The Pros and Cons of Centralized Vs. Federated IT Organizational Model..any views?

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Bill Laberis 161 Points | Wed, 08/10/2011 - 14:30

Seems that these days anyway the pendulum has swung clearly in the direction of greater centralization. I think security in the face of very real and persistent threats has a lot to do with it, as well as some sense the costs (CAPEX) can be better contained or managed in a centralized environment. But additionally, I think that the centralized models today particularly around desktop virtualization gives IT the control it needs while still giving users a vast degree of self-selection and independence. In other words, they don't feel necessarily like they are under central 'control'. I think it makes more sense.

John Dodge 1534 Points | Wed, 08/10/2011 - 16:03

In some ways, consumerization makes us federated by default!

Jerry Bishop 100 Points | Tue, 08/09/2011 - 22:21

Love this question and will work hard to keep it brief.

The more important question to address first is which one can you make work in your organization? Generically each model and the others, have advantages and disadvantages as with almost anything. But which one is right for any organization depends on organization specific factors.

The second important issue is to consider or maybe the right word is realize that how you organize your IT function is not necessarily the same as your service model. In fact you can have it both ways. Infrastructure centralized and customer facing functions like applications decentralized like in a shared services model.

I used to help organizations with this very issue several years ago and was a part of moving to a federated model in a large company. I was able to find some old slides from back then that might still be useful to you in considering your options.

Other big factors that drive the debate are organizational size, nature of the business and the role IT plays in delivering the products to the market. And finally, if there is a trump card it would be culture since best practice doesn't mean a thing if you aren't supported in doing it.

Organizing_IT.ppt 503.5 KB
Pearl Zhu 90 Points | Wed, 06/29/2011 - 18:18

Hi, JIm

Great question to bring up, I think centralized IT department to deliver the solution-based IT services should be more efficent and effective: 

1. Solid IT Governace Discipline: the centralized IT could effectly build up the standard, policy, more efficently control, monitor and delegate the technology solutions to business department, to avod Shadow IT, with potiential security, reliability and management loopholes.

2. Transparent and Speed: If CIO and IT department could work closely with other business departments through the full IT solution life cyle: from selecting the products and vendors, digging into SLA, building and delivering the service, it should actually improve the service transparency and speed up the services even at today's cloud-economy. 

3. Create bette innovative Synergy between busienss and IT convergence: the centralized IT could become the innovation hub or even sustainability hub (CIO may have another persona: chief sustainability officer) to overview the business efficiency and process effectiveness, expedite the strategy making via expanded lens of enterprise as a whole, even extended to customers and partners. 

Well, I also like Joe's approach below, hybrid one is always the safe bet. 



Joel Dobbs 339 Points | Wed, 06/29/2011 - 15:21



Finding the "right" IT org structure has been an ongoing discussion for as long as I have been in this business. Centralized models give the greatest control and provide the best opportunities for cost optomization. Unfortunately one can easily loose close contact with the rest of the business and become isolated and unresponsive. Totally decentralized orgs usually are highly responsive to local business needs but are horrendously inefficient.  What one generally sees is decentralization during times of prosperity and centralization when the money gets tight.  Thus the swings back and forth between structures as one goes through the business cycle.

Federated orgs are a hybrid of the two and , if done well, provide closer business alignment with better control of shared services costs.  To be successful they require very strong leadership at the CIO level.

I pulled out a few slides that I use in my consulting and teaching that illustrate the points.  I am attaching these.  Hope they are helpful.

IT Org Models2.ppt 191 KB
John Dodge 1534 Points | Wed, 06/29/2011 - 17:43

Sounds like centralized is old thinking...and that you, Joel, think federated is a peeferable approach. No?

Joel Dobbs 339 Points | Thu, 06/30/2011 - 01:41

I think that, for most large organizations, that the federated structure is best assuming that one has a strong CIO.  Weak leadership + federated structure= disaster!

Jim Lee 2 Points | Wed, 06/29/2011 - 12:18

Hi All -

what are the views around centralized Vs. federated IT organization from an application development standpoint?


John Dodge 1534 Points | Wed, 06/29/2011 - 14:05

Hi Jim,

I found a centralized v. federated blog post you might find useful. Best...JD, ECF community manager.