According to Gartner, a federated IT organization is multi-tier and has an arrangement to share power between corporate IT and business unit (BU) IT. The corporate IT group has a mandate to provide a common set of IT services to BUs across the group, while BU IT organizations fill the gaps, providing only those IT services not supplied by corporate IT.

Typically under the federated model the corporate IT group is a new creation focusing on consolidating commodity IT services, optimizing business processes that span multiple BUs or harmonizing business processes and information that are duplicated in multiple BUs.

Centralization held out the promise of global efficiencies, while decentralization was believed to make IT more responsive to the business units. In fact Gartner found CIOs claimed to achieve equal levels of enterprise effectiveness whether working within a centralized or decentralized model, although those already in a centralized IS organization could lay claim to higher IT performance levels.

"IT is increasingly expected to enhance and enable business processes and operations through service excellence," Gartner said in a subsequent report. "This implies a best practice combination of federated operating models and service-oriented delivery models, where strategy development, architecture, governance and infrastructure support are centralized and demand management, application development and regionalized service delivery are decentralized.

"All the internal IT departments are adopting management structures and practices that support service optimization. Such practices build on mature process capabilities; use service catalogues to define service levels, pricing and performance metrics, and move toward a commercial-like service delivery capability. A key feature of an optimum services model is the use of process guidelines, such as IT Infrastructure Library (ITIL), CobiT [Control Objectives for Information and related Technology], Capability Maturity Model Integrated (CMMI) or Six Sigma methodologies and techniques," Gartner reported.

Yet while earlier surveys had found 70 percent of Gartner clients had either adopted or planned to adopt the hybrid or federated model, the "2006 EXP Report: Growing IT's Agenda" found centralization becoming the dominant operating model. Now 71 percent run a centralized model, while just 14 percent have adopted the federated model and 15 percent run a decentralized model.

Extrapolating the results across the entire global IT organizational population, Gartner concluded most IT groups were risking their credibility and relevance within their parent organizations. The research organization painted a picture of a status quo of IT organizations during the past decade: basically centralized and siloed, with a heavy emphasis on cost control and a modicum of emphasis on process excellence and service quality.

Moreover, what the IT organizations report as a shared services model looks more like a centralized, functional model, based on the respondents' relatively low commitment to process standards and methodologies, Gartner concludes. And it predicts that were such a profile to continue during the next decade, it will lead to greater decentralization of IT and greater outsourcing to global service firms of infrastructure and application development services. Eventually, it warns, these will help facilitate a "business takeover" of IT.