2.3 Theories of globalization

2.3 Theories of globalization

A sociological perspective on globalization, given the primary focus on ˜understanding the process by which a GSA relationship evolves over time , broadly informs our analysis of GSAs. This evolution is primarily a social process involving a relationship between people, organizations and technology within a global setting. We draw upon the writings of three contemporary and influential social theorists “ Anthony Giddens, Manuel Castells and Ulrich Beck “ to situate GSAs conceptually within globalization, especially to analyse the structure, process and nature of risks of GSAs.

Structure of GSAs

Castells (1996) uses the ˜network society as a metaphor to describe contemporary social structure as made up of networks “ and more specifically , informational networks . There are two key elements in Castells analysis “ networking and technology. Networks are made up of interconnected nodes with no centre , exemplified in global financial networks, production and consumption organized around the network enterprise, the global criminal economy and various other networks that exert joint influence on global flows of power and wealth. Castells emphasizes the importance of such networks:

Because networks are extremely efficient organizations, they eliminate, through competition, alternative structures, so their logic expands. Because they operate in a globally interconnected environment, they diffuse unevenly, throughout the planet, blurring institutional and cultural boundaries, and focussing exclusively on their instrumental performance. Networks are the carriers of globalization. (Castells 2001: 5)

In chapter 1, we discussed how the structure of GSAs can be conceptualized using this ˜network metaphor that includes a set of software development nodes (of users and providers in the USA, India, Ireland, Israel, etc.) linked together through the extensive use of ICTs and various standardized processes. In this network structure, an informational logic is fundamental and characterized by two ongoing processes. First, firms try to situate themselves within a network that can help increase the informational content of their activities “ for example, software firms increasingly rely on the Web for meeting their recruitment needs and so build networks with various employment agencies that maintain relevant personnel databases. Secondly, firms try to network with organizations specializing in R&D, engaged in generating new knowledge, and integrating this knowledge into internal production processes to enhance the value of the firm. To permit this external and internal networking, firms need to have a structure that is flexible and supportive of ongoing learning processes. Developing such net works is not without inherent contradictions: while cost considerations drive software production to areas where labour costs are lowest , software development is seen by many to be more effective in conditions of co-location of developers in proximity to the user .

While networks are not a new phenomenon , what distinguishes GSA networks from what existed in the past is the extent of use of ICTs, which helps to impart flexibility to the software development process in ways not possible before. While past networks could perform tasks of limited functionality, Castells (2001) argues that present-day networks (like GSAs) permit more complex tasks to be undertaken:

They [earlier networked enterprises ] failed in their coordination functions; they could not master large resources, and marshal them in one particular direction. Centred, hierarchical organizations were much more efficient at mobilizing resources and executing the order. New information technologies changed all this. Suddenly networks could at the same time coordinate decision-making and decentralize execution of shared tasks. They could issue orders, and receive feed back in real time. They could be multi-directional and interactive. (2001: 5)

The aspects of interactivity, adaptability, coordination and decentralization of execution tasks, which Castells describes above, are fundamental to GSAs. Without ICTs, distributed development would be impossible , since programmer teams would not be able to coordinate almost instantaneously with each other to clarify requirements, deal with bugs , monitor quality levels and build trust in the skills of other developers without being able to see them face to face. There is a technological determinism in the argument that ICTs fundamentally provide the capability to organizations to coordinate and decentralize the execution of tasks and GSAs would never have been possible if today s technological infrastructure (such as the Internet and the Web) did not exist. However, it is not totally deterministic since the evolution of GSA networks takes place within particular historical and social contexts that shape the dynamics of their evolution in particular ways. Large MNCs typically have the power to make independent investments to establish infrastructure, and lobby for the implementation of standards that are advantageous to them. This power is evident in that the first entrants into the GSW arena were large corporations like Texas Instruments, Nortel and Oracle. But as the networks diffused and various cost sharing models evolved, we find the active presence of smaller organizations, including those based in developing countries like India. These firms challenge the traditional power dynamics by virtue of their capacity to leverage intellectual capital using a networking logic that ˜induces a social determination of a higher level than that of the specific social interests expressed through the networks: the power of flows takes precedence over the flows of power (Castells 1996: 469). The network structure helps to shift power dynamics and redefine patterns of communication and cooperation among institutions.

GSA processes

Anthony Giddens (1999) ˜runaway world serves as a useful metaphor to emphasize the speed and ˜ out-of-control nature of GSA processes. Processes of change and the interdependency of systems influence the status of knowledge, contributing to the sense of a juggernaut that is out of control. Giddens argues that this intensification needs to be understood at an institutional level and in its interconnection with the individual level. ICTs facilitate this intensification, and serve as ˜disembedding mechanisms , enabling formalization, codification and redistribution across other time and space domains. In GSAs, the use of software development methodologies reflects these disembedding mechanisms that are transported across time and space. However, there are often problems in applying these methodologies in practice because of the complexity inherent in codifying different forms of knowledge.

In conditions of intensified global interdependencies and reflexivity of knowledge, no firm can take it for granted that any established GSA will go on forever. Each actor is constantly acquiring new knowledge about technologies, markets and organizational arrangements. Each actor is also coping with global events (like the 2001 US slowdown ) that places new demands on the relationship. Changes in globalization are not external and ˜out-there but something internal and defined by internal actions such as a partner deciding to terminate the relationship in order to exploit new market opportunities. Such institutional changes resulting from new markets or technologies have implications at the individual level, as evidenced in the extensive and continuous global movement of software developers. Attracting and retaining human talent is one of the key management challenges of GSAs. Giddens (1994) describes the current processes of capitalism to be characterized by competitive markets, the commodification of labour power and the insulation of the economic system from the political arena. An example of this insulation is reflected in Germany s decision in 2001 to allow the entry of foreign programmers under the ˜green-card scheme. This scheme was implemented for economic and resource considerations despite popular political protests that Germans would lose employment possibilities.

