In Europe, Greece’s parliament yesterday approved an austerity package. One wonders though whether financial instability will be replaced by financial and social instability.
The European crisis continues to directly and indirectly impact the Australian economy through slowing global growth and funding pressures for the banks. Significant interest rate differentials between Australia and other countries is encouraging carry trade — borrowing at low rates in other countries and investing in relative higher rates in Australia — thereby keeping the Australian to US dollar exchange rate high. The net impact of all this is a structural change in the Australian economy where cost focus is the dominant theme in practically all sectors of the economy, except the resources sector.
Like most developed countries, Australia’s services sector makes up more than 75 per cent of the country’s workforce. Services share of the workforce is even higher if we consider embedded services.
The structural changes in the Australian economy are resulting in onshore job losses, jobs moving offshore or both. The challenge for Australian corporates is to best balance the benefits of globalised service delivery against additional complexity and associated higher risk. If managed properly, services globalisation can work very well for an organisation. But if not managed properly, it can become a nightmare.
Working well with different cultures is now emerging as a critical success factor for globalisation of services. In this context, it is often presumed we are referring to working well with different national cultures. However, in reality, it is a blend of national and organisational cultures — one that can vary significantly from one services provider to another.
A lot of research has been done on culture — both national and organisational. By appreciating there is no right or wrong culture, and groups of people behave differently for a variety of reasons, it helps form a better understanding of working with different cultures.
Let’s look at how this combination of organisational and national culture impacts a service provider of globalised service delivery.
Professor Nancy Adler, in her book International Dimensions of Organizational Behaviour, cites researcher André Laurent: Cultural differences were “significantly greater among managers working within the same multinational corporation than they were among managers working for companies in their own native country. When working for multinational companies, Germans seemingly became more German, Americans more American, Swedes more Swedish, and so on.”
In the case of global service providers such as IBM, Accenture, HP CapGemini etc, do Indian employees become more Indian and Philippine employees become more Philippinio when dealing with their counterparts and their customers in other countries? Or, is the organisational culture of these global organisations so strong that it becomes the dominating culture in spite of a large number of one or two country nationals in their global workforce? Likewise, is the culture of Indian service providers like TCS, Infosys, Wipro, HCL, Tech Mahindra more dominantly Indian or a blend of their national and organisational culture?
Let’s have a look at two leading service providers — Accenture and TCS. These two have been chosen because TCS’s global headcount is now about 90 per cent of Accenture’s and in time, it may well be equal or higher than Accenture. A similar analogy can equally well apply to other organisations as well.
Here is some comparative information on Accenture and TCS:
Table 1: Accenture and TCS — Global Presence, Comparative Global Headcount*, Annual Revenues** and People from India & Philippines as a percentage of the Global Headcount. * Global headcount above is comparative headcount with Accenture as a base of 100
**Accenture’s revenue is for the FY that ended 31 August 2011 and TCS revenue is for the FY that ended 31 March 2011
Source: Accenture and TCS websites
When looking at Table 1, columns (2) & (3) only, it could be inferred that both Accenture and TCS are geographical well diversified global organisations with TCS being relatively smaller of the two. As presumably both don’t appear to have a dominant nationality (when looking at column (2) and (3) only), it could possibly be inferred that both have a dominating organisation culture which appropriately takes cognizance of differing national cultures in the countries these two organisations operate.
Looking at Table 1, column (4), however, Accenture’s revenues are almost three times TCS’ revenues. It could therefore be inferred that Accenture is more into high-end consulting with higher charge out rates. So, Accenture’s culture is probably more innovative as required by a successful consulting company.
Now, when looking at additional information in column (5) of Table 1, people from India and Philippines as a percentage of the global headcount provides more insights. In Accenture’s case, people from India and Philippines now account for 40 per cent of their global workforce, with India headcount being almost three times the Philippines headcount. These two countries are a major part of Accenture’s Global Delivery Network (GDN). Accenture GDN’s rapid growth has come almost entirely in the last eight years and more so in the recent years. GDN accounted for 13 per cent of Accenture’s global headcount in 2003 and this has now grown to almost 60 per cent in 2011.
These numbers become important as market feedback indicates global organisations and are now including global delivery in almost all deals wherever possible.
So, we come back to the key questions we asked earlier in this article: In the case of global organisations such as Accenture, IBM, HP, CapGemini etc, do Indian employees become more Indian and Philippino employees become more Philippinio when dealing with their counterparts and their customers in other countries? Or, is the organisational culture of these global organisations so strong that it becomes the dominating culture in spite of a large number of one or two country nationals in their global workforce? While I could answer these questions, for the time being, I will leave them with you as some points to consider.
In TCS’ case, people from India and Philippines account for almost 93 per cent of TCS’ workforce. People from Philippines are less than 0.5 per cent.
Do Indian organisations like TCS, Infosys, Wipro, HCL, Tech Mahindra have a dominant national (Indian) culture which possibly blends with its organisational culture? This is something to consider and to ask these organisations when you have them as a service provider. And presumably, an understanding of and an ability of working with Indian culture would be helpful when they are the service providers.
Working well with different cultures is just one of the critical success factors in managing a successful globalised service delivery and there are other aspects of culture that are just as equally important. But this success factor is an important one to consider.
Pradeep Khanna is chief executive and managing director of Global Mindset
Join the CIO Australia group on LinkedIn. The group is open to CIOs, IT Directors, COOs, CTOs and senior IT managers.