Information technology (IT) is deeply ingrained in how businesses operate and deliver value for their clients. For medium-sized companies, having effective IT governance is crucial to align technology strategy with your business goals. With the right governance model, IT can transition from being a cost centre to becoming a strategic asset of the business, driving growth and competitiveness.

What is IT Governance?

There is a common misunderstanding that IT governance is solely about technology systems and tools, however in my experience governance should be more about the practices, collaboration, and leadership that is adopted, rather than specific technologies. Although good governance does use performance management systems and portfolio management tools these are enablers rather than the primary focus – to ensure that your technology investments are delivering value and mitigating your risk.

Good governance requires cross-functional participation, executive engagement, and transparent decision-making processes that may or may not involve specialised software. The key distinction is that IT governance is fundamentally about connecting business strategy with technology strategy and investments. It goes beyond just managing technical operations and infrastructure.

This is why IT governance needs to involve executives and leaders from finance, operations, marketing etc. along with IT. IT governance is the strategic alignment and value realisation piece, not just the technical management piece.

Some of the crucial and core components of effective IT governance include:

• IT strategic planning: Defining technology vision, roadmaps, and priorities in line with business strategy.
• Portfolio management: Determining which IT investments and projects to fund based on expected ROI.
• System implementation: Establishing processes for developing, testing, and deploying new systems.
• Vendor management: Managing third-party technology partners and outsourcing relationships.
• IT risk management: Identifying and mitigating information security, disaster recovery, and regulatory compliance risks.
• Performance monitoring: Tracking KPIs to evaluate if IT initiatives are achieving expected benefits.

Why IT Governance Matters

Effective governance allows medium-sized businesses to fully capitalise on their existing agility and nimbleness to get maximum value from their technology investments, in fact a solid IT Governance framework can bring you:

• Strategic agility: A governance framework enables agile decision-making capabilities and provides clarity on how IT can create value.
• Managed risk: Through robust risk management practices, IT governance can reduce cybersecurity threats like data breaches, ransomware attacks, etc., maintain regulatory compliance, and plan for disaster recovery.
• Improved efficiency: IT portfolio management ensures your resources are better allocated to key priorities rather than spread too thinly across disjointed projects.
• Innovation support: Proper governance provides a framework for rapidly adopting technologies like AI for chatbots when they align to business goals like improving customer service.
• Growth enablement: Technology, when correctly governed, is a core driver of developing new products, entering new markets, and enhancing competitiveness.

Implementing effective governance poses challenges for many companies due to constraints like budget, talent gaps, and inadequate executive support. Success requires leadership commitment to rigorously align IT with your strategic objectives.

Implementing IT Governance Best Practices

While the optimal governance model depends on factors like company size, technology footprint, and growth objectives, there are some fundamental best practices that will help you establish a solid IT governance foundation:

• Establish a cross-functional Technology Strategy Team: Create a team of senior leaders from business units like finance, operations, and marketing, not just IT. They are responsible for core governance duties including IT strategic planning, investment prioritisation, and performance oversight.
• Adopt Agile Portfolio Management: Employ flexible, data-driven processes to evaluate and prioritise IT investments based on alignment with the overall IT strategy and delivering continuous business value.
• Develop Formal IT Policies and Procedures: Document detailed policies and procedures covering critical areas like security, vendor management, system implementations, change control, and more.
• Implement an IT Service Management Framework: Adopt an ITSM framework like ITIL to standardise service delivery processes across infrastructure, operations, applications, and end-user support.
• Establish and Report on IT Performance Metrics: Define KPIs that quantify and monitor the ROI, risk management, operational excellence, and strategic alignment of technology investments. Routinely report performance results to business leadership.
• Continually Evaluate the Governance Model: Periodically review and update the governance practices to account for evolving business needs, industry trends, emerging technologies, and IT’s role in the organisation.

The Virtual or Fractional CIO’s Role

If you’re resource-constrained, collaborating with an experienced fractional or outsourced CIO is an effective way to establish robust IT governance.  A virtual CIO can provide strategic leadership on implementing governance principles that are tailored to your organisation. Typical governance activities that you can expect from a vCIO should include:

• Guiding IT strategic planning to identify opportunities for technology to drive business value.
• Performing current state analyses evaluating existing IT strengths, weaknesses, gaps, and capabilities.
• Recommending optimised governance structures including committees, policies, procedures.
• Instituting rigorous ROI analyses and approval processes for IT investments.
• Implementing IT portfolio management to align initiatives with strategic priorities.
• Defining KPIs and reporting to quantify the business impact of technology.
• Educating leaders on effective governance frameworks and practices.

By leveraging this expertise, medium-sized businesses can make rapid headway in transforming IT into a well-governed strategic asset. The insights and specialised expertise from on-demand advisors can help medium-sized companies quickly build governance capabilities that may otherwise take years to develop internally.

The Path Forward

Failing to govern IT effectively puts your business at a severe disadvantage in leveraging technology for growth. It leads to misaligned systems, uncontrolled costs, unmanaged risks, and missed innovation opportunities. Establishing even basic IT governance practices can help medium-sized organisations thrive in an increasingly digital-first business landscape. Leveraging fractional or outsourced expertise can provide an accelerated path to optimising your technology with improved governance and control.