Good Governance - Effective use of IT

Written evidence submitted by Jonathan Murray (IT 12)

Summary

1. UK public sector IT faces significant challenges in responding to three competing realities: The emergence of a post-bureaucratic age, the move towards decentralization of government and the fiscal constraints created by an age of austerity.

2. Resolving these tensions will be impossible without the implementation of integrated IT governance processes which drive radical reductions in complexity, link the center with the periphery, gain control over costs and increase delivery speed and flexibility.

3. Leading private sector companies have already faced these challenges and have successfully transformed and improved their management of IT over the last decade.

4. An integrated set of Governance, Architecture and Procurement (GAP) principles can be synthesized from these private sector best practices.

5. These principles - if uniformly applied across the UK public sector - would have profoundly positive impacts on IT service delivery and would help resolve the tension between competing demands.

6. Holistic application of these principles would carry additional downstream benefits for the development of the UK IT service sector.

Introduction and Context

1. The inquiry asks in Q5: What role should IT play in a ‘post-bureaucratic age’? and in Q9: How will public sector IT adapt to the new ‘age of austerity’? The answer to these questions illuminates a critical and some might say irresolvable tension for UK public sector IT.

2. Q5 implies an emerging age of decentralization where decision-making is dispersed to the periphery and where old hierarchical organizational models are transformed into new distributed, decision-making networks.

3. The successful implementation of such a transformation depends critically on the following:

a. That the information on which decision-making is based be available at any time and in any place within the network.

b. That central changes in policy and the learning from front-line operational experience can be encoded within rules-based systems and made available in real-time to all who need it.

c. That the system boundaries between government – as the producer of policy – and citizens and private sector businesses – as the consumers of government services and providers of information – be removed to allow for the implementation of deep models of public/private integration.

4. The implications from 2.a,b and c for UK public sector IT service delivery are profound. They imply a complete inversion of historic practice, moving from traditional closed, stovepipe and domain centered approaches of system design and implementation towards an open, distributed, rules and information based network model.

5. In the author’s opinion, UK public sector IT is not ready to meet the demands implied by Q5.

6. Q9 implies that there will be less investment available for IT in the years ahead. UK public sector IT will be expected to do more with less – an apparent contradiction – and particularly so when the demands implied by Q5 are taken into account.

7. The author believes that the central issue facing UK public sector IT today is how to resolve this contradiction?

8. The greatest barrier to progress is complexity. The complexity generated by historic – and current - approaches to IT infrastructure increases systems integration costs, reduces flexibility and slows down or prevents the implementation of new distributed network based models of information and business process management.

9. The first priority of UK public sector IT should be the implementation of novel approaches to governance, architecture and procurement that focus on massive simplification of IT infrastructure. Only if this is done will UK public sector IT be in a position to deliver the modern, flexible infrastructure required to meet the needs of a post-bureaucratic world while doing so at lower cost to the UK taxpayer over time.

The Framework of a Solution

1. The challenges facing UK public sector IT are not unique and nor are the organizational demands. Large global private sector companies have been on the path to decentralized decision making since the mid-1980s. The competitive pressures of today’s global market place do not allow for slow decision making.

2. Highly autonomous distributed decision-making models based on defined policy encoded in business rules systems have already replaced previous hierarchical approaches in most organizations of this class. The days when local management teams would request guidance from corporate headquarters before making local decisions are long gone.

3. Decision-making has been pushed to the very periphery of these best-in-class organizations. In a very real sense they are living in the post-bureaucratic world today.

7. The author believes that the remedies for the strategic and performance issues facing UK public sector IT can be identified by examining the pathways to excellence forged by these private sector organizations as they overcame similar strategic challenges.

The GAP Principles

8. In response to advisory engagements at the World Bank and United Nations between 2003 and 2007 - looking at the underperformance of public sector IT - the author’s research identified a number of critical private sector best practices that might be effectively implemented in public sector settings.

9. This research was further developed in collaboration with Charles Chang – at that time with Oaksmill Consulting – and published as a white paper entitled ‘The GAP Principles: Supporting IT Projects and e-Government through Improved Governance, Architecture and Procurement’ [1] in 2006.

10. The author proposes that the principles outlined remain as valid and applicable to the challenges facing UK public sector IT today as they did back in 2006.

