IT and the Global Labor MarketInvestigationOutlineLooking Back: Mid 90sNarrowly TailoredService SectorService SectorManufacturingManufacturingManufacturing (cont)Global ImplicationsGlobal ImplicationsConclusion?IT and the Global Labor MarketJonathan Harris21F.034Investigation• Role and value of IT in global economy– Service sector– Manufacturing• Is this value responsible for outsourcing?Outline• Value of IT in U.S. economy– Service sector– Manufacturing• Value of IT in developing countries• Discussion of outsourcingLooking Back: Mid 90s• IT is important to growth, but in context of a broader set of managerial decisions• Productive IT applications had 3 characteristics– Tailored by sector and linked to performance levers– Built capabilities over time– Co-evolved with managerial innovationNarrowly Tailored• Eight performance levers– Substituting capital for labor– Deploying labor more efficiently– Reducing non-labor costs– Increasing labor efficiency– Increasing asset utilization– Selling new value added goods– Shifting to higher value added goods– Realizing more value from existing goodsService Sector• Retail– Examples• Warehouse and transportation management systems– Reduced nonlabor costs– Substitution of capital for labor– Realized more value from existing goods– Increased labor efficiencyService Sector• Banking– Examples• Credit scoring and underwriting software• Check imaging• Voice Response Units (VRUs)– Levers• Substituting capital for labor• Deploying labor more efficiently• Increasing asset utilizationManufacturing• Semiconductors– Examples• Electronic design automation• Process control systems• Process diagnostic tools– Levers• Selling of new value added goods• Increased labor efficiency• Increased asset utilizationManufacturing• Valve making– Computer numerically controlled (CNC) machines• Programmed by software• Leads to reduction in number of machines– Flexible manufacturing systems• Coordinates multiple CNC machines• Speeds up run timeManufacturing (cont)• Thus, competitive strategy of IT enabled U.S. firms has changed to producing customized productsGlobal Implications• Outsourced services and goods– IT offers little comparative advantage– Domestic demand for IT has dropped– Comparative advantage in labor• Demand still exists for specialized, expert servicesGlobal Implications• Same is true of manufacturing– US firms produce more specialized goods– Developing nations producing more batch commoditiesConclusion?• Given 3.4 million IT jobs are projected to go offshore by 2015, how will we bridge digital divide here in US?• How will we distribute those jobs among developing
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