Barclays banks on an integrated IT department in a bid to cut costs

Firms follow a cyclical pattern for centralising IT.

Firms follow a cyclical pattern for centralising IT.

A plan by Barclays bank to restructure its IT division is the latest attempt by a company to bridge the divide between the general business and its IT staff.

Under the restructuring plans, Barclays will integrate its main IT division, called Enable, into its UK banking business. Enable covers most IT systems and support.

IT staff who support administrative processes in Enable will move over to be part of the UK banking business, completing a process of centralising its UK IT which began in January.

Previously, Enable was run as a separate unit under a decentralised model.

However, Barclays will maintain a separate IT division, called CIO, which will continue to be responsible for core IT systems and strategy across the Barclays group worldwide.

The restructuring, part of a company-wide review, aims to help Barclays meet a target for reducing its costs and boosting its income in its UK retail business by 2% a year between 2005 and 2007.

Companies have been changing their minds about where to put the IT department within their business over the past 20 years, according to Gary Barnett, IT research director at analyst firm Ovum.

Under this corporate cycle, IT departments have been run centrally from a head office with an all-powerful chief information officer, or decentralised where business units are charged for IT services or even become independent companies with external clients.

"Over the past 20 years companies have oscillated between [centralised and decentralised IT] every four years," said Barnett. "It is an attempt to bridge the gap between IT and the business, but the fact organisations have oscillated shows that it has patently not worked."

Richard Edwards, a research analyst at Butler Group, said the introduction of new technology in the 1990s, such as client-server systems and e-commerce, suited a decentralised IT structure in which staff worked for business units.

"Under a centralised model IT staff are available to support all IT across the business and not just one subsidiary," said Edwards. "This allows you to have a smaller number of people looking after the systems."

He added that firms were beginning to copy the way outsourcing suppliers run their business - low costs per transaction, economies of scale and standardised technology. This is easier to achieve when IT is controlled centrally, said Edwards.

To centralise or decentralise?

The centralised IT department is the preferred model for European companies, according to a recent survey. Of the 510 European firms surveyed by Forrester Research, 64% described their IT organisation as centralised.

In the UK, 54% of those surveyed described their organisation's IT as centralised. Only 10% described it as decentralised - where individual business units or geographic locations have separate IT departments. Some 36% said their IT function was a mixture of both.

In the centralised model, all IT functions - strategy and planning, application development and operations - report directly to a head of department such as an IT director or chief information officer. All of the department's assets, including hardware, software, staff and budget, are controlled by a central organisation.

Shell is one of the companies that have changed the structure of their IT departments.

In 2001 the oil firm brought its multibillion-dollar subsidiary, Shell Services International, back to its central business.

The old IT subsidiary had provided services to other companies as well as Shell, but after the 2001 restructuring the IT department reverted to its traditional role.

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