Knowledge Work on the Move

As a result of the location independence of knowledge work, many organizations seek to lower their labor Source: Courtesy of CEO Express.

FIGURE 12.22

The CEO Express Web site.

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540 ● Module V / Management Challenges

costs by moving their digital operations overseas. When managers evaluate such opportunities, they must con- sider the following regional attributes:

• Political and regulatory environment

• Infrastructure (electrical, telecommunications) • Professionally skilled labor force

• Information systems skilled labor force

All prospective locations must have a supportive political and regulatory environment; however, varia- tions within the other three attributes will pose special limitations. For example, India has millions of well- educated workers but notoriously unreliable telecommunications and electrical grids. Organizations that set up outsourcing operations in India build their own islands of stability with backup power and satellite telecommunications systems. A region with a shortage of profes-

sionally skilled labor may offer labor-intensive activi ties such as call centers or data entry instead, yet even these jobs require basic computer literacy.

The value of services provided depends primarily on the expertise or creativity involved in its performance. List suitable job titles for each work characteris- tic below. Rank each item in order of the value provided.

a. Digitize: Convert data or information into a digital form.

b. Distribute: Process information in one direction or another based on strict rules and nondigital inputs (if the inputs were digital, a computer could proba- bly do the job).

c. Analyze: Process information based on human expertise.

d. Create: Create new information or products based on human expertise.

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IBM Corporation: Competing

Globally by Offshoring IT Workers and Giving Away Technology

but newcomers in any number would add to an already surprisingly large roster in developing countries. Of the program- mers who write custom code for IBM’s services group, about half—26,000 or so—are in India, Brazil, or China. “Strategic low-cost geographies” is the IBM lingo for such places.

India already accounts for the largest number of IBMers outside the United States (it recently surpassed Japan). In 2004, Big Blue acquired India’s Daksh eServices, whose 6,000 employees operate call centers for companies like Amazon.com and Citicorp. Goldman Sachs calculates that by the end of next year, IBM Services’ head count in India will top 52,000. That would be more than one-fourth of all its services personnel and about one-sixth of IBMers world- wide. It would put IBM in India on a par with Wipro, the largest local software company, and it would make it bigger than Infosys and Tata Consultancy Services.

Growth in the developing world is a natural part of imple- menting a “global delivery model” for services, says senior vice president Bob Moffat. In July, Palmisano reorganized services, naming the 49-year-old Moffat as one of three executives who will run it jointly. Although the other two will over- see the delivery of services to clients, Moffat’s job is to find efficiencies. He spent the past three years taking billions of dollars in costs out of IBM’s physical supply chain—the delivery of parts and goods to and from factories and then on to the customer. His mission now is to cut the cost of delivering services, even high-value ones, by tightening the “services supply chain.” Mostly, that means people; he must get the right ones to the right place at the right time. He has to ex- tract every last penny of value from IBM’s 260,000 developed- country employees if they’re going to stay on the payroll.

Palmisano certainly sounds confident. In an e-mail to Fortune , he makes a remarkable claim: that by adopting the strategy that he calls, simply, “openness,” IBM has tapped a major new “spur to innovation itself.” The company lavishes some $5.7 billion a year on R&D. By sharing its discoveries wisely, Palmisano says, IBM will “make the pie bigger,” and the entire industry will grow faster.

Collaborating with customers, and even rivals, to invent new technologies is a big part of this sharing plan, and the first fruits are already apparent. In hardware, IBM, Sony, and Toshiba have codeveloped a breakthrough chip called the Cell, which could eventually help transform all of IBM’s computers. In software, embracing Linux and other open- source technology has given IBM new platforms on which it is building almost all of its high-growth applications.

The idea that giving things away makes the pie bigger for everybody is not IBM’s invention, of course. The open- source software movement that developed Linux is a good example. Says Palmisano: “This isn’t theory for us. Collabo- rative innovation today is crucial to every aspect of our business. We’ve learned how to deliver value within this kind of business system and how to make money.”

t’s IBM’s nightmare. In a conference room in Bangalore, a team of retail experts at software company Wipro are redesigning the consumer experience for a major U.S. retail chain. They’re methodically evaluating the checkout area.

