This article was co-authored by Giacomo Cantu, Douglas Tsang, Chris Mulh, Annette Goodfellow, Aditi Mahajan, and Udayan Maithani of AlixPartners along with Matt Jones, Chief Product Officer at Cielo.
For years, tech companies adopted a growth-at-all-costs philosophy, fighting each other for top talent to drive scale, entice investors, and ultimately turn a profit. However, as economic uncertainty pervades and companies feel the resulting pressure, many question the efficacy of this strategy. The 2024 AlixPartners Disruption Index, a survey of more than 3,000 global executives, sheds light on the disruptive concerns keeping leaders up at night. 63% of CEOs worry their company can't keep up with technological advancements, while 77% of technology executives say it is increasingly difficult to know which disruptive forces to prioritize.
It's becoming clear that tech companies may need to reverse the order and instead prioritize profitability and positive cash flow over growth. According to the 2023 AlixPartners tech industry survey report, this shift towards profitability is already underway—56% of tech executives prioritized profitability over or equal to growth over the past 24 months, but 74% plan to do so in 2024. For companies to pivot successfully, they'll need to revamp talent acquisition strategies to both reduce costs and increase quality hires.
AlixPartners, in tandem with leading global talent acquisition partner Cielo, believe enterprise software companies are most effectively tackling this challenge through their development of "global innovation hubs"—captive business models that leverage local markets with skilled, technologically advanced employees that continuously grow stronger as top academic institutions bolster the talent pool quality. Global hubs drive value-added projects around new product development, innovation, and other key pieces of CEO agendas—this is much more than relying on the outdated practice of using offshore employees for simple, transactional work. Those who enact a global innovation hub can expect:
- Superior talent acquisition: These hubs broaden access to leading talent pools and competitive markets. This makes companies more agile while mitigating risk and reducing hiring costs. India is a solid choice for placing global hubs, given its strong, sustainable talent pool.
- Superior talent performance: According to Cielo's analysis, global innovation hubs increase retention and engagement, leading to increases in productivity from employees who have access to high-impact workstreams such as product development and innovation.
- Superior business performance: As a result of the above, companies see an uptick in overall performance and innovation, with top- and bottom-line benefits. This boosts sales and profitability while improving customer outcomes.
The time to start considering adoption is now, as these hubs are not developed overnight. To determine readiness for global innovation hubs, companies must first assess their planning strategy and location fit and then enable hiring processes to ramp up teams. If these first two phases run smoothly, they can sustain success by empowering local teams to work independently with senior management.
AlixPartners and Cielo have witnessed industry leaders implement this approach to transform talent sourcing and achieve desired innovation and sustainability goals. For example, a PE portfolio company tapped into AI-related talent in Bangalore, India, by establishing a hub of nearly 500 data and tech services employees alongside a new 120-person team building bespoke AI and digital tools. This allowed the company to cost-effectively scale its tech solution functions from mid-size to full-scale.
With time, this strategy has the potential to transform not just enterprise software companies but the rest of the tech industry and other fields as well. Global innovation hubs could be particularly applicable to the automotive industry, given the vast operational footprint of manufacturers, which continues to expand with new EV technologies. We believe this talent strategy will prove an effective lever and drive revenue at a most needed inflection point—it's time to tap into the global talent supply.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.