Globalization: New Management Challenges Facing IT leaders

As the globalization wave reaches emerging markets, IT leaders face new mangement challenges. Here's advice on how to balance the competing—and often conflicting—needs of established and developing business locations.

Wayne Shurts had no experience overseeing IT operations in emerging markets when Cadbury CEO Todd Stitzer appointed him global CIO last summer. The geographic parameters of Shurts' responsibilities at the sweets maker—with a presence everywhere from Pakistan to Palau—multiplied overnight.

The former CIO for North America now spends most of his time globe-trotting from his home base in Parsippany, N.J., to London headquarters to operations on six continents.

Shurts also had to shift his thinking. The $7.8 billion company has made a concerted effort to expand in the developing world, giving it the biggest and most dispersed emerging markets business in the confectionery industry. (In fact, Cadbury's business in rapidly developing markets was reportedly a major driver in Kraft's $16.7 billion takeover bid for the British candy maker in September.) Last year, 60 percent of the company's growth came from emerging markets.


To read more on this topic see: 6 Globalization Tips: Managing IT in Emerging Markets and Are You Qualified to Be a Global CIO?


"That means that my world as CIO does not solely revolve around big economies of North America, Europe, Australia and New Zealand," explains Shurts. "Emerging markets are not afterthoughts to me. They demand—and get—a lot of my attention." Shurts isn't alone. In industries ranging from consumer goods and agriculture to banking and electronics, multinationals are investing more in the Middle East, Asia, Eastern Europe, Africa and South America.

"Companies are going to tap those markets as mature markets stagnate or decline," says Bob Haas, a partner and vice president with A.T. Kearney who leads the consultancy's strategic IT practice for North America. "And CIOs are gaining more and more responsibility for those emerging markets since IT is one of the most globally integrated corporate functions."

The work amounts to much more than just bringing some distant locations into the IT fold. Setting up shop in Bogotá or in Bursa, Turkey, is clearly a different proposition than supporting a new office in Boise, Idaho, or Brussels. Infrastructure limitations, local talent supply, unfamiliar business and cultural norms, limited vendor support and restricted budgets require creative solutions. At the same time, there is pressure to integrate these often one-off extensions of the company into the global infrastructure.

One Size Does Not Fit All

Bobby Cameron, vice president and principal analyst with Forrester Research, got a call recently from the CIO of a U.S.-based agribusiness building a new manufacturing plant in a tiny Peruvian fishing village. "It's 250 miles away from Lima. There's no water. There's no electricity. There's nothing there," Cameron says. "What's that about?"

It's about having an ideal port for moving goods throughout South America. All the CIO has to do is figure out how to build something from nothing without many of the support structures—vendors, a trained workforce, infrastructure—he'd have in a mature market. "And once you get through all of that," says Cameron," then you have to figure out how to connect it to the global infrastructure."

It's an extreme example, but supporting business in developing regions rarely lends itself to cookie-cutter IT. Moreover, the importance of emerging markets today means IT leaders can't fob off second-hand technology to non-Western locations. "The strategy of many corporations was basically to develop things in major markets then hand down those solutions to the emerging markets," Shurts says. "Hey, this laptop is two years old, maybe we pass that down, too."

That's not the case at Cadbury, explains Shurts. "I have to deliver strategies that address the specific needs of emerging markets. It requires some creativity and new thinking."

Understanding your company's business model for developing markets is critical. "Will there be manufacturing? Will you distribute from this market? How will your salesforce engage customers and what is their role while engaged?" says Ed Holmes, vice president of Global IT for Stiefel, an $812 million dollar skincare company (acquired by GlaxoSmithKline this summer) that operates in 28 countries.

You may end up providing technology and services similar to those you supply in established markets, Holmes adds, "but you must challenge the baseline assumptions in order to ensure that your solution will fit the market both economically and culturally."

Know What You're Up Against

Obstacles vary by location. Many developing markets face disadvantages due to decades of having closed economies, including limited exposure to global business practices. But two overriding—and sometimes conflicting—considerations for global CIOs are cost structure and scalability. "From an IT perspective, these markets need to grow at an investment rate that makes sense for them," Shurts explains. "What they need today may not be what they need tomorrow. And tomorrow might actually mean tomorrow."

In its early days, an operation in an emerging market country may not need, nor could it support, the complexity and cost of a full-fledged ERP system. "Then, suddenly, through organic growth and an acquisition, everything changes and you do need the disciplines and features that an ERP system provides," Shurts says.

At the same time, any unique solutions need to integrate with the global whole. Cloud computing, component-based architectures and lightweight ERP systems make that easier than before, says Haas. But it's still a struggle.

For instance, there's little support for emerging market needs among IT vendors, which means global CIOs and their teams go it, for the most part, alone. Traditional solutions from IT vendors can be "too heavy and expensive for emerging markets," says Shurts. "It is very easy and neat and comfortable to walk around with that developed market mind-set. There's a whole industry of people who would love for you to do that—hardware, software companies that have built their businesses focused on the developed market," Shurts says. "It's much harder to get out of that comfort zone." (For more on the type of executive who makes a good global CIO, see "Are You Fit to Be a Global CIO?")

Typical of global CIOs, Shurts finds that exciting. "Many of them enjoy starting from scratch," says Forrester's Cameron. "They can't turn to IBM or SAP and have them solve all of their problems."

Standard processes for developing software in mature markets can be cost prohibitive in developing locations. And strategies employed to contain those costs—offshoring, for example—don't translate. Sending development work to India provides incremental cost savings when times are tight in a more expensive, mature market. But when you're trying to support a developing market on the cheap, there's no place that's much cheaper to send the work. You're already offshore, Shurts' Indian director of finance gently reminds him.

Cadbury does try to take advantage of corporate-level IT investments where possible. "We can leverage some systems from our developed markets and adapt that to emerging markets at a much lower cost," Shurts says. SAP instances, for example, where 80 percent of the investment has been made in a more established market, may be used in a developing market, even if that new market can't support all the same capabilities, has different legal or regulatory needs, or requires unique functionality. The Australia instance has been leveraged in parts of Asia; the Britain/Ireland instance has been reused in South Africa; and the initial instance in Brazil is being recycled for use throughout Latin America.

Other IT priorities just don't apply. In the United States, Canada and Australia, Cadbury IT is laser-focused on trade promotion management. Sophisticated tools are used to analyze the amount of money Cadbury spends and types of corporate programs it uses to promote its products. None of that will do a lick of good in South America or India, where the Mom-and-Pop shop still rules, and there are no big promotions to manage with Wal-Mart. Rather, the focus is on lower-end tools to determine the right delivery routes, make sales calls and take orders.  The good news is that there are similarities across the company's locations. "Route-to-market tools, salesforce automation and supply chain planning are important to all emerging markets," Shurts says.

A Different Pace

"Insha'Allah."

It was one of the first Arabic expressions John Topete picked up in Dubai. "Can you come Wednesday at 10 a.m. to run those cables?" "Yes, Mr. John. I will definitely be there as scheduled at 10 a.m., insha'Allah."

Literally translated as "God willing," Topete came to understand that it meant there was only a 50/50 chance that something would actually happen. If the cable supplier didn't show up, "it was socially acceptable," explains Topete, IT and business development manager for engineering services company Terrasearch. "Their insha'Allah is like our maybe." Only more pervasive.

The insha'Allah factor was one of many issues Topete had to take into account as he set up shop in Dubai, and later Abu Dhabi, for a new subsidiary, Terrasearch Gulf.

Briefed on Dubai's rapid technology infrastructure ramp-up, Topete flew from San Francisco expecting to touch down in tomorrowland, but he ended up in yesteryear. Topete assumed IT equipment and services would be readily available given the number of large corporations moving into the tax-free zone dubbed Internet City. "I found myself spending days at a time just locating simple pieces of network equipment," Topete says. He had to barter with a local IT professional to get his hands on some Cat 5 Ethernet cables and related equipment.

Dealing with the local ISP—at the time, the only game in town—was a challenge. "They monitor all Internet traffic and ban a lot of sites," Topete says. He had to create a VPN link with the home office to access basic but necessary websites like Skype.

And then there were the people problems. "Finding the right personnel was difficult. Most had very little knowledge of IT," Topete says. "Local employees were very respectful and always willing to do what you told them. However, oftentimes that meant that they needed constant supervision or else nothing got done." The concept of urgency—embedded in the workplace culture of established markets—was foreign.

Every emerging market has similar types of challenges. For instance, notes Shurts, most countries in Africa still struggle with broadband access. This problem will be alleviated somewhat by submarine cable projects on either side of the continent, scheduled to go live this fall, but "that's the most frustrating thing for us," Shurts says. "We do a lot of satellite in Africa and with our global applications—HR, finance. You'll notice slower response rates and latency."

Topete of Terrasearch found that importing hardware and software was the best way to go in Dubai and Abu Dhabi. But CIOs managing IT in Brazil—including Shurts and Holmes—know that heavy tariffs there mean it's cheaper to buy everything in-country. "Our standard procurement solution doesn't really work there," says Holmes."The only way you learn about these country-specific challenges is by engaging with other CIOs, talking to your HR leads in those locations and paying attention to previous challenges in other business functions."

Topete had a local sponsor to show him the ropes in Dubai. "The person in-market better understands vendor relationships, cultural norms and the way people get their work done. [That] insight is critical for the CIO to determine possible solutions to a given problem," adds Holmes. "But [you] must be willing to challenge the recommendations of the in-market liaison to ensure it is best aligned for the organization."

Corralling Chaos

Indeed, it's figuring out that right combination of localization and centralized control that can stymie the CIO in a rapidly developing location.

Swing too far in either direction and the IT operating model may break down. It all comes down to "identifying what's common and can be leveraged and optimized for efficiency while still allowing local operations to be competitive and do what they need to do," says Cameron. Simple on paper, complex in reality.

A CIO has to learn to live with a level of ambiguity—something that can spook traditional IT leaders. "You have to have the ability to be comfortable with chaos," says Cameron. More often than not, a global IT leader will take a bifurcated approach—"centralized in [developed] areas, localized in the third world," says Cameron. (See "Best Practices for Managing Globally" for tips on how to strike the balance.)

One of Holmes's biggest challenges is local staffing. At one time when Stiefel was a more distributed organization, emerging markets had their own locally staffed and managed IT organizations. Today, however, Holmes directly controls global staffing. He's found that employee retention depends on the culture. In some markets, "longevity is not a cultural norm," notes Holmes.

Holmes will hire locally for some jobs—for example, positions such as business analysts that require face-to-face contact. But other services might be provided from a different location where many of these issues aren't as big of a challenge.

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