staying the course for globalisation: a business imperative* · staying the course for...

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Staying the course for globalisation:A business imperative*

Technology executive connectionsVolume 7

*connectedthinking

The surveyThe quantitative findings presented in this report are based on an online survey conducted by the Economist Intelligence Unit (EIU) in mid-2009.

A total of 159 senior technology industry executives from a broad range of functions participated in the survey, of whom 49% were C-suite or above. Roughly 33% were based in Europe, 32% in North and Latin America, and 31% in the Asia-Pacific region, with the remaining 4% coming from the Middle East and Africa. Participants also represented a wide cross-section of company sizes, with 53% having annual revenue of over $500 million, and 29% with revenue of over $5 billion per year.

For detailed, question-by-question survey results, please see the Appendix at the back of this publication.

The interviewsIn addition to the online survey, five executives were interviewed on the record for this report. We would like to thank the following individuals for their valuable contributions:

• Wim Elfrink, Chief Globalisation Officer, Cisco Systems

• Kris Gopalakrishnan, CEO, InfoSys

• KR Lakshminarayana, Chief Strategy Officer, Information Technology Business, Wipro

• Neil Sutton, Vice President, Global Portfolio, BT Global Services

• Ravi Venkatesan, President, Microsoft India

About PricewaterhouseCoopersPricewaterhouseCoopers (www.pwc.com) provides industry-focused assurance, tax and advisory services to build public trust and enhance value for our clients and their stakeholders. More than 163,000 people in 151 countries across our network share their thinking, experience and solutions to develop fresh perspectives and practical advice.

PricewaterhouseCoopers and PwC refer to the network of member firms of PricewaterhouseCoopers International Limited (PwCIL). Each member firm is a separate legal entity and does not act as agent of PwCIL or any other member firm. PwCIL does not provide any services to clients. PwCIL is not responsible or liable for the acts or omissions of any of its member firms nor can it control the exercise of their professional judgment or bind them in any way. No member firm is responsible or liable for the acts or omissions of any other member firm nor can it control the exercise of another member firm’s professional judgment or bind another member firm or PwCIL in any way.

About our technology industry practicePwC works with technology companies around the world to help them fulfill the promise of their great ideas. Whether it’s managing rapid growth in a thriving economy or maximising efficiency in challenging times, we are the trusted advisor or auditor to a majority of both the Financial Times Global 500 and the Fortune 500 technology companies.

We have made a significant and ongoing commitment to train our people in industry-specific issues so that we can deliver services with a global perspective, local implementation, in-depth experience and a forward-thinking approach.

There is an ever-present state of change and evolution in each of the technology sectors. We’re ready to help your company face the challenges the industry and the global economy throws your way. Given our global client base and worldwide resources, our technology professionals work from an experience base that is as broad as it is deep. That’s why more technology companies choose PwC than any other professional services firm. We’re in touch with your industry—and ready to work with you.

For more information on how the PricewaterhouseCoopers’ Technology industry practice can help your company, or to get in touch with a technology industry partner in your area, please visit us at www.pwc.com/technology or contact one of the professionals listed at the back of this publication.

Dear Executive,

Welcome to the seventh volume of our Technology Executive Connections, a series of survey reports designed to provide executives in the technology industries an opportunity to explore, understand and share ideas about today’s pressing business and strategic issues.

Our unique combination of data from a succinct online survey of senior executives enhanced with observations gained from in-depth one-on-one interviews with industry leaders around the world allows this series to provide both an accurate snapshot of the industry and insights into the latest views and opinions, promoting active discussion and proactive analysis of current issues.

In times of financial and economic uncertainties, companies are looking for ways to not only build revenues but also to contain costs. With these two goals in mind, globalisation has become an even more attractive strategy for technology businesses. But economic conditions are impacting the barriers faced by companies looking to expand around the globe and the emphasis on meeting short-term goals rather than maintaining a long-term strategy could be affecting returns on investment. On the following pages, we explore how companies are changing their approach to globalisation and what this may mean to their long-term vitality.

To date, our Technology Executive Connections series has explored the challenging issues of change management, convergence, talent management, intellectual property value, the demand for green operations and products, and the risks and rewards of collaboration. For soft or hard copies of any of these reports, please visit www.pwc.com/techconnect.

I hope this report provides food for thought as you adjust your company’s goals, strategies and practices around globalisation. PwC is ready to help you strategically expand your global footprint. I welcome your feedback and questions. Please feel free to contact me about this series via email at [email protected].

Sincerely,

Raman ChitkaraPartner and Global Technology Industry LeaderPricewaterhouseCoopers

WelcomeMarch 2010

Table of contents

Executive summary 02

Introduction 10

PwC connection: Meeting the challenges of global expansion and collaboration 11

A shift in thinking about world business 13

PwC connection: Paying taxes 2010 – Reducing costs with a clearer global picture 14

Rising protectionism? 16

PwC connection: Keys to successful shared service centres and outsourcing 18

Types of globalisers 20

PwC connection: The advantages of a simplified business model 27

The B(R)ICs and global IT 29

PwC connection: Euro-India Business Group – Your link between India and Europe 31

Conclusion 33

Appendix

Survey methodology 35

Results of the survey 36

Profile of survey respondents 42

Acknowledgements 44

Of further interest 45

PwC can help 46

2 PricewaterhouseCoopers

Executive summary

Sharply reduced world trade and international investment; protectionist rhetoric from politicians—there are many signs that the downturn will slow or restrict globalisation. This issue is particularly relevant to the technology industry, among the world’s most globalised sectors. This study is based on desk research, in-depth interviews with corporate leaders at a half-dozen significant companies within the industry, and a survey of over 150 senior technology executives worldwide. It examines the impact of today’s economic troubles on globalisation in the technology industry, as well as the implications for corporate strategy. Its key findings include:

Globalisation remains an attractive strategy, even if costs restrict its use. For 67% of survey respondents, current economic conditions have made globalisation more important strategically, and 69% say that a downturn presents above-average opportunities to benefit from globalisation. The underlying, long-term economic and demographic shifts continue to point in the direction of globalisation. Nevertheless, cost considerations constrain choices here as everywhere else: only 39% of companies have accelerated their globalisation initiatives.

Companies are not taking a long-term view, despite the fact that globalisation requires steadfastness. Firms are continuing to globalise by entering new markets and expanding their market share. But cost cutting has become the leading corporate driver of globalisation, cited by 50% of those surveyed now, compared with only 36% before the downturn. Similarly, the proportion of businesses using globalisation to overcome problems in existing markets has risen to 40% from 29%. Meanwhile longer-term considerations, such as access to R&D, have declined in importance.

Fear of protectionism is rising. Thirty-eight percent of companies list this as a leading barrier to globalisation, up from 21% before the downturn. Moreover, 44% say that protectionism has affected their globalisation strategy. The problem is rarely tariff increases. Rather, governments are using other techniques to throw sand in the gears of international trade. The IT industry in particular worries about the ability to move talent around the globe.

3Staying the course for globalisation

• Effective globalisers: What separates firms that have success with globalisation is the degree of preparation that goes into their initiatives. They are willing to take time to build up operations from scratch and to understand new markets, including the availability of superior R&D or talent. The results speak for themselves: 65% of effective globalisers say they have outperformed their peers financially in the last year, against just 36% of other firms.

The downturn has highlighted the importance of the BRICs as global IT players. Nearly half of companies say that the economic situation has increased the importance of the BRIC countries as current markets, although in practice Russia is less weighty than the other three, China, India and Brazil. Similarly, 80% expect increased competition from emerging market companies. Interviews indicate that most of the competitive pressure is likely to come from China and India. The sheer size of their skilled workforces and markets may make it hard for other developed economies to keep up.

The survey reveals three types of globalisers, each with different levels of success.

• Autopilot globalisers: These companies, over a quarter of respondents, have either not rethought their globalisation strategy since the downturn began or say it would be too difficult to change. Their business performance seems little different from average. This may be because such companies are more common than people admit: 71% of respondents agree that companies in general often follow a “herd mentality” when going into new markets rather than making careful preparations.

• Reactive globalisers: These businesses are using globalisation to cut costs and increase sales quickly to counteract the impact of the downturn. They do better financially than average, although not greatly. As Mr Kris Gopalakrishnan, president and CEO of Infosys, explains, those looking for rapid results are likely to be disappointed: “these shifts take time.”


Les entreprises ne se projettent pas à un horizon long terme, alors que la mondialisation nécessite une approche volontaire. Les entreprises poursuivent leur mondialisation en pénétrant de nouveaux marchés et en accroissant leur part de marché. Mais la réduction des coûts est devenue le facteur déterminant de la mondialisation, cité par 50% des personnes interrogées aujourd’hui, contre 36% seulement avant la récession. De même, la proportion des entreprises recourant à la mondialisation pour surmonter les problèmes qu’elles rencontrent sur les marchés existants a augmenté, passant de 29 à 40%. Parallèlement, on observe une diminution de l’importance de facteurs à long terme tels que l’accès à la recherche et au développement.

Les craintes ayant trait au protectionnisme s’intensifient. Trente-huit pour cent des entreprises indiquent que ce facteur constitue un obstacle majeur à la mondialisation, alors qu’elles n’étaient que 21% avant la récession. En outre, 44% d’entre elles déclarent que leur stratégie de mondialisation a été affectée par le protectionnisme. Le problème concerne moins les hausses des droits de douane que les autres techniques plus dissimulées auxquelles recourent les gouvernements pour mettre des bâtons dans les roues des échanges internationaux. Le secteur des technologies de l’information s’inquiète en particulier de la capacité à déployer librement les talents dans le monde.

La forte baisse des échanges mondiaux et des investissements internationaux, les discours protectionnistes des hommes politiques – nombreux sont les signes témoignant du fait que la récession freinera ou restreindra la mondialisation. Cette question est particulièrement pertinente pour le secteur de la technologie, qui compte parmi les plus mondialisés. Cette étude est basée sur des recherches théoriques, des entretiens approfondis avec dirigeants d’une demi-douzaine d’entreprises importantes du secteur, et sur une enquête conduite au niveau mondial auprès de plus de 150 responsables de la technologie (senior technology executives). Elle analyse l’impact des perturbations économiques actuelles sur la mondialisation dans le secteur de la technologie, ainsi que les conséquences stratégiques pour les entreprises. Ses principaux résultats sont résumés ci-après :

Malgré les limites inhérentes aux coûts, la mondialisation reste une stratégie attrayante. Pour 67% des participants à l’enquête, la conjoncture économique actuelle a accentué l’importance stratégique de la mondialisation, et 69% des participants déclarent qu’un ralentissement offre des opportunités supérieures à la moyenne permettant de bénéficier de la mondialisation. Sur les plans économique et démographique, les évolutions sous-jacentes à long terme continuent de pointer dans la direction de la mondialisation. Toutefois, les contraintes inhérentes aux coûts limitent les choix dans ce domaine comme dans les autres: seulement 39% des entreprises ont renforcé leurs initiatives concernant la mondialisation.

