IT governance is increasingly being discussed as a method for ensuring quality IT management and IT service provision. Tools such as Six Sigma and balanced scorecards are being employed to better manage IT processes and deliver more business value. What are your experiences and what has worked for you in practice?

The results of using a balanced scorecard crucially depend on what is chosen to be included for measurement. The first decision is whether a company should look to monitor business metrics or key performance indicators (KPIs).

A metric is a quantitative measure of some aspect of your internal or external business environment that is of interest, but not something that can be managed directly. For instance, UK broadband penetration is a metric of importance to Betfair, but not something we control directly.

A KPI is a metric over which we have direct control and it is considered an important measure of business effectiveness. The KPIs need to be chosen carefully, and abandoned if they prove ineffective. I think a good rule of thumb for a KPI is that it should measure something that will necessitate action if it moves out of the range you consider acceptable. If KPI change does not motivate action then either the KPI is wrong or the scale you’re measuring it on should be changed.

Six Sigma is a highly quantitative process improvement methodology that uses numerical techniques to reduce variations from the desired mean of a metric under consideration. We have found it useful at Betfair, and have trained a number of staff in how to apply it. It was particularly productive in assessing and enhancing customer value in our helpdesk. As with any methodology, it provides a framework of proven techniques, but will only be effective if combined with a company culture that selects and actively manages the correct KPIs.

Rorie Devine, IS director, Betfair

Simply defined, IT governance represents the process of making decisions about IT. IT governance ensures that IT delivers the required business value and that organisations manage the associated risks. IT governance aids overall IT performance management, helps establish IT credibility, and forces better alignment with business strategy. By default, whether conscious or not, every organisation has some sort of IT governance in place; however, not all structures lend themselves to effective governance.

The four key elements of an IT governance model are IT value delivery, management of risk, accountability, and measurement. The real challenge and benefit of IT governance lies in making valuable exchanges, both across business units and between business units and the enterprise. Successful IT governance requires having the appropriate organisational structures in place, empowering those structures to make the required decisions, and documenting the processes or rules for those decisions.

Craig Symons, principal analyst, Forrester Research

Many large organisations are embracing the principles of IT governance to ensure the appropriate control and exploitation of IT. There is a growing recognition that it is important for IT to redesign and manage its own processes with the same rationale as enabling improved business processes. The advantage is that the CIO can start to build up a business process capability using a low-risk approach.

In doing so, CIOs have the same challenges to measure the efficiency and effectiveness of their IT processes. There are examples of successful organisations using the balanced scorecard to combine customer learning and growth, internal processes and finance measures. The advice here is to keep it simple with a few trackable measures that make sense to the business.

Sharm Manwani, Henley Management College

Outsourcing: How do you ensure that a long-term outsourcing deal signed today will continue to meet your needs as they change during the lifetime of the contract? Many companies have suffered from the inflexibility of poorly managed contracts. What are your tips for success?

An outsourced implementation project coupled with an outsourced maintenance contract can work very well if awarded to the same company. At implementation, the outsourcer will not cut corners because they know faults will come back to haunt them. During the maintenance phase, if any issues arise, the onus is on the outsourcer to fix any bugs that stem from the implementation. They cannot point the finger at another firm if anything goes wrong. Ultimately, relying on one outsourcer ensures a better quality, end-to-end solution and more value out of contracts.

Just because an outsourced deal is intended to be long term does not mean it has to be a long-term contract. An initial one- or two-year contract can be completely renegotiated at the end of the term and renewed on an annual basis. This allows for a simpler, more flexible contract that does not attempt to foresee every contingency.

Sandra Smith, IS director, Toshiba

Flexibility in outsource contracts is the holy grail that we all seek. All too often contracts are established on the basis of handing over the status quo – for whatever reason, for example cost saving, with little or no thought to the future. Then, once the honeymoon period is over and the customer wants to add or remove applications or services to or from the arrangement, or – heaven forbid – wants to see signs of innovation from the supplier, that is when the trouble starts. Always remember that you get what you measure and if you don’t measure it, you don’t get it. Set out your aspirations and need for change during the life of the contract at the outset; build in a risk and reward process, which encourages change that will benefit both parties; and as a customer do not be afraid to discuss your ideas with your suppliers at the earliest opportunity.

Denise Plumpton, director of information at the Highways Agency

Creating a long-term outsourcing contract is a major challenge today with the potential for significant internal and external drivers for change. One solution is to adopt a tailored approach to different products and services. For example, there might be tight service level agreements for up-time of hardware and more flexible arrangements for real-time performance where the supplier does not have control of all the components. In this case, more of a partnership philosophy is required. This places more emphasis on the cultural alignment between customer and supplier.

At the legal level the contract should be capable of an agreed interpretation if it is carefully structured and between two parties operating in the same country. Careful consideration is needed both on the legal and the cultural aspects.

Sharm Manwani, Henley Management College