A STUDY OF THE DATA PR]CESSING REQUIREMENTS OF THE RESEARCH DEPARTMENT OF THE FEDERAL RESERVE
BANK OF BOSTON by
DONAL) L. ISAACS
B.S., Tufts University (1969)
SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE
DEGREE IF MASTER OF SCIENCE -t the MASSACHUSETTS INSTITUTE OF TE C HNOLOGY JUNJE, 1974 Signature of Au
Alfred P. Sloan School of Management
Certified by...--- --- ---The , Ma si s y 10, 1974 Supervisor Accepted by...----.----.---.---...
Thesis Title: Centralization A Study of the of the Research Federal Reserve or Decentralizat Data Processing Departmnt f t Bank of Boston ion? Requirements hC Donald L. Isaics
ted to the Alfred P. Sloan 74 in partial fulfillient
of Master of Science.
School of Management on May of the requirements for the
ABSTRACT This study processing Federal Rese centralized An in rve Ba li tera centra urces. trod nk i ture li za investigates requi rements rve Bank of or decentra tion to the presented. ealing with on or decent
the question of whe of the Research )ep Boston would be best lized organization. organization within It is followed by a the organizational q ralization of data p ther the artment of satisfied the Federal summary of uestion of rocessing The specific situation within the Boston Federal Reserve Bank is then investigated. The needs of the organization are described. Three various alternative organizations are then presented and evaluated in light of
the previously developed framework. These alternatives include complete centralization of all data processing resources; decentralization of the programming effort while retaining centralized operations; and decentralizing the
equipment through the use of timeshariig services and mini computers.
The conclusions of this study are that thie centralized organization is apparently the best choice as it provides the greatest benefits for tie least costs.
Thesis Supervisor: Stuart Madnick
Title: Assistant Professor 3f Management Author: Submit 10, 19 degree data the by a Rese the the reso
ACKNDWLEDGEMENTS
I would like to thank some of the many people whose contributions were instrumental in the successful
undertaking and completion of this study. I am indebted-to my advisor, Mr. Stuart Madnick, who reviewed my work and provided many valuable suggestions.
I would 3oston for i Mr. Robert E of Research, supported my approval of Larsen, Mr. Cooper. also like ts sponsors isenmenger, approved t efforts. the topic o Peter Zotto to hi S he Al r ,P
tiank the Federal
p of this project. enior Vice Presiden
undertaking of thi so contributing to
the actual study we Mr. Larry Robbins, Reserve Bank of In particular, t and Director s study and either the re Mr. Nils and Mr. Peter
Special thanks are due to those members of the Res lepartment who 3oth provided information and reviewed t report for accuracy. These include Mr. Donald Kenney, Kevin McCabe, and Mrs. Joanne Grotnic.
ear c he Mr.
Finally, but perhaps most importantly, I would like to thank my wife Debby whose patience and encouragement
TABLE IF CONTENTS Page ABSTRACT ACKNOWLEOGEMENTS TABLE OF CONTENTS LIST OF FIGURES LIST OF TABLES CHAPTER 1 CHAPTER 2 CHAPTER 3 CHAPTER 4 - INTRODUCTION 1.1 Purpose of Study 1.2 Organization if Study
- BACKGROUND INFORMATION: ORGANIZATIONAL STRUCTURES
2.1 Federal Reserve System
2.2 Organization of the Boston Federal Reserve Bank
- CENTRALIZATION 3R DECENTRALIZATION? 3.1 Chapter Overview
3.2 Key Factors in the Evaluation of Centralized or Decentralized EDP Operations
3.3 Summary
- GOALS OF THE RESEARCH DEPARTMENT
4.1 General Data Processing Needs of the Research Department
4.2 Specific Requirements of the Statistical Section
4.3 Specific Requirements of the Economic Research Section
9 9 10 12 12 13 23 23 58 59
CHAPTER 5
CHAPTER 6
CHAPTER 7
CHAPTER 8
FOOTNOTES
- CENTRALIZED EQUIPMENT AND SOFTWARE
5.1 Descriptive Madet of the Current Centralized Organization
5.2 An Evaluation of the Centralized Organization
5.3 Possible Change;
- DECENTRALIZED SJFTWARE
6.1 Descriptive Madrd of a Decentralized Software Support Organization
6.2 An Evaluation of the Decentralized Software Or jani zat ion
- DECENTRALIZED 7.1 Feasibility 7.2 Feasibility
EQUIPMENT FACILITY of Using Minicomputers
fa Using Timesharing Services
- SUMMARY AND RECJMMIENDATIONS
3 IBLIGRAPHY APPENDIX I 96 97 101 121 124 125 126 134 136 149 160 172 175 177
LIST OF FIGURES
Ti tle
The Federal Reserve System
Abbreviated Organization Chart Department
Abbreviated Organization Chart Reserve Bank of Boston
Organization Chart of the Data Departments
Major Requirements and Questions Consideration in the Analysis of or Decentralizati on Page of the Research of the Federal Processing for Centr at i z at ion 52
Key Arguments for Centratization and Decentralization F i gure 2-1 2-2 2-3 2-4 3-1 3-2 56
LIST OF TABLES
Ti tIe
Allowable EDP Costs
Storage Requirements Sect ion Number of Report ing Stat isti Period Page
for the Statistical
cal Section Jobs per
Programming Requests -of the Statistical Section
Sample Response t: Survey Concerning the Desired Levels of Service Requested by Economists 94
Econometric Research De ESS Joos
and Jther Techniques partment in
Used by the a Sample of 120
Rating System Used in Tables 8-1, 8-2, 8-3, and 8-4
A Comparison of the Rela Centralized Facility and
A Comparison of Centralized and A Comparison of Centralized Faci Service tive Benefits Minicomputers of the 168
tie Relative Benefits. of Decentralized Staffs
tie Relative Benefits of the lity and a Timesharing
A Comparison of tie Relative Benefits of the Centralized Staff and a Timesharing Service
169 170 171 Tabl e 4-1 4-2 4-3 4-4 4-5 4-6 167 8-2 8-3 8-4
-1 Price and Frequen:y of Regression and
CHAPTER 1 - INTRODUCTION
1.1 Purpose of Study
The Research Department of the Federal Boston is responsible for producing various analyses which necessitate the utilization
processing resources. Currently the Researc data processing needs are met by a centrali is responsible for handling almost att of t data processing requirements. Various peop
have ex a lized tment a be bet This st process be sat i zat ion i tates
a lizati
to anal
pressed an i organization nd for the B te r. udy investig ing require. isfied best * A general the consider on-decentral yze various n a terest is opti nkp or in whet mat for whether Reserve reports of data h )epartm zed staff he Boston le within Bank of and ent 's which Bank's the her the currentthe Research
another arrangement
ates the question of w ents of the Research D by a centralized or de fr3mework is develope ation of the
ization issue. This f opti ons. hether the ep art m ent centralized d which ramework is Bank cent Depa migh data woul orga faci cent used
1.2 Organ The ao 2 presents organizati and partic Emphasis i affects th Department issues of processing facilitate ization of Study
rganization of the report is as follows. C background information concerning the
onal structures within the Federal Reserve ularly, the Federal Reserve Bank of Boston. s placed on the organizational structure as e data processing requirements of the Resea . Chapter 3 reviews the literature related centralization and decentralization of data resources. A framework is developed which the evaluation of any particular proposed
hapt er System it rch to arrangement. Chap Departmen constrain The alternati centraliz describes the frame possible explores effort wh functions computer services ter 4 t's r
includes a n3rmative model of equirements. It describes the
the Research goats and ts of senior management.
