I was reading the above article on the economist about decentralisation of companies and I came across this comment (it’s the second to last):
When the phone came along and lowered the cost of communication, the result was greater centralization. The net lowered the cost of communication even further: why would that lead to decentralization? Not sure I get this.
Since commenting was already closed on the article (seem to close commenting rather quickly on the economist) I thought I’d post a reply here instead on the weird, off chance that either the poster finds it or someone else is looking for a similar answer.
The way I see this is that there is a difference in what kind of communication the two technologies enabled. The telephone enabled two individual people to have a direct dialog over a longer distance. This allowed instructions to be sent more easily and quickly. The internet on the other hand allows large amounts of general data to be sent from many people to many people.
So before technologies like the phone came along a far flung office would have its own information at hand and maybe some fairly recent reports of what was going on at the company and in markets back home. If some event came up, the local staff would deal with it and probably then send a letter to the home office informing them of the event and response.
In the phone era, contact could be made more easily back to the home office and direct guidance could be sent to tell the remote office how the company wanted things dealt with. Small direct reports could be given over the phone and the central organisers could react to that. The remote office is unlikely to be receiving much information on every other aspect of the company’s activities and the markets in general.
Finally in this era of the internet, a regional office can have more direct access to the full company reports and data and also the data of what is going on in the wider markets and can directly react to events with better full knowledge. This allows the regional offices to remain much more independent of the central office.