THOROGOOD PROFESSIONAL INSIGHTS
A SPECIALLY COMMISSIONED REPORT
IT GOVERNANCE MANAGING INFORMATION TECHNOLOGY FOR BUSINESS
David Norfolk
IFC
THOROGOOD PROFESSIONAL INSIGHTS
A SPECIALLY COMMISSIONED REPORT
IT GOVERNANCE MANAGING INFORMATION TECHNOLOGY FOR BUSINESS
David Norfolk
Published in 2005
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Contents
MANAGEMENT OVERVIEW: DRIVERS FOR IT GOVERNANCE
V
Management issues in IT governance......................................................vi Definition of IT governance.......................................................................vi
1
CONTEXT: CORPORATE GOVERNANCE
2
EXTERNAL PRESSURES: WHAT REGULATIONS? 6
1
The response to apparent governance failures ........................................9 Legislative changes directly affecting IT governance ...........................12 General legislation with IT governance implications ............................19
3
ORGANIZATIONAL IMPACT
23
Culture ........................................................................................................24 Organizational maturity ............................................................................26 Roles and responsibilities .........................................................................30 Practical experience of governance ........................................................32
4
THE IMPACT ON IT
35
IT service management .............................................................................37 Lifecycle systems development process..................................................43 Management reporting: Telling a true story ..........................................49 Practical IT governance tools ...................................................................51
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IMPLEMENTING IT GOVERNANCE
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Obtain management sponsorship............................................................58 IT governance methodology overview....................................................58
6
CONCLUSIONS
APPENDIX
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72
Resources....................................................................................................73
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Management overview: Drivers for IT governance Corporate scandals such as Enron and perceived issues such as storage of illegal pornography on company servers, money laundering and terrorism have led to a change in the way law is applied to ‘limited companies’. Increasingly, the buck stops with the directors (including non-executive directors) of a company – who are held personally responsible for the actions of their companies and, in some cases, face huge fines and possible imprisonment. There is no doubt that this has increased Board-level interest in IT governance, as corporate fraud, use of corporate resources for illegal purposes, sexual and racial harassment increasingly occur in the digital domain. The latest legislation means that a director who turns a blind eye towards what is going on in his or her computers and to what may be stored on company servers will probably find that ‘ignorance is no excuse’. However, although this has been an immediate driver, a moment’s reflection will assure us that IT governance is a very positive thing for a company. Increasingly, computers are mission critical; increasingly a company couldn’t function without its computers and much of the worth of a company resides in ‘digital IP’: intellectual property in digital form. This includes not only digital documents but also company knowledge embodied in the algorithms implemented in computer programs and the models and ‘repositories’ that are used to analyze and validate business processes as part of software engineering generally. If you are not in control of your IT resource, you are not in control of your company. In the same way that your annual report is audited to ensure that it tells a ‘true story’ about your financial position, your computer systems must be audited to show that they tell a ‘true story’ in the management reports they provide, in the databases they update and in the reports they send to your regulators. Ultimately, you need to be a mature organization with a measurement culture – ‘you can’t control what you can’t measure’. You must have well-defined organizational goals, measure your progress towards these goals and apply corrections – feedback – if you aren’t getting closer to these goals. This is commonly accepted in business but a, largely unconscious, exception has commonly been made in favour of the IT group. How do many organizations truly measure the ROI (return on investment) from IT? How many organizations accept IT projects that are ‘late, over budget and wrong’ as the norm? How many managers know what their IT staff actually do? How many organizations don’t accurately know how many PCs they have and what programs run on them? How many organizations don’t have an overall picture of exactly what is stored on their servers?
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M A N A G E M E N T O V E RV I E W
When the directors of such companies accept responsibility for what their organization does and how it does it, how can they do so with any confidence at all? Such a state of affairs cannot be allowed to continue.
Management issues in IT governance •
Providing an organizational structure that allows Board-level management to set strategic goals and cascade these through the organization down to the IT technicians implementing automated systems.
•
Aligning IT strategy with business strategy.
•
Providing an effective communications infrastructure that enables twoway communication (feedback) between all the stakeholders in the governance process, both internal and external.
•
Providing effective low-level enforcement of business-focused governance policies in the IT sphere.
•
Enabling the effective identification of IT-related risk in the context of business service provision, and the translation of IT risk mitigation measures into a business terminology.
•
Providing metrics for the effectiveness of IT governance.
•
Identifying a return on the investment in IT Governance in terms of ‘better, faster, cheaper’ business systems.
Definition of IT governance IT Governance is that part of corporate governance in general which ensures that automated systems contribute effectively to the business goals of an organization; that IT-related risk is adequately identified and managed (mitigated, transferred or accepted); and that automated information systems (including financial reporting and audit systems) provide a ‘true picture’ of the operation of the business.
References References in square brackets, e.g. [8th DirCons, web], refer to entries in the Resources appendix, at the end of this Report.
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Chapter 1 Context: Corporate governance
Chapter 1 Context: Corporate governance “Modern capitalism – the model to which virtually the whole world now aspires – is totally dependent on high standards of governance.” GEORGE COX, ERSTWHILE DIRECTOR GENERAL OF THE INSTITUTE OF DIRECTORS
According to George Cox when he was Director General of the Institute of Directors, in the Introduction to the director’s guide to ‘corporate governance’ [IOD, 2004], “Modern capitalism – the model to which virtually the whole world now aspires – is totally dependent on high standards of governance”. What he means by ‘governance’ is the overall and rigorous supervision of company management so that business is done competently, with integrity and with due regard for the interests of all stakeholders. And this is important, not for altruistic reasons but because investors wouldn’t buy shares in a company (or, rather, they’d insist in a considerable discount) if it wasn’t run that way. As Alastair Sim, Director of Strategy and Marketing at SAS, points out in his Forward to the same work [op. cit.], staying competitive involves maintaining investor confidence. The best way to do this is to ensure the transparency of a company’s operations to investors and other stakeholders, by supplying them with appropriate and trustworthy information (with due regard to business confidentiality) and this is one of the main concerns of corporate governance, along with the need to comply with applicable laws and regulations. In the UK, the law is defined by statute; statutory instruments, which implement Acts of Parliament and can materially affect the impact of a statute; and is further developed in the courts by precedent – so determining exactly what the law says is not always straightforward and taking expert advice is often a good idea. We then follow a ‘comply or explain’ approach to governance. What this means is that, for example, companies with a full London Stock Exchange listing have to state that they comply with, for instance, the Combined Code (the consolidated governance rules promulgated in June 1998) but can report exceptions in certain areas, where they must explain the reasons for their departure from the rules.
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The Combined Code places great emphasis on the need to manage risk, which is largely what the financial reports made available to the various stakeholders are used for. As Peyman Mestchian, (Director, risk management practice, SAS UK) puts it “the sensible company takes risks – but not gambles”. You must take a holistic and objective view of risk – there is more to worry about than just financial risk. Reputation risk, for example, is frequently overlooked – until loss of reputation starts to affect the financial bottom-line, when it is often too late to mitigate it (a reputation that took years to build can be lost in months). The Turnbull Report guidelines to governance for companies quoted on the UK stock exchange talk about the risk associated with market, credit, liquidity, technological, legal, health and safety, environmental, reputation and business probity issues, as well as financial risk. However, some risk is good – you can’t avoid risk without forgoing the business opportunities associated with new kinds of customers, new technologies and new products. In fact, risk avoidance is in itself risky as it limits your opportunities for profit, and doing nothing is frequently the worst possible response to an emerging issue. What is important is that commensurate rewards are associated with the risks that you take, which implies that you have access to reliable information that lets you forecast the rewards and assess the risks with confidence. Corporate governance ultimately depends on the good functioning of the Board of Directors – and, increasingly, non-executive directors are asked to take responsibility for deviations from good governance. Quoting Kerrie Waring, international professional development manager at the IOD [op. cit.], “A well functioning Board is key to the performance of companies and their capacity to attract capital. A well-established corporate governance framework should ensure that Boards monitor managerial performance effectively to achieve an equitable return for shareholders and uphold the values of fairness, transparency, accountability and honesty”. You could say that the prime objective of IT governance is to help rather than hinder the Board in its governance efforts, as part of a dynamic partnership between business and technology. (Technologists enable business; business rewards technologists.) In many organizations, the IT function is seen as a bit of a loose cannon, subject to different standards, responsibilities and controls to the rest of the organization; and, in the long term, this isn’t going to be good for the careers of those employed by the IT function. Corporate governance is often talked about in the context of publicly quoted companies, because the shareholders in such companies form a wide and visible set of stakeholders, and because stock markets underlie most economies these
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days. However, similar considerations also apply to private companies, of course, since although the stakeholders are different and the legal issues perhaps rather simpler, the owners of the company still need access to reliable information as to its operation. Regulations in the USA, say, are generally more draconian these days – although even Sarbanes-Oxley seems to be less prescriptive and more in the European style than previous US regulations. This is actually an improvement, as it is harder to merely comply with the ‘letter of the law’ if you can be assessed both on what you consider to be appropriate internal controls and also on the effectiveness of your implementation of these controls. International corporate governance rules are also changing, but rules worldwide seem to be generally moving in the same direction. Eventually, it is hoped that the mission statement of the International Accounting Standards Board (IASB) will come to fruition and we will have ‘a single set of high quality, understandable and enforceable global accounting standards that require transparent and comparable information in general purpose financial statements’. Which brings us to Information Technology (IT), since large amounts of information are seldom stored, processed and retrieved manually these days. Your financial reporting is only as good as the quality of the data reported. You must be able to audit the lifecycle of this data from collection through to destruction: you must be able to show where it comes from, who has access to it and that any changes are properly authorized. IT can facilitate this: there is an issue with the transparency of IT (few businessmen are completely comfortable with code analysis) but business policies can be rigorously enforced in unambiguous computer code and any risk of manual error mitigated. Well, up to a point – ‘garbage in = garbage out’ applies and IT systems only do what they are told to do. This is, of course, a governance issue: the policies embodied in the automated systems must be aligned with corporate policy, the instructions input to the IT systems must be the right instructions, and the accuracy of the translation of these instructions into code must be tested. IT is also increasingly a major source of risk in companies: •
IT facilitates worldwide access to internal systems, increasing the opportunity for fraud and data theft.
•
The scope of impact of IT systems failure can be company-wide.
•
IT projects are frequently an enabler for new business; in fact, IT systems are increasingly central to the operation of many companies.
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•
Despite the importance of IT, according to the Standish Group Chaos Reports [Standish, web], over 80% of IT projects come in late, over budget or wrong (and frequently all three) – over a quarter are cancelled before they are fully implemented.
The Board needs to recognize the risk factors affecting IT projects: very large projects, visible projects, projects crossing geographical or departmental boundaries, projects using new technology projects particularly dear to the Board’s heart are all particularly risky. IT development failures or operational failures are equally matters of corporate governance. When Nick Leeson brought down Barings, there was a real failure of banking governance – essentially, it simply isn’t good practice to allow traders to make their own settlements. However, you can equally see this as partly an IT governance issue: •
The technology is available to enforce governance policies.
•
Positions and limits can be reported transparently to management.
•
The calculation of settlements can be removed from the possibility of human error.
What technology can’t do, of course, is to inculcate common sense in the Board or counteract complacency or greed. Increasingly, a technical failure that is allowed to affect the operation or reputation of a company is being seen as a failure of corporate governance – as, of course, it is. The next chapter looks at the legal framework underlying governance generally in the context of IT governance specifically.
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Chapter 2 External pressures: What regulations? The response to apparent governance failures ..................................9 Legislative changes directly affecting IT governance .....................12 General legislation with IT governance implications ......................19
Chapter 2 External pressures: What regulations? “I think the reason that we are seeing an increase in ITIL® [say] over the last 9 months is due to Sarbanes-Oxley. They have to look at it, it’s not a question of should we/shouldn’t we, they do have to look at the process issues.” THOMAS MENDEL, PRINCIPLE ANALYST, FORRESTER RESEARCH.
It is a mistake to see IT Governance as purely a response to external regulatory pressures, as this engenders a fundamentally unsound attitude: governance becomes seen purely as a cost, a cost of doing business, over which you have no control. In fact, IT governance should be seen as a way in which the Board can ensure that IT resources are deployed and managed cost-effectively, in the pursuit of business strategy. The ultimate aim of IT governance is better, faster, cheaper business. Nevertheless, one aspect of this is the transparency that ensures that all the stakeholders in a business can satisfy themselves that the business is being carried out honestly and ethically, in the interests of the business (and community) as a whole, instead of the dysfunctional interests of particular parties. In the extreme, IT Governance is about mitigating the risk of internal IT-assisted fraud, probably a far greater potential disaster to a company than the high profile risk of external hacking. The positive benefit from this transparency is that you can demonstrate the probity and reliability of your company to third parties: business partnerships will be easier to arrange (thus enabling greater automation of interbusiness processes or ‘straight through processing’) and that raising investment capital (from shareholders) should be easier. Unfortunately, it must be apparent that corporate governance in general has had a bumpy ride at the end of the last century and the beginning of this one. The Bank of Credit and Commerce International survived conventional auditing for years, despite being run as a criminal enterprise (a fact apparently known to many inside the banking industry, where it was sometimes referred to as the
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Bank of Crooks and Conmen International). It became apparent that many people held more non-executive directorships than they could manage if they were really overseeing the governance of the companies they held them with, and were treating them simply as a rewarding perk; and then Enron threatened to make the idea of corporate governance a joke. Since a lack of confidence in the operational probity of commercial organizations threatens the very fabric of international commerce, governments rapidly began to investigate the issue of what proper internal control should be – and then to tighten up regulatory legislation. This generally addressed corporate governance in the widest sense but, unavoidably, had implications for IT governance specifically. Fortunately, most new legislation is no longer purely prescriptive (that is, it doesn’t just specify a list of more-or-less arbitrary rules) but attempts to engender ‘good practice’ and foster ‘organizational maturity’. A company that satisfies the spirit of Sarbanes-Oxley, for example, will be a better-managed company, able to measure the effectiveness with which it aligns IT objectives to business objectives, able to demonstrate the effectiveness and honesty of its financial reporting – and able to operate more cost-effectively as a result. Even so, there is a lot of new legislation surrounding financial reporting and internal control generally, which the IT group must be aware of. It is always going to be more effective in the context of an evolving business and rapidly changing technology if IT governance is built into automated systems from the start. This means adopting a lifecycle development and maintenance process, which treats regulatory requirements as equal in importance to the other business requirements and implies that automated systems are tested against scenarios derived from applicable legislation. In general, the IT group can expect business stakeholders in an automated system to tell it what the regulatory requirements are, but the IT analysts must question what they are told and ensure that automated systems can satisfy ‘non functional’ requirements for effective audit trails, access controls and systems resilience, which originate in governance-promoting legislation. In turn, this means that they must be aware of what legislation exists and what sort of controls it mandates, at least so they can have sensible conversations with business managers as to what is needed.
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The response to apparent governance failures There are several commissions/committees etc that have reported on corporate governance and which provide a background to IT governance. Broadly speaking, these seem to have had wide influence, so that the Cadbury Report in the UK, for example, may well influence US legislators formulating US legislation.
Committee of Sponsoring Organizations of the Treadway Commission (COSO) As long ago as 1985, The National Commission on Fraudulent Financial Reporting (the Treadway Commission) was set up under joint sponsorship by the American Institute of Certified Public Accountants (AICPA), American Accounting Association (AAA), Financial Executives International (FEI), Institute of Internal Auditors (IIA) and Institute of Management Accountants (IMA, formerly the National Association of Accountants) to address the issue of fraudulent financial reporting. It resulted in the setting up of a task force under the auspices of the Committee of Sponsoring Organizations of the Treadway Commission (COSO), which developed a set of practical, broadly accepted criteria for establishing internal control and then evaluating its effectiveness. In 1992, this issued the Internal Control—Integrated Framework, commonly called the COSO framework, which has in turn influenced other initiatives, such as COBIT (Control Objectives for Information and related Technology) from the IT Governance Institute. COSO was developed in the USA but has influenced thinking on internal control and governance worldwide. COSO describes an internal control process, run by the Board with the co-operation of an organization’s management, which addresses the need for: •
effective and efficient operational processes;
•
reliable and truthful financial reporting processes; and
•
compliance with all applicable laws and regulations.
Report of the Committee on the Financial Aspects of Corporate Governance (Cadbury Report, 1992) This began the process of formalizing corporate governance in the UK and included a code of best practice. It was extended to cover, for example, corporate pay by the Greenbury Committee.
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Combined Code on Corporate Governance (UK) In 1995 a review of corporate governance in the UK started under the chairmanship of Sir Ronald Hampel, culminating in the Final Report: Committee on corporate governance, issued in Jan 1998. In June 1998, this resulted in the Combined Code [CC, web], which has more or less regulated corporate governance in the UK since, although it has been developed further (see The Higgs Review, below).
Organization for Economic Co-operation and Development (OECD), Principles of Corporate Governance These were first published in 1999 and updated following a consultation process started in 2004, with representatives from, for example, business, trade unions and governments. The principles assert such things as the right of investors to nominate and elect company directors, question companies on their compensation policy and to ask questions of the auditors. The OECD also expects Boards to protect whistle-blowers by allowing them confidential access to someone on the Board. It is expected that the final version of the principles will be submitted to OECD governments for approval at the annual meeting of the OECD Council at Ministerial Level on 13-14 May 2005. The review process for the OECD Principles of corporate governance is described at [OECD, web].