next three chapters analyze three various
ves. Chapter 5 evaluates a system characterized ed programming and computer equipment. It
the current organization, evaluates it in light work provided in Chapter 3, and then considers an improvements to the organization. Chapter 6
the effects of decentralizing the programming ile retaining the :entralized operational
. Chapter 7 investigates the decentralization of equipment. Specifically the use of timesharing and minicomputers are evaluated.
the
will
by
of y
Chapter 4 summarizes the findinqs of the report and prov ides overa Il rec omm friati ons.
CHAPTER 2 - BACKGROUND INFORMATION: ORGANIZATIONAL STRUCTURES
2.1 Federal Reserve System
The Federal Reserve Baik of Boston is one of twelve regional Federal Reserve Banks which, alonq with the Board of Governors of the Federal Reserve System, constitute the Federal Reserve System. The Federal Reserve Bank of Boston (or the Boston Fed, as it is commonly called), like each of the 11 other regional Federal Reserve Banks, is a
corporation which is owned by its member banks. Despite this status as 3 corporation, the individual Reserve Banks are not completely autonomous but are closely coordinated by the seven-member Board of Gavernors (or Board). Figure 2-1 represents the overall stru:trure of the Federal Reserve
2.2 Organization of the Boston Federal Reserve Bank The Boston Fed is organized inco functional
departments. Due to the specific problem being addressed in this report* the description of the internal organization of the Boston Federal Reserve Bank will be limited to those departments which in any way affect the data processing decisions of the Research Department. The following
subsections summarize the general organizational structure and responsibilities of the relevant departments.
2.2.1 Research Department The Research Departme President and Director of responsible for the perfor research as well as for th reporting of data from var
institutions, and utilitie Reserve System.
The economic research economists whop supported directly to the Director o Section is further divided which is generally respons there is a monetary sectio national business conditio
is headed b search. The nce and publ collection' us banks, fi in District y the Senior department ication of e editing, and nancial I of the Fed Vice is conom i c eral is performed by a staff of by research assistants, report
f Research. The Economic Research into smaller sections each of iale for different areas. Thus n, an international section' a
section. Each of these officer and addition, th The res and support Administrati part of the sections. The Sta editing, rep
sections is directed by a Bank includes one or more ad na!
ere are also a few special staf t of the department consists of areas and is unler the directio ve Assistant to the Director of department is also divided into
st ti ical Secti0 and rel n is resp easing at economists. In f members. the statistical n of the Research. This functional onsible for I financial cot l dat a ect i ng, which the B respo proce
oston Fed processes. The Computer Liaison Section i nsible for coordinating all of the departmental data ssing 3ctivities.
Figure 2-2 illustrates an abbreviated organizational s
chart of the Research Department as it pertains tt data processing.
2.2.2 Loan and Credit Department
The Loan and Credit Deoartment includes among its many responsibilities the evaluation of all requests by member
banks to borrow funds. In making a decision as to whether bank qualifies for borrowing at the discount rate, the Loan and Credit 3epartment utilizes many analytical tools and various data. Used in this analysis are some of the
financial data collected by the Research Department as well ng, P
as a statistical package which is used by both departments. Data collected by the Loa,- and
Credit
)eaartment are used in reports made by the Statistical Section of the Research Department.2.2.3 Accounting Department
The Accounting Department is responsible for informing all member banks of their required reserves (the amount of funds which must :e kept on reserve at the Fed) for the coming period. These reserve requirements are based on
individual bank deposit data which are collected and
processed by the Research Department; they are generated by a computer program which accesses the deposit data.
2.2.4 Data Under and depart is respons maintenanc computer a during 197 of which i is respons functional Systems Support (DSS)
the supervision of an Assistant Vice President ment manager, the Data Systems Support Department
ible for the design, development, implementation, e, and documentation of most of the Bank's
pplications. The department was reorganized
3 and now is divided into three Task Forces, each s directed by an administrator. Each Task Force
ible for providing full support to certain areas within the Bank.
