Depending on the business pressure du jour, large IT shops tend to swing back and forth from one organizational model to another. Need to save money and promote technology standards across the organization? Centralize. Need to respond more quickly to local market demands and better align with the business? Decentralize. “It’s a constant tension between the two extremes of the pendulum,” says Ron Kifer, senior VP and CIO for the United States and Canada at DHL Express.
The global transportation and logistics services giant began centralizing and consolidating IT infrastructure and services six years ago, building a massive computing supercenter in Kuala Lumpur to manage IT for most of its operations in the Asia-Pacific and emerging markets, Kifer says. Two years ago, DHL opened a supercenter in Scottsdale, Ariz., to consolidate IT for the United States, Canada, and parts of Central and South America; and this year, the company set up a supercenter in Prague to condense IT for most of Europe and the Mediterranean.
While centralization drove down costs, it did make it harder for business units to ensure that IT spending was in sync with business strategy. “It was difficult to get the right people from the business together with the right people from IT to define project requirements in a manner that was suitable for design and specification,” Kifer says. Multiple iterations of project requirement specs were continually shifting between the business and IT (because of their remoteness to each other), adding cost and time to project lifecycles, he says.
Today DHL has embarked on an IT transformation that aims to give it the best of both worlds. The arrangement separates the supply side of DHL’s IT organization from the demand side, and it puts IT demand management under the business’s control. “Demand CIOs” report to regional CEOs and manage the region’s IT budget, Kifer says, to better align IT spending with business strategy. The demand-management function—Express Business IT (EbIT)—is staffed by IT employees who were previously focused on demand-management aspects of IT.Under the new model, Kifer says, DHL will be able to reap the cost savings of its centralized computing supercenters—and the alignment benefits of having IT closely tied to regional operations. All regions of DHL are adopting this organizational model. While regional teams are in charge of implementing the EbIT functions within their regions, Kifer says, a “thin global group” under a single CIO is coordinating to ensure a consistent approach, standards, processes and tools from region to region. DHL also has a global corporate transformation office supporting this initiative.
For many employees, the reorganization means a dramatic change in roles, reporting relationships and processes, Kifer says. DHL’s change-management plan emphasizes education and training to help employees understand the benefits of these changes to the company as a whole—and to them personally. –S.K.