The client wants state-of-the-art processes, and Srikant Shankaranarayana, Wipro’s brainy, intense, 44-year-old gen- eral manager for retail solutions, is pushing his consultants and engineers to ask tough questions: Should salesclerks carry handheld transaction devices or stand at cash registers?

Which merchandise should be tracked electronically? How much information needs to be in the database to ensure that discount promotions don’t last longer than necessary?

Those are exactly the kinds of questions that IBM wants to ask its retail customers, and the fact that such companies as Louis Vuitton and Target are turning to India for answers is not a good thing for IBM. Almost half of IBM’s revenues now come from such business/IT services, and only services promise to provide growth on the massive scale that IBM needs to make shareholders happy. Luckily for IBM, Wipro has only 100 retail consultants—so far.

Meanwhile, IBM’s costs remain those of a mature First World corporation. It has approximately 260,000 expensive employees in the United States and other developed countries (the other 60,000 are in lower-cost regions) and 164,000 pensioned retirees, all quarterbacked from a gleaming mod- ern headquarters on 432 acres of pricey Westchester County real estate.

Although they don’t put it quite this boldly, CEO Sam Palmisano and other top IBMers think they’re well on the way to solving the problem. Interviews with the CEO’s lieu- tenants reveal their strategy: It will not only challenge upstarts like Wipro directly by taking the low-cost model right back at them, but it also includes a dimension that is so original and so bold that it will either reenergize Big Blue’s profits or un- dermine its vaunted status as the biggest company in IT.

Simply put, IBM is gambling that it can win by giving away crown jewels—precious intellectual property in the form of software, patents, and ideas. Spread enough of those riches around, the theory goes, and the entire industry will grow faster, opening new frontiers. That, in turn, should create opportunities for IBM to sell high-value products and services that meet the new demand.

IBM’s response to the India threat has been swift. In April 2005, after first-quarter revenues from services came in unexpectedly weak and IBM disappointed Wall Street’s earnings expectations, the company eliminated 14,500 jobs, mostly in Europe. It was the biggest job cut in three years:

The company shut its European headquarters and moved most of the surviving employees out to the field, to what Palmisano calls “client-facing positions.”

Next, The New York Times reported that it obtained an in- ternal IBM memo that said the company would hire 14,000 people in India this year. IBM calls the figure “exaggerated,”

REAL WORLD

CASE 3

Chapter 12 / Enterprise and Global Management of Information Technology ● 541

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A walking, talking embodiment of that is Jim Stallings, Palmisano’s vice president for intellectual property and standards—a job Palmisano invented when he tapped Stall- ings for it last September. Stallings, 49, used to manage IBM’s work with the Linux community; now he’s the guy who figures out what Big Blue should give away and what it should keep. A buttoned-down former Marine Corps cap- tain and 14-year IBM veteran, he’s not the most likely high- tech Santa. Yet he’s almost hypnotically good at explaining how IBM’s plan works. The giveaways to open-source software groups, customer groups, universities, and other IT companies are surprisingly extensive and diverse.

IBM says there’s no way to attach a precise dollar value to its giveaways, but Fortune calculates they’re worth at least

$150 million a year. Although sharing is not yet a universal part of its culture, the company has come a long way from the arrogant, standoffish, monopolistic IBM of yore.

What’s in it for IBM? Big Blue seldom gives away a technology unless it has intellectual property and expertise that will enable it to make money if the technology is widely adopted. When IBM hands out tools to retailers, it often sells them additional software and consulting services.

What’s more, freebies themselves can be a potent weapon.

Application-related software from Microsoft can be costly.

An open-source version like Apache Geronimo is free and is the latest salvo in IBM’s open-source challenge to Microsoft.

It has also embraced the Linux operating system, a formidable

rival to Windows, as well as Firefox, a popular challenger to the Internet Explorer Web browser.

IBM has also found giveaways to be a potent door opener abroad, where the company derives 63 percent of its revenues. Stallings has been to China four times this year and plans to go two more times in September. He’s working to convince policymakers and business leaders that using open- source software makes more sense than buying Microsoft’s.

This IBMer bearing gifts has found a receptive audience.

