Centralized vs. Decentralized IT Organizational Structures

by | Jan 14, 2023 | IT Workforce, Software

The question should you centralize or decentralize your IT organizational structures does not generate a one-size-fits-all answer. In fact, maybe your company requires a hybrid approach that leverages the advantages of both centralization and decentralization. Both types of IT organizational structures represent polar opposites of the spectrum, and most businesses find themselves somewhere near the middle. The key is to understand the advantages and disadvantages of each IT organizational structure, and then take steps to find the right mix for your type of business model.

A Brief History of Organizational Structures

Decentralized organizational structures go back a little more than 70 years when in 1964, Paul Baran presented the concept of decentralization. During the Cold War, IT researchers searched for an alternative to centralized communication systems to improve the response rate to different events, some of which turned out to be emergency responses to crises. IT researchers feared that an attack on a centralized server could turn a highly-functioning communications system into a communications system that became useless.

Baran’s new approach to IT challenges involved distributing the crucial control and switching equipment throughout a network. If one section of a network sustained damage from an attack, the remaining undamaged sections continued functioning at an optimal level. Distributing crucial control and switching equipment required the addition of devices and communication hubs to boost the security protections provided by a decentralized IT structure.

What is a Centralized Management Structure?

A centralized IT organizational structure depends on the decisions made from the top of an organization’s hierarchy. The CIO assumes the responsibility of approving every decision made that impacts the IT department. After reaching decisions, the CIO informs less senior managers about the decisions and in many cases provides a detailed explanation of how to achieve the goals established by the IT decisions. The less senior members of management then relay the information to employees.

What is a Decentralized Management Structure?

A decentralized IT organizational structure disperses decision-making power among several different members of the management team. The CIO still assumes the role of the primary decision-maker in the IT department. However, several decisions once the sole domain of the CIO fall on the shoulders of less senior members of management. Emerging industries often establish decentralized IT organizational structures since it is much easier to shift employees to different roles, as well as change their job responsibilities.

What Are the Benefits of Centralized IT Organizational Structures?

Under a centralized IT organizational structure, a single server monitors the flow of network data to give the CIO more control over the entire IT network. In addition to granting the CIO more control over network operations, a centralized IT organizational structure also delivers several benefits.

Reduced Hardware Costs

Since hardware represents one of the costliest investments for an entire network, CIOs and less senior managers welcome any effective strategy that allows them to reduce hardware expenses. Storing every server and network equipment in one convenient location reduces the need to purchase the additional servers and equipment required for different server locations.

Enhanced Productivity

A centralized IT organizational structure provides the IT staff with improved oversight over repetitive tasks. For example, your IT staff can perform routine, repetitive tasks like updates, software installations, and adding security patches from one centralized location. If you went with a more decentralized model, completing repetitive tasks requires more staff to manage every location.

Comply with Government Regulations

Regulations that apply to different industries require some degree of IT centralization. For instance, a centralized IT organizational structure helps a healthcare provider comply with the financial service provisions written into the Sarbanes-Oxley Act. Companies that store and process user information like credit card companies find it to be much easier to comply with government regulations by working from a centralized IT organizational structure.

What Are the Benefits of Decentralized IT Organizational Structures?

If we had to choose one word that summarizes the benefits of decentralized IT organizational structures, the one word would be “flexibility.” Decentralization of IT tasks works for companies that have a large number of IT strategies to implement. Companies that follow more of a decentralized approach to organizational structures maintain different serves to address different IT tasks. This allows employees to tailor the selection and configuration of networks depending on individual project requirements.

Decentralization also creates more resiliency for IT networks to rebound from internally caused hardware issues, as well as from externally driven cyberattacks. For example, one server used for a specific project can play the role of a backup server for another server in case of network failure. Moreover, a decentralized IT organizational structure allows IT professionals to respond much faster to changing technology trends.

The Bottom Line: What Type of IT Organizational Structure is the Right One for Your Business?

Since there is not one answer to this question, the CIO and members of the management team should meet to discuss how to integrate the features of each type of IT organizational structure to meet the needs of their companies. More often than not, CIOs should find that a blend of both IT organizational structures represents the right approach. A decentralized approach to management can help CIOs implement a hybrid approach to building an IT organizational structure.


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