Reference no: EM131052890

CASE

Wayne Shurts had no experience overseeing IT operations in emerging markets when Cadbury CEO Todd Stitzer appointed him global CIO the summer of 2009. The geographic parameters of Shurts's responsibilities at the sweets maker-with a presence everywhere from Pakistan to Palau-multiplied overnight. The former CIO for North America now spends most of his time globe-trotting from his home base in Parsippany, New Jersey, to London headquarters to operations on six continents. Shurts also had to shift his thinking. The $7.8 billion company has made a concerted effort to expand in the developing world, giving it the biggest and most dispersed emerging markets business in the confectionery industry. In fact, Cadbury's business in rapidly developing markets was a major driver in Kraft's $19.5 billion takeover bid for the British candy maker. Last year, 60 percent of the company's growth came from emerging markets. "That means that my world as CIO does not solely revolve around big economies of North America, Europe, Australia and New Zealand," explains Shurts. "Emerging markets are not afterthoughts to me. They demand-and get-a lot of my attention." Shurts isn't alone. In industries ranging from consumer goods and agriculture to banking and electronics, multinationals are investing more in the Middle East, Asia, Eastern Europe, Africa, and South America. Now imagine developing a single system that manages reinsurance business processes for numerous offices around the world-offices whose staffs speak different languages, are in different time zones, and just might be stuck in their ways as to how they manage their business. It's a challenge that could overwhelm you if you tried to tackle it all at once instead of breaking it into small pieces. "Companies are going to tap those markets as mature markets stagnate or decline," says Bob Haas, a partner and vice president with A.T. Kearney who leads the consultancy's strategic IT practice for North America. "And CIOs are gaining more and more responsibility for those emerging markets since IT is one of the most globally integrated corporate functions." The work amounts to much more than just bringing some distant locations into the IT fold. Setting up shop in Bogotá or in Bursa, Turkey, is clearly a different proposition than supporting a new office in Boise, Idaho, or Brussels. Infrastructure limitations, local talent supply, unfamiliar business and cultural norms, limited vendor support, and restricted budgets require creative solutions. At the same time, there is pressure to integrate these often one-off extensions of the company into the global infrastructure. Bobby Cameron, vice president and principal analyst with Forrester Research, got a call recently from the chief information officer of a U.S.-based agribusiness building a new manufacturing plant in a tiny Peruvian fishing village. "It's 250 miles away from Lima. There's no water. There's no electricity. There's nothing there," Cameron says. "What's that about?" It's about having an ideal port for moving goods throughout South America. All the chief information officer has to do is figure out how to build something from nothing without many of the support structures-vendors, a trained workforce, infrastructure-he'd have in a mature market. "And once you get through all of that," says Cameron," then you have to figure out how to connect it to the global infrastructure." It's an extreme example, but supporting business in developing regions rarely lends itself to cookie-cutter IT. Moreover, the importance of emerging markets today means IT leaders can't fob off secondhand technology to non-Western locations. "The strategy of many corporations was basically to develop things in major markets then hand down those solutions to the emerging markets," Shurts says. "Hey, this laptop is two years old, maybe we pass that down, too." That's not the case at Cadbury, explains Shurts. "I have to deliver strategies that address the specific needs of emerging markets. It requires some creativity and new thinking." Understanding your company's business model for developing markets is critical. "Will there be manufacturing? Will you distribute from this market? How will your sales force engage customers and what is their role while engaged?" says Ed Holmes, vice president of Global IT for Stiefel, an $812 million dollar skin care company, acquired by Glaxo SmithKline, that operates in 28 countries. You may end up providing technology and services similar to those you supply in established markets, Holmes adds, "but you must challenge the baseline assumptions in order to ensure that your solution will fit the market both economically and culturally." Obstacles vary by location. Many developing markets face disadvantages after decades of having closed economies, including limited exposure to global business practices. But two overriding-and sometimes conflicting-considerations for global CIOs are cost structure and scalability. "From an IT perspective, these markets need to grow at an investment rate that makes sense for them," Shurts explains. "What they need today may not