Anti-globalization rhetoric is circulating and gaining volume at present. However, investment in education plus a localism approach to globalization is benefiting southern Europe, many of its citizens, local economies and the CIOs building digital hubs in Portugal, Spain and Greece.
So is it time for other countries and local communities to sit up and learn? And should CIOs be looking to southern Europe to deliver digital capabilities? CIOs and industry experts share their insights.
Barcelona, Lisbon, and Thessaloniki have all become homes to digital hubs for Danone, Carlsberg and insurance firm Chubb respectively. Launched in 2022, the Danone digital hub in Barcelona is a return of the native for the fast-moving consumer goods (FMCG) firm that was founded in the city before moving to France. Vice President for Global Technology at Danone Yalda Mirzai says of the hub:
What we have now is a digital team that is part of the commercial function, as well as a data team. These are delivering digital outcomes for sales, marketing, e-commerce, customer engagement, health tech and specialized nutrition.
Mirzai reveals that digital hubs are centered around business outcomes, something CIO Jawaz Illavia also focused on when he was VP Digital for Carlsberg, the brewing firm and set up a digital hub in Portugal's capital Lisbon:
In 2017, we didn't have the digital and data skills; we had the traditional technology skills. We looked at options from our home country, Denmark, to various other cities around Europe and realized that if we were to scale the teams, we would have to choose somewhere that was both cost effective, but also had a growing pool of talent.
The demand for digital transformation is leading CIOs to explore new horizons. As Chubb Vice President and Global Chief Information Officer Shekar Pannala said when opening a new hub in Greece:
As we look to further expand the capabilities and capacity of our technology organization, Thessaloniki offers what we are looking for: a large and growing pool of technology talent, proximity to the important markets across Europe and a welcoming business environment.
The keywords here are "large and growing pool of technology talent", which Greece, Portugal and Spain have. Mirzia says:
We knew that Barcelona is really rich in digital talent, it is also becoming an FMCG hub.
Pannala at Chubbs adds:
To build a strong pipeline for talent, we will be partnering with local technology firms and academic institutions to find candidates who want to join a company with great career growth opportunities and where they will have the ability to make an impact.
For Illavia at Carlsberg, he says the Lisbon digital hub reduced the average age of the technology department by 10 years and adds that these cities have further connections to talent pools. In the case of Portugal, the growing number of digitally skilled Brazilians keen to work in Lisbon.
Barcelona, Thessaloniki and Lisbon have long been coveted tourism destinations, and this is beneficial to CIOs - digital talent want to live and work in nice surroundings. In addition, the CIOs report that business line peers enjoy visiting and working in these cities. Illavia says:
Some people think it is a bit of a jolly, but that lifestyle element is really important and there is a really innovative culture in Lisbon.
Mirzai at Danone agrees and adds:
Since we set up the Barcelona hub, it has become a home away from home for many of our global teams, and we get a lot of productivity out of the center.
It is not Silicon Valley, but it has that same sense of open space, and people feel energized as people experience the quality of life. I find I get so much done when I am there, and I don't believe this is a honeymoon period. We have hired subject matter experts that are masters of their trade.
The CIOs report this is benefiting recruitment, as Illavia says:
Lisbon is a great place to live and attract people. Without being disrespectful, it’s easier to convince, for example, a brilliant UX specialist from Spain or France to move to Lisbon, than it would be to get them to move to somewhere in eastern europe.
As global cities within the European Union, this boosts recruitment, according to Mirzia:
Barcelona is a great city, very multicultural and therefore inclusive when it comes to hiring as people from talent centres like Portugal and Brazil were already residents of Spain when we hired them. So the value for money is very high.
Following the banking crisis of 2008, which hit Spain, Portugal and Greece hard, the countries took a long-term view when it comes to education. Whilst some nations opted for austerity and real-term cuts to education over the last 12 years, the southern European countries backed their youth and ensured they had the skills to entice organizations to invest in their country and provide jobs. Tiago Azevedo, CIO for Low Code technology firm OutSystems is based in Lisbon, where OutSystems was formed and has seen the benefits of this investment. He says:
We have really great engineering schools, and that is being recognized around the world, and the government is still investing in education. The government has also done a good job of promoting the country as tech-friendly.