Bank for International Settlements (BIS), Enhancing Corporate Governance in Banking Organizations The Bank for International Settlements (BIS) is an international organization that fosters international monetary and financial cooperation and serves as a bank for central banks. The head office is in Basel, Switzerland and it has representative offices in the Hong Kong Special Administrative Region of the People’s Republic of China and in Mexico City. It was established in 1930 and is the world’s oldest international financial organization. The BIS report, Enhancing corporate governance in Banking Organizations (1999) [BIS, web], is a useful summary of the principles of corporate governance in 1999, referencing the Basel Committee etc. The BIS site is generally a useful source of information on banking governance.
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Internal Control: Guidance for Directors on the Combined Code (Turnbull Report) The Turnbull Report was issued in 1999 and adopting its recommendations [Turnbull, Web] is mandatory for companies quoted on the UK Stock Exchange, but the recommendations are far from prescriptive, although companies will find them sufficiently challenging. They call for Audit Committees to adopt a broader role in corporate governance and reiterate that the Board should maintain an effective internal control regime. This implies accuracy and transparency in the IT reporting systems that must be a foundation of any such effort. The Financial Reporting Council announced a review of Turnbull in July 2004, which should be published in time for it to take effect in accounting periods starting on or after 2006. This review is to ensure that the Turnbull guidance still achieves its intended effect, in the light of UK and international experience since 1999. Turnbull at present is concerned with the spirit of corporate governance and isn’t very prescriptive; it remains to be seen whether this review will make Turnbull more prescriptive, along the lines of Sarbanes-Oxley (which is more prescriptive and longer than Turnbull, although less purely prescriptive than is usual with US regulations), and what effect this will have. The UK Auditing Practices Board promises to revise its Bulletin 2004/3 on The Combined Code on corporate governance: Requirements of Auditors under the Listing Rules of the Financial Services Authority [ASB, web] in the light of any changes to Turnbull, for example.
IT Governance Institute, Control Objectives for Information and Related Technology The Control Objectives for Information and related Technology (COBIT) is an important framework developed by the IT Governance Institute in the context of COSO and is built on the premise that the role of IT is to deliver the information that an organization needs in order to meet its objectives. IT Governance is then the process that ensures that it satisfies this role adequately. A useful introduction and overview of COBIT is contained in the Board Briefing on IT Governance, from the IT Governance Institute [BoardBrief, web].
The Higgs review Derek Higgs was commissioned by the DTI to review the role and effectiveness of non-executive directors in the implementation of good corporate governance. He reported in 2003 with a set of suggested changes to the Combined Code, which was republished accordingly in that year.
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The Combined Code is now under the auspices of the Financial Reporting Council (FRC) and further changes can be expected as and when needed to ensure that it remains relevant in the face of changing business conditions and technologies.
Legislative changes directly affecting IT governance Legislation is what actually affects IT governance and it is important to actually read the legislation, as well as any guidance notes or press releases. Many vendors seek to generate sales from high profile legislation and only by referring to the legislation itself will you discover that there may be, for example, exceptions for smaller companies or wider issues that make a vendor’s ‘silver bullet’ solution unlikely to be effective. For example, ‘SOX kits’ are appearing which promise to deliver Sarbanes-Oxley compliance – but in the absence of an active and wellunderstood process framework it is unlikely that these will deliver more than compliance with the ‘letter’ of the law on the day that they are delivered. Since directors are supposed to revisit internal controls whenever anything which might affect them changes, it is likely that any ‘silver bullet’ will prove to be expensive in the longer term, may well prove not to deliver the compliance with the spirit of the law that regulators expect – and won’t deliver the organizational benefits possible from a holistic approach. Of course, if you put in place the frameworks, processes and organizational maturity necessary to comply with the spirit of Sarbanes-Oxley, say, you may find a ‘silver bullet’ technology that meets your needs – but it is then hardly just a silver bullet.
The Companies (Audit, Investigations and Community Enterprise) Act, 2004, in conjunction with the Companies Acts 1985 and 1989 This is the latest amendment to what is usually called the Companies Act [CompaniesAudit. Web], which regulates businesses in the UK. It’s a bit of a hotchpotch of different regulations and must be read in conjunction with the Acts it amends. It talks about auditors at the beginning and about a new type of company at the end, but in the middle it, in effect, sets up an equivalent to the US SarbanesOxley Act (see below) in the UK. It is less prescriptive and detailed than SOX, but the devil will be in the detail of how the regulators and law courts interpret the Act.
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So, it is a matter of some concern that in a survey commissioned by Netegrity in 2004 of 281 security and compliance decision-makers in a range of UK companies across a number of sectors [Netegrity, 2005], over half of the respondents weren’t aware of The Companies (Audit, Investigations and Community Enterprise) Act, 2004. It is perhaps interesting that just over half were also confident that they’d meet the deadlines associated with current legislation – the survey doesn’t correlate the answers to these questions, so it isn’t possible to decide whether this is confidence born of optimism or ignorance. The new Act comes into effect in stages, but the sections affecting IT Governance came into effect in April 2005. This didn’t give companies long to prepare. The new Act defines the obligations and powers of company auditors in more detail than before and probably means that pulling the wool over the eyes of the auditors will become harder. The auditors have strong rights of access to all the company’s books and can require people to answer almost any questions that they think are important to their audit – even people that are no longer employed by the company – and can require the company to obtain information from overseas subsidiaries. Failure to supply relevant information needed by the auditors will usually be a criminal offence, punishable by a fine or imprisonment, or both. The Act states ‘If a person knowingly or recklessly makes to an auditor of a company a statement (oral or written) that (a) conveys or purports to convey any information or explanations which the auditor requires, or is entitled to require... and (b), is misleading, false or deceptive in a material particular’, then the person is guilty of the offence. An offence is also committed if someone delays in giving required information (without good reason) and the auditors can always obtain an injunction to enforce their rights anyway. This section of the Act has serious implications for IT governance, always remembering that the detailed impact will depend on the attitude of the courts in interpreting it. It implies that any information likely to be required by an auditor should be easy to extract from automated systems, and that its provenance and reliability can be demonstrated. Since it cannot be determined in advance precisely what will be required or what criticism will be made of the quality of any information supplied, this has serious implications for the technical design of IT systems. If you don’t have an authoritative audit trail for a piece of information before the auditors ask for it, it may be very hard to implement one ‘after the fact’ – if all and sundry could access the information and change it proving its authenticity may be impossible or, at the very least, may involve very expensive and time-consuming analysis of systems logs.
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What this also means is that company management, and its directors in particular, will have to think in advance about the sort of information the auditors might need and ensure that systems are designed to provide it (or can be easily modified to provide it) as and when required. This policy then forms a ‘non functional requirement’ for systems development in general – which developers must be made aware of. Similarly, the provision of robust audit trails for financial information becomes a general non-functional requirement. Further, the only practical way you can be sure that your policies concerning the provision of audited financial information have actually been adopted in the automated systems that you use, is to implement recognized ‘industry best practice’ processes for the development of automated systems and the operational management of the infrastructure that they run on – such as the Dynamic Systems Development Method [DSDM, web] and the IT Infrastructure Library [ITIL®, web] procedures. Beyond even this, a company might find that process improvement (the ability to say what you are going to do, measure what you actually do and apply changes to the process that reduce any gap between aspiration and achievement) helps it address regulatory criticisms in a cost-effective way and cope with changing circumstances. One recognized process improvement regime for IT organizations is CMMI (Capability Maturity Model Integration) from the Software Engineering Institute [CMMI, Web]. Under the new Act, the company report must contain a statement from each of the company directors at the relevant time, to the effect that there is no relevant audit information of which the auditors are unaware (as far as the director knows), and that he or she has taken all appropriate steps to make him or herself aware of such information and to bring it to the attention of the auditors. This is very similar to the requirements of American SOX legislation. In order to fulfill his or her duties as a director, a director is expected to communicate with his/her fellow directors and to have taken ‘such other steps (if any)... as were required by his duty as a director of the company to exercise due care, skill and diligence’. The director is thus expected to be reasonably well-informed, although only to have ‘the knowledge, skill and experience that may reasonably be expected of a person carrying out the same functions as are carried out by the director in relation to the company’, unless he or she has other specific skills. This implies traceability from policy through to execution, rather than any expectation that the director should check any code for him/herself. However, if the director is also Chief Technical Officer and a skilled programmer, say, he or she might be expected to have some responsibility for poor IT systems QA – resulting
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in code that doesn’t implement company policy or which implements fraudulent practices. It’s hard to predict exactly how the courts will view this part of the Act but when governance becomes a real issue for a company it’s hard to believe that any director who has attended college in the last 10 years, at least, can reasonably claim total ignorance of what constitutes good practice in IT systems development or operations, as most students attend at least some computer science courses at some stage in their education. Actually falsifying director’s statements in an approved company report is, of course, an offence punishable by a fine, imprisonment, or both. This applies not only to the director making a false statement but also to any other directors that knew the statement was false or who didn’t try hard enough to find out whether the statement was true, or who didn’t take reasonable steps to stop a report containing false statements from being approved and issued. The Act appears to make life easier for directors in one aspect, by relaxing current prohibitions on companies from indemnifying Directors against their liabilities to third parties; it also allows companies to pay director’s defence costs if they are taken to court. Nevertheless, such indemnification is largely illusory (and very tightly controlled), because it is made in the form of a loan, which is immediately repayable if a director is convicted of a criminal offence or fined by regulatory bodies. Such indemnification is also open to shareholder inspection. Other parts of the new Act deal with the supervision of accounts and handling of defective accounts; and identify the bodies responsible for accounting standards. The powers of the Financial Reporting Review Panel are increased so that it will now be able to look at interim as well as annual accounts and reports and will be able to compel companies it is investigating to supply necessary information. In some circumstances, the Panel can also obtain information from the Inland Revenue if this is needed to prove an account defective. Overall, it appears that the net result of the Companies (Audit, Investigations and Community Enterprise) Act, 2004 will be that those directors that have heard of it will begin to take a more active interest in whether their IT reporting systems present a true and complete picture of what is going on in company financial systems – and one that can be defended to third parties. IT Governance is likely to be on the Board agenda as part of corporate governance – and all concerned should be aware of this new Act.
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Sarbanes-Oxley Act (USA) Sarbanes-Oxley (SOX, [SOX, Web]) is US legislation but it is very high profile. Mark Mitchell of Informatica has met UK companies that are not subsidiaries of US companies or listed on US stock exchanges, that claim to have a strategy involving Sarbanes-Oxley compliance. This is usually revisited when he points out the likely cost of this (although there are reasons for pre-emptive compliance: the prospect of takeover by a US company, perhaps). Effective IT governance is a worthwhile goal but compliance with any regulations that don’t specifically apply to you, without a clear business reason, is very unlikely to be cost effective. Nevertheless, SOX does affect many UK companies. In the Netegrity Security and Compliance Survey [op. cit.], however, only 15% of respondents thought that it was important. It seems rather unlikely that 85% of UK companies are neither listed on the NY Stock Exchange nor NASDAQ; nor are offshoots of US companies; nor doing significant business with US companies (in which case they’ll need to supply the information their partner needs to satisfy SOX); nor likely to be taken over by, nor merge with, a US company. Generally, SOX involves implementing an internal control framework such as COSO (see above) – and only a recognized control framework that is established by a body or group that has followed due process procedures, including the broad distribution of the framework for public comment, will be accepted. The essence of SOX compliance seems to be that you build a rod for your own back. You must develop a defensible approach to internal control for your business (and this can be criticized), and then you devise a defensible approach to internal control for your systems and then you must demonstrate that you are adhering to your own rules. In other words, it’s not simply a case of adhering to the rules, there’s an effectiveness measure too (and this is more along the lines of European regulatory practice). The impact on IT is that it must facilitate this process, by building into its systems and processes facilities that provide the information needed by SOX, the audit trails needed to assure the integrity of this information, and so on. The IT Group must also be aware of ‘Silver Bullet’ solutions: cosmetic ‘quick fixes’ for compliance, that are a constant maintenance overhead when the business changes [Faegre, web]. The two sections with most impact on IT are 302 and 404(a), which deal with the internal controls that should be in place to ensure the integrity of a company’s financial reporting and this will impact directly on the software that controls, transmits and calculates the data used to build the company’s financial reports.
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SOX SECTION 302
Since August 29, 2002, Section 302 has made CEOs and CFOs commit to the accuracy of their company’s quarterly and annual reports. They must state: 1.
That they have viewed the report.
2.
That to the best of their knowledge, the report contains no untrue statement of a material fact and does not omit any material fact that would cause any statements to be misleading.
3.
That to the best of their knowledge, the financial statements and other financial information in the report fairly present, in all material aspects, the company’s financial position, results of operations and cash flows.
4.
That they accept responsibility for establishing and maintaining disclosure controls and procedures, and the report contains an evaluation of the effectiveness of these measures.
5.
That any major deficiencies or material weaknesses in controls, and any control-related fraud, have been disclosed to the audit committee and external auditor.
6.
That the report discloses significant changes affecting internal controls that have occurred since the last report, and whether corrective actions have been taken.
There are serious civil and criminal penalties for making untrue statements in the areas above, so C-level executives are placing considerable trust in the integrity of their IT systems and the people developing and supporting them. Which means that they will start taking an interest in the IT process and that this will likely become seen as an area C-level executives worldwide should be interested in – even if SOX isn’t involved.
SECTION 404(A)
If Section 302 might have onerous implications for executives, Section 404 sets out the rules in detail (and you should check the Securities Exchange Commission (SEC) website [SECSOX, web] for the latest details and implementation dates). In September 2003 the SEC said, “We recognize that our definition of the term ‘internal control over financial reporting’ reflected in the final rules encompasses the subset of internal controls addressed in the COSO Report that pertains to financial reporting objectives”.
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The SEC expects to see an Internal Control report in a company’s annual report that: •
states that company management is responsible for establishing and maintaining adequate internal control over financial reporting for the company;
•
identifies the framework against which the effectiveness of this internal control is assessed by management;
•
assesses the actual effectiveness of a company’s internal controls in practice; at the latest financial year-end; and
•
states that the company auditor has checked out the management’s assessment of its internal controls.
Not surprisingly, perhaps, in view of its general findings, the Netegrity Security and Compliance Report [op. cit.] found that about a third of those that thought SOX was important (only 15% of the total, remember) weren’t spending any money on technology to facilitate compliance with Section 404; and a further third were spending less than £50,000. In the light of this, it will also be no surprise that almost 90% of them either weren’t sure that they’d manage to get their internal controls accredited against SOX, or thought it not likely. Leaving aside the question of penalties, is it possible that prospective partners in, investors in, or purchasers of a business, might think a business that couldn’t satisfy SOX Section 404 represented an increased risk over investing in, say, a more compliant organization? One would certainly think so.
The 8th Directive on Company Law in the EU This is the European equivalent to Sarbanes-Oxley [8thDirCons, web] and could, if it is agreed, be implemented in UK law during 2006. The UK Department of Trade and Industry supports many of the proposals, which seem similar to UK initiatives on, for example, auditor independence and independent monitoring and public oversight, and it supports the adoption of International Standards on Auditing (ISAs) in the EU. However, the DTI is (as usual) interested in a better balance between principles and detailed rules (presumably this reflects UK concern with the spirit rather than the letter of company law) and in the principles of subsidiarity and proportionality. James S Turley, Chairman and CEO, Ernst and Young [Turley, Web] sees this as a welcome step towards global corporate governance standards. It certainly underlines the global nature of commerce today and hence the need for global regulation.
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Basel II and the EU’s CRD The Basel Committee on Banking Supervision issued a revised framework for capital adequacy (credit risk management) generally known as the Basel II (or Basel 2) accord in June 2004. This comes into full effect in 2007. In July 2004, the European Commission published a Capital Requirements Directive (CRD) to bring Basel II into European Union (EU) law (although some aspects of CRD are not yet finalized). Basel II will have a significant impact on banking processes and the IT systems that implement and support them – largely in the area of credit risk profiling and monitoring. The UK FSA issued a consultative paper ‘Strengthening capital standards’ in January 2005 (consultation closed at the end of April 2005), putting forward the options for implementing CRD in the UK. Basel II is of great importance to banks, but probably won’t affect companies in general very much. However, for financial institutions, Basel II has some quite subtle implications. Especially as some financial observers think that banking is all about the serious business of trying to evade the letter and spirit of the new accord, without being ambushed by the small print. Risk management is not particularly deterministic and the new rules may simply mean that risk is transferred to less (or differently) regulated subsidiaries. This could certainly result in some challenges for the IT group – a need for rapid changes to financial systems as risk arbitrage opportunities arise and disappear. This will be an environment not especially friendly to IT governance (higher levels of capability/maturity may not be particularly appropriate, for example) but business needs must rule and IT risk must still be managed (look what happened to Barings when controls were relaxed for a new business environment). And, problems appearing with Basel II in practice, as it is implemented, will almost certainly result in a Basel III accord before too long.
