This paper examines the trade-offs between centralized and decentralized Management Information Systems (MIS) and IT infrastructures. It explores how Service-Oriented Architectures (SOA) and Software-as-a-Service (SaaS) platforms are reshaping organizational decisions about IT structure. The advantages of decentralization — including greater agility, regional responsiveness, and tailored CRM systems — are weighed against the benefits of centralization, such as economies of scale, data consistency, and cost reduction. Drawing on industry examples and research, the paper concludes that the tension between these two approaches is increasingly mediated by emerging technologies that enable hybrid strategies.
The widespread adoption of Service-Oriented Architectures (SOA) is significantly transforming the decisions companies make about whether to centralize or decentralize critical parts of their IT infrastructure. The fact that nearly every CIO is now expected to make all information assets, systems, databases, and processes align with line-of-business objectives is further driving the decentralization of IT.
Despite these market dynamics, however, there are still many organizations that resist the tendency to decentralize any IT resource that has a bearing on the company's ability to be demand-driven and embrace time-to-market strategies. In the interest of being demand-driven, manufacturers are increasingly looking at IT infrastructures that give them greater agility and responsiveness to market conditions. This is in conflict with the centralization of resources driven by cost-reduction strategies within many organizations. This tension between centralization and decentralization of IT resources forms the basis of the following analysis.
The most common reason companies decentralize their MIS and IT systems is to make them more agile and capable of responding to market dynamics, including the ability to deliver faster time-to-market for new product and service introductions. Additional advantages of a decentralized MIS architecture include the following:
Non-shared databases, information, content management systems, and pricing databases all need to be decentralized — especially when they have been purpose-built for a given geography, market, or regionalized strategy. When data is only pertinent to a given strategy in a given location, decentralization is the best possible approach.
Strategic use of resources — including product-specific features and content, pricing, services, sales and fulfillment, and supply chain visibility — can be accessible from decentralized locations yet administered and managed centrally. This is the propagation of content and information to local levels where it can be used to accomplish business goals and objectives. The propagation and replication of data to local levels through the use of XML is making hosting and the Software-as-a-Service (SaaS) model viable for making organizations more adept at responding quickly to local market opportunities without being constrained by heavy centralized content. SaaS is revolutionizing the use of centralized content, pricing, and data within a decentralized business strategy and IT architecture.
Decentralization of data and the processes employed to create, maintain, and grow data repositories more accurately reflects the market conditions and dynamics of a specific regional market than centralized data does.
For companies that have a strong indirect and direct channel distribution strategy in place, decentralized systems provide a greater ability to assign Profit & Loss (P&L) performance levels throughout an entire series of channels. This decentralization of selling expense and profit data makes it possible to quickly identify which direct and indirect channel strategies are working and why — invaluable insight when channel and distribution managers need to meet their goals in terms of sales and profits per customer and partner.
Customer Relationship Management (CRM) systems, including Sales Force Automation (SFA) at a regional level, provide a more defined and precise measure of performance when integrated with marketing strategies than they would if centralized. Decentralized CRM and SFA strategies — whether within a region or division — are often used more effectively than their centralized counterparts because local sales representatives and sales managers have tailored the systems to their specific needs.
In many cases, the disadvantages of decentralized MIS and IT systems are, in effect, the advantages of a centralized system strategy. For purposes of this analysis, these are treated as the genuine advantages of centralization, and include the following factors:
"Centralization benefits: consistency, SOA, cost savings, Centers of Excellence"
"SaaS and SOA mediate centralization vs. decentralization tension"
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