To save over a hundred million dollars a year is a wonderful thing. Is that truly what “globalization” provides?
After reading over “Globalized IT operations pay off” several times, I remain skeptical. “By interlocking business services, companies gain customer knowledge, efficiency and speed. The payoffs are huge …” we’re promised. The article is admirably full of concrete quotes, specific names, measurements, and descriptions. I’m still left wondering what to conclude from it all.
Start, for example, with the arresting claim that Procter & Gamble “cut its IT [information technology] costs by one-third and saved $1 billion over the past nine years.” That sounds like a wonderful model, one that deserves our study.
At the same time, it’s hard for any outsider to substantiate this claim attributed to CIO and group president of Global Business Services Filippo Passerini. Bracketing the initiative to the past nine years, for example, is curious, as Passerini only became CIO in 2004. The savings truly are noteworthy; spread over the 2,500 P&G employees assigned to IT, they represent over $40K annually in savings, let alone value-added.
What we do know is that P&G is under pressure from investors to follow through on its high-profile pledges to cut costs by $10 billion, to remake itself into a “digital powerhouse“, and so on. Some organizations would treat an innovation like “globalization” as a strategic advantage that they’re reluctant to reveal to competitors. The incentives at P&G seem to be to remain in the public eye as a progressive innovator.
This doesn’t disprove the merits of globalization; it only suggests that its benefits might be more specific to a particular organization than the article lays out. To go deeper, consider how the article presents “globalization” itself.
More than just a fancy “war room”
This is not your older brother’s IT globalization. For an earlier generation of business analysts centered around 2001, including mentions emerging from P&G, “globalization” was code for off-shoring: re-basing IT to cheaper technical centers in India, Russia, and so on. It was an emotionally-divisive term for at least a period.
It surprises me that the word has been revived in a new role. Now it seems to mean something more like, “centralization as applied to a global organization”. Article author Robert L. Mitchell profiles globalization in four other companies beside P&G: IDEX, The Vanguard Group, Bank of America, and Equifax. What they share, from his description, is consolidated infrastructure, centralization and standardization of services or processes, and strategic reliance on outsourcing.
The difficulty is that the borders of this kind of “globalization” are so blurry that it’s hard to pin down exactly where the profit lies. I have no doubt that each of these organizations has smart, hard-working people implementing new IT plans. Are they similar enough to lead to definite conclusions that apply in your organization? Is it centralization that pays off, or standardization–or the combination?
To some extent, all these narratives also bring the Hawthorne effect and other measurement artifacts to mind. The article quotes Dave Kamath, vice president and CIO of IDEX: “There’s always a tension between what should be done locally and what should be done globally.” That’s one statement I’m sure is true; for every success of centralization, it’s possible to find an example of a different organization that believes its success due to practices of local autonomy, empowerment, federated management structure, and so on.
That’s not an invitation to despair and nihilism. Much of the character of business is the obligation and opportunity to take action even in the absence of complete or certain information. I doubt that the most impressive results the article cites admit replication by a simple formula. Several more modest insights and achievements make sense, though:
- Look for the right balance between centralization and de-centralization;
- Recognize that IT doesn’t stand still, but deserves frequent re-assessment and correction;
- Seek processes that can be automated; and
- Exploit new technologies, including content delivery networks (CDNs), videoconferencing, virtualization, multiprotocol label switching (MPLS), and cloud, to turn IT into cost-effective services.
Choose the right mix, and you might be able to echo P&G vice president Jim Fortner, for whom outsourcing, optimizing and consolidating “… changed the whole focus from 70% running the operations to 70% innovating on the operations.”