Globalisation: IT management strategies

In this first in a series on globalisation, Lindsay Clark looks at how this conceptual shift is changing the way businesses operate and how the IT function is managed and deployed

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 >>

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