Centralized or Decentralized Organization?
Faculty of Technology, Policy and Management,
Delft University of Technology
Jaffalaan 5, NL-2628 BX, Delft,
Tel. +31 (15) 278 1140,
Politicians and public managers continue to debate over whether
to centralize or to decentralize departments, information systems
and services. Shared service centers (SSCs) are gaining
importance in public administration as a means to innovate, to
reduce costs and to increase service levels. The SSC is a business
model in which selected government functions are concentrated
into a semi-autonomous business unit. Implementing SSCs is not
easy, as it often requires several trade-offs and an effective
organization and management structure.
The discussions about the decision whether to use SSCs seem to
be predominantly focused on efficiency and effectiveness aspects,
which are rational arguments. In this research-in-progress ongoing
research into the design and governance of SSC is presented. We
analyze a case study at a municipality and identify factors
contributing to success and failure. Our preliminary findings
suggest that designing an effective management structure,
establishing an architecture capturing central and decentral
elements, setting the right expectations, creating a sense of
urgency and ensuring that all stakeholders understand the
centralization/decentralization aspects of the SSC are important
elements resulting in success.
Categories and Subject Descriptors
H.1.1. [General System Theory]: Models and Principles –
Systems and Information Theory; J.1 [Administrative Data
Processing]: Administrative Data Processing – Government;
K.6.4 [Management of computing and Information Systems]
Management of Computing and Information Systems– System
Management, Performance, Design, Economics.
Success factors, Data Centers, Shared Service Centers,
dissatisfied with the returns obtained from their investments in
ICT. Costs are rising too rapidly and technology seems to be
changing so quickly that one organization can hardly keep up
with the latest developments by itself. This has sporadically
resulted in collaboration between small municipalities to avoid
duplication of efforts and to establish one shared back-office .
The main motivations seem to be cost reduction and concentration
of expertise . Collaboration resulted in the centralization of
functions in so-called shared services centers (SSCs).
public organizations become increasingly
Obtaining all the advantages of SSCs is extremely difficult 
and requires at least an organization capturing central and
decentral elements, an effective management structure and
addressing a number of critical success factors, which are not
known yet. A lot of efforts are necessary to adapt and adopt the
new organizational arrangements, coordination mechanisms, new
processes and the allocation of responsibilities. Motives to
implement a SSC are to some degree conflicting and therefore
difficult to combine in practice. For example accomplishing cost
reduction, service improvement and innovation is difficult.
Consequently measuring the benefits is difficult as it is often
impossible to measure actual outcomes and only respondent’s
perceptions can be measured, which depends on the specific
position they have. As such, it is necessary to understand how the
promises of SSCs can be accomplished and which factors result in
failure or success.
2. SHARED SERVICE CENTERS
The SSC is a business model in which selected government
functions are concentrated into a semi-autonomous business unit
with management structures that promote efficiency, value
generation, and cost savings in a manner akin to companies
competing in an open market . By unbundling and centralizing
activities, the basic premise for a SSC seems to be that services
provided by one local department can be provided to others with
relatively few efforts. With centralization and decentralization
respectively we denote the (de)centralization of the broad
spectrum of information systems resources including human
resources, computing hardware, applications, storage and network
services, web hosting, application hosting and information
Figure 2 depicts a classification of SSC archetype as a (1) staff
department, (2) internal joint venture, (3) infrastructure facilities
for multiple business units (BU), (4) a center within one BU, (5)
service firm, which is similar to outsourcing arrangements and (6)
joint venture with an outsourcing vendor . Combinations of
archetypes can be found within large organizations.
Board of directors
(3) SSC as infrastructure
(2) Internal joint venture
within 1 BU
Figure 2: Archetypes of SSC business models (based
The decision to use a SSC is a decision whether to centralize or
decentralize activities and systems. Managers have been
confronted with these kinds of decisions ever since the computer
was introduced . There is limited emphasis on the business
engineering  and the management of change  in public
administration. The centralization/decentralization choice is a
critical decision on a strategic level. It implies a long-term
decision with significant complexity and risks.
The decision-making whether or not to use a SSC seems to be
predominantly focused on efficiency and effectiveness, rational
arguments . In previous research we identified services
that can be shared among government agencies , investigated
the motives and management issues determining the successful
implementation of SSCs  and investigated the management
relationships in SSCs  We found that obtaining the promised
benefits is not easily accomplished and can require considerable
changes in organizational
mechanisms, business processes and allocation of responsibilities.
Our current research is focused on supporting decision-making
concerning the implementation of SSC.
Our intention is to study the elements contributing to the success
or failure of SSCs. Case study research was chosen as it is a
suitable instrument for studying a contemporary phenomenon in
its natural setting, and investigating a wide range of variables
. We investigated a large municipality in the Netherlands to
explore issues resulting in failure of success. The city council
decided to initiate a SSC concerning the internal joint venture
archetype. The case study is being investigated using reports,
policy documents and semi-structured interviews.
In this research-in-progress we presented ongoing research into
shared services centers in e-government. We investigated a case
study at a large municipality. Our preliminary findings suggest
that designing an effective management structure, establishing an
architecture capturing central and decentral elements, setting the
right expectations, creating a sense of urgency and ensuring that
all stakeholders understand the centralization/decentralization
aspects of the SSC are important elements resulting in success.
This research-in-progress is part of ongoing research into the
concept of SSCs. This research is responsive to the call of public
agencies about which kind of services are suitable to share, how
to obtain the expected benefits and how to organize SSCs.
Clearly, there is no one-size-fits-all business model that
incorporates all benefits and has no negative aspects. As such, it is
necessary to understand how the promises of SSCs can be
accomplished, which trade-offs should be made and which factors
result in failure or success given certain conditions.
The quest towards shared service business models has just started
and there remain many research questions to be solved. There still
is a major need to further investigate the governance and design
issues of shared service centers and the major factors contributing
to success and failure. Further research in this direction has been
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