Within each section ranging from programmer
Sthere trainees is a to variety o senior sys f ta te ms lent, analysts-The objective with flexibili individaul pro to oe performe of expertise. intersectional This stru which the depa were assigned departments or organization w of this organization ty in ject m d by a In ad mobil c t ure rt men on a appl as staff; the user projects and req on his projects organization' th Although on the support, at any assigned to his relation to all ass ay se di t i ty is wa ul I cat to pro determi uested ignirng personne be subdivided i ction member of ion, possibilit , although this unlike the prev s divided into -time basis to ions. The effe vide each user ned the priorit DSS aersonnel a is to provide management t to nto the i es is ious sm al supp ct o with y of ss ig
in a particular order. Under t e user shares a larger pool of average he should receive the s
time he may have many more (or projects deoending upon their p other outstanding Bank projects
tasks. Any specific modules apropriate level exist for less prevalent. organization in I groups which ort specific f the earlier a fixed support his outstanding ned to him to work
e ne esou me I ewer i ari w rces. evel of ) people ty in
2.2.5 Computer Planning Department
The Computer Planning )epartment is headed by an Assistant Vice President and is organized into three
sections. The Computer Plaining Section is primarily
concerned with the planninq of computer systems within the Bank and has minimal contact with the Research Department.
The Systems Section is resp3nsible for designing,
developing, and supporting :ertain major systems which are used by other programs or programmers. Included in this category are such systems as data communications packages
which support remote facilities and on-line text editors, which are used by programmers and other departments
(including Research).
The ESS Section is resoonsible for the development aid support of the Bank's Econometric Statistical System (ESS).
This system was originally developed as an econometric tool to be used by Research economists and their research
assistants in the analysis of data. Although this continues to be its primary use, the wide range of system capabilities has resulted in its being used by several other departments as well as by Research personnel for non-econometric
applications.
2.2.6 Data Processing and Data Communications Department The Data Processing and Data Communications Department' under the direction of an Assistant Vice President and
department manager, is responsible for all of the Bank's data processing operations (exclusive of the check
collection and transit operation).
The department operates
two Burroughs 4700 computer systems as well as an IBM 2968
which is part of a Federal Reserve System network for
transmitting data.
In addition, the DPDC department also
supervises all keypunching, job control work, and certain
other functions which do not affect the Research Jepartment.
Figures 2-3 and
organizational chart
Support Departmentso,
2-4
present an abbreviated
of the Boston Fed and of the Computer
Research
Figure 2-2: Abbreviated Ortanization Chart of the Research Department
Administrative
Assistant to the
Director of
Research
L"Irst
V
Ic
Presiden't
Researcl-D
epa
r
tman
t
"-ared itrDe
Dca tmninc[Data ProcesS-inai
Departments
Data Systems
Support Dep't.
Data Processing
and Data
Communica t
ions
CHAPTER 3 - CENTRALIZATION 3R DECENTRALIZATION? 3.1 Chapter Overview This theoretic decentral functions key issue spec i f ies a system. The decentrat the conft The provides
hapter presents a detai considerations related ation of electronic dat
The first section incl presents the possible ertain criteria for con
sec
iza iC t thi a f
ond section divides th tion issue into seven iing ideas related to rd section summarizes ramework through which
led analysis of the
to the centralization or a processing (E)P)
udes an overview of the alternatives, and
sideration when analyzing
e centralizati key factors an each of the fa the major issu
various Propo on -d summarizes ct or s. es and sed systems may be evaluated.
3.1.1 Definitions and Constraints
The issue of whether tie EDP functions are best
satisfied through a centralized or decentralized arrangement has been analyzed from various perspectives. Many different definitions and conclusions have resulted. There have been considerations from a georgraphic point of view as well as
terms are now amoiguous and must be defined before any analysis of the controversary
Centralization is defieaed placing of all responsibility one organizational unit. TNus
"Centralization is an organiza necessary implications for phy
managerial restrictions" (1). centralization also includes t
location (or resident analysts geographically and functionall
is begun. within this for certain as Solomon ti anal si S he ) y report as the functions under states,
concept and holds cal, geograo
olomon's def concept of which are as to one user under the administration of one central auth the theory presented in this chapter will Li of centralization to the more conventionaal broadened concept actually represents a vari basic organizations.
Similarly, decentralization is defined "delegation of decision making authority to
hic, or
inition
of
teams on signed bothbut which remain ority. However' mit the analysis mode; this
ation of the two
by Kaater as t the lowest poi in the organization where tie required information and capabilities can be brought together" (2).
This perspective of centralization-decentralization as an organizational problem seems appropriate given the
current state of the EDP fuictions. The major problem is no longer one of technical developments; rather, advances must involve utilizing more effectively the resources currently available. As Dinter states: "Computer technology, if not
ahead of us, a t least is ca:able of servicing our needs at whatever level we are capable of employing this technology" (3).
Dinter proceeds to stress that "in searching for more effective links oetween the computer and applications, we might thus concentrate on the human and organizational problems alone" (4).
The definitions of centralization-decentralization do not limit the scope of the function being controlled. Thus
it may include all EDP functions' or merely certain aspects (such as programming, operations, or planning).
3.1.2 Basic Issues
On the surface' the question of centralization or decentralization seems to reduce to a tradeoff between economies of scale and the user's level of service.
Proponents of centralization argue that economies of scale encourage specialization (of both managerial talent and
staff members) and avoids the duplication of efforts offered
by a decentralized authority. Advocates of a decentralized organization argue that the needs of the user are foremost, and that even if centralization might reduce costs, that it does so by neglecting the needs of the user. In effect this argument states that centralization provides false economy by minimizing cost through a reduction in service.
The generally equipment support. quest i on analyzed r other h Howe V computers gene of equipment I decentratizati hardware and o believe that b controversial, hardware seem A key iss programming st staffing provi oenefits to th
costs that are Decentral implie that th lowever, the c decentralized programming st installations different r e 0 f 0 m u a d e of centra for two ardwarer Li zat a reas and o err recent har ally make the ss controversi n, contends th
staff are two th subjects sh the arguments uch more valid e thus becomes ff. Berman :t es for greater total organiz at most only s ization e operat onverse operatio aff. To operated operating department fails to organization. of th ional doe s ns ar have by d a
no
e a m if ion or decentr : operations ( perators) and ization i mputer ogramming dware advances and thequestion of the central al. Berman, a proponen at "the centralization
separate questions... ould be viewed as
for physical centraliza
" (5).
