The Global Enterprise: IBM changes the rules

By Scot Herrick | Cube Rules Commentary

Jan 28

IBM is managing global operations in a way that will completely transform jobs for people who work in cubes.

IBM continues to move to a global operation. In Business Week’s International isn’t just IBM’s first name, the article notes that “Big Blue has built a global network for client services and in the past three years has hired 90,000 people in low-cost countries.”

I’ve written about these actions before in IBM claims the largest technology services company — in India. While, on the face of it, all this just seems like news, the truth of the matter is that IBM’s approach to operations has significant implications for the types of job skills, networking skills, and personal choices workers will need to develop relatively soon. And, if you work in a global corporation of any sort, you need to be working on this starting right now.

In this article, I’ll give you the big picture and then, for the rest of the week, I’ll cover what I think are the critical aspects that need to be addressed by Cubicle Warriors.

The big deal here is that IBM, for the last two years, has significantly changed how they do business in the services area. Essentially, they have looked at the planet and determined (rightly or wrongly) where the best locations are that have the right mix of skills, talent, innovation, and market proximity to perform a particular function of operations.

Take, for instance, finance and administration where IBM has set up back office centers in “Bangalore, Buenos Aires, Krakow, Shanghai, and Tulsa.” By having these concentrated centers, they have eliminated the rest of the function from the IBM planet.

Here are some of the reasons this operational approach is so different from what we have seen in the past:

  1. “Global enterprise” is not the same as a multi-national company. In the past — and most current operations by global companies — finds a company’s operations to be mini-operations of each other in each of the countries they are located. In each country are developers, accounting and finance functions, sales, warehousing, and management.
  2. Using IBM’s approach of using the right function for cost, skill and innovation in a particular country significantly reduces the cost — and people — needed to perform the function.
  3. There is an entire set of knowledge needed to determine the best places to have operational functions. Management of a global company now has to understand the entire geography, strengths, educational systems, and current operations by other companies for the entire planet in order to understand the competition and opportunities out there. The playing field is a sphere, not a country or even a continent.
  4. Management of workers is no longer based upon geographic proximity to workers. Now management needs to be able to work with people on multiple continents, a relatively new skill set. Which, as an aside, pointedly means “working remotely” such as at home is a job skill, not a privilege.
  5. The entire tool set to understand skills and capabilities of the work force (i.e., YOU) needs to change so that teams and projects can be best formed based upon the skills needed for the work.

IBM has been working this approach for two years and it is starting to pay off. After a flattening of revenue and margin, profits have returned:

The results are starting to come in. You can see them most clearly in the performance of IBM’s $50 billion global services business, the focal point of the effort, which represents about half of IBM sales. In the third quarter of 2007, global services revenues grew 14%, to $13.7 billion, and pretax profit margins topped 10.7%, up from 8.2% three years earlier.

Perhaps, in the past, this operational approach to global operations was just interesting. But, when Big Blue shows these kinds of increases in revenue, margin and profit, you can bet that every global corporation on the planet will be looking hard at this approach and asking why they aren’t doing the same thing.

That is why developing job skills to match up with this approach is critical to your career management. I’ll start covering these tomorrow.

  • USB 3G says:

    Oh nice, thanks for your information!

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  • Great Post Scot. It is fascinating to see this happening in real-life, creating an organization which leverages treats the world as their campus, locating engineers where it gives biggest bang for buck. As the article suggests, electronic communication skills are going to be paramount if one has to succeed in such a structure. However, I wonder how skills development and career growth will be handled when teams can be so distributed. Interesting study..

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