As businesses globalise, where should IS processes be carried out and where should the key IS roles be positioned?
IT is fuelling the trend to globalisation: the ability to communicate and complete processes electronically enables greater globalising of business. How does this affect the IS organisation, and what action should CIOs take? We recently studied multinational enterprises including BP, HSBC, Pirelli, Solectron, Southcorp and UNICEF, to capture their key decision points for balancing global and local pressures.
Every business takes a specific strategic focus, strives for a desired level of synergy, and places its assets to best leverage its synergies and meet local needs. When you understand these factors in a multinational business, it is easier to determine where to locate your IS resources.
Balancing Global and Local
Honda used the term glocalising to describe the best balance of global and local orientation for the business and IS. The 21st century goal is for global operations to be increasingly self-reliant and able to source locally or anywhere in the world, depending on the most efficient and effective arrangements.
It's important to identify the balance between global integration and local responsiveness from a business rather than an IS perspective. To simplify things, we use four predominant global business governance orientations: centralised, federated, parent-led and multi-local. Each has an associated IS governance orientation that identifies the most appropriate location for IS processes and roles. However, choosing the most appropriate orientation is seldom straightforward. A range of constraints and leverage points influence decisions. Understanding these complications produces the best hybrid model for your organisation.
Assess your global business governance orientation. Global governance orientation refers to the interaction of two competing forces: the desire to integrate globally and the need to maintain local responsiveness.
A centralised business is heavily pressured to provide global integration, but less pressured to provide local responsiveness. Australian-headquartered Southcorp is an example. It has two very different businesses - Wines, which is globally marketed, and Water Heaters, which is regional. It is the global brands that make Southcorp a global business. As Southcorp's CIO indicated, "Our brand is central to us. We manufacture in the locations that have the best conditions, then we have an internal infrastructure to market and sell globally."
A federated business is heavily pressured to provide both global integration and local responsiveness. In this model assets are usually highly coordinated. The US-headquartered global electronics manufacturer Solectron uses a federated governance model. The enterprise level consists of about 100 US-based people who are responsible for everything enterprisewide. The second tier is made up of three regional IS organisations with small staffs responsible for regional activities. The third tier consists of local IS organisations which are responsible for customer-facing IT activities. The regional and local IS organisations report to their respective organisations and have only dotted line responsibility to the global CIO. This reporting structure allows them to be responsive to local conditions.
A parent-led business has medium to low pressure for both global integration and local responsiveness. In this model, most assets, apart from those associated with core capabilities, are decentralised. And a multi-local business is heavily pressured to be locally responsive.
Link IS macro-processes to global governance orientations. Grouping all IS activities into three macro-processes helps to sort out where processes should be located in different global governance orientations. The three processes are: driving innovation and strategy, delivering business change initiatives and supplying and supporting infrastructure Each IS macro-process can occur globally or locally or in a mix of locations.
Incentralised businesses, all three macro-processes are centralised. Southcorp is an example of a centralised business that has centralised all three macro processes. SAP teams work as one logical team, albeit in separate locations, with the goal being to reuse procedures, methods, applications, specialist resources and case learning.
In federated businesses, the driving innovation and strategy and infrastructure supply and support processes occur both globally and locally, while delivering change happens locally. The tyre and cable manufacturer Pirelli has gradually shifted from operating locally to managing key processes around the globe.
In parent-led businesses, driving innovation and delivering change are done both globally and locally, while supplying the infrastructure is local. In multi-local businesses, all three IS macro-processes are handled locally.
Link IS roles to global governance orientations. In Gartner Executive Program's previous work on IS Lite we identified five roles crucial to all IS organisations no matter how IT services were delivered: IT leadership, architecture development, business enhancement, technology advancement and vendor management. These roles can be mapped onto the four global governance orientations to identify their best location.
In centralised businesses, all roles are centralised, except business enhancement, which is mixed. In federated businesses, all the roles are mixed, except business enhancement, which is local. In parent-led businesses, the IT leadership and architecture development roles are centralised, where possible. Business enhancement, and vendor management are mixed depending on circumstances. In multi-local businesses, all IS roles are handled locally.
As a generalisation, the IS processes and roles in a multinational business should flow from the parent governance orientation. Or, more specifically, they should flow from where the enterprise is moving to, rather than reflect enterprise history.
For example, at Solectron, the location of processes and roles shifted as both the business and IS wanted process models that supported Solectron's enterprise-region-site structure and that handled both global and local needs. The CIO has found that such alignment eases selection of cross-business software products.
At BP, IS executives are at all three levels of the business - group, business stream and business unit - each reporting to its respective business level. This is in line with how the business operates and helps rapid local decision making.
Beware the Murphy Factor
Be warned: logic and rationality can get you part of the way to working out where and how to locate your IS processes and roles. However, every multinational enterprise has a number of constraints and leverage points that have to be assessed carefully. Three factors in particular introduce uncertainties that mean decisions are not as easy as they might be:n The business mandating-autonomy profilen The diversity of the countries in which the business operatesn The IT maturity of the countries in which the business operatesBusinesses with a history of autonomous local units have difficulty globalising and standardising. They can do so through corporate mandates or socialisation. But mandates really work only where there is a strong focus on and history of control. Socialisation takes time, lots of face-to-face dialogue, and collaboration mechanisms.
At BP, mandates are not part of the corporate culture. They are rarely issued because the business lines have always acted as independent entities. Any form of standardisation at BP must come through socialising decisions, that is, building up support along the way and having business units and local IS groups come to the view that changes are in their best interests too. This takes patience and persistence, but is absolutely essential in many businesses.
Globalising businesses also need to accommodate the diversity among the countries in which they operate - in areas such as political environment, business culture, legal structure, overall economy, public infrastructure, and market structure.
For example, businesses with operations in different parts of Europe need to accommodate differences in data protection and workforce arrangements. In the Asia/Pacific region, each country must be treated individually because of the different patterns of economic development, political systems and public infrastructure. The greater the diversity, the more challenging it is for IS.
The third constraint - or leverage point - is the IT maturity of the countries where the business operates. IT maturity can be measured in many ways: degree of telecom deregulation, PC penetration, Internet connections, penetration of fibre-optic cable, IT investment, maturity of the IT services market, and IT market attractiveness; and this needs to be tracked.
For example, doing business in Vietnam in 2001 is very different from 1991. For starters, the country technology infrastructure is much more mature. But there are always considerations; what is possible technologically is not always what can or should be implemented from a political or social perspective.
Centralise with Caution
In looking at the glocalising patterns of many enterprises we found there was a trend towards recentralisation of specific processes and roles - especially parts of infrastructure services and roles of IT leadership, architecture and vendor management. This must be done with care. Just because it can be done - technologically - does not mean it should be done.
Dr Marianne Broadbent is group vice president and global head of research for Gartner's Executive Programs.
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