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Project Management in Emerging Economies

This article tries to capture such differences seen between New York and New Delhi. Globalization has had multiple effects on emerging economies.

The per capita income has risen, and the underlying facets of project execution and delivery are subject to these changes in the economy. The emerging nations have provided relatively abundant low-cost, English-speaking labor that could deliver under tough constraints. In these circumstances, project management has been focused primarily on meeting the bottom line, as opposed to focusing on the other values and methodologies required for managing projects. However, the cost-driven outsourcing of earlier years has changed to value-driven outsourcing in more recent years.

While the overall goal of project management is to ensure successful delivery while adhering to project management principles as described in A Guide to the Project Management Body of Knowledge (PMBOK® Guide)—Fourth edition (Project Management Institute [PMI], 2008), another dimension is added by the constraints and culture in which the project itself is executed. Project management cannot provide the final required value to the project as long as “individual interests” (such as keeping down cost) are given higher priority than other aspects of the project. This difficulty is more obvious in emerging nations.

By Bharat Gera, PMP

I firmly believe that principles in project management should be adhered to that not only strengthen delivery, but also promote strong focus on issues causing such “individual priorities” to shape project executions—in some cases resulting in their only meeting deadlines or keeping costs low. Project management must be extended to address the special circumstances in emerging economies that may cause deviations from PMI principles.

Below are statistics on the share of the GDP in India by the IT/ITES (information technology–enabled service) sector (NASSCOM 2008):

Year Share of GDP1. 1998 US$4.8 billion ~ 1.2% of GDP 2. 2006 US$37.6 billion ~ 4.7% of GDP

Population employed: 1.3 million Total population: 1.15 billion

In a developing country such as India with a per capita GDP of US$1,000 (2008), just marginally less than the per capita deficit, the social and economic impact of employment is very high. The IT sector is largely driven by multinationals (in India, of the top 20 IT firms, 12 are multinationals, and among the top 200 firms, 34% are multinationals [Dataquest, 2008]).It is also true that high-end technology product development is still emerging in these markets, with growth being sustained heavily by the IT services sector.

In addition, good business school curriculum is not available to the majority of the management personnel responsible for offshore development (although multinational corporations do have expatriates that can help in overcoming some of the limitations this causes).

Project management as

traditionally envisaged can be

very different from that practiced

in regions of the world with

emerging economies. ”

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In the light of this, it cannot be denied that project management and the principles discussed in the PMBOK® Guide are not going to be exactly the same in both emerging and developed economies. The core principles of project management must be extended to meet the needs of emerging economies and its markets.

Consider, for example, scope management where the primary markets are either the United States or Europe. The scope of specifics will not be completely deciphered by project managers in emerging economies, and therefore these project managers must by default add distinct error factors in execution. This impacts time and quality. The power of the project manager itself is limited, and the focus is more on the delivery angle than on project management principles. Although projects are delivered, the quantum of effort is much greater. Nevertheless, the workforce in these economies is willing to undertake this greater effort, given the dire socioeconomic circumstances that we have described.

The only answer is to arrive at a model where project management standards (as discussed in the PMBOK® Guide) are extended to address these issues. Even basics such as organizational structure and design will be unclear, as these are actually matrices with dual solid-line reporting, leaving the project manager to the pressures of both the local seniority and offshore seniority.

A simple mathematical simulation of this model can be given as follows:

Project Management (PMBOK® Guide) Principles = PMI Principles +/- Δ Globalization Factor of Economy

Below are certain principles that can be modified in the context of emerging economies:

Cost ManagementThe major forces behind the actual investment of such economies are predominantly the percentage gains made by the investment. In other words, if the cost expenditure to corporate headquarters is half what it would be by investing elsewhere, that will be the primary driver for the investment.

Earned value calculations will have the advantage due to basic currency exchange between developing and developed economies. As intellectual property ownership of high technology is also based out of emerging economies, the whole concept of earned value management may need to take the geographic factor into account.

Comparative CPI = CPI Normalized over Exchange Factor and Local/Cultural Differences

Schedule ManagementSchedule management needs to be viewed with high sensitivity. When organizational designs are output-driven; the corporate headquarters align to strict market schedules to meet bottom lines. This is a perfectly correct business policy. Now the investments that are made in emerging economies carry strong weight for such market requirements.

In practice it is just not the scope of the work that determines the schedule, but also the quantum of recovery investment to the parent office that will pay the weight age for the schedule.

Actual SPI = SPI * Delta Geo-Economics Acceleration Factor

Note that here we have an acceleration factor driving schedules far ahead to meet the cost of investments. The core concepts of work breakdown structures, etc. are still equally relevant to project executions.

Quality, integration, communication management and so on have their own scope of deviations in emerging economies.

Risk ManagementThis can be by far one of the most critical differences between emerging and developed economies. There is a limited high-end talent pool that is sought by the competing multinationals. A high rate of attrition is a very big risk in project management. Risk mitigation as described in A Guide to the Project Management Body of Knowledge (PMBOK® Guide)—Fourth edition (PMI, 2008) is not completely sufficient for dealing with such situations. Although job rotation is helpful, competing for the same talent pool in these economies poses different challenges that probably need to be handled in a way similar to “portfolio investments” in investment economics. For instance, the Business Process Outsourcing (BPO) sector’s growth in India is primarily driven by recruitments in tier-three or tier-four cities, where the opportunities are seen as short, summer-vacation-money-making jobs. In fact there are distinct patterns of attrition that are observed, and the industry is geared to these patterns.

Although I have touched on only one facet of the risk management aspect, there are a multitude of issues requiring careful project management “intelligence,” such as high security risks, macroeconomic risks, and so on. (A complete discussion of these is beyond the scope this article.)

Business Valuation of Multinationals and the Nature of Global AcquisitionsIt is becoming more common for entrepreneurs of the IT services sector in emerging economies to make acquisitions in

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developed nations. It is the growth potential in the emerging economy and labor availability that drive the business valuation of these companies. In the light of economic analysis, business valuation using Discounted Cash Flow (DCF) is based on cash flows from a company primarily over the immediate future. The cash flows do increase, either by developed nations investing in emerging economies or by IT acquisitions made in developed nations.

The long-term repercussions of such developments will be a subject of debate. Nevertheless the immediate impacts on the project management principles used are of tremendous importance.

ConclusionWhile I strongly believe that the project management principles described in the PMBOK® Guide—Fourth edition (PMI, 2008) should be envisaged in every project execution,

we should consider the deviations that exist in the various economies and regions of the world. Over time, I hope a model emerges that considers a larger, world community.

About the AuthorBharat Gera is an advisory software project manager at IBM Corporation. He has been involved in project management of enterprise software and hardware projects over the past decade. He is a Project Management Professional (PMP®) holding an executive management degree from the Indian Institute of Management, Bangalore. He can be reached at bharat.gera@in.ibm.com.

Disclaimer: The views expressed are strictly the personal thoughts of the author as deemed applicable to major IT project execution in emerging economies.