Note de synthese


• Entreprise en voie de mondialisation effective: Ce qui différencie les entreprises dont la stratégie de mondialisation est couronnée de succès est le degré de préparation de leurs initiatives. Elles sont prêtes à consacrer du temps à l’élaboration d’activités à partir de rien, et à la compréhension des nouveaux marchés, y compris l’existence de recherche et développement de pointe ou de talents. Les résultats sont édifiants: 65% des entreprises en voie de mondialisation effective déclarent avoir enregistré des performances financières supérieures à celles de leurs concurrents au cours de l’année passée, contre seulement 36% pour les autres entreprises.

La récession a mis en évidence que les pays BRIC sont des acteurs importants du secteur international des technologies de l’information. Près de la moitié des entreprises déclarent que la conjoncture économique a renforcé l’importance actuelle des pays BRIC, bien qu’en réalité, la Russie pèse moins lourd que la Chine, l’Inde et le Brésil. De même, 80% d’entre elles anticipent un accroissement de la concurrence en provenance des entreprises des marchés émergents. Il ressort des entretiens que les pressions concurrentielles proviendront sans doute principalement de la Chine et de l’Inde. L’importance même de la main d’œuvre formée et des marchés fait que les économies développées ont des difficultés à ne pas se laisser distancer.

L’étude met en évidence trois types d’entreprises en voie de mondialisation, chacune d’entre elles rencontrant différents niveaux de succès:

• Entreprise en voie de mondialisation passive: Ces entreprises, qui représentent plus d’un quart des participants, n’ont pas repensé leur stratégie de mondialisation depuis le début de la récession, ou déclarent qu’il serait trop difficile de la modifier. Leur performance commerciale paraît peu différente de la moyenne, peut-être parce que ces entreprises sont plus nombreuses que l’on veut bien l’admettre: 71% des participants conviennent qu’en règle générale, plutôt que de se préparer soigneusement à pénétrer un nouveau marché, les entreprises adoptent souvent une attitude « moutonnière ».

• Entreprise en voie de mondialisation réactive: Ces entreprises s’appuient sur la mondialisation pour diminuer les coûts et accroître les ventes rapidement afin de contrer l’impact de la récession. Leurs performances financières sont supérieures à la moyenne, quoique dans des proportions modestes. Comme l’explique Kris Gopalakrishnan, Président-directeur général d’Infosys, ceux qui sont en quête de résultats rapides risquent d’être déçus: « Ces orientations prennent du temps. »


Ungeachtet der Tatsache, dass eine Globalisierungsstrategie Standhaftigkeit erfordert, schlagen Unternehmen keine Langfristperspektive ein. Nach wie vor weiten Unternehmen ihre weltweiten Aktivitäten aus, indem sie neue Märkte erschließen und ihren Marktanteil erhöhen. Kostenüberlegungen sind aber der treibende Faktor hinter der Globalisierung: Dies bestätigen 50 Prozent der Befragten, vor dem wirtschaftlichen Abschwung waren es nur 36 Prozent. Auch der Anteil der Unternehmen, die Globalisierung als Lösung sieht, um Problemen in bestehenden Märkten zu überkommen, hat sich von 29 auf 40 Prozent erhöht. Gleichzeitig haben langfristigere Beweggründe wie der Zugang zu F&E an Wichtigkeit verloren.

Die Angst vor Protektionismus steigt. 38 Prozent der Unternehmen sehen im Protektionismus eine maßgebliche Hürde für den Welthandel, vor dem Abschwung waren es erst 21 Prozent. Zudem sagen 44 Prozent, dass Protektionismus die Globalisierungsstrategie beeinträchtigt. Selten liegt das Problem aber in offenkundigen Zollerhöhungen. Vielmehr nutzen die nationalen Regierungen andere Mittel, um Sand in das Getriebe des Welthandels zu streuen. Die IT-Branche fürchtet insbesondere beschränkte Möglichkeiten, Spitzenkräfte weltweit einzusetzen.

Drastische Einbrüche im Welthandel, signifikant reduzierte internationale Investitionen und protektionistische Reden der Politiker: Zahlreiche Indikatoren weisen darauf hin, dass der weltweite Abschwung die Globalisierungstendenzen hemmt oder zumindest verlangsamt. Dies ist für die Technologiebranche als eine der weltweit am meisten globalisierten Sektoren besonders relevant. Diese Ausgabe des Technology Executice Connections untersucht die Auswirkungen der aktuellen wirtschaftlichen Probleme auf die Technologiebranche und deren Implikationen auf die Unternehmensstrategie. Dafür wurden weltweit mehr als 150 Führungskräften der Technologiebranche befragt und durch vertiefende Interviews mit Unternehmensleitern von sechs bedeutenden Technologieunternehmen und umfangreiche Recherchen ergänzt. Die wichtigsten Ergebnisse im Überblick:

Globalisierung bleibt eine attraktive Strategie, selbst wenn Kostensenkungsmaßnahmen derzeit dominieren. Für 67 Prozent der Befragen haben die aktuellen wirtschaftlichen Rahmenbedingungen die Globalisierung strategisch wichtiger gemacht und 69 Prozent sind der Meinung, dass der Abschwung überdurchschnittliche Chancen bietet, um vom Welthandel zu profitieren. Die grundlegenden wirtschaftlichen und demographischen Veränderungen weisen nach wie vor in Richtung Welthandel. Dennoch drängen Kostensenkungsanstrengungen andere Handlungsalternativen in den Hintergrund: Nur 39 Prozent der Unternehmen haben daher ihre Globalisierungsstrategien intensiviert.

Zusammenfassung


• Erfolgreiche Globalisierer: Was Unternehmen von jenen unterscheidet, die Erfolg mit ihrer Globalisierungsstrategie haben, ist die Art und Weise der Vorbereitung ihrer Strategien. Sie sind bereit, Zeit zu investieren, um Arbeitsprozesse von Null auf aufzubauen und neue Märkte und die Verfügbarkeit von besserem F&E oder Spitzenkräften zu verstehen. Die Ergebnisse einer solchen Strategie sprechen für sich: 65 Prozent der erfolgreichen Globalisierer sagen, dass sie im letzten Jahr finanziell besser abgeschnitten haben als ihre Peergruppe, bei anderen Unternehmen war dies nur in 36 Prozent der Fall.

Der weltwirtschaftliche Abschwung hat die Bedeutung der BRIC-Länder als weltweite IT Unternehmen hervorgehoben. Nahezu die Hälfte der Unternehmen sagen, dass die wirtschaftlichen Bedingungen die Bedeutung der BRIC-Länder als aktuelle Märkte gesteigert hat, wobei Russland geringere Bedeutung zukommt als China, Indien und Brasilien. Zudem erwarten 80 Prozent der Unternehmen steigenden Wettbewerb von Unternehmen aus Schwellenländern. Die Interviews haben gezeigt, dass der größte Wettbewerbsdruck aus Indien und China erwartet wird. Bereits das Ausmaß ihrer qualifizierten Arbeitskräfte und Märkte erschwert es anderen Schwellenländern, mit ihnen mitzuhalten.

Die Umfrageergebnisse lassen die Kategorisierung in drei Arten der Globalisierer zu, alle drei mit unterschiedlichen Erfolgsmöglichkeiten:

• Autopilot Globalisierer: Diese Unternehmen, mehr als ein Viertel der Befragten, haben entweder ihre Globalisierungsstrategie seit dem Abschwung nicht überdacht oder sind der Auffassung, dass eine Veränderung zu große Probleme mit sich bringen würde. Ihre Unternehmen schneiden finanziell kaum besser ab als der Durchschnitt. Dies liegt wohl auch daran, dass Unternehmen sich oftmals ähnlicher sind als vielfach zugegeben wird: 71 Prozent der Befragten stimmen mit der Auffassung überein, dass Unternehmen häufiger einem “Herdensyndrom” unterliegen, wenn es darum geht, neue Märkte zu betreten, als sich gewissenhaft auf einen Markteintritt vorzubereiten.

• Reaktive Globalisierer: Jene Unternehmen nutzen die Globalisierung, um ihre Kosten zu reduzieren und ihre Umsätze schnell zu steigern, um den Auswirkungen des Abschwungs entgegenzutreten. Diese Firmen haben eine, wenn auch nur leicht bessere finanzielle Performance als der Durchschnitt. Kris Gopalakrishnan, Präsident und CEO von Infosys, erklärt, dass jene Unternehmen, die auf schnelle Ergebnisse abzielen, aber oftmals enttäuscht werden. Schließlich, so Gopalakrishnan, nehmen Veränderungen Zeit in Anspruch.


