IBM Puts The Theory Of Comparative Advantage Into Practice
from the complements-across-the-globe dept
The success of American IT firms in recent years has pretty much put to rest the idea that competition from Indian outsourcing firms would pull the rug out from under their business. Part of the problem was that outsourcing labor to India was never the magic bullet for cost savings that companies assumed it would be. A cost justification is even hard to make now, as salaries there continue to rise. The New York Times has an interesting look at IBM’s outsourcing and services business and how it combines its own workforce in India and the US. The key is in identifying the relative strengths of each part of the company. When it comes to the aspects of a job that are mainly technical, the company can realize cost savings by using its Indian workers. But for the parts that involve specialized knowledge into a clients’ business, IBM’s American workers are well suited to do the job. The complementary nature of the company’s various units arose out of a realization that IBM had to compete on more than just price in order to thrive. Going forward, the arrangement should continue to prove beneficial to IBM. As the IT industry becomes more and more about services, a company that has deep understanding of its clients’ businesses should have an advantage over a company that just knows technology.