the decentralization o aims that "decentralize
return in performance a tion fo
Lightly
programm cti vi ty t genera almost any diff ferent d r additiona higher" (6) ing staff d can not be Ily hold. prohibits a erent compu epartments systems but programmed byfully utilize the centrali
oes cent That cen ter and a cent Cost izat i t of of whil e t ion f the d and rsonnel not raliz is,' trali under rat zed software ed. a zed
3.1.3 Possib Glaser
le Alternatives
suggests four pssible orqaniz at ional structuir e The firs tire EDP lized. t of these function; The other would involve both programm three alternat
the cen tr alization ng ves and all er-at ncl u ions are de decentralized Of the r operations. decentralized some form of coordinator w and processes of systems. administratio equipment com e T c h E n p documentation. complete decen have complete accountability It should are not exhaus combinations o do represent a One poten and centralize unfeasibte for programmin maining th he second operations entral con o would be but not th xamples of , career p atibilitys, The fina tralizatio autonomy w g.
ree, one proposal is for central of the remaining three calls for
and programming which are under trol. Glaser proposes a central
responsible for controlling met e actual design and implementati
his responsibilities include sa ath planning, training programs,
and standards for programs and t proposed alternative is for a n ii which each department would ithin the constraints of its
i
zed aho ds on l ary
je emphasized that these four alternatives tive. Many passible variations and
f the four basic plans exist. However, they good framework for subsequent analysis. tial organization - decentralized operations d programming - has been dismissed as being
reasons which were mentioned in the previous
(7).
the cent
subsection of this chapter.
3.1.4 Criteria for Viewing a System
The issue of centralization-decentralization is not a programmed decision. The analyst must consider the details of the situation (the environment) and the particular
proposal and evaluate the Latter in tight of the former. Glaser suggests seven key criteria which should be considered when deciding on the
centralization-decentralization of EDP resources (8). (1) Minimum total cost
(2) Sensiti'vity to user problems
(3) Effective utilization of personnel
(4) Ability to attract and retain good personnel (5) Rational selection of projects for development (6) Opportunities to siare common systems
(7) Ability to adapt to changes in the technological or economic environment
The first of these considers the actual cost of the proposed system. The seconi factor* user satisfaction, is
difficult to quantify but of extreme importance. One
important subissue is the ralationship between the user and the service group. Dolkas claims that "to be effective in communicating with the user, the installation must respond quickly to user needs. To gain the confidence of the user
there must exist within the facility a good relationship between the facility
The third facto determines cost effi also affects the fou retain good personne the costs of recruit sign if ican factor inc project wh The s - is impor comptetion ability to be conside economic c both an in t- bo ludie s ich i ix th tant with adj u re di. ondi t te rna t s f i h in the mos acto n th less t to New i ons l bud
and the use r is crucial ciency and e rth factor, rs." for several ffectiveness the ability L. This factor is also ing and training personn
monetary and time terms abitity to commit resour t important from a corpo r - the ability to share at it allows for quicker
testing and debugging. technological or econom technology may be develo may change. Included in getary :hange as welt as
reasons. . However, to attract important, el are quit . The fift ces to the rate viewpo common sys pro
j
ect Finally, t ic changes ped or the the tatter pot eriti atchanges in the external environment (for example, a shortage of programmers, a sudden rise in the cost of equipment).
It it and for e h int.
t ems
he mus t ar e3.2 Key Factors in the Evaluation of Centralized or
)ecentralized E2P rrqanizations
This section explores the seven key criteria related to the centralization or decentralization of E)P resources.
The issues are presented in a framework which is a slight modification of that proposed by Glaser.
3.2.1 Minimum Total Cost
One key criterion in the evaluation of a system is the overall cost. Proponents of centralization maintain that there are economies of scale with centralized organizations and that therefore the same amount of EDP capability can be obtained for less cost through centralization (9). For example, Glaser mentions that it is often less expensive to have one large computer than several smaller ones which collectively provide the computing power of the larger one (10).
Blose and Carter claim that the centralization of equipment will result in more sophisticated hardware which will in turn lead to reduced processing costs (11).
3.2.2 Sens Problems
The c
itivity and Responsiveness to User Needs and
entralization of EDP functions results in the formation of larger organization
decentralization. Therefora, on consideration of the centralizat question is whether the potentia user of a large centralized orga worse than those available from organization.
One of the major benefits o department is that it makes feas specialized re sources which are quantities. have special However, lar pool their n extensively Example centralizati installation one job whic
which needs justify purc However, if
Small organizations ized resources which ger organizations, b
eeds and utilize the and thus justify the s of these potential on of both operation
with only one job w h requires a random extensive core memor hasing any of tiem f several departments
than would occur with key factor in the n or decentralization services available to the zation will be better or decentral i zed
f the larger centralized EDP ible the possession of
not available in continuous often can not afford to a y se ir b s hi ac y or we re only us their very resources avail abi l enefits ex and progra ch needs a cess devic might find its needs re service ed infreque nature, ca mor e
ity and cos ist for the m ming. A s tape drive ep or one
j
it difficu alone. d together, nt ly. n t. maP
ob Itsufficient to justify their purchase. Similar oeaefits may be
Small staffs can not personne l can not spe: ms analysis, systems ma
just not be enough work alist busy. The result ned, or that he wilt be
(this aspect is discuss alized arrangement, the ce is likely to increas areas their syste will speci reta i t i me cent r serv i feas i talen alway organ decen to en Thus ui red ould at tr B on to zed o hese example, certa which elects t which average economies of s decentralized numbering seve A second organization i larger staff for specifi:c e mentioned utable to a a centralize rgani 3ene f n ben zati o its w efi ts is tio may available in th afford to have alize in data c ntenance, etc. of one type is that eit underutiliz ed subsequen demand for e and specia s can provid problems. that these b switch from d organizati t he ed tI a Ii e en a on large enough ut having to be experienc e programming specialists; ommun i cat ions,
Typically there o keep a r he will for part y). Under particular zation is the levels ef i t dece . I , it cent ed b centralize the EDP functions
EDP employees; these same b le might already be realized partments were large with an
I hundred.
