Feb 13 2009   4:42PM GMT

IT centralization grows as approach to IT consolidation

EditorAnne Anne McCrory Profile: EditorAnne

Of interest to me this week: stories of how CIOs are approaching IT consolidation not just in the data center, but also in their organizations. It’s no surprise that flat or reduced budgets impel a leader to look at roles and processes to find efficiencies, and often, when you’ve already done this time and again, your next choice is a massive restructuring.

Often that means IT centralization: Organizations that moved IT out into the business units to get closer to users are finding, as the Salvation Army did, that bringing them back together makes more economic sense, especially given technologies to manage branch offices remotely. Then there’s the move to combine disparate IT units, as is the case in Tulare County in California, where Lee Root, IT division manager, merged two county IT departments. That’s not unlike what Stephen Fletcher set out to do for the state of Utah — combine 24 separate IT departments and 1,000 IT employees into one central IT unit. When we spoke to him in 2007, he expected the effort to take three years.

IT centralization is no small effort — as Tulare County’s Root says, “We had to merge two separate workflows, two separate IT systems, two separate policies and we had to find a new way to manage IT services” — and large enterprise mergers have many times that number of systems and policies. Indeed, there are many other considerations, as Susan Cramm, former Taco Bell CIO, writes in a piece on IT Centralization or Decentralization, and the answer isn’t always soup-to-nuts centralization. Still, evaluating your organization with some centralization in mind makes too much sense not to consider in these tough economic times, and I expect we’ll see a lot more of it.

3  Comments on this Post

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  • Cfarren
    Anne, while I agree IT centralization has huge cost savings potential there are so many other high impact savings opportunities that don't involve disrupting the entire organization. I still see companies throwing money away but not managing their environments and their contracts (think of software...this alone is typically 30% or more of IT's budget, and how few firms have that under control). IT centralization can save money, but it's cyclical and in a few years they will move to de-centralization again because money is no longer the issue, service now is the flavor of the day. How about saving money in areas that don't have to be cyclical?
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  • StephenHarris
    I don't disagree that this is the pendulum swinging back to centralization, although from what I hear it's been heading in that direction for some time. I do wonder if technology advancements like WAN acceleration and desktop virtualization mean a centralized (or more centralized) infrastructure is here to stay, and what that means for organizational structures. In any case, I would hope organizations would fully model any such disruptive change and implement it only if it meets multiple objectives, including not just savings and efficiency but value as well. .
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  • 4111
    You both are correct and hit the right point. IT departments are both a key business enabler and a "true" business unit as part of the organisation. Over the years I have seen decisions made based on what is happening to the business itself e.g. market share changes, profitability, changes as a result of M&A and changes at the C-level. The debate should be focussed on the "total business value" that IT is delivering to the business bottom line. Inherent in this discussion is achieving this outcome without compromising customer service (i.e. what and how IT services is delivered to the business areas). So one can see that demonstrating and delivering business value is of the first order while centralization vs. decentralization becomes a second order question. The challenge for us all is how we can easily quantify (both qualitative and quantitative) business value of IT and importantly, acceptable and valued by our business partners in the organisation.
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