General legislation with IT governance implications A great deal of legislation has implications for the design and implementation of IT systems – and always remember that IT isn’t a special case. The Internet, for example, is often thought of as unregulated, because much legislation was formulated before the Internet came along or without any particular reference to it. In truth, however, it is over-regulated, since existing legislation usually applies to it anyway, whether appropriate or not. Of course, some of this legislation
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would be very hard to enforce, but inappropriate legislation that is only erratically or arbitrarily enforced is hardly a sound basis for electronic or computer-supported commerce. One of the objectives of corporate governance in the COSO framework is ‘compliance with all applicable laws and regulations’. In the IT world, this means that you must address, at least (the list isn’t exhaustive): •
The Freedom of Information Act (UK) [FI, web] or the equivalent in other countries. This does only apply to government services, but it will affect the design of information storage and retrieval systems for such services (not only must information be retrievable but the performance impact of this must be considered).
•
Data Protection regulations; for example, the Data Protection Act (UK) [DPA, web] and legislation throughout Europe enforcing the EU Data Protection Directive. Not only must you protect personal information, which you can only collect and use for specified purposes, you must destroy it securely when it is no longer needed and provide facilities for the subjects of personal data to access and correct it.
•
Intellectual Property (IP) protection; for example, the UK Copyright, Designs and Patents Act and others [Copyright Act, web]. In many cases, the most valuable property in a company is its IP and it is particularly hard to manage technology IP, because a lot of it is still in people’s heads. An important related issue these days is software licensing. Unlicensed software may have been ‘hacked’ crudely and made unreliable, or even insecure, although it is hard to see that this makes it much worse than some legitimate products. However, it is illegal and the activities of organizations such as the Business Software Alliance [BSA, web] or FAST (the Federation Against Software Theft) [FAST, web]) makes even unintentional use of unlicensed software unacceptably risky. In January 2004, The Federation reinforced its use of criminal proceedings to crack down the misuse of software under s.109 of the Copyright, Designs and Patent Act 1988. Companies have been prosecuted even while in the process of addressing their licensing issues, and the interruption to business (from confiscated computers etc.) and loss of reputation, may be a bigger problem than the fine.
•
Health services and pharmaceutical regulations such as, for example, the US Health Insurance Portability and Accountability Act of 1996 [HIPAA, web], and various pharmaceutical industry regulations worldwide. The pharmaceutical industry is particularly highly regulated.
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•
Telecommunications regulations such as the Regulation of Investigatory Powers Act (RIPA) [RIPA, web]. This impacts the interception of electronic communications and the use of encryption technology.
•
The Health and Safety at Work Act in the UK [HAS, web]. This applies to workers in IT just as much as anywhere else. It isn’t perhaps an IT governance issue, exactly, but it is important to remember that IT workers are not exempt from Health and Safety issues – and some of these (the impact of computer monitors on eyesight and Repetitive Strain Injury (RSI) from keyboard use, for example) are particularly related to computer use.
•
The WEEE Recycling Directive [WEEE, web]. This probably won’t impact end-users of IT much, but it may impact Operations, as most electronic equipment must now be recycled when it is disposed of (luckily, the vendor probably has to arrange this).
•
The Disability Act, 1995 [Disability, web]. Again, like Health and Safety, IT organizations are not exempt. In particularly, web sites must be designed to facilitate access by the differently abled. The key standard in this area is probably the Web Content Accessibility Guidelines 1.0 (1999; work continues on these and a Working Draft 2.0 was produced in 2003), created by the Web Accessibility Initiative of the W3C [WCAG, web].
•
Anti-Money Laundering legislation, which (in the UK) is embodied in several pieces of primary legislation: the Criminal Justice Act 1988 (as amended), the Drug Trafficking Act 1994 and the Terrorism Act 2000 (as amended). This largely, although not exclusively, affects banking and financial organizations, which must make Suspicious Transaction Reports (STRs), if money laundering is suspected, to either the law enforcement authorities or to the relevant Money Laundering Reporting Officer (MLRO).
Obviously, automated financial processing systems may have to recognize suspicious transactions and this may impact IT systems design; there is also a possibility that STR processing may appear to conflict with the requirements of the Data Protection Act (since ‘tipping off’ the subject of an STR is illegal) and this may also have an impact on IT systems design or operation [STR-DPA, web]. AntiMoney Laundering legislation introduces its own risks too – what should a bank do if it finds that its best and most profitable customers are probably money launderers but it can’t really afford to lose their business?
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Publications such as Gee’s IT Policies and Procedures [ITPP, 2004] attempt to guide subscribers on the current state of such legislation and are regularly updated, but you should always take professional advice as to the exact implications of legislation, if it affects you specifically. In the next chapter we look at the impact of IT governance on the organisation in general.
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Chapter 3 Organizational impact Culture ..................................................................................................24 Organizational maturity......................................................................26 Roles and responsibilities ...................................................................30 Practical experience of governance ..................................................32
Chapter 3 Organizational impact “It is a society’s entire governance culture that affects its long-term development. Its institutions of governance as a whole – corporate and public governance together – rather than any of them alone are what matter.” FROM THE FLYER FOR ‘GOVERNANCE CULTURE AND DEVELOPMENT: A DIFFERENT PERSPECTIVE ON CORPORATE GOVERNANCE’ BY NICOLAS MEISEL, ON THE OECD WEBSITE.
Culture Good IT governance doesn’t exist in a vacuum. However experienced your IT staff are, and however good the practices they follow, you don’t have good IT governance unless these practices are institutionalized as part of a formal process that is regularly assessed and updated in the light of changes to the business or technology. If you just ‘do it right, because that’s how we do things’, even if you are successful, how will you convince the auditors or regulators that you weren’t successful purely through luck and that you will continue to do things right? Well, you’ll have to conduct a review for them (or give them access to conduct their own review) that lets them discover all your critical processes and determine that they are properly controlled. This will be expensive, especially if you delegate it to an external party – and you’ll have to do it all over again if the business, the technology or even the interested party changes. This is not an efficient use of resources and you can hardly claim to have implemented good governance if it is based on such an ad-hoc set of processes. Especially if you also consider the fact that time and resource pressures applied to a process that, essentially, repeats the same redundant evaluations repeatedly, will result in omissions and superficial assessments. An organization that wants to implement good IT governance must have a supportive culture behind this. This means a culture that institutionalizes good
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practice processes in pursuit of clearly defined organizational goals, and encourages buy-in to these goals at all levels. However, you can imagine a company that employs the best (or most expensive) people taking the view that “what kept programmers from reaching their full potentials were managers who tried to impose standards, expectations or restrictions” (quoting from Larry Constantine’s description of the state of affairs at the fictional Nanomush, in ‘Constantine on Peopleware’ [Constantine, 1995]). Such companies are fairly common in the software industry and they usually enforce any regulatory rules with draconian disciplinary procedures, once they have been bought to their attention. So, if you’re caught using someone else’s intellectual property in your IT systems, unlicensed, or you find fraudsters using a back door into your systems put there so that programmers could fix bugs faster, do you simply sack the person responsible for that bit of the system (if they are still working for you) and hope that the issue goes away? Of course, it doesn’t – the lawyers carry on seeking damages or whatever; you’ve lost the free spirits who built your code without wasting time on documenting what they did and the rest of your staff think you’re victimizing the unfortunate sacked programmers, who were only doing what their culture expected anyway. In this situation, you then start worrying about what other surprises await you, because if leaving programmers free to do their own thing has given you one problem, you have no means of assuring yourself that others haven’t taken similar risks. Typically, after one bad experience, you start mandating compliance with some source of ‘best practice’, telling your programmers ‘to get it right or else’ which, since you are trying to change their culture, probably won’t go down very well (you may lose the best of them and keep the ‘dead wood’ that can’t easily get a job elsewhere). You’ll find that you can’t just mandate compliance with anything outside of a military organization – and, in fact, military management practices are usually fairly enlightened because even under military discipline the people at the sharp end can work around your mandates (and also because, possibly, battlefield soldiers have the ultimate sanction available against bad managers). Unless you are the sort of company that sets goals before taking action, that measures the impact of its actions relative to those goals and then changes what it is doing to reduce the gap between its aspirations and what it actually achieves, then attempts to achieve good IT governance are probably doomed to failure. This culture of measurement and continuous process improvement is largely what is meant by ‘organizational maturity’ – although in our ageist society, companies often prefer to aspire to being ‘adaptive’ rather than ‘mature’.
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Organizational maturity As Constantine points out [op. cit.], “Maturity is a central issue for the field of software development. Methodologists are wondering how long it will take for software engineering to mature as a discipline, managers are concerned about the level of ‘process maturity’ in the approaches to development used within their organizations, and project leaders wonder about the maturity of the individuals whom they are called upon to lead”. But it’s a concern in many more fields than just software development. Firefighting system failures may be fun and, in some organizations, you may be rewarded for the loyalty and dedication firefighting at 03:00 am demonstrates – even if you’re responsible for the problem you’re fighting (you probably delivered really fast and got rewarded for that too). However, most business users would prefer you to take a more mature approach and not put the problem there in the first place (or, at least, observe its appearance and preemptively nip it in the bud). This concern for ‘maturity’ is really driven by a desire for a quiet life, without surprises and embarrassments. Allegedly, the Software Engineering Institute at Carnegie Mellon started looking at capability and maturity in IT software development because someone at a party to celebrate the first moon landing noticed that we could put a man on the moon but couldn’t build software that worked reliably. It started to develop a Capability Maturity Model for Software that an organization could use as a target to assess the maturity of its software delivery processes against. It then found that there was a need for other process maturity models and, to avoid the management issues of multiple assessments, came up with the Capability Maturity Model Integration (or Integrated, in older references) – CMMI. CMMI is proving popular, both as a way of an organization internally benchmarking its own ability to deliver and, perhaps unfortunately, as a marketing tool for organizations striving to distinguish themselves in a competitive marketplace. However, you don’t have to have CMMI in order to be a mature organization, it’s just a good framework to work within (and you do really need an external benchmark to manage your progress against). ‘Passing’ a CMMI appraisal (actually, there’s no ‘pass’ in the certification sense, you just get appraised) doesn’t guarantee good governance – it may simply show that your lack of governance is deliberate and that your management should be aware of this (which is, actually, a good start). However, mostly, what you measure (even process) you try to do well.
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CMMI We must stress that we are not really discussing formal CMMI process improvement initiatives here – they’re a whole different topic and deserve a report in themselves. However, we are using CMMI as a framework within which to talk about the maturity necessary for good IT governance. It is a convenient way to categorize the levels of maturity in an IT organization, but we must apologize to serious CMMI practitioners for taking a rather superficial view of the subject. You should also remember that although CMMI deals with more than just software development, it doesn’t cover every aspect of an organization, even if its levels could provide a convenient shorthand for describing maturity in areas where CMMI proper doesn’t apply. For those seeking more information, refer to the CMMI, web address in Resources Appendix. CMMI is commonly seen as a five-stage process, with organizations progressing through the stages in turn, although there is also a continuous representation, which allows an organization to be at a different capability level in different process areas at the same time. The staged representation is easier to follow as a basis for discussion of maturity. The stages are: 5
The institutionalization of continuous process improvement through proactive process measurement.
4
The use of quantitative process metrics, at the organizational level, to manage and improve the process.
3
The availability of managed process at an organizational level.
2
The availability of managed process, at a project level.
1
The adhoc application of process.
Level 1 doesn’t mean that you have no process or that projects always fail or that nothing good happens – a common misconception. However, at Level 1 any successes can’t be guaranteed – they may depend on particular people or circumstances and a way of working in one project that delivers success may be abandoned or, at least, not used somewhere else, simply because management doesn’t recognize what it has. It is hard to see how you can claim any great degree of IT Governance at the equivalent of CMMI Level 1. Going from Level 1 to Level 2 can be quite onerous, because it involves recognizing and documenting what you have – and that often brings you up against the usual people issues as your IT ‘mavens’ may feel that documenting what they do and sharing it with others diminishes their value in the organization. At Level 2, you are starting to have a degree of IT Governance – and, remember, that we are only using the CMMI Levels as a framework for describing maturity levels.
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You may effectively be at something corresponding to CMMI Level 2 as far as IT Governance is concerned, even if you aren’t formally implementing a CMMI initiative and haven’t undergone CMMI assessment (just don’t claim to be at CMMI Level 2 unless you do undergo proper assessment). CMMI Level 3 is probably as far as you absolutely need to go for IT Governance – which is not to say that going further doesn’t bring advantages and even better governance. However, at Level 3, you not only know what you have and know what you are doing with it, you are managing your IT resource at an organizational level and making basic measurements of the effectiveness of your management, which you can use to improve it. At what corresponds to Capability/Maturity Level 3, which includes Level 2, you should have, at least: •
Asset management in place, including management of information, infrastructure and application assets.
•
An organization-wide security policy, based on risk management and effective identity management.
•
Implemented a business continuity policy; complemented with service level management; incident, service impact and problem management; and effective capacity planning and provisioning.
•
Effective configuration management in place.
•
Information lifecycle management in place, ensuring that electronic business records are kept safely for as long as necessary and then disposed of reliably and securely.
•
Managed processes for application lifecycle and operational management.
Process-driven development and operations are fundamental to what we think of as IT governance and will be treated in more detail in the next chapter. A typical but vendor-independent development process is the Dynamic Systems Development Method [DSDM, web] and a widely accepted infrastructure/operations management process is documented in the IT infrastructure Library sponsored by the UK Government [ITIL®, web]. Higher levels of maturity will fundamentally alter the nature of an organization – the comparison is with the way that ‘lean’ engineering revolutionized the Japanese car industry and enabled it to compete with and displace the traditional US motor industry in world markets. However, higher levels of maturity may not suit some organizations or, in particular, emerging industries and
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technologies, where things may be changing too fast for a stable process to be feasible (if you are implementing CMMI properly, we suspect that there is room for argument here). Whatever, it is probably true that you can’t properly appreciate the benefits, and the consequences or implications, of higher maturity levels until you are at Level 2 or 3. At the equivalent of Level 4, you become a metrics-focused organization, managing quantitatively through metrics. You don’t just measure a few key things, you measure everything, on the grounds that you can’t manage what you can’t measure. There is an overhead associated with this measurement activity, so automation is vital (and you really need to build the necessary instrumentation into the design of your systems rather than try to bolt it on afterwards). With the benefit of the metrics you collect, you can focus on areas for improvement and confirm that your improvements are, in fact, working. At the equivalent of Level 5, you are into continuous process improvement and the occult powers of warrior-monks in Chinese martial arts movies start to seem normal. Your metrics become predictive and you start to improve processes in anticipation of emerging problems. At this level, IT Governance is so innate that you probably don’t even need to think about it – but there aren’t many true Level 5 organizations in the world and many that have been assessed at CMMI Level 5 have only done so with a limited scope. The point of this section is not to say that you must gain CMMI Assessment at Level 3 in order to implement good IT governance but that you must have a certain level of maturity across the whole organization in order to implement IT governance effectively. And CMMI Level 3 gives you some idea of the minimum maturity level you will need in practice. If you implement IT governance at lower maturity levels you will be lucky if it achieves what you hope it will. You will likely end up with ‘islands of good governance’ and may find that embarrassing areas aren’t covered. You will be unable to reliably measure either the effectiveness or the overheads of your governance initiatives, and you will be unable to manage the overall alignment of your IT Governance efforts with the requirements of corporate governance as a whole.
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Roles and responsibilities One of the key issues in IT governance is the assignment of roles and responsibilities. The IT optimization company, Mercury Interactive, an industry leader in application delivery, application management and IT governance once commissioned a survey (back when it was still called application delivery ‘testing’) which showed that the management in many companies assumed that IT tested its customized package solutions; whilst the IT Group assumed that the management wanted rapid delivery of its new business functionality and had verified its purchase during selection. The vendor, of course, claimed that its package worked perfectly, until it was customized by its customer’s IT Group. The net result, which is all too believable to anyone who has worked in a big corporation, is that much of the business functionality in the customization was never properly tested – an obvious failure in IT governance. Assignment and recognition of the roles and responsibilities affecting IT governance is definitely a cultural issue and will depend on tradition and company size as well as on the company culture and attitude to technology (a high tech company employing highly trained engineers might give users greater responsibility than a company operating a call centre could) but it is always essential that responsibilities are assigned clearly and accepted. At the highest level, this can be done during staff induction and in job statements, backed up by training. Generally, the IT Group will be responsible for systems development and technology implementation. It will probably be responsible for implementing IT governance, because it is usually a very bad idea to bolt governance onto a system – at the very least, performance problems are likely; but there is also a significant risk that the governance solution will break the logic of the system and an expensive rewrite of much of it will be necessary. Although not exactly typical, the problems Microsoft is having as it tries to implement security in its operating system (starting with stopping all productive development for a reasonably long period and continuing with ‘critical’ service packs that break existing, but insecure, working, applications) give some idea of the issues with this approach. However, the IT group is not best placed to design and enforce governance for three main reasons: 1.
IT people are technology focused, and many governance issues are at least partly to do with people.
2.
IT people are innovation-oriented, and frequently ‘tried and tested’ is best for good governance.
3.
