Internal competition & scarce resources

On our lunch table, we were having quite an interesting discussion. The question which was under scrutiny was

Why am I locked to one project? When will I be released? Hope I don't retire in this project.

Lot of organizations practice what is called as "Internal Competition". Internal fights are primarily instigated by the top management layer to get the best of the products from different project teams. In some cases, the same product might be developed by 2 different teams and the best version will be given the chance to continue it further.

This culture of internal competition can also be noticed in a lot of IT Service companies. For any IT Service company, their product is their people. They sell people and their experience on the projects And you will find that most of these companies would have services/offerings compartmentalized by "industry" groups. So, they sell people with good technology and industry skills. 

Now, when competition is induced between these groups, they fight for the scarce resource's (people's) time. They wouldn't want to release these people to other opportunities in other divisions. Its a classic example of "Controlled Labor", where the allocation of scarce resources is not controlled by the demand, but by "internal competition". And whenever this imbalance in economics happen, we know the result is not desirable.

Let's say I want to rent out 5 houses. Should I rent it out on the basis of the market(demand) or should I rent it out on the basis of some kind of rent control scheme ( like renting out to only bachelors who are vegetarians)? We all know the ill effects of rent control schemes. That's what is setting out to happen in IT Services industry. Technology skills are getting locked. And they are locked hoping that their skills would be required for future usage in the same industry group, whereas another industry group might potentially lose a deal, unable to staff the skill set. And in effect, the organization stands out as a loser.

Internal competition is good, but not in a way that it locks the scarce resources that the entire market is dependent on.