Contained in this piece talking about IBM and their recent investors day held outside US for the first time, in Bangalore, India, is a nice summary of the three stages of the global enterprise.

1. Home country base – overseas sales offices
2. Mini HQ’s spread around the world
3. globally integrated – 1 HQ, with work placed in the appropriate country(s) based on cost, skills, and local business environment

In a speech last year at INSEAD business school in France, Mr Palmisano set IBM’s Indian move in the context of the modern multinational company. This, he said, had passed through three phases. First was the 19th-century “international model”, whereby firms were based in their home country, but sold goods through overseas sales offices.

Then came the classic multinational firm, in which the parent company created smaller versions of itself in countries around the world. This was how Mr Palmisano found IBM when he joined it in 1973.

The third model, argues Mr Palmisano, the IBM he is now building, is the “globally integrated enterprise”. Rather than have a parent with lots of Mini-Mes around the world, such a firm shapes its strategy, management and operations as a single global entity. It puts people and jobs anywhere in the world “based on the right cost, the right skills and the right business environment. And it integrates those operations horizontally and globally.” In this approach, “work flows to the places where it will be done best”, that is, most efficiently and to the highest quality.

Source: IBM and globalisation | Hungry tiger, dancing elephant | Economist.com (Subscription required)

Relevance to Bankwatch:

Aside from branches, Banks can and are taking advantage of this model, with help desks, call centre’s, and software development outsourced to India.  It will be interesting to see to what extent this is applicable to Banks, beyond simple outsourcing of functions.  In fact there is already significant resistance to outsourcing of service functions to India.