尽管全球化需要稳定坚定性，但各公司并未从长远考虑。各公司继续进入新市场，增加市场份额，从而实现全球化。但降低成本已经成为公司全球化最重要的推动因素，50%的被调查者具有这样的观点，而经济衰退前只有36%这样认为。类似地，使用全球化方式克服当今市场问题的企业的比例从29%增加至40%。同时，研究与开发等长远的考虑因素的重要性已经下降。

对于贸易保护主义的恐惧正在加剧对于贸易保护主义的担忧正在加剧。38%的公司将其列为全球化的最大障碍，而在经济衰退前为21%。而且，44%受访者表示贸易保护主义已经影响其全球化战略。问题并不是明显的关税增加，而是各国政府使用其它方法技术阻碍国际贸易。特别是IT行业忧虑将无法在全球调用转移人才。

全球贸易和国际投资急剧减少；政客抛出贸易保护主义的花言巧语-许多迹象表明经济衰退即将减缓或将限制全球化。该问题对于科技技术行业-全球化程度最高的领域之一-尤为重要。本研究基于案头调研和，与六家行业内六家重要公司的领导人进行的深入交谈，以及对于全球150多位技术高管的调查。本研究考察当前的经济低迷对于科技技术行业全球化的影响，以及关于公司战略的建议。主要研究成果如下：

虽然受限于存在成本控制限制，但全球化仍然是具有吸引力的战略。67%的调查回复者认为当前的经济形势使全球化在战略上更加重要，69%的回复者表示全球化在经济衰退期使公司受益，带来更多机遇经济衰退提供了受益于全球化的更多机会。经济和人口的长期和基本的转变变化继续沿着顺应驱动全球化的潮流方向发生。然而，与其它领域一样，成本因素限制选择的余地：只有39%的公司加速了全球化方案的实施。

概述


• 有效的全球化公司：区分是否通过全球化取得成功的标准是为实施方案所作准备的程度。成功的公司愿意花费时间从零开始实施业务成功的公司愿意花费时间从零开始开发业务，理解新市场，包括高级研发的可行性或高级人才的可获性包括优质研发的可行性或优质人才的可获性。业务成果就是明证：65%的有效全球化公司表示去年在财务上优于同行，而其它公司只有36%优于同行。

经济衰退凸显“金砖四国”作为全球IT产业参与者的重要性。几乎一半公司表示，目前的经济形势增加了“金砖四国”作为当今市场的重要性，虽然实际上俄罗斯不及中国、印度和巴西重要。类似地，80%的公司预计来自新兴市场公司的竞争加剧。谈话表明访谈表明，大多数竞争压力有可能源于中国和印度。它们的熟练劳动力和市场的巨大规模使其它发达经济体难以企及。

调查表明，存在三类全球化公司，成功程度各异。• 随波逐流的全球化公司：超过四分之一的回

复者表示自从经济衰退开始尚未重新考虑全球化战略，或认为太困难而不去改变。它们的业绩非常一般普通。这可能是因为这类公司比人们所承认的更为普遍通：71%的回复者同意，一般来说公司在进入新市场时通常具有从众心理，而不是进行详细的准备而不是进行周密的准备。

• 作出反应的全球化公司：这些企业使用全球化方式迅速降低成本并提高销售额这些企业使用全球化方式以求在短期内降低成本并提高销售额，从而抵消经济衰退的影响。它们在财务表现上稍优于一般企业，虽然不是超出太多。Infosys总裁兼首席执行官Kris Gopalakrishnan先生解释说，寻求快速成功效的公司可能会失望：“这些转变需要时间。”


Introduction

Globalisation in reverse?

The statistical indicators used for years to demonstrate globalisation’s onward march have shown a marked reversal during the current economic downturn. In July 2009, the World Trade Organisation (WTO) predicted that international trade would drop by 10% in 2009, the biggest contraction since the Second World War, following a historically weak increase of just 2% in 2008. The World Bank’s June 2009 forecast was almost identical – a drop of 9.7%. Developed countries will be hit harder than emerging economies. According to data from the Economist Intelligence Unit (EIU), exports from countries belonging to the Organisation for Economic Co-Operation and Development (OECD) fell by 16% in 2009 with weak recoveries this year. Foreign direct investment flows are showing even greater declines. Based on first quarter figures, the OECD is predicting a drop of about 50% in total inward direct investment into its thirty member economies in 2009. Outward mergers and acquisitions investment from OECD states into major emerging economies will likely go down by 60% in 2009 compared with the previous year.

These developments have led traditional opponents of globalisation to sound its death knell. Walden Bello, for example, a leading critic, wrote in September 2009 in the Huffington Post: “the current global downturn...pounded the last nail into the coffin of globalisation... [G]lobalisation has been terminally discredited in the last two years.” Those who support globalisation are also less sanguine than before about its

prospects. “Deglobalisation” has entered the commentator’s and politician’s lexicons, with British Prime Minister Gordon Brown warning of this threat at the World Economic Forum in Davos in January 2009. Even within trading blocs tensions are showing: In February 2009, French President Nicholas Sarkozy opined that any of his country’s auto companies receiving government aid should repatriate operations to France even from other states within the European Union. Meanwhile in January 2009, the “Buy American” provisions of the American Recovery and Reinvestment Act, although eventually watered down, alarmed trading partners.

The technology industry is not exempt. The EIU predicts that in the G7 states, IT spending will drop by over 5%. Meanwhile weakened companies have become targets for takeovers. Bankrupt firms such as Nortel are seeing pieces sold off and, as Oracle’s purchase of Sun Microsystems shows, even large brands may not survive.

Globalisation is clearly under fire: some companies will see it as courageous to stay the course, others as prudent to cut and run. Amid the turmoil, this study, drawing on a survey of over 150 senior executives worldwide and in-depth interviews with half a dozen corporate leaders, examines how the downturn is affecting views of globalisation within the IT sector. More important, it seeks to understand the strategies that will help companies not only to weather the current difficulties, but to emerge stronger when the storm has passed.

PwC connection

Meeting the challenges of global expansion and collaboration

1. Determine a clearly defined strategy for growth and risk appetite as well as a consensus on the markets of most strategic interest for the organisation.

2. Define the level of support needed from the organisation and its operations.

For example, a global provider of engineered electronic components wished to address operational issues around process and reporting line inconsistency and internal control issues, while also eliminating process duplication and improving business decision support. The company had significant business in China but was supporting these activities from outside the region and determined that establishment of a finance and accounting shared services centre in China to serve its Chinese and regional operations would benefit current activities and also serve as a platform for further regional growth. First, PwC defined the desired future-state operating model in order to develop the migration strategy. Next, the implementation blueprint, including organisational and operating requirements to meet a two-year transition objective, was developed. With a focus on knowledge transfer, PwC equipped the client’s project team with the skills to internally manage and drive the subsequent implementation.

3. Establish an appropriate balance between organic and inorganic expansion, using business partnering where required to access new markets.

4. Develop a thorough understanding of specific market conditions by conducting robust due diligence on the business opportunities and risks.

(continued)

Technology companies are increasingly looking to go abroad to grow revenues, secure market share, and gain access to key talent. This borderless environment challenges companies to manage a global workforce, business partnerships, currency risks, technology transfers, and global supply chains, while being responsive and managing complex relationships with customers, suppliers, governments and regulators.

Offshore outsourcing to lower costs also makes technology companies vulnerable to supplier financial instability, intellectual property breaches, legal and regulatory risks, labour and social issues, insufficient and ineffective supply chain control procedures, and environmental issues. While collaboration with partners is the new imperative, the challenge is to manage the risks while capturing the opportunities for growth. Selecting the right model for your business objectives is critical.

Globalisation and increased connectivity also mean that both opportunities and risks need to be considered across both borders and an organisation’s extended supply chain. Despite the opportunities, globalisation is not about growth for growth’s sake. Defining business objectives and developing the operational support plan to match those objectives is critical. Leading global companies achieving success in emerging markets are selective about the right expansion opportunities to ensure the right strategic fit for their organisation. They perform the necessary due diligence, collaborate as required and then execute effectively.

Greg Unsworth, PwC’s technology industry leader for the Asia-Pacific region, notes that the following steps are essential to build a foundation for successful expansion and to capitalise on opportunities in new markets:


PricewaterhouseCoopers12

PwC connection (continued)

Meeting the challenges of global expansion and collaboration

7. Secure the right talent and execute diligently do not underestimate the local cultural, regulatory and operational challenges of entering emerging markets.

How PricewaterhouseCoopers can help

Regardless of physical location or business challenge, PricewaterhouseCoopers’ well integrated global network delivers tailored international solutions for our technology clients that encompass:

• Market entry feasibility

• Talent management and workforce issues

• Global supply chain controls and optimisation

• International tax structuring and compliance

• Business partner and channel management

• Value chain transformation and transfer pricing

• Risk management and controls optimisation

• Navigating country regulations

• Process improvement and profitability enhancement

To find out more, visit www.pwc.com/ techconnect.

For example, many companies have found it necessary to establish anti-corruption compliance programmes to combat challenges with bribery and fraud. In addition to training programmes for staff, PwC has helped deliver significant benefits with web-based tools around tracking, monitoring and reporting as well as developing specific applications that ssess and manage corruption risks associated with government-related projects and “Business Partner Due Diligence” for third-party risk assessment and risk-based due diligence. As evidenced by several high-profile cases, the US Department of Justice, along with other regulators around the globe, has stepped up enforcement of Foreign Corrupt Practices Act (FCPA) violations.

5. Engage regulators, customers, suppliers and business partners early in the process to pave the way and ensure their buy-in.

6. Establish an efficient global operational structure at the outset to ensure access to market, supply chain effectiveness, a favourable worldwide structural tax rate and to provide the necessary platform for growth and expansion.

For example, a global manufacturer of memory solutions facing declining profit undertook a global structural realignment to improve operational efficiencies and minimise US income and local country taxes through a tax structure that simplified intercompany pricing arrangements. The realignment involved establishment of a China-based entrepreneurial company to address the operating and tax needs as well as supporting the expected organic and acquisition-based growth.


“We expect GDP numbers to change dramatically. The top ten countries will include India, China, the United States and Brazil. We have to be closer to the new markets.”

A shift in thinking about world business

Despite the drop in foreign trade and investment happening across the economy, for technology businesses globalisation has, if anything, become a more attractive strategy in the downturn. Wim Elfrink, Chief Globalisation Officer, Cisco and EVP, Cisco Services, notes that the underlying trends that led businesses to globalise have not disappeared in the current malaise. “The demographic shifts around the world are the biggest in history,” he says. As a result, “we expect GDP numbers to change dramatically. The top ten countries will include India, China, the United States and Brazil. We have to be closer to the new markets.” Sixty-seven percent of respondents say that globalisation has become more important because of the current economic climate. As Mr Elfrink points out, the nature of the current contraction, with Asian countries entering the recession later and coming out earlier “is proving the point” of this long-term global focus.

Similarly, 69% of respondents say that current conditions present better opportunities to benefit from globalisation than normal times. Talent is easier to retain in bad times, and cost-conscious buyers are open to products or services that bring overall savings. Looking further, notes KR Lakshminarayana, Chief Strategy Officer of Wipro’s Information Technology Business, “new business models emerge in every slowdown.” Most industries will want to transform during the downturn, and providing the means to do so will be highly profitable for IT companies. “In a bad environment,” he concludes, “one invests more.”

Although companies remain strongly committed to global strategies, current realities are restricting their ability to carry them out. Only 39% of respondents have accelerated their globalisation strategies, and 20% have become less global. Even firms that are still globalising have to make tough choices. Kris Gopalakrishnan, CEO of Infosys, says that “in the short term there is a lot more focus on cost-cutting. We are still expanding into new markets, but the number of markets and people assigned are less.”

