Centralized vs. Federated Digital Transformations: Which Approach Will You Choose?

Undertaking a digital transformation means more than just moving data and applications to the cloud. Done well, a digital transformation lets your company do more, such as automate key processes, enable machine learning, and execute a strategy to leverage data for innovation.

We’ve guided many clients through digital transformations, and one of the fundamental questions that must be answered first is: “What matters most to you as a business?”

Two IT management models provide different benefits depending on the answer to that question. The models represent opposite ends of a spectrum—one centralizes key functions within a digital transformation team and one gives decision making to various areas or lines of business.

Centralized approach

Taking a centralized approach means creating a dedicated IT transformation team responsible for enacting the transformation and empowering them to do so.

Benefits:

  • Centralizing decision making and key functions provides a high level of reliability and reduces risk, especially important for regulated industries.
  • Having a single team focused on your transformation can provide more efficient project management.
  • A centralized approach also helps large organizations ensure things get done quickly, due to the central tracking mechanisms you enact.

Drawbacks:

  • A centralized approach means bringing in the right people to define strategy and execution, including dedicated roles for change management, metrics definition and tracking, risk management, and communications. This requires a greater level of investment upfront.
  • Your dedicated team must be empowered to enact change across the organization or you else you jeopardize the key priorities. Giving them control may impact other areas where they feel like they are losing control.

Federated approach

Taking a federated approach means giving teams the autonomy to make their own decisions to get to a destination.

Benefits:

  • Individual teams get to decide how they want to implement change. This results in the ability to adjust more quickly and can foster greater collaboration across units, as multiple teams are required to work together to accomplish the goal.
  • When there are large differences between the teams themselves, a federated approach brings expertise closer to where decision making lies rather than leaving it all within a single team.

Drawbacks:

  • Different teams may track things differently, so it may be more difficult to measure progress on an equal scale. It also is more difficult to scale, due to different methods being used across the organization.
  • It might be harder to relay a single message or apply a unified change management strategy with many different teams.

Hybrid models that utilize a dedicated central office but allow individual team autonomy are also possible but must be carefully considered. A central body without full powers can be more challenging than a fully centralized or federated model and cost more with a longer execution time. But if resources are available and lines of business are so distinct that it doesn’t make sense to organize under a single umbrella, a hybrid model can work.

We’ve seen firsthand how digital transformation efforts can benefit both large and small companies. In fact, any business that wants to take advantage of changing technologies can—but you must establish a strategy and create the mechanisms to enact it. If you want to become a market leader in your industry, or just want to utilize your data capabilities to provide exceptional customer services, transformational efforts are required.

The decision to go with a centralized or a federated approach should not be taken lightly and will impact your entire organization, but Infinitive can help you decide which is best.