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April 23, 2001

Global IT

continued...page 3 of 3

Photo by Celia Johnson

More on global strategies:

sidebar: Keeping Their Fingers Crossed: IT Spending Forecast
sidebar: How We Got The Numbers
sidebar: Heavy Exporters Spend Big On Leading-Edge IT
InternetWeek: Spotty Infrastructure Impairs World View (3/26/01)

The success of SAR1's expansion into China hinges on how quickly China rolls out a broadband data network. But right now, Chinese companies and the Chinese government are stalling on the necessary network investments, in part because of economic concerns, Poon says.

The difficulties encountered aren't limited to less-developed countries. One IT executive at a European company that's expanded into the U.S. market says he's had enormous problems working with SBC Communications Inc., the largest local telephone company in the United States. "I'd rather deal with a rattlesnake in a small bag than deal with SBC," says the executive, who asked not to be identified. The company also encountered local regulations that snagged efforts to set up a satellite communications site in Texas. Talk about a Catch-22: The company was allowed to build a large satellite tower, but only in an unpopulated area where it couldn't get a land-line fiber-optic circuit to carry the traffic captured by the satellite, though fiber circuits were readily available in more densely populated areas.

In general, infrastructure issues plague businesses more acutely in less-developed countries, IT managers say. "In the United States, when we think of wide area [data] we're thinking of gigabit and terabit speeds, when [overseas] they're happy just to get connections," says PMI Group's Roberts.

In some countries, the lack of a dependable supply of IT products, the difficulty in obtaining support, and poor communications infrastructures have forced businesses to adapt on their own. Russians, in particular, have a good grasp of science and technology and are adept at solving their own technical challenges, says Chris Gabriel, a regional director of marketing for switch vendor Enterasys Networks Inc., who's traveled the world providing support for his company's products. Before the Soviet Union crumbled, "Russians basically got systems without any support, so they're very capable of working things out for themselves," Gabriel says.

E-Business Choices The economic malaise may have mitigated one major obstacle to expanding outside of a company's home country. James Dobree, CEO of 60-employee U.K. software company Zygon Systems, decided last fall to expand to the United States and traveled from London to San Francisco to search for office space. At the time, dot-coms were hot, and everyone--from the lawyers and landlords to the recruiters Dobree was thinking of hiring--wanted Zygon stock. The Internet frenzy also pushed real-estate prices sky-high. Dobree decided to wait for the market to cool and was rewarded. "It was impossible to find good office space back in November and now I'm spoiled for choice," he says. Zygon opened its San Francisco office in February and has hired seven employees.

Because of the difficulties encountered overseas, many companies outsource some of their IT or networking operations either to a local IT or networking outfit or a global outsourcer that's able to provide around-the-world support. Respondents to the InformationWeek survey say 61% of their IT staff work in their company's home country, and 9% work in other countries. Also, the companies say 9% of their IT staff are third-party contractors from the company's home country, while 3% are from other countries.

Broken out by region, companies in the Pacific Rim use more third-party providers than do companies in North America. Specifically, North American companies say 12% of their IT staffs are outside consultants or outsourcers; South American companies say third-party providers account for 11% of their staffs; European companies say that figure is 10%; and Pacific Rim companies say it's 17%.

In Hong Kong, IT salaries are the biggest issue, not the availability of talented IT staff. "Hiring people is never a problem," says SAR1 CEO Poon, "but they're expensive."

Despite flailing economies, business and IT managers around the globe remain surprisingly upbeat. Though most are being cautious about expanding abroad, they expect increasing sales this year from their existing global operations. And the majority of the nearly 900 managers interviewed in InformationWeek Research's survey are continuing to increase IT budgets to support that growth, whether to improve customer service, upgrade Web-site performance, or beef up network security. It suggests that perhaps economic recovery isn't all that far away--and that these companies will be ready when it arrives.