jor
advantage of the central that resourzes, if availablenot be of the a type of of s will not ntralized f the will be able ralize. For y a company of departments enefits and if the EDP staff i z ed , wilt not be b le. t req It sh s be izat i trali
joy
tunderutilized or have to have its
duplicated. Th own tape drive,
us every deoar or programmin
ert will not specialist. It ma would welt be underuti could share Another organi zati on organization particular e can be more (where the i groups which switch. Thi programming have the cap to schedule more likely cent ra lizati utilization The inc cushion the continuity r is more like in the large hat ze ach in it in a cent benefit whi is that the more flexib vents and ne easily met b mpact of the are more li s phenomenon areas. A sm acity to run extensive ov to provide t on provides of personnel reased flexi organization esul ti ly to r one. from felt a a ra ch i le ed y m ke i
ctivity needs that r Jecentralized envir lized environment.
results from the ce n:reased size helps
and thus more respo S. sh ov ly s alle
af
erti hat the to bili aga As an uffling e is dam to feel true in r comput ew extra me. The buffer. opportun meet pea nd pr i I lustr people Dened) the fu operati er inst jobst larger Sim iI a ity for ik work esource onment, ntral make ns ive and but zed he toation, peak loads in large groups than in smaller ll effect of a ons as well as allation may not or the pesonnel installation is r ly, a more efficient loads. responsiveness at oblems with proje turnover. The
in the smaller
helps
loss of one person organization than
Still another advantage which is attributed to the organization's size is mentioned by Blose and Carter who
claim that the in equipment will re
Although all result from the c
that they will. all have diverse will in no way co of resources. In additiono, to centralization if the conditions decentralized org varying needs' :u through time. Un trained to meet t requiring various Similarly, i predictable, and staltati suLt in of the entraliz For exam needs, t ntribute on of f as te
more advanced methods r processing (12). previously mentioned e p h many of can exis are righ anization t rather der these hese spec speci a Ii f the wor th
resulting from the important.
The size of an decentralization of and Carter claim th adaptable in order
addition, they feel
d orqanization, it le, if the central en the centralized toward a more comp
the a t in t. S s hou one w -ond ific zed t k loa e personnel increased ft lleged benefits a a decentralized e pecifically, the td be one which d hose needs remain itions, personnel needs and the pro alents will not e d is fairly even is fairly stable, exibility will no benefits and can does not follow ized departments organization lete utilization ttrI nv i r butable onment -oes not h constant may be blem of xist and benefits t be
organization can be an argument for the equipment in two additional ways. Blose
t large scale facilities are not always o meet local service requirements. In that some local problems, because of their small volume and relative simplicity, are not
processed efficiently on large scale equipment.
Just as the factors related te si'o resources orovi d
most convincing user's needs is
The basic a best service res understanding an service facility communicat quickI gain t facili users" decent sens it able t ing w y to user he confid ty a good (14). T ralizatio ive to th o provide The a tend to co i
e
h nea
rgumen ncentr decent rat i za ti on best expresses t intelligently to environments, sy thoroughly famil of familiarity c and specialized e proponents of centralization with some arguments, so the ability to understand the a major argument for decentralization.rgument for decentralization is that the ults when tiere is a good Level of
d communication between the users and the
. As Dolkas says, "to be effective in th the user, the installation must respond needs" (13). Dolkas further adds that "to nce of the user there must exist within the retationshi3 between the facility and the us' the major contention for
is that decentralized staffs are most user's neels and wants and are thus best responsive and satisfactory service.
ts for decentralization of EDP functions
ate on, but are not limited to, the
of the programming efforts. Perhaps Glaser his view: "To apply the computer
the solutibn of complex problems in complex stems analysts and programmers must be
iar with the problems in detail. This level an best be achieved by individuals who are
close (both ph to be solved a One of th are more sensi institutional department. A more successfu technical know so defined for Glaser ma decentralizati will encourage any given conf local processi ysically and j nd to those wh e reasons why tive to the us knowledge of h s he says, "Ti I (than the ce ledge) because other than te kes a similar on of computer a user-orient rganizationally) to th o want solutions" (15) Glaser feels that loca er's needs is their ow things work in thei e local antayst often ntralized analyst with
most of the tough pro chnical reasons" (16).
argument for the
equipment. He feels ed organization and wi iguration, fa:ilitate a more rapid ng needs and that faster turnaroun
e . problem analysts r will more bl ems ar e that this ll, for response d will (17).
nother advantage of decentralization cited authors is t participatio development. that it faci centralized by Avots who programmers) important. process, the their commit hat it increases n I
the involvement and of the user and analysts in design and
Berman argues for decentralization by saying tates user involvement which is not true of a ganization (13). Another advantage is cited tates that: "3articipation of the groups (of n the development of these detailed tasks is
programmers participate in the planning
gain a better understanding of the goats - and nts to the praject b3ecome more meaningful" result
(19). A staffs become to pro well t user a centra needs 3.2.3 Effective Utilizat The question of cen further clouded by key i utilization of personnel of the type of managemen Solomon contends that da managed by professional other specialists, they decentralized organizati this concept and add tha managed by skilled speci freed to devote more tim responsibilities (22).
ion of Personnel
tralization or decentr ssues concerning the e
. First of all, there t required for EDP aer ta processinq personne ED' managers and that, can not be afforded by ons (21). Blose and C t when data processing alists, other managers e ta their primary and Solomon further adds t
alization is ic i ent s the nnel must b ike al mall ter su ersonn re thu ore fa t if t issue e L pport el are s miliar he manager is not an EDP expert,. that he is then much more
seing "snowel" by his personnel (23).
Ithough it is generally recognized that decentralized witl usually better understand the user's needs and more involved, it is possible for centralized staffs vide this level of service. Solomon argues that a rained and managed centralized staff can involve the nd recognize his needs. Furthermore, because the lized staff can afford to have specialists, the user's will not only be recognized but also served (20).
