Opportunity Lying Beneath the Globalization of Services and Software - Term Paper Example

The Globalization of White Collar jobs and IT Servicers to trigger productivity increment Policy brief drafted for the US Secretary of Labor United States Department of Labor Description of the Opportunity Lying Beneath the Globalization of Services and Software Despite the fact that the technology boom of the recent years, businesses operating in the US have continued to transform. The major factors underlying the transformation of businesses included the reorientation of business processes and activities and also the widening levels of investment channeled towards the field of IT (Information Technology).1 The field of IT covers business-service applications, software and hardware. The globalization of the production of IT products, particularly hardware led to the reduction of prices during the 1990s, and the changes triggered the increment of business transformation and IT investments.2 Irrespective of the fact that the entry of IT into the field of business operations was disruptive to workers and also businesses, it had a major influence on the two areas, and the impacts contributed to the growth of productivity, income, employment levels and a reduction in inflation levels. The institution of a more in-depth diffusion of IT in the economy of the US is likely to trigger another wave of production increment. Towards the realization of that, the producers based in the US should increase the production of hardware, as well as services and software, which will trigger a reduction in the prices of services and software.3 The outcome will be the reduction in the overall cost of accessing and employing IT systems for more businesses, which will trigger the incidence of a second productivity boom.4 Apart from increasing the production of the software, hardware and the services produced in the US, the services and the software that are imported at expensive rates can be produced locally, which will reduce the costs of the packages, taking into account that the production facilities will be closer to the customers; the products and services can also be produced with the specific specifications of businesses in American. The globalization of IT services and software will imply that some of the IT employment offered by the facilities will be transferred to overseas production centers. However, with the increasing uptake of IT services and software packages within the borders of the US, high-skill capacity for the development of IT services and software packages will be increased within the American IT sector, and the employment positions requiring the usage of these skills will become abundant throughout the American society. The conclusion of this policy brief is that the globalization of the production of IT hardware will offer the model required for the evolution of software and IT services. Following the further reduction of the prices of IT hardware, the role played by software and IT services will increase significantly. The off-shoring of the production of software and services will imply that some jobs will be sent abroad, but the increased uptake of software and services will trigger the increment of the production capacity of software and services in America, warranting skills and capacity development. The final outcome is that the globalization of services and software production will foster the consumption of IT and transform business activities in different sectors, leading to the further creation of employment in the US.5 The Options of Benefiting from the Globalization of Services and Software The Globalization of IT services and software Looking back at the case of the 1990s, the global integration of IT services and production led to about 10 to 30% reduction in the prices of IT hardware products, which spurred increases in investments in IT capital and also the increase of the spending channeled towards the transformation of business processes and activities using IT. Irrespective of the fact that the productivity boosts that arise from the incorporation of IT hardware and software is well known, major segments of the American economy are not fully taking advantage of the facilitating role of IT in business.6 The sectors were fast in adopting the use of IT during the 1990s included the securities and commodity brokerage, wholesale trade, telecommunications and depository institutions. Some of the sectors that can benefit greatly, from the adoption of IT into their business processes include construction, health services and service centers. In particular, (SMEs) small and medium-sized enterprises have not been fast in incorporating IT into their activities, irrespective of the fact that they can benefit greatly from doing so. Export-led Production and Growth Model The second option available to the US is that of adopting an export-led production outlook, similar to that adopted by the Irish and the Indian software and services industry, which have been primarily producing for the international market.7 For example, from the case of the Indian software and services industry, a larger share of the products produced within the country were sold as exports to the international market, since the 1990s. During 1993, the portion of the production output channeled towards the export market was 59 percent, which marked an increment from the 41 percent registered during 1991.8 Due to the changing dynamics of the world economy and international trade, this option may not be viable for the US in the long-term, taking into account that the slow growth that has characterized major markets in the recent past implies that their levels of imports will reduce or remain constant. Instead of this model, the US is better with a model that emphasizes the role of growing the public sector and wages, which will spur the development process.9 The outcomes of this spiral include that the local market will expand considerably, and compensate for the slow export markets. Development-led Production and Growth Model The third software and services production outlook that the US can adopt is a development-led export model. This one is evident from the case of Israel, which was spurred by the domestic consumption of its software and services products, and then ventured into the international export trade of the products later on, which made it an international player.10 The importance of a development-led export model has been exemplified by China, which has changed its export outlook after the financial crisis of 2008.11 The financial crises and the currency wars taking place around the world make export markets unreliable for economic growth and the creation of employment.12 The case of China should serve as an example to the US, to show it that development-led exportation, merged with other strategies is the best option for employment creation and economic development.13 The Option that best suits the US The increased usage of IT, which spurred the transformation of business activities and the increment of the investments in the area of services and software, was critical to the economic expansion of 1990s, in the US.14 The globalization of IT hardware played a critical role in the transformations and the growth that took place evidencing the importance of globalizing the service and software, so as to stimulate the growth of businesses, organizations, economic sectors and the US economy in general.15 The globalization process will be very helpful to the sectors that did not embrace it during the 1990s, including construction, health services and SMEs. Due to the probability that the globalization process will yield major impact on economic development, it is the best option for the US currently.16 Bibliography Arora, Ashish, and Alfonso, Gambardella. “The Globalization of the Software Industry: Perspectives and Opportunities for Developed and Developing Countries,” Innovation Policy and the Economy 5 (2005): 2-30. Athreye, Suma. “The Indian Software Industry,” In From Underdogs to Tigers: The Rise of Growth of the Software Industry in Some Emerging Economies, Eds. Ashish Arora and Alfonso Gambardella, pgs. Oxford, UK: Oxford University Press, 2005. Besen, Stanley, and Joseph, Farrell. "Choosing How to Compete: Strategies and Tactics in Standardization." The Journal of Economic Perspectives 8(1994):117-131. Breznitz, Dan. “Development, Flexibility, and R&D Performance in the Taiwanese IT industry- Capability creation and the effects of State-industry Co-evolution.” Industrial and Corporate Change 14, no 3(2005):153-187. 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