The Accenture IT Governance Model - Essay Example

? Alcan Case Study of the of the Alcan Case Study Introduction Issues of governance in the corporate sector are not uncommon- in fact there can be any number of difficulties or complexities, especially in the case of a global enterprise like Alcan that has grown and expanded by virtue of acquisitions, mergers and buyouts. Common problems that emerge when administrative difficulties get out of hand relate to cohesion and reporting structure, adherence to country specific laws and reporting regulations, issues of centralization and decentralization, and the need to be updated on operating and management issues that are important without delay and that could lead to permanent and long lasting effects on company reputation and productivity. In this era of computerization, IT is playing a key role in the management and reporting of exceptions so that pertinent issues could be highlighted and addressed before assuming alarming proportions. In the present case, Robert Ouelette the new CIO has three main concerns: (1) how to co-ordinate the IT functions across different countries and continents; (2) converting the IT governance function into a centralized one; and (3) monitoring the cost of IT, controlling wasteful expenditure and overseeing the usefulness of output produced by the IT function in the enterprise. The Accenture IT Governance Model Weill and Ross in their book ‘IT Governance’ define the term as “specifying the decision rights and accountability framework to encourage desirable behavior in the use of IT.” (Weill & Ross, 2004, 7 ). Some IT professionals and laymen at large seem to confuse the IT governance model with the way that IT is implemented and managed in an organization. We need to establish at the outset that IT governance does not give us the means to manage the IT department- rather it is the model through which the business manages its use of IT. Accenture has developed an IT governance model framework in which they classify industries based on (1) the pace of technology changes that they face and (2) their basis for competitive advantage, this being either product differentiation or cost. Accordingly they have identified four business classifications: (A) Efficient Predictable Operators (B) Information Integrators (3) Responsive Solution Providers and (4) New Capability Enablers. Which Quadrant Does Alcan Fall In & Why In the above stated framework, Accenture define an efficient predictable operator as one whose industry experiences a slow rate of change and competes on the basis of its operational efficiency. This is a common picture of the aluminum and allied industry where there is vertical integration among the top firms in order to take advantage of lower production costs based on volumes produced of various outputs, and very high production capacities are used to break-even point. Secondly, with the high costs of running electrolytic processes, there is a dire need for constant and reliable sources of cheaply available power. Alcan has managed to set up factories, refineries and mines at various places along the globe so that the cost of production is minimized or can be controlled to some extent, while supply of various outputs such as cans, sheets, ingots etc. is maintained. Now that the industry has overcome the lean period of the worldwide recession of the 1990s and the Russian oversupply shock that sent the price careening in a downward spiral, the price of aluminum per ounce has been increasing steadily and stands at $2,520 per tonne in 2007. I would put Alcan in the quadrant reserved for an Efficient Predictable Operator. Weill & Ross Model of IT Governance Weill and Ross have identified three questions that must be answered in order to achieve effective IT governance (Weill & Ross, 2004, 10). These are as follows: (1) What are the decisions that need to be made in order to ensure effective management and use of IT? (2) Who will need to make these decisions? (3) How will these decisions be made and monitored? In the course of their research and experience, Weill and Ross have often found that the third question has been given little thought by firms, or what is even worse, ignored altogether. This is highly regrettable when it is evident that a clear and transparent process is critical to IT governance success. The said processes must be agreed upon by top management as well as departmental heads, the outputs decided must be accepted as adding value to the productivity and decision making ability of the organization, while at the same time recognizing and controlling wasteful and duplicated processes and expenditures. The understanding and acceptance must go down the line and overseen by IT managers and other participants in the process such as executives and supervisors. There must also be a process whereby the business team managers or their designated underlings meet and interact with IT or a regular basis, or as and when an emergency situation arises, requiring exception reporting or monitoring of results or output. The major errors committed by global firms having diversified operations and IT needs are to either (a) outsource the IT handling function to an outsider who may or may not have an understanding of the industry and its business needs and processes or (b) rely upon outdated processes and technology in an effort to control costs, while trying to develop programs and applications that the system does not support or (c) give up and accept the inevitable fact that every business acquired is used to its own method of reporting and let it be that way, since it apparently matches the legal and financial regulations of the country in question. An added complexity for global firms having operations in different countries stems from the diverse corporate cultures and language barriers that are a part of this puzzle- if anything, they add to the problems of communicating and understanding IT and other needs, rather than solving them. Governance Styles in Use at Alcan in the Five Decision Areas We also see that the Alcan case is a good example of different governance styles being used in the same global enterprise- albeit in different areas of the business. A look at the corporate structure or organizational chart of the business shows that the five different decision areas or departments are 1) Financial Applications 2) Architecture 3) Information Systems Solutions 4) Infrastructure Planning and 5) Infrastructure Shared Services. While 900 people worked in the IT function across the enterprise, it is startling to see that 80 percent of