11. An updated version of the GAP Principles can be summarized as follows:

a. The establishment of a cross-government Chief Information Officer position with the authority to enforce a single set of operational and architectural standards across government.

b. Creation of a ‘left-to-right’ IT investment strategy and budgetary governance ‘Star Chamber’ - lead jointly by the Government CIO, a Cabinet member and a senior civil servant – with the authority to review and control the IT spending of individual departments.

c. The creation of a unified - government wide - Enterprise Architecture Framework that establishes technical standards to be followed by all departments while encouraging fast, flexible, distributed applications development.

d. Adoption of ‘Abstracted’ architecture models and ‘Service Oriented’ design principles which allow for clear separation between the physical, operating system, middleware and application layers of the architecture and enable the decomposition of large complex system developments into smaller, lower risk components.

e. Flexible procurement models that recognize the difference between long-term strategic infrastructure investment and the short-term, flexible approaches needed for rapid application development and delivery. These models should support and encourage the awarding of contracts to smaller – local – service providers as a spur to the development of the UK’s indigenous IT services sector.

The Role of the Enterprise CIO

12. The author is unaware of a best-in-class private sector organization today which does not have a corporate CIO vested with the authority outlined above. In many cases the corporate CIO is a board level position with equal weight and influence to senior members of the executive team.

13. Progressive CEOs recognize the deep strategic importance of IT delivery to the commercial success of their company and require a close working relationship with the corporate CIO. This creates significant challenges in hiring individuals with the correct mix of skills for the role. A successful corporate CIO must combine a keen strategic understanding of the organizations objectives while also possessing the skills required to address the complex technical issues at play.

IT Governance Processes

14. Leading companies have established very sophisticated IT governance processes which aim to align IT investment with the strategic direction and growth drivers of the business, promote decentralized decision-making and keep operational complexity and costs under control.

15. The GAP Principles research identified two critical governance processes.

a. The Architecture and Standards process creates a common technical blueprint for operational systems and IT processes across the enterprise. The corporate CIO has ultimate authority for the development and enforcement of this blueprint but must balance the benefits of centralized cost control with the need for operational flexibility and responsiveness at the departmental level. This is almost universally implemented as a ‘Federated’ governance model where collaborative decision-making is shared between the corporate and departmental CIOs. However, despite the joint decision making model, ultimate authority for the definition of standards rests with the corporate CIO.

b. The Strategic Investment process creates alignment between business strategy and the IT systems investment needed to implement that strategy. This governance process is lead by a senior business leader jointly with the corporate CIO and includes senior business leaders from key divisions. Most offices of the corporate CIO employ departmental or divisional Relationship managers whose are responsible for maintaining the day-to-day link between corporate IT organization and divisional business leadership. This role feeds departmental demands and requirements into the Strategic Investment process where competing demands are resolved and aligned to the prevailing investment budget.

Enterprise Architecture Planning Processes

16. A critical tool of the corporate CIO is the Enterprise Architecture Framework (EAF) that establishes key technical and operational standards to be enforced across the organization.

17. When done well an EAF accomplishes several goals. It prevents the unnecessary proliferation of multiple, redundant technologies that do drive up complexity and costs. It establishes a framework for operational excellence that ensures the adoption of common measures and service levels across the business and it enables a flexible, cost controlled IT infrastructure that can rapidly respond to the changing needs of the business.

18. As with each of these governance processes it is critical to find the balance between central control over costs and performance and departmental needs for operational flexibility. When used in combination, the Strategic Investment process and the EAF drive dramatic improvements in delivery service levels and cost control in many complex private sector organizations.

Enterprise Architecture Models

19. The GAP Principles identified a number of progressive approaches to enterprise architecture five years ago that have accelerated and become mainstream in the period since.

20. All large complex companies are rapidly moving to highly abstracted or virtualized IT architectures. This approach decouples key layers of the architecture reducing intra-system dependencies that historically drove the complexity and fragility of IT environments. Decoupling delivers multiple benefits; increased flexibility and responsiveness, improved cost control and improved service quality.

21. Virtualizing the link between software and the hardware on which it runs enables significant levels of server consolidation. Where ten business applications previously each needed their own individual server, these can now be run as virtualized workloads on a single – admittedly larger capacity – server. This approach to consolidation benefits from requiring little or no adaptation to existing applications.

22. The move to abstracted architecture continues apace with the introduction of new models of Cloud Computing. With this new approach IT infrastructure and application services are procured and delivered as a service to the consuming organization. In a very real sense a company’s entire IT environment becomes virtualized and is delivered back by the Cloud service provider as a pay-as-you-go, consumption based, utility service. The consuming organization benefits from no longer having to manage a complex, costly and fragile physical IT infrastructure while gaining the benefit of access to an essentially unlimited amount of computational resource as needed. The potential benefits to organizations with peak driven workloads – HMRC as an example – are significant because the organization is no-longer required to sustain the infrastructure investment required to support extreme peak loads which only occurs at certain times. Additionally this approach enables a single cloud infrastructure to service the needs to multiple diverse consuming organizations driving further levels of infrastructure consolidation.