On the other hand, Glaser proposes that recent trends favor decentralization (24). He contends that today's
managers are processing ar manage them. centralizatio A second evaluation ar decentralized maintain that control. Thi which cross d corporation, generally can a decentraliz The more involves the i nt rad epa r t me centralizatic can then affc evaluation of encourages sr management wh administer ar Proponer can be more
e
ore knowledgeable and understanding of dat a eas and are therefore much better prepared to
The consequence is that the need for n is not as great as it once was.
key issue is whether project control and e oest performed under a centralized or
organization. Advocates of centralization it improves managerial information and
s is unquestionably true for integrated systems epartmental lines, involve the entire
and require a team effort. These projects
not be standardized or coordinated easily with ed organization.
interesting' and controversial, question appropriate organizational structure for ntal projects. The arguments for
n are varied. It creates larger groups which rd to develop jetter standards for the accurate
personnel and the monitoring of projects. It ecialization and thus permits specialized EDP o have the knowledge and experience to
d control projects.
ts of decentralization argue that small groups asily monitored and thus provide the
opportunity evaluation. development
for oetter project control and performance There is also the belief that system
will Je less massive problems if it is
handled by small d Advocates of saying that "the u dissatisfied with organizations are To summarize, it provides the us oetter control of Proponents of cent organizations have consequently have necessarity justif needless applicati Another key i question of organi broken into sm ece cen se r the not th ers the ra I
no
an ica ons ssL zat and prone to al ntralized gro tralization r can irifluenc performance" necessarily e decentraliz with more in project and ization argue project cont easy Life. Ftion for proj result.
e of concern ional synergy that a single, large, centralize contribute on the othe necessarily more r han more He contends that management out t offset by additi d
than several small
d, offers tat a s
effective than se a large graup may hat any economies onal expenses for
ler pi ups. efute e staf (25) cumber at ion fLuenc perfor eces w these ar f select and that some bur argument e and fa mance ev that decentra ro ur ec I and th thermore t approv to management . There is so staff may be a er groups woul ingle staff is veral smaller faci l it of direc the indi serious hich can guments by ion when centralized eauracies. s holds that ciLitates aluation. Li zed programmers there is not and many is the me feeling bLe to d. Glaser, not ones (26). ate manpower t Labor may be rect Labor
required to administer the larger staff.
Another key advantage of centralization is that it makes training
affordable wit initial traini for more senio able to cover percentage of specialized re Similar r development of there is less train, develop potential (27) efforts within more effective The train against decent programs h smaller ng of new r employee such costs their budg source (as easoning m manageria opportunit , and reta . Further a central pr ng ra l
feasible which would not be groups. Th recruits as S. Larger be:ause th et and are is is true fo well as ongo organizations ey represent characteri sti discussed earl ay oe extended I p3rsonnel. S y within the de in 3eople with more, he claims izel organizati oject management. of personnel may ization if opport not uniti both qg training are better small er of any i er ). to the training olomon contends centralized staf high management that specialize on will result i key or tr fact ai ni and that f to d n
exist
elsewhere. Thus smaller groups do not have to trairecruits if they can hire trained personnel or if t educational opportunities available locally.
One additional argument for centralization is facilitates informal training and education. With centralized staffs, the many members will generally geographically located together and the resulting interaction will expose the staff to more new ideas
n here that large be ar e it and thus
provide additional training. The other side of argument decentrat if they a centraliz The often pro decentrat to deal w previoust add it i ona who favor organizat The affected all the d especially personalit is ze re ed use duc iza i th y e L c ce on iss by epa i ie possible ove decentralize been written the author t structures.
that the intera:tion c
d staffs if the people
not, the communication organ i za ti on.
of specialized manage es a bureaucratic orga tion argue that it is . Furthermore, they a arned from centralizat osts of communication. ntralization argue tha
need not be gigantic ue of centralization o the internal organizat rtments are organized f the managers are str s, they will want to h r their performance. d concept will be most
about this issue and o discuss the pros and
Rather, the issue is
an occur even with are so inclined; an will not occur even
d that in a
ment of E)P personnel nization. Proponents of cumbersome and difficult dd that any savings
ion are lost due to the On the other handp those t the centralized
or monolithic.
r decentralization is
ion of the corporation. If as profit centers, and ong, aggressive
ave as much contral as Consequently, the
appropriate. Much has it is not the intent of I cons of various control
merely being listed as one which must be considered in the choice of any EDP
organization
One other related advantage of centralization is that this
it facilitates control and interaction by top management. Glaser suggests that top management can better control any EDP function when there is one individual center with one
reporting system than when there are many nonuniform centers (28).
3.2.4 Ability to Attract and The difference in the si centralized or decentralized
Retain Good Personnel
ze of groups resulting from a organization raises some key personnel advanceme One Proponent (up to a employees opportuni projects; to more s Advocates point is satisfact groups th spec i a liz
issues concerning employee sat is fact ion' and other related matte
the key issues involves S of c ert for ties for oph i of much ion an i e# m centralization arg ain undefined ooint
the following reas for participation more and better ca sticated hardware a decentralization co lower than ex3ecte is greater for empl n large groups. In obility among areas
u ) 0 i r n n d 0 employee satisfaction. e that tar are more ns: they o n more exc eer paths; d software tend that and that yees worki addition' is more di ger att r f fer itin and sy s thi s fur t nq i if b ffi c organizations active to the g and diverse for exposure t ems. undefined hermore, job n small ig groups ult and the opportunity diminishes. for participati If the groups in diverse apal not specialize, t ions en one
the prime potential adva realized.
Another key issue i generally recognized tha
ntages of centralization is not
s euployee t turnover turnover. is greater percentage basis favor decentrali increase employe in ati sa tar on c ti sf ger onte acti gani tha and ati on . their reduce Thus oeople small groups the problems costs associ central i zati contend that which inhere organized pr to a small g organization of its size, thus minimiz A tack another caus not require upward caree and training decentratize more likely, managerial r avai labLe in Another ate on th nt t ope rou is es of
d with turnover. Prooonents refute this argument. Firs ere is nothing about large y causes turnover; if the o rly, the employee can feel p and yet retain the benefi Secondly, a centralized org
less dependent on any one the impact of untimely turn career paths is generally r
t of a organi rg an i z as if ts of an i z at indi vi over. eco gni ll, t zat i o at ion he be a lar
i
on dual zed t e of turnover. Small decentralized staff management specialists and thus can not p r paths. Similarly, intradepartmental ro programs are frequently less feasible in d organizations. Interdepartmental rotatibut often includes a prerequisite of cer esoonsibility, the opportunity for which
smaller groups.
important issue is employee recruitment. hey ns s are longs ger because and o be s do rov ide tat ion on is tain is not it is (on a who will and
Because large groups often look more attractive to potential employees, recruitment is made easier with a centralized organization. In addition, the size and ability to
specialize makes it better able to prepare and concentrate on recruitment.
