Smell Opportunity, Not Just Upheaval, In Globalization

Down To Business:

If there’s such a thing as a business technology profession of the future, it’s in developing, building, managing, and cultivating global supply chains.

Broach the subject of globalization at the water cooler or watering hole, and prepare to get an earful. For its ardent supporters, globalization is a force for economic expansion and prosperity, the way for small and large companies alike to access new markets, products, materials, and talents and elevate standards of living. For its harsh critics, it’s a form of brute force, where the powerful crush the weak and the rich exploit the poor in the quest for profit.

Argue all you want about which definition comes closer to the truth, but globalization is a force that will stay in forward motion. Some 90% of the 217 senior executives worldwide surveyed by advisory firm EquaTerra see globalization as unstoppable, even in the face of protectionism and an economic downturn. More than a third of those execs view increasing globalization as a threat or challenge on some level, but one that will be more than offset by new market opportunities.

So for those still unconvinced that their company and profession will continue to take a more global turn, it’s time to face facts: We can’t stop this economic movement any more than we could have stopped the Industrial Revolution more than a century ago. Just as advances in manufacturing and transport altered the economic landscape in the late 1800s, the Internet (and related communications, logistics, and collaboration technologies) is the backbone of an economy that will increasingly transcend borders. You’re a key enabler of globalization, not just rolling with its punches.

In their new book, The New Age Of Innovation, University of Michigan professors C.K. Prahalad and M.S. Krishnan lay out example after example of how companies with superior access to global resources are winning. This isn’t just a “race to the bottom,” as critics maintain, with companies chasing sweatshop labor and cheaper materials. It’s also a race to unlock in developing countries the kind of ingenuity, ambition, and entrepreneurship Americans pride themselves on.

At the center of global business expansion is the supply chain, a once back-office function that is becoming a competitive differentiator across industries. The global companies in AMR Research’s Supply Chain Top 25 index, for example, earned an average return of 17.9% in 2007, compared with 3.5% for S&P 500 companies. Among U.S.-based companies in the Top 25 are Apple, Best Buy, Coca-Cola, Dell, Nike, Procter & Gamble, and Wal-Mart.

Holding back companies, according to an AMR survey of 198 organizations, is a shortage of trained supply chain management pros and an overemphasis on engineering and logistics vs. product development and manufacturing chops. Meantime, a lack of consistency across organizations as to what constitutes supply chain best practices makes it difficult to establish standardized training and university curriculums for the profession.

General Motors CIO Ralph Szygenda, in an interview with my colleague John Soat, insists that 95% of companies still aren’t truly global. Most companies, Szygenda says, maintain only “global presences”–a few offices here, some resellers there, most of them acting locally or regionally. Even GM’s big IT suppliers aren’t global, he says. Only through GM’s massive purchasing power has it been able to negotiate global IT contracts, Most other customers, he says, must still deal with “10 different IBMs, 23 Ciscos.”

Other executives have more modest views on what globalization means. In its survey of business execs, EquaTerra asked whether their companies are investing in foreign markets (46% are) and locating and recruiting local talent (35%). That’s just Globalization 101. A better measure is whether companies are leveraging their operations around the globe as manufacturing, distribution, R&D, and other centers that feed operations and serve customers in other regions.

So if there’s such a thing as a business technology profession of the future, it’s in developing, building, managing, and cultivating global supply chains, better described as value networks. Most companies haven’t even scratched the surface.

Rob Preston,
VP and Editor in Chief
rpreston@techweb.com

Crowdsourcing vs. Hiring Employees?

There is a somewhat surprising element to the Intuit announcement, highlighted earlier this week by ZDNet’s Tom Foremski. During a presentation at Fortune magazine’s Brainstorm conference, Intuit CEO Brad Smith spoke about the company’s efforts to tap into the power of the Internet to better serve customers. In the video included with Foremski’s post, Smith mentions that as part of that effort, the company has recognized that in many cases, customers can deliver higher value to other customers than Intuit employees can. He says:

… Are we paying employees today to do the work that our customers would volunteer to do, and actually do better than us?

He notes that after Intuit put a Turbo Tax Live Community feature into its popular Turbo Tax software, 40 percent of customers’ questions were answered by other customers, with a higher degree of accuracy than ever before, and at no added cost to Intuit.

I remembered mentioning Intuit when I wrote about companies using social networking for business advantage. I tracked down the post from September of 2006 and found a similar reference to what Smith calls “innovation in an age of customer empowerment.” It said that some 70 percent of inquiries on Intuit’s Quicken forum were being answered by customers rather than Intuit staffers. It also mentioned Intuit planned to beef up the forums with blogging and podcasting tools.

Eastern European IT Outsourcing: LUXOFT ACQUIRES ROMANIAN OUTSOURCER

Luxoft, a global provider of high-end application and product development services, today announced it has acquired Bucharest-headquartered ITC Networks (ITCN), a leading Romanian software outsourcing provider specializing in the telecommunications industry. The combined company will have more then 3,000 employees worldwide and an annual revenue run rate of over $150 million.

Luxoft is Russia’s largest homegrown IT services company (and part of the larger IBS group). Based in Moscow, it also has operations at several lower cost locations across Russia and the Ukraine.

The company started in 2000 with 80 staff, now has 2,300 employees - almost three-quarters of whom have Master’s degrees - and is currently hiring at the rate of 100 per month. Luxoft’s key market is financial services and customers include Citibank, Deutsche Bank and UBS.

Economist.Com Calls Ukrainians Hyper-Educated Technical Workforce

Economist.com

July 12th - 18th, 2008
www.economist.com







The Med’s moment comes

“Israel, with its hyper-educated technical workforces, boosted by arrivals from the former Soviet Union, has been a happy, high tech hunting ground for American investors.”