More broadly, today’s intense cost pressures are making the driving forces behind globalisation strategies more short term. Obtaining a position in lucrative new markets or gaining long-term market share in an existing one remain important: 47% of respondents consider these collectively as a leading driver of globalisation by their company, little changed from the pre-downturn figure of 51%. Such long term positioning, however, is no longer the most pressing issue: the wish to cut costs is the most frequently cited consideration, by 50% of respondents, up from 36% before the economy worsened. Similarly, the impetus to find new markets to counteract current difficulties in existing ones, which was previously a consideration for 29% of respondents, now drives 40%. Meanwhile, the immediate demands of survival are leading some to take their eyes off globalisation’s possible longer term benefits. The importance of issues such as access to superior research and development, new ideas and talent has dropped.

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Agree Disagree

A Increased regulation arising from current economic and political conditions is reducing the benefits of globalisation for us.B The current economic situation has made globalisation a higher priority for us.C The downturn has led us to emphasise our strategy more in developed countries than developing ones.D An economic downturn is a better time to benefit from globalisation than other times.E Greater protectionism has affected our company’s globalisation strategy.F In selecting foreign countries in which to increase or decrease their level of presence, companies make choices based on a “herd mentality” as often as they do based on a detailed analysis of the risks and benefits.G Over the next three years, we expect to see greater competition from companies located in emerging markets.H In searching for new emerging markets, our firm will look more closely at South America than Africa.

HGFEDCBA

Do you agree or disagree with the following?

PwC connection

Paying taxes 2010 – Reducing costs with a clearer global picture

Benchmark tax payments and compliance costs – TTC allows clients to see how much tax they are paying in specific areas compared to their peers, and assess their competitiveness.

Make strategic decisions – such as where to locate activities and assets.

Increase transparency – TTC enables companies to foster greater understanding among stakeholders of the overall economic contributions they make through the taxes they pay.

Communicate tax contributions – the TTC framework can help companies develop the economic dimension of their corporate responsibility or sustainability reporting and consider how to report their total tax contribution both internally and externally.

Make informed business decisions – TTC provides valuable management information which supports the complexity and value that the tax function delivers to the business. This can help in managing stakeholder expectations, and may even be useful in justifying additional resources.

“Undergoing a TTC evaluation and using the data found in Paying Taxes 2010 are two steps companies can take to ensure their tax decisions are strategically advantageous,” concludes Symons.

To view or download the full Paying Taxes 2010 report, please visit www.pwc.com/payingtaxes. To find out how a PwC tax professional can help evaluate your total tax contribution, visit www.pwc.com/techconnect.

In today’s business environment, reducing operating costs is a top priority. A focus on taxes can be a quick and quite effective hit. Susan Symons, a tax partner at PwC in London, explains: “Because taxation affects a number of business units, often operating in silos, many companies don’t have a full understanding of all of the taxes that they pay and of the full cost of tax compliance that they have to undertake.” In fact, according to a new study, Paying Taxes 2010, from PwC and the World Bank Group, the global average for a small to medium sized company is to pay 9.5 different taxes and for corporate income tax to account for only 38% of tax cost and 26% of the compliance time.

“Once companies understand and benchmark their global tax footprint, they can strategise to reduce this very basic operating cost,” adds Symons.

Paying Taxes 2010 compares tax systems in 183 economies, allowing companies to take an initial look on where they might want to do business. The report uses principles from PwC’s Total Tax Contribution (TTC) Framework to calculate each country’s total tax rate indicator.

PwC developed the Total Tax Contribution (TTC) framework to help companies identify and communicate their global tax contribution. TTC can evaluate all business taxes paid by an individual company, group of companies or an industry sector. It can also measure the costs incurred in complying with tax payment obligations. PwC uses the TTC data to help companies:

Manage tax liabilities – in identifying and analysing all the taxes companies pay and collect, TTC can help to identify previously unmeasured tax charges which can then be monitored and managed for the future.



Questions for further reflection

Which emerging markets offer your company the best opportunities to increase revenue and why?

What level of importance do you place on globalisation to ensure long-term success?

To what degree have you factored emerging markets into your operating plans?

How have you factored tax issues into your cost reduction efforts?

Do you believe you have a good understanding of what you pay in taxes relative to your peers?


The barriers to globalisation are also changing. In particular, state interference is a growing concern. Forty-nine percent of those surveyed say that increased regulation arising out of the downturn is restricting the benefits of globalisation and 44% agree that protectionism has affected their globalisation strategy. Indeed, protectionism has risen from a mid-ranking issue for companies (cited by 21% as a leading barrier before the downturn) to the second biggest impediment to the strategy (38%) after poor local infrastructure (41%, down from 48%). Similarly, increased pressure by governments to locate in home countries is now a leading issue for 19% of companies, up from 13% before the economic troubles.

Very few states have adopted formal tariffs or financial restrictions. An OECD report from June 2009, for example, found little evidence of restrictions on foreign investment. Instead, political interference today takes other forms. Rhetoric has been much in evidence. Ravi Venkatesan, President of Microsoft India, notes that speeches in the United States on labour mobility have raised particular worries. “The biggest issue that we are concerned about globally is potential curbs on the movement of talent,” he says. Quieter tactics have also been used. Mr Lakshminarayana of Wipro explains that while banks are traditionally major IT spenders, those that have received state aid “may find it challenging to outsource globally” because of government involvement. As a joint report by the WTO, United Nations Conference on Trade and Development (UNCTAD) and the OECD found, while governments have not created extensive new tariffs, their use of existing duties, non-tariff measures, subsidies, and burdensome administrative requirements have created “‘sand in the gears’ of international trade that may retard the global recovery.”

Rising protectionism?

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A Political environment in countries where we are looking to increase our presenceB Desire to focus on markets where we are strongestC Inefficient infrastructure in countries where we would be interested in having a presenceD Government pressure to locate activities in country of company’s headquartersE Rising protectionismF Tax issuesG Environmental/social impact of activitiesH Buyer hostility to foreign products/elements in productsI Hostility to presence of foreign companies in targeted marketsJ Don’t know

JIHGFEDCBA

What would you say were the greatest barriers to globalisation at your company before the current downturn, compared with today?


Populist politicians are not the only ones seeking to use protectionism: Companies seek to benefit as well, as seen in recent reports of certain Canadian firms that asked their federal government to block Ericsson AB’s purchase of Nortel’s wireless operations. Meanwhile respondents, particularly those based in Asia-Pacific, are noticing increased buyer hostility to foreign goods, with 27% saying that it is now a leading impediment to their globalisation strategies. “Protectionism is a natural reaction to job losses in different parts of the world,” says Mr Lakshminarayana, but for Wipro, customers’ concern about being perceived as outsourcing jobs outside the country during a time of high unemployment is an important consideration. Accordingly, Wipro has accelerated its program of creating local centres to meet local demand.

So far, rhetoric has not translated into hard legislation. The industry, however, remains wary. The possibility of a W-shaped recovery, and the potential for a protectionist backlash in response, is top of mind for many executives.

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A Cut costs/keep costs lowB Tax incentivesC It was an existing strategy and has not been rethoughtD It would have been (would be) too difficult to reverse courseE Need to find new markets to counteract immediate difficulties in existing onesF Need to position ourselves in lucrative new markets or gain market share in existing ones over the long termG Ability to access superior R&DH Ability to access new ideas and/or technologyI Ability to access talentJ Ability to take advantage of less demanding regulatory environmentK Diversify supply chain baseL OtherM Don’t know

J K L MIHGFEDCBA

What did your company see as the main reasons for increasing its level of globalisation before the current downturn, and what would it see as the biggest advantages today?


PwC connection

Keys to successful shared service centres and outsourcing

shared services and outsourcing teams have significant experience. We offer:

End-to-end deal support

Our shared services and outsource methodology enables us to advise clients on all aspects of the outsource lifecycle from initial feasibility and business case to contract negotiation, transition and transformation. Our team can give you access to subject matter experts across the firm including tax, corporate finance, human resources and change management. We act as a partnership bridge between you as our client and the outsource service providers whether it be first, second or third generation deals, supporting you on large complex deals and distressed contracts.

PwCs Contract Comparator

Contract Comparator draws on PwC’s knowledge of the outsource market and our access to significant contract data to rapidly assess your outsource contracts, right down to the responsibilities of each party to deliver the benefits. Contract Comparator provides comparative analysis across four key areas:

1. Market intelligence: Detailed analysis of your providers and their market position for each of the services they offer.

2. Service and price: A directional view of how service levels and price interact.

3. Retained organisation: Assessment against sector best practice.

4. Other terms and conditions: Detailed comparative analysis of the key terms in your contract against the market.

Many organisations still see the selection of an outsource service provider as just another procurement programme executed and managed by the purchasing department. Successful companies, however, treat both outsourcing and shared service centre delivery as strategic decisions that require a long-term partnership to be built with an external independent entity. For more information, please visit www.pwc.com/techconnect.

Historically, many organisations have developed their own captive shared services operations, leading to a transfer of services to an outsource service provider several years later. The current economic downturn, coupled with increasing pressures on margins, is causing organisations inmature global technology markets to seek a step-change in their operating cost models, leading to an increase in firms turning to outsource service providers as a first step in creating shared service centres.

When used strategically, shared service centres and the use of outsource providers have the potential to make a material impact on the performance of an organisation. In a recent PwC global outsourcing survey, two-thirds of respondents reported that whilst their outsourcing deals did not completely deliver the benefits in the business case, 90% say they will continue to outsource.

Developing trends in shared services and outsourcing

Whether outsourcing for the first time or renewing an existing arrangement, organisations are increasingly questioning what services can be outsourced and how; recent trends include the outsourcing of several business processes such as finance and HR linked to combined technology and infrastructure contracts. Multi-function deals have the potential to transform an organisation, and many are using outsourcing strategically to transform their operating models.

“Our clients see complex alliance and partnering arrangements as vital to innovation, competitiveness and cost base management,” commented Tom Brooks, PwC director in London. “Getting these arrangements right and ensuring the appropriate access to skilled and global outsource providers is critical if the quality and responsiveness to their clients is to be achieved.”

How we can help

Whether advising a client, acting as a client, or working for an outsource service provider in previous organisations, PricewaterhouseCoopers



How would increased government intervention impact your current globalisation strategy? What steps should you be taking now to mitigate rising protectionism?