Now IBM is helping build a giant network based largely on Linux to connect all of China’s libraries.

All this sounds well and good, but the outcome is far from certain. IBM is in a brutally competitive marketplace with a long list of rivals going after the same customer dollar, but Palmisano argues that IBM will be able to create products and services that capitalize on new markets as they emerge.

Yet even his own executives need to be convinced from time to time. Two years ago, some insiders fretted that IBM might be “shooting itself in the foot” by giving its ideas away.

In the end, however, company researchers concluded that as long as IT remains hard to use, expensive, and labor-intensive, with customers continuing to need help solving business problems, IBM will have the opportunity to thrive. Any business computer user would guess that means forever.

Source: Adapted from David Kirkpatrick, “IBM Shares Its Secrets,” Fortune , September 5, 2005.

1. Do you agree with IBM’s employment response to competition from software development contractors in India, like Wipro, that are expanding into IT consulting services? Why or why not?

2. Will IBM’s plan to give away some of its IT assets and intellectual property, as well as increase its support of open-source software products like Linux, be a success- ful growth strategy in the “brutally competitive marketplace” in which it operates? Why or why not?

3. Do you agree with IBM researchers’ assumption that IT will remain “hard to use, expensive, and labor- intensive, with customers continuing to need help s olving business problems” for a long time to come?

Should IBM bet its business on that assumption?

Defend your answers to both questions.

1. Use the Internet to research news on the latest developments in the competition to provide IT consulting services to businesses and governments. Check out IBM’s performance, as well as major players like HP and Accenture, new entrants like Dell, and inter- national competitors like Wipro. Who appears to be winning or losing in this arena? What reasons can you uncover for the results you find?

2. IBM eliminated 14,500 jobs, mostly in Europe, and then reportedly hired thousands of additional IT workers in India. Cutting high-cost jobs and then offshoring jobs to a subsidiary in a lower-cost country is a contro- versial business strategy being used by other global companies. Break into small groups with your class- mates to discuss the implications of this issue for your current or future career choices and the kinds of companies or organizations you would want to work for.

