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California and the West

Cisco's executive migration

Silicon Valley firm is sending some higher-ups overseas, a move that others may follow. Some fear a U.S. brain drain.

January 12, 2007|Rachel Konrad | The Associated Press

SAN JOSE — Wim Elfrink's climb up the corporate ladder has taken him from Holland to France, Italy, Switzerland and the United States.

But his latest promotion will take the Dutch polyglot far from his Western comfort zone. As the chief globalization officer at Cisco Systems Inc., Elfrink is taking his wife, two daughters and the family dog from suburban Silicon Valley to Bangalore, India.

"My mother-in-law said to my wife, 'What did you do to deserve this?' " said Elfrink, who was scheduled to depart Sunday for a luxury home he's leasing in the southern Indian tech hub. "I just tell people that I want to be where the innovation is."

Elfrink, who reports directly to Cisco Chief Executive John Chambers, is the vanguard of one of the tech industry's most ambitious globalization campaigns.

The 50,000-person company wants 20% of its senior managers working at the proposed Cisco Globalization Center in Bangalore by 2010. The executives will be a mixture of rising stars from San Jose and Bangalore and talent plucked from acquisitions and competitors worldwide.

International business experts say Cisco's executive migration is a shrewd move that should give high-ranking employees crucial insight into one of the world's fastest-growing economies.

Will Cisco successfully pull it off? Does the move foreshadow a brain drain of top talent from the United States?

"From John Chambers' point of view, it makes perfect sense," said Vivek Wadhwa, adjunct professor of globalization and engineering at Duke University. "As an academic and an American, I'm worried. Too much is happening too fast, and the U.S. could lose the ability and insight it takes to develop the next Internet or other big phenomenon."

Hundreds of Silicon Valley companies -- including Oracle Corp. Yahoo Inc. and obscure start-ups -- are expanding in Asia's emerging economies. Under pressure from investors and venture capitalists to slash costs after the 2000 dot-com crash, some companies farmed out entire departments -- software development, data analysis, even research and development -- to developing countries, where workers earn a fraction of their American counterparts' pay.

But top executives such as chief information and technology officers rarely saw their own positions moved halfway around the world -- in part because they typically command six-figure incomes and lucrative compensation packages no matter where they're living. Relocation costs and "hardship" allowances mean most companies pay more for executives to live in developing countries than near U.S. headquarters.

The executive migration at Cisco -- Silicon Valley's most richly valued company based on market capitalization -- signals that moving resources to far-flung parts of the world has evolved from cost arbitrage to strategic imperative. Other companies will probably mirror Cisco's strategy, said AnnaLee Saxenian, dean of the School of Information at UC Berkeley.

"In the past, executives assumed that managers could just set up shop in Bangalore and it would work just like it would in Cupertino or San Jose, only cheaper -- but in fact there are snags," she said. "People are finally realizing that the only way to create cultural capabilities, linguistic skills and personal social relationships is to move executives abroad."

IBM Corp. has about 150 executives living in emerging markets, including 35 in India and 89 in China. Last summer, the Armonk, N.Y.-based technology company moved its Global Procurement office from Somers, N.Y., to Shenzhen, China, and IBM Vice President John Paterson moved with it.

Even companies that aren't sending American executives packing acknowledge that a long-term stint abroad may soon become a requirement for reaching the corporate pinnacle.

At online auctioneer EBay Inc., CEO Meg Whitman said the San Jose-based company was increasingly looking to its foreign offices for rising stars. Whitman is modeling EBay after Proctor & Gamble Corp., where she serves on the board and 17 of the top 30 executives have international experience.

"What we're trying to do is to bring international talent to San Jose, not the other way around," Whitman said in a phone interview from Shanghai. "But you have to have a leadership team that's global, and that's what we aspire to be."

Cisco's initial deployment of executives -- Elfrink and seven who report directly to him -- will have immediate ripple effects in San Jose.

Chambers usually holds a conference call with top executives Fridays at 3 p.m. Pacific time -- the middle of the night in Bangalore.

"Now whenever John plans a meeting, he will have to think about me," Elfrink said. "More broadly, all executives at Cisco and our partners will have to think about accommodating the entire world."

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