RESEARCH TRIANGLE PARK, N.C. — Fresh from last week’s announcement of a $6 billion investment in India, IBM Chief Executive Officer Samuel Palmisano is making headlines around the world again today with a call for “the globally integrated enterprise”.
In a letter published in The Financial Times for June 12, Palmisano said the old model of the multinational corporation should be scrapped. He favors a new type of enterprise that integrates all aspects of a company — research and development, produce design, etc. — across its international operations.
“Everyone, it seems, has a strongly felt position on globalisation,” he wrote. “But there has been a lot less in-depth thought about the institution many see as globalisation’s primary driver, the multinational corporation. The very word we use suggests how antiquated our thinking about it is.”
The globally integrated enterprise is the emerging business model for the new century, he said. (See: news.ft.com/cms/s/75459e9e-f9af-11da-8ced-0000779e2340.html .)
“The globally integrated enterprise — fashions its strategy, management and operations to integrate production — and deliver value to clients — worldwide,” Palmisano added. “That has been made possible by shared technologies and shared business standards, built on top of a global information technology and communications infrastructure.”
Palmisano’s beliefs can be seen in the details of the IBM plan for India. (The Motley Fool headline read: ‘IBM: I Stands for India’.”) Rather that just outsource more labor to India, IBM is investing heavily in new centers for R&D and products.
“These decisions are not simply a matter of offloading non-core activities, nor are they mere labour arbitrage — that is, shifting work to low-wage regions,” Palmisano said.
IBM’s CEO believes that corporations operating with such a strategy can help overcome opposition to globalization, lead to more economic benefit for developing nations, and help head off protectionist governmental policies.
Palmisano realizes that obstacles must be overcome in building a different kind of international company, such as skilled workforces and trust. “A company’s standards of governance, transparency, privacy, security and quality need to be maintained even when products and operations are handled by a dozen organisations in as many countries,” he wrote.
Proof of that concern is the difficulties Google, Yahoo, Cisco and others are facing in China with its stringent demands for censorship.
If companies and countries don’t work together to foster more “global integration”, Palmisano warned that more governments of “a highly protectionist sort” or those embracing “more extreme forms of nationalism, xenophobia and anti-modernism” could rise to power.
On the other hand, some people oppose Palmisano’s strategy of expanding internationally while cutting back or selling off operations in the United States.
In a letter to the editor of The News & Observer on Monday, Charles Braunhardt, who holds a PhD, wrote about the India deal: “Nice going, IBM. — Wow, would IBM employees and retirees love to see some of that money. First the company sells its laptop division to the Chinese, then it invests in India – and maybe next it’ll change the name to India Business Machines?”