Finance & Accounting Globalization

This blog will deal with globalization of the Finance & Accounting function.

Well if you are running a company and made a decision about staying away from handling finances, I wouldn’t blame you. There are a whole bunch of activities in that function with varying levels of complexity and dependencies. On a very broad level they can be classified into Procure to Pay, Order to Cash, General Accounting, Closing & Reporting, Treasury & Tax, Financial Planning & Analysis and Compliance. The activities are mentioned in their decreasing order of offshoring/ globalization propensity.

For most of the transactional activities globalization makes a pronounced impact since it does not require any high levels of intellect. These activities are typically offshored and are carried out by fresh graduates with minimal work experience. Then there are other activities which cannot be globalized since the laws in the head quarter country forbid certain types of data from being taken out of the geographical boundary.

Based on my experience in the past couple of years a trend that I have noticed is that small sized companies (Revenue < USD 5 Bn) and mid-sized companies (Revenue: USD 5 – 20 Bn) have typically globalized F&A activities to 3 locations, while large sized companies (Revenue > USD 20Bn) have globalized across 6 locations. 

(The trends are limited to technology product companies)

The locations are closely co-related to where the company has its customers (Since the company is bound to have significant operations to either cater to the customers or target them for potential sales). Another interesting trend is that there is at least one location to cater to each geographic theatre – APAC, EMEA, Americas. Typically the APAC region is catered to from India, China, Singapore, Australia or Malaysia; EMEA region from Ireland or UK; Americas from the HQ itself.

The Asian locations have matured significantly to handle global F&A activities. This trend can also be explained by large pools of talent available in these locations which makes them attractive for companies to set-up shop, F&A wise. I think this trend would continue to take place until most offshore locations become the F&A hubs for companies.

Author: Anand Tatambhotla, Consultant, Zinnov LLC

Blog: http://tatambhotla.wordpress.com/

LinkedIn: http://www.linkedin.com/in/tatambhotla

India’s Problems, a Source for Product Development Companies

In Hinduism you always pray to Lord Ganesha (Deity) before you start any work, be it small or big. I was wondering, if there is something similar which can be done while starting to write a blog. Then it struck me, probably its good to think about Google, before you write anything, because a) Reminds you that you need to be innovative b) Google is watching you, and finally c) Google can punish you really bad. So to please the almighty, I decided to write something interesting that I had heard about Google from one of its top executives.

In one of my recent engagements, my team conducted a study to understand the Captive (R&D/IT/BPO) Landscape in India. Apart from many things, we were interested in knowing the key drivers for MNC’s to set up their captive centers here in India and how they are shaping up with time. Also what drives them to continue business in India and what challenges do they face? For this purpose, I had interviewed country heads of various captives from various technology companies.

One of the very interesting and strikingly different conversations I had was with one of the top management leaders of Google (here after referred to as John in this post). I started off the interview by introducing myself and posted the standard set of questions. It is a very well known fact that cost and talent pool are the key drivers for offshoring R&D activities to India. I was just waiting for a similar answer, but I heard something different. John’s answer to this question was a big NO. I was surprised and asked for reasons. He gave me a very interesting and a different perspective of globalization.

He said, “I don’t think there is any cost advantage as Google pays really well to their employees; the difference is very less. Also in terms of talent pool, for the kind of work we do I think we can find better people in the US than in India. India has nothing. There is no advantage to do R&D related work out of India. I dont see cost or talent pool as the reasons. Even if they were, the ROI on these two factors is very minimal for us.”

“However what India has is a whole set of problems. Problems for which people still struggle to find solutions. We are here in India in search of those problems and solutions for them. These problems give us lot of scope of develop new products.”

“Take for example the Indian cities. It is just impossible to locate a particular place. Looking at India, it brought us the thought of Google Maps. India did not have maps for 90% of the cities. We developed Google maps for 160 countries and India was the 57th country to be launched. The strategy here is to look at the problems in countries like India and take it to a global level.”

“Another good example, is the translation tool that we developed. It was released in 47 languages of which 42 were non-Indian. But the inspiration was from the multi lingual culture in India. This product was very successful the first day of its launch in countries like Japan, US and Europe. Fortunately or unfortunately, the power users reside in the developed countries like US and the adoption is very fast.”

“The Indian users caught up with it only after 3 to 4 months. So for us the strategy has been to develop products for global issues by getting inspired by the problems in India. That is the reason why we are in India”
This was a completely new story with interesting insights giving a new dimension to my understanding of globalization. My takeaway from this interview was a whole new set of questions.

How did Google come up with this as the reason for globalization? What stops other companies to think in this fashion? Can this model be used by other companies? Can small companies or companies new to globalization think this way? or Is it restricted to only the big players?

I will attempt to answer some of these in my next post.

Thanks for reading.
Author: My Colleague Kartik Vittal, Consultant, Zinnov Management Consulting