Wednesday, April 22, 2009

Has the global-network business increase spreading of recession?

I would say yes. The idea of value chain helps in explaining this. Let try to explain this at the level of companies. Companies that are connected globally and doing business by extracting the value of the network has to be careful. The connected has many obvious advantages as well some disadvantages. In the network the problem can arise at the node or in its links.
Just to emphasize the point I would like to create an analogy to the virus attack (I can’t help thinking of this analogy, with so many types of virus attacks in the last decade). Let me call this virus the recession virus. The recession virus as all other in my opinion is very infectious. The probability that one gets affected depends on the link strength between node already affected by recession and other nodes in the network.
A classic example is the IT industry here in Bangalore, where I live and work. The dominance of IT business in Bangalore has been undoubtedly because of our strong partnership with companies in the US. As the US economy slowed down and got into recession the IT companies in Bangalore have started to feel the heat. IT companies in Bangalore need to find ways to keep the temperature at a comfortable level, else these companies will soon end up as hard boiled eggs.
So, in doing global business it is very important to clearly understand the impact of the network. There is a clear need for provisioning risk mitigation to insulate from the recession virus.