Rapid Value Delivery Through Service Orientation

23. The term Service Orientated Architecture (SOA) has lost much of its luster over the last twelve to twenty four months as technology vendors and professional service firm marketing has pivoted towards the new market opportunities of virtualization and Cloud Computing.

24. Despite this change in marketing emphasis the design principles embedded within SOA remain critically important to unlocking bottlenecks in enterprise application development. SOA implies an approach to system design focused on delivering smaller and more focused service components that can then be combined to form more complex and complete systems.

25. Best-in-class companies apply SOA design principles that break complex application systems development down into smaller service components. This approach allows for rapid prototyping and iterative development methodologies that ensure faster alignment with business needs and faster delivery of value than was possible with monolithically integrated approaches.

26. Successful implementation of SOA design principles has a high and critical dependency on the architecture and standards process outlined above. A well-defined Enterprise Architecture Framework and strict adherence to defined development standards are critical to ensure that individually developed service components can be combined to deliver the end-to-end functionality of the complete system. Implementing SOA approaches without these governance frameworks in place will add – not reduce – complexity and cost.

The Problem with Procurement

27. The inflexibility of many complex IT infrastructures is largely driven by the historic practice of procuring monolithically integrated systems. This approach – which combine hardware, operating system and application software and often services in one tightly coupled package – makes it easier for vendors to tender for but significantly increases future systems integration costs and can create severe barriers when horizontal business integration becomes a strategic imperative.

28. This approach also acts to drive diversification and complexity within the IT environment as each new system adds its own mix of system software and hardware to an already complex IT environment.

29. This vertically integrated approach has long ago been abandoned by best-in-class private sector companies and yet remains the dominant procurement model within the public sector.

30. Large monolithically integrated application projects carry a huge win-or-lose risk profile. Very few vendor companies can afford to take on the risk associated with this type of project. It is not surprising that the monolithic approach is welcomed and promoted by most global systems integration and technology companies. This approach severely limits the pool of vendors who are qualified to tender for public sector projects and that reduces competition for services and ultimately raises costs to the public sector.

Strategic Approaches to IT Procurement

31. Application of the GAP Principles moves the balance of power in procurement relationships back towards the purchaser. However, there is remains a tension which must be resolved.

32. At one end of the procurement spectrum, effective governance processes and enterprise architecture blueprints are used to gain control over complexity and cost by limiting the set of technologies used within an organization. This is entirely appropriate and moves select vendors from a transactional relationship - based on quarterly unit sales - towards a strategic partnership model where value is measured in lifetime share of the customer’s total spend.

33. At the other end of the spectrum service oriented decomposition of application development acts to increase competitive bidding for service component development work by expanding the pool of vendors who can afford to tender for projects with a much smaller risk profile.

34. Best-in-class companies manage this tension by creating distinct procurement processes for Infrastructure and Application development.

35. Infrastructure procurement focuses on an ever-narrower set of very strategic vendor relationships that deliver the standardized infrastructure architecture upon which applications are built. Infrastructure has a much longer lifecycle that is reflected in longer-term strategic contract awards.

36. Application development procurement focuses on shorter term more dynamic procurement models that meet these flexibility requirements of a dynamic and rapidly changing business.

Strategic Procurement Impact on Sectorial Development

37. Government spending practices have profound impacts on the development and trajectory of the UK’s indigenous IT service sector. A move towards the strategic procurement and architecture practices outlined in the GAP Principles would have a profound economic effect by stimulating the the development of an entirely new generation of small scale, agile and innovative UK based application development companies.

Conclusions

38. The GAP Principles represent a synthesis of best practice identified from within a group of large, complex global companies who have already addressed the strategic challenges similar to those facing the UK public sector today.

39. It is recognized that public and private sector organization serve different needs and are driven by different objectives. The majority of private sector organizations are motivated by a common set of financial performance objectives. Governance structures and business models can remain stable in private sector organizations for decades. These factors greatly simplify the process of identifying and implementing common best practice.

40. Public sector organizations operate in a reality that challenges many attempts to identify and transfer best practice. There is no homogeneity of objectives across government departments. The nature of the election cycle places severe constraints on the time window available for governance reform and acts to reinforce institutional resistance to change. The traditional – and understandable - constraints and conservatism of public procurement regulations and processes are antithetical to the speed with which organizations must adopt technology to support rapid change. Finally the political process has traditionally reinforced a stovepipe approach to governance where Ministers and senior civil servants are given autonomy and full authority over their departments to the detriments of more distributed and integrated approaches.

41. Despite these daunting challenges the author is convinced that a consistent and conscientious implementation of the GAP Principles – with support from the highest levels of government – and tailored to the unique objectives and motivations of the UK public sector - would have a deeply transformative impact on the quality of IT service delivery; leading to significantly improved outcomes for both UK citizens and government.

January 2011