Eye On Emerging Markets

At Forrester Research&'s executive strategy briefing in Boston, Virginia Rometty, senior vice president of IBM Global Services&' Enterprise Services Division, said U.S.-based IT service firms must prepare to participate in Brazil, Russia, India, China and other emerging markets. This will require them to embrace new business models that offer higher value-add services than their offshore counterparts.

These services must be deployed with the same quality and accountability consistently across the globe, she said. “Services industries are the ones that have to change the most,” she said. “It isn&'t just about advice and assistance, but about assets and helping people run [business] processes and drawing on these capabilities globally.”

Rometty said smaller services firms can participate in globalization but must be highly specialized in a particular business process.

Rometty said it&'s a mistake to think about globalization in terms of “bodies cheaper by the hour,” and that changing business processes will require all businesses—and their IT services partners—to make changes to their corporate internal workings as well as rethink their partnership networks.

Companies that generate less than $1 billion in annual revenue may have a tougher time getting in the global game, but they can participate in the next-generation “global innovation networks” springing up, said Navi Radjou, vice president at Forrester.

India-based Wipro, for example, has developed a customer-facing portal for a banking firm by working with a software vendor and a hosting provider, said Theodore Forbath, chief strategist and practice leader of Global Product Strategy and Architecture Practice at the company. Forbath told CRN he thinks smaller partners can play in global networks, but they must have domain expertise. He said offshore service firms will lead these networks. “We become an integrator of innovation for an ecosystem,” Forbath said. Wipro is building its own innovation networks and portfolios of intellectual property. Wipro Owns patents to several wireless technologies, he added.

Diane Farrell, director of McKinsey Global Institute, said globalization calls for a restructuring of all U.S. businesses.

Massachusetts Gov. Mitt Romney, a former Bain Capital venture capitalist mulling a 2008 presidential run, said jobs will continue to be lost to offshore firms, but U.S. businesses have far more to gain than lose by selling their products into massive markets such as China and India.