REAL WORLD ACTIVITIES CASE STUDY QUESTIONS

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543

R e v i e w Q u i z A n s w e r s

1. 20 2. 18 3. 24 4. 24a 5. 24b 6. 24c 7. 15

8. 1 9. 23b 10. 8 11. 9 12. 10 13. 26 14. 12

15. 2 16. 3 17. 14 18. 16 19. 17 20. 13 21. 13a

22. 13b 23. 25 24. 25a 25. 25b 26. 23 27. 16a 28. 16b

29. 16c 30. 16d 31. 16e 32. 27 33. 27c 34. 27b 35. 27a

36. 19 37. 11 38. 7 39. 27d 40. 5 41. 6 42. 14a

43. 22 44. 23a 45. 4 46. 27f 47. 21 48. 27e 49. 27g Chapter 1

1. 3 2. 4 3. 12

4. 11 5. 5 6. 13

7. 6 8. 14 9. 10

10. 2 11. 1 12. 15

13. 8 14. 9 15. 7 Chapter 2

1. 3 2. 2 3. 5 4. 8 5. 27 6. 30 7. 25 8. 22

9. 21 10. 1 11. 7 12. 13 13. 14 14. 9a 15. 9b 16. 18

17. 9c 18. 20 19. 19 20. 35 21. 10 22. 28c 23. 34e 24. 26

25. 15 26. 12 27. 16 28. 17 29. 33 30. 24 31. 28 32. 28a

33. 34c 34. 4 35. 34 36. 37 37. 34a 38. 34f 39. 31b 40. 31a

41. 36 42. 6 43. 32 44. 31 45. 9 46. 11 47. 23 48. 28b

49. 28d 50. 34b 51. 29 52. 34d 53. 34g Chapter 3

1. 5 2. 2 3. 31 4. 1 5. 4 6. 7

7. 32 8. 6 9. 34 10. 22 11. 27 12. 19

13. 33 14. 12 15. 11 16. 35 17. 9 18. 30

19. 37 20. 8 21. 26 22. 17 23. 29 24. 13

25. 20 26. 3 27. 14 28. 10 29. 24 30. 23

31. 28 32. 15 33. 38 34. 18 35. 25 36. 21

37. 16 38. 36 Chapter 4

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544 ● Review Quiz Answers

1. 11 2. 3 3. 9 4. 19 5. 2 6. 10

7. 12 8. 20b 9. 13d 10. 20d 11. 8 12. 5

13. 6 14. 16e 15. 16g 16. 16f 17. 16c 18. 15

19. 13a 20. 13e 21. 13b 22. 20e 23. 20a 24. 20c

25. 1 26. 13 27. 16b 28. 18 29. 4 30. 17

31. 16a 32. 20 33. 7 34. 14 35. 16d

36. 13c 37. 16 Chapter 5

1. 34 2. 23 3. 20 4. 17 5. 16 6. 13

7. 8 8. 10 9. 35 10. 15 11. 7 12. 29

13. 9 14. 3 15. 31 16. 32 17. 18 18. 19

19. 24 20. 1 21. 2 22. 33 23. 5 24. 27

25. 21a 26. 21b 27. 25 28. 12 29. 11 30. 4

31. 22 32. 26 33. 6 34. 14 35. 28 36. 36

37. 21 38. 30 39. 37 Chapter 6

1. 7 2. 5 3. 14 4. 9 5. 10

6. 20 7. 16 8. 24 9. 19 10. 4

11. 3 12. 11 13. 22 14. 17 15. 15

16. 8 17. 1 18. 13 19. 18 20. 27

21. 6 22. 12 23. 26 24. 25 25. 2

26. 23 27. 28 28. 21 29. 29 Chapter 7

1. 5 2. 5b 3. 5a 4. 5c

5. 4 6. 4a 7. 4f 8. 4c

9. 4h 10. 4e 11. 4b 12. 7

13. 8 14. 3d 15. 3a 16. 3c

17. 3b 18. 2 19. 6 20. 4d

21. 1 22. 3 23. 4g Chapter 8

1. 6 2. 10 3. 21 4. 7 5. 3

6. 22 7. 1 8. 1d 9. 1c 10. 1a

11. 1b 12. 24 13. 4 14. 5 15. 8

16. 20 17. 9 18. 2 19. 25 20. 26

21. 15 22. 11 23. 18 24. 16 25. 12

26. 19 27. 23 28. 13 29. 17 30. 14 Chapter 9

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Review Quiz Answers ● 545

1. 24 2. 20 3. 29 4. 16 5. 17

6. 10 7. 2 8. 4 9. 11 10. 13

11. 15 12. 5 13. 27 14. 28 15. 22

16. 7 17. 8 18. 12 19. 6 20. 30

21. 26 22. 21 23. 19 24. 9 25. 1

26. 18 27. 14 28. 25 29. 3 30. 23

1. 2 2. 11 3. 15 4. 12

5. 3 6. 1 7. 22 8. 13

9. 7 10. 19 11. 16 12. 5

13. 6 14. 18 15. 4 16. 8

17. 17 18. 10 19. 21 20. 9

21. 20 22. 10b 23. 10a 24. 14 Chapter 12

Chapter 11 1. 21 2. 27 3. 17 4. 3 5. 28b 6. 12b

7. 28b 8. 12a 9. 22 10. 14 11. 8 12. 6

13. 29 14. 13 15. 10 16. 20 17. 9 18. 30

19. 25 20. 23 21. 24 22. 19 23. 7 24. 11

25. 2 26. 26 27. 5 28. 18 29. 32 30. 31

31. 1 32. 4 33. 28 34. 15 35. 12 36. 16 Chapter 10

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547

S e l e c t e d R e f e r e n c e s

Preface

Sawhney, Mohan; and Jeff Zabin. The Seven Steps to Nirvana: Strategic Insights into e-Business Transformation.

New York: McGraw-Hill, 2001.

Chapter 1—Foundations of Information Systems in Business 1. Melymuka, Kathleen. “Profiting from Mistakes.” Com-

puterworld, April 20, 2001.

2. Kalakota, Ravi; and Marcia Robinson. E-Business 2.0:

Roadmap for Success. Reading, MA: Addison-Wesley, 2001.

