Centralized versus Decentralized Computing: Organizational Considerations and Management Options JOHN LESLIE KING Department of Information and Computer Science, University of Cahfornia, Irvine, Irvine, California 92717 The long.standing debate over whether to centralize or decentralize computing is examined in terms of the fundamental organizational and economic factors at stake. The traditional debate is evaluated, and found to focus predominantly on issues of efficiency versus effectiveness, with solutions based on a rationalistic strategy of optimizing in this trade-off. A behavioral assessment suggests that the driving issues in the debate are the politics of organization and resources, centering on the issue of control. The economics of computing depolyment decisions are presented as an important issue, but one that often serves as a field of argument in which political concerns are dealt with. The debate in this light appears to be unresolvable in the long run, although effective strategies can be developed when the larger issues are recognized. The current situation facing managers of computing, given the advent of small and comparatively inexpensive computers, is examined in detail, and a set of management options for dealing with this persistent issue is presented. Categories and Subject Descriptors: K.6.0 [Management of Computing and Information Systems]: General; K.6.1 [Management of Computing and Information Systems]: Project and People Management; K.6.4 [Management of Computing and Information Systems]: System Management General Terms: Economics, Management Additional Key Words and Phrases: Centralization/decentralization, management of computing/information systems, structural arrangements for computing INTRODUCTION usually prompted by technological changes that affect the efficiencies of existing ar- Managers of computing have confronted rangements [EDPIDR 1979; Bernard 1979; decisions about centralizing or decentral- Breslin and Tashenberg 1978; Bucci and izing computing ever since the computer Streeter 1979; Buchanan and Linowes proved to be more than just another piece 1980a, 19801o; Chervany et al. 1978; Demb of office equipment. The debate has flour- 1975; D'Oliveria 1977; Ein-Dor and Segev ished for nearly twenty years in the infor- 1978; McKenney and McFarlan 1982; mation systems community. The goal has Metres 1981; Nolan 1979; Reynolds 1977; been to determine an appropriate arrange- Rockhart et al. 1979; Withington 1980]. ment for the deployment of computing re- The terrain in which to make centrali- sources in organizations, given user needs zation decisions has been continually and the desire of management to control changing. Predictions about the "comput- both costs and uses. A universally appro- ing arrangement of the future" range from priate arrangement has never been found. the conservative to the revolutionary: from Nevertheless, there has been a steady flow the deployment of small, special-purpose of advice on how to deal with this question, computers in user departments, to net- Permission to copy without fee all or part of this material is granted provided that the copies are not made or distributed for direct commercial advantage, the ACM copyright notice and the title of the publication and its date appear, and notice is given that copying is by permission of the Association for Computing Machinery. To copy otherwise, or to republish, requires a fee and/or specific permission. © 1984 ACM 0360-0300/83/1200-0319 $00.75 ComputingSurveys, Vol. 15, No. 4, December1983 320 • John Leslie King CONTENTS in perspective. It provides a working defi- nition of these concepts and outlines the basic pros and cons of each. The traditional arguments are then discussed, focusing on INTRODUCTION the customary assessment of trade-offs be- 1. THE DEBATE IN PERSPECTIVE tween efficiency and effectiveness. A de- 1 1 A Working Defimtion tailed examination of the problems with 1.2 Pros and Cons of the Alternatwes this traditional perspective concentrates on 2, THE TRADITIONAL DEBATE 3. ORGANIZATIONAL CONSIDERATIONS the critical importance of political and or- IN THE DEBATE TODAY ganizational factors, and notes the ways in 3.1 Politics of Orgamzation which simple economic analyses of the al- and Resources ternatives can result in misleading conclu- 3 2 The Economic Dynamics of Deployment Decisions sions. The examination reveals that control 3.3 The Interaction of Pohtical is the major factor in centralization/decen- and Economic Considerations tralization decisions, and that other aspects 4 MANAGEMENT OPTIONS IN of the debate must be seen in light of this CENTRALIZATION VERSUS DECENTRALIZATION fact. The paper concludes with discussion 4.1 A No-Option Option of the options available to management in 4.2 The Centralization Continuum dealing with the centralization issue, given 4.3 Mixed Strategies the political and economic factors that un- 4.4 Choosing an Option derlie the debate.2 5. CONCLUSION ACKNOWLEDGMENTS REFERENCES 1. THE DEBATE IN PERSPECTIVE 1.1 A Working Definition A v Most conceptualizations of centralization worked distributed systems deployed and decentralization rely on some concept throughout the organization, and even to of distance: the distance between plant lo- remote intelligent terminals in employees' cations, the distance between organiza- homes enabling the work force to "telecom- tional levels or operations, or the distance mute" instead of coming in to the office. 