IBM Chief Palmisano Says Offshore Outsourcing Could Help Save World from Terrorism

In a letter to the Financial Times, IBM CEO Sam Palmisano says his multi-billion dollar investments in offshore production facilities are part of a campaign to transform the company from classic multinational (read: evil, exploitive, outdated, bad for world peace) into "a new actor" known as "the globally integrated enterprise." The GIE, says Palmisano, is a benevolent form of industrial organization that creates lasting wealth and meaningful jobs around the world. It can even disarm terrorists--figuratively, at least. Sounds like a corporation your mother could love, even if she's a raving anarchist. But is this really why IBM is spending $6 billion in India?Not entirely. IBM is facing stiff competition from foreign tech services rivals like TCS, Wipro and Infosys. These Indian vendors are able to pay workers pennies on the dollar compared to what they would earn in the U.S. Despite their low wages, these guys could build you an SOA architecture or Web services interface faster than you can say Hyderabad. If IBM is to remain competitive, it's got to get in on this action. And that's exactly what it's doing by hiring thousands upon thousands of Indian techies.

Still, while Palmisano will never be confused with Karl Marx or Frantz Fanon, his recognition that the organization of a typical multinational mirrors colonialist political structures--and thus needs to change lest it suffer the same fate--is both enlightened and refreshing, coming as it does from a company whose previous CEO famously said "The last thing we need is a vision."

In Palmisano's view, the chief difference between the classic MNC and the new, globally integrated enterprise is that the former sets up shop in new markets mostly just to sell stuff and send money back to the home office. Local personnel are limited to low level production and sales functions. The GIE, on the other hand, invites and encourages locals to fully participate at all levels, depending on their skills and talents. Hence, IBM's India operations carry out advanced R&D that's crucial to its future. Indian managers have opportunities throughout the company--and not just within India.

Proving that CEOs love their children too, Palmisano says he wants to make IBM a GIE not solely because it's an efficient way to organize a company that does business around the world. Sticking with the old MNC model, he says, inspires protectionism against the West or, in the worst case, nightmarish acts of terrorism. "Left unaddressed, the issues surrounding globalization will only grow. People may ultimately elect governments that impose strict regulations on trade or labour," writes Palmisano. "Worse, they might gravitate toward more extreme forms of nationalism, xenophobia and anti-modernism."

To be sure, IBM's push into India (and China and South America) is chiefly about taking costs out of its operations. It's what efficient corporations are supposed to do. But shouldn't we also applaud Palmisano's recognition of the fact that a company with the size and scope of IBM has responsibilities that go well beyond pleasing Wall Street?