe McKendrick June 2008

No longer can IT departments operate in a vacuum, attempting to second-guess what applications the business needs. The business needs to guide IT decisions, say industry experts, especially in an era when the insurance industry relies on IT to manage everything from new applications to claims processing.

Effective IT governance, driven by decision-makers outside of IT and from across the business, provides guidance to IT as to what projects are most critical and what ones are not. IT governance helps IT avoid making decisions inside of a black box, says Jeff Goldberg, senior analyst at Celent, Boston. In many cases IT has unilaterally made major systems decisions without thinking about the business implications, such as the purchase of a content management system, he says. As a result, “multiple IT projects end up competing with each other for scarce IT resources.”


Jeff Goldberg

Not that some businesses didn’t intentionally want things this way. “In many organizations, the business leaders like to push off decisions to IT so they’re not really accountable for an IT project going poorly,” Goldberg explains. “They get to complain when things aren’t going the way they want, but they’re not necessarily taking ownership of new projects.”

As a result of such costly miscommunications and lack of accountability, insurance companies are starting to recognize that IT decisions need to be driven more by the business itself than the IT department. A recent survey by the IT Governance Institute (ITGI), Rolling Meadows, Ill., for example, finds that 71% of 749 executives surveyed say they now have IT budgets and plans reviewed by a board. About 68% report that business management in their companies participates to some degree in IT governance. However, in most cases, says ITGI, most of these initiatives are led by IT, and non-IT executives still tend to play more of a peripheral role, versus directly driving decisions around IT expenditures and projects.

Typically, a board or steering committee—consisting of executives from across the business, along with the CIO or top IT executive—directs IT governance. Projects of a certain budget or magnitude are approved and prioritized by this group. Smaller, routine projects, such as software patches, are usually part of a regular IT maintenance cycle, and would not require the input of a governance board.

The inherent advantage of IT governance is that “it requires IT leaders to understand the business behind what they’re trying to do, and it requires business leaders to take ownership of technology decisions,” says Goldberg. “When done properly, IT governance will make IT projects much more successful, which means that you’re attending to truly important projects that have the highest priority, and you have support and finances behind them.”

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