Go East young man

Earlier this week I was speaking at the Born Global event run by Entrepreneur Country. On the same day, the latest UK unemployment figures were released, with the shocking statistic that youth unemployment now exceeds over 1 million, with a staggering 21% of 16 – 24 year olds without a job.

While I was listening to some excellent speakers, urging entrepreneurs to look around the world to expand their businesses in fast growing economies, it struck me that perhaps there are opportunities for ambitious young people who are willing to travel.

In our offices in Vadoroda, India, there are currently 3 interns who have come to India to learn how business works there. They are from Mexico, Brazil and China. They have recognised that today’s economy is global and the more you can learn from other countries at the beginning of your career, the more marketable you will be. Employers in fast growing economies value the skills that British people can bring to the market; examples could be a trainer in a call centre, or a marketing graduate who can provide a view of the UK economy and customers.

Any young Brit that is willing to go and spend 6-12 months in one of these emerging countries will almost certainly walk into a job when they get back. I think if we had a generation of young people, who had experience of other fast growing markets it could only help the UK to become more competitive as an economy and perhaps even assist us in getting back on the path to growth.

Indian Dynamism

Today I attended a presentation in Vadodara, India where we celebrated team members who had been with Quickstart Global for 5 years. At the same time, due to our significant headcount growth across India, we asked new employees to introduce themselves to the rest of the team. What astounded me was the level of hunger, passion, professionalism, dynamism and energy that every single person displayed. Those that think that India is just a labour arbitrage play are sorely mistaken, India is a force to be reckoned with. India has also changed significantly since Quickstart Global set up our first centre here 6 years ago; unless your experience is very recent (weeks and months rather than years), I recommend that you do not judge based on past experience and that you revisit the country with an open mind.

Indian ownership of UK companies

When Tata agreed a takeover of Jaguar and Land Rover, I can recall headlines in the Indian press such as:  “The Empire Strikes Back”.  In the British media the mood was more:  “The Great Indian Takeaway”.   Unfortunately, discussion about foreign takeovers is often laced with xenophobic language which blurs the real issues.

The problem is, it’s costly to be xenophobic in matters of business and economics.  Let’s face it, the British car industry was the proverbial “dead parrot” for decades under domestic ownership and failed to meet the challenges of international competition.  Thankfully, Japanese investment and skillful management, showed that the British car industry was not actually dead, but “just resting”.  The renaissance generated thousands of jobs and left a high quality skills base.

The Tata Group is now the largest manufacturing employer in the UK, and Indian companies as a whole employ nearly 100,000 people in Britain.  Thousands more jobs exist thanks to activity of British companies in India.

Tata Motors’ purchase of the Jaguar and Land Rover marques from Ford for £1.15bn in 2008, is an example of a long-term investment which will benefit both historic marques.  In return, Tata will learn much about the premium and executive car markets.  It’s important to remember that Indian acquisitions tend to be “agreed” rather than “hostile” and are viewed as partnerships, with managements and workforce kept in place.  The approach to business is long-term because the UK is seen as a base from which to expand in to Europe.  Tata has also launched the Jaguar and Land Rover brands in India, where the luxury market is expected to grow quickly in the next 5 to 10 years.  All this bodes well for the future.

In 1600, India and China accounted for over 70% of the world’s GDP.  As both countries take centre stage once again, their economic power will be felt across the world. The UK will need to be pragmatic and forge mutually beneficial business links.

The UK’s economy has been more open, flexible, dynamic and welcoming of foreign capital and talent than many of its European neighbours.  This has been a source of competitive advantage in the past, and will continue to be so in the future.  When the usual concerns about foreign ownership are raised in the UK, it’s worth recalling the words of Deng Xiaoping.  He said:  ” It does not matter whether a cat is black or white, if it catches mice, it’s a good cat.”  In other words, if foreign ownership of UK companies brings investment, skills, and jobs, then surely it’s a good thing.

Britain has nothing to fear from long-term investment from India and everything to gain.  In fact, the UK and India are natural business partners.  JCB, BAE, Mott McDonald, Cairn, Standard Chartered, Infosys, Wipro, Religare, HCL  – these are just some of the companies who do business across both countries.  We have a historic opportunity to develop a relationship between the UK and India which will drive growth and prosperity in both countries whilst reducing unemployment.  As someone once said: “This could be the beginning of a beautiful friendship”.

