Centralized vs. Decentralized Methods in IT – Current Issues Research Paper

Centralized vs. Decentralized Methods in IT – Current Issues Research Paper

Centralization of information technology resources refers to organizing all technology related services into a single business unit that then provides services to the entire organization. An excellent non-IT example of this practice is the method in which major airlines centralize their flights through “hubs”. Instead of flying directly from every airport to every other one, the “connections” are centralized through the hubs to make things run more efficiently.

With the wave of information technology that has surged through the business world in the last decade or so great opportunities for rethinking the way organizations work is possible. In particular, the old mode of centralized authority has been severely undermined. Not because information technology in itself has great value but rather technology has allowed for aggressive out-of-the box thinking and method approaches that were once thought impossible.

Decentralization on the other hand gives individual business units the responsibility for control over local IT resources with little or no consideration of other units. However there is value in the hierarchical decision-making structure that centralized offers. With no help in coordinating all technology decisions business units would otherwise have to make do on their own (or hire someone else to make for them). One of the most important things that decentralization is enabling is the ability for decision-making to be far more widely dispersed in both large and small firms. With cheaper communication costs, many more people can make decisions for themselves, because they have the information they need. And when more people make more of their own decisions, they are often more creative, more motivated, more dedicated. This means having many of the economic benefits of large organizations without having to give up the human benefits like motivation, creativity, and freedom.

The most basic analyses would contrast the control, efficiency, and economy of centralization with the flexibility, empowerment, service level, and efficiency of decentralization in meeting business needs. A firm must examine the alignment between IT centralization and the need for information sharing in the organization. In firms that use a hierarchical structure, IT services and their management can be both centralized with IT specialists at the corporate level and decentralized with IT specialists placed in business units.

Many experts are now offering shared internal services models as another hybrid way of solving the centralization vs.decentralization question. This model captures the economies of scale in centralization while keeping the support functions focused on the business units. The hybrid models combine centralized and decentralized approaches to IT delivery, suggesting that generic types of interaction between corporate IT and business units must exist.

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