An IT Process Institute (ITPI) study postulates that better IT governance improves the overall business performance. The study assessed the maturity of IT Governance initiatives, by collecting its survey data from 389 organizations from multiple industries in North America, the United Kingdom, and Australia. IT Governance maturity was determined by a combination of the use of governance practices and performance. Enterprises at the lowest level of maturity have governance objectives focused on cost and risk reduction. High-maturity organizations have the highest focus on customer- and business-related objectives.
The study reveals three tiers of IT governance maturity based on the overall use of IT governance practices:
- Low-maturity enterprises have IT governance objectives that are more focused on cost and compliance objectives.
- Medium-maturity enterprises are also focused on cost objectives, but they also have a greater focus on customer- and business-related objectives.
- High-maturity enterprises focus primarily on customer and business needs, IT decision making and prioritization, agility and innovation. They also have significantly higher performance in all areas and add more value to product or service differentiation.
An earlier MIT research study also finds that firms with above-average IT governance performance had superior profits. This was shown by the measurement of three-year industry-adjusted return on assets (ROA). The average ROAs of the firms with above-average governance was more than double the firms with poorer governance. Of course, governance was not the only factor, but often good governance comes in all areas with effective management.
But what are the factors that contribute to above-average IT governance performance? Here are some conclusions we can draw from the above studies:
- More focused IT strategies for driving specific outcomes;
- Not expecting IT investments to excel in delivering on multiple business objectives at the same time;
- Specific focus on a small number of objectives for each IT investment in a company’s portfolio;
- Senior business leaders heavily involved in IT governance;
- A higher level of involvement from the CEO, COO, business unit leaders, CIOs and CFO;
- More managers in leadership positions who can accurately describe governance agreements;
- Fewer changes in IT governance, year to year.
IT Governance is increasingly being recognized as providing a framework for board members and senior management to ensure that IT effectively supports business strategy and improves business performance.