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.

Quickstart Global featured on BBC Radio 4

I’m over the moon with coverage that we received on Sunday on BBC Radio 4’s In Business program, presented by respected journalist, Peter Day.

The 28 minute show featured interviews with 5 Quickstart Global clients as well as staff members that work with them.  If ever there was proof that what we do works, this is it!

Listen for yourself at http://bit.ly/8YCH2E

Quickstart Global featured in The Financial Times

I’m pleased to say that both “Born Global” and Quickstart Global were featured in the entrepreneurs section of The Financial Times today.  Couldn’t have put it better myself!

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!

Is it getting easier to find high end talent?

With the global recession upon us, it would be logical to think that it must be getting easier to find talent in G8 countries.  After all, we are hearing every day about mass lay offs and unemployment rising rapidly.

However, I’m not sure if that is really the case.  Common sense says that when companies lay people off, they tend to focus on the weaker performers and try their best to retain their stronger talent.  Which in turn means that while you may get lots of applicants for a role at a time like this, you may have to try harder to sift to find the real talent that is going to be able to really do the job.  As most recruitment going on right now is likely to be replacement headcount rather than necessarily growth headcount, it will be crucial that you don’t replace a top performer that is leaving or retiring with a mediocre one, particularly when the company is going through challenging times and needs its best people to perform.  I know our own search for a management accountant in the UK is proving this point!

And if companies execute on mass indiscriminate lay offs such as when they fail or close entire divisions,  anecdotal evidence among a few of my own friends suggests that some of the best people will take this time to have a break for a year or so.  I’ve got numerous banking sector friends saying exactly that – they made during the good times and so don’t need to rush into the next job.

Also, structural weaknesses in the quality of the available workforce does not change.  The US, UK and other countries are still not churning out enough engineers, accountants, mathematicians etc and that has been a problem that has been compounding over a couple of decades.

In a global context, some would be tempted to think that lots of offshoring will be reversed during this time, however I believe the opposite.  Companies will continue to search for the best and most cost effective talent pools.  And they are more likely to be open to innovative staffing models.

Bottom line, getting the best talent is just as hard as ever.

Global reach

So here I am on a conference call with one of our clients.  The client is in the UK, as am I today.  On the call is our General Manager and Ops Manager from Bulgaria and Prem Gyani, our UK General Manager who is calling in from India.  We’re reviewing candidates recently sent through to the client and we have just looked at one person who is working in Bulgaria but has his home address as Karachi in Pakistan.  I believe this is a fabulous example of truly borderless business!

Western jobs again

I wrote the following article for a UK publication called eGov monitor. It was published on their site on Feb 25th.

Neal Gandhi suggests that the globalisation debate in Britain should be framed differently. We must accept globalisation and seek out ways so that the next global leaders such as Google emerge in the UK.

The offshore outsourcing industry is often accused of damaging the prospects of British workers and of taking abroad jobs that should be done in Britain, sometimes to lower standards than if the job was carried out locally. The poster child of such comments is the now ubiquitous offshore call centre with calls being answered by “Sandra” in Bangalore who just needs to check how to spell M A N C H E S T E R. Further fuel is added by banks and insurance companies that proudly proclaim on TV adverts that their call centres are in the UK, not India. The inference is clear, offshoring was a poorly conceived idea and the rapid move to embrace such activities by companies is now reversing with many jobs being repatriated to the UK. “Hooray”, shout the unions, “British jobs for British people!” The end of globalisation is here!

But is the debate really that simple? The reality is that globalisation is now with us whether we like it or not. Successful companies sell their products and services and staff their companies from across the globe. Customers, for all their jingoism, still demand the lowest cost or best value for the products and services that they consume. History is littered with patriotic companies that tried forlornly to keep their local manufacturing facility open but then ultimately failed under the relentless pressure of global competitors with better products and lower costs. Quite why what happened in the manufacturing sector should not also follow in the services or other sectors is a question worth asking.

Of course many of those countries where jobs are currently migrating to are in their own right becoming major markets. Apparently 100,000 British jobs are dependent on Airbus’ success, yet the fastest growing aviation markets in the world are China and India. India has the fastest growing mobile phone market with seven million new handsets being sold every month. It’s not hard to imagine that many people are gainfully employed at Vodafone’s headquarters in Newbury thinking hard about how to increase their company’s market share in India. So if a company moves a services job to India and in doing so assists in creating a new middle-class of consumer for mobile phones and domestic flights, do they actually create a new higher skilled job in Newbury or Bridgend?

