When a Russian owns the FA cup winning team and your
insurance company calls from India, you know the world has changed.
That change has been dubbed
globalisation: a buzzword that covers a multitude of political,
economic and cultural phenomena.
In big business IT, globalisation's influence is difficult to
overstate. It has altered strategy, recruitment and infrastructure.
It is also demanding new management styles from the top level of
the IT organisation. At the Corporate IT Forum (Tif), a body that
represents IT management of FTSE 500 companies, globalisation has
become a hot topic.
Offshore IT development and support has become the most salient
feature of IT's response to globalisation, says Ollie Ross, head of
research at Tif. "It has really become important over the past 18
months. Before, you might have seen some
outsourcing of non-critical IT functions - almost exclusively
to India, where skills were well tested - but there was not much
elsewhere. Now there are highly skilled areas all over the
world."
Offshoring describes the movement of customer service, IT
support and other standardised operations to areas of lower labour
costs, such as India, China or Eastern Europe. Although it
sometimes goes hand-in-hand with IT outsourcing, some firms run
their own offshore operations.
The financial services industry has been the leader in
offshoring. Research by consultancy Deloitte shows that financial
services firms now hope to save £4.5bn a year through offshoring.
Earlier this year, HSBC said it would double the size of its
offshore operations to 25,000 staff in the next three years.
Spreading the word
While financial services firms may offer standard products that
lend themselves to an offshore operation, other higher-level
service industries are also getting in on the act. UK-based global
law firm
Clifford Chance is now using a shared service centre in Delhi, run
by IT services provider Integreon.
The law firm says it is the biggest offshoring project in the
sector and will create about £9m in savings.
Amanda Burton, director of global business services at Clifford
Chance, says, "In the nearly two years we have worked with
Integreon, we have been impressed by their high level of physical
and data security."
The 45,000-square-feet Delhi facility accommodates more than 600
desktops. While Clifford Chance is the founding user for the site,
it will also offer services to other firms. Integreon will manage
the start-up and operation, working together with Clifford Chance
employees in the service centre.
With some IT support and software development jobs being moved
to lower-cost locations, the UK job market has begun to change its
shape. Research from the Computer Weekly/SSL Quarterly Survey of
Appointments Data and Trends shows that salaries for
business-focused IT professionals are rising at a faster rate than
salaries for technical specialists in both permanent and contract
work.
The survey provides further evidence that a two-speed jobs
market is developing, in which junior programmers and support
specialists are seeing their salaries eroded. Many commentators see
this as a result of the offshoring trend.
Although the move of lower-level IT skills offshore has provoked
concern about the UK IT jobs market, it could also become an
opportunity, according to Tilly Travers, head of communications at
E-skills UK, a joint government-business body charged with helping
the UK develop a globally competitive IT workforce.
"In the past, IT professionals would start with a
computing-related degree, spend a few years as a programmer, then
as a project manager and work their way up," she says.
Although lower-level programming and support jobs are going
offshore, the UK remains a strong centre of commerce, which gives
IT professionals the opportunity to understand how IT relates to
business, she says.
Globalisation is also influencing the way technology is
developed and supported in the business. More and more companies
are attempting to minimise support costs by using global standards
for desktops, e-mail systems and servers.
Application development
In application development too, globalisation is affecting the
way companies work. Self-styled "world's local bank"
HSBC is at the vanguard of globalisation. As well as leading
the way in offshoring IT support and customer service, it has also
built a global centre of excellence.
The centralised development model allows the bank to build new
e-commerce software rapidly, but deploy the systems with a local
look and feel.
HSBC has a single global centre of excellence for e-commerce IT,
made up of co-located businesses and staff. The main offices are in
New Jersey and Chicago in the US, with functional reporting units
in Canada, Hong Kong and London, plus a 740-strong team of
application developers in Canada and India.
HSBCnet is the key global platform developed by HSBC. Designed
for commercial customers, the platform spans 60 countries and
offers some account functionality across 115 countries.
HSBCnet includes services for global markets, global cash
management and investment banking. The bank said 89% of its
corporate customers are regular users. A single sign-on gives
customers access to more than 100 applications, many of which
overlap intuitively for the end-user.
