Dynamic specialization

Cheap, off-shore outsourcing isn't the bogeyman it's made out to be. In fact, outsourcing and offshoring are nothing new. In the past, we've always referred to these trends -- in economic terms -- as specialization. In their new book The Only Sustainable Edge: Why Business Strategy Depends on Productive Friction and Dynamic Specialization (Harvard Business School Press, April 2005), John Hagel and John Seely Brown point to the plus sides of the globalization equation.

They foresee a coming economic transformation involving "deepening specialization within the enterprise, mobilizing best-in-class capabilities across enterprises, and, ultimately, accelerating learning across broad networks of enterprises."  As the authors see it, "the convergence of service-oriented architectures (SOAs), virtualization, and interaction tools such as social networks will be especially important. Companies will use these tools to coordinate resources on a global scale and provide a robust platform on which to quickly build new capabilities."

New generations of IT promise new ways to address business process management. "These architectures and tools are significant for two main reasons. First, they help executives to more effectively access and mobilize people and resources across enterprise boundaries. Second, they increase options for building capabilities across enterprises. They'll become even more powerful when they all come together to support business initiatives."

Virtualization, they explain, helps us "organize and manage distributed hardware resources—processing, storage, and networks—so they appear to the IT manager as parts of a single, integrated system. In this way, the architectures simplify the management task. They also provide flexible scalability: More resources can be added in smaller increments without complexity overload. Virtualization architectures also increase the use of hardware resources and the reliability of their performance by making it easier to shift work to the resource that's most appropriate and most available."
SOA, they add, "seeks to make software resources more flexibly available. Businesspeople have come to view their existing application platforms as prisons. In contrast, SOAs break down these prison walls with a more modular approach....This new architecture, in turn, will automate connections across the global network of business partners, as it continues to provide flexibility."

Some will continue to fear the future -- as they always do. However, globalization enables us to draw on the best resources, skills and capabilities around the world, deploying them to drive productivity gains and liberate value-adding, innovation-chasing capital in the process. Most people in America don't work on farms or in factories anymore, but they are not starving or unemployed either. We always find the next thing and we move on to it. Hagel and Brown offer us a roadmap for our next moves.