Another key aspect of current processes of globalization concerns the ˜reverse effects that reflect the mutual impact of local and global events. No longer are local events shaped only by global happenings, but the global is also shaped by local happenings. The ˜green-card example referred to above is a case in point. Trying to attract foreign software professionals opened a wider debate about Germany s immigration policies in general. At another level, software development activities taking place in an organization in India are shaped by methodologies and processes developed in the USA “ for example, systems for quality control. However, through the incorporation of these standardized processes into their work practices, Indian firms become more ˜global and this helps to encourage other foreign firms to move their software development activities to India. Large-scale relocation of work of this kind can potentially lead to unemployment or underemployment conditions in the country from where work is relocated . Events occurring locally are thus both shaped by and also shape global happenings.

Risks in GSAs

The structure and processes of GSAs both emphasize the unique nature of risks in such arrangements. These risks can be examined through Ulrich Beck s (1992) metaphor of the ˜risk society that emphasizes the changing nature of relations between social structures and human actors in contemporary life. Beck draws our attention to the risks inherent in social structures today, arising in particular from their global nature, their interdependence and the political and social nature of the process by which risk is defined and globally diffused. GSAs, conceptualized as work configurations in a risk society, draw attention to the inherent risks and how they are redistributed globally across time and space.

Risks come in many forms and affect multiple levels including nations, industries, organizations and particular individuals. An example of the nature and interdependence of these risks is seen in the manner in which the 2001 US slowdown affected the entire GSW marketplace , including cancellation of projects, laying off of personnel and firms seeking new markets in Europe and East Asia. This slowdown was magnified by the 11 September attacks in New York that introduced new risks in travel and international business. The interdependence of risks comes in many forms, including political, economic as well as geographical, where events in Manhattan have profound global implications. Another important feature is the manner in which risks are politically and socially constructed . The continuous CNN broadcasts on the ˜war against terror influence our construction of what terrorism is and the associated risks.

GSAs, by virtue of their globally diffused network structure, reflect and transmit contemporary risks. Managers need to respond at short notice to these risks and redefine structure, address new markets, learn about new technologies and build buffers to withstand shocks arising from cancellation of projects. Risks are not always external but can also be internal, as GSAs depend on a large and complex technological infrastructure for their survival. Breakdowns in infrastructure can disrupt the project where even small downtimes can be fatal. As Beck argues, a fundamental concern of organizations in the risk society is not the redistribution of wealth, but the redistribution of risks , and seeking new geographical markets and technologies are strategies being used to redistribute risks. The risks of success or failure of projects are inherently incalculable, particularly the risk of whether a piece of software that has been built partly in India and Russia will function in a bug-free manner. Despite the various quality certification processes “ for example, ISO 9000 and CMM Levels 1 “5 “ such risks of software malfunctioning remain inherently incalculable. The unpredictable nature of the risks heightens the potential for unintended consequences.

Risks also come with the new kinds of choices that GSW permits ; for example programmers can choose where and with whom to work. Beck describes the current nature of ˜individualization as an ˜I am I structure that implies liberation at one level, and at another a loss of stability and ˜re-embedding into other contexts. The very medium that enables individualization also brings about standardization because individual situations are thoroughly dependent on the global labour market that operates through standardized capitalist templates. Money both individualizes and standardizes. Beck thus argues that we are confronted with a situation of ˜institutionally dependent individual situations that ˜[deliver] people over to an external control and [develop] standardization that was unknown in feudal times . While on one hand developers have the possibility to select employment options from a set of global alternatives, at another level these choices are made within standardized templates of salaries, stock options, protection against termination and other benefits. However, these choices are not insulated from the risks that institutions have to face, such as the situation resulting from the meltdown of the dotcom phenomenon in North America in 2000. The theoretically attractive choice of going to North America comes with risks that are fundamental to the capitalist structure within which these choices are offered .

The metaphor of the risk society helps to conceptualize the nature of risks that GSAs have to contend with arising from their structure, processes and the global context within which they are situated. While GSAs have constantly to seek to develop strategies to redistribute the risks they deal with, they are also carriers of these risks into the various domains where they operate. Global risks are just the part of everyday existence of GSAs that cannot be avoided and must be confronted on a continuous basis.

In table 2.1, we summarize key features of the structure, process and nature of GSA risks that reflect the different aspect of the ˜model of and ˜model for relationship between GSAs and globalization. We relate these features to various ˜micro-level themes that are drawn from the literature on globalization and are also themes that we have identified through our empirical analysis to be of prime importance in understanding the process of evolution of GSAs. We elaborate on these themes in the following section.

Table 2.1: The ˜model of and ˜model for relationship

Macro-level aspects


Relation to micro-level themes


Network configuration

Tensions of space and place


Informational flows

Issues of power and control


Power of flows


Decentralization of execution


Role of technological innovation




Transformations of identity


Unintended effects

Tensions of standardization


Reverse effects



Transferring risks

Complexity of knowledge transfer


Risks and software development

Language and culture


Risks inherent in new knowledge systems