How important is labour mobility to your competitive position? What contingency plans have you developed to address talent restrictions?

What have you learned from your experiences with shared services and outsourcing? Which issues have proven the most difficult to resolve?

Do you feel your shared services and outsource contracts are competitive relative to your peers?


Survey respondents benchmarked their companies against peers in various areas of ability. Three of these directly affect how well organisations execute global strategies: the ability to assess and exploit opportunities worldwide, to assess and manage risks worldwide, and to integrate the business’s global assets and strengths in collective undertakings. Overall, respondents are less confident about globalisation than most other areas. Only 22%, for example, say that they are better than peers at managing risks globally, against 40% or more who call themselves above average in general areas of strategy and financial performance.

From the survey data three broad categories of globalisers emerge:

• Autopilot Globalisers: Those who have either not rethought strategy in this area since the downturn—19% of those surveyed—as well as those who believe it would simply be too hard to change course anyway, an additional 9%.

• Reactive Globalisers: Those who are accelerating the pace of globalisation at their companies but seem to seek short- rather than long-term goals.

• Effective Globalisers: Those who ranked themselves above average in at least two of the three globalisation-related areas—and who have reviewed their strategy since the downturn—have much in common, and are here called “effective globalisers.”

Autopilot globalisers

Respondents from these companies, 28% of the survey sample, sense that they are missing out. Some 74% say that a downturn is a better time than usual to benefit from globalisation—slightly higher than the average of 69%—but only 52% say that current conditions have made globalisation more important to them, well below the overall figure of 67%. As a group, these companies do no worse financially than the norm, but no better either: 46% consider their financial performance above average both in the current year and over the last five years against survey averages of 42% and 48%, respectively.

This type of globaliser may achieve average financial performance because the practice itself is so common. It is certainly more widespread than businesses wish to admit. Of all respondents, 71% agreed that companies, in selecting

Types of globalisers

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A Financial performance in the current yearB Financial performance over the last five yearsC Ability to formulate long-term strategyD Ability to execute long-term strategyE Ability to change strategy quicklyF Ability to assess and exploit opportunities worldwideG Ability to assess and manage risks worldwideH Ability to integrate global assets/strengths of company in collective undertakings (e.g., to get different parts of the company to work together)I Ability to turn new technology into commercial products/services

IHGFEDCBA

How does your company’s performance compare with that of peers in the following areas?


where to increase or decrease their foreign presence, follow a “herd mentality” rather than doing detailed homework. Although asked about business as a whole, rather than their own firms, 77% of autopilot globalisers agreed with this, perhaps having experienced it themselves.

Mr Lakshminarayana has seen this tendency among competitors. “Most people rush in because ‘if I’m not there first there will be nothing left.’ That hurts in the long run. A variation is: ‘let’s go in and figure it out as we go along.’ If you follow this reasoning, you’ll make some very costly mistakes.” Mr Venkatesan adds that two common misjudgements he sees others making “is to assume that a new country is very similar to your own and not investing to win. Nine out of ten multinationals are unwilling or unable to localise sufficiently to be real players. They dabble in the market but are completely irrelevant.”

Reactive globalisers

A slightly smaller group, roughly 20% of the total, is made up of respondents from organisations that are accelerating the pace of globalisation. Though not on autopilot, this group does not consider itself all that good at globalisation. Reactive globalisers are not looking for long-term strategic opportunities so much as a quick fix to the economic crisis.

• 87% say the downturn has made globalisation a higher priority, and 80% say that now is a better time than normal to benefit from it;

• 55% say that today the search for new markets to deal with immediate troubles in existing ones is their leading driver of globalisation, compared with 36% for all other respondents;

• 57% see cost savings as a leading impetus of their policy, compared with 48% for other respondents.

In seeking these results, many of these companies are also looking to act fast. When asked about which of a variety of ownership arrangements they were more likely to use because of the downturn when entering new markets, 48% of reactive globalisers say they are more likely to purchase local firms directly, their preferred answer. This is double the figure for other companies in the survey. Building from scratch holds much less appeal: 22% of those in a hurry are more likely to do so, the same as the survey average.

“ Nine out of ten multinationals are unwilling or unable to localise sufficiently to be real players. They dabble in the market but are completely irrelevant.”


As a group, reactive globalisers more often reported above-average financial performance during the last five years (52% to 48%). In the last year, this proportion has decreased (49%) although the gap with the survey average (42%) has grown slightly. In other words, reactive globalisation has probably yielded only a small advantage, and is unlikely to create much more because globalisation is a long-term strategy. As Mr Gopalakrishnan points out, “There is a kind of myth about globalisation. If a company is looking at this as an answer for the slowdown, it is not going to get an immediate one. The benefits are definitely going to take some time.”

Effective globalisers

This group, 23% of those surveyed, are much more likely to be accelerating their globalisation strategies (42% to 19%), though these figures differ little from the overall response (39% to 20%). What sets effective globalisers apart is the degree of thought and planning behind their strategies. A much higher percentage give a great deal of consideration to a whole range of factors before entering or increasing activity in a new market [see chart below].

Factors given consideration when making decisions about increasing activity in countries

Effective globalisers

Rest of survey

IP protection/strength of legal system 44% 22%

Exchange controls/controls on repatriation of profits

42% 18%

Level of technology infrastructure 32% 25%

Level of other infrastructure 31% 12%

Tax incentives 25% 19%

Level of technological expertise/education in country

44% 20%

Size and demographics of market 66% 38%

Effective globalisers are also much more willing to build from scratch, a sign of willingness to learn about, and commit to, local markets: 43% say that the current climate makes them more likely to enter into direct ownership of a new unit that they

Staying the course for globalisation 23

intend to grow, against 17% who are less likely. The equivalent figures for the rest of the survey are 17% and 19%, respectively. Another indication of this willingness to get involved on the ground is that the condition of local infrastructure is more likely to be a leading barrier to globalisation efforts for this group (48%) than for the survey as a whole (41%). While they are more willing to create a new business, effective globalisers consider it just one of a range of options, based on their understanding of the local situation, legal requirements, and market segment. Neil Sutton, Vice President, Global Portfolio, BT Global Services, calls it a matter of “horses for courses” or choosing the best tool for the job at hand.

Companies seeking to understand and engage with new markets begin with an in-depth study. Mr Lakshminarayana explains that at Wipro, “Before we enter a market we spend up to a year understanding it. It means you can be slower to enter. If you look at business as something you want to do for 30 to 50 years, one year doesn’t matter.” Next, interviewees stressed the importance of paying attention to local conditions, especially in emerging economies where average disposable income remains significantly less than in the West. Cisco went so far as to base its Chief Globalisation Officer in Bangalore because, as Mr Elfrink says, “if you want to think outside the box, you have to step outside the box.” He adds that while many companies try to sell their existing products into new markets, “we try to create products and services for these markets—which we can perhaps then sell in the West, something we call “reverse innovation.” Microsoft’s Mr Venkatesan agrees: “You can’t address 90% of the population unless you localise. You have to have local leadership and be willing to invest for the long term.”

Such local understanding not only improves sales; it helps show what else given economies might offer. Although cutting costs and growth are the leading factors driving effective globalisers in their strategies, they are less dominant than for other companies. Instead, these businesses are much more likely than others to focus on important long-term drivers, including access to talent (a leading impetus for 42% of effective globalisers but only 21% of others), access to new ideas (39% to 27%) and access to superior R&D (16% to 9%).

“ If you want to think outside the box, you have to step outside the box.”


In fact, for those tuned into a market, a downturn helps ease one of IT’s perennial problems—a scarcity of talent, especially in developing countries. Mr Sutton notes that “you are seeing reduced workforce churning. People have the opportunity to solidify their experience base.” Mr Venkatesan agrees: “there has probably never been a better time to attract talent than now.”

Regarding new ideas and R&D, experienced executives agree that it’s vital to be connected to the market—to be developing products not only in the market but for the market. For Mr Wilfrink, this wider vision is the cutting-edge approach to globalisation. “It is about access to talent, access to new markets, access to new innovation.”

The value of this approach shows on the bottom line. Effective globalisers, by thinking more thoroughly, showing more commitment, and looking at the broader range of benefits to be had from globalisation, have been reaping economic gains: 68% said that they have above-average financial results in the last five years, against 44% of all other companies. Moreover, their edge has widened in the downturn: 65% of effective globalisers indicated that they outperformed their peers in the last year, against just 36% of other firms. These results, however, require ongoing commitment—courage under fire—even in the face of economic turmoil. At Cisco, says Mr Elfrink, “globalisation is one of our five top company priorities.” Similarly at Microsoft, Mr Venkatesan says, “We have a fundamental view that is long term and unaffected by current prospects. If anything we are going to be more global rather than less.”

A change in tactics

A long-term vision is not an inflexible one. The downturn is causing companies in particular to spread out their sales and marketing activity. Fifty-seven percent of all respondents, and 77% of effective globalisers, say they will do so within the next year. Similarly, 54% of those surveyed, and 58% of effective globalisers, will move toward a more globalised IT service delivery in the next 12 months.

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HGFEDCBA

Given current economic conditions, will elements of the following business activities and operations be spread out over more or fewer countries in a year’s time?


What this might mean in practice differs by company. Mr Venkatesan of Microsoft notes that “like many companies we were almost dangerously focused on the top cities and top customers. That produced healthy growth, but with the softening of the economy we realised that we had to increase our geographical presence and customer base.” This has led to expansion within markets, with the company now present in 260 towns in India and with a large number of additional distributors.

Wipro has also started casting its net further because of the downturn. “We have started looking beyond our traditional markets of North America, Europe and Japan,” says Mr Lakshminarayana. “If you need growth, you need mass markets and growth markets. India, the Middle East and China are a lot more important now.” At the same time, it is looking to serve existing customers better by near-sourcing some operations to North America, which previously took place in developing countries.

From a tactical point of view, the current economic situation presents IT companies with challenges and opportunities that need to be addressed. Interviewees all spoke of the need to cut costs, a given in a downturn. Good companies, however, are looking further. Cisco, for example, is also actively pursuing what Mr Elfrink calls “an opportunity that was not that obvious.” In particular, he believes that his company’s technology and expertise around initiatives that enhance the sustainability of cities will become even more attractive as cities seek to differentiate themselves as locations for investment. He cites Korea as a country where “‘green’ growth is the number- one priority.”