IT people are rewarded for delivery, which may conflict with the need to get governance right.
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The IT Group can well supply some of the requirements for IT governance, in the areas of business continuity and configuration management, for example, but there is a risk that its view of Governance will only reflect the technical issues. Being able to restore a working and up-to-date version of a database in the event of a contingency is very much a part of IT governance – but it is not sufficient, as if the people using the database can’t log into it, or don’t have desks to sit at or phones on which to call their customers, then the success of the IT governance of the database won’t matter much in the context of overall business continuity. On the other hand, even though business users are ultimately the stakeholders and paymasters for IT governance, they don’t have the technical expertise needed to specify IT governance at the technical level. The business users may well be the source of the specifications for IT governance embodied in or implied by the legislatory or regulatory environment, but, again, they are likely to specify only part of the solution. It is quite common to think that a conventional Audit Group will look after Governance but, in reality, it is almost the worst choice of all for this function. Auditors often specialize (although this is changing) in after-the-fact criticism (which is too late, impacts on delivery and is expensive to address), don’t generally have the up-to-date technical knowledge to control technologists and don’t have the culture to become part of the development team. We once remember noticing that the information archiving in a bank was rather out of control – everything was copied to tape, often several times after a series of changes and, while everything was in an archive, these were growing uncontrollably and it was doubtful whether the bank could answer ad-hoc enquires from archives with any confidence. So we asked the auditors what the archive requirements were – and they wouldn’t budge from saying ‘archive everything forever’, which was hardly very helpful. However, the auditors may well be the ultimate backstop, the people who confirm that you have, in fact, addressed the letter of the laws and regulations. Nevertheless, it’s really too expensive to find out that you haven’t at this stage. One solution to IT governance is setting up an Internal Control Group, reporting to the Board separately, probably through a Governance Committee. The responsibility of such a group is to take a holistic view of governance, reporting at a business service level. However, it is also responsible for assisting or mentoring developers and IT operations staff and should be both technically and socially able to relate to the IT Group in an early stage of its projects. The Internal Control Group is responsible for championing the governance point of view in IT, but it must be seen as a service function – a source of help and comfort, and assurance that a technically successful project won’t
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be criticized after implementation over governance issues the IT Group was hardly aware of. This is largely a social matter, but an Internal Control Group can hardly be expected to be respected, or even accepted, by the technologists in the IT Group unless its members have experience and technical knowledge that the IT Group respects – and unless the Internal Control Group acts as mentors instead of policemen or technology superstars.
Practical experience of governance At a roundtable entitled ‘IT Governance: The Role of measurement and metrics’, held in London November 2004 by Managed Objects (the inventors of Business Service Management [ManObj, web]), Ron Whitehand (SVP, Computer Sciences Corp EMEA) described, in CSC, a governance-focused organization. Whitehand points out that as a service provider to many large, and not so large, companies across the globe, CSC has to make sure that its relationship to its clients is good, in order to deliver the service its customers expect. IT governance is often confused with external control, he says, but it’s an internal thing, and has to be directed at managing the value delivered as well as the much more straightforward problem of controlling costs. ”We spend a lot of time, not talking about governance per se but just doing governance”, he says. “It’s not a big item on our agenda, we just have to get on with it because any services company has to worry about relationships and value delivered to the client, and the more we can demonstrate that this is a value and the more we can get the client to find it with us, the more we can help him – it’s a mutual benefit.” ”There’s a whole range of layers around how we do this”, Whitehand continues, “ranging from the old-fashioned SLA (Service Level Agreement), where we measure the uptime of every component in a service through to the total availability of a business process. It depends on the maturity of the client, how they’re managed, how far we can take them on the journey towards IT governance – or towards business governance, which is what really matters”. Metrics, Whitehand says, are very important, but they’re not the be all and end all. You need to understand the value of the metrics. CSC is adopting a ‘balanced scorecard’ approach (which balances hard financial bottom-line metrics against softer metrics relating to intangible assets such as morale and customer satisfaction [BalScore, web]. Other participants at the roundtable, Thomas Mendel
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(principle analyst, Forrester Research) and Dr Jim White (Business Technologist, Managed Objects) confirmed that there were signs of a resurgence of interest in balanced scorecard since their first popularity almost a decade ago [Kaplan and Norton, 1992] [Kaplan and Norton, 1996]. This may be due to the availability of better automated metrics, so the choice of metric is driven by business need, not the accessibility of the metric. According to Whitehand, balanced scorecard helps you easily identify management disconnects and gaps in your metrics, but you need to introduce it gradually, you can’t simply take three years off to deliver a ‘big bang’ balanced scorecard solution. The developers of balanced scorecard, Dr Robert Kaplan and Dr David Norton working at the Harvard Business School, said some 15 years ago: “The balanced scorecard retains traditional financial measures. But financial measures tell the story of past events, an adequate story for industrial age companies for which investments in long-term capabilities and customer relationships were not critical for success. These financial measures are inadequate, however, for guiding and evaluating the journey that information age companies must make to create future value through investment in customers, suppliers, employees, processes, technology, and innovation”. What this implies, of course, is that IT Governance based entirely on cost control, while comparatively easy to formulate and implement, will not deliver governance of all those aspects of an organization that are required for success today. And as an aside, in CSC’s world of outsourcing, the contract services are based in SLAs (‘we will do something for you on this day, or our networks will be up, or someone will answer the phone in a given timeframe and resolve your problem on the phone in a given timeframe too’), so performance against SLA may be an important metric for governance. Of course, the IT Department should be relating to outside customers anyway, but one speaker didn’t think that they usually do; although those that do see it as part of the business are probably the most productive and forward-looking companies. Nevertheless, there are potential issues with making the IT Group part of the business. “In a previous life,” Whitehand says, “I actually ran internal IT services for a company and I did engender a kind of governance board to understand what my clients wanted inside the company. But it turned into the very thing you’re talking about, Tom [Thomas Mendel], which is ‘we’re going to control you”. Although Whitehand believes in understanding quite as much as you can about what the client wants and what the business wants, because the customer is
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the final arbiter of where you’re going, he doesn’t think that business managers should try to control technologists directly. So he cancelled that governance meeting, “because it was of non-value to the company – it just turned into ‘lets stop them spending money and doing stuff’ [although] it was probably a bit highhanded of me at the time”. Business managers do not generally know enough about technology (at the cutting edge, especially) to effectively manage technologists who may know more about technology and its implications than they do. Similarly, we have seen a business-focused IT group that thought that it knew more about the business process than the business itself. It probably did, at the start, but it couldn’t maintain this knowledge of the business cutting-edge without actually being involved in the business day-to-day (perhaps this is less true in a user-focused development environment such as eXtreme Programming). Finally, Mendel made an illuminating remark to the table generally: “If you ask IT directors and CIOs about governance you may be asking the wrong people,” he said, “because from what we can tell all the initiatives around managing the risk of IT delivery, making your IT processes produce business value, those kind of things, they’re all not driven by IT, not in the beginning anyway, they’re driven by the end users, by the Board, so the understanding of what governance means to IT will come as a second step. We’re in a first phase,” he continues, “where the business is starting to demand from IT an understanding of what products we’re producing and how these compare with those from external markets, rather than just internal service delivery”. Now, perhaps, is the opportunity for a mature IT department to move ahead of the curve and start to preemptively deliver the style of IT governance the Board of the company is coming to expect. In the next chapter we look at the impact of IT governance on the IT department specifically.
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Chapter 4 The impact on IT IT service management .......................................................................37 Lifecycle systems development process............................................43 Management reporting: Telling a true story ...................................49 Practical IT governance tools .............................................................51
Chapter 4 The impact on IT “AberdeenGroup research indicates that industry is wasting an estimated 15 to 25 percent of its IT investment. Most organizations have effective investment and cost control mechanisms in place for facilities directly affecting production, but in very few cases are these mechanisms applied to the organization’s computing resource.” FROM THE FLYER TO THE ABERDEENGROUP’S STRATEGIC ENTERPRISE IT BUDGET REALITIES BENCHMARK REPORT, DECEMBER 2004.
IT governance will have an impact on IT – there will be some things that IT staff want to do that they won’t be able to do after you implement IT governance and new initiatives that they’ll have to buy into. If implementing IT governance has no effect on the way you work, one wonders why you’re bothering. This impact must be managed, as must the fear that IT governance will get in the way of productivity and increase bureaucracy for its own sake. It may be worthwhile pointing out that unproductive IT – wasting resources – is itself a symptom of poor IT governance. You could do this in IT governance workshops, as part of the introduction of IT Governance. The point to stress is that IT governance is intended to produce a positive business benefit – although you may have to invest up front in order to achieve a longer term benefit. It is best to catalyze the implementation of IT governance with an obvious short-term benefit, such as the prospect of regulatory fines (or worse) if you don’t get your house in order. You don’t have to do it all at once – if you take a process-driven approach to IT Governance. You can put in place processes to address immediate problems (a long as you think a bit about the ‘big picture’ context), measure the consequences of this and use these metrics to justify further investment or, perhaps, to change the process you’re adopting. Promoting IT Governance should be made part of an employee’s conditions of employment and the promotion of good governance recognized in pay awards and staff appraisals. A necessary (but not sufficient) requirement for good IT
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governance is the availability of a proper security policy and adherence to this, and promotion of good governance generally, should be mentioned in standard employment contracts and, more importantly, made part of staff induction training. So, to summarize, the most important effect on the IT Group is that it will have to become a process-oriented organization with a measurement culture. The idea is that it will be able to say what it is going to do about IT issues (including things like compliance, reliable business service delivery and other governance issues), evaluate its success in doing it and change what it does next in order to reduce the gap between aspiration and achievement. This is the essence of good governance.
IT service management Business service management The first part of our working definition of IT governance (see Definition of IT governance in the Management overview) is that it’s ‘that part of corporate governance in general which ensures that automated systems contribute effectively to the business goals of an organization’. Now, it probably isn’t the only possible approach to IT governance, but if you want to implement IT Governance firmly in the context of corporate governance as a whole, it helps if IT takes a serviceoriented approach (built on a Service Oriented Architecture or SOA). As David Chappel of Sonic Software says in the introduction of his work on the Enterprise Service Bus [ESB, 2004], “An SOA [Service Oriented Architecture] provides a business analyst or integration architect with a broad abstract view of applications and integration components to be dealt with as high-level services”. He goes on to point out that an Enterprise service bus (ESB) ties together applications and event-driven services in a loosely coupled way, which means that they can be treated independently, but still in the context of an overall business function. It is a fundamental thesis of this report that IT Governance is about IT in the service of the business, whether it’s about returning an ROI in the form of assistance to moneymaking business processes, or about the avoidance of waste (and IT without a business purpose is a waste of resources), or about the satisfying of business regulatory or compliance requirements. From this point of view, the service-oriented approach to IT simply makes effective, business-oriented governance easier – although there are other technical reasons why SOA, and perhaps even ESB, will be important strategic directions for IT.
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However, this is a top-level, architectural view of the matter. Nevertheless, a very similar view is emerging bottom-up, from the (often neglected) IT operations world, in the form of Business Service Management (BSM), a term which Managed Objects [ManObj, web] claims to have invented but is now also used by BMC and HP. According to HP, its BSM solution (which is based on its well-established HP OpenView product range) ‘provides CIOs, business process owners, and key application owners with a view of their business processes from a customer perspective’ [OpenView, Web]. This should enable them to maintain a clear understanding of the high-level health of their computer infrastructure and the applications on which the business processes depend – certainly an aspect of IT governance. According to BMC Software [BSM, Web], “Business Service Management (BSM) provides an incremental approach to understanding and meeting your specific business needs. With BSM, you can identify the best technology solution to support your business and make the most of your current investments. You can deliver faster, more comprehensive and consistent services, increase revenue opportunities, lower the cost of ownership and reduce the risk of unnecessary IT expenditures”. BSM obviously addresses the first part of our definition of IT Governance, to do with serving the business effectively, and goes on to deal with the middle part, the management and mitigation of IT risk. An important practical part of the BMC BSM picture is the Atrium Configuration Management Database (CMDB – an ITIL® term, see below – [Atrium, Web]), which provides information sharing and centralized management across both BMC and third party solutions. BMC claims that Atrium provides ‘a single source of truth for your IT environment’, an important basis for effective, manageable IT Governance (even if you don’t choose to obtain it with Atrium, it is an issue you will have to address). BMC identifies the following entry points to BSM: •
Service level management
•
Incident and problem management
•
Infrastructure and application management
•
Service impact and event management
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Asset management and discovery
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Change and configuration management
•
Capacity management and provisioning
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Identity management.
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If you go back and compare these with the list of desirable processes in the previous section (under CMMI) you see a considerable overlap. You can come at IT governance top-down, from a process-oriented and process-improvement angle; or you can come at it bottom up, from best practice infrastructure procedures such as ITIL® (see below). Business Service Management can provide a good framework for presenting an integrated IT governance policy to both IT operations staff and even operational staff in the business; whereas the process-oriented view can appeal to upper management and regulators. In reality, both views are complementary.
ITIL® Vendors usually promote Business Service Management but there should be a standards-based approach underlying it. This is usually ITIL®, the IT Infrastructure Library [ITIL®, Web], which was developed by the UK CCTA (Central Computer and Telecommunications Agency) in the late 1980’s and is now owned by the UK Office of Government Commerce (the OGC – ITIL® is both a Registered and Community trade mark of the OGC) and adopted worldwide. The ITIL® documentation has been revised during 2000 to ensure that it is consistent with, and forms part of a logical structure with, the BSI Management Overview (PD0005) from the British Standards Institute (BSI), BS15000-1 (Specification for service management) and BS15000-2 (Code of practice for service management). The British Standards Institution’s Standard for IT Service Management (BS15000) supports ITIL® and, unlike ITIL® itself, is a standard that you can certify against. ITIL® is a library of books describing ‘best practice’ taken from both the public and private sectors internationally, together with a qualifications scheme, accredited training, and tools to assist with implementation and assessment. It certainly isn’t limited to UK practice or to public services organizations, despite its ‘ownership’ by an office of the UK government it is, in fact, a general framework for IT governance, suitable for small, medium or large organizations, which must be customized to the needs of any particular organization. A whole philosophy of infrastructure management has grown up around ITIL® and the environment needed to support it. A comprehensive ITIL® FAQ is available on the Web [ITIL® FAQ, Web] but organizations planning to implement IT Service Management might also want to read ‘Planning to Implement Service Management’, which explains the steps involved in implementing or improving IT service provision [PlanISM, 2002]. There is also
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an independent not-for-profit ‘user group’ (including vendors) called the IT Service Management Forum or itSMF [itSMF, web], which claims to be a major influence on, and contributor to, industry ‘best practice’ and Standards worldwide, working in partnership with a wide range of governmental and standards bodies. To use ITIL® you really need to buy the library; we can’t cover it all here. However, we will provide an overview of its structure and scope, although this is not a definative guide to ITIL®, which is well-documented by the OGC. ITIL® divides Service Management into Service Support and Service Delivery. Service support consists of six functional areas: 1.
Configuration Management;
2.
Change Management;
3.
Release Management;
4.
Incident Management;
5.
Problem Management; and
6.
Service Desk
Service Delivery is comprised of another five functional areas: 1.
Service Level Management;
2.
Capacity Management;
3.
Cost Management for IT Services;
4.
Availability Management; and
5.
IT Service Continuity Management.
SERVICE SUPPORT: CONFIGURATION MANAGEMENT
This provides a foundation for other processes such as Incident, Problem, Change and Release Management. It maintains a logical model of the IT infrastructure, stored in a CMDB (Configuration Management Database) and built from ‘configuration items’ (CIs). It identifies, controls, manages and verifies the version of each configuration item. Configuration management involves planning (in detail for 3-6 months ahead and in outline for 12 months past that); identification of CIs (ownership, and unique id, for example); control of CIs under change management review; status accounting and tracking; verification and audit of CIs.
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SERVICE SUPPORT: CHANGE MANAGEMENT.
This controls changes to CIs in the production environment and has to balance the need for systems improvement (driven by changing business or the discovery of defects) against the potential risk associated with making changes. ITIL® appears to limit Change Management to the live environment, relying on project change processes to manage change within ongoing projects. Change Management typically deals with raising and documenting a change request, assessing its impact, cost, benefit and associated risk, obtaining and documenting change approval, managing the implementation of change, reviewing the change and closing off the request.
SERVICE SUPPORT: RELEASE MANAGEMENT
This is the holistic management of both the technical and the non-technical aspects of major or critical changes. It plans and oversees the successful rollout of new and changed software and associated hardware and documentation across a distributed environment. Release management includes, but is rather more than, software control and distribution.
SERVICE SUPPORT: INCIDENT MANAGEMENT
This is about detecting and recording incidents (events impacting service levels), classifying them, diagnosing the root cause of the incident and resolving it, with the aim of restoring normal service as soon as possible, with minimum disruption to the business.
SERVICE SUPPORT: PROBLEM MANAGEMENT
This is similar to incident management, except that problems encompass the wider issues behind incidents. An important aspect of problem management is trend analysis and the proactive prevention of problems/incidents. Problem management is more-or-less the opposite of firefighting. Problem management should supply the organization with relevant management information reports.
