For IT managers in a larger company, they are either part of a centralized IT organization or report to a management team that has considered or is considering centralization of IT. In fact, IT as a discipline has been wrestling with between a centralized and decentralized governance structure for a long time, certainly during my management career which began in the mid-90s.
Some of the traditional pros/cons associated with centralizing IT management are as follows.
- Leveraging buying power: This is inherent in economies of scale.
- Standardizing on frameworks, standards and vendors: allows a reduction of maintenance and training costs and facilitates volume pricing (see #1)
- Creation of internal competency centers of expertise: IT builds a bench of qualified support professionals instead of being “one deep”.
- Develop more mature areas of expertise and focus on preventive vs reactive; i.e., configuration management, capacity planning, performance analysis, monitoring, automated correction and self-healing)
- Identification of IT expenses: Costs are tracked centrally and transparently, which will empower #1 and improve the budgeting and funding process.
- Identification and managing of security and compliance risks: Such risks are much easier to notice and then mitigate when they are grouped centrally.
- Effective implementation of best (or standard) practices of production control, change management, release management, SDLC, division of labor, service management
- Improvement in support for underfunded divisions and business units
- Reduction in redundant resources
- Improve chances of success for DR and lower the costs of DR (see #1 and #9)
- Centralize and “operationalize” commodity services and focus personnel on strategic initiatives
- Reduce data center footprint and therefore contribution to “greening”: This may be more political than factual depending on the current footprint.
- Sacrifice of flexibility for efficiency: This is a simple phrase, but it plays out in many ways. Individual IT managers and business units will find themselves handcuffed by policies and standards. Centralized IT must focus on the entire enterprise first and individuals second; i.e., the good of the many vs. the good of the few.
- Cannot leverage local partners and vendors: While a centralized contract may provide great pricing, local managers may be unable to leverage local vendor and partner relationships.
- Loss or perceived loss of control
- Loss or perceived loss of personalized service
- Increased bureaucracy: By definition.
- IT further removed from the front line and alignment with business unit strategies: While this can be mitigated with attentive “relationship managers”, still nothing beats business units having an IT staff at their finger tips.
- Pain of transition: This should not be underestimated. The effect on morale and productivity can be significant and will likely have a negative effect on revenue and customer service somewhere down the line. “Short term pain for long term gain” is a relevant axiom here, but so is a “avoid a cure worse than the disease”.
Obviously, these pros and cons will be more or less numerous and more or less important based on the perspective of the thinker. IT staff will likely have a preference based on their status as a remote or corporate IT employee. Many will worry centralization is a precursor to outsourcing, and rightly so.
I have seen cost savings frequently quantified by consultants “selling” this org structure (and thereby, their engagement). Gartner coined “same mess for less” to describe the pitch and recommends it not be the centerpiece of the argument. Any number will be hypothetical and hotly debated.
There will always be reasons for either model. Decentralization is popular when technology is rapidly evolving and times are good. Centralization is popular when times are tight and/or efficiency is valued over flexibility. As a technology matures, centralization looks more and more logical. Many believe that IT will even centralize down to a handful of companies providing a utility like service. Yet “technology” is not one element, but many, all at different points of their life cycle; thus a hybrid organizational model may be a successful approach. The pendulum has swung back and forth at many organizations.
Below are some published success stories and varied opinions.
- InfoWorld, 2008: “Centralized IT Pays off for ADP“
- ComputerWorld, 2010: “IT centralization is back in fashion” (Salvation Army)
- Cutter, 2009: “Business Technology Governance: Why the Pendulum Finally Stops Swinging“
- Vaughn Merlyn, 2009: “To Centralize or Decentralize IT – That Was The Question…“
- ComputerWorld, 2004: “IT Governance: Stop the Pendulum!“