Central vs. decentralized IT-structure

Definitions, Advantages & Disadvantages

Freddy Czaja

For many companies, the decision for or against a centralized / decentralized IT structure is very explosive and not easy to answer. Bad decisions can cost a lot of money, negatively impact business processes, and hinder business growth. With this article we want to show the advantages and disadvantages of a central and decentralized IT structure.

Central IT structure

A central IT structure bundles the necessary information technology, if possible in one system. On the software side, it is also referred to as "integrated software" and includes several application programs (modules) that function across functions. A typical example is an ERP software with the areas of sales, purchasing, warehouse, personnel, CRM, accounting etc.

Decentralized IT structure

A decentralized IT structure is a composite of software and hardware (sometimes island solution) that is used to map and control a company's processes. These solutions are networked at best via middleware to a ERP, but are usually controlled separately. Examples are software such as: accounting (datev), project management (Jira), online shop software (Magento), inventory management (afterbuy) or CRM (Salesforce).

Odoo CMS - a big picture

Mixed form central / decentralized IT structure

Many companies prefer a hybrid of centralized and decentralized IT structure. It consists of centralized software, such as an ERP that maps and controls most of the processes, and specialized software that is ahead of the ERP and its modules and adds value to the business. Interfaced with the ERP, these softwares can be used even more profitably. Of course, in reality, many softwares are also operated without interfaces to the ERP - this is ok if the result is correct.

The right way

The point when companies should opt for a centralized, decentralized or mixed IT structure is not entirely clear. Clues can be the size of the business, the number of branch offices and divisions, the complexity of the business, the growth of the business, or the IT costs.

Advantages of a central IT structure

If had ERP systems combined all the advantages of specialized software, companies would only use ERP software. But that's not the case - and that's a good thing. Nevertheless, it can be said that ERP systems offer advantages that a decentralized IT structure can not offer. Below is a summary.

Data exchange in real time

One of the strongest benefits of a centralized IT structure (e.g., ERP) is that the data exchange happens in real time. Adding and changing data affects all ERP areas and makes planning, control, and evaluation more accurate. This also avoids errors that occur due to time-delayed adaptation of the data.

Common database

A consistent database eliminates redundancy caused by transferring data from one system to another. This also applies to the same data records that would naturally appear in the various software (consistency of the master data). Another big advantage is that the mapping of all processes in the company and thus the planning, control and evaluation is much more accurate, because all the data in a system converge.

IT costs

When it comes to IT costs, most people think on rental or purchase software. But that's just one part, because the biggest expenses usually come from staffing costs for IT specialists and migrating (updating) interfaces and software. For companies that have their IT systems managed externally, the use of a central IT system considerably reduces the number of specialists, IT companies and contact persons required, which results in high cost savings.

Standard for hardware and software

Managing software is much easier than managing 10 softwares with a variety of architectures, interfaces & hardwares. This consistency not only makes the handling by employees much easier, but also brings a uniform standard in data security. Furthermore, a uniform standard, the use of isolated solutions and the "wild growth" of various software solutions are avoided.

High reliability

Minimizing software solutions also increases resiliency by allowing the IT department can focus on a few (one) software and hardwares. This concerns the monitoring of the system, backups (testing of backups) or the optimization of the system.

Administration, control, mapping, evaluation of processes

A holistic, transparent overview of the company helps to make the right decisions at the right time. This is made possible by an enterprise resource planning software in which all data converges and influences each other. The control, mapping and evaluation of the processes can thus be done by well-founded, real-time generated data, which positively influences almost all company decisions.

Employee know-how

The specialization on a system automatically brings with it a specialization of the employees. This means: safe handling of the software, more background knowledge, faster operation, higher employee motivation and thus more profitable use of the software and added value for the company.

Advantages of a decentralized IT structure

The Best individual softwares

If we ignore the advantages of a central IT structure, one of the company's goals is to use the best possible software for all processes. Of course, this endeavor is in contrast to a centralized IT structure and, if the advantages of both structures are to be used can only be realized through a hybrid of centralized and decentralized IT structure. However, fact is one, a software specialized in specific areas, processes or industries is usually better than a standard software.

Fast adaptability of IT, higher local autonomy and faster processes

Individual customer wishes or requests of individual departments can be implemented more quickly in decentralized IT structures, since the complexity is lower than in large ERP systems. This can be adding a plugin, changing processes by department, or simply choosing another software. Short decision paths and procurement times are therefore the advantages of a decentralized IT structure.

Special tasks

Special tasks are easier to implement and coordinate due to decentralized IT structures, because the customer is in the foreground and not the system. For special tasks, solutions can be found and implemented within a short time without changing an entire ERP.

Conclusion

The trend is towards a central IT structure! However, only very few companies can afford to realize everything in an ERP - which is why small and medium-sized companies usually opt for a hybrid. The combination of centralized and decentralized system offers the advantages of both systems and therefore has enough scope for quick and innovative decisions.

About Freddy Czaja

SEO is the air he breaths. If it has a bit of Oxygen, he doesn't care/ He likes his coffee black and cold.