SERVICE SUPPORT: SERVICE DESK
This is the central point of contact with the IT Service Organization for users experiencing problems. A good Service Desk can have a disproportionate effect on customer satisfaction. A good target is to close most service requests at first point of contact with the Service Desk. Service Desk is preferable to the older term ‘help desk’, as it reflects the wider scope of a service desk facility. The Service Desk can be expected, these days, to be proactive, suggesting ways in which problems can be addressed before they appear.
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SERVICE DELIVERY: SERVICE LEVEL MANAGEMENT
The aim of this is to document and agree service level agreements (SLAs) between the providers and consumers of IT services, and improve service levels over time, as the business changes. It is usually important that SLAs are business-oriented, as the availability of one component is of no interest if the service it helps support isn’t available to the business.
SERVICE DELIVERY: CAPACITY MANAGEMENT
The aim of this is to ensure that capacity (disk space, computer power etc) increases or decreases in line with anticipated business volumes and performance needs. There should be a capacity plan, which is agreed with management and assigned a budget, so that it can be implemented to ensure that (in particular) lack of capacity doesn’t impact the business. There are three main areas of Capacity Management: •
analyzing future business plans and ensuring that adequate capacity will be available;
•
analyzing the services provided to customers and anticipated future demand, so that lack of capacity doesn’t impact service levels; and
•
analyzing and monitoring the resources used by the IT infrastructure, so that resources don’t run out.
SERVICE DELIVERY: FINANCIAL MANAGEMENT FOR IT SERVICES
This is a vital part of IT Service Management and is really just the good financial governance of the IT infrastructure – management and reduction of costs, calculation of cost of ownership and return on investment, effective utilization of resources, management of internal and external contracts – and, of course provision of financial reporting information to management. You would expect an IT organization to be able to account for the money it spends and to allocate this spend to the provision of defined services. Most organizations will also want to recover these costs from the users of these services, and possibly to influence customer behaviour, by means of some form of chargeback.
SERVICE DELIVERY: AVAILABILITY MANAGEMENT
This concerns itself with ensuring that IT resources are available as and when needed by the business to satisfy its objectives. It is usually a balance of cost and demand, tempered by business criticality – redundancy, for example, helps to ensure availability but increases the cost of the infrastructure, with redundant components lying idle (unless you exploit some form of grid or on-demand
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computing model), so is only used for critical components. Availability Management will monitor service availability against the appropriate service level agreements, and adjust targets and agreements as appropriate.
SERVICE DELIVERY: IT SERVICE CONTINUITY MANAGEMENT
This supports Business Continuity Management, it doesn’t replace it (there is no point in ensuring IT service continuity if the business can’t make use of the service because something else can’t be recovered. This is typically about having tested recovery plans for IT components in the event of a disaster or major failure impacting the business (it is also known as contingency planning or disaster recovery), but the need for management of the recovery process, and the people issues involved (including customer and public confidence) can’t be over-emphasized. The recovery plans must be regularly reviewed, to make sure that they remain in alignment with the needs of the business (and that the processes being recovered are still current) and are worthless unless and until they are tested – which should be repeated regularly. ITIL® is not a fixed standard but is evolving in response to feedback from its stakeholders. It was last updated in 1997, and the process of implementing a new update started at the end of 2004; the project reported in April 2005. This next version of ITIL® will preserve the key concepts of Service Support and Service Delivery. However, the consistency of its underlying structure and navigation will be improved and ITIL® will also be extended to increase its coverage of service management and of the cultural and organisational aspects of managing ITIL® best practice in a modern multi-sourced environment. It will also take on a ‘knowledge management’ aspect, with case studies, subject matter expert white papers, implementation packages, business cases etc, complementing the core content; and additional material to support the ‘value proposition’ associated with ITIL®. This may involve the addition of new books and topics to the ITIL® library and the removal of some books and topics; and may well change the qualification scheme. However, it will be an evolution of ITIL®, not a complete rewrite - the core volumes should be republished during 2007.
Lifecycle systems development process The process that most affects the IT group is the lifecycle development process – ‘lifecycle’ meaning that you apply as much or more weight to the business operation and continuing maintenance of IT systems as to the initial development.
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After all, most systems spend far longer, and consume more resources while ‘in maintenance’ than they do during development. The implication of this is that it is generally wrong to think in terms of IT projects if you want to develop automated systems that contribute effectively to the business goals of an organization. An engineering project, such as a bridge, is complete in itself. It starts, it has resources more or less exclusively assigned to it and it finishes – when you can evaluate its success or failure. Maintenance has minimal effect on the function of the bridge. In contrast, a software engineering ‘project’ is actually part of a programme – Geoff Reiss writes about Programme Management Demystified [Reiss, 1996] in the follow-up to his book Project Management Demystified [Reiss 1995]. Programme management is, according to Reiss, “the co-ordinated management of a portfolio of projects which call upon the same resources”. The IT group is usually working on several projects at once and most of its effort is often devoted to the integration of these projects with each other and with the operational systems already installed. The members of a software engineering team ostensibly devoted to a single ‘project’ will be involved in the maintenance of previous projects they have completed, and may be adding considerable new business functionality during maintenance, and may be called upon to provide particular expertise to other development projects. Two of the characteristics of programme planning that Reiss identifies are relevant to the issue of IT Governance: 1.
The team must ensure that the project’s aim helps the organization forward.
2.
Concentration on the corporate objectives.
What this means in practical terms is that the development and maintenance of automated systems must be firmly based on the analysis and prioritization of business requirements (including regulatory requirements). It must be possible to trace through from business requirement to code and vice versa. Code should contribute to an identifiable business objective (even if indirectly, as some code is there for technical reasons) and if it doesn’t it shouldn’t be there; defects and failures should be categorized/reported in terms of the business services they impact. So, the IT Group can expect to be involved in Business Process Management (BPM) using languages such as BPEL (Business Process Execution Language) and Requirements Management. It will be generating at least the framework of an automated system from Analysis and Design models, derived from Requirements models – in fact, it may well adopt Model Driven Development as a discipline. Iterative development with constant reference back to the end-users
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of the system will be the norm (even eXtreme Programming) and, of course, testing will be key to building the final system. Developers will be as familiar with modeling languages such as UML2 as with coding languages, because abstraction via models lets you more easily understand and validate complex automated systems. And, of necessity, management will give developers realistic schedules, which mean that they have the time to ensure that their automated systems really do align with the business goals of the organization. There are many standard development processes, so writing your own from scratch (which is how many of the currently available ones started) is no longer particularly useful. Most of them are supported by vendors; IBM/Rational RUP (Rational Unified Process) is a notable, and respected, example. The issue with a vendor-supported process is that it may focus on areas where the vendor has tools to sell; and it may not abstract its physical implementation from its logical model sufficiently. Ideally, a process should be implemented as a meta-process, used to instantiate a specific process for a particular activity (although the availability of ‘pattern’ instantiations for typical business situations would make sense). Nevertheless, many organizations get on well with commercial development processes – there are potential issues but as long as you’re aware of them, then they can provide a good basis for governance of the development process. However, we’ll look at a couple of vendor independent development processes, in order to illustrate the IT governance issues.
DSDM The Dynamic Systems Development Method [DSDM, web] is an accepted methodology for Rapid Application Development (RAD), originally developed by a consortium sponsored by IBM. DSDM is designed to be flexible – Agile – and relies on iterative development, using prototypes, within a non-prescriptive framework. It really consists of a non-prescriptive collection of ‘best practices’. The framework within which iteration fits talks about five lifecycle phases: 1.
Feasibility Study: this evaluates a proposed development for business justification and decides whether using DSDM is appropriate. It produces a Feasibility Report, which may include an initial solution prototype.
2.
Business Study: this phase reviews the business process the IT system should support, develops an outline prototyping plan and
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identifies external stakeholders (such as user sponsors and workshop representatives). 3.
Functional Model Iteration: this phase uses prototypes to model the required system, identify non-functional requirements (such as performance and regulatory issues) and produces a functional model and the implementation strategy and cost benefit analysis.
4.
System Design and Build Iteration: this phase refines the functional prototype using feedback from the business to drive the production of new prototypes. After sufficient iterations, this phase delivers a working system, which addresses all the agreed stakeholder requirements.
5.
Implementation: this phase moves the tested system into the user’s production environment and will include any user training required.
An important feature of DSDM is ‘time boxing’. This recognizes that scheduled delivery dates are important to the business, so if the project is slipping it maintains the agreed delivery dates by negotiating a reduction in functionality for the relevant prototype, instead of (say) reducing quality. In DSDM, dates do not slip but functionality might. The essence of DSDM [PCSupportAdv, web] lies in its nine principles: 1.
Active user involvement is imperative. DSDM takes a user-centred approach, ensuring that users are closely involved throughout the development life cycle as active participants in the overall process.
2.
DSDM teams must be empowered to make decisions. The DSDM teams combine developers and users, who have the power to decide upon functionality, etc.
3.
The focus is on frequent delivery of products. DSDM is more concerned with the products of a project than the activities per se. Each product is produced within an agreed period of time or timebox (generally a short time period, as for earlier RAD approaches), with the team responsible able to choose its own approach to delivering that product.
4.
Fitness for business purpose is the essential criterion for acceptance of deliverables. DSDM is aimed at delivering necessary business functionality when it is needed, with an acceptance that there may be a need for subsequent refinement. This contrasts to more traditional approaches, which can degenerate into slavish delivery of requirements,
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even after it has become recognized that the requirement has been overtaken by events or was simply plain wrong. 5.
Iterative and incremental development is necessary to converge on an accurate business solution. The DSDM approach favours incremental development, with a significant level of feedback from users. This helps the rapid satisfaction of business need and builds in iteration, in contrast to the view that re-work is managed under an exception procedure, which can be common in other development approaches. This is all believed to facilitate achieving rapid and continuing benefits in DSDM.
6.
Requirements are initially base-lined at a high level. DSDM agrees the high-level requirements at the start of the project, fixing an agreed scope and purpose of the system overall. This provides a framework within which detailed investigation of the requirements can be conducted.
7.
All changes during development are reversible. DSDM supports the idea of ‘backtracking’ to earlier states once iterations of the software stop satisfying the needs of the system’s stakeholders. Obviously, this requires work to be performed within a development environment that supports the return to earlier products.
8.
Testing is integrated throughout the lifecycle. Testing of DSDM products is performed on a continuing basis as an integral part of the overall work. Testing involves both the developers and users, and is concerned with both the verification and validation aspects of the product.
9.
A collaborative and co-operative approach between all stakeholders is imperative. The developers, users and other stakeholders in a DSDM project work together to clarify the business need and ensure that development satisfies that need. This contrasts to the ‘contractual’ approach of traditional development processes, where users are expected to have all their requirements fully elaborated prior to implementation and the developers provide a clear specification of what will be delivered. DSDM is more realistic in its approach, reflecting the hard won IT experience that requirements evolve, due to developing understanding and a changing external environment.
DSDM is particularly useful to IT governance because it increases user involvement in IT projects and preserves external delivery dates; both of which help reassure external stakeholders in IT, in the business, that IT is under control.
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eXtreme programming IT developers, in particular, are often frightened of process (and, indeed, governance) because of a fear that it will restrict their creativity and put a pile of paperwork in the way of their productivity. In fact, this fear is usually unfounded – building on an accepted process frees developers to be more creative, to do more – and much of the required documentation can be machine-generated (a computer-maintained UML model of a system is better documentation than a folder-full of paper). Nevertheless, an Agile development process has grown up in the light of these fears – valuing people over process and output of working systems or prototypes over abstract documentation – Thoughtworks [Thoughtworks, web] is a good example of a consultancy espousing Agile principles, not only in dealing with customers but also internally. An extreme example of Agile development is eXtreme Programming (XP). It isn’t really defined anywhere (one of its principles is that if XP is broken, you are allowed to fix it – i.e., you can customize your own version of XP) but it is generally accepted that Kent Beck’s book, eXtreme Programming Explained [Beck, 1999], is a good starting point. An XP ‘process’ will consist of a set of good practices, for example: •
Start by collecting short ‘user stories’ from your users, consisting of a description of some feature of the new system and an acceptance test. Build a release plan, delivering useful business function, by grouping user stories together.
•
Deliver project iterations taking about 1-3 weeks, selecting the deliverables for an iteration from a prioritized list of user stories and failed acceptance tests.
•
Program in pairs, two programmers working on the same code on a single terminal. You’d think this would reduce productivity but, in fact, it increases it because it reduces rework (neither partner can tolerate unclear code from the other and they spot each other’s omissions).
•
Keep things as simple as possible for as long as possible, by never adding functionality before it is asked for in a user story.
•
Refine the design to remove redundancy, eliminate the unnecessary and rejuvenate tired designs whenever and wherever possible. This is called ‘re-factoring’ and is an area where experience is vital. It’s all about removing unnecessary features and complexity, not about optimizing performance and adding new features.
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In marked contrast with the expectations of people who don’t know XP, it can be very compatible with good IT governance, and even process improvement approaches such as CMMI. The user involvement ensures that the IT project is aligned with the business; the emphasis on tests for each and every ‘requirement’, and constant repetition of the tests as the build changes, promotes quality; incremental delivery ensures that projects don’t run out of control. However, XP requires an extremely disciplined development team – at least as disciplined as for normal development, possibly more so – and some people adopt ‘XP-But’ (as in ‘we do XP but we don’t bother with all that awful testing...’) which won’t deliver the same results. According to Kent Beck (op. cit.): “XP is my baby, XP reflects my fears I am afraid of doing work that doesn’t matter; having projects cancelled because I didn’t make enough technical progress; making business decisions badly; having business people make technical decisions badly for me; …doing work that I’m not proud of.” If your programmers think like this, then XP delivers good development governance. If they don’t, well, that is a management issue.
Management reporting: Telling a true story The last part of our working definition of IT Governance (see Definition of IT governance in the Management overview) is that it ensures that, ‘automated information systems (including financial reporting and audit systems) provide a true picture of the operation of the business’.
Demonstrable audit controls Everything in IT governance contributes to this but in the end it is a question of security – not of Confidentiality, but of the often overlooked Integrity and Availability aspects of security. Many systems provide audit trails, but how many of them protect the audit trails from systems administrators? If they don’t, the audit trail may prove to be worthless in court – if it ever comes to that – its Integrity can be compromised. And, if access to audit data (and legislation such as the UK Companies Act allows auditors access to any data that they need for their audit) hasn’t been considered in advance, its Availability may be compromised – it may take too long to retrieve, the detail may be lost in an aggregation, the data format or physical medium may be obsolete. Audit data is only really useful
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if you know that you can prove it hasn’t been tampered with and that you can read it – if you had a nine track tape of IMS transactions from 1980, could you find the hardware to read it on, run a version of IMS that could recreate the transaction, prove that no-one tampered with it 25 years ago and understand the application well enough to make sense of the business behind the transaction? Some people think that the only truly reliable audit records are human -readable document images, written in duplicate (with each duplicate stored in a different location) using standard document formats on robust media – but the implementation details of this will depend on the precise requirements. In fact, without special provisions, computer forensics can usually demonstrate that computer data hasn’t been tampered with or that it has been (beyond reasonable doubt) by analyzing the time stamps and similar data attached to changes by the operating system. However, you’d be unwise to rely on this, if only because computer forensics experts are expensive, especially if they’re expert on obsolete computer systems. It is better to build audit trails into the system design and possibly copy them securely into a system that only the auditors or internal control group, not the usual system administrators, have access to. However, in practice, this is not always easy: not all operating systems have fully granular security permissions, with no ‘super users’ (in fact, few do). You perhaps need to give systems administrators the power to change everything except audit data (this may be needed in order to fix problems) although you might want to provide controls on the exercise of these powers; but you might also want to give the auditors the power to see everything, including normally confidential data, but change nothing. When you try to implement such schemes, you discover that you need a sophisticated, rules-based security scheme but effective schemes like this aren’t common when you delve into the details. Taking two examples from the past, Windows NT had the granularity, but was too hard to manage and seldom implemented properly; Novell Netware (after v4) had the sophistication and directory-based manageability, but still supported ‘superuser’ (all powerful) IDs (including legacy admin ID’s from a previous security model); neither implemented roles fully. Encryption can come to your aid, not for Confidentiality but for non-repudiation. By encrypting a hash total derived from a document and transmitting the encrypted data alongside the document, you can prove that it hasn’t been altered (by checking that the received document hashes to the same figure as the original did); a similar approach can be used for ‘digital signatures’ (remembering that an email, say, is effectively digitally signed anyway, in practice). However, providing a hash signature for everything an auditor may ask about, may prove impractical.
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When you design financial reporting, it must be based on proper analysis of both the business and regulatory requirements and fully tested. This extends to the audit trail of changes to the financial record. Think in terms of demonstrating the integrity of your financial reporting in court, not in terms of a computer science exercise (being logically correct is necessary, but may not be sufficient). This is an area where role-playing games in a training situation can concentrate peoples’ minds on the issues.
Practical IT governance tools This report does not aim at being a buyers guide to IT governance software. Nevertheless, examination of a few representative products may be of value, as giving an idea of the sort of computer assistance that is available to an IT governance project. However, there are many more tools out there to choose from.
