Recently I was asked to join a discussion regarding organisational structure of IT departments in large corporations and to compare pros and cons of a centralized and decentralized structure of IT departments. Discussed were IT departments consisting of a large team based in the HQ and smaller teams based in different countries where the corporation was present.
Centralised structure – with a strong IT core team based in HQ. It is the HQ where general rules are created: IT strategy, infrastructure standards, operational guidelines, IT procurement and program / project portfolios. Local IT teams are meant to run local IT operations and to execute rules / projects coming from HQ.
Decentralised structure – IT core team based in HQ is responsible for key strategies and procedures, where local IT teams are responsible to create local strategies and IT operations standards. Program / project portfolios and IT procurement are decided locally or with cooperation with HQ.
During the discussion, several key pros and cons of both approaches were discussed:
Pros: identical IT standards and procedures among all local IT teams, Program / project portfolios compliant with corporate strategy, homogenous IT infrastructure, cost savings based on centralised IT procurement.
Cons: slow adaptation to change due to beaurocracy, local needs might be dismissed by HQ, local legal requirements are handled not flexible enough, innovation coming from local teams is given lesser priority, one-fit-all solutions might not be suitable for some local orgs.
Pros: faster reactions to local needs, ability to offer tailored solutions to every local org, proximity to customer makes it possible to address business needs,
Cons: heterogeneous IT infrastructure among local orgs, scattered focus among many projects / initiatives through local orgs, disability to roll out standards across all local orgs, increased IT costs due to local IT procurement.
Another possibility was discussed later on, a hybrid structure, taking best of both worlds … local agility AND global efficiency. The key was to find the right mixture of competencies for all involved IT teams, HQ and local ones. Based on the type and maturity of discussed company, industry sector and actual size, ways to achieve both benefits did vary. A hybrid structure would be able to use the benefits of a central strategy and infrastructure, cost savings for IT procurement and still enjoy the agility of engaged local teams addressing needs of local business.