The question really is why Britain does not have many companies that are true global leaders in their field? Could an island nation’s desire to try and stick within our own shores actually be the problem? Is the UK market just big enough to sustain reasonably large companies such that there is no real need to explore new horizons? Helsinki is the most unlikely place to create Nokia, the largest mobile phone handset maker in the world, but maybe the narrow confines of the small domestic Finnish market forced their business leaders to look elsewhere for growth opportunities? Is it unrealistic to hope that British companies can be the global number one or number two in every sector of the FTSE listing, and if so, why? If our companies were true leaders, we would not have the question about British jobs, instead we would all be enjoying the spoils of being in a country with high GDP growth punching significantly above its weight.

The focus of the debate should be how we go about creating future global leaders right here in the UK, and step one is to assist those future leaders to understand that globalisation is the opportunity rather than the threat. Historically, leading companies have used their home advantage to achieve scale first before expanding internationally in search of new opportunity. Naturally, this favours companies with large domestic markets. A hundred years ago, British companies were the beneficiaries of the domestic market that was the Empire, since then American companies have used their own domestic scale to expand. In the 21st Century though, leaders can emerge from anywhere in the world. Fuelled by worldwide sales and staffed by a distributed workforce, these globally leveraged companies will embrace the best the world has to offer and will outgun any domestically constrained competitor. Government’s role is to educate both business and the population more broadly that UK companies embracing globalisation are to be congratulated and encouraged.

Technology has a role to play here. Today, it is more than possible to cost effectively establish a network that delivers near LAN speeds across the world. In lay mans terms, this means I can use my PC in India to connect to my SAP or Oracle system in the UK with no performance limitations. This in turn means that information security can be assured as the data never leaves the UK but more importantly, it means that companies are no longer limited by geography. Why have your highly skilled management accountants sitting in expensive office space in London doing routine accounting tasks or mundane analysis work? Or the bulk of your internal IT development being done by UK based staff who are better equipped to do the high value add business analysis work instead? Or your graphic production work carried out by highly creative artists that resent doing dull production work anyway?

And when a company is truly globally leveraged with the right people doing the right work in the right place and at the right cost, they are then in optimal shape to take on any global competitor. From this foundation are great companies created in the 21st Century.

So in conclusion, far from offshoring taking British jobs, offshoring is the enabler to create many more higher value British jobs as globally leveraged companies become world leaders in their field. For definitive proof, look no further than Google. From Trondheim in Norway to Bangalore in India, Google has scoured the globe looking for the best talent to enable them to maximise their competitive edge yet thousands of people are employed in their head office in California. Our job is to make sure the next “Google” comes out of the UK.

To link to the actual article, please click here http://www.egovmonitor.com/node/17353

Will India stumble?

It’s clear to almost everyone that the long term view of India is of growth for several decades and the creation of a true global superpower.  However, I have doubts over whether this will be smooth ride, I think it will be a period of quite wild swings but with the long term trend being upwards.  I predict some downward swings as the market corrects some of the excesses that are taking place in such a bull market, and I think one of those downward swings will take place within the next 12-24 months.  At that point, it will be interesting to see how the ITES/BPO professionals, who have only ever seen a boom market, will react.  Let me share some observations:

1.  Basic contractual respect has not yet reached this market, there seems to be no speedy legal recourse through the court system and minimal respect for contracts.  For example, we regularly find new potential employees who would like to join our organization in India are simply not relieved by their existing employer in time to join, despite the employee serving out their contractually commited 30 days notice period.  Such behaviour would not be tolerated by any employee in the west.  Once you’ve given your notice, you work out your notice period and then you leave.  It would be outrageous to think that an employer could hold you back simply by refusing to hand over standard documents but this is going on every day in India and most worryingly, employees seem to be falling for it!  Companies and employees need to professionalize their approach.
2.  If a great project manager earns $40k a year in India and works for an outsourcer, that outsourcer has to charge him or her out at around $120k a year to make a reasonable profit (standard professional services 3 times salary).  That just about works at the moment, but if the project manager salary reaches $50k-60k or more, I can see many companies questioning the validity of using an Indian based outsourcing company.  (By the way, this is where captive operations win out).  If you combine a US downturn with this scenario, I can see demand for Indian based resources falling away quite quickly.  We’re already seeing the start of this with TCS reducing some salaries during last week.

3.  Tier 1 city real estate prices are through the roof in India.  Right now, prime real estate in Mumbai costs the same as prime real estate in the best parts of New York or London.  Currently, there are significant restrictions on how much money Indians can legitimately move outside of the country.  When such restrictions lift, I can see an exodus of money towards the best homes in the best locations.  As fantastic as Mumbai is, its overall quality of life does not compare with other great cities of the world.  If the money can go anywhere, I can see real estate prices in these tier 1 cities falling.  Combine that with a hiccup in the ITES/BPO sector and you have a recipe for genuine market panic.