1. Select Business Solutions Process Director [ProcDir, web] This addresses the management of Software Development process, one step above Software Development Process itself and is an aid to process maturity – it appears to markedly speed up CMMI level 3 assessments, particularly in two areas: •
Organizational Process Focus: To plan and implement organizational process improvement based upon a thorough understanding of the current strengths and weaknesses of the process and process assets; and
•
Organizational Process Definition: To establish and maintain a set of organizational process assets.
Process Director comes with a range of processes ‘in the box’: Select Perspective; Waterfall, Prince II (a UK Government sponsored project management process); and ‘Alignments’ to DSDM, Agile/XP and others. You can use these as a basis for developing a process customized to your own development requirements, without the risks associated with reinventing the wheel from scratch – real IT governance. See a brief review of the product by Andrew Griffiths of Lamri at [ADA2005-3, web].
2. Compuware Changepoint [Changepoint, web] Compuware IT Governance by Changepoint, to give it its full title, is a holistic IT business management tool that enables organizations to implement effective
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governance models, providing the organization with a framework for measuring and managing IT value, cost and risk. It also helps you align IT with the business by applying a portfolio management discipline to IT projects, applications and infrastructure. It can automate core business processes and promises to reduce costs, while increasing the efficiency and quality of all IT work. It can enable management to improve decision-making and proactive performance management at all levels, by providing visibility into critical performance indicators in real-time. It helps management gain control over IT spending through accurate, comprehensive cost measurement, budgeting and meaningful charge-backs, and helps to improve client satisfaction by gathering feedback and collaborating with clients online. It also supports skill tracking; demand and capacity planning; scheduling and time tracking. It helps to control administrative overheads and to eliminate redundant, error-prone manual data handling processes and improve the morale of both management and staff. Big claims but in our opinion, after talking to Ayman Gabarin, VP of IT Governance EMEA at Compuware, probably not unfounded.
3. BMC Atrium [Atrium, web] A key part of the underlying ITIL® model is the Configuration Management Database (CMDB). Atrium from BMC Software is one of the few specialized implementations of CMDB. It is an intelligent data repository that BMC says “provides a working model of your enterprise IT infrastructure” – a single source of truth for your IT environment. It promises to underpin the IT governance you need in order to support your organization’s business goals effectively. CMDB is, in effect, an integration tool which federates the data from multiple infrastructure monitoring and discovery tools into a cohesive logical whole – that can reside on multiple physical platforms throughout an IT organization.
4. Mercury BTO [Mercury, web] Part of IT governance is assurance of the continuing operational efficiency of automated systems, especially after a regulatory or compliance initiative has increased data volumes or increased administrative overheads – Mercury’s Business Technology Optimization (BTO) promises to be a valuable addition to your toolkit.
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Mercury promises specific assistance with, for example, the key sections of Sabanes-Oxley: Section 302, which requires CEOs and CFOs to sign statements, under penalty of perjury, verifying the completeness and accuracy of company financial statements; Section 404, which requires CEOs, CFOs and outside auditors to attest to the effectiveness of internal controls for financial reporting; and Section 409, which requires companies to report material financial events immediately, in real-time, instead of waiting for quarter-end. Mercury’s products include comprehensive portfolio, program, and project management software and realtime dashboards that can be configured for CIOs, CFOs and CEOs to provide early warning of any project missteps, avoiding end-of-quarter surprises. They also provide end-to-end process control over software changes including enhancements, customizations, configuration, vendor patches and bug fixes; logging of all changes across the development, test stage and production landscapes; control over lifecycle processes and real-time project status.
5. Borland ALM toolset [ALM, web] Borland sees itself as the last truly non-aligned vendor of a complete set of software development tools in a world dominated by IBM/Rational (Eclipse, J2EE) and Microsoft (.NET). Some others might disagree but it is certainly a major player in that space. Borland quotes independent research by ROI experts at Consynity that suggests that using an integrated set of solutions to support the entire systems development process offers real benefits: Reduced application development, testing and deployment costs by 25% to 75%; improved application quality and performance by 25% to 65%; reduced time to market by 33% to 85%; reduced time and resources to deploy applications across multiple environments by as much as 80%; Reduced application downtime by 50% to 90%. Achieving any or all of these would seem to demonstrate effective IT governance. Borland tools really do address most of the lifecycle, ranging from requirements management with its innovative Caliber RM tool to model-driven development with its Together products. However, perhaps what makes it stand out from an IT governance point of view is its recent acquisition of Teraquest [TeraQuest, web] (a CMMI consultancy), and focus on CMMI: it is actively pursuing CMMI level 3 certification over this year and 2006 across all ALM products. Together with its retention of Dr Bill Curtis of TeraQuest as Borland’s first Chief Process Officer, this makes Borland a very interesting partner for process-focused IT governance initiatives.
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6. Telelogic Doors-Synergy Integration [Doors, web] Telelogic SYNERGY is a task-based change and configuration management solution built upon a robust and scalable repository. It is closely integrated with, but separate from, DOORS, which is a requirements management tool (which itself supports the TAU systems development environment). Telogic believes that the federated tool approach is appropriate, because different audiences need different tool philosophies and interfaces – a reasonable approach, as long as it is done well. Change and configuration management is central to the ITIL® best practices for infrastructure management. The Telelogic product set complements the core ITIL® processes including problem, incident, change, release and configuration management. Moreover, Telelogic’s professional services organization methods are built on industry best practices to ensure ITIL® success. For instance, Telelogic claims that SYNERGY/Change is the ideal tool to define, refine and deploy an Incident Management Process, as its process definition can include lifecycles (workflows), states and transitions, attributes and formulas, rules and access security.
7. Fujitsu QoS Management [QoSM, web] Mike Tsykin, Senior Business Development Manager with the SERC (Systems Engineering Research Centre) of Fujitsu Australia Limited and a Steering Committee member of the AQRM Forum of The Open Group, says that ITIL® and ‘Sarbanes-Oxley’ Act require business process improvement and prescribe pervasive measurement and, frequently, predictive management of business processes, which is the focus of his tool. The tool itself is a repackaging of Fujitsu’s enterprise systems management tools into a customized Quality of Service appliance for enforcing and reporting service level agreements (SLAs), capacity planning etc. It differs from many such tools in the degree of automation it offers and also in that it is offered on a rental basis (the user needs no continuing investment in hardware infrastructure to deploy it).
8. Pervasive AuditMaster [AuditMaster, web] This goes beyond the usual data access controls to audit authorized users of your data resources – a vital aspect of protecting, for example, your financial records for Sabanes-Oxley. It is a database add-on with transaction intelligence
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and proactive monitoring capabilities but, unfortunately, it only supports the Pervasive SQL embedded databases currently. However, support for the general-purpose Open Source database Ingres is promised soon, which will open up its applications. See a short review of AuditMaster at [ADA2004-1, web].
9. Managed Objects Formula [Formula, web] The Formula BSM Platform can be used to measure, improve and enforce the performance and availability of all kinds of services, from online trading and customer relationship management, say to something as basic as corporate email. Managed Objects claims that Platform covers the full spectrum of Business Service Management and that you can use it to align IT to the business incrementally, attacking the key issues first. As most people will agree that the key issues are, in fact, important, this helps you gain acceptance for your IT governance initiative. The strength of Platform lies in its Business Service Object Model, effectively a schema that should allow for the storage of an object’s state (where an object may be anything from a whole service to an individual server), together with the root cause of that state and its business impact. It appears that views into this model can be customized for different audiences – always a useful feature. Managed Objects also sells a specialised CMDB offering. In the next chapter we look at some of the issues associated with actually implementing IT governance.
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Chapter 5 Implementing IT governance Obtain management sponsorship .....................................................58 IT governance methodology overview..............................................58
Chapter 5 Implementing IT governance “Look at types of tools that are coming out to support IT governance – they only deal with risk in the development environment. What’s the risk of a project going wrong? They are not yet able to apply themselves to the operational world, the world that transactions live in. To detect, to measure success in any way.” SPEAKER AT MANAGED OBJECTS ROUNDTABLE ENTITLED: IT GOVERNANCE: THE ROLE OF MEASUREMENT AND METRIC.
Implementing a formal IT Governance regime, assuming that you have only adhoc or informal governance processes at present, involves (despite what some vendors may tell you) a lot more than just buying some software – although once you do have the required culture in place, tools can facilitate the initiative. A first requirement is to align IT governance with corporate governance in general. Think of this as high-level requirements gathering – what are the business governance issues that currently worry the Board and the company auditors, and what questions would they like to ask or ‘more importantly, are they afraid to ask? Try to talk in terms of business issues, not technical solutions, of being able to demonstrate that the physical implementation of a bank’s money laundering policy, for example, is tested against the policies discussed by the Board of Directors, not about implementing Model Driven Architecture and Applications Lifecycle Management tools. This discussion is only an input to your governance initiative. You can’t assume that the Board’s concerns are the right concerns – because informal risk analysis is often driven by media hype and by our tendency to concentrate on the most recent crisis we experienced. After the IRA bombings in London, people moved data centres down into the basement where they were safe from bombs but far more vulnerable to flooding, which is far more likely to affect a building in London than a bomb. Nevertheless, you’ll get no credit for your IT governance initiative if you can’t sensibly address the one question the CEO wants to ask, when he wants to ask it (even if the answer goes on to suggest that he/she may be asking the wrong question).
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Obtain management sponsorship The first essential for IT governance is informed top management sponsorship. If management sends mixed messages – if it insists on good governance in practice but pays performance bonuses to people who deliver systems faster by cutting corners – people at the sharp end of IT will soon realize that only lip service to good governance is required. However, since in this situation they will also realize that this makes them ideal scapegoat material if something does go wrong, morale, productivity and systems quality will fall, as a direct result of your governance efforts. There are three ‘metrics’ for management sponsorship of IT governance: 1.
The availability of a corporate IT governance plan, overseen by a Governance Committee, with representation from IT professionals in the IT Group and reporting at Board level. The names are immaterial, the group could easily be called the IT Strategy Committee, say; what is important is that IT governance issues can be raised at Board level and that technically informed input to the discussion is available.
2.
An IT governance framework is implemented, typically with an Internal Control department or some such group. What is important is that governance can be policed proactively, not ‘after the fact’ as an Audit Group would. Governance must not be seen as a barrier to implementation but as an assistive process, which ensures that IT systems get it right first time and contain no hidden surprises that will excite the regulators down the track.
3.
Provision of a formal budget for the IT governance initiative. Without a budget, which Internal Control can book time against and that can be used for any tools and training that may be required, you really don’t have a government initiative, no matter how much people talk about governance.
IT governance methodology overview You should take a process-based approach to governance, which is why process initiatives like CMMI and ITIL® can be an important underpinning to IT governance. CMMI is about organizational maturity, the ability of an organization to implement a process in pursuit of an objective, measure its consequences and improve the process to better deliver against changing business objectives; ITIL® is a collection of ‘best practice’ processes for managing IT infrastructure. If third
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parties (such as regulators) question your IT governance in detail, it can be useful to point to your maturity/capability as an indicator that your process can be effectively improved to address the questions raised. It is significant that Borland, a vendor of Application Lifecycle Management tools has recently acquired the CMMI and process consultancy, TeraQuest. Borland is implementing CMMI Level 3 (the adoption of managed process at the organizational level) internally and will no doubt include process improvement on the CMMI model as part of its Application Lifecycle Management offerings. You should take a systems approach to governance. Your internal process is in a state of dynamic equilibrium. Changing external threats and regulations provide external stimuli, resulting in feedback through the Internal Control function to management and the technicians in the IT Group, which results in changes to the internal process that satisfy the new regulations or mitigate the new threats. Separation of function keeps the whole process ‘honest’: •
The Internal Control Group reports to the Board via the Governance Committee – it is immune to local politics in the IT Group and in business departments, and is focused on corporate strategy. Since it sets requirements but isn’t responsible for systems delivery, it isn’t tempted to interfere in technical matters that are properly the province of the experts in the IT group.
•
The IT Group is presented with governance as, essentially, a systems requirement. It isn’t tempted to compromise governance in the interests of speedy or cheap delivery, because governance is part of what it is delivering. At the same time, it is free to determine the most effective technical solution to the business governance requirements raised by the Internal Control function, without having possibly inappropriate technical controls bolted on to completed systems, that can easily introduce technical defects.
•
The Auditors report independently and confirm that the processes are working by comparing practice against the agreed framework everyone should be working to. If it is all working properly, the Auditors should not find problems after the fact when they are expensive to address because any problems should have been addressed proactively during systems development/maintenance. However, if the process is starting to fail, the Auditors should be able to proactively alert management to the issue.
As with any other IT project, IT governance needs clear objectives and a budget allocation; and a plan showing how these objectives will be achieved and how
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the budget will be allocated. Implementation should be in stages, frequently delivering defined governance benefits, rather than a ‘big bang’ implementation delivering perfect governance in one go years in the future – if the company remains focused on the project that long. The stages in implementing an IT governance initiative from scratch would be, broadly (and in no particular order) as follows:
1. Obtain buy-in on the ground The impetus to good governance may be clear at Board level but the troops can be surprisingly cynical about such initiatives. Too many of us have heard managers talk about the best of practices – and seen them reward cowboys for rapid delivery of systems which are full of problems for less charismatic workers to clear up, for little reward or thanks. Training is probably key to an organization demonstrating to its staff that it is serious about governance – training in new tools, training in performance management, so as to ensure that the possible overheads of governance don’t impact on operational performance. In addition to training, experienced (perhaps external) mentors who have a wide experience of IT generally and recognize, and know how to address, the more subtle governance issues, can be helpful A governance forum, in which workers at the sharp end can discuss governance issues and suggest solutions in public (far more useful than mutterings around the water cooler about some technically infeasible governance edict), is a good idea. However, you must make sure that you document the action points from such a forum and show the community that the issues it identifies are at least given proper consideration (this is process management through feedback). It is also important that such a forum represents both the business and IT points of view, with fully informed and empowered attendees. If it becomes a costfocused drag on innovation (e.g.: ‘our job is to find out where the IT department wants to spend money and stop it’) such a forum can be counterproductive.
2. Map IT to the business Generally, there is a ‘many to many’ relationship between business functions and the IT infrastructure. A particular server, a computer storing both business data and automated data processing systems, may support many business functions, for example; conversely, a single business function may invoke many servers. The best way to do this is with diagrams, but the relationships involved are too complex for this to be done manually. In addition, there is a strong risk that such
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maps will become out-of-step with reality. Business process analysis/management tools can provide a useful bridge between the world of IT and the world of business, although there isn’t a lot of evidence that they’re being used for this yet. The best way to maintain such mappings is therefore with automated tools that can generate the framework (at least) for automated systems from models relating business processes to IT systems. Look for suites of systems development tools (not necessarily from the same vendor) that support the entire development lifecycle from business process modeling and requirements management, through to coding and testing.
3. Implement policy-based security and identity management There is a lot more to IT governance than security, but security is part of it. Good security requires risk and threat analysis, to determine and prioritize the risks facing the organization; and then formulation of a Security Policy, which documents policies designed to mitigate, transfer (through insurance, say) or accept (in conjunction with contingency plans) the various identified risks. Then you can begin to design procedures that will implement the policies. Ideally, the policies will be fairly generic, so that when changing technology or business renders a procedure obsolete, the intent of the policy is clear and can direct the formulation of a new procedure. Good security is role based, as this aids maintenance. People in an organization have basic, restricted access as employees; then as they are given roles in the organization, each role brings with it appropriate access permissions. If people move roles within the organization, they lose permissions associated with one role and gain those associated with another. Identity management is related to security. It is all about identifying people unambiguously and managing the attribution of identity to people seeking access to your organization. It includes providing the facilities to enable the unambiguous attribution of actions to identities, essential for audit trails and security. A large part of IT governance comes from people taking responsibility for their actions. Without identity management, your governance is built on sand. In common with the general tenor of this report, a standards-based approach to security is recommended, although you may not need to formally certify against the standards. ISO/IEC 17799:2000 [StandDir, web] is becoming accepted worldwide as the code of practice for information security management, although you can’t really certify against this, as it isn’t a specification you can assess against.
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You also need BS7799-2:2002, the corresponding specification (which you can certify against); and both are available as a package, with some extra material, as the ISO 17799 Toolkit. ISO 17799 et al provides an excellent framework for implementing security and ensures that you take a holistic approach, starting with risk management (although it isn’t strong on the details of this) and covering often-neglected areas such as business continuity. However, some form of mentoring from an external security consultant is recommended too – it is difficult to make an unbiased assessment of risk and the threats facing you, from inside an organization. Tools to support IT risk assessment, implement ISO 17799 etc are available. Some of these can be very useful but beware of concentrating only on those areas your tools cover and neglecting business risk assessment as a whole: there is little point in mitigating the IT risk affecting a system if the business risk is uncontrolled; and almost any IT security measures can be rendered ineffective if unhappy or unjustly-treated staff can be compromised, or if physical access to the premises and IT infrastructure isn’t effectively controlled. In the case of risk assessment tools, in particular, investigate the provenance and localization of the threat database that underlies their risk assessment facilities. A database relating to US threats, say, may not be wholly appropriate in the UK, and a database that is some years old may miss emerging threats (ideally, you should be able to add threats from your own history to the database).
