Life in Flatland

Life in Flatland

“For technology executives to become business executives, they should understand the ramifications of globalization”

Part 6 of CXO Priorities | GLOBALIZATION

Globalization means watching the barriers that have constrained world trade, communications, employment and social discourse since time immemorial fall like dominos, under the weight of new technologies and a revolution in social and business dynamics.

These converged forces - or flatteners - have "created a flat world: a global, Web-enabled platform for multiple forms of sharing knowledge and work, irrespective of time, distance, geography and, increasingly, language", as Thomas L Friedman, New York Times columnist and author of The Flat World: A Brief History of the Twenty-First Century, observed.

Globalization, Friedman pointed out, has seen Beijing, Bangalore and Bethesda become "accidental" neighbours over recent years. For some CIOs, and many organizations, the implications have been profound. Yet Gartner believes most enterprises are misapplying 20th century management science practices as they attempt to succeed in a 21st century global economy.

"Increased connectivity, made possible by IT and the Internet, is removing many of the barriers that previously constrained world trade, communications, employment and social discourse," warns Gartner VP and distinguished analyst David Furlonger.

"However, the past decade's multibillion-dollar investment in fibre-optic highways and satellites, which have made the world flatter and smaller, has had little or no impact on how businesses manage themselves. Moreover, technology still cannot act on its own volition. It is part of a large social ecosystem and, therefore, subject to the vagaries of human inclination and behaviour. Use and adoption are conditioned by social mores and economic reality. These will take longer and be harder to flatten than a fibre-optic cable."

In the 21st century, companies are no longer isolated archipelagos, Furlonger notes, but instead operate in a "larger ecosystem of networked ideas, information, creation, and product or service delivery". That means management science is arguably more dynamic and less predetermined, as the world becomes more consumer-centric and the emphasis shifts from product push to customer pull. The implication, Furlonger argues, is that both management science and 20th century companies must eschew the efficiency motto of doing things right, in favour of the more effectiveness-based motto of doing the right thing.

"Firms must put more emphasis on defining what is right in a global, rather than a narrow, context. This should weigh the firm's short- and long-term positioning/functioning in the larger ecosystem, instead of being blinded to anything beyond the firm's immediate stakeholders. To do this, firms will need a broader web of awareness and sensitivity to the flatter and spikier aspects of their market," Furlonger says.

Of course the tyranny of distance ensures globalization means something very different to the average local CIO than it does to his counterparts in the United States and Europe. Many Australian CIOs, particularly those working in subsidiaries, are already finding their roles greatly diminished and their autonomy threatened, notes Gartner EXP research director Andy Rowsell-Jones.

"If you happen to be the CIO of a subsidiary, then there is the strong sucking noise back to wherever your head office is, so there's a question of how much you actually get to do locally versus how much is done in the US, Germany, Britain or wherever that happens to be," Rowsell-Jones says. "That's the first challenge. As companies globalize so they begin to reduce the amount of autonomy and the amount of stuff that is done locally.

"I'm not going to name names, but if you think of some of the car companies and so on, it's quite a struggle if you've been used to running your own shop to then suddenly have to go cap in hand [to head office]. Australia is not a big market for many of these firms so it's a bit of a challenge for the local Australian CIOs who suddenly find themselves swimming in the sea with the sharks."

On the other hand, those new imperatives can cut both ways, Rowsell-Jones says. CIOs in Australian-owned companies are also taking a more global view of their own subsidiaries, while accepting greater accountability and responsibility for IT in those subsidiaries.

CIOs working in a subsidiary of a European or American company that's building its abilities by strongly centralizing its capabilities often find the nature of the role changes from being a supplier of services locally to being a diplomat and a representative of the requirements of the subsidiary to head office. Whether you're a company selling cars or a manufacturing company or a financial services company, as the weight increasingly shifts back towards head office, so you find yourself rather more as a diplomat and rather less as a doer, Rowsell-Jones says.

Globalization also impacts the CIO role because of the effect on resourcing, of course, with both pluses and minuses at play, he says. Inhabiting "a big island" as we do means it is still relatively easy to attract IT people in a way that CIOs in New Zealand currently find impossible, he says. In fact Australian companies are "sucking in" people from New Zealand, in the same way the Americans are sucking our own IT people.

"So we are operating in a global resource pool," Rowsell-Jones says. "Now is that new? Not really; it's been going on for some time.

But I think coupled with the acute shortage of IT skills is the issue of the globalizing of the world, which I think is something that can only get worse."

And finally, Rowsell-Jones says, globalization is having an impact on vendors, with the number and variety of vendors continually reducing, leading to larger and larger vendors that increasingly operate globally. As the likes of SAP and Oracle extend their reach, more home-grown Australian products are morphing into global solutions.

"From the point of view of the CIO dealing with those global supplies that becomes more and more of an issue," Rowsell-Jones says.

Meanwhile on the resources and supply side, globalization increasingly means moving to the lowest cost source of the requisite skill, via offshoring, but here too the picture is increasingly complex, he says. For instance as Indian enterprises increasingly invest quite strongly in IT, wage inflation pressures are rising on IT skills in India.

"Then we will be looking to places like Cambodia and Vietnam and looking much harder at the Philippines," Rowsell-Jones says.

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