IT Mergers Have Feds Flailing Against Tech Globalization

The US Department of Defense aims to scrutinize any foreign entity that wants to buy US information-technology (IT) firms. Before Canada-based Nortel Networks purchased government-contractor PEC Solutions, it had to set up a separate subsidiary and allow the Defense Department to monitor e-mails. Election-year politics in the US could lead to more intense scrutiny. In particular, the government will examine a bid by France’s Alcatel for US Lucent, which owns Bell Labs, one of the nation’s premier research sites. But enforcement could be unrealistic with the increasing global and integrated nature of the IT industry. In 2004, the Pentagon questioned the increasing reliance on overseas manufacturers to produce computer equipment in the US, suggesting that finished products could include embedded chips to monitor or disrupt critical military or business operations. That worry comes a bit late: In 2005, during a congressional hearing, engineers dismantled US computer equipment and demonstrated how most parts had been made in China. Indeed, author J. Nicholas Hoover points out that advanced manufacturers of US jet fighters, helicopters, and missile weapon systems rely on subcontractors using offshore locations and foreign companies for software development. The topic allows politicians to posture, but real security of military IT equipment will be time-consuming and costly. – YaleGlobal