4. Implement BSM across all platforms Business Service Management (BSM – see Chapter 4) means that you manage your IT infrastructure in terms of the business services it implements. Managed Objects claims to have invented the term [ManObj, web] but it is also associated with HP and BMC Software these days; and BMC’s Atrium CMDB, which addresses the IT Infrastructure Library (ITIL®) requirement for a single, enterprise database to ensure data consistency and support integration across differing service management processes may be a significant enabler for BSM. Business Service Management is commonly taken to include Service Level Management, Incident and Problem Management, Infrastructure and Application Management (including Licence Management), Service Impact and Event Management, Asset Management and Discovery, Change and Configuration Management, Capacity Management and Provisioning, and Identity Management. Some of these have been split out for special emphasis in the present chapter. By its very nature, BSM must be cross-platform. Business users will not be happy if business-friendly service level reporting and management stops abruptly when
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their data strays onto the mainframe, for example. This is a serious governance issue as discontinuities in the vocabulary and culture of service level management and security facilitate breakdowns in IT governance at that point.
5. Implement infrastructure management Having a fully managed infrastructure based on an up-to-date and maintained asset register is an essential part of IT governance. Even something as simple as IT asset management is a vital part of IT governance. If you don’t know exactly what hardware you have and exactly what software is running on it, how can you claim any sort of IT governance? Software piracy is one area where organizations seem to be assumed guilty unless they can prove innocence, and the consequences of a visit by the piracy police (disruption, confiscation, fines) can be immense. Yet how effective can a plea that ‘we’re sure all our software is licensed although we don’t know what software we have and where it is running’ be? ITIL® is a good basis for infrastructure management, although it is probably sufficient rather than necessary. As well as asset management, capacity management and service level management, the Service Desk function and defect tracking are typically part of an IT governance framework.
6. Implement configuration management Configuration management involves the identification of the components of an automated system that contribute to the service it delivers and the management of changes to this configuration (including audit trails and facilities for backing out of unsuccessful changes). Software change control (keeping track of changes to software code as requirements change or defects are addressed) is only part of configuration management. Defect and problem tracking and service desk support are closely related to configuration management.
7. Implement business continuity management The availability of IT systems is now critical to the operation of many businesses. This makes Business Continuity Management (BCM) a vital part of IT governance (it’s also required by the ISO 17799 security standard). In fact, it should be built in from the start by designing critical systems to be resilient. BCM is non-trivial to do well and external consultancy may be attractive. It must be firmly based on an objective assessment of risks (itself difficult unless you are an experi-
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enced risk assessor), including risks the organization hasn’t encountered yet, and deal with the spectrum of contingency from minor service interruptions to a full-blown disaster that eliminates a data centre in its entirety. It is important to ensure that IT governance is maintained sensibly (at a managed level) during a contingency, as otherwise a contingency could be engineered as an opportunity to steal data, compromise business transactions or financial reports, or sabotage systems. A ‘whole systems’ approach to business continuity should be adopted. The non-availability of phones or a serious health and safety issue can take out a business service just as effectively as a fire-damaged computer.
8. Implement information lifecycle management Electronic information can be as important and legally significant as paper documents such as contracts formal and (potentially forged) instruments. The courts will probably treat any email as an electronically signed document, according to Stephen Mason, Barrister, speaking at SUNLive05 [SUNLive05, web] in London. The regulations and laws affecting business information (see Chapter 2) say that information must be available to answer auditors’ questions in a timely manner, and its provenance must be capable of proof; but, as well as this, some personal information must be destroyed securely when you no longer need it. This means that you need a policy-based information lifecycle management system (similar in purpose to document management systems in the ‘real world’). This must be able to classify information, store it cost-effectively and securely (possibly with backup copies kept offsite), document its creation, amendment and destruction, and securely audit the critical events in the lifecycle.
9. Implement a systems development/acquisition process If you build software, you must have a lifecycle development process (see Chapter 4) from business requirements analysis through to coding, testing and implementing systems (in fact, testing should start with validation of the requirements). This is best implemented by training and mentoring, using tools to facilitate desired practice. Simply mandating a development process does not work well. If you don’t build software, you need a similar process for implanting packages. You still need to analyze business requirements, in order to choose a package which best fits your business process and in order to assess the impact of the business process embodied in the package on your existing business process.
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And, you still need to test package applications, in case they don’t do what they say they will, or you implement them incorrectly. If you customize a package, this is really a small systems development project and similar QA measures are necessary.
10. Optimize processing If you don’t have a great deal of IT governance, introducing full-blown governance and compliance measures can impact processing overheads – and, therefore, the business (after implementing HIPAA in the States, data volumes often increase by an order of magnitude or more). It is therefore vital to include what Mercury Interactive calls ‘business technology optimization’ [Mercury, web] in your governance program. Put crudely, satisfying the requirements of HIPAA or Sarbanes-Oxley (or local equivalents) can increase, say, database accesses by several orders of magnitude – and, doubtless, many database infrastructures won’t be designed to cope with this. Unless you reassess and, possibly, optimize performance, the immediate result of introducing IT governance may be to impact business performance and, thus, the reputation of IT (and also badly impact your career).
11. Implement problem management Business Continuity is often thought of as disaster recovery, something standalone that you bring in after a disaster, such as the loss of a data centre in a fire. This is obviously an aspect of IT governance, if the business depends on applications running in that data centre, but this is too limited a view (see Business Continuity Management, BCM, above). Business continuity is also a function of IT problem management. The business needs to be isolated from IT problems: at one end, a significant part of the IT infrastructure is lost and we talk of disaster recovery and BCM; at the other end, a bug is encountered that affects the business or a small part of the IT infrastructure (a single phone line perhaps) drops out and we talk about problem or incident management and defect tracking. In the interests of good IT governance, you should probably see this as a continuum: the impact of IT issues on the business should be limited, well controlled and managed. This is usually associated with a service desk function, which should aim for pre-emptive identification and mitigation of emerging issues, ideally before they have any impact on a business service. There are many sophisticated service desk packages: BMC Remedy [Remedy, web], for example, or FrontRange’s HEAT [HEAT, web].
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12. Demonstrate ROI At least one of the objectives behind any IT governance initiative is likely to be to better run IT for the organization’s benefit. So, it is very good practice to instrument IT Governance systems and report business information so that IT governance, and the ROI (Return on Investment) from the governance project, can be demonstrated on a continuing basis. Choose your metrics carefully – people tend to deliver what you measure, so if you choose the wrong measures you may get the wrong results. Early attempts to measure the quality of support staff, for instance, in terms of the number of calls completed in a period resulted in a plethora of quick fixes and recurring problems – because continual short-term fixes to the same problem made the metrics look better. It might have been better to measure problems fixed without recurrences and customer satisfaction rather than calls processed. After all, provided it is accessible and servicing the calls it gets, the fewer calls a service desk has to process, the more successful it is! Look beyond a purely financial ROI. Good IT governance reduces risk, so it increases business confidence and allows you to play in areas your competitors find too risky. It involves efficient provisioning, so new staff get up-to-speed faster, and promotes a supportive IT environment, with fewer surprises, so staff morale generally should improve. A ‘balanced scorecard’ [BalScore, web] approach to measuring the impact of IT governance is probably appropriate. It is always important to remember that IT governance is only a means to an end. ‘Better IT governance’ is not really a useful objective; it is better to have increasing the ‘bang per buck’ spent on IT as an objective (measured in business terms), or widening your customer base in areas where good governance forms part of the acceptance criteria, or even reducing the cost of regulatory compliance and controlling the risk of legal action. Nevertheless, be realistic. If your improved IT governance allows you to win a lucrative contract in the health industry, you can’t accrue the entire profit to your IT governance effort – it may be an enabler, and this is a real non-financial ROI, but the final profit is mostly down to the software or services you supply against the contract. Similarly, if your improved governance makes you more efficient, you can’t claim the manhours saved as a benefit until you actually reduce headcount or redeploy people onto productive work.
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13. Reviews Reviews of IT systems after changes have bedded in, in order to enable a ‘gap analysis’ of the differences between aspiration and reality, followed by the scheduling of maintenance efforts aimed at reducing any gaps, is an important characteristic of good IT governance. Sometimes, as with CMMI initiatives (see Chapter 2), these reviews are part of a formal process but, regardless of how you approach IT governance, there must be some sort of review and feedback process. Change seems to be part of the nature of IT, so a static governance system, however effective, is unlikely to stay effective for long. In the next chapter we summarise the findings of the Report.
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Chapter 6 Conclusions
Chapter 6 Conclusions “Companies with better than average IT governance earn at least a 20 percent higher return on assets than organizations with weaker governance.” JEANNE ROSS AND PETER WEILL IN THE JUN. 15, 2004 ISSUE OF CIO MAGAZINE.
“If it were done when ‘tis done, then ‘twere well it were done quickly.” SHAKESPEARE, MACBETH.
So, what is IT governance? It is an extension of corporate governance generally, which ensures that automated systems contribute effectively to the business goals of an organization, that IT-related risk is adequately identified and managed (mitigated, transferred or accepted), and that automated information systems (including financial reporting and audit systems) provide a ‘true picture’ of the operation of the business. Changes in legislation mean that IT governance is, or will be shortly, a pressing concern in many companies dependent on IT. In Chapter 1, we looked at the context of IT governance in corporate governance. IT governance is important because various accounting and other scandals (Worldcom, Enron, failed government contracts and so on) have led ‘the powers that be’ to suspect that financial systems are creeping out of control. They are realizing that most financial controls are based on IT and that this apparent loss of control could impact commercial confidence generally. Stephen Haddrill, Director General, Fair Markets, summed the situation up well in his Foreword to Proposal by the European Commission for a Directive on Statutory Audit of Annual and Consolidated Accounts, September 2004 (The Department of Trade and Industry (DTI) consultation period on this ended 30 November 2004 [8thDir, web]): “We believe the market is the best regulator of corporate activity. For the market to operate efficiently, however, we need a robust legal framework that ensures that investors have full and accurate information on which to base their decisions.
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6 CONCLUSIONS
Following the collapse of WorldCom and Enron in the US, and miscellaneous corporate scandals elsewhere, the Department of Trade and Industry (DTI) reviewed all aspects of financial and audit reporting. We concluded that our approach was fundamentally sound, but that the system could be strengthened in a number of ways. In particular, we expanded the role of the Financial Reporting Council to provide independent oversight of the audit profession. The European Commission has looked at these issues in parallel. One result of their work is a proposal for a new 8th Company Law Directive on statutory auditing – which updates the original 1984 Directive, and follows many of the UK’s initiatives.” This activity means that stakeholders in IT governance, even if they are indirect stakeholders, are starting to ask questions that concern IT governance. An investor in a company wants to be sure that the financial reports s/he relies on haven’t been tampered with so as to misrepresent the true position of the company – and also wants to be confident that they won’t contain errors that are the result of program bugs or logic errors. In Chapter 2, we reviewed the external pressures for IT governance, from the legal and regulatory systems in which companies using IT must operate. The legal systems in most countries are increasingly making company directors responsible for corporate governance – and therefore IT governance. In Chapter 3, we analysed the organizational impact of corporate governance and the building of a more mature, measurement-focused organization. The Capability Maturity Model Integration (CMMI) from the Software Engineering Institute at Carnegie Mellon University was described, which can be taken as a framework for talking about Capability and Maturity, even if you don’t assess formally. In Chapter 4, we looked at the impact on the IT group specifically and at initiatives like DSDM (the Dynamic Systems Development Method) and ITIL® (the IT Infrastructure Library). In Chapter 5, we overviewed the implementation of IT governance. Key to this is, as always, getting buy-in at all levels and removing barriers to implementation with training. Our overall conclusion must be that good IT governance, in a form that can be demonstrated to the stakeholders in an organization and interested third parties, if appropriate, is now an explicit requirement for any IT group. A piecemeal approach is likely to be expensive, as it will have to be repeated every time
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6 CONCLUSIONS
something changes – the legal framework around corporate governance these days makes cosmetic compliance a high-risk strategy. So, the fundamental requisite for good IT governance is a ‘mature and capable’ organization – one that says what it is going to do, does it, measures the consequences – and applies feedback in order to bring reality closer to the original aspiration. Such an organization will find a process-based approach to be more effective and, in the long term, cheaper to maintain. It will adopt standards-based frameworks such as ITIL® for infrastructure management and DSDM for systems development, both to avoid reinventing the wheel and also to ensure that inappropriate assumptions don’t result in aspects of governance being overlooked. Then, once it knows what it wants to do, it will use tools to automate its processes as far as is appropriate. ‘Computer-aided people’ are more cost-effective and efficient than people alone, more flexible than automation alone, and governance rules embodied in software or as parameters applied to software are easier (and cheaper) to audit and enforce.
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Appendix
Resources [8thDirCons, web] – http://www.dti.gov.uk/consultations/files/publication1371.pdf. [ADA2005-3, web] – ‘Manage the Process’, Andrew Griffiths, ADA Mar/Apr 2005, http://www.appdevadvisor.co.uk/prod_rev/index.html or archived at (registration required) http://www.appdevadvisor.co.uk/archive/index.php. [ADA2004-1, web] – ‘Would Sir like his database managed?’, Ian Murphy, ADA Jan/Feb 2004, archived at (registration required): http://www.appdevadvisor.co.uk/archive/index.php. [ALM, web] – the Borland solution for Application Lifecycle Management (ALM), http://www.borland.com/alm/. [ASB, web] – Bulletin 2004/3 (December 2004), ‘The Combined Code on corporate governance: Requirements of auditors under the Listing Rules of the Financial Services Authority’, http://www.asb.org.uk/apb/publications/pub0648.html. [Atrium, Web] – http://www.bmc.com/products/products_services_detail/ 0,,0_0_0_1806,00.html. [AuditMaster, web] – Pervasive’s AuditMaster tool, http://www.pervasive.com/ auditmaster/index.asp. [BalScore, web] – The Balanced Scorecard Institute, http://www.balancedscorecard.org/. [Beck, 1999] – Kent Beck, ‘Extreme Programming Explained: Embracing Change’, 1999, Addison Wesley, ISBN: 0201616416 [BIS, web] – Bank for International Settlements, Enhancing corporate governance for banking organizations (September 1999) http://www.bis.org/publ/ bcbsc138.pdf. [BoardBrief, web] – Board Briefing on IT Governance, 2nd Edition – IT Governance Institute, 3701 Algonquin Road, Suite 1010, Rolling Meadows, IL
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60008 USA, Phone: +1.847.590.7491, Fax: +1.847.253.1443, E-mail:
[email protected], Web sites: www.itgi.org and www.isaca.org. [BSA, web] – The Business Software Alliance, http://www.bsa.org/ [BSM, Web] – http://www.bmc.com/BMC/BSM/CDA/hou_bsm_page/ 0,3752,11459313_11468130,00.html [CC, web] – The Combined Code on corporate governance, July 2003 http://www.fsa.gov.uk/pubs/ukla/lr_comcode2003.pdf [Changepoint, web] – Compuware Changepoint, http://www.compuware.com/it-governance/default.htm [CMMI, web] – Capability Maturity Model Integration, http://www.sei.cmu.edu/ cmmi. This model is based on assessment against 5 maturity levels: 5 – Continuous process improvement through proactive process measurement; 4 – Quantitative process metrics, at the organizational level, used to manage and improve the process; 3 – Managed process at an organizational level; 2 – Managed process, at a project level; 1 – Adhoc application of process. [CompaniesAudit, web] – Companies (Audit, Investigations and Community Enterprise) Act 2004, http://www.legislation.hmso.gov.uk/acts/acts2004/20040027.htm [Constantine, 1995] – Larry Constantine, ‘Constantine on Peopleware’, Yourdon Press, 1995, ISBN 0-13-331976-8 [CoprightAct, web] – UK Copyright, Designs and Patents Act http://www.hmso.gov.uk/acts/acts1988/Ukpga_19880048_en_1.htm. [Disability, web] – Disability Discrimination Act 1995 http://www.disability.gov.uk/ dda/; also Special Educational Needs and Disability Act 2001, http://www.hmso.gov.uk/acts/acts2001/20010010.htm. [Doors, web] – Telelogic Doors-Synergy integration, http://www.telelogic.com/ products/integrations/doors_synergy.cfm?campaigncode=000418-001647. [DPA, web] – Data Protection Act 1998, http://www.hmso.gov.uk/acts/ acts1998/19980029.htm. [DSDM, web] – Dynamic Systems Development Method, http://www.dsdm.org/.