the IT work was outsourced, with a major part of the annual $295 million expenditure spent on servicing payments for outsourcing and consulting, equipment and software development. A major part of this expenditure is a colossal waste and would have to be curtailed. Another point to note is that somewhere along its line of growth, the firm was so overburdened that it decided to let each unit adopt its own methods to deal with IT needs and services. The consequence is disparity, confusion and waste. The financial and corporate applications area is a stark example of this. There has been no effort to coordinate these 14 resources along any common ground, with the result that there are a number of suppliers for product delivery and application management, no single architecture base, and the absence of a consolidated view for needs and requests. The disparate picture produced by this disarray is giving a false picture that they have rarified and specialized needs, with need for outside expertise. The three resources in the Architecture group are well versed with web technologies and applications- however they are not being properly harnessed for these skills as reporting responsibilities are shared between Infrastructure Planning and Shared Services. The 60 resources in the Information Systems Solutions Group are mainly concerned with meeting the needs of the Pechiney plant and the SAP Implementation Project- however they are divided across five different cities. The Infrastructure Planning Group had 16 resources across different cities entrusted with planning needed improvements to the technological and technical processes. With the same skills being duplicated by the Architecture and Shared Infrastructure Groups, this is a wasteful expenditure and needs to be eliminated altogether. The Shared Infrastructure Group having 40 resources across 6 cities took care of the simple infrastructure support needed for email, data processing and global networking. The size of this group could also be reduced in the light of its simple functions. To sum up, Robert Ouelette is faced with the task of not only coordinating the different IT functions into an organized whole, but also to eliminate duplication and waste and reduce IT expenditure to manageable levels. Advantages & Disadvantages While it would appear advantageous to have a variety of personnel in the different functional areas spread across the length and breadth of the enterprise, this has resulted in wasted costs and resource underutilization for Alcan. Robert would have to make a concerted effort to get everything under control. He has already taken the first step in letting five people go from the Shared Services Group, as the work was being duplicated here without any benefit to the business enterprise. The disadvantages are that it is unnecessarily burdening the business in terms of cost where at the same time there is underutilization or improper utilization of financial and people resources. Changes I Would Make to Governance Styles as CIO 1. I would first of all make a list of all projects currently being utilized or developed, applications being used and infrastructure and equipment contracts, including consultancies. I would need to get this from all departments in all countries. 2. Once this is on the table, I would then look at the architectural requirements needed to support such an infrastructure. I would see if the current SAP program and modules can be further utilized, what are its limits and redundancies, what programs can be developed in-house or contracted outward that would being the reporting systems to a common ground and infrastructure. I would also see if this could be translated in other languages as may be needed to be used in other countries. 3. The entire concept of specialized requirements for the Financial Services Group needs to be overturned. There is no reason why a common ground cannot be reached on infrastructure and architectural requirements, even for the diverse needs of the Group. There is too much wasteful expenditure and a proper plan for in-house or outsourced development from a reputed firm such as Accenture, IBM or Microsoft or even SAP itself may be worked out for the benefit of the entire organization. 4. The in-house expertise of the web developers in the Architecture Group can be utilized for specific internal requirements of the business. The reporting split needs to be removed and they need to be reporting to the Shared Infrastructure Services Group only. They can also be used to develop specific applications. 5. There is no use carrying on with the Infrastructure Planning Group since its skills and expertise are already duplicated within the enterprise. It needs to be abolished and this function can be carried out by the CIO himself. Other IT Projects or Initiatives I Would Recommend To Help Support Changes in Governance I would recommend that most of the core processes and requirements of IT such as purchases, equipments, outsourcing and consultancy be centralized. The IT culture needs to be changed and even the programs and outputs in other languages used in different countries would need to be standardized so that final reports flow in English and French to the corporate headquarters in Montreal. Each country or region should have a budgeted allocation for equipment purchases, outsourcing and consultancy. All exceptions would need to be justified and approved by the CIO and CEO. The major decisions about infrastructure, planning and development will remain under the control of the CIO. Critique of Ouelette’s Plans in the Light of Accenture Recommendations In fact the CIOs plans are strictly in line with Accenture’s recommendations for an Efficient Predictable Operator. Accenture recommends a centralized IT governance model for such an enterprise, where the CIO takes decisions regarding planning and infrastructure. Under this system, all decisions for architecture, vendor and technology decisions should be centralized and the processes and responsibilities known throughout the organization. Exceptions must be reported to the CIO and higher management. Conclusion The Alcan case study is a good reminder that IT administrative decisions can soon get out of hand if not followed and monitored closely. The responsibility of IT governance should be clearly identifiable and such policies should be enacted that show the responsibility and accountability for corporate goals. Works Cited Weill, Peter & Ross, Jeanne. IT Governance: How Top Performers Manage IT Decisions for Superior Results, 1st Ed. Harvard Business Press 2004. Read More