3.2.5 Rational Selection of Projects for Development
Another key criterion an which any proposed system must be evaluated is its ability to provide the capability of altocating resources on the basis of corporate goals and priorities.
One major advantage of a centralized organization is that it facilitates management's assignment of top talent to the high priority projects. Under a centralized
arrangement' one central authority is in a better position to be informed of the overall corporate picture and to assign scarce resources accordingly. With a decentralized organization, the tendency is only to have a limited
perspective and to see only that department's needs and to thus assign resources accorlingly - even if this means that more worthwhile projects (from the corporate point of view) are ignored.
Advocates of decentralization maintain that they have little control over their destiny under a centralized
influence th They fear th a misatlocat argue that t well managed allocated on Furthermore, user might f if it means department a project (29) centralizati automate an (30). e le at i ion
vets of service which they mportant projects will not
resources. his is not necessa
centralized organ the correct basis Solomon contenis eel he has under c that projects must
management can no . 3erman reverses on is not good if application which Proponents wil I be pu c rity true, and t ization, resourc
of corporate or that the weak vo entratization is be cost justifi t automatically this argument a it means that a has sufficient j r ece i Ve. rsued due to en t r at hat un es wit of its. ice wh not a ed and pursue nd cla user c us t i fi izat der l be ion a ich a orobt em that any ims that an not cat ion
3.2.6 Opportunities to Share Common Systems and Standards
- DOcumentation
Like apple pie and motherhood, documentation and standardization of EDP areas are considered to be ideal institutions. lo one will refute that programs aid
operational procedures should be documented, and that the method of documentation should be standardized. In
addition, there is almost unanimous agreement that this
standardization should extend to most other E)P areas. Thus all programs written for a oarticutar installation should
adhere to the same set of standards; of data bases, the demands olaced on and the purchase of equipmeit should
set of standards.
The reasons for the nead of goo
si m the all
ilarly, the design computer system, be subjected to a d documentation and standardization are order to avoid which already software syste necessary); to departmental L facilitate the The intent of documentation to consider th
they are more decentralized Proponent and standardiz environments f soft the ware progr dupl exist ms an help i nes; use th i s and s em as readi organ s of ation or a documen ammers tat gen thus do not bother
d a p t varied. cation o to ensu hardwar develop and, in nd modif aper is andardiz Basically, f efforts re compati e configur integrated the case o ication of not to det ation are desired objectives
they are required in in develop bility amo ations (wh systems w f document an existi ail the re desireable and evaluate ing modules ng existing ere hich cross ation, to ng system. asons why , but rathe r whether ly accomotished with a centralized or i zati on.
centralization argue that documentati just do not exist in decentralized variety of reasons. In the case of ion, the programminq groups are small eratly are familiar with the programs to document them. Secondly, small
on
a a
nd nd
decentralized groups are unable to s are unable to justify the use of tec
In the case of standarlization,
peci at hni cal
Blose
ize and therefore wri ters.
that policies can best be established to standardize forms and procedures in a centralized organization (31). Solomon adds that "sma ll data processing groups are simoly not
staffed to develop, maintain, or enforce such standards" (32).
Propone documentat io
nts of decentral n and standards
ization contend that
can exist in a decentralized organization. Their theory i
responsible for the setting o are not maintained, the resul consequence of the decentrali
the corporate structure (for responsible for standards).
Another advantage of dec centralized EDP often require system to distribute the cost contention is that these cost of service but rather just re
A potential , b ted t ic gn eca in tin of disadvanta use the analysts
perspective and
g efforts can re
data 3ases which must be tied hermore, since decisions made sp Jo sul together in many depart concerning s that f s tand ting pr zed org example some a ar ds. oblems anizat , the uthority If the are not ion, but group or entralization is th s a sophisticated a s among the users. s in no way imorove present additional
of the decentraliz ecialize in one are not see the corpor t. An example of t ten contain decentr
ill be andards at her er son at ccounting The the quality overhead. ed staff is a. they are ate picture. his is the alized data a centralized manner.
ments may use the same it must consider all o
dat a, f the that li mi Conf desi that Furt any ge
partments and not just one user. Solomon and Fredericks th claim that this is most easily accomplished through a ntralized organization (33).
To summarize, standards are needed and they must be set the corporate level in order to eliminate undesireable dundancy in hardware' programming, and machine processing'
well as to facilitate efficient implementation of centralized of standard or a decent facilitate decentratiz produce the some centra responsibil standards. "to enforce i r s e i
integrated file systems. zation can be a:hieved wi atized organization. Cen tandardi zati on; however,-d organization :an offset
same results. In either authority at tie corpora ty to see that there is c Fredericks adds that this
c'ompliance with its stand t t 9 c t 0 A satisfactory level h either a centralized ralization will ood communication in a the problems and
ase, there must be e level who has the mpliance with the
authority must be able ardized procedures voluntary cooperation cannot be achieved" (34).
