Global service delivery:
history and context
The Information and Service Economy
October 17 2007
Bob Glushko and Anno Saxenian
It’s a Flat World, After All
Global economic integration
Is the world flat?
The new Argonauts
This is globalization 3.0
Globalization 1.0
Nations globalize for resources & imperial conquest
Globalization 2.0
Companies globalize for markets & labor
Globalization 3.0
Individuals & small groups globalize:
connecting the world’s knowledge pools together
Thomas Friedman The World is Flat: A Brief History of the
Twenty-First Century, 2005
Ten forces that flattened the world
1. 11/9/89- Berlin wall
2. 8/9/95- Yahoo!
3. Work flow software
4. Open-sourcing
5. Outsourcing
6. Offshoring
7. Supply-chaining
8. Insourcing
9. In-forming
10. The steroids
The triple convergence
“Creation of a global, web-enabled playing
field that allows for multiple forms of
collaboration—the sharing of knowledge
and work—in real time, without regard for
geography, distance, or, in the near
future, even language.
. . . new players, a new global playing
field, and new processes and habits for
horizontal collaboration.”
Thomas Friedman, The World is Flat
The view from the Fed
History of global economic integration
 Roman empire: common language, legal
system, currency
 15th-16th c: mercantilist European empires
 1815-1914: increasing global trade, crossborder flows of financial capital and labor
 Post-WWII: global re-integration, intraindustry manufacturing trade (v. comparative
Ben Bernanke, Chair of Federal Reserve Bank, 2006
What’s New, What’s Not?
Historical commonalities:
1. New transportation & communication
technologies a major factor in global
economic integration
2. National policy choices play a critical
role in the extent of integration
3. Social dislocation and resistance may
result with greater openness
What is really new today?
1. Scale and pace of global integration is
2. Core-periphery distinction less relevant as
interdependencies grow
3. Geographic fragmentation of prodn,
development of global supply chains
4. International capital markets more mature,
capital flows greater
Is the world really flat?
 The 10 percent presumption
 Most economic activity is still conducted
 Most activities, like FDI in world capital
formation, only 10 percent
 Only trade accounts for over 20 percent
 Tyranny of times zones, languages,
proximity to client: “home bias”
 Tension: national sovereignty and global
economic integration
The world is spiky: population
The spikes
The world is spiky: innovation
More perspectives
 Edward Leamer “A Flat World, A Level Playing
Field, a Small World After All, or None of the
Above? A Review of Thomas L. Friedman, The
World is Flat” Journal of Economic Literature,
Vol. XLV (March 2007), pp. 83-126
 William Nordhaus’ spinning globe, origins of GDP
The global labor pool: 1980
Global labor pools: 1980 & 2000
The power of “gravity”
The power of gravity: 1960
The power of gravity: 1990
Is the Internet flat? hosts
Is the Internet flat? users
Why are there firms?
 Coase’s theory: no longer relevant
 Firms exist to accelerate talent
development (Hagel and Brown)
 Talent is a flow, not a stock: people seek
firms and locations that provide
challnges, help them refresh their talent
 Geographic clustering and virtuous cycle:
enhances opportunity to develop talent
 Large firms face vicious cycle: scale
limits potential for talent development
Talent development in firms
 Implications for managers
1. Need to develop talent, not just “attract
and retain”
2. Learning, not training, is the goal
3. Need to access and motivate external
as well as internal talent
4. Use IT to amplify, not automate, talent
5. Growth is key to developing talent
because it creates new challenges

Global service delivery: history and context