Recently Portugal's Prime Minister António Costa announced support for higher education students, including €25 million for institutions and a 10% increase in the number of available scholarships. In a speech, Costa said:
The world, Europe and Portugal face a serious inflationary phase. It affects the functioning of the institutions, the ability of families to keep their children studying and of the children themselves to keep studying. There will also be an extraordinary reinforcement of the increase of all scholarships by 10% as well as a five percentage point increase in scholarships handed out to displaced students.
Azevedo adds that this isn't only benefiting Lisbon:
There are also good technical colleges in Porto and Braga. Locally there are also good technical schools, and the local government creates incentives for firms to establish themselves there through access to buildings and collaboration with education.
People value working for a global company with a good local high quality of life.
Andy Palfrey, a founding partner with This Partners, which advises CIOs and CEOs on nearshoring and outsourcing, discovered during a project for a client that Barcelona, Madrid and Estonia's Tallinn have the highest percentage of city population with tertiary education of ISCED (International Standard Classification of Education) levels five to eight - the top levels.
Danone's Mirzia says of working with Spain:
Spanish people have a very high value for university education, so you have access to a highly educated workforce. This is also leading to a booming startup culture.
Both Azevedo and Illavia add that being the host of the Web Summit has benefited Portugal and helped shape the image of Portugal as a tech-centric nation.
Talent has to deliver business outcomes, though, and the CIOs are reaping the rewards; Mirzai says Danone's Barcelona hub has developed scalable content management, customer relationship management (CRM), loyalty and omnichannel programmes. Whilst Illavia's Lisbon team took over a previously outsourced B2B e-commerce service that was disliked by the hospitality sector and, within 18 months, was generating £250 million of revenue on a new platform. He says:
We started with a broken service and by bringing it internally and setting up the Lisbon team for success, we leapfrogged many of our competitors by building an industry-leading platform.
Spinning up a hub
So what do CIOs need to know about building a digital hub? Palfrey says:
Clients will need to consider carefully how talent acquisition and retention is undertaken and how to create a centre where top talent "wants" to work, rather than simply "goes" to work. A significant challenge will also be to avoid the problems encountered by many of the Indian pure play organisations over the last 15 years, where employee mobility drove unexpected levels of attrition, wage growth and value leakage.
Most organizations have a blind spot where the notion of building a hub is to locate it where the business is already successful.
As we have detailed, organizations are successful when they understand the talent pool available, the commitment by the city or nation to develop that talent and its openness to partnering with the CIO. Illavia adds:
We looked at 14 cities from London to Berlin via Poland, and we did a lot of analysis on the number of STEM universities, product, engineering, data, UX and design talent. We also analysed our ability to recruit.
A lesson and success for Carlsberg was that it realized it had to embed itself into Lisbon and recruit from there. CIO Illavia says other organizations that tried to build their hubs in Portugal from outside of the country struggled to attract the talent. He says:
You have to really get your tentacles into the local technology culture. You need to build it from the inside. Sounds obvious, but not always done.
We were not the first movers and that matters when you are selling the digital hub to the board.
That last point, which Mirzia also raised, is vital; boards need reassurance that a hub in a far-flung sunny city will create business benefits. This also makes leadership demands on the CIO. Both CIOs state that it is vital to ensure the digital hub is well connected to the central organization, that members of the leadership team are present and involved, and that a shared culture between the hub and the central business exists.
Globalization and technology go hand in hand. All of us in the technology sector have benefited from the international nature of our roles, partners and clients. There are risks to this globalization; Azevedo at OutSystems says he is already seeing US firms using Portuguese talent as remote resources, which saves the US firm money, but places inflationary pressure on the digital hubs and tech firms that invested in Portugal. That inflation filters down the economy, too. Reuters recently reported on housing issues in Portugal as those outside of the technology sector struggle to find affordable homes for their families. Technological progress must always benefit a society wider than those of us in tech.
The localism and investment in education that southern Europe has made is an example to other nations and local communities. As diginomica has detailed, the skills shortage is having a real impact. If nations choose not to invest in education, then they will fall behind, whilst those fortunate to afford or access education will leave for other nations. The digital hubs of southern Europe have open arms to talent - and to CIOs.