Reduction of organizational and technological complexity

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Description:

In the 80’s and 90’s, following the rise of concepts like ‘integral management’ and ‘end user computing’, many of the responsibilities over business processes and technology have been decentralized in organizations because end users and decentralized management had to be ‘empowered’ in order to be able to be autonomous, flexible and agile. Because decentralized management felt responsible for business processes and technology they also felt responsible for controlling the cost resulting from the management of processes and technology.

Because of the rapid technological developments the complexity of technology increased rapidly during the 90’s. And with complexity, the cost involved with management of business and IT also increased. At the same time, the need for security of data and transaction also increased because of the rise of the internet and cross-organizational networking. Cross-organizational networking and enterprise application integration resulted in the need to standardise technology.

In reaction to these developments and trends, organizations started to think about ways to reduce the increasing complexity of business processes and technology in order to reduce cost and to increase control of processes and technology. This resulted in the following (popular) organizational concepts:

  • outsourcing – external sourcing of non-core business processes and technology.
  • shared services – internal central sourcing of standard and common processes and technology in shared service centers.

A recent enabler for this driving force is the rise of the low-wage / high-level education countries in Eastern Europe and Asia. They are seen by many organizations as a viable opportunity for low-cost and high quality outsourcing of business processes and technology.

Enablers:

  • Standardization
  • Shared Services concepts
  • Outsourcing
  • Cost reduction
  • Need for data and transaction security

Inhibitors:

  • Increasing technological complexity – new technology may increase complexity
  • Proprietary technology – proprietary technology can counter standardization and obstruct integration
  • Legacy systems – legacy systems can obstruct integration
  • Existing power bases – decentralized management is reluctant to let go of existing responsibilities

Paradigms:

Old: decentralization is good for organizational flexibility and cost control.
New: shared services can help to reduce complexity and cost by centralizing standardized and common processes and technology while retaining organizational flexibility and agility.

Experts:

  • Management
  • Management consultants on shared services
  • Business ICT managers

Timing:

No timing information is needed to understand this driving force.

Web Resources:

http://en.wikipedia.org/wiki/Outsourcing
http://en.wikipedia.org/wiki/Shared_services
http://en.wikipedia.org/wiki/Standardization