Michael Dolan Dot Com

Thursday, April 5th, 2007

IBM Version of “The World is Flat” – Open Source Parallels?

I can attest that IBM is a leader in embracing globalization for the potential opportunities it creates rather than the ‘old school’ fight the forces of competition approach. Our executives clearly have a solid strategy that is working.

These are exciting times. I can draw so many parallels from Sam Palmisano’s discussion on the trend towards a ‘globally integrated enterprise’ (short version pasted below) to the trends around open source software and Linux. It’s not that all software is better off open source or that all software will be open source – just like all work is not going to go to low cost countries just b/c it’s lower cost. Rather – the marketplace, customers, and vendors will pick which pieces, platforms, components are best developed in an open community with open standards. This is not vastly different from a leading edge, globally integrated enterprises that will determine where best to source the modular components of their value chain.

In a speech last year at INSEAD business school in France, Mr Palmisano set IBM‘s Indian move in the context of the modern multinational company. This, he said, had passed through three phases. First was the 19th-century “international model”, whereby firms were based in their home country, but sold goods through overseas sales offices. Then came the classic multinational firm, in which the parent company created smaller versions of itself in countries around the world. This was how Mr Palmisano found IBM when he joined it in 1973.

The third model, argues Mr Palmisano, the IBM he is now building, is the “globally integrated enterprise”. Rather than have a parent with lots of Mini-Mes around the world, such a firm shapes its strategy, management and operations as a single global entity. It puts people and jobs anywhere in the world “based on the right cost, the right skills and the right business environment. And it integrates those operations horizontally and globally.” In this approach, “work flows to the places where it will be done best”, that is, most efficiently and to the highest quality. The forces behind this “are irresistible”, he says. “The genie’s out of the bottle and there’s no stopping it.”