The health of competition
Remember “The World Is Flat”, the best-seller by Tom Friedman that hailed a future of open competition and innovation driven by a global networked economy?
Just how true have those forecasts proved to be? For a brief period, we certainly saw aggressive action on input prices as low cost economies provided multiple opportunities to outsource or offshore both manufacturing and a wide array of services. Procurement practices evolved around the theory of endless competition, placing most suppliers in a defensive position as they fought to maintain margins and market share.
Yet ironically, while global markets have clearly produced some new suppliers, in many industries the level of competition seems to have dropped. Innovation, consolidation, altered levels of dependency, increased teaming – these are among the factors that have led to shifts in buyer / supplier power in industries such as oil and gas, automotive and pharmaceuticals.
But what about the IT industry?