This article was originally written by Rakesh Rawal of Plus 91 Europe and published in Professional Engineering magazine.

Is the correction starting?

A few weeks ago, a friend of mine forwarded this article to me.  It talks about a small town in Wyoming in the US providing English language training to students in Asia via video conferencing technology.  Then today I was visiting a client in the north of England who told me that there was a significant salary differential between the south and the north of England; a distance of just 200 miles or so.  The two points set me thinking about whether the correction in costs is beginning to take place?

The UK and US look set to have growth rates of maybe 2.0 – 2.5% for the foreseeable future while India and China are both forecasting growth of at least 9%.  Will we see salary and office space costs rise in the growth countries while they plateau in the developed nations?  Will the differential reach a point where it no longer makes sense to locate teams in countries like India?

My conclusion though is no, it will still be many years before the so called correction is really in place.  In the UK, the salary cost inflation that is already going on in places like London will spread outwards.  It may take a year or so but it will happen; it’s just that people forget that when they’re in the middle of a recessionary period.  We’re already seeing banks start hiring technology staff in particular and that is bound to have a ripple effect.  I recently heard an example of a developer from one of our clients in the UK moving jobs for a £20k ($31k) annual salary increase.  In addition, we’re seeing office space rental rates in the London and again this is bound to spread outwards.  Even if it doesn’t spread, differentials like that are bound to make people move.  In addition, companies will delve deeper into China and India away from the well known cities where costs are still relatively low and cost of living more affordable.

As for the article above – it makes sense for English to be taught by native speakers.  The world is full of English as a Foreign Language teachers from the UK and US and this just uses the technology to make it more cost effective – no more and no less.

An example of stoicism described in my book “Born Global”

If you’ve read my book, you know that I describe a vision for Britain as a hub for the globalized economy.  I go on to describe some reasons why that is the case and the unique assets that Britain has that justifies my view one of which a great sense of British stoicism.  Then on 13th Feb, there was a bomb blast in Pune, India, the same city as where Quickstart Global has an office.  We verified that clients and staff in Pune at the time were safe and then sent out an email to our clients that have operations with us in Pune notifying them.

What came back in response from one of our clients describes that stoicism perfectly and he has given me permission to publish his email here.

“I have caught up with Brigadier Harinder and have let him know that my main concern was for all the staff here, certainly not for myself. As agreed with the team when I first arrived these attacks aim to create fear, and I am glad to say that this doesn’t seem to be the mood anywhere here in Pune. Other than the airports being extra vigilant I have had a very pleasant journey here and am very glad to be united with the team.

This is quite typical of an Appleby visit to any location! So please don’t worry I and the team are very well.”

No need to add anything from my side, I thought he summed up what I wrote perfectly!

The wealthy in China

I just read a fascinating article in the UK Sunday Times today.  It describes the market opportunity for luxury brands in China (http://bit.ly/9iOMEZ).  More than just luxury brands, it tells me very clearly that nearly all products and services that are successful in the developed world can be potentially even more successful in the developing world, particularly the BRIC countries.  If you’re not already considering your company’s market opportunity, you really need to wake up and realise what’s going on.  If you don’t know how to, ready my book, Born Global.

Is globalization ethical?

I was recently discussing my book, Born Global, with a fellow parent from my son’s school.  She immediately started saying how globalization was bad with sweat shops and poor quality call centers both being cited as examples of why.  I then proceeded to explain why in actual fact the majority of examples of excellent globalized companies go unreported by the popular press.

Take for example, Quickstart Global’s operation in Baroda, India.  In that city alone, we’ve been responsible for creating around 400 high end, knowledge worker jobs in the last four years.  These jobs are highly sustainable, with salaries significantly higher than the city average.  Collectively, they contribute significantly to the local community, particularly when the multiplier affect of their spending is taken into account.  There is no exploitation here, our clients treat team members exactly as they would any other member of their team anywhere else in the world.  In addition, with a global war on talent that is unlikely to reduce in intensity, I have a sense that while these teams continue to deliver value, the roles will be there for many years to come.

