Apr 192011

Large, complex organizations regularly struggle with the pros and cons on each side of the centralization/ decentralization argument — and then they reorganize, usually to the opposite extreme. If you are looking at decentralization, the argument is that business unit executives need IT resources under their direct control to better achieve their business goals. Under this approach, the organization will typically maintain a small central IT group with limited responsibility, perhaps related to architecture and standards. If looking to centralize control, the argument is that this is the only way to ensure economic efficiency, and it may be absolute. These arguments have merit, but not absolutely, in either case. Both extremes create an environment for dissatisfaction in some part of the organization, and there often isn’t any mechanism for relieving that dissatisfaction other than another broad reorganization.

So what’s the solution? IT management structure has to follow service needs: centralized for those services better provided centrally, and decentralized for those services better provided locally, and with established channels for close collaboration across all units. This isn’t easy, but it is the middle ground that will avoid the disruptive sine wave. If we look hard enough, we can all recognize that there are some IT needs that really are better met via a localized approach (e.g., specialized applications used by particular division where detailed subject matter knowledge is particularly important). At the same time, others benefit in both efficiency and effectiveness from a more centralized approach. Examples are e-mail, networks, and corporate enterprise resource planning (ERP). The question is how to set up and then govern this type of mixed environment.

Many organizations have created the post of corporate CIO to focus on these issues, and that person almost always begins with improving communication and collaboration. A CIO creates an environment where responsibilities are clear and benefits long-lasting by proceeding along the following lines:

Take steps to ensure good communication between central and local IT. Regardless of IT department reporting relationships, communication across units is key to reducing tension and resolving issues. Creating a CIO council with leaders of all divisional IT departments as well as directors from the corporate IT department provides a structure for ongoing communication and creation of collaborative efforts.

Establish a governance process for deciding which services are to be managed by the central IT department and which by local IT. The first step is to understand where you are now: develop a matrix listing key IT services (e.g., e-mail, network, telecom, general user support, data center operations, database services, Web development, major application areas) and show who the “service provider” is for each business unit or department (i.e., who that department holds responsible for providing the service). Note whether the service is provided by internal resources or is outsourced, but the primary question is who is responsible.

Set up processes for measuring cost and quality of IT services across the organization on an ongoing or periodic basis. This gets to the issue of how to know that all businesses are getting the best service for the money, and seeing trends that may signal that a change is required. While “cost per unit” is a standard operating measure in the manufacturing world, we in IT also must learn how much it costs to provide and service an e-mail box, network access, and every other IT function. Determining your costs also gives you data for comparing internal costs to outside vendor costs in making sourcing decisions. You can measure quality through on-the-spot surveys, Web pages with “like-dislike” buttons, and periodic in-depth focus groups, not to mention on-time and uptime measures and problem reports.

Keep in mind that the types of services and the balance between centralized and locally managed services will change over time, so build a regular review process from the very start. In the 1980s, central IT departments were mostly in the business of running the corporate accounting system. They weren’t ready for designing and running networks and e-mail systems. It made sense for operating departments to make their own decisions and handle their own support for these new services. More than 20 years later, the vast majority of the organization is best served by corporate decisions on what e-mail to use, what network routers to install, and whether to run these services internally or to outsource them. These changes don’t occur overnight (or even over a single year), but they do change and you must reassess regularly the technology, cost, and service levels in your IT services matrix.

Implementing these processes will go a long way to helping you provide IT services that satisfy corporate needs efficiently and effectively — and keep you off the IT reorganization sine wave.


Jerry Grochow

Dr. Jerrold M. Grochow is a Senior Consultant with Cutter Consortium's Business Technology Strategies and Government & Public Sector practices. He is an innovator in the areas of strategic and tactical technology planning, operational effectiveness and risk assessment, and general IT management.


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