Centralization and Decentralization IT Organizations:

Which One Is Better?


In this article, Is a Centralized or Decentralized IT Organization Better?, Barbara T. Bauer basically says that the issue of whether to centralize or to decentralize IT organization was and still a really confusing issue. So many reasons were causing that confusion in choosing the structure for IT organizations. For example, because of the expense of computing technology and expertise required made centralization the only structure for IT organizations. However, the decrease in the cost of computing technology in the 1980's made employees work on their own and be desperate of working for a local service organizations. That forced companies to decentralize parts of their IT organizations. Anyhow, companies now are confused about which structure is best for IT operations, and which one they should apply. Both centralized and decentralized structures have good and bad aspects.

Centralization occurs when all strategy and planning, application development and maintenance, and operations report directly to a senior executive. A more general definition is found in the book, it says "it's a function of how much decision-making authority is pushed down to the lower levels" (p168). However, centralization appear to be good in a way that it eliminates many important functions such as multiple help desk support groups in which centralized data results in cost-saving. On the other hand, very centralized structure requires a very efficient decision, so if a deficient decision occurs; it will negatively affect the organization as whole.

Decentralization occurs when a decision-making is done by each unit closest to the problem. So decentralization as said in the book is the pushing down of decision-making to the lower levels of an organization. The benefit of decentralized structure is that it produces a more efficient decisions because each business units has a complete knowledge and choice over the allocation of IT recourses to support business priorities. The book also says that many managers believed that decision must be done by those closer to the problem. Anyhow, what appears to be a disadvantage of decentralization is that its really hard to introduce a new technology to all the decision-making authorities.

The book says that managers don't choose a complete centralized or decentralized structure, but they choose the amount of both structures that allow them to achieve the maximum benefit for their organization. Applying both structures in IT organizations is called hybrid or federal IT organization. In this structure, the decision-making of different function is split into the both structures, but the decision made by the business unit functions must rolled up the overall organizations plan.

Shortly, the answer of the question concerning the better structure for IT organizations is not clear. IT managers should choose the structure that support functions that they think would be beneficial for their organization.