The World Is Flat by Thomas L. Friedman
Destination-India • Christopher Columbus went to “India” and discovered America • The world is Round • Thomas L. Friedman went to Indiaand findAmerica. • The world is Flat
Globalization • Time period:1942-1800-Columbus’s Voyage • Open trade between the Old World and the New World, “Indians” • Force driving: Countries • Steam Power, