IT governance is hot as CA acquires Niku

Computer Associates announced this week that it is buying Niku, a small provider of systems that support IT management, IT governance, and portfolio and project management.

The segment
Software to support IT governance is a small but growing segment of the enterprise systems marketplace. However, it has suffered from the lack of a common moniker to define this segment. Historically, most of the solutions fell within the segment known as professional services automation (PSA). But that term was too closely aligned with consulting firms, whereas these solutions were also targeted at internal IS organizations in general. Other labels include project and portfolio management (PPM), services relationship management (SRM), and business technology optimization (BTO). I'm sure there are others.

Whatever they are called, these are software products that are aimed at optimizing the management of information systems. To some extent, IS departments have been cobbler's children going shoeless--building and implementing systems for the rest of the organization while business processes within IS itself are managed with spreadsheets and email attachments. But the situation is now changing for many IS organizations.

Market drivers
There are several reasons that companies are attracted to tools to support better IT governance:

1. Spending constraints. The free-spending days of Y2K and the dot-com boom are over--organizations expect IS to do more with little or no budgetary increase. Every dollar wasted internally in the IS group is a dollar not available for the delivery of new systems to the organization. Because personnel is almost always the largest expense item in the IS budget, anything that can be done to better manage the productivity of IS personnel is an important initiative.
   


2. Quality initiatives. Many organizations are implementing quality improvement initiatives such six sigma and lean thinking. Such initiatives were originally focused on business operations, such as product development, manufacturing, and distribution. But they are now being rolled out in administrative and supporting functions, such as the IS group. Furthermore, process improvement programs that specifically target the IS group, such as CMMI from the Software Engineering Institute, and the IT Infrastructure Library (ITIL) are gaining in popularity. In response, CIOs are looking for systems and tools to better manage the many activities and relationships between projects, people, and processes. Tools such as Niku provide such capabilities.
   


3. Government mandates. Finally, regulatory requirements such as Sarbanes-Oxley are putting the spotlight on internal controls throughout the organization, including information systems. IS groups that got by in the past with informal controls are now finding it necessary to formalize systems and procedures that track project approvals, justification, and delivery. Systems like Niku provide those tools.

IT governance systems are beginning to show their worth, and I expect the market to continue to grow for the next 3-5 years at a minimum.

The players
The vendor landscape for these systems is highly fragmented. In 2001, I did a vendor evaluation for my own consulting firm, Strativa, which was looking for a PSA system. At the time, I started with a long list of at least 30 vendors, and even after we had selected the winner I was still discovering new players.

Since then, there has been a vendor consolidation underway, with many of the niche players being purchased by larger players that are looking to enter this market. For example, Lawson Software bought Account4, Compuware bought Changepoint, Exigen bought Portera, and Mercury Interactive recently bought Kitana. CA's acquisition of Niku simply continues the trend. In addition, there are a number of standalone vendors which remain independent, such as Primavera, which has strong credentials as a high-end project management vendor.

The Tier I ERP vendors, namely Oracle (and PeopleSoft) and SAP, claim to support requirements for IT governance, but their offerings are largely built by redeploying, repackaging, and enhancing their existing functionality for project management, time and expense capture, and procurement. They are still a few steps behind the best-of-breed vendors such as Niku in functionality. Of course, the integration of the ERP suites is going to be better, but there's a price to be paid for it.

Bottom line
In many IS organizations, the track record is poor for delivering projects on time and within budget. In larger IS shops in particular, there may be hundreds of large and small projects competing for resources and with interdependencies that are not well understood. Some may carry high ROI, while others are included with questionable payback. Systems for IT governance will not solve the problem of weak internal controls by themselves, but if implemented within a framework of internal process improvement, they can be an important part of the solution.

Related posts
When CRM means "Client Relationship Management"