It may be counter-intuitive, but done right, IT centraliszation can save money and increase agility. While centralisation isn't a fit for all organisations, coming out of a recession and facing an uncertain recovery, these combined benefits look attractive to many leadership teams. Research by the CIO Executive Board - a program of the Corporate Executive Board - finds that IT centralisation can help organisations cut IT delivery costs by up to 40 per cent, in addition to improving service provision. So it comes as no surprise that 44 per cent of respondents in a recent survey are planning to increase the number of IT activities provided centrally.
The Peril of IT Centralisation
So what's the catch? The same research shows that failing to get centralisation right can quickly destroy any expected savings. By failing to align IT centralisation closely with long-term business and IT strategic goals, and to manage the transition to centralised delivery carefully, an organisation can actually increase its cost of delivering IT services by up to 45 per cent. CIO Executive Board research suggests that to prevent this loss of value, CIOs should focus on five key areas when transitioning to central delivery.
Effects of IT centralisation on the IT cost structure (click on the image to see in full screen)
Capturing the Full Potential of Centralisation
Many organisations under-invest in managing the transition to central service delivery, losing the business partner support they worked hard to win. Here is a five-step guide to overcoming the most significant planning, governance, and staff-management challenges that IT organisations face as they centralise:
1. Align IT centralisation to corporate, business unit, and IT goals: Many CIOs pursue IT centralisation in the strategic vacuum of cost-savings targets and forget to consider the business goals they need to support. To get it right, ensure that the selected degree of centralisation provides sufficient agility and responsiveness to support business unit and enterprise strategic goals.
2. Don't forget the end user: IT organisations often forget about end users whose ability to absorb change, after all, is a key factor in determining centralisation progress. To get it right, communicate early successes to build momentum, and sequence the transition so no part of the organisation is overwhelmed with change.
3. Create an end-to-end transition plan: When implementing a major effort, IT executives often overlook silent resistors, and the fact that they can derail or jeopardize the centralisation effort through non-compliance. To get it right, try to identify the change resistors and champions and understand who each of them influence, ensure that you share information about the effort consistently, and to do this, equip change champions with scripting to help them build support.
4. Ensure effective central delivery early on: CIOs often underestimate the effort required to rebuild trust lost due to poor initial service delivery. To get it right, over-invest in business-facing governance and service delivery processes to ensure that these processes run cleanly from day one so you can build and preserve business partner goodwill.
5. Optimise talent selection and retention during the transition: IT often leaves managers unprepared for handling staff separation conversations, which are usually unavoidable in a centralisation effort. To get it right, involve HR early and as a coach, not just as an enforcer, to ensure that legal and reputational implications of the centralization effort are fully addressed.
For further information on IT centralisation and best practice case studies showing how others ‘got it right' contact the CIO Executive Board www.exbd.com/Tech.
It's Worth Getting It Right
Assuming IT centralisation is right for your organisation's business model, adopting a disciplined approach can help reduce IT delivery costs by up to 40 per cent. In addition, centralisation can create significant benefits from process and platform standardisation, pooling of skills and resources, and improved control and decision support.
About the Corporate Executive Board
For additional information about the CIO Executive Board, please visit www.exbd.com/IT. The Corporate Executive Board (NASDAQ: EXBD) drives faster, more effective decision-making among the world's leading executives and business professionals. As the premier, network-based knowledge resource, it provides them with the authoritative and timely guidance needed to excel in their roles, take decisive action and improve company performance.