3.2.7 The Impact and Abili Technological or Economic
Recent technological influenced the question of decentratization. There i able to adapt to changes i
ty to Adapt to Changes Environment
and educational trends :entralization or s a need for an organi n the environment. Ex in the have zation to be amples of de bo ce at re as
these current First of considerably
trends follow: all, the cost of and
consequently,-equipment has decreased many of the arguments for hardware rtant. H part of t savings. The of the issue "Arguments ba are the most
based rd war a tot
on economies of no longer repr it EOP costs and result has been a of centralized har
sed on staff - not
important in nearl scat esent thus are as offers decrease in Iware. As equipment -every case" Secondly, the improvement facilitated the entry techniques, result is not users now mo A of ine amount being is cur and re f th i xpen s of used
the reduction of equipment cost of data communications softwar use of conversational
and other that geographic pr renttly important f that' accordingly, ea sib l e. programs tetecommuni cation oximi ty or the p geograp
rd trend has been the adve sive minicomputers. These computing power at reason increasingly as dedicated to the com rogrammers hic decent s as well as e have , remote job devices. The puter facility or the actual ralization is
nt and rising popularity provide moderate
able prices and are devices both for for specific user applications as well as for front ends to larger computers.
In short' many of the significant recent trends have
aliza nger fican poten mport r sta dera t cent r no to sign i L es s the i GLase consi (35) t
i
on as i t of ti a t a nce tes, ionsinvolved the minicomputer operations a data communi decent ral iza centralized Another timesharing of software thus enable system, rece One tre recent impro computers. particular, "Computer sc educational graduate wor
cost of equioment. The availability of s has encouragel decentralization of the EDP
reas. fOn the other hand' the availability of cations and RJE have encouraged geographic tion of equipment out the retention of a
organization.
key advancement has been the development of systems. These take advantage of a distribution development costs to all users of the system and many people witi similar needs to share a
ive good response time, and pay less.
nd which affects the programming issue is the vement in the overall public knowledge of The public in general, and management in are now better informed about E)P issues. ience" has made great inroads into the
curriculum - from elementary school through k. In particular, more and more business schools now require some form of formal course
E)P area.
3.3 Summary
The question of organization is best issue. It seems tha rather that the choi have been presented in
There
whether a centralized or decentralized for ED3 operations is a controversial
there is no one correct answer, but :e depends on a variety of factors which
this chapter. are clearly tradeoffs Therefore, the optim
of the user of EDP r merit of a proposed establish the specif organization. This seven broad areas co relevant needs withi the major requiremen considered before a
Having determin possible to consider and decentralization system. Figure 3-1 will serve as a guid
w al choi:e will esources. Thus system, it is ic requirement necessitates t vered in this n each of them ts of aiy EDP ith e depe , in first s and ooki n chapt . Fi syste particular proposal ed the specific req
the arguments for and how they perta also summarizes the e in tha evaluation
ither organization. nd on the objectives order to evaluate the
necessary to
constraints of the
g at each of the
er and specifying the gure 3-1 summarizes m which nust be can be evaluated, uirements, it is then both centralization n to the key ques of wheth propose tions wh er the i
user's needs will best be satisfied under centralization decentralization.
Figure 3-2 provides a summary of the micro arguments for centraliza tion and decentralization.
Figure 3-1: Major Requirements and Questions for Consideration in the Analysis of Centralization Decentrat
i
za ti onMINIMUM TOTAL COST
COST
What is the :ost within range?
of the system and is it
Are there potenti at economi es of scal e to b e realized or lost under the proposed system?
SENSITIVITY AND RESPONSIVENESS TO USER NEEDS
NEED FOR SPECIALIZED RESOURCES
If there is a need are there opaortuni with a centr3lized for speci ties for organizat lized resources, ustifying them on?
NEED FOR FLEXIBILITY IN SCHEDULING
If there scheduli
is ng, centralized
3 need for flexibility :an it be met through a
3r decentralized organization?
TURNAROUND TIME
Will the system provide the desired turnaround time?
LEVEL OF INVOLVEMENT AND UNDERSTANDING REQUIRED EDP PERSONNEL Will invol which the veme are system nt and needed
provide the level of
understanding of the user
9
UTILIZATION OF PERSONNEL
NEED FOR EFFICIENT RESOURCE UTILIZATION
Will the system pro management needed t utilization of pers
vide the 1ev o provide ef onnel and ot
ll the system provide the nec project control and performa insure efficient personnel u
Will the system operate it become an unworkable el of EDP ficient her resources? essary level nce evaluation tilization? efficiently or will bureauracy?
Is the organizational structure consistent with the corporate structure and
personalities?
Are there synergy?
opiortunities for organizational
NEE) FOR TRAINING
Will the system provide the necessary level of training (both initial and ongoing)?
IMPORTANCE OF TURNOVER AND RECRUITMENT PROBLEMS
Can the system satisfy the turnover and recruitment 3roblems?
IMPORTANCE OF EMP-OYEE SATISFACTION
Will the system provide sati sfact ion?
RATIONAL
adequate
SELECTION OF PROJECTS FOR DEVELOPMENT
NEED FOR COMMUNICATION WITH TOP MANAGEMENT
Will reso corporate departmen
urces be allocated correctly from point of view as well as from a tat point of view?
OPPORTUNITIES TO SHARE COMMON SYSTEMS: DOCUMENTATION AND STANDARDIZATION
NEED FOR STANDARDIZATION AND DOCUMENTATION
Can internal standards be enforced proposed organi zati on?
under the
Will the system permit the required level of doc umenta t i on?
IMPACT AND ABILITY TO ADAPT TO CHANGES IN THE TECHNOLOGICAL OR ECON04IC ENVIRONMENT?
A)APTABILITY TO CIANGE
If recent te:hnologic data communi:ations,
influence the decisio adapt? advances d minicomp can the o in hardware, ut er s rganization
Figure 3-2: Key arguments for centralization and decentralization
Arguments for Centralization:
Specialized resources iade feasible through oooling of needs
Costs reduced through economies of scale
More complete utilization of specialized resources More flexiale and responsive organization; better able to handle peak loads, turnover problems
User involvement possiole under centralization Provides the corporate view of problems
Facilitates the development of documentation and standards
Facilitates informal training and education through better communication.
Atlows for specialized EDP management Provides for organizational synergy
More attractive to employees because of increased project diversity, mor3 sophisticated projects, and better career paths
Recruitment easier due to specialization and desireability
Facilitates corporate control of top priority projects Better managerial control over ongoing projects
Better able to develop standards for performance evaluation
Top management better informed if only interacting with one user who is responsible for all EDP