More broadly, the downturn is also causing firms, as Mr Sutton says of BT, “to ask what we need to do and at what level. You need to be clear about what you need to do globally, locally, regionally and centrally.” This will accelerate shifts in the degree of globalisation of certain functions. Nearly half of companies (47%), for example, have restructured back-office operations


due to cost concerns in the last year, the second most frequently changed area after travel policy (53%), traditionally the first victim in a downturn. The impact on globalisation depends on the organisation: 35% expect back-office operations to be more spread out geographically, while 31% expect them to be less so. The nature of the shift, however, does not suggest an abandonment of globalisation. Notes Mr. Lakshminarayana, “as part of overall optimisation, certain back- office functions are getting centralised. That is part of routine; strategically there is no place we are withdrawing.”

One particular trend discernable from the survey is a tendency toward increased virtualisation within IT businesses. Forty-two percent of respondents have reviewed corporate IT infrastructure with a view to reducing costs, but 54% expect their IT service delivery to be more geographically spread out, against just 17% predicting the reverse. On the other hand, 43% expect a reduction in the spread of physical offices, against just 26% who see an increase. Even among effective globalisers, those retrenching here have an edge (39% to 36%). Mr Sutton explains “there is a trend within our business to have fewer locations and have them work in greater harmony. A lot of companies have grown at a significant rate, and are now questioning what is most efficient.” Mr Elfrink adds that Cisco already has an ongoing policy of virtualisation that attempts to leave behind “old-fashioned thinking about where you have to have offices. Of course [because of the downturn] we had to adjust it a little bit, but we were already on that trajectory.”

For Cisco, however, virtualisation is part of a broader shift that will allow what Mr Elfrink calls “globalisation 3.0.” International trade, he explains, has been going on for centuries: the cutting edge in this field is “the globalisation of the corporate brain. It is really about the rebalancing of knowledge, of wealth, of competencies.”

The downturn, then, has caused some reevaluation of how to pursue globalisation most profitably, though it has not lessened the appeal of the strategy as a whole.

International trade, he explains, has been going on for centuries: the cutting edge in this field is “the globalisation of the corporate brain.”


In our view, there are three routes to simplification for technology companies:

1. Management model – Winning companies are those that consciously map the role of their corporate centre to the needs of the business. Simplifying the management model requires reviewing the business value chain to clarify and agree which decisions are owned centrally versus locally, and where activities should be executed to reduce duplication and costs.

2. Tax optimisation – The fundamental principle underpinning opportunities to move to a tax optimised model is that the centralisation of key decision makers and executives, functions, assets and risks allows for an associated consolidation of reward and profits. This provides a platform for moving profit to tax advantageous jurisdictions. Whilst some technology companies have implemented tax optimised sales and manufacturing models, there are emerging new models for tax optimisation in the areas of services, IP and functions such procurement which companies should consider.

3. Legal structure simplification – European companies are increasingly using a range of legal entity related simplification opportunities, including eliminating dormant entities, reducing the number of active companies, and using new legislation to: rationalise entities; align their legal and operational worlds; reduce internal costs such as administration costs, and reduce governance risks. They can also become more flexible organisations benefiting from a common corporate culture and approach across multiple regions, and offer a single face to regional customers and suppliers.

Technology companies need to examine these three routes to simplification and evaluate which one (or combination) would be most effective for them. While the changes outlined are not easy, companies that have addressed their complexity have found the effort well worth pursuing.

For more information visit www.pwc.com/techconnect.

As technology companies have grown, so has the complexity in their business. Many companies have evolved through a combination of organic growth, mergers, acquisitions and divestments. The resulting management structures are fragmented, with costly back-office support functions and complex tax and legal structures.

Companies operating across the globe often have cultural and legacy issues which drive their operating model. For example:

• US companies have a history of implementing tax-effective business structures for sales and manufacturing, but still operate through multiple national legal entities.

• Asian, and particularly Japanese companies, have structures focused on optimising profit repatriation. Typically, they are based around divisions reporting back to HQ in the parent country, which leads to duplication of business and back-office activities and structures, and hence higher costs.

• European-parented companies are increasingly using centralised and tax efficient business models, again through multiple national legal entities.

During the last decade, this complexity was hidden by a benign business environment. However the global recession has challenged the operating models of companies. At the same time, strategic challenges have included:

• Global supply chain management optimisation

• An increasing focus for some on brand and services whilst others continue manufacturing and research led strategies

• Tax and tax planning being firmly on the business agenda

• Consideration of the best location for Intellectual Property (IP) and brands, for tax planning and protection and exploitation of IP

PwC connections

The advantages of a simplified business model


Which type of globaliser is your company?

Which type of globaliser is your closest competitor?

How has your globalisation type/strategy positively affected your revenues?

What risks are associated with your current globalisation strategy?



The B(R)ICs and global IT

Emerging markets were already key players in global IT, and the downturn has increased their importance.

Among developing economies, the BRIC countries (Brazil, Russia, India, China) stand apart. Because of the downturn, 42% of respondents see them as more important sources of low-cost inputs, over twice the equivalent figure for other emerging markets (19%). Sales opportunities are even more attractive than cost containment. Here too, the BRICs outshine others: Nearly half of respondents (48%) see them as more important current markets, compared with 21% who say the same of other emerging economies. Looking to the future, 60% say the BRICs’ potential market size is of increased interest, compared with 44% of other developing countries.

More striking than the potential benefits of emerging markets, 80% of respondents expect to see increasing competition in the next three years from companies based there. Wim Elfrink of Cisco is under no illusions: “It is a challenge and a threat.” At the same time, though, he points out that if companies understand that it is also an opportunity to take part in new developments—such as the creation of an analytics industry— the growth of such companies offers tremendous technological, collaborative and revenue benefits for all.

Executives interviewed for this report suggest that much of this growth will come from India and China rather than elsewhere in the developing world. The reasons are the combination of skill and scale—for the latter both of workforce and of domestic market. As Microsoft’s Ravi Venkatesan puts it, “You may find something surprising coming from a smaller economy, but the law of numbers favours India and China quite a lot.” KR Lakshminarayana of Wipro agrees: “Other countries will be able to improve their technical skills, but won’t be able to change their scale for a very long time.”

Just as not all developing economies are alike, however, neither are all the BRICs. For the IT industry, interviews suggest that Russia is a case apart. Its economy is driven by natural resources, and will likely grow more slowly in importance as oil prices rise. BT’s Neil Sutton explains, “Russia is a challenging place to do business, but it is where companies like ours have to have a presence.” Meanwhile, “Brazil, India and China are

0%

10%

20%

30%

40%

50%

60%

70%

Other emerging markets as a source of low-cost inputs

Other emerging markets as a current market

Other emerging markets as a potential future market

BRICs as a source of low-cost inputs

BRICs as a current market

BRICs as a potential future market

48%

60%

42%44%

21%19%

A B C D E F

A

B

C

D

E

F

Has the downturn made the BRIC countries (Brazil, Russia, India, China) and other emerging markets more important to your organisation as a potential future market, as a current market, or as a source of low-cost inputs?


an intrinsic part of how we deliver global services.” For many technology companies, China, India and, to a lesser (but still significant) extent, Brazil, enter into current strategy; Russia is a medium-term proposition.

Going beyond the BRICs, although various developing countries have rapidly growing IT sectors, no consensus on the next new powerhouse is discernable in the survey. Instead, investment is driven by geography. For North American IT companies, the emerging market most likely to receive investment is Mexico; for Europeans it is Poland; and for those in the Asia-Pacific region it is South Africa, followed by Indonesia, Malaysia and Thailand.


PwC connections

Euro-India Business Group –Your link between India and Europe

Today, trade between India and Europe is rapidly expanding as the Indian economy is amongst the fastest growing in the world. This vibrant country offers countless opportunities, both to Indian companies looking to expand overseas and to foreign players considering investing in this dynamic market. But, together with vast opportunities, numerous challenges arise which need to be addressed effectively. The need for a competent and experienced advisory partner hence becomes vital to ensure cross-border success.

The Euro-India Business Group (EIBG) combines the expertise of the various India Desks at PricewaterhouseCoopers (PwC) firms in Europe and PwC India. The EIBG acts as the first point of contact, providing advice and practical assistance to Indian companies entering Europe and guiding European companies on how best to enter the Indian market.

EIBG’s multidisciplinary teams have acquired the right combination of multi-cultural skills and business know-how needed for success in today’s globally competitive environment. We make connections that work in order to leverage expertise, skills and best practices from around the globe.

Randolph de Cuba, Tax Partner, PricewaterhouseCoopers the Netherlands, explains: “The EIBG was created to provide one point of entry for our clients, either Indian companies or European companies, looking for assistance with their business needs. Our network of 16 countries and over 50 professionals is an extremely powerful tool to enable PwC to effectively mobilise competent resources that respond to our clients’ needs.”

Ketan Dalal, Tax Leader, PricewaterhouseCoopers India, adds: “Given the continuing robustness of the Indian economy, relatively far less impacted by the global economic downturn, India continues to

remain a compelling destination for European companies. Similarly, Indian companies continue to invest in Europe, partly as a de-risking strategy against over-dependence on the US. Given this backdrop, the EIBG has played, and endeavours to continue playing, a catalyst role, by offering a wide range of services to investors from both ends of the spectrum.”

PwC’s EIBG offers practical solutions when addressing cross-border needs to:

• Meet challenges relating to tax, legal and regulatory compliance requirements.

• Take the right strategic investment decisions by identifying suitable market opportunities and performing feasibility studies for market entry and development strategies.

• Meet human capital challenges by supporting all aspects of immigration, social security, tax and employment law and providing comprehensive HR services.

• Identify suitable local partners and alliances that will be compatible with your business by leveraging our contacts.

• Advise on the day-to-day practicalities of doing business, with continuous support from our specialists across different industries and territories.

• Assist with due diligence, transaction structuring and valuation in order to identify the risks and opportunities related to the proposed investment.

• Keep abreast of the latest news and developments in Europe and India.

For more information on how PwC can help address your European and Indian cross- border business needs, visit www.pwc.com/techconnect.


How important are the BRICs to your competitive position, short-term and long-term?

Entering new markets of course involves risk. To what degree do you feel you understand the risks and have developed adequate plans to address those risks?

Russia is considered by many a difficult place to do business, but is it an important strategic market for your company? Why or why not?

What other areas of the world does your company see as potential growth markets? What’s your strategy for entering these markets?



