Business report on IT Governance and Change Management
Investments in IT require right governance, appropriate management processes, and a strong commitment from the entire management hierarchy to achieve optimum results (ITGI, 2008, p. 8). The Val IT Framework 2.0 and COBIT 4.1 framework help in the enterprise governance of IT as part of the overall enterprise governance. Enterprise governance of IT is defined as set of responsibilities, leadership, organisational structures and processes implemented by the board of directors and executive management to leverage the power of IT for creating enterprise value (ITGI, 2008, p. 24). There is a strong relationship between implementation of COBIT and Val IT processes in organisations and the achievement of IT goals. Further, there is a significant relationship between achievement of IT goals and business goals (ISACA, 2009, p. 28). However, introducing shared services in a government setup is particularly difficult because the stakeholder relationships are more complicated, the process is subject to more public scrutiny, and there is higher risk aversion (PWC, 2010). This report discusses the case of the Queensland Government which failed to implement its ambitious Shared Services Initiative (SSI) for designing and implementing a financial transaction and payroll solution for the entire government. The SSI started in 2003, and was largely abandoned in 2009. The only remnant of the project, the Queensland Health (QH) payroll system, was pursued because the existing system needed to be replaced urgently (Chesterman, 2013, p. 10). However, the government was unable to roll out a functional new payroll system for the QH on time, or within budget. The intentions were good because the government wanted to provide a payroll and rostering system for its employees and QH (Moore, 2013). The dismal failure and remarkable ballooning of the budget of the project led to a government inquiry to examine the causes of the fiasco (Chesterman, 2013, p. 86). This report traces the history of the failure to understand the reasons and aims to provide some solutions that may help avoid governance problems in other major IT projects and operations. For this purpose, the report also discusses the Val IT and the COBIT frameworks and their applicability to such public projects. A new IT governance implementation plan for the Queensland Government is presented.
The SSI started in July 2003, and CorpTech, a technology centre in the Queensland Treasury, was assigned the responsibility for design and implementation of the initiative. The capital budget for the whole-government project was $125M. In 2006, there was a sense of urgency for replacing the existing QH payroll system called the LATTICE. This was because the supplier had declared that it would not be able to service the system after 30 June 2008. However, implementation of the SSI and the new payroll system remained behind schedule, and reviews by private consultants in April and May 2007 recommended a new organisation structure. A Prime Contractor Model was mooted where a single external contractor was to be given the responsibility for designing and implementing the SSI initiative instead of CorpTech. Engagement of consultants by CorpTech for the review did not follow any formal process. Even the process for selection of the Prime contractor was improper. IBM was ultimately awarded the contract in December 2007 for the provision of Shared Services to nominated departments of the Queensland Government. The replacement of QH Payroll was the top priority, to be completed by 31 July 2008. Scoping was weak and remained volatile during the project. Around 220 changes were made to the contract to ratify the actions taken to implement the contract. Contract Change Documents and Change Requests were used. QH was slow in the identification and communication of its business requirements to IBM (Chesterman, 2013).
The relative complexity of the QH payroll, with 24,000 different pay combinations each fortnight, added to the woes. The complexity required significant customisation of WorkBrain, which was the awards interpretation engine, and the SAP payroll system (KPMG, 2012). More changes in payroll administration practices adversely impacted the timely release of the SAP HR and WorkBrain systems by IBM (QAO, 2010, p. 3). Even by October 2008, IBM had not achieved any of the performance criteria, and its cost estimate shot up from $98M to $181M. So the Shared Services Solution for the whole-of-government was given up, and the scope of IBM’s contract was restricted to the replacement of the QH payroll. After several failed attempts, the replacement went live in March 2010, but the system was still unable to achieve proper functionality. The estimated cost for the system was estimated at $1.2B over the next eight years. A Supplemental Agreement was reached with IBM in August / September 2010 which let IBM go scot free despite its failures. In return, IBM agreed to rectify the major errors in the system (Chesterman, 2013).
From the outset, the authorities were under pressure, whether real or perceived, of the tight deadline to replace the LATTICE system. This was partly a result of underestimating the profoundness of the transition to the whole-government paradigm. Complicated nature of the QH awards system and misconceptions amongst the users about the nature of the new payroll system added to the woes. Importantly, various departments in Queensland were averse to the Shared Services concept as they wanted customised services for their department. This increased the complexity and cost. This implies that the stakeholder involvement was not proper. Further, past unsuccessful experience regarding payroll implementation in the Department of Housing was also ignored. Organisational changes, e.g. shift to the prime contractor model, were made without adequate thought and proper authority. Scoping and budgeting of the project was unrealistic. QH was not the client department, and hence there were gaps in understanding its business requirements (Chesterman, 2013).
Improper involvement and undue influence of private consultants with vested interests biased the system and diminished the chances of success even further. Further, there was no Conflicts Register to declare conflicts of interest. Mr Terence Burns, a key player in the selection of the prime contractor, was an ex-IBM employee. He should have been disallowed from participating in the process. It was later found that Burns favoured IBM during the May 2007 review. The selection process was rushed, improper and unfair. As a result of scoping and budgeting errors, IBM was not able to deliver a functional system, even in its diminished role. The warning signs were ignored and bars were lowered. Ad-hoc decisions continued throughout the project. The Defect Management Plan was also inadequate and there was no business continuity plan to provide for unforeseen circumstances. Diffusion and fluidity of the governance structure added to the woes. There was sub-optimal contract administration as IBM managed to go scot free. ‘Unwarranted urgency and a lack of diligence’ on the part of government officials was a major factor that contributed to the dismal failure of the endeavour (Chesterman, 2013).
Val IT Framework 2.0 supports the organisation’s goal of creating optimal value from IT investments, at an acceptable cost and risk. Val IT is guided by its principles which are enabled by key management practices. The management practices are monitored by comparing the performance with the goals and metrics (ITGI, 2008, p. 11) The Val IT principles state that IT-enabled investments should be managed like a portfolio of investments, they should have a comprehensive scope of activities for achieving business value, and they should be managed over their entire economic life-cycle. All stakeholders should be involved and made accountable for effective delivery. The delivery process should be monitored, evaluated and evolved continuously. These principles should be applied to the three Val IT domains, namely Value Governance, Portfolio Management and Investment Management (ITGI, 2008, p. 12).
The main focus of Value Governance (VG) domain is to deliver business value by establishing governance practices that link enterprise strategy with the portfolio of IT-enabled investment programmes. The Portfolio Management (PM) domain delivers business value by managing the overall investment portfolio to optimise their value to the enterprise. The Investment Management (IM) domain manages the results of various investment programmes, including the various changes resulting from the business and IT projects that are part of the programmes (ITGI, 2008, p. 24).
Val IT 2.0 takes the enterprise governance view, and focuses on two of the four fundamental IT governance-related questions, namely the strategic question and the value question. The questions are ‘Are we doing the right things?’ and ‘Are we getting the benefits?’. The strategic question focuses on asking whether the investment is in line with the vision, business principles, and strategic objectives. The value questions seeks to find out whether there is a clear and shared understanding of what benefits can be expected from the investment, and who is accountable for realizing the benefits. Relevant metrics and processes are a must to realize the benefits (ITGI, 2008, p. 9).