INDUSTRY STUDIES ASSOCATION WORKING PAPER SERIES How Value Chains Grow in the IT Sector – R&D, Software Development, and IT Support Services and How This Affects Work

This contribution examines companies’ and public-sector organisations’ external restructuring processes, with consideration of emerging or lengthening value chains and network relationships in the service sector. Focusing on three business functions – software development in the IT industry, R&D in the IT industry and IT services for public-sector organisations – the paper describes the types of inter-organisational relations that emerge and analyses the impact of restructuring on employment conditions and work organisation. The business functions clearly differ according to the form that restructuring takes and with regard to the impact of restructuring on work and employment. Common trends include increased insecurity, growing flexibility demands and higher levels of standardisation and formalisation of work. 1. External restructuring in the service sector Restructuring in companies is a difficult phenomenon to analyse, because of the speed at which change is happening, the challenge of unravelling the complex web of drivers, the resulting multitude of forms it takes and the diverse effects for a variety of actors. Traditionally the term restructuring has been used to denote organisational change leading to job loss. In this paper restructuring refers to a process involving the dispersion of functions and activities across company boundaries. The resulting effects can lead to redundancies, but there is actually a much broader range of outcomes on employment relations and conditions of work. The concept of value chains is a useful analytical tool for this task because it encompasses the processes of internal restructuring by looking at the way business functions are broken down by activity and task to be distributed across the chain. It also captures external restructuring by looking at the disintegration that occurs through outsourcing and relocation of tasks, functions and units across the entire range of actors involved in the chain: customers, producers and suppliers. One problem with the term value chain is distinguishing it from a variety of other terms used to describe cross boundary economic activities such as supply chain, value system, commodity chains and filière (Gereffi 1994, Kaplinsky 2006). Here “value chains” refer to a growing literature in which chains are seen as dynamic and reconfigured on an ongoing basis (Sturgeon 2001, p.2), power relations are embedded in the analysis (Gereffi 1994; Huws et. al 2009), the lead or dominant firm is part of the chain, and systems are dispersed, but also linked and coordinated (and controlled). Often value-chain restructuring is associated with issues popularised by management literature on competitive advantage (e.g. Porter, 1980) in which it is argued that to realise gains, tasks have to be identified that can be externalised to be provided more cheaply, without compromising the company’s main business. Logically these processes