Outsourcing the High-Tech C-Suite
High tech firms have been sending more and more engineering, programming, and science work to other countries. Where will it stop? Not with upper management. Corporations are already looking to bring talent from other geographic areas into the highest positions. Many top firms -- Goldman Sachs, Nokia, Novartis, Procter & Gamble, and Deere -- have added Chinese and Indian natives to their boards. The reason is obvious: many are doing an ever-expanding amount of business in Asian markets, and high tech corporations play across the same waters.
Given demand by an emerging middle class of consumers in India, China, and the Middle East for laptops and cell phones -- as well as the need for those countries' industries to modernize their computer systems -- technology companies are natural candidates to diversify their boards. Hewlett-Packard gets 70% of its revenue from overseas, IBM about two-thirds, Cisco Systems 45%. "If you look at the companies we consider American, look at their revenue. They're not American anymore," says Vivek Wadhwa, an engineering professor at Duke University and a fellow at Harvard Law School.If you follow the theory of governance and board composition at all, this isn't surprising. To operate at top competitive levels in a region, you need a deep understanding of the culture. Bringing in board members from those areas helps incorporate that background and experience into the decisions a company makes. But why assume that the movement will, or should, end at a board member here or there? Many tech companies do large amounts -- sometimes even a majority -- of their business outside of their home countries. Assuming that, for example, an American firm will always have an American CEO, CFO, and other three-letter acronyms is naive.
Look at Sony, about as Japanese a business as you could name, which in 2005 named Howard Stringer chairman and CEO. If it works in one direction, it works in the other. Why not an experienced Indian CEO for a major computer software or hardware company? And then the next logical step becomes moving the whole C-suite to another country. It would be easy enough, and in some cases, management would actually be in a company's biggest markets. There was a time when people thought that only clerical work could be successfully outsourced. Then they swore that seeing programming jobs was the last straw. Given the global nature of companies, management will absolutely be next, because there is too much benefit from having the entire world to search for the best candidates.
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