In the early 2000s I built Morgan Stanley's global capability center (GCC) in Mumbai. With a small mission team helping me, we went from zero to 400 seats in less than nine months. After that I ran the firm's global offshore strategy for about a year and a half.
People hear 400 seats and assume we were buying people. My “seat” definition was about two things: (i) what we could get done by reconfiguring our workflows without recreating a Western office structure and (ii) outcome-driven mindset. However, it was driven more by labor arbitrage, for sure.
What labor arbitrage really meant
The idea was simple. An analyst or engineer in Mumbai cost a fraction of one in New York. That gap paid for the whole build. The seats were how the gap showed up on a spreadsheet.
Our whole industry grew up on that gap. Buyers like me needed a way to compare one bid with another, so vendors learned to price by the head. The FTE was a convenience for everybody.
Over twenty plus years that convenience became the product. Whole careers were built on selling it and staffing it.
A new gap has opened
AI is a new arbitrage. It does not need the seats.
The gap now sits between work done by people and work done by people with AI beside them. If I were in that buyer's chair today, that is the gap I would chase. I chased the Mumbai gap the same way twenty years ago.
So picture the vendor who walks in still selling the old unit. Forty people for twelve months, priced off a rate card. The buyer is polite. He is also already talking to someone who is offering him the new gap.
What a buyer wants to hear
A buyer at a bank today thinks in his own numbers. He wants to know how many days it takes to close the books. He wants to know how much manual work is still left in operations.
The leaders who keep their accounts in the next few years talk that way. They show the buyer the new gap before a competitor does. Then they measure it in the client's own numbers.
My only point here is this. The arbitrage was the product from day one, and the seats were just how we counted it. Leaders who see that can build the next 400 of something. My guess is it will not be seats.
Three questions for this week
If your biggest client's buyer sat across from you tomorrow, what new gap could you show him?
Which of your offers is still sold by FTE out of habit?
Who on your team can talk about the client's results in the client's own words?
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Raju Panjwani | Founder of Live Masterminds, Inc.
I was a Managing Director at Morgan Stanley for 18 years. I now work with senior leaders in IT services and technology consulting, on becoming the leader the business now needs.