In good times, global corporations primarily outsourced technical work to their offices in India. Today, as the economic slowdown shrinks demand in mature markets, some of the world’s largest companies are drawing on inputs provided by their Indian talent and running critical functions from their Indian units. They are devising future strategy, creating blueprints for marketing campaigns, building brands and new businesses from India-based centres that are more tuned to the needs of customers in emerging markets.
At Cisco Systems, Inc., the legal services hub, which structures deals for markets as far as eastern Europe or Mexico, is located at Cisco East, the company’s second global headquarters in Bangalore. Apart from legal functions, the analytics and research findings that underpin global marketing campaigns for the networking major are also sourced from Cisco East.
Fresh insights: Sharad Sharma, chief executive officer, Yahoo India R&D, attributes the increase in revenues from search to a set of releases from India.
“Four years ago, we had no vice-presidents based in India; today we have 13 and expect to double that number,” says Syed Hoda, chief of staff, Cisco globalization office. The global services business that generates revenues worth $8 billion (about Rs39,000 crore), roughly a fifth of Cisco’s global revenues, is headquartered in Bangalore.
“The focus is to grow business in emerging markets that need localized attention,” says Hoda who expects the company to add a million new customers from developing markets in the next few years. In 2007, Wim Elfrink, executive vice-president, Cisco Services, and chief globalization officer, Cisco Systems, moved from the US to head Cisco East. “He is one of the top three executives in Cisco globally and he is based in India, I don’t know of any other multinational company that has such senior talent here,” says Hoda.
The search for new customers has also led software maker Microsoft Corp. to expand its India operations. “A vast majority of the five billion people in the world currently underserved by technology live in emerging countries, so growth for Microsoft or any other company across any industry will come from these geographies,” says Ravi Venkatesan, chairman, Microsoft India Pvt. Ltd. The Indian subsidiary is the only one where the software company’s six business units at present employ about 5,000 people, makes it the second largest employee base—next only to the US. “India is definitely a big bet for Microsoft,” says Venkatesan, who expects to spend 60% of the company’s investments in India on building new products.
If Cisco and Microsoft are moving closer to where new customers are, computer maker Lenovo Group Ltd is aiming to build a “world sourcing model” for its advertising and marketing functions. In this model, inputs are drawn from centres best suited for that function. The company’s global marketing hub, based in Bangalore, creates advertising campaigns in tandem with creative agency Ogilvy and Mather (India) Pvt. Ltd, servicing Lenovo’s advertising and marketing needs across 50 countries and three time zones. Its portfolio includes the advertising campaign for the 2008 Beijing Olympics as well as the Ideas Everywhere advertising campaign that runs globally.
“In 18 months, the centralized marketing function at the hub has helped raise awareness of the Lenovo brand from 40% two years ago to 62% as of September 2008, while brand referrals have grown from 45% to 56% in the same period,” says Rahul Agarwal, executive director, global marketing hub, Lenovo India.
Global businesses are also gaining from innovative products that are born out of insights provided by India’s domestic market. Web tools that hike the amount of money earned from Internet search, termed search monetization, developed by the India research centre of Yahoo Inc. , have helped boost the Internet company’s profits. “In the third quarter of 2008, revenue from search went up by 20% while search queries increased by 10%,” says Sharad Sharma, chief executive officer, Yahoo India R&D. “This is entirely attributable to a set of releases from India.”
It is not just technology companies that are sourcing ideas and business concepts from their Indian business units. Iconic apparel maker Levi Strauss and Co. is set to launch a range of non-denim street wear in the US market, a sub-brand that was first developed for collegegoers in India. The launch of Levi’s Sykes, a range of non-denim street wear for 15- to 19-year-olds, marks the international debut of a product category built primarily in India.
“In global markets, Levi Strauss does not operate in the street wear segment; this is an opportunity we spotted in India that now contributes nearly 20% of business,” says Shyam Sukhramani, director, marketing, Levi Strauss (India) Pvt. Ltd, who says the success of this brand in India is what has prompted the parent company to consider a US launch.
