A new look at globalization

There are issues with globalization, some say it does not happen, other believe it is happening. From software industry's view, I think globalization is already happened on a massive scale. How do you explain that 30% of software works in U.S and Europe are now being outsourced to India, China, and other countries? How do you explain that in less than ten years the outsourcing market has grown from few millions to hundred billions? How do you explain that within a short time, India is emerging as the dominating force with software exports close to hundred billion dollars each year?

In this financial crisis time, as U.S. companies are spending billions of dollars in outsourcing to reduce costs and hiring thousands of software people from India and China to come to work in the U.S on H-1B program, many Indian companies are buying U.S and European companies to get deeper industry expertise and access to new markets. The fact is the concept of globalization does NOT means business is moving one way, from developed countries to developing countries, but rather, it represents a two-way integration where companies will have workers and business all over the world.

In the past few years, Indian companies are "buying" U.S. and European companies that specializes in financial services, insurance, health care, pharmaceuticals, retail, and telecommunications because they want to expanding in these areas. The reason is Indian companies such as Infosys, TCS and Wipro need to have industry expertise in certain areas in order to move into more profitable market.

Imran Sayeed, vice president of Wipro explained that they want to doubles their size to at least 17,000 employees in the U.S so they can get the big projects. The fact is that Indian companies are good in small software projects but do not have much experiences in larger project. They have to acquire U.S companies to get to people with big projects and specialties experienced. Sayeed told the news media: "Now we have more than 17,000 people in the U.S. that can work on larger projects, as it is much more profitable to deal with projects worth hundred million dollars than project of one or two million dollars. When it was just a matter of software maintenance and support then outsourcing made sense. However, Indian companies are now looking for better business by involving in the beginning of product development so it is important to have someone working alongside with customers. In addition, we need people who understand what the business problem is, we need requirements engineers, we need software architect, and that takes more than just having programmers in India. What we really need is more software engineers that have industry expertise".

As U.S. and Indian software companies fighting for the larger market share, what will happen next is the matter of strategy and execution. Many U.S and European companies have outsourced to India for lower costs but being suppliers in outsourcing provides a lot of money to Indian companies. Having more money they grow larger, stronger and be able to acquire more U.S and European companies to improve their knowledge and compete with other U.S and European companies. That is what globalization is all about, more opportunities for who can catch them quickly.

Of course, U.S and European companies also have their strategies. Last year, IBM came to India and hired 53,000 Indian workers at the same time when Infosys comes to the U.S and hired 36,000 U.S. workers. As many U.S and European companies begin to move to India, China and hiring people there, many Indian and Chinese companies are opening their offices in U.S and Europe and hire local people too. The whole software market is still changing fast with so many companies recruiting and hiring software workers but behind all these strategic moves and market battles there is one key factors that "fuel" the globalization: The knowledge and skills of people.

Newspapers and TV often describe the success of software companies from India and who is buying whom, but they do not mention that the success or failure of globalization is depending on the "Movement of knowledge and skills" across national borders. The real "essence" of globalization is the knowledge on how to do business “better, faster, and cheaper”. I think these factors should be taught in business schools around the world because "knowledge and skills" are the "Fuel" that “lit up” the globalization rather than continue to teach the financial aspect of "making money the old way" in investing in banking, stock market, having capital etc.. Business people should understand that in the 21st century, capital it NOT the most important, financial is NOT the most important as we have seen what happened in this financial crisis where companies went out of business or when financial market collapsed. Actually it is the knowledge and skills of the people that are the most important because nobody can take them away. Having knowledge and skills are the best assets of a person, a company, and a country. A strong country in this 21st century is a country with strong, highly skilled and capable workforce. Capital can be taken, money can get lost in bad investment, natural resources can be exploited but knowledge can not be taken. So the best investment of anyone, any company and any country in this globalized world is the investment in education for these “precious knowledge and skills” because globalization is here and now.

Sources

  • Blogs of Prof. John Vu, Carnegie Mellon University

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