I do not for one minute believe that this activity is in any way unethical, nor do I believe this represents an exception.  Even in sectors like clothing manufacturing, the vast majority of operators offer well paid, secure jobs with good benefits and conditions compared to local norms and are seen as good jobs by people undertaking them.  What the world doesn’t need is sanctimonious folk from OECD countries pushing their values and mis-guided beliefs combined with their lack of local conditions on the ground.

BRIC + US Institute of Directors Conference – October 20, 2009

Last week I chaired the afternoon session of the BRIC + US conference held at the Institute of Directors in London (Hot Spots in a Cold World).

During the day, each of Brazil, Russia, India, China and US were given the opportunity to present why their countries represented significant market opportunities for companies looking to set up in their respective countries. And each of the speakers gave a fantastic picture demonstrating in clear terms why companies of all sizes should consider expansion into these countries. It never ceases to amaze me how little knowledge there is in OECD countries about the high growth emerging economies in particular so let me gave you a few of the numbers that were mentioned:

• In China, there are 274 cities with populations of greater than 1 million people and over the next 20 years, some 350 million additional people will relocate from the countryside to cities
• Russia aims to become a top 5 global economy by 2020 – just 11 years from now
• India is committed to sustainable growth of at least 6-7% per annum leading to it becoming a top 3 nation by 2050
• 47% of Brazil’s energy already comes from renewable sources making it a global leader in the field
• The population of the US will reach 400m by 2040 making it the 3rd most populous country on Earth after China and India

The message from the conference was clear, you cannot simply think in domestic terms, if you really want your business to succeed, you need to take an international perspective.

The new realities

Two things caught my attention yesterday.

Firstly an article by Jane Simms in the September issue of Director magazine headlined “Bosses in denial over a volatile new world”. The article discusses that a post recession world will not look anything like the pre-recession world and so those looking to a return to the status quo are likely to be disappointed. I couldn’t agree more.

Secondly, a news report on the BBC discussed the volume of graduates in the UK versus other economies. Basically, 39% of students go on to earn a degree whereas India is targetting 30% of a MUCH bigger number of students by 2020.

The world is indeed changing very rapidly.

Incidentally, came across a newer edition of Shift Happens on YouTube. Well worth a look

Finally, my new book, Born Global is out early October. If you’re interested, it can be pre-ordered by following the link.

What Satyam really means to India’s IT industry

By now everyone will be aware of the Satyam situation.  Sure, the Indian government may step in and provide the working capital required to keep the company going but the reality is that Satyam are unlikely to ever win another new business contract, which in turn means that they are likely to be bought for next to nothing by another IT major.  The days of Satyam as a brand are limited.

The bigger problem is the damage to brand India.  India already has a reputation for being corrupt and despite amazing changes over the last few years that began to reverse that reputation, this episode will re-awake that belief.  Vietnam, Ukraine, Philippines and other alternative offshoring destinations will all be kicking their business development efforts into overdrive now to try and win clients that are currently offshoring in India.  And those countries do offer a credible alternative so some clients will be tempted to move in the hysteria.

But for clients to move away from an entire country in a knee jerk reaction would be a mistake.  The fundamentals of the country remain; a very high quality, highly scalable workforce with excellent English language skills.  Instead of questioning the country, clients should question their model of engagement.  Satyam has shown that outsourcer “black box” their engagements meaning clients have very little knowledge about how their outsourced business processes actually work.  For many Satyam customers, that is a scary proposition.  Many are in a situation where key business processes are being delivered by a company that may or may not be in place next week, with no roadmap of how to ensure business continuity if the company does actually fail.  If Satyam suddenly disappear, many Fortune 500 companies are going feel even more pain that the recession is already giving them!

The answer is for companies to move towards establishing captive or hybrid captive operations in India.  Companies need to take control of their offshored business functions.  The old story of captives being unable to hire or retain staff are gone.  Indian outsourcers are now all in a mature state with slow growth (Infosys 3.7% decline in revenues quarter on quarter).  Indian IT workers from this episode will grow to realise that greater job security lies in captive operations that deliver value.

Quickstart Global stands ready to support both the clients that may be having near term issues as well as IT workers looking for a stable career with smart, successful captive operations!