Governing IT Decisions: Who’s in Charge?

Insurance Networking News, June 2008

Joe McKendrick

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.”

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.”

GATED GOVERNANCE

At Columbus, Ga.-based AFLAC, IT governance has been baked into the executive culture—business line executives from the president on down are involved in decisions regarding technology implementations. The company recognized four years ago that it needed an enterprisewide governance approach to effectively leverage various technology initiatives across its business units.

AFLAC’s IT governance is led by a high-level steering committee, chaired by AFLAC’s U.S. president, says Brian Abeyta, VP of the IT project management office at AFLAC. At the next level is a “C-level” review board run by the company’s chief administration officer, CIO and chief accounting officer. Below that, for smaller projects, are project boards run by line-of-business VPs.

This three-tier corporate IT governance structure, in place for more than two years, has enabled AFLAC to better identify and move forward with initiatives that provide the most strategic value to the company. Previously, Abeyta says, IT staff resources were often consumed with projects that extended beyond their useful life.

Abeyta credits AFLAC’s “gated” governance process, in which proposed IT projects are required to pass through several layers of control gates to get sign-off from managers involved with or affected by the project. “Because our governance process is gated, we’ve been able to, in some cases, make decisions to stop working on a project if we have found, as an organization, that it’s not worth doing anymore,” he explains. “We’ve had some efforts on our roadmap that never actually made it to the approval process, because we determined they’re not worth pursuing. As a result, we saved ourselves from proposing projects that wouldn’t have the return on investment that we initially thought they would.”

Effective, business-driven governance helps AFLAC initiate and manage a wide range of new projects, launching up to 40 a year. “Sometimes the initiatives are top-down driven, but oftentimes they’re bottom-up as well,” Abeyta says. “We begin the year with a corporate-wide roadmap, so we have an idea going into the year what projects we will do during the course of that year. Even at that, the projects still need to go back up to the steering committee, because the executive may decide to pull a planned project, in lieu of another project that has just come to the surface. So we are nimble enough to make those changes and adapt to them throughout the year.”

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