Wednesday, September 8, 2010

What is the shape of Earth?

'World is Flat', most of you must have heard this phrase and if you have been to any of the business schools then you ought to know what it means. Btw, I have religiously bought that book in my MBA days and with the same religious zeal I have kept it on my shelf (never been able to go beyond the first few pages). Coming back to this blog, the term globalization has been used and abused so extensively that few actually understand the depth of this term. Fewer still, actually know that there are 2 aspects of globalization: globalization of market and globalization of industry. Both of these, although related, are quite different. Globalization of market is concerned with the homogeneity of the customers of a particular market with respect to customers in some other market. By this I mean that the customer demands and needs in one market are same/similar to the that in the other market. Globalization of industry is concerned with how the industry align its value chain to take advantage of global opportunities which might exists beyond and across national boundaries. There are many driving factors for each of these forms of globalization, but I will not be going into that. What I will be talking here is today's headline - "Ohio bans outsourcing of IT projects by government departments".

Talking from globalization point of view, this is an anti-globalization move. US has been a big bully of globalization where in past it has threatened smaller economies to open their markets for US Corporations. In those days US corporations have been behind such moves. It was in their economic interest. But what is happening now is very interesting. Not only US is going against WTO norms but is also going against its own industry. Corporations are not really supportive of this and other related moves by the democrat government like hike in Visa fee etc. But leave all this apart. What is your opinion on this subject?

First of all let me clarify, its not necessary to hold a opinion on a issue. You might or might not have one. Fine. Nothing to be embarrassed about. But even if you don't have a opinion till now, and if you are from Indian IT industry, I guess your first reaction would be - its outrageous... how can they do it.... what will be the impact on us... etc etc... right? If you didn't reacted like that then believe me, you would be in the precious few. But hold on, lets ponder over this topic a bit more. Let us first discuss why do governments exists. Any government is quite similar to a very large corporation. As any corporation's objective is to create value for its stakeholders, every government has to create value for its stakeholders. The majority of stakeholders consists of the citizens of the country to whom the government is answerable to. So, in short, governments exists to create value for its citizens, to ensure their welfare. Going by this, what Ohio government has done is totally fine. Their people are out of jobs, so its justified that they find ways to get them employed. But is it not against globalization and the norms which US has set for others? Well yes, but so what? I will follow the rules which are beneficial for me and my people. So, what if you brand me hypocrite. Thats not my priority. And my friends, THATS the truth. If the same thing would be happening in India, would you not have expected the government to take similar steps? We talk much about globalization and Thomas Friedman call it a flat world, but the truth is, the world will never be flat. Not until you have the concept of country. As far as the implications of such move on Indian IT industry is concerned, well there will not be any significant impact. Why? Well, its an open market... you can't hold such policies for long else you will be India pre 1991. Its my opinions, you are free to hold your views and are welcomed to share in the comment section. BTW, there is also a poll on this topic on this blog. Feel free to vote if you want.


RISHABH said...

First of all thanks a lot to the writer for giving us all ( UGs) the feel of B school..Before reading this I really wanted to get into one but now i m having second thoughts :P..seriously it was just like going thru some case study... Secondly looking at the length of the post and the hr when it was posted (Office hr obviously :P) and adding to it my small 2 months of work ex in IT industry i want to ask one ques .. are US firms really outsourcing anything to this place?? bcoz i don't find anyone doing any productive here .. Now before coming to the main ques i just wanna tell that i voted yes in the poll even before reading the post .. so that's i think tells everything about how & what i feel about this issue and about this case study :P

Sidharth said...

Its like spending govt. money (because project would now cost 3 times more) to give jobs. Does that make sense for the government. Yes in short term, not in long term.

Your economy does not have enough jobs, so government uses its fund to employ people. This will make things costlier, purchasig power reduces, thus consumption (lifeline of US economy) reduces.

In short term, a few people get jobs, their purchasing power increases consumption looks to be increasing. But, as explained in long term this money comes out from pockets of a larger mass (the tax payers).

In politics (especially democracy) when local election are nearby always think short term has become the mantra everywhere.