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[ESB, 2004] – David A Chappell, ‘Enterprise Service Bus’, 2004, O’Reilly, ISBN 0-596-00675-6. [FAST, web] – the Federation Against Software Theft, http://www.fast.org.uk/ [Faegre, web] – Michael Fleming, ‘Sarbanes-Oxley and IT: Beware of Magic Bullet Solutions’, http://www.faegre.com/articles/article_1076.aspx. [FI, web] – Freedom of Information Act 2000, http://www.hmso.gov.uk/acts/ acts2000/20000036.htm. [Formula, web] – The Formula BSM Platform, http://www.managedobjects.com/ products/formula.jsp. [HAS, web] – The Health and Safety Homepages, http://www.healthandsafety.co.uk/haswa.htm; also Statutory Instrument 1999 No. 3242 The Management of Health and Safety at Work Regulations 1999, http://www.hmso.gov.uk/ si/si1999/19993242.htm. [HEAT, web] – The HEAT service management product suite from FrontRange Solutions http://www.frontrange.com/ProductsSolutions/Category.aspx?id= 22&ccid=41. [HIPAA, web] – Health Insurance Portability and Accountability Act, http://www.hipaa.org/. [IOD, 2004] – Institute of Directors and SAS, ‘corporate governance’, 2004, Director Publications, ISBN 1 9045 2025 3. [ITIL®, web] – IT Infrastructure Library, http://www.ogc.gov.uk/index.asp?id=2261 [ITIL® FAQ, Web] – http://www.ogc.gov.uk/index.asp?id=1000368 [ITPP, 2004] – ‘IT Policies and Procedures’, Section 9, Legislative Compliance, Thomson/GEE (http://supp.gee.co.uk/gee/it/). [itSMF, Web] – IT Service Management Forum, http://www.itsmf.com/ [Kaplan and Norton, 1992] – Robert Kaplan and David Norton, ‘The Balanced Scorecard – Measures that Drive Performance’, Harvard Business Review, 1992 [Kaplan and Norton, 1996] – Robert Kaplan and David Norton, ‘The Balanced Scorecard: Translating Strategy into Action’, Harvard Business School Press, 1996, ISBN 0-87584-651-3
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[ManObj, web] – Managed Objects, http://www.managedobjects.com. [Mercury, web] – Mercury Business Technology Optimisation (BTO) solutions, http://www.mercury.com/uk/solutions/ [Netegrity, 2005] – Netegrity IT Security/Compliance Survey, 2005, unfortunately not available on the Netegrity website (http://www.netegrity.com). [OECD, web] – The review process for the OECD Principles of corporate governance http://www.oecd.org/document/26/0,2340,en_2649_201185_ 23898906_1_1_1_1,00.html. [OpenView, Web] – http://www.managementsoftware.hp.com/solutions/bsm/. [PCSupportAdv, web] – David Norfolk, Understanding DSDM, http://www.pcsupportadvisor.com/nasample/D1121.pdf. [PlanISM, 2002] – ‘Planning to Implement Service Management’, 2002, ISBN 0113308779 (CD ISBN: 0113309058). [ProcDir, web] – Select Business Solutions’ Process Director http://www.selectbs.com/products/select_process_director_plus.htm. [QoSM, web] – Fujitsu’s Quality of Service (QoS) solution, http://www.qosm.co.uk/. [Reiss. 1995] – Geoff Reiss, ‘Project Management Demystified’, 2nd ed, 1995, E and FN Spon, ISBN 0 419 20750 3. [Reiss. 1996] – Geoff Reiss, ‘Programme Management Demystified’, 1st ed., 1996, E and FN Spon, ISBN 0 419 21350 3. [Remedy, web] – BMC Software Remedy Service Management, http://www.remedy.com/ and http://www.bmc.com/products/proddocview/ 0,2832,19052_19429_10101852_9987,00.html [RIPA, web] – Regulation of Investigatory Powers Act (RIPA), http://www.hmso.gov.uk/acts/acts2000/20000023.htm. [SEC-SOX, web] – SEC compliance dates for Section 404 of Sarbanes-Oxley (http://www.sec.gov/rules/final/33-8238.htm) [SOX, web] – Sarbanes-Oxley Act, http://www.sarbanes-oxley.com/
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[StandDir, web] – Standards Direct is a source for copies of the ISO 17799 security standard, and a useful source of other BSI standards, http://www.standardsdirect.org/iso17799.htm. The ISO 17799 Service & Software Directory, http://www.iso17799software.com/, is also a useful resource. [Standish, web] – http://www.standishgroup.com/sample_research/ chaos_1994_1.php. [STR-DPA, web] – the UK’s anti-money laundering legislation and the Data Protection Act 1998, guidance notes for the financial sector April 2002, http://www.hm-treasury.gov.uk/mediastore/ otherfiles/money_laundering.pdf [SUNLive05, web] – SUNLive05 conference, March 22nd 2005, http://www.sunlive05.com/mk/get/HOME [TeraQuest, web] – Borland/TeraQuest, http://www.teraquest.com/ [Thoughtworks, web] – ‘Why we favour Agile Methods’, http://www.thoughtworks.com/us/approach/index.html [Turley, web] – ‘Get Ready for the EU’s 8th Directive’, James S Turley, Chairman and CEO, Ernst and Young, Directorship, June 2004 – http://www2.eycom.ch/library/ items/directorship_200406/en.pdf [Turnbull, web] – Internal Control, Guidance for directors on the Combined Code (The Turnbull Report) from The Institute of Chartered Accountants in England & Wales, http://www.icaew.co.uk/cbp/index.cfm?aub=tb2I_6242. [WCAG, web] – W3C Web Content Accessibility Guidelines, http://www.w3.org/TR/ WAI-WEBCONTENT/ [WEEE, web] – WEEE Recycling Directive, http://www.dti.gov.uk/sustainability/weee/
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Other specially commissioned reports BUSINESS AND COMMERCIAL LAW
The commercial exploitation of intellectual property rights by licensing
The Competition Act 1998: practical advice and guidance
CHARLES DESFORGES
SUSAN SINGLETON
£125.00
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1 85418 285 4 • 2001
1 85418 205 6 • 2001
Expert advice and techniques for the identification and successful exploitation of key opportunities.
Failure to operate within UK and EU competition rules can lead to heavy fines of up to 10 per cent of a business’s total UK turnover.
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Insights into successfully managing the in-house legal function BARRY O’MEARA
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Damages and other remedies for breach of commercial contracts ROBERT RIBEIRO
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Negotiating the fault line between private practice and in-house employment can be tricky, as the scope for conflicts of interest is greatly increased. Insights into successfully managing the In-house legal function discusses and suggests ways of dealing with these and other issues.
1 85418 226 X • 2002 This valuable new report sets out a systematic approach for assessing the remedies available for various types of breach of contract, what the remedies mean in terms of compensation and how the compensation is calculated.
Commercial contracts – drafting techniques and precedents ROBERT RIBEIRO
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The legal protection of databases SIMON CHALTON
Email – legal issues £145.00
SUSAN SINGLETON
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1 85418 215 3 • 2001
Inventions can be patented, knowledge can be protected, but what of information itself?
What are the chances of either you or your employees breaking the law?
This valuable report examines the current EU [and so EEA] law on the legal protection of databases, including the sui generis right established when the European Union adopted its Directive 96/9/EC in 1996.
The report explains clearly:
Litigation costs MICHAEL BACON
•
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TUC guidelines
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Example of an e-mail and Internet policy document.
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1 85418 241 2 • 2001 The rules and regulations are complex – but can be turned to advantage. The astute practitioner will understand the importance and relevance of costs to the litigation process and will wish to learn how to turn the large number of rules to maximum advantage.
International commercial agreements REBECCA ATTREE
£175
1 85418 286 2 • 2002 A major new report on recent changes to the law and their commercial implications and possibilities. The report explains the principles and techniques of successful international negotiation and provides a valuable insight into the commercial points to be considered as a result of the laws relating to: pre-contract, private international law, resolving disputes (including alternative methods, such as mediation), competition law, drafting common clauses and contracting electronically. It also examines in more detail certain specific international commercial agreements, namely agency and distribution and licensing. For full details of any title, and to view sample extracts please visit: www.thorogood.ws You can place an order in four ways: 1 Email:
[email protected] 2 Telephone: +44 (0)20 7749 4748 3 Fax: +44 (0)20 7729 6110 4 Post: Thorogood, 10-12 Rivington Street, London EC2A 3DU, UK
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HR AND EMPLOYMENT LAW
Employee sickness and fitness for work – successfully dealing with the legal system GILLIAN HOWARD
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1 85418 281 1 • 2002 Many executives see Employment Law as an obstacle course or, even worse, an opponent – but it can contribute positively to keeping employees fit and productive. This specially commissioned report will show you how to get the best out of your employees, from recruitment to retirement, while protecting yourself and your firm to the full.
How to turn your HR strategy into reality TONY GRUNDY
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1 85418 183 1 • 1999 A practical guide to developing and implementing an effective HR strategy.
Internal communications JAMES FARRANT
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1 85418 149 1 • July 2003 How to improve your organisation’s internal communications – and performance as a result.
Data protection law for employers SUSAN SINGLETON
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There is growing evidence that the organisations that ‘get it right’ reap dividends in corporate energy and enhanced performance.
1 85418 283 8 • May 2003 The new four-part Code of Practice under the Data Protection Act 1998 on employment and data protection makes places a further burden of responsibility on employers and their advisers. The Data protection Act also applies to manual data, not just computer data, and a new tough enforcement policy was announced in October 2002.
MARK THOMAS
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1 85418 270 6 • 2001 Practical advice on how to attract and keep the best.
Successfully defending employment tribunal cases
1 85418 008 8 • 1997
This report will help you to understand the key practical and legal issues, achieve consensus and involvement at all levels, understand and implement TUPE regulations and identify the documentation that needs to be drafted or reviewed.
New ways of working STEPHEN JUPP
DENNIS HUNT
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Why do so many mergers and acquisitions end in tears and reduced shareholder value?
Successful graduate recruitment JEAN BRADING
Mergers and acquisitions – confronting the organisation and people issues
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£95 1 85418 169 6 • 2000
1 85418 267 6 • 2003 Fully up to date with all the Employment Act 2002 changes. 165,000 claims were made last year and the numbers are rising. What will you do when one comes your way?
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New ways of working examines the nature of the work done in an organisation and seeks to optimise the working practices and the whole context in which the work takes place.
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Knowledge management SUE BRELADE, CHRISTOPHER HARMAN
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1 85418 230 7 • 2001 Managing knowledge in companies is nothing new. However, the development of a separate discipline called ‘knowledge management’ is new – the introduction of recognised techniques and approaches for effectively managing the knowledge resources of an organisation. This report will provide you with these techniques.
Reviewing and changing contracts of employment ANNELISE PHILLIPS, TOM PLAYER and PAULA ROME
This specially commissioned new report examines each of the key developments where the Act changes existing provisions or introduces new rights. Each chapter deals with a discreet area.
Email – legal issues £125
SUSAN SINGLETON
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1 85418 215 3 • 2001
1 85418 296 X • 2003 The Employment Act 2002 has raised the stakes. Imperfect understanding of the law and poor drafting will now be very costly.
360,000 email messages are sent in the UK every second (The Guardian). What are the chances of either you or your employees breaking the law? The report explains clearly:
This new report will: •
Ensure that you have a total grip on what should be in a contract and what should not
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Applying the Employment Act 2002 – crucial developments for employers and employees AUDREY WILLIAMS
•
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How to establish a sensible policy and whether or not you are entitled to insist on it as binding
•
The degree to which you may lawfully monitor your employees’ e-mail and Internet use
•
The implications of the Regulation of Investigatory Powers Act 2000 and the Electronic Communications Act 2000
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TUC guidelines
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Example of an e-mail and Internet policy document.
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1 85418 253 6 • May 2003 The Act represents a major shift in the commercial environment, with far-reaching changes for employers and employees. The majority of the new rights under the family friendly section take effect from April 2003 with most of the other provisions later in the year. The consequences of getting it wrong, for both employer and employee, will be considerable – financial and otherwise. The Act affects nearly every aspect of the work place, including: •
flexible working
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family rights (adoption, paternity and improved maternity leave)
For full details of any title, and to view sample extracts please visit: www.thorogood.ws You can place an order in four ways: 1 Email:
[email protected] 2 Telephone: +44 (0)20 7749 4748 3 Fax: +44 (0)20 7729 6110 4 Post: Thorogood, 10-12 Rivington Street, London EC2A 3DU, UK
S e e f u l l d e t a i l s o f a l l T h o r o g o o d t i t l e s o n w w w. t h o r o g o o d . w s
SALES, MARKETING AND PR
Implementing an integrated marketing communications strategy
Tendering and negotiating for MoD contracts
NORMAN HART
TIM BOYCE
£99.00
£125.00
1 85418 120 3 • 1999
1 85418 276 5 • 2002
Just what is meant by marketing communications, or ‘marcom’? How does it fit in with other corporate functions, and in particular how does it relate to business and marketing objectives?
This specially commissioned report aims to draw out the main principles, processes and procedures involved in tendering and negotiating MoD contracts.
Defending your reputation Strategic customer planning ALAN MELKMAN AND PROFESSOR KEN SIMMONDS
SIMON TAYLOR £95.00
1 85418 255 2 • 2001 This is very much a ‘how to’ Report. After reading those parts that are relevant to your business, you will be able to compile a plan that will work within your particular organisation for you, a powerful customer plan that you can implement immediately. Charts, checklists and diagrams throughout.
1 85418 251 • 2001 ‘Buildings can be rebuilt, IT systems replaced. People can be recruited, but a reputation lost can never be regained…’ ‘The media will publish a story – you may as well ensure it is your story’ Simon Taylor ‘News is whatever someone, somewhere, does not want published’ William Randoplh Hearst When a major crisis does suddenly break, how ready will you be to defend your reputation?
Selling skills for professionals KIM TASSO
£65.00
1 85418 179 3 • 2000 Many professionals still feel awkward about really selling their professional services. They are not usually trained in selling. This is a much-needed report which addresses the unique concerns of professionals who wish to sell their services successfully and to feel comfortable doing so. ‘Comprehensive, well written and very readable… this is a super book, go and buy it as it is well worth the money’ Professional Marketing International
Insights into understanding the financial media – an insider’s view SIMON SCOTT
This practical briefing will help you understand the way the financial print and broadcast media works in the UK.
European lobbying guide £129.00
1 85418 144 0 • 2000
Corporate community investment £75.00
Understand how the EU works and how to get your message across effectively to the right people.
1 85418 192 0 • 1999 Supporting good causes is big business – and good business. Corporate community investment (CCI) is the general term for companies’ support of good causes, and is a very fast growing area of PR and marketing.
t +44 (0)20 7749 4748
£99.00
1 85418 083 5 • 1998
BRYAN CASSIDY
CHRIS GENASI
£95.00
e
[email protected]
w w w w. t h o r o g o o d . w s
Lobbying and the media: working with politicians and journalists
Managing corporate reputation – the new currency
MICHAEL BURRELL
SUSAN CROFT and JOHN DALTON
£95.00
1 85418 240 4 • 2001
1 85418 272 2 • June 2003
Lobbying is an art form rather than a science, so there is inevitably an element of judgement in what line to take. This expert report explains the knowledge and techniques required.
ENRON, WORLDCOM… who next?
Strategic planning in public relations KIERAN KNIGHTS
£69.00
At a time when trust in corporations has plumbed new depths, knowing how to manage corporate reputation professionally and effectively has never been more crucial.
Surviving a corporate crisis – 100 things you need to know
1 85418 225 0 • 2001
PAUL BATCHELOR
Tips and techniques to aid you in a new approach to campaign planning.
1 85418 208 0 • April 2003
Strategic planning is a fresh approach to PR. An approach that is fact-based and scientific, clearly presenting the arguments for a campaign proposal backed with evidence.
£125
£125
Seven out of ten organisations that experience a corporate crisis go out of business within 18 months. This very timely report not only covers remedial action after the event but offers expert advice on preparing every department and every key player of the organisation so that, should a crisis occur, damage of every kind is limited as far as possible.
FINANCE
Tax aspects of buying and selling companies MARTYN INGLES
Practical techniques for effective project investment appraisal £99.00
RALPH TIFFIN
£99.00
1 85418 189 0 • 2001
1 85418 099 1 • 1999
This report takes you through the buying and selling process from the tax angle. It uses straightforward case studies to highlight the issues and more important strategies that are likely to have a significant impact on the taxation position.
How to ensure you have a reliable system in place. Spending money on projects automatically necessitates an effective appraisal system – a way of deciding whether the correct decisions on investment have been made.
Tax planning opportunities for family businesses in the new regime CHRISTOPHER JONES
£49.00
1 85418 154 8 • 2000 Following recent legislative and case law changes, the whole area of tax planning for family businesses requires very careful and thorough attention in order to avoid the many pitfalls.
S e e f u l l d e t a i l s o f a l l T h o r o g o o d t i t l e s o n w w w. t h o r o g o o d . w s
MANAGEMENT AND PERSONAL DEVELOPMENT
Strategy implementation through project management TONY GRUNDY
£95.00
1 85418 250 1 • 2001 The gap Far too few managers know how to apply project management techniques to their strategic planning. The result is often strategy that is poorly thought out and executed. The answer Strategic project management is a new and powerful process designed to manage complex projects by combining traditional business analysis with project management techniques.
For full details of any title, and to view sample extracts please visit: www.thorogood.ws You can place an order in four ways: 1 Email:
[email protected] 2 Telephone: +44 (0)20 7749 4748 3 Fax: +44 (0)20 7729 6110 4 Post: Thorogood, 10-12 Rivington Street, London EC2A 3DU, UK
t +44 (0)20 7749 4748
e
[email protected]
w w w w. t h o r o g o o d . w s
