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Next Stop: Centralisation

Next Stop: Centralisation

It was in, it was out, and now it's back and better than before. Is it time for your company to get on board?

For many IT execs, the term centralisation is a relic of the 1970s, eliciting memories of skyrocketing petrol prices, VW Beetles and Sir John Kerr. Like all those timepieces, centralisation is back. But it's not your father's centralised IT organisation - this time it has a chance to succeed.

Centralisation in the 1970s and early 1980s involved monolithic IT organisations built around a mainframe that served the entire enterprise. Because IT staffers were set apart from the business units, they were usually out of touch with users who saw them - often accurately - as unresponsive and irrelevant. In the late 1980s, with the rise of distributed computing environments, IT departments also became distributed, with IT employees organised to support specific business units at different geographic locations.

Today there are two new breeds of centralisation. The first involves organising IT employees into groups that support specific business processes for the entire enterprise, such as supply chain management or marketing. While that strategy sounds more dispersed than centralised, it dictates that a single IT organisation provide services for the entire company, regardless of business unit or location.

The second breed organises information technology employees by skill set and assigns them to project teams that break up when the projects conclude.

Companies are centralising now because it is more cost-effective than having a distributed environment; it allows them to create consistent technology standards across the enterprise; and it cuts down on "reinventions of the wheel"that occur when separate business units devise identical solutions to the same problems.

But doing it and doing it right are two different things. Centralisation can be a disaster if CIOs don't address cultural issues and if they don't have processes in place to determine funding and staffing priorities across business units. (For another take on IT organisational models, see "Let's Get Organised!",)The Cult of Functionality Rather than assign IT workers to handle tasks such as supply chain management, procurement and distribution for one particular unit, companies that are centralising IT operations by business process are assigning each worker to support one process for the enterprise as a whole.

CIO Jon Ricker is doing just that at Columbus, Ohio-based Limited Technology Services (LTS), a subsidiary of The Limited that supports the company's retail businesses, including Bath & Body Works, Express, The Limited, Victoria's Secret and White Barn Candle Company. Previously, each of these brands had its own IT organisation. But as the company centralised more of its operations, making The Limited a hub for its other brands, IT followed suit, first implementing a centralised model to handle Y2K issues. Ricker kept the structure in place for future IT projects.

Today Ricker's staff works for a host of strategic functions across the enterprise, including distribution services, store operations and real estate. (IS employees who work with less strategic functions such as LAN administration and PC support are still distributed geographically.) The reorganisation has improved project delivery and financial performance. For example, LTS just completed a massive migration of the Express business unit from home-grown legacy technologies to The Limited's common systems platform, on time and on budget. In a distributed environment, Ricker says, Express would have been able to use only its own internal IT staff instead of recruiting skilled IT people from across the enterprise. He adds that each of The Limited's past six major IT projects, including the installation of new warehouse management systems for both The Limited and Victoria's Secret stores, have also benefited. "Previously, we'd have one or two people in the individual division trying to do the whole thing,"he says. "Now if I need to apply 10 people to make something happen at one brand, I can do it."

Centralisation has also helped to improve staff retention - it has led to clearer job descriptions, which in turn helped the IS staff reach defined goals, Ricker says. In the past three years attrition has been cut in half.

Kathy Tamer, vice president and CIO of United Space Alliance (USA) in Houston, has also re-engineered her IT organisation along business process lines. USA is NASA's prime contractor for space shuttle operations, supporting launches, landings and logistics. It's a product of a 1995 joint venture of 16 NASA contractors, including Boeing and Lockheed Martin, with offices in Houston, at the Kennedy Space Centre in Cape Canaveral, and at the Marshall Space Flight Centre in Alabama. Before 1999, Tamer's IS employees were dedicated to their particular sites and loyal to the companies they had worked for previously. There were also redundancies, notably the multiple help desks in each location - remnants of the contractors that combined to form USA. The help desks all operated differently and couldn't communicate with one another to devise consistent solutions to problems.

In the past couple of years, Tamer has worked hard to eliminate those inefficiencies. She used a centralised organisational model, she says, because she had seen too many low-level decisions work their way up to the CIO's office. With IT decentralised, people below her didn't feel they had the authority to make decisions that might affect another location or business unit.

Tamer has centralised USA around six business process centres: strategic planning and integration, platform engineering and operations, application engineering services, data and documentation management, IT security, and user support services. She's done it without relocating anyone. And, as at The Limited, in her own development group each employee supports a process such as procurement, HR or logistics.

So far the rewards have been great, Tamer says. Minor project plans are handled at the appropriate levels, leaving her to focus on issues such as overall IT strategy. She's consolidated the three help desks in Florida and the four help desks in Houston so that there is just one in each location. Users now get better support because each help desk is staffed by people with a greater diversity of skills, Tamer says. Meanwhile, consolidating employees by skills has allowed her to trim 17 per cent of USA's help-desk staff - through natural attrition and reassignment, not layoffs - at a savings of $US300,000 a year.

Tamer has also created consistent technology standards across the enterprise, such as the common desktop she's putting into place. Now, whenever IT rolls out an enterprisewide application to USA's more than 11,000 users, Tamer can do less testing beforehand and encounters fewer variables and complexities in the programming process. "You could never get a common desktop without centralisation,"she says. "[Each location] would insist on doing its own thing. Of course, you still have to have enough flexibility in the process to accommodate local differences."

Re-establishing an IT organisation along enterprisewide business processes isn't easy. Ricker's greatest challenge has been planning for big, long-range projects while leaving enough flexibility to tackle smaller, unplanned but necessary projects. "How do I ensure I have enough local resources left to do the quick hits without decimating the large enterprise project resource pool?"he says. For example, last fall Ricker's group was asked to enable cash registers in the Bath & Body Works stores to process several promotional schemes simultaneously. That way, as merchandise is scanned the customer can get the best deal the combinations will yield. Because no process governs resource allocation yet, it took almost three months to figure out which projects in other business units could spare the necessary staff and funding. "That should have taken three days,"Ricker says.

Tamer, for her part, has struggled to convert employees from being loyal to their location or prior employer to supporting the enterprise as a whole. People who have always been part of a single-point operation are reluctant to give up their independence, she says. Tamer has travelled to meet with IS and businesspeople to foster centralisation efforts. She's also made geography-sensitive decisions, such as combating a perceived bias toward Houston, where USA's executives are primarily based, by planning to put a production system as well as a distribution and manufacturing system in Florida. Though Tamer picked Florida strictly for business reasons - it put the systems close to its primary users - the heightened sense of corporate unity was a nice by-product. "We were sending a message to the Florida people that we weren't just thinking about Houston,"Tamer says. "It was a vote of confidence."

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