The Global Enterprise: Cost reductions

By Scot Herrick | Job Search

Jan 29

If you were a CEO of a multi-national corporation — with mini-companies in twenty different countries all with their own management, administration, finance, warehouse and support operations — how much money could you save if you reduced your financial centers from twenty to, say, two?

Quite a bit, wouldn’t you say? There is tremendous fixed costs associated with permanent operations in a particular place and reducing those costs through having functions in fewer places. Many companies have significantly reduced costs on just eliminating data centers from many to two (for redundancy).

As noted yesterday in The Global Enterprise: IBM changes the rules, having a company make the decision to break from a multi-national approach to operations to one of a “global enterprise” means that finding the right place to have a function allows you to evaluate all factors for that function. And cost is one of those factors as seen by IBM hiring “90,000 people in low cost countries” in the last three years.

From a company viewpoint, this makes perfect sense — find the right people with the right talent at the lowest cost to perform this function.

There are lots of implications for Cubicle Warriors as well:

  • In a transition, layoffs will occur. If you currently work in a company with global operations, the transition to “best fit” locales for certain functions will result in layoffs. Outside of the skills, talent, innovation, and proximity to market tests, a large portion of the decision of where to locate work comes down to cost and your wages are factored into those costs. This is true if you are in India, Europe, or the United States.
  • In order to work at a global company, you have to move to where your work is being done. For example, all of IBM’s data center management function is done in either Boulder, CO, or Bangalore, India. If your company decided to move the function you work in to a different city — or country — would you be willing to move with the work?
  • Promotions now have a geography component. If you were or wanted to be promoted within the company, would your work as a result of the promotion even be done in the same city or country? Or does a promotion mean moving?
  • Moving between global companies becomes harder. If your job is data center management and you work for IBM in Boulder because that is where the work is located for them, how would you move to a different global company in Boulder and still perform the same function? You could, of course, but your options are limited — which also limits your career.
  • Couples face harder choices. Consider that there are two careers in the household — in different industries and/or functions. If this global approach becomes widespread, it is very conceivable that one person’s work can only be done in certain cities and the other person’s work can only be done in certain different cities. The result is a choice where neither person wins.

No matter how you slice it, large companies with global operations will look hard at the “global enterprise” model being created by IBM. If a company makes a decision to move in this direction, the probability of being laid off significantly increases while the transition is done and — the more this approach is implemented — the harder it will be to manage our career.

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About the Author

Scot Herrick is the author of “I’ve Landed My Dream Job–Now What???” and owner of Cube Rules, LLC. Scot has a long history of management and individual contribution in multiple Fortune 100 corporations.

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