Developing an effective IT governance framework

The ninth and final blog in this series of blogs on the sourcing lifecycle discusses the important elements to consider in order to develop an effective IT governance framework. The blog also lists down the 10 steps to good contract governance.

Governance is one of the main reasons why IT managed service or outsource contracts succeed or fail. Good contract governance is about the delivery of business benefits, well managed services, and a strong customer-supplier relationship. Poor contract governance, on the other hand, often results in poor service delivery to the customer and an unprofitable contract to the supplier.

The IT governance framework highlights the ‘who’ and ‘how’ elements of the operating model. It defines the principles, rules and processes that enable effective decision-making. It provides the framework to address how decisions are made, who has the authority to make decisions and how decisions are communicated. The IT governance framework must be fit-for-purpose and flexible such that it can readily adapt to the customer’s changing business requirements.

The IT governance framework should be multi-tiered, ideally across three levels: executive, commercial and operational. This not only ensures effective decision-making but also provides a clear escalation path for dispute resolution. The IT governance framework also needs to define the performance measures and reporting requirements – standardising management information across all the different parties in your operating model will enable you to effectively evaluate the success of your operating model.

As a general rule, good governance maximises the potential for successful contract implementation whereas poor governance is often the reason why contracts fail to meet expectations. At Wavestone we believe there are 10 steps to good contract governance:

1. Define and implement a clear and unambiguous governance structure
2. Track and report on contractual obligations
3. Actively monitor and review service delivery performance
4. Consider the IT ecosystem interdependencies
5. Proactively manage operational changes
6. Implement effective commercial governance
7. Create and manage a contract risk register
8. Create, populate and act upon a supplier scorecard
9. Implement a clear communications strategy
10. Perform regular contract assessments

You can read in further detail about these 10 steps to good contract governance in our insight.