IT organizational models come in and out of fashion; they usually alternate between decentralized and centralized IT. In a decentralized model, IT may be charged with operational functions, leaving business units to create their own IT staffs and initiatives. In centralized structures, IT handles all the operational systems such as e-mail, telecom, and desktops, as well as IT projects for various business units.
A shift from one model to the other can seriously affect a CIO’s current tenure and professional goals. To avert that, you need to know how to survive the reorg to keep your job, and career, on the right track.
You must take control
The most effective CIOs understand the business and political drivers behind corporate reorgs and take control of the process and the outcome.
"If you're not politically savvy enough to be part of [influencing organizational structures], you're in no position to be a CIO," noted Dave Raspallo, executive VP and CIO with Textron Financial Services.
Raspallo explained that in his 23-year IT career, he's seen the tug-of-war between centralization and decentralization played out many times in major departmental or corporate reorganizations.
When mainframes were the IT model, centralized IT departments were in vogue. Then, with the advent of desktop computing, the winds blew toward decentralization. With PCs and client-side applications readily accessible, maverick computing initiatives from various business units rose up to seize computing power for their own benefit. Of course, the side effect was information silos and maintenance nightmares when IT executives were kept in the dark about many projects.
Understanding the two models
In the dark, such as when the Y2K issue came to light, isn’t the place to be. The need to know what was vulnerable and what had to be protected meant looking at every system, and companies discovered sometimes hundreds of systems outside of IT's view.
The subsequent management headache and the expense of maintaining disparate systems made centralizing computing systems look like a good solution once again.
"In the last three to four years, I've seen a swing back to centralization," said Raspallo. "I think that's true all across the board."
Business drivers have certainly caused a need for centralized computer services. Years ago, no one spoke about 24x7 business availability and the need for multilingual systems. When it comes to keeping track of projects and maintaining operational visibility, decentralized IT is proving to be increasingly cumbersome. The aftermath of large financial scandals is also driving the desire to centralize IT. Plainly put, the CEO and board of directors demand credible answers about business operations, and they expect the CIO to identify any problematic or outstanding technology issues.
A CIO with insufficient oversight of a decentralized IT organization runs the risk of losing credibility with higher-ups. For that reason, said Raspallo, "I think all businesses, not just financial, are questioning the decentralized model."
One way to cope with decentralization
Centralized IT is not without its challenges. Competing business units within larger organizations may object to having their data living side by side on the same servers, noted Warren Leggett, CIO of NIKU, a Redwood City, CA, provider of Web-based project management visibility tools. Some companies may be tempted to break apart IT, subordinating it under different business units.
Also, when companies try to reduce their headcount, decentralized IT may sound like a viable solution. As funds get cut, the IT systems that companies deem most important start to reveal themselves, and funding to support them may crop up under a department other than IT, further driving decentralization.
If decentralization becomes the model of operation, CIOs would be wise to create an effective project management office (PMO), said Leggett. The PMO manages the portfolio, making sure it is aligned with the company's business strategy. The PMO can be the sign-off body for initiatives arising from within various business units.
The CIO's role, or perhaps that of an executive portfolio management officer (EPMO, an emerging job title), is to oversee and provide consistency for the project portfolio so that all projects follow a uniform strategy for measuring project performance and ROI. You’ll also want to watch for hidden maintenance and service expenses associated with new projects.
While searching for the monetary impact of projects, keep strict control and standardize the accounting methods for depreciating capital investments. Today, for instance, it's possible to capitalize not only the hardware and software expenses, but also the consulting resources applied to bringing them into operation. All of these subtleties can trip you up if you don’t take control.
Reorganization and communication
Whether a reorg involves creating or dismantling centralized IT, part of taking charge involves communicating the strategy to the employees in a way that marshals their support. You want to start crafting the appropriate strategy and then sell it to the organization, advised Raspallo. "You need to understand why you support it and why it makes sense for you and the business."
Then it's a matter of communicating the change to managers and backing them up in motivational ways—with clear metrics and bonuses, for instance. Clearly, in critical times such as organizational change, you have to rely on the management abilities of supervisors.
"There's nothing worse than having a couple of naysayers behind the scene," said Raspallo. "That'll kill anything." To avoid disunity, you have to coach the managers on the reasons behind the reorganization and gain consensus. In the end, whether you maintain control during and after a reorganization comes down to sound strategies and personal abilities.
Whether the reorg involves a decision to decentralize or centralize shouldn't be a matter of fashion. IT has to be part of a company's overall business strategy, and that’s why the CIO role is so crucial. If this is not the case, it's likely that decisions about organizational structure will be made elsewhere, an unsavory proposition for you. As Raspallo said, it's better to be part of the decision-making process than having the decision done to you. In either case, you’ll be left holding the bag.