It is with good reason that the Indian arms of global corporations are now part of the thought leadership teams of parent companies. Business confidence across privately held businesses in the country is at a high of 83%, making India the country that is most optimistic about its economy in the International Business Report, or IBR, 2009 released earlier this month by Grant Thornton International Ltd, an accounting and consulting firm.
According to the survey done in 36 countries, optimism among privately held businesses around the world slumped by 56% in the last 12 months and pushed the Grant Thornton International optimism/pessimism barometer to a record negative balance of -16% compared to +40% this time last year, the first time that pessimists have outweighed optimists on the outlook for their economy since research began in the current form in 2003. US businesses recorded –34% on the pessimism index, while China ranked +30% on the optimism index, behind Brazil at +50% and Botswana at +81%.
“The competitive landscape is changing and the global economy is being reshaped, so the situation today offers an opportunity for businesses to introspect, integrate, consolidate and even grow, and India is central to this process,” says Monish Chatrath, national markets leader, Grant Thornton India.
The growing size and maturity of the domestic market is also a strong lure for global companies, which are boosting their presence in India. According to research and consulting firm Zinnov Management Consulting Pvt. Ltd, there are currently 12 multinational corporations that earn at least $500 million in revenues from India. “Companies in telecom and those building low-power, low-cost devices will continue to invest in India,” says Glen Serrao, engagement manager, Zinnov.
“Emerging markets have similar issues of affordability, accessibility and relevance. A lot of innovation happening in India will be useful in similar economies,” says Venkatesan. Microsoft has built a range of products in the mobile application space that include using Microsoft Word, Microsoft Powerpoint and Microsoft Excel on mobile phones. “We are involved in driving innovation in India through strategic product development at the Microsoft India Development Centre in Hyderabad. The centre has filed 220 patents in the last four years.
At Cisco, the focus on emerging markets includes basing new business lines such as the smart building technology unit, a business that tracks growing construction activity in developing markets, in India. This business has been based in India since “a little over a year ago”, according to Hoda. He says Cisco’s decision to have the real estate vertical in India was based on market opportunity. There are multiple customers for this business in emerging markets such as West Asia and India, which have been seeing a boom in construction.
“India is the hub for innovation in new products and technology, for innovation in business processes, where we look for ways to do business differently and finally in business model innovation, where innovation can change the way we sell to customers,” says Hoda.
But it is not just other emerging markets where innovations built in, and for, India are being retailed. The growing maturity of the Indian consumer now makes it possible to create products and concepts in India that can be marketed in mature markets in the West as well.
“Around 30% of global research for Yahoo is sourced from the R&D centre in Bangalore,” says Sharma. For instance, in May, Yahoo India launched a search tool called Glue Pages Beta, which aggregates text, images and video content categories such as health, sports, entertainment, travel, technology and finance. Once through with the beta run in India, the tool was rolled out in US markets at the end of December.
“The Indian consumer has become increasingly sophisticated in his consuming habits compared with even seven to eight years ago,” says Sukhramani. Levi Strauss India now participates in the global denim retailer’s teams working on developing global brands targeted at women and is also helping develop a line of luxury wear in the denim market in tandem with Levi Strauss Europe.
So also at Lenovo, where an advertising campaign that features Bollywood actor Saif Ali Khan has found acceptance in countries as varied as Brazil and Turkey. “Cultural differences exist but once we develop a product with an international appeal, it can run in multiple markets,” says Agarwal. As more global corporations look to India to boost growth and innovation, the primary challenge they will face is finding the right talent to man operations. That is why companies are focusing on identifying and fostering skills among Indian employees. “We have a multilevel approach; 1% of the employees at Cisco East will be expatriates and then we will foster talent internally,” says Hoda.
Manpower is an issue that also figured in the IBR 2009 survey. “In mature markets, falling consumer demand is seen as (a) business constraint but in markets such as India, energy prices and skilled manpower are seen as challenges,” says Chatrath. As more companies look to the East to boost growth, finding the right person for the right job is going to be a challenge.