In the preceding post I made an argument that growth demands in the business will tear apart IT’s centralized and consolidated operations. CIOs will face demands for decentralization, greater federation or recognizing that its time to swing the pendulum back to the field as all symptoms of this tension. It is a tension that they must prepare for and combat for one simple reason.
In general, decentralized IT is less effective than centralized IT. Data reported over the past four years from CIOs in the Gartner Executive Programs CIO survey points to higher levels of effectiveness at the IT and enterprise level coming from centralized IT shops.
There are exceptions, for example companies with business units who do not sell to the same customer, companies with independent and non-bundled products, companies whose corporate function is basically that of a holding company. That accounts for many firms, but not all and certainly not everyone. A test of whether or not you are an enterprise – and therefore should have enterprise IT can be found by following this link.
A few years ago I was talking with a CIO of a major telecommunications company and he observed that it was probably time for him to move on. I asked why and how do you know. He answered that he had been brought in by the CEO to clean up and centralize IT and now the BU heads were calling for decentralized IT so it was time for him to go. When I followed up and asked what would change the pendulum back the other way, he casually observed ‘When the CEO wakes up one morning and asks where did the billion dollars go?”
The billion dollars he was talking about was the additional cost of setting up and running duplicative organizations, the multiplicity of systems, the duplication of data, loss of buying power, among other things. Setting up BU IT does not have to be that way, but the BU CIO is rewarded for serving BU needs and distinguishing its services from those provided by corporate.
Demands for decentralizing IT have more to do with the level of service, relationship and perception than with any real need for an organizational change. Business Unit leaders who feel that they are not getting good service, do not have a good relationship with each other, and are tired of having to work as an enterprise often call for decentralized IT to get greater control.
If the root causes behind calls decentralization are not based on an organizational problem, then it is possible for CIOS to address these issues and remain centralized.
CIOs need to find a way to appear small and focused to each BU aka decentralized while generating the scale efficiencies associated with a centralized organization. Here are a few thoughts.
Figure out if your company is an enterprise. Many are not. If you are not an enterprise, then the executive team needs to reconsider the notion of central IT, versus shared services, versus decentralized IT.
Look at your IT department edge on. That is instead of an org chart that decomposes your operation via a side view, look at it the way the business sees it – from the edge of its touch points. Think about it as a fork with each tine being a small-dedicated group focused on the BU. Look at the fork from the edge on and you see three or four dedicated groups. Most centralized IT organizations look like a monolith with everyone treated the same. That is akin to a spoon. Look at a spoon edge on and all you see is a single spoon.
Don’t assign relationship managers, at least make sure that relationship mangers are not the only resources focusing on the BU. Modern relationship management practices are engineered to create BU frustration as they seek to understand BU needs, represent them in central IT and deliver the news about where they fit in corporate priorities. BU’s need more than a person to be the liaison with central IT. They need a small-dedicated team that includes a relationship manager, business analyst(s), technical support and perhaps a small focused development team if they are using unique technology.
Establish Job Jars with each of the BU’s to give them fixed capacity to address the issues they see. This will help relieve BU frustration. The business units direct the resources in the job jar. This gives them autonomy while preserving the core systems.
Recognize that nuisance demand is central to setting business expectations and delivering quality services.
Stop thinking about a ‘fixed supply of IT’ nothing tells the BU that they do not matter than saying that things are fixed and need to be rationed. Generate a flexible model that is able to take in funding and resources to scale as needs change.
Be transparent let people know what you are working on, the services delivered, the value created across the business units. This helps build trust by tamping down the rumor mill that you are being treated different.
Consider a move to a shared services organization. Shared services appear similar but they no the same as centralized IT.