Platt Perspective on Business and Technology

Outsourcing and globalization – some thoughts re three questions shared from the LinkedIn community

Posted in book recommendations, outsourcing and globalization by Timothy Platt on September 19, 2009

I responded right away to the social networking business questions shared with me from my LinkedIn query four days ago. I also received three questions that connect in varying ways to what has to one of the most significant transitions in human history, that we are currently living through the early stages of – the rapid shrinking of our world and the breaking down of barriers and walls.

This is not a smooth or uneventful process and it has and will have setbacks, and create tremendous controversy – this is already happening, of course. There is, however a strong sense of inevitability in much of it. And the questions of what form this will have and of the impact on the lives of individuals and communities, of industries and local economies from al this are still largely in doubt..

I look up while writing this to note books like:

• Friedman, Thomas L. (2007) The World Is Flat: a brief history of the 21st century. Farrar, Straus and Giroux
• Fung, VK, Fung, WK and Wind, Y. (2007) Competing In A Flat World: building enterprises for a borderless world. Wharton School Publishing

and a number of others that I have read and learned from, and I think of the impact that all of this is having, not just on the “view from space” perspective of the global economy with its major political and economic forces, but on the individual caught up in all this.

The questions that I was given through LinkedIn and in response to my request for feedback are as follows:

1. “How does use of free OPEN software (like OpenWorkBench) affect America’s ability to retain strategic software development proficiency skill sets and long-term competitive advantage in a global economy? Will we eventually realize modest short-term cost savings in exchange for longer term strategic advantages and opportunity? Once proficiency skills are lost, what happens when FREE OPEN is switched off? Where does that leave us?”

2. “What is the best way to develop and compensate Intellectual Property? How can this be done to eliminate or reduce deadweight loss? In a similar fashion as user based content has become a valuable product of the internet, and open communication channels, can something similar exist for the generation of IP?

“I’m not think about reducing incentives for those who develop IP, but to come up with a more profitable (to the consumer) way to develop, handle, and compensate for the IP such that society as a whole can benefit from innovation as much as those who spur the innovation do. Thus addressing the deadweight loss.”

3. “In America, Why in the world are we severely restricting H1B visas for very well qualified technologists (and other scientists or generally brilliant people) and even deporting such talent? It seems counter to the intent to encourage innovation and business development (and job creation). We are sending these brilliant people home after they were educated here rather than welcoming them to build their business here. Other countries seem to be adopting similar immigration barriers to talented people such as this. Why?”

The first question that I would address here is that of why I bring these together in this category – Outsourcing and Globalization and I start on that by focusing on the first two questions, and by sharing a book recommendation.

• Benkler, Yochai. (2006) The Wealth of Networks: how social production transforms markets and freedom. Yale University Press

Much of the flattening of the world that Thomas Friedman and others write and speak of so much involves opening up avenues and creating networks for developing and sharing information and intellectual property. This involves the open software and related movements cited in question 1, and the proliferation of open standards that make easy widespread distribution and reuse of the fruits of this effort possible. And it involves intellectual property law as the potential for conflict of interest comes up as far as simultaneously protecting the rights of information resource developers so they can benefit from the fruits of their labor, and of the larger public to access and share, and to build upon the current state of the art. I will add that Yochai Benkler’s book offers penetrating insight into issues crucial to question 2, above so I highly recommend it to anyone interested in the set of issues that question raises.

Question 3, above enters in here, insofar as the breaking down of boundaries for sharing information and intellectual property, and the blurring of private and public that is developing in concert with that, is also being accompanied by a blurring and even a breakdown of other boundaries as well. For national boundaries, the European Union with its inclusion of 27 member states comes immediately to mind with more traditionally shared military defense accompanied by a shared economy and currency – resources more commonly thought of as so fundamental to the definition of nation states as to be all but requisite to the definition that separate sovereign nations manage them separately. And where nation states go, individual citizens have already been going.

Question three, in fact raises some of the most important issues that come up in the context of globalization. Bringing in outside and extra-national employees who have special skills and experience difficult or impossible to find more locally raises issues of the educational systems and on the job training and career development opportunities for countries forced to look outside to fill important job openings. When a country finds itself unable to find sufficient numbers of sufficiently trained and experienced professionals from within its own citizenry to meet crucial marketplace needs and to remain competitive, it is in real trouble as a stand-alone entity.