4.  While the trend is for more professionals being educated and coming available on the jobs market, particularly in the medium term (3-5 years), right now there is a definite shortage in certain areas.  Time will tell what impact a US downturn will have, maybe actually this will correct itself quite quickly if TCS, Wipro etc stumble.

5.  IPO mania is taking place in India.  During my visit last week, billboards were advertising IPOs to retail investors.  Experience tells us that markets crash just as small, private retail investors driven to a frenzy by over subscribed IPOs enter the market.

Here’s my prediction.  US economy falters, Indian outsourcers, particularly small to mid sized ones struggle significantly and larger ones see flat revenues, wage inflation stops, rapid career progression stops, Indian stock market with growth built into valuations crashes, retail investors loose money, property prices fall and all this happens sometime in 2009 or 2010.   Then recovery is quick because of the macros and the upward trend will continue.  Let’s see if I’m right!  Personally, I think this will be a healthy thing is it will give some perspective to many people who are going around India today thinking the world owes them something, I think such people, who may well be mortgaged to the hilt will have a rude awakening.

Cultural Differences – how to succeed in India

There are so many rules that I can think of for maximizing your chances of success when you run an operation in India. This week, one of the rules that really came to mind was the idea that you can never take what seems to be a no brainer situation at face value.

This weeks situation was one where we were to move into our new office in Pune. Everything was set for the move, scheduled on January 31st. In the western sense, every eventuality was covered. However when I arrived in Pune on the 30th, I began to wonder about what could go wrong at this late stage. My instinct told me that we needed an alternative plan. I asked my team to come up with a plan B. During the day we worked on the alternative plan and guess what, it became apparent through the day on the 30th that we would have to invoke that plan. The unthinkable looked like it was going to happen and eventually it did!

In the end, the move went ahead as planned with the usual teething issues. But there was a sting in the tail. Just as the move was happening, it became apparent that the submarine cable linking Asia to Europe and East Coast US had been cut causing a major Internet outage across India and the rest of Asia as well as the Middle East. The result, a shiny new office location, fitted out on time, designed to provide services to western based clients but with no network connectivity at all. As I write this, the team are working furiously to try and rectify the situation.

It just goes to prove, in India you need to think of the worst case scenario, and then double it and think what else could possibly go wrong! With that attitude in mind, you just might succeed in India!

Working in India – Cultural Differences

When I first started working with Quickstart Global, I remember reading an article on cultural differences. The article clearly stated that you should not try and change the hierarchical nature of business in India. It said that any attempt to do so would end in frustration. At the time, I remember looking at it thinking that’s wrong. India must have changed, all those IT professionals, a bold shining New India with 9% GDP growth, surely they would not want this. Surely an empowered, flat structure with no hierarchy would work. My Chairman, who had worked in India for years also urged caution with my approach. His instinct said I was wrong but he was also prepared to believe that maybe things had changed, maybe there really was a new India.

Two years down the line and I have to say, the article and my Chairman were right. To succeed in India as a successful manager from the west, you almost have to hit the reset button on everything that you’ve ever learnt about management frameworks and style. The western instinct is to empower people to make their own decisions within a given scope, to allow them to learn for themselves the best way to get the job done, to provide an inclusive environment where everyone is striving for the same bigger picture. You get the gist.

To succeed in India though, I now believe you really need to define roles in detail, define processes of what you want people to do, define clearly how an individual will be measured giving clear KPIs, define the organizational hierarchy with many layers showing clear career progression and don’t undermine the hierarchy, define the role of checking to make sure the processes are being followed. That is why quality accreditations such as CMM or ISO are so sought after in India compared to the west. I believe this is the root cause of where companies that struggle in India actually go wrong. You cannot bypass hundreds of years of culture in a single generation. After all, on one side, companies like Infosys, TCS, Wipro etc are all incredibly successful yet on the other hand western companies entering India somtimes struggle.

Ultimately, I think a middle ground will emerge however my advice to anyone starting out in India is to start in a very process oriented and hierarchical way initially and then gradually let other management influences in as you become successful and are hitting your original goals.

I told a good few people that the opposite was true. To any of those reading this, I apologize, I’m happy to revisit to impart my experiences over the last couple of years if you want! I strongly believe now that if you follow a simple set of rules, you can definitely succeed and establishing in India can be a very positive experience delivering business value even beyond your initial expectations.