28/10/2004 CISC Seminar 1

The Evolution of Multinational Computer Services Affiliates in Ireland

Konstanze Höchtbergerkonstanze.hoechtberger@nuigalway.ie

Dr. Mark C. White

Dr. Seamus Grimes

seamus.grimes@nuigalway.ie

Paper available at:

http://www.nuigalway.ie/cisc/papers/0013ciscwp.pdf

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Organisation of the paper

• Research framework for the affiliate evolution process

• Choice of the case studies: three Irish-based IT services affiliates

• The Key Findings – what factors drive affiliate evolution in Ireland?

• Future research

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Research Framework

Industry Context:• Wintelist form of competition• Coupling of business services and

manufacturing

Corporate Context:• Heterarchy in organisation and intracorporate

competition• Bounded rationality

Affiliate context:• Performance and managerial attitude• Interpersonal corporate relationships

Host economy context:• Technology embeddedness• Stakeholder intervention

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The overseas ICT sector in Ireland

• FDI-induced economic boom of the 1990s led to near full employment

• Economic policies now prioritising higher quality FDI projects and focusing on repeat investments

• Emphasis on higher value activities like software development and R&D

• Increased involvement of overseas ICT firms in IT services as a by-product of wider shifts in corporate strategy

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Top IT services firms in Ireland

Company 2002 Sales StaffHP services 110 380IBM Global services 65 800Fujitsu 55 850Accenture 50 600EDS 23 500Cap Gemini Ernst & Young 19 100Siemens Business Services 18 200Bearing Point 17 100Dell 15 -Cara Group 14 200CSC - 300

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Choice of Case Studies

IBM EDS HPHQ Location Armonk, NY Plano, TX Palo Alto, CA

Irish Location Dublin Dublin Galway

Irish Employment

4,000 500 380

Global Employment

315,889 130,000 142,000

Turnover in Ireland (€ million)

2,500 50 400

Global Revenue ($ billion)

81.2 21.5 73.1

Vintage 1956 1990 1971Orginal Irish Activities

Manu-facturing

Offshore Software

Development

Software Distribution

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Key Findings I

Industry Context

Hardware manufacturing gives way to more diversified, global services operations (e.g. IBM)

Transformation of multinational IT sector in Ireland accelerated by M&A activity (e.g. Digital – Compaq – HP)

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Key Findings II

Corporate Context

Complex, multidivisional structures retrievable in Irish affiliates (e.g. IBM)

Multitude of corporate and customer linkages connect affiliates to the GPNs

Significant degree of decision-making autonomy with hierarchical control not loosing in importance (e.g. EDS)

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Key Findings III

Affiliate Context

Occurrence of subversive affiliate strategies (e.g. Digital)

Cultural interconnectivity aids managers’ contact networks with HQ management (e.g. IBM)

Affiliate performance & reputation decisive at any stage of development (e.g. EDS)

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Key Findings IV

Host Economy Context

Agglomeration economies arising from a highly skilled pool of labour and the presence of the key competitor firms

Network externalities of less importance

Pro-business attitude of the Irish government supports affiliate development

University collaborations play key role in the shift towards knowledge-intensive activities (e.g. HP-DERI; IBM-Centre for Advanced Studies)

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Future Research

• More empirical evidence needed on the individual trajectories of foreign affiliates

• Paying attention to the various influences on the global, organisational and local level

• A case study based, affiliate focused perspective shows most promising for research on GPN and regional futures