1 (physical or organizational) between where This rapid pace of change helps sustain the decisions are made and where they are en- centralization debate. But as we shall see, acted.3 the debate is rooted in more basic questions of organizational structure and behavior. 2 This paper deals specifically with computer applica- Changing technology merely rearranges the tion to administrative data processing. It does not address the special cases such as process control ap- forum in which these issues are debated. At plications or computer-aided design and manufactur- a time of rapid technological change, with ing that typically do not require intraorganizational concomitant pressure to decide how "best" data sharing. However, many of the issues discussed to organize the use of computing technol- here apply also to such applications. ogy, a review of these basic issues will help 3 This paper addresses centralization as a policy issue (i.e., what centralization/decentralization policies make sense of a confusing subject. should be followed under certain circumstances). It This paper puts the issue of centraliza- does not deal with centralization as an artifact of other tion versus decentralization of computing forces. See Robey [1981] for a discussion oftbe impact of computing on organizational structure (i.e. comput- 1 The predictions made about the potential impact of ing use as it results in greater or lesser organizational computing on organizations can be drawn from a wide centralization). The definition of centralization pro- variety of sources, including the popular press. Among vided in this paper draws upon an established tradition the better grounded predictions and assessments of research in organizations. The reader is encouraged are those by Buchanan and Linowes [1980a, 1980b], to review work by Blau [1970], Burns and Stalker Dolotta et al. [1976], EDP Analyzer [1980a, 1980b, [1961], Child [1973], Cyert and March [1963], Downs 1980c], Infotech International [1977a, 1977b], Jenkins [1967], Lawrence and Lorsch [1969], Meyer [1972], and Santos [1982], King [1982b], Kraemer [1982], Moore [1962, 1967], Perrow [1979, 1982], Pfeffer Kraemer and King [1982], McKenney and McFarlan [1982], Simon et al. [1954], Wagner [1966], Weber [1982], Mertes [1981], Olson [1983], Rockart et al. [1947, 1952] and Zannetos [1965]. These provide both [1979], Salerno [1981], and Statland [1979]. overviews and detailed definitions of the concept of Computing Surveys, Vol. 15, No.' 4, December 1983 Centralized versus Decentralized Computing • 321 There are three separate aspects to the performance. It also encourages lower level centralization issue. Centralization versus managers to exploit innovative opportuni- decentralization of control concerns the lo- ties that improve unit-level performance. cus of decision-making activity in the or- Decentralization of control can create prob- ganization. Centralization implies the con- lems if lower level managers are incompe- centration of decision-making power in a tent, are not appropriately held to account single person or small group; decentraliza- for their decisions, or make decisions that tion implies that decisions are made at result in problems for other organizational various levels in the organizational hier- units or for higher management. archy. Centralization versus decentraliza- Centralization of physical location capi- tion of physical location concerns the siting talizes on economies of scale and preserves of facilities. Centralized physical location organizational integrity in operations. The has all facilitiesin one place; decentralized economies of scale arise from exploiting the location spreads facilitiesaround the region full potential of technologies that cause or the country, or even internationally. output to increase more rapidly than costs. Centralization versus decentralization of The costs of duplicating overhead and fa- function refers to the position of an activity cilities can be avoided, and organizational or responsibility within the structure of the protocols are easier