Two Sides of Globalization in the Banking Crisis

The layout on the first page of today’s business section in the New York Times creates a powerful meta-message. The first article, As Wall Street Stumbles…, is about how major banking firms in the U.S. are sending key employees to international markets they see as growth opportunities. The second article, …India’s Role is Growing, is about the growth in outsourcing jobs to India, particularly for middle office banking jobs.  The two articles are clearly linked, making the point that the US banking crisis is spurring greater attention to international opportunities, both to grow top line revenue and reduce costs.

I think this is the hallmark of globalization at this time, that it is not just about selling into international markets, and not just about outsourcing operations to lower cost regions, but both, which creates, even demands, new ways of organizing businesses.   Multi-national companies with a typical “country manager” model, where each country operates as its own business, reporting to central headquarters, cannot capture the opportunities for global economies of scale in their operations.  But when back office functions are centralized and outsourced to reduce costs, companies may see emerging economies simply as low cost regions, and miss growing market opportunities.  We need new network structures that are able to leverage low cost operations and capitalize on new markets, crisscrossing functions and product offerings across geographies.  We’re just beginning to see this kind of structure in a few global companies – GE, Lenovo, Coke, Fidelity – come to mind.  While promising, it places new demands on employees and managers to learn how to work effectively in a challenging and changing global structure.