impacts of globalization on it industry

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Assignment #1 | Chandra Vijay Dubey (822-766-275)

GBMP 528 IMPACTS OF GLOBALIZATION ON IT INDUSTRY

GBMP 528 – 01 Assignment #1

Chandra Vijay Dubey (822-766-275) Page 1 of 5

IMPACTS OF GLOBALIZATION ON IT INDUSTRY

I. INTRODUCTION

Globalization is the process of worldwide incorporation arising from the exchange of views,

products, ideas, and other aspects of nation. In other words, globalization refers to process

that increases world-wide trade of assets. Advancements in transportation and

communications infrastructure, including the growth of internet, are the major factors of

globalization.

An astonishing phenomenon of the 1990s has been the remarkable growth of the software

industry throughout the globe. The element of surprise is that progress is not in countries

where one would expect of what is commonly thought of as a high-tech and what the 1990s

have shown is not just growth of the IT industry, but a remarkable growth of economy

because of globalization. In India, for example, software production was virtually non-

existent in the early 1980s. Today software employs more than 450,000 employees,

sustaining annual growth rates of 30-40% in revenues and employment over more than 10

years. (Arora & Gambardella, 2004)

II. IMPACTS OF GLOBALIZATION

As a product of globalization, the internet (a subset of IT industry) connects computer

users around the world. From 2000 to 2009, the number of internet users globally rose

from 394 million to 1.858 billion. By 2010, 22 percent of the world's population had access

to computers with 1 billion Google searches every day, 300 million internet users reading



blogs, and 2 billion videos viewed daily on YouTube. According to research firm IDC, the

size of total worldwide e-commerce, when global business-to-business and consumer

transactions are added together, will equate to US$16 trillion in 2013. IDate, another

research firm, estimates the global market for digital products and services at US$4.4

trillion in 2013. A report by Oxford Economics adds those two together to estimate the

total size of the digital economy at $20.4 trillion, equivalent to roughly 13.8% of global

sales. While much has been written of the economic advantages of internet-enabled

commerce, there is also evidence that some aspects of the internet such as maps and

location-aware services may serve to reinforce economic inequality and the digital divide.

An online community is a virtual community that exists online and whose members enable

its existence through taking part in membership ritual. (Wikipedia, Globalization)

If we consider the past scenario, during the 1990s India, Ireland and Israel have emerged

as significant software exporters. In the same period, Brazil and China have also developed

an extensive software sector relying largely on the domestic market, and are now

attempting to move to exports. The Indian and Chinese industries were of comparable size

(respectively $12.5 and $13.3 billions), while the 2001 sales of Brazil and Israel were $7.7

and $4.1 billion. The Irish industry reached $13.9 billion in total sales in 2002, of which

$12.3 billion is attributed to the multinational companies and $1.6 billion to the indigenous

sector. (Arora & Gambardella, 2004)

III. GLOBALIZATION OPPORTUNITIES, CHALLENGES & RESPONSE



Technological developments have enabled global distribution of software development

teams. The best software talent is in increasing demand as the IT industry itself grows, and

as software systems become a competitive tool in many other industries. The most visible

segments of the IT industry, the software products publishers and services firms, grossed

worldwide in 1995 approximately $92B and $170B, respectively. The US software products

and services industries, at $71B and $92B in annual revenues, dominate the world picture.

With current growth rates of 12-15% expected to continue, some analysts predict that the

industry will represent 10% of the GDP by early next century. (Barr & Tessler)

The true impact of IT industry on the economy, however, goes well beyond product and

services sales. In terms of dollar value of activity, more software is written by companies

for their own operations than the value of software products and services combined.

Corporate operations software development is approximately a $500B expense worldwide.

These “information systems” were originally deployed to gain efficiency in the financial and

administrative data processing of large companies, in which role they have become

essential. Today their impact is much deeper: home banking, self-service package tracking,

frequent flyer programs and data mining for customer preferences are a few examples of

the now-pervasive use of automation in the “front office” to attempt to achieve competitive

advantage. The biggest industrial impact of software mostly likely results from the use of

embedded chips to achieve product functionality in everything from cellular telephones to

automobiles. As the cost of computer chips drops, computers and the software that runs

them have become as important a part of everyday products as they are of aerospace and

defense systems. Companies in industries like telecommunications, aircraft manufacturing,

consumer electronics, and automobiles now have products whose competitive features



depend on the software they’ve embedded in them. Some of these companies have

indicated that 70% of their product development costs are now in software development.

There are no estimates of the total amount of this “embedded” software in the products of

so many industries, but we estimate that it is even larger than the $500B in-house software

segment. Furthermore, software-based product functionality is a relatively new

phenomenon and there is every indication that it will continue to grow rapidly, in the

amount of software and in its complexity. (Barr & Tessler)

IV. CONCLUSION

In a nutshell, globalization enables expansion of IT industry beyond any imaginable limits.

Three decades age, what was considered a science fiction is now a child’s gameplay and it’s

all because of developments in technology and widespread of globalization. IT industry has

made a major impact on development of economy through globalization. Some authors

have argued that IT is to the knowledge based economy what capital goods were to

manufacturing – an input source whose importance for productivity and innovation was far

greater than was reflected in revenues or share of GDP. IT does supply basic inputs to

virtually every industrial sector. Better software would therefore increase productivity

across the board.



V. WORKS CITED

Arora, A., & Gambardella, A. (2004, June). Working Paper 10538. Retrieved from NBER

WORKING PAPER SERIES: http://www.nber.org/papers/w10538.pdf

Barr, A., & Tessler, S. (n.d.). The Globalization of Software R&D: The Search for Talent.

Retrieved from Stanford Computer Industry Project:

http://www.stanford.edu/group/scip/avsgt/cfr1296.pdf

Wikipedia, Globalization. (n.d.). Retrieved from Wikipedia, the free encyclopedia:

http://en.wikipedia.org/wiki/Globalization

Cover Page: Globalization - The Wall Street Journal

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owUWc/s1600/globalization.jpg

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