Meanwhile, First Direct, a division of HSBC, has moved to a new
e-commerce platform. Jonathan Etheridge, head of e-futures at the
bank, said it gave customers additional functionality and offered
an improved business development environment for controlling
workflow.
This would allow technically competent business managers to
introduce customer programmes in hours rather than days, he
said.
"The system has been live in Hong Kong for some time and it will
eventually be rolled out to all HSBC brands worldwide," said
Etheridge. "Each brand will have its own look and feel, but the
technology will be the same."
In the UK, HSBC's own internet banking service will move onto
the platform later this year, although it will not offer the same
features as First Direct, Etheridge said.
Dave Aron, research vice-president at analyst firm Gartner,
said, "There are not many companies creating these global centres
of excellence yet, but they are a really exciting opportunity for a
strong global company to take advantage of its IT expertise."
Centres of excellence could be based on technical problems, such
as service oriented architecture, or addressing particular business
issues, he said.
Management of IT suppliers has also been affected by
globalisation. "IT sourcing with globalisation in mind is
essential," says Aron.
As companies seek new markets around the world, it is essential
for IT to support this mission. "One company I worked with had 300
IT suppliers worldwide, including software, hardware, hosting and
so on. What was not clear to the company was that not all of those
suppliers could scale as it grew globally. The CIO was in trouble
and was not there for much longer," said Aron.
Standardising processes
Although global management of skills, suppliers and standards in
technology can help reduce costs, by far the greatest contribution
IT can make to an international business is to support a global
view of business processes.
As world markets open up, more competition enters. One way to
remain competitive is to look at processes. The argument goes that
if you can do things in more or less the same way, no matter where
you are in the world, then you stand a better chance of
understanding and improving your performance. It also helps you
find resources and meet demand on a global basis.
Aron says IT could benefit the business in four broad
categories: reducing costs, improving growth, enabling agility and
helping to manage risk. "I think the appeal of standardising
business processes can help bring about all of these, but doing it
badly can also destroy all four."
The overall aim of standardising processes for a global
enterprise is so it can compare like-with-like throughout the
world, he says. "This way, it is easier for a business to know what
decisions it should make. It creates transparency so a business can
see what is going on and why."
In manufacturing, the management of physical resources makes
globalisation more tangible.
Sandvik Mining and Construction, a global manufacturer of
mining and construction machinery, is in the middle of a massive
enterprise resource planning overhaul to create standard business
processes.
The overhaul is part of a move to enable the company to
introduce and support a global change management programme from its
Swedish headquarters.
Anders Klang, global ERP manager at Sandvik, said the worldwide
roll-out of the platform would allow Sandvik to consolidate the
firms' IT efforts as well. "We will have one development team and
one development box for the whole company. This will allow central
development of the IT processes," he said.
However, driving these kinds of global standards is not without
its pain. Processes may be dependant on local culture or
legislation. Growth through acquisition can also make it hard to
integrate IT systems. The challenge for IT departments in
businesses trying to achieve global standard processes, such as
Sandvik, is to ensure local managers are driven to achieve the same
goals.
Such a strategy requires strong engagement with business
leaders, which in turn affects IT management styles, Aron says. "We
are seeing more and more CIOs getting their IT staff to think about
the business implications of their decisions. One CIO I know makes
his top staff say how their contribution will help the business win
at the start of each meeting if they cannot, he cancels it."
Globalisation also affects the structure within IT
organisations, according to Ross. She makes the distinction between
international organisations with a central IT function, and those
that are truly global. "You should not confuse globalisation with
centralisation. The former is more inclusive, while with the later
drives from the centre in a stricter fashion."
Here too, new management styles are required, with an emphasis
on building relationships and cultural understanding, Ross
says.
Over the coming months Computer Weekly will describe the IT
management challenges of globalisation. Technology, skills,
business processes, suppliers and risk management will all
feature.
Aron believes some of the results of globalisation are still
uncertain, but one thing is for sure: it is not about to stop.
Offshoring transforms the market >>
Offshoring widens IT skills pay gap >>
Standardise to reap global gains >>
Globalisation's offspring >>
Wikipedia definition >>