SAN JOSE, Calif. — For the better part of a decade, India has been the outsourcing destination-of-choice for American IT companies looking to reduce costs without sacrificing quality.
While that trend appears to be holding steady, India could soon become home to a bevy of top level executives from the choicest global technology giants. And ushering in this era is Wim Elfrink, the chief globalization officer at Cisco Systems Inc., who along with a seven member team has shifted base from Silicon Valley to Bangalore, India.
They represent what many in the tech industry consider to be one of the most ambitious globalization campaigns ever undertaken. Cisco wants to have 20 percent of its senior management working at the company's Globalization Center East, a sprawling $50 million research-and-development center currently under construction in Bangalore, India, by 2010. According to Cisco, the executives will consist of a mixture of rising stars from San Jose and Bangalore, and talent landed through acquisitions or plucked away from competitors around the world.
Elfrink described the facility and Cisco's plans for it in a recent interview with the company's media department. "The Cisco Globalization Center will enable Cisco to locate a significant presence in Asia — a region in which there is high growth potential. All of the company's primary business functions, including sales, business development, IBSG, finance, human resources, marketing, engineering, and customer support will all be represented in India, as well as the United States," Elfrink said.
"We believe that India, with its educated workforce, market opportunities, rich history and culture, is a great location from which to implement our globalization strategy. As a result of the Cisco Globalization Center East, we will be able to best serve our customers by creating new ways to deliver information, products and services," he added.
International business experts are divided over whether the 50,000-person company's plans make sense. Some have called it a shrewd move that will give high-ranking employees critical insight into one of the world's fastest-growing economies. Others, like Vivek Wadhwa, an adjunct professor of globalization and engineering at Duke University, questioned whether Cisco is attempting too much, too fast. He said it is possible that the United States could lose the ability and insight required to develop "the next Internet or other big phenomenon."
"From Cisco's point of view, this deal makes absolute sense — it gets them access to lot of very bright talent at low prices," Wadwha said. "It's all good for Cisco, but it's also good for India because it brings to the country a lot of new jobs and high technology.
"For the United States, India doesn't represent much competition, so this isn't bad news, per se. The trouble is in the trend: If U.S. companies continue to outsource research jobs so fast, it could erode this country's competitiveness to the point where we might not be able to invent the next big technology."
Asia's emerging economies have long proven attractive targets to Silicon Valley's tech giants. Hundreds of American companies, from giants such as Oracle Corp. and Yahoo Inc. to fledgling startups, have entered Asia since the 2000 dotcom crash. They did so under pressure from investors and venture capitalists to cut costs, big time; some firms outsourced entire departments — be they software development, data analysis, even research and development — to developing countries where the help is cheap but skilled.
But rarely have top executives, such as chief information and technology officers, seen their positions shifted halfway around the world — partly because they command high salaries and special compensation packages no matter where they reside. Figure in relocation costs and hardship allowances and most companies pay more for a top-level executive to live outside the United States.
The executive migration at Cisco indicates that offshoring has evolved from a cost-savings measure to a strategic imperative. Given Cisco's massive size — it is Silicon Valley's most valuable company, based on market capitalization — many other multinational corporations are expected to follow suit.
IBM Corp. already has approximately 150 executives living in emerging markets, including 35 in India and 89 in China. Last summer, the Armonk, N.Y.-based technology company moved its Global Procurement Office from Somers, N.Y., to Shenzen, China. IBM vice president John Paterson moved with it.
"India was chosen for a number of reasons," Elfrink said. "First, it has innovative customers and skilled partners that have global capabilities. India has a culture that is known for its strong understanding of the concept of partnership. And, India's government is focused on economic development across all levels of society.
"We believe in India, with its educated workforce, market opportunities, and supportive culture, is a great location from which to implement our globalization strategy."