be what they need tomorrow. And tomorrow might actually mean tomorrow." In its early days, an operation in an emerging market country may not need, nor could it support, the complexity and cost of a full-fledged ERP system. "Then, suddenly, through organic growth and an acquisition, everything changes and you do need the disciplines and features that an ERP system provides," Shurts says. For instance, there's little support for emerging market needs among IT vendors, which means global CIOs and their teams go it alone, for the most part. Traditional solutions from IT vendors can be "too heavy and expensive for emerging markets," says Shurts. "It is very easy and neat and comfortable to walk around with that developed market mind-set. There's a whole industry of people who would love for you to do that-hardware, software companies that have built their businesses focused on the developed market," Shurts says. "It's much harder to get out of that comfort zone." Typical of global CIOs, Shurts finds that exciting. "Many of them enjoy starting from scratch," says Forrester's Cameron. "They can't turn to IBM or SAP and have them solve all of their problems." Cadbury does try to take advantage of corporate-level IT investments where possible. "We can leverage some systems from our developed markets and adapt that to emerging markets at a much lower cost," Shurts says. SAP instances, for example, where 80 percent of the investment has been made in a more established market, may be used in a developing market, even if that new market can't support all the same capabilities, has different legal or regulatory needs, or requires unique functionality. The Australia instance has been leveraged in parts of Asia; the Britain/Ireland instance has been reused in South Africa; and the initial instance in Brazil is being recycled for use throughout Latin America. Other IT priorities just don't apply. In the United States, Canada, and Australia, Cadbury IT is laser-focused on trade promotion management. Sophisticated tools are used to analyze the amount of money Cadbury spends and types of corporate programs it uses to promote its products. None of that will do a lick of good in South America or India, where the mom-and-pop shop still rules, and there are no big promotions to manage with Wal-Mart. Rather, the focus is on lower-end tools to determine the right delivery routes, make sales calls, and take orders. The good news is that there are similarities across the company's locations. "Route-to-market tools, sales force automation and supply chain planning are important to all emerging markets," Shurts says. Every country has its own particular problems. In some, the concept of urgency-embedded in the workplace culture of established markets-is foreign. In others, it is about infrastructure, or lack thereof. For instance, notes Shurts, most countries in Africa still struggle with broadband access. This problem will be alleviated somewhat by submarine cable projects on either side of the continent, scheduled to go live this fall, but "that's the most frustrating thing for us," Shurts says. "We do a lot of satellite in Africa and with our global applications-HR, finance. You'll notice slower response rates and latency." Importing hardware and software may be the best way to go in Dubai and Abu Dhabi. But CIOs managing IT in Brazil-including Shurts and Holmes-know that heavy tariffs there mean it's cheaper to buy everything in-country. "Our standard procurement solution doesn't really work there," says Holmes. "The only way you learn about these country specific challenges is by engaging with other CIOs, talking to your HR leads in those locations and paying attention to previous challenges in other business functions." "You have the ability to completely rethink the norms. This lets you create new solutions that would not have otherwise been viable," says Holmes. "The best opportunity is learning something that can then be translated back to a larger, more costly country." Less-developed regions of the world can also serve as testing grounds for new technologies or processes, says Haas, because the IT environment is less complex. It's a big job, but lots of CIOs are going to have to do it, says Haas, who thinks developing markets experience is becoming a rite of passage for tomorrow's multinational CIOs. "Because we're a business with a very big presence in emerging markets, I am faced with the challenges of supporting IT in developing markets more than my peers," says Shurts. "But for others, it's coming. It's absolutely coming."

CASE STUDY QUESTIONS

1. What are the challenges faced by the CIOs mentioned in the case? Group them into categories and use examples from the case to define each.

2. The case mentions that the traditional approach toward emerging countries had been to develop technology in the corporate offices and then hand them down to satellite operations. How has that changed, as discussed in the case?

3. "IT is one of the most globally integrated corporate functions." How is IT different from other business areas when it comes to global integration? Why do you think this is the case?