On the other hand, the trends and processes of globalization are making national boundaries much less important as far as stability and strength for any given nation state. On a different level than that of individual H1B visas, how much does a nation’s trade deficit matter when such a large percentage of any trade deficit or surplus number is tied up in the activities of multinational corporations and so much of the trade takes the form of product and service that is developed and manufactured globally, with some components built here, some subassembly taking place there and final assembly frequently taking place in several places and on several different continents? Fung, Fung and Wind’s book cited above is very good for outlining how dynamic, transnational supply chain systems work and how they can out-compete more nationally restricted alternatives. So measures of national trade deficit and surplus can in fact be more a matter of where companies house their global headquarters and are incorporated for legal purposes than they are of direct or meaningful economic analysis per se.

And what of the individual worker and of companies and organizations that seek to reach across borders to find the best so they can be more effectively competitive than their direct competition is? I do not have a general answer to that and am not sure there can be one now. At the same time I wonder if we are looking at the right issues here and if the whole question of local versus foreign high-skills workers is not based on faulty and unconsidered assumptions – like the debate of national trade deficits and surpluses absent consideration of the multinational and transnational basis of production and trade as that creates and biases how these numbers are arrived at.

Are there real issues here with the growing global migration of skilled and also unskilled labor? Yes, certainly! And this affects real individuals and families and in ways that are important and in ways that cannot be seen from the global and macroeconomic prospective of world flattening and world lumpiness in the face of this or of macroeconomic trends and pressures.

I have just tossed together a 1300 plus word note on this and have simply tried to highlight one real point here – that these three seemingly unrelated questions all connect together and in a very important way that impacts on all of us and on all communities, and on our economics and our futures. I expect to come back to this again in future blog entries and I will probably offer some more book recommendations too.

2 Responses

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  1. Mandy said, on September 20, 2009 at 10:26 am

    Are you aware that companies are not required to look for local talent before hiring H-1B?

    This makes your statement here untrue:

    “Bringing in outside and extra-national employees who have special skills and experience difficult or impossible to find more locally ”

    The H-1B visa is for ordinary workers doing ordinary work.

    There is no restriction on the O visa for extraordinary talent.

  2. Tim Platt said, on September 20, 2009 at 4:08 pm

    Thank you for your clarification Mandy. I did misspeak as to H1-B versus O visas. I simply add that there is a distinct difference between “can” and “must” when it comes to local versus visa-based non-local hiring. Employers can look locally and for most purposes and in most circumstances I expect that they will when hiring as that is easier. As to whether they do or not and as to the intricacies of employee visa law – that brings up a very important set of issues that Friedman and a number of others touch on but that we need to really explore as a society. It is argued that the world is getting flatter and there is tremendous pressure in that direction, but there are also pressures to add and maintain wrinkles in the system and incentives to game it, and in hiring practices as much as anything else.

    I do not claim to be an expert in the visa system as I only have limited experience with it. Fair or unfair though, I still see this system and the impact of visas on hiring practices as being intimately connected to this larger issue of globalization as an ongoing, fundamental shift in our world culture and in the changing and breaking of barriers. I will add that if history is a guide, fundamental changes of that sort always seem to include both positive and negative impact. I also note that the best historical examples I can think of involve setting up barriers with the closing of the frontier and fencing in of the West in the United States, and with the closing of the Commons in Britain. This time we are seeing elements of closing but in the larger context of an opening, but general trends in either direction can create conflict and both can have negative impact on the individual and on many individuals, regardless of overall and long term effect on society as a whole.

    To really step outside of my areas of expertise I am of the impression that internationally, we currently face a bewildering array of visa and related systems of restriction and access across borders. I can only assume this will just get more complex before it becomes standardized and more organized and that what comes of this will probably be different than anyone can currently envision.

    I see real value, long term and short term in this trend towards world flattening and globalization, but I do not see this as unfolding as a simple straightforward process. I do not see this overall process as meriting the wearing of rose colored glasses either as it will not and cannot happen without conflict and discord and it will create disruptions for people and for segments of our larger society as new patterns are formed – many in response to these problems as they arise.

    I thank you for pointing out my error in detail and thank you very much for reading something of my blog.

    Tim Platt

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