Ethics

Transnational IT operations

Introduction

The global marketplace opens many new avenues of growth for national firms. Industry competition has galvanized companies to seek transnational opportunities that have developed due to technological, social, and economic changes around the world. By in large, this new corporate culture may reflect the need to hire and locate information technology facilities in whatever country meets the demands of corporate activities. International networks in terms of computers and telecommunications has allowed companies to expand their reach to host environments in order to facilitate and standardize the control and performance required to remain profitable.

Advantages of Transnational IT Operations

Technological, economical, political, and socio-cultural developments in the global marketplace have made locating or relocating facilities to other countries profitable and beneficial. The strategy of decentralizing corporate activities has made "national borders almost irrelevant." (Goar, Ð'¶ 2, 1993) While the U.S. Free Trade Agreement and North American Free Trade Agreement may have created an atmosphere in which business can conduct global production, development, and marketing, TNC's (Transnational Corporations) may also find those cross-national agreements with information technology hiring and facility locations in other countries as "free-production agreements". (Ð'¶ 6) IT Operation facilities that we may likely see being hosted by a TNC may include production, development, project management, and telecommunications such as a call center. Hosting these facilities in other countries may reveal many advantages, such as:

Ð'* Competition. In order for many companies to remain competitive, seeking a TNC solution can provide minimized investments in jobs, technology, and facilities when compared to domestic equivalents. Requiring fewer investments can decrease costs and increase competitive leverage.

Ð'* Leveraging costs. Traditional centralized investment strategies in IT operations may take a standardized-market approach when domestic markets are the same or comparable. However, transnational corporate leverage can assume a divide and conquer strategy that allows an organization to diversify information technology among several different countries or regions that will leverage costs in the advent of adverse host-market changes and domestic-market changes.

Ð'* Legal and regulatory. The regulatory environment in domestic information technology markets may be complex and costly. Transnational corporations may be leveraged to take advantage of fewer (and simpler) legal requirements in host countries.

Ð'* Corporate economics. Establishing IT operation facilities and investments in a domestic market may offer few opportunities for flexibility as the market changes. Investing in offshore IT operations can leverage costs but also to rapidly value and reevaluate strategies as risks increase due to changing market conditions. (Jones, 2000)

The above-mentioned advantages can offer considerable leverage to companies that utilize IT operations in other countries. Transnational corporations must meet the mandates of stakeholders, which often require developing new strategies to expand IT operations to other countries. Hiring, locating, and/or relocating information technology operations and facilities to other countries can lower costs, increase revenue, and manage investments to remain competitive and profitable.

Disadvantages of Transnational IT Operations

Disadvantages to locating IT operation facilities exist as well. From a domestic perspective, locating or relocating IT operations can lead to perceptions that the transnational corporation does not value local avenues of employment and community building. On the contrary, a TNC may be considering the economic impact to the community by establishing offshore IT operations. First and foremost, many if not most corporations have an obligation to stakeholders to be profitable, and remaining competitive in the global marketplace may often lend to becoming transnational. Other disadvantages may include:

Ð'* Fewer controls. Geographic disparity can lead to fewer and/or diverse controls. While advancements in technology and communications have increased over the years, controlling activities in a consistent and performance-related manner can be complex and difficult. (Frenzel & Frenzel, 2004)

Ð'* Legal responsibility. Legal responsibilities to the host nation of a transnational corporation can be challenging in terms of encompassing the company as a whole with different (perhaps even conflicting) accountabilities. (Goar, 1993)

Ð'* Changing political or economic climate. Political or economic changes within the host country can make seemingly good investments look much less desirable. Changes can include increased taxation, restrictive government regulations, and greater demand for IT operations skills.

Ð'* Cost of doing business. Developing a transnational strategy will have differing costs depending on many independent factors such as local economy, job market, and facilities. Japan and Europe will likely see higher costs of doing business, while Asia and other areas may see lower costs. Another important factor to consider is the currency exchange rate when looking at operational cost differences between home and abroad.

Ð'* Difficulty in identifying high-quality employees. In any country, finding the right employee