A Higher Power

A Higher Power

When State Street acquired a Deutsche Bank company, it had to decide whether to keep or retire more than 900 inherited applications. The guiding force that helped it do that was governance.

Reader ROI

  • How governance worked in one high-stakes acquisition
  • How strategy informs governance and governance serves strategy
  • How to understand and improve your own governance processes

If information technology has a god, his name is governance. Good but elusive, pervasive but difficult to quantify, powerful but intangible, the ideal of IT governance has been sought by CIOs ever since the concept began to attract a following in the late 1990s.

Apostles like the MIT Sloan School's Peter Weill have extolled its benefits. "Companies with better than average IT governance earn at least a 20 percent higher return on assets than organizations with weaker governance," he asserted in these pages last July (see "Recipe for Good Governance"), upon the release of his book (with Jeanne Ross) IT Governance: How Top Performers Manage IT Decision Rights for Superior Results.

One company Weill identifies as an exemplar of good IT governance is State Street, the $US5.5 billion Boston-based financial services company that manages $US1.2 trillion in assets. And few situations reveal IT governance in action as well as the massive integration project that followed hard on the heels of State Street's daring acquisition of Deutsche Bank Global Securities Services in 2003.

Acquisitions are "a fabulous opportunity to test the limits of governance", says Weill, director of the Sloan School's Centre for Information Systems Research. "What good governance does is it makes decision rights and accountabilities clear. Instead of arguing over or even wondering who should make certain decisions, the company can go about making the integration work."

Analysts call the State Street-Deutsche Bank integration, now nearly complete, a success. State Street has held onto an impressive 88 percent of the revenue generated by the Deutsche Bank business, falling just 2 percent short of the acquisition's ambitious goal.

Yet State Street CIO Joseph Antonellis, a hard-nosed MBA, struggles to identify how much of that 88 percent is attributable to IT governance. "I don't know if I'd attribute any of it" to governance, he admits.

In other words, even this top disciple has a difficult time explaining the mysteries of IT governance. "I guess I attribute the project's success to the fact that the conversions went seamlessly," Antonellis continues. "We were able to service clients, and that happened because we have a good IT governance process and good execution on IT. You have to keep the revenue and keep your clients happy, but you can't do it at all costs. The IT governance process allowed us to work with the business units to make those balanced decisions more profitable."

"IT governance" is the name Antonellis gives to the higher power that guided him through those myriad decisions - a power that he agreed to try to explain.

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