Swinging Toward Centralization

The pendulum is moving toward IT consolidation as CIOs try to save money and gain efficiencies. But it's possible to go too far.

When the economy plummeted at the end of 2008, the Western U.S. branch of The Salvation Army was ahead of the cost-cutting game. CIO Clarence White had centralized the IT organization a year or two earlier, and he had consolidated the database and storage servers from the business units into a single data center in Long Beach, Calif.

The move wasn't aimed at cutting costs, but "the timing was good," White says. It reduced the charitable organization's technology footprint, encouraged more virtualization and lowered maintenance and power costs. "It was an unanticipated benefit," he says. "We looked like geniuses."

And White says that for the first time he feels that the organization has a strong disaster recovery strategy, thanks to consolidated storage and a fully replicated set of servers in a remote data center in Phoenix.

For decades, the pendulum has swung between centralized IT organizations and decentralized operations featuring small IT groups in each business unit. But with the urgent need to cut costs today, there's a good argument to be made for the former arrangement. With technology assets in one place, it's easier to take advantage of developments such as virtualization, storage de-duplication, cloud computing and outsourcing, all of which promise to lower costs.

Centralization also makes it easier to create an effective disaster recovery strategy, minimize labor redundancies, get volume discounts on technology purchases, and lower maintenance and training costs through standardization, proponents say.

There's some statistical evidence of a tilt toward IT centralization. In Computerworld's recent Forecast survey, 37% of 312 respondents said it's likely that their IT units will become more centralized in the next 12 months. And in a 2009 IBM survey of 2,500 CIO worldwide, 76% of respondents said they anticipated having a strongly centralized infrastructure in five years.

Under a more powerful corporate CIO, IBM itself last year completed a shift to centralized IT management, reducing the number of data centers it operates from 155 to five and trimming its portfolio of applications from 15,000 to 4,500 -- so far.

IT management consultant Harwell Thrasher says he hasn't seen direct evidence of more companies centralizing their IT organizations, but in this economy he can easily imagine why they might. The three reasons to centralize, he says, are to lower costs, improve efficiency and gain better control over operations.

With technologies such as virtualization and remote management making centralized infrastructures more economical, companies that at one time deferred to decentralized IT groups may now say, "We're in so much trouble economically that we're going to have to centralize even though it may hurt you," Thrasher contends.

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