I know IT departments often sound like party poopers when they say tell you not to install the latest and greatest OS, or that if you do you won't be supported, but there are plenty of reasons for it.
Tech-savvy users are few and far between - they're the exception rather than the rule. Unless people in your IT department know you personally, they don't know whether you're up to the task of installing an OS successfully or not, let alone whether you can handle what happens after the OS is on your computer. Even if you tell them you do know what you're doing, there is no way for them to really know that. It's probably is not the reason you were employed and it's not a job requirement. At the same time, I have seen plenty of end-users who are entirely capable of a 98/XP or 9/X upgrade, I've also seen plenty of departmental IT "experts" who I would not want to try an upgrade (these are people paid to be IT-savvy). Your IT department is well aware that if there is a problem, they are likely to be the ones who have to sort it out, particularly if they didn't say "no" when you asked in the first place. The "no" is as much a disclaimer as anything else - fixing a problem on a new OS, or going backwards from such an upgrade (eg: you find out that Application X which you depend on heavily doesn't run properly on the new OS) can take hours and hours; there is no Uninstall option for an OS.
There are also issues relating to integration. These issues are similar for Windows 98 > XP and Mac OS 8/9 > Mac OS X: authentication, security, deployment, standard operating environment support, etc - issues which are not necessarily associated with "consumer" OSes like 98/OS9. Deployment is often pooh-poohed as it sounds easy - just run the installer over the top. But what happens 6 months from now when your IT department rolls out their fully developed XP deployment plan, and all these rogue machines don't fit into the environment? When you're told that to fit into the authentication system, your otherwise fully functional XP computer has to be completely re-formatted and re-imaged. AND that you have to pay to have a non-standard conversion from your XP to the corporate install? That there is a roll-over plan from 98 to XP, but not for XP to XP because you weren't supposed to have it in the first place.
There's also the matter of training (both for users and those who provide the support), hardware support (how many machines need memory upgrades to handle the new OSes? how many companies provide updated drivers?), and a bunch of other issues.
I'm the primary Mac engineer for a university, and am having to deal with these issues myself for Mac OS X deployment. We're probably a bit more giving on the "new OS" front than a company might be - I'm telling people who I know are technically capable that they can upgrade to OS X if they like, but only if they are capable of supporting themselves. I'm more than willing to help them out if I can, knowing that they have at least an intermediate skill-set, but they can't depend completely on me, since I'm basically only learning this stuff about 3 months ahead of them, not to mention that any support I give them is in my own time as I have responsibilities. Users who I know are not capable of supporting their own machines (and, lets be clear here, this includes some faculty IT staff - being able to solve a basic email configuration problem does not necessarily mean they're ready to do a complete ), or who I don't know the skill level of, they get a simple "no", on the threat of termination of support. Simply because I don't want to get that call from them that says "hi, I installed the XP/OSX upgrade and now I'm stuck with this problem..."