3. Institute for Development Policy and Management, http://www.egov4dev.org/home.htm and http://www.

e-devexchange.org/eGov/home.htm, March 2004.

4. “Citibank E-Mail Hoax and Webpage Scam,” http://

www.millersmiles.co.uk/identitytheft/citibank-email- verification-hoax.htm, November 2003.

5. Lee, Allen. “Inaugural Editor’s Comments.” MIS Quar- terly, March 1999.

6. Norris, Grant; James Hurley; Kenneth Hartley;

John Dunleavy; and John Balls. E-Business and ERP:

Transforming the Enterprise. New York: John Wiley &

Sons, 2000.

7. Radcliff, Deborah. “Aligning Marriott.” Computerworld, April 20, 2000.

8. Rosencrance, L. “Citibank Customers Hit with E-Mail Scam.” Computerworld, October 24, 2003.

9. Steadman, Craig. “Failed ERP Gamble Haunts Hershey.” Computerworld, November 1, 1999.

10. Weiss, Todd. “Hershey Upgrades R/3 ERP System without Hitches.” Computerworld, September 9, 2002.

11. Williams, Lisa. “EMC Keeps Red Sox in the Game.”

ITworldcanada.com. 2006.

12. Thibodeau, Patrick. “Want to Win in Vegas? Bet on an IT Job, Not the Super Bowl.” Computerworld, February 2, 2007.

Chapter 2—Competing with Information Technology 1. “Agilent Technologies ERP Information for Custom-

ers,” http://www.tmintl.agilent.com/model/index.

shtml, n.d.

2. Applegate, Lynda; Robert D. Austin; and F. Warren McFarlan. Corporate Information Systems Management:

Text and Cases. 6th ed. Burr Ridge, IL: Irwin/McGraw- Hill, 2003.

3. Bowles, Jerry. “Best Practices for Global Competitive- ness.” Fortune, Special Advertising Section, November 24, 1997.

4. Caron, J. Raymond; Sirkka Jarvenpaa; and Donna Stoddard. “Business Reengineering at CIGNA Cor- poration: Experiences and Lessons from the First Five Years.” MIS Quarterly, September 1994.

5. Christensen, Clayton. The Innovators Dilemma: When New Technologies Cause Great Firms to Fail. Boston:

Harvard Business School Press, 1997.

6. Cronin, Mary. The Internet Strategy Handbook. Boston:

Harvard Business School Press, 1996.

7. Davenport, Thomas H. Process Innovation: Reengineering Work through Information Technology. Boston: Harvard Business School Press, 1993.

8. El Sawy, Omar; and Gene Bowles. “Redesigning the Customer Support Process for the Electronic Economy: Insights from Storage Dimensions.” MIS Quarterly, December 1997.

9. El Sawy, Omar; Arvind Malhotra; Sanjay Gosain; and Kerry Young. “IT-Intensive Value Innovation in the Electronic Economy: Insights from Marshall Indus- tries.” MIS Quarterly, September 1999.

10. Frye, Colleen. “Imaging Proves Catalyst for Reengineering.” Client/Server Computing, November 1994.

11. Garner, Rochelle. “Please Don’t Call IT Knowledge Management!” Computerworld, August 9, 1999.

12. Goldman, Steven; Roger Nagel; and Kenneth Preis.

Agile Competitors and Virtual Organizations: Strategies for Enriching the Customer. New York: Van Nostrand Reinhold, 1995.

13. Grover, Varun; and Pradipkumar Ramanlal. “Six Myths of Information and Markets: Information Technology Networks, Electronic Commerce, and the Battle for Consumer Surplus.” MIS Quarterly, December 1999.

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548 ● Selected References

14. Hamm, Steve; and Marcia Stepaneck. “From Reengi- neering to E-Engineering.” BusinessWeek e.biz, March 22, 1999.

15. Hoffman, T. “In the Know: Knowledge Management Case Study Pays Off for BAE Systems.” Computerworld, October 14, 2002.

16. “Intel Telecom Case Studies, Best Known Call Center Practices,” http://www.intel.com/network/csp/

resources/case_studies/enterprise/7867web.htm, n.d.

17. Kalakota, Ravi; and Marcia Robinson. E-Business 2.0:

Roadmap for Success. Reading, MA: Addison-Wesley, 2001.

18. Kettinger, William; Varun Grover; and Albert Segars.

“Do Strategic Systems Really Pay Off? An Analysis of Classic Strategic IT Cases.” Information Systems Management, Winter 1995.

19. Kettinger, William; James Teng; and Subashish Guha.

“Business Process Change: A Study of Methodologies, Techniques, and Tools.” MIS Quarterly, March 1997.

20. Nonaka, Ikujiro. “The Knowledge Creating Company.”

Harvard Business Review, November–December 1991.

21. Porter, Michael, and Victor Millar. “How Information Gives You Competitive Advantage.” Harvard Business Review, July–August 1985.

22. Prokesch, Steven. “Unleashing the Power of Learning:

An Interview with British Petroleum’s John Browne.”

Harvard Business Review, September–October 1997.

23. Sambamurthy, V.; Anandhi Bharadwaj; and Varun Grover. “Shaping Agility through Digital Options:

Reconceptualizing the Role of Information Technology in Contemporary Firms.” MIS Quarterly, June 2003.

24. Seybold, Patricia. Customers.com: How to Create a Profit- able Business Strategy for the Internet and Beyond. New York: Times Books, 1998.

25. Shapiro, Carl; and Hal Varian. Information Rules: A Strategic Guide to the Network Economy. Boston: Harvard Business School Press, 1999.

26. Siekman, Philip. “Why Infotech Loves Its Giant Job Shops.” Fortune, May 12, 1997.

27. Songini, Marc. “ERP Effort Sinks Agilent Revenue.”

Computerworld, August 26, 2002.

28. Strategy Works, “Retrieval Is the Key to the New Economy,” http://www.thestrategyworks.com/articles/

knowledge2.htm, August 31, 2000.

29. Babcock, Charles. “Evolve Business Processes, Don’t Reengineer Them.” InformationWeek, November 11, 2004.

30. Weill, Peter; and Michael Vitale. Place to Space:

Migrating to E-Business Models. Boston: Harvard Business School Press, 2001.

Chapter 3—Computer Hardware

1. Computerworld, PC Week, PC Magazine, and PC World are just a few examples of many good magazines for current information on computer systems hardware and its use in end-user and enterprise applications.

2. The World Wide Web sites of computer manufactur- ers such as Apple Computer, Dell Computer, Gateway, IBM, Hewlett-Packard, Compaq, and Sun Microsystems are good sources of information about computer hardware developments.

3. Alexander, Steve. “Speech Recognition.” Computer- world, November 8, 1999.

4. “Computing in the New Millennium.” Fortune, Tech- nology Buyers Guide, Winter 2000.

5. Guyon, Janet. “Smart Plastic.” Fortune, October 13, 1997.

6. “Hardware.” Fortune, Technology Buyer’s Guide, Winter 1999.

7. Hecht, Jeff. “Casino Chips to Carry RFID Tags.” New Scientist, January 2004.

8. Joch, Alan. “Fewer Servers, Better Service.” Computer- world, June 4, 2001.

9. Kennedy, Ken, et al. “A Nationwide Parallel Com- puting Environment.” Communications of the ACM, November 1997.

10. Messerschmitt, David. Networked Applications: A Guide to the New Computing Infrastructure. San Francisco:

Morgan Kaufmann, 1999.

11. Ouellette, Tim. “Goodbye to the Glass House.” Com- puterworld, May 26, 1997.

12. Ouellette, Tim. “Tape Storage Put to New Enterprise Uses.” Computerworld, November 10, 1997.

13. Reimers, Barbara. “Blades Spin ROI Potential.” Com- puterworld, February 11, 2002.

14. Simpson, David. “The Datamation 100.” Datamation, July 1997.

15. “Top 500 Supercomputer Sites: ASCII White,” www.

top500.org, May 18, 2003.

16. Gaudin, Sharon. “Kurzweil: Computers Will Enable People to Live Forever.” Informationweek, November 21, 2006.

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CASE STUDY QUESTIONS REAL WORLD ACTIVITIES

CASE STUDY QUESTIONS REAL WORLD ACTIVITIES