It has always made sense that IT organizations which follow a federated model are likely to be better aligned with the business. Now, there some’s proof: The 47% of companies so far surveyed who subscribe to this model have the highest scores on the Strategic Alignment Maturity Assessment survey conducted by The Society of Information Management.
Federated models combine the best of centralized and decentralized models. Those services that are common, and the personnel to perform them, can be centralized, and those that are specific to a business unit can be assigned to those units.
Most IT shops start off either as centralized or, in some cases, as decentralized service providers, and it isn’t always easy to make the move to the next step.
“The one who has to be behind making that happen is the CIO,” says Jerry Luftman, vice president of chapter relations at SIM and also the professor and associate dean of graduate IS programs at Stevens Institute of Technology. “But if they move from centralized to federated, they have fewer people reporting to them. Our culture suggests the more people reporting to you, the more powerful you are.”
At the same time, business leadership also may have its concerns that the IT personnel who might wind up in their units will be too technically oriented and won’t speak the same language.
Moving to a federated model requires more than organizational change, says Luftman.
“The governance processes have to change,” he says. “Where I had all IS people report to me as CIO, and now I don’t, how do you relate to these decentralized units? How do you ensure you integrate data and leverage applications, make decisions vis a vis standards and ensure that they are being adhered to?”
Putting the pieces in place
Those companies that have made the move successfully get there because all parties understand the value of IT and appreciate the ability to enable autonomy in services that are directly related to the business and its objectives, and centralization of common IT functions such as infrastructure.
And the way they have come to this understanding is through IT communicating and partnering with the business, doing strategic planning, and practically demonstrating the value of IT while placing governance controls upon it.
“You have to have all these pieces in place before making the move,” says Luftman.
“You could be federated and have problems if you don’t focus on these other areas,” he says. “You can federate but not have balanced metrics or not do a good job in strategic planning, and you’re still not going to move anywhere further up the ladder in the more mature alignment assessment.”
Unfortunately, the latest update of the survey shows that IT strategic planning is still very poor overall, business liaisons are still not effectively used, and IT metrics remain more technical than capable of relating IT’s overall contribution to the business.
“SLAs are another shocker,” says Luftman. “For big companies, this should be way up high as being strong and effective as perceived by IT and business people, and it’s not.”