Fortune favours the brave

The financial crisis has seriously hampered world trade, foreign investment, and GDP growth in many countries. But this does not mean globalisation is fading; far from it. Companies’ global operations are becoming even more complex, with competing short- and long-term considerations demanding attention as new barriers to globalisation arise.

In such conditions, successful companies cannot continue their existing policies as though economic conditions remained the same as before the recession. Nor should they simply rush into—or out of—markets in hopes of salvation. A successful globalisation strategy requires a thorough understanding of markets and a willingness to stick to a long-term plan even while adjusting to the short-term risks and opportunities. “Courage under fire” does not mean just the courage to act where necessary. It also means the courage to stop, learn and think about the best course of action despite the clamour for a quick fix.

The main lessons for executives who are planning their global strategies in 2010 include:

• An economic downturn is a good time to transform business operations. As Wipro’s Mr Lakshminarayana notes, “New business models emerge in every slowdown.” Consider how operations can be improved—particularly to take advantage of global opportunities—while business is slower than usual.

• Remember that talent is easier to retain during periods of slow economic growth, and customers tend to be more open to new products or services that will bring overall savings. Nearly 70% of respondents say that current conditions present better opportunities to benefit from globalisation than normal times.

• Globalisation without a well thought-out strategy may yield short-term benefits, but companies that take time to craft a plan will see sustained success: 65% of “effective” globalisers have outperformed their peers over the past 12 months.

Conclusion


Appendix

Staying the course for globalisation

Survey methodology

The analysis in this report is based on the results of a survey conducted in June 2009 by the Economist Intelligence Unit.

Analysis

The survey relies on a variety of question formats. For example, on a number of questions, respondents were asked to respond on a scale of 1 to 5 with 1 being ‘strongly agree’ and 5 being ‘strongly disagree’. In other cases, comparison phrases such as ‘highly accurate/not accurate’ or ‘very extensively/not extensively’ were utilised within a similar five-point scale to capture attitudes and practices. In still other cases, respondents were asked to choose their top two or three answers or select all that apply.

The report itself uses actual percentages from the survey in every case. But in many situations, the analysis may combine two similar categories of answers (such as all those respondents who chose 1 or 2) to draw its conclusions. While such combinations are referenced in all cases, the tables themselves (appearing throughout the report and again below) are often useful for a more detailed view of the responses.

Industry sectors

The findings are drawn from surveys completed by 159 executives in the technology, telecom and digital media sectors. The top three sectors include software (34%), nonconsumer hardware manufacturers (10%) and business information content developers (7%).

Seniority of respondents

A good cross-section of executives responded to the survey. Again in terms of frequency, the top three specific titles include CEO/President/Managing director (23%), manager (21%) and SVP/VP/Director (12%).

Geography

The respondent profiles are also well dispersed geographically. About one-third (32%) were based in Europe, 32% in North and Latin America and 31% in the Asia-Pacific region.

35


Results of the surveyRespondents’ answers to the survey questions are illustrated in the following figures. Please note that not all answers add up to 100% because of rounding or because respondents were able to provide multiple answers.

0 10 20 30 40 50

YemenSudanNepal

EthiopiaPakistan

CongoUganda

MozambiqueMorocco

BangladeshAlgeria

IraqIran

TanzaniaGhana

AfghanistanUzbekistan

NigeriaSri Lanka

PeruColombiaVenezuela

KenyaEgypt

UkraineThailand

ArgentinaVietnam

RomaniaPhilippinesIndonesia

TurkeyMalaysia

PolandMexico

South Africa

0%0%0%0%

1%1%1%1%1%1%1%

2%2%

3%3%3%3%3%

4%4%4%

38%28%

24%20%

19%18%

16%13%13%13%

11%11%

8%6%

5%

1. Given current economic conditions, will elements of the following business activities and operations be spread out over more or fewer countries in a year’s time?

2. Excluding the BRIC countries (Brazil, Russia, India, China), which three emerging markets offer the most potential for your business?

0 10 20 30 40 50 60 70 80 90 100

Physical offices or operational facilities

Information technology service delivery

Production of goods and services

Back-office operations

IP rights management

Joint ventures

Sales and marketing

R&D

1 Significantly more 2 3 The same 4 5 Significantly fewer 6 Don’t know/Not applicable

11%

20% 37% 30% 11%

1%

1%

29% 39% 13% 7% 1%

13% 35% 28% 12% 4% 7%

10% 26% 41% 6% 10% 6%

7% 19% 30% 25% 18% 1%

19% 35% 27% 11% 1%6%

8% 24% 39% 22% 4% 2%

15% 20% 35% 21% 10%


3. Has the downturn made the BRIC countries (Brazil, Russia, India, China) and other emerging markets more important to your organisation as a potential future market, as a current market, or as a source of low-cost inputs?

4. How has your globalisation strategy shifted since the downturn?

0 10 20 30 40 50 60 70

Other emerging markets as a source of low-cost inputs

Other emerging markets as a current market

Other emerging markets as a potential future market

BRICs as a source of low-cost inputs

BRICs as a current market

BRICs as a potential future market

48%

60%

42%

44%

21%

19%

9%

30%

42%

18%

2%

0 10 20 30 40 50 60

Decelerated greatly

Decelerated

Continued at the same rate

Accelerated

Accelerated greatly


5. How does your company’s performance compare with that of peers in the following areas?

6. What did your company see as the main reasons for increasing its level of globalisation before the current downturn, and what would it see as the biggest advantages today?

0 20 40 60 80 100

Ability to turn new technology into commercial products/services

Ability to integrate global assets/strengths of company in collective undertakings(e.g., to get different parts of the company to work together)

Ability to assess and manage risks worldwide

Ability to assess and exploit opportunities worldwide

Ability to change strategy quickly

Ability to execute long-term strategy

Ability to formulate long-term strategy

Financial performance over the last five years

Financial performance in the current year

40% 50% 8% 3%

27% 59% 11% 3%

22% 57% 17% 5%

35% 47% 14% 3%

46% 42% 11% 2%

43% 45% 9% 3%

40% 52% 6% 2%

48% 37% 11% 3%

42% 43% 13% 3%

Better About average Worse Don’t know/Not applicable

0 10 20 30 40 50 60

36%

16%

22%

9%

29%

51%

15%

32%

31%

14%

14%

3%

1%

50%

15%

19%

10%

40%

47%

11%

29%

25%

12%

18%

1%

1%

Before downturn Today

Cut costs/Keep costs low

Tax incentives

It was an existing strategy andhas not been rethought

It would have been (would be) toodifficult to reverse course

Need to find new markets to counteractimmediate difficulities in existing ones

Need to position ourselves in lucrative new markets or gain market share in existing ones over the long term

Ability to access superior R&D

Ability to access new ideasand/or technology

Ability to access talent

Ability to take advantage of lessdemanding regulatory environment

Diversify supply chain base

Other

Don’t know0 10 20 30 40 50 60

36%

16%

22%

9%

29%

51%

15%

32%

31%

14%

14%

3%

1%

50%

15%

19%

10%

40%

47%

11%

29%

25%

12%

18%

1%

1%


Cut costs/Keep costs low

Tax incentives

It was an existing strategy andhas not been rethought

It would have been (would be) toodifficult to reverse course

Need to find new markets to counteractimmediate difficulities in existing ones

Need to position ourselves in lucrative new markets or gain market share in existing ones over the long term

Ability to access superior R&D

Ability to access new ideasand/or technology

Ability to access talent

Ability to take advantage of lessdemanding regulatory environment

Diversify supply chain base

Other

Don’t know


7. What would you say were the greatest barriers to globalisation at your company before the current downturn, compared with today?

8. How much consideration are the following given when making decisions about increasing activity in countries?

0 10 20 30 40 50


33%

43%

48%

13%

21%

22%

18%

16%

19%

9%

33%

34%

41%

19%

38%

18%

11%

16%

21%

8%

Political environment in countrieswhere we are looking to increase our presence

Desire to focus on markets where we are strongest

Inefficient infrastructure in countries wherewe would be interested in having a presence

Government pressure to locate activities incountry of company’s headquarter

Rising protectionism

Tax issues

Environmental/social impact of activities

Buyer hostility to foreignproducts/elements in products

Hostility to presence of foreigncompanies in targeted markets

Don’t know0 10 20 30 40 50


33%

43%

48%

13%

21%

22%

18%

16%

19%

9%

33%

34%

41%

19%

38%

18%

11%

16%

21%

8%

Political environment in countrieswhere we are looking to increase our presence

Desire to focus on markets where we are strongest

Inefficient infrastructure in countries wherewe would be interested in having a presence

Government pressure to locate activities incountry of company’s headquarter

Rising protectionism

Tax issues

Environmental/social impact of activities

Buyer hostility to foreignproducts/elements in products

Hostility to presence of foreigncompanies in targeted markets

Don’t know

0 20 40 60 80 100

Size and demographics of market

Level of technological expertise/education in country

Tax incentives

Level of other infrastructure

Level of technology infrastructure

Exchange controls/Controls on repatriation of profits

IP protection/Strength of legal system

44% 32% 16% 1%

3%

5%

29% 41% 22% 1%

20% 32% 12%

5%

2%

3%27%

45%

6%

3%16% 30% 5%

26% 45% 23%

12%

5%

2%

6%

1%

23% 33% 23% 3%

26% 35% 28% 6%

13%

1%

3%

1 A great deal 2 3 Some 5 Not considered4 6 Don’t know/Not applicable


9. Has the current economic climate made your company more or less likely to enter into the following types of arrangements in foreign markets?

10. How has the level of cross-border and domestic consolidation within your sector changed as a result of the current economic difficulties?

0 20 40 60 80 100

Strategic alliance

Joint venture

Partnership

Direct ownership (through organic growth or newly established unit)

Dir ect ownership(through M&A with existing local firm)

28%

45%

30%

22%

28%

40%

35%

43%

52%

44%

20%

11%

18%

19%

18%

12%

9%

9%

8%

10%

More Same Less Don’t know

0 20 40 60 80 100

Domestic

Cross-border

41%

46%

41%

38%

10%

7%

8%

8%

Increase Stay the same Decrease Don’t know


11. With regard to the following, have cost concerns led your company to restructure at the global, company-wide level in the past 12 months?

12. Do you agree or disagree with the following?

24%

26%

0 10 20 30 40 50 60 70

Customer service

Intelligence gathering

Communications infrastructure

Production arrangements

Risk assessment

Procurement

R&D 31%

Sales

Marketing

IT infrastructure

Back-office operations

Travel policy

26%

27%

28%

30%

38%

42%

42%

47%

53%

0 20 40 60 80 100

In searching for new emerging markets, our firm will look more closely at South America than Africa

Over the next three years, we expect to see greater competition from companies located in emerging markets

In selecting foreign countries in which to increase or decrease their level of presence, companies make choices based on a “herd mentality” as often as they do based on a detailed analysis of the risks and benefits

Greater protectionism has affected ourcompany’s globalisation strategy

An economic downturn is a better time to benefit from globalisation than other times

The downturn has led us to emphasise our strategy morein developed countries than developing ones

The current economic situation has made globalisation a higher priority for us

Increased regulation arising from current economic and political conditions is reducing the benefits of globalisation for us

69%

44%

42%

67%

49%

31%

56%

71% 29%

80% 20%

57% 43%

58%

33%

51%

Agree Disagree


Profile of the survey respondents

Which of the following best describes your title?Manager 22.58%

CEO/President/Managing director 21.29%

SVP/VP/Director 9.68%

Head of Business Unit 9.03%

Head of Department 8.39%

Board member 7.10%

CIO/Technology director 7.10%

Other C-level executive 6.45%

CFO/Treasurer/Comptroller 4.52%

Other 3.86%

What are your main functional roles? Choose no more than three.Strategy and business development 44.23%

General management 37.18%

Marketing and sales 32.05%

IT 30.13%

Operations and production 13.46%

Customer service 12.82%

Finance 12.18%

R&D 10.90%

Human resources 10.26%

Information and research 8.33%

Supply-chain management 5.13%

Risk 3.21%

Other 3.21%

Legal 2.56%

Procurement 1.28%

What type of company do you work for?Software developer 30.28%

Content developers (business information) 16.20%

Nonconsumer hardware manufacturer 13.38%

Consumer electronics/device manufacturer 11.97%

Other, please specify 10.56%

Content developers (entertainment) 7.04%

Wireless distribution service provider 5.63%

Semiconductors and other components maker 2.82%

Hard-wired distribution service provider (e.g., cable TV operator) 2.12%


Please provide your personal tenure in the following categories.

Under 1 year

1 to 3 years

4 to 5 years

6 to 10 years

11 to 15 years

15 to 20 years

Over 20 years

Working as a professional 0.00% 5.92% 7.89% 15.79% 21.72% 24.34% 24.34%

Working in the human resources function (if applicable)

26.00% 22.00% 16.00% 28.00% 4.00% 0.00% 4.00%

Working in the technology industry 3.57% 9.29% 8.57% 29.29% 18.57% 12.14% 18.57%

Working for your present employer 7.95% 29.14% 20.53% 27.81% 7.28% 2.65% 4.64%

What are your organisation’s global annual revenues in US dollars?Over $10bn 21.44%

$5bn to $10bn 5.84%

$1bn to $5bn 12.99%

$500m to $1bn 5.84%

$250m to $500m 5.84%

Under $250m 48.05%

In which region are you personally based? Western Europe 32.26%

Asia-Pacific 30.32%

North America 22.58%

Eastern Europe 9.03%

Middle East & Africa 4.52%

Latin America 1.29%


Acknowledgments

This report was developed by PricewaterhouseCoopers’ Global Technology Industry Group with contributions from a number of PwC subject matter experts across the globe. We gratefully acknowledge the following colleagues who contributed their thoughts, knowledge and experience.

Global expansion and collaboration

Greg UnsworthPartner+65 6236 [email protected]

Paul ZankerDirector+65 6236 [email protected]

Tax services

Susan SymonsPartner+44 (20) 7804 [email protected]

Shared service centres & outsourcing

Tom BrooksDirector+44 (0) 207 213 [email protected]

Mike GibsonPartner+44 (0) 207 212 [email protected]

Simplified business model

Mohi KhanDirector+44 (0) 207 213 [email protected]

David RussellPartner+44 (0) 207 804 0555david.russell@ uk.pwc.com

Euro-India Business Group

Randolph de CubaPartnerPwC Euro-India Business Group+31 (20) 568 [email protected]

Ketan DalalPartnerPwC Euro-India Business Group +91 (22) 668 [email protected]

Technology executive connections project team

From PricewaterhouseCoopers: Jan Akers, San JoseAndrea Alter, ParisClare Matthews, LondonTeresa Perlstein, BostonFiona Scholes, London

From the Economist Intelligence UnitDebra D’Agostino, New YorkNigel Holloway, New YorkDr. Paul Kielstra, London


Of further interest

Additional related thought leadership from PricewaterhouseCoopers includes:

Paying taxes 2010: The global picturePwC and the World Bank take an in-depth look at the tax structures of 183 economies.

Strategic partnerships: The real deal?PwC offers a fresh perspective on the structuring of strategic partnerships to increase their rate of success.

Is the global outsourcing industry in for a no-holds barred competition?PwC and Duke University’s Offshoring Research Network project examine the transformation taking place within the outsourcing supplier market as new entrants and incumbents struggle to expand into new markets to keep up with increasing demand and intensified competition.

Technology forecast: Issue 1 2010PwC’s quarterly journal exploring the latest technology trends and business drivers, this issue has an overarching theme of unlocking hidden transformation value and includes three feature articles and four interviews.

Shared service centre – The 2nd generation Taking the next step to reach a more efficient level of evolutionPwC provides a roadmap for how to take your company’s SSC to the next level.

To download or order a hard copy of any of the above reports please visit www.pwc.com/techconnect.

Additional Technology Executive Connections reports:

Managing the risks and rewards of collaborationAn examination of the advantages offered by various collaborative arrangements, strategies for successful collaboration and ways to avoid pitfalls

Going green: Sustainable growth strategiesHow technology companies are responding to the growing demand for green products, services, and operations

Exploiting intellectual property in a complex worldA look at the shift in attitude from IP as legal issue/concern to IP as strategic asset that must be managed and maximised

Successful strategies for talent managementHow technology companies are responding to the increasing scarcity of the right talent

Shaping digital convergence through mergers & acquisitionsWhat M&A activity is telling us about the market’s approach to convergence

Embracing change in the technology industriesHow successful technology companies manage and respond to never-ending change in the market

To download or order a hard copy of any of the above reports please visit www.pwc.com/techconnect.


PwC technology industry leaders

PwC can help

PricewaterhouseCoopers delivers value with a global perspective through local implementation. Please contact the technology industry leader at the PricewaterhouseCoopers’ firm nearest you to discuss the challenges facing your company and how we can help you.

Argentina Edgardo Sajon +54 11 4850 6806 [email protected]

Australia Rod Dring +61 2 8266 7865 [email protected]

Austria Bernd Hofmann +43 1 501 88 3332 [email protected]

Belgium Koen Hens +32 2 710 7228 [email protected]

Bermuda George Holmes +1 441 299 7109 [email protected]

Bolivia Cesar Lora Moretto +591 2 240 8181 [email protected]

Brazil Estela Vieira +55 21 3232 6069 [email protected]

Bulgaria Borislava Nalbantova +359 2 9355 200 [email protected]

Canada Howard Quon +416 869 2396 [email protected]

Chile Rafael Ruano +56 2 940 0160 [email protected]

China/Hong Kong Alison Wong +86 21 6123 2551 [email protected]

Colombia Jorge Mario Añez R. +57 1 634 0556 [email protected]

Cyprus Christos Themistocleous +357 (0) 24 555 222 [email protected]

Czech Republic Petr Sobotnik +420 251 152 016 [email protected]

Denmark Leif Ulbaek Jensen +45 39 45 92 16 [email protected]

Finland Marko Korkiakoski +358 9 2280 1220 [email protected]

France Xavier Cauchois +33 1 56 57 10 33 [email protected]

Germany Werner Ballhaus +49 211 981 5848 [email protected]

Gibraltar Colin Vaughan +350 73520 [email protected]

Greece George Naoum +30 210 6874 030 [email protected]

Guatemala Luis Valdez +502 5802 0290 [email protected]

Hungary Manfred Krawietz +36 1 461 9470 manfred.h.krawietz @hu.pwc.com

India Hari Rajagopalachari +91 80 4079 4002 hari.rajagopalachari @in.pwc.com

Indonesia Eddy Rintis +62 21 528 91040 [email protected]

Ireland Paul O’Connor +353 1 792 6035 [email protected]

Israel Joseph Fellus +972 3 795 4683 [email protected]

Italy Andrea Samaja +390 2 6672 0555 [email protected]


Japan Akihiko Nakamura +81 80 3158 6693 [email protected]

Korea Yong-Won Kim +82 2 709 0471 [email protected]

Lithuania Chris Butler +370 5 239 2303 [email protected]

Luxembourg Mervyn Martins +352 49 48 48 2053 [email protected]

Malaysia Uthaya Kumar +60 3 2693 3957 [email protected]

Mexico Enrique Bertran +52 55 5263 6000 [email protected]

Netherlands Marcel Jakobsen +31 10 407 5354 [email protected]

New Zealand Owen Gibson +64 4 462 7230 [email protected]

Nigeria Osere Alakhume +234 1 2711 700 [email protected]

Norway Bjorn Leiknes +47 02316 [email protected]

Paraguay Ruben Taboada +595 21 445 003 [email protected]

Peru Orlando Marchesi +511 211 6500 [email protected]

Poland Adam Krason +48 22 523 4475 [email protected]

Portugal Paul Mallett +351 213 599 356 [email protected]

Romania Dinu Bumbacea +40 21 202 8820 [email protected]

Russia Natalia Milchakova +7 495 967 62 40 [email protected]

Singapore Greg Unsworth +65 6236 3738 [email protected]

Spain Antonio Vázquez +34 91 568 4674 [email protected]

Sweden Reino Johansson +46 8 555 33290 [email protected]

Switzerland Mike Foley +41 58 792 82 44 [email protected]

Taiwan Andy Chang +886 4 2328 4868 ext. 212 [email protected]

Thailand Kajornkiet Aroonpirodkul +66 2 344 1110 [email protected]

Turkey Haluk Yalcin +90 212 326 6065 [email protected]

United Arab Emirates Douglas Mahony +971 4 3043151 [email protected]

United Kingdom Barry Murphy +44 20 7804 5284 [email protected]

United States of America Rob Gittings +1 408 817 3730 [email protected]

Uruguay Javier Becchio +598 2 916 0463 ext. 1352 [email protected]

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