Zigging When India (Or Any Other Country) Zags

(MoneyWatch)  High tech companies are used to outsourcing and selling overseas. But are they used to dealing with the intricacies of global politics? I doubt that too many board rooms in Silicon Valley are spending much time thinking about the current political crisis in India, nor on how the vote of confidence on the Prime Minister might go. But as the world gets smaller, it's a disinterest that virtually no established company can afford, because increasingly they will find that no business is an island.

Some years ago, I was sitting in the office of David O'Reilly, CEO of ChevronTexaco, interviewing him for a profile. We got onto the subject of operating in a commodity trade that is enormously beholden to the Middle East, and what a company can do when it sees widespread political unrest in the area. His answer was far more matter-of-fact than I would have expected:

We're in 186 countries and it's rare that all of them are going well all the time. What helps me a lot is that we have very competent people spread all over the globe. We're fairly decentralized ?€" we delegate a lot of authority to our country managers. To me that's tremendous comfort, because difficult times are going to come and go. If you look back over the last 30 or 40 years in our business, you can think of very traumatic times and our company came back and prospered. What's going on in the Middle East is a traumatic and tragic thing, but this is reality and our business has had to function in all sorts of economic ups and downs and political ups and downs. It's a business where you have economics and technology and geopolitics intersecting and all have an impact on the outcome.

Politics and world events, disasters and economics, technology and market trends, all were important but routine considerations in strategic and tactical planning. Unfortunately, high tech doesn't have a hundred or more years of corporate maturity and discipline. So when there are signs to hedge bets, companies may keep putting money on the same spots at the business roulette wheel.

For example, look again at India, a popular destination for outsourcing and offshoring. The tumult over Prime Minister Manmohan Singh has everything to do with his willingness to deal with the U.S. on nuclear issues, but it's not the only issue in the country. As the Financial Times pointed out:

Market sell signals seldom come much clearer than this. Two of India's top industrialists are poised to trade in controlling stakes in their businesses. Anil Ambani, chairman of Reliance Communications, is set to swap a 66 per cent stake in RCom, India's number two mobile operator, for a 35 per cent holding in South Africa's MTN. Meanwhile, Malvinder Mohan Singh, scion of the family that founded Ranbaxy, India's largest generic drug manufacturer, is cashing out altogether. He has agreed to sell the family's 35 per cent stake in Ranbaxy, founded by his grandfather in 1961, to Japan's Daiichi Sankyo for about $4.5bn.

The deals suggest that some savvy people in India think that the end of high business valuations may be coming to an end. Now combine that with news that the country is seeing "widespread protests over land use, food, fuel and jobs" and, if you're in high tech, you come up with a reason to be concerned. It's not a "good" or "bad" thing. It could be that companies might more easily consider acquisitions of Indian businesses, or that engineers and scientists from India might be more available and interested in working for a foreign company.

The important thing is to remember the saying of former speaker of the House Tip O'Neill: All politics are local. But sometimes you have to look at different locales.

Image of Manmohan Singh, Prime Minister of India, via Flickr user markhillary, CC 2.0