Global service delivery: history and context

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Global service delivery history and context

• The Information and Service Economy
• October 17 2007
• Bob Glushko and Anno Saxenian

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Outline

• Its a Flat World, After All
• Global economic integration
• Is the world flat?
• The new Argonauts

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This is globalization 3.0

• Globalization 1.0 1492-1800
• Nations globalize for resources imperial
  conquest
• Globalization 2.0 1800-2000
• Companies globalize for markets labor
• Globalization 3.0 2000-??
• Individuals small groups globalize
• connecting the worlds knowledge pools together
• Thomas Friedman The World is Flat A Brief
  History of the Twenty-First Century, 2005

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Ten forces that flattened the world

1. 11/9/89- Berlin wall
2. 8/9/95- Yahoo!
3. Work flow software
4. Open-sourcing
5. Outsourcing
6. Offshoring
7. Supply-chaining
8. Insourcing
9. In-forming
10. The steroids

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The triple convergence

• Creation of a global, web-enabled playing field
  that allows for multiple forms of
  collaborationthe sharing of knowledge and
  workin real time, without regard for geography,
  distance, or, in the near future, even language.
• . . . new players, a new global playing field,
  and new processes and habits for horizontal
  collaboration.
• Thomas Friedman, The World is Flat

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The view from the Fed

• History of global economic integration
• Roman empire common language, legal system,
  currency
• 15th-16th c mercantilist European empires
• 1815-1914 increasing global trade, cross-border
  flows of financial capital and labor
• Post-WWII global re-integration, intra-industry
  manufacturing trade (v. comparative advantage)
• Ben Bernanke, Chair of Federal Reserve Bank, 2006

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Whats New, Whats Not?

• Historical commonalities
• New transportation communication technologies a
  major factor in global economic integration
• National policy choices play a critical role in
  the extent of integration
• Social dislocation and resistance may result with
  greater openness

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What is really new today?

1. Scale and pace of global integration is
   unprecedented
2. Core-periphery distinction less relevant as
   interdependencies grow
3. Geographic fragmentation of prodn, development of
   global supply chains
4. International capital markets more mature,
   capital flows greater

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Is the world really flat?

• The 10 percent presumption
• Most economic activity is still conducted
  domestically
• Most activities, like FDI in world capital
  formation, only 10 percent
• Only trade accounts for over 20 percent
• Tyranny of times zones, languages, proximity to
  client home bias
• Tension national sovereignty and global economic
  integration

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The world is spiky population
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The spikes
http//creativeclass.com/rfcgdb/articles/other-200
5-The20World20is20Spiky.pdf
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The world is spiky innovation
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More perspectives

• Edward Leamer A Flat World, A Level Playing
  Field, a Small World After All, or None of the
  Above? A Review of Thomas L. Friedman, The World
  is Flat Journal of Economic Literature, Vol. XLV
  (March 2007), pp. 83-126
• William Nordhaus spinning globe, origins of GDP
• http//www.econ.yale.edu/nordhaus/homepage/homepa
  ge.htm

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The global labor pool 1980
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Global labor pools 1980 2000
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The power of gravity
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The power of gravity 1960
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The power of gravity 1990
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Is the Internet flat? hosts
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Is the Internet flat? users
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Why are there firms?

• Coases theory no longer relevant
• Firms exist to accelerate talent development
  (Hagel and Brown)
• Talent is a flow, not a stock people seek firms
  and locations that provide challnges, help them
  refresh their talent
• Geographic clustering and virtuous cycle
  enhances opportunity to develop talent
• Large firms face vicious cycle scale limits
  potential for talent development

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Talent development in firms

• Implications for managers
• Need to develop talent, not just attract and
  retain
• Learning, not training, is the goal
• Need to access and motivate external as well as
  internal talent
• Use IT to amplify, not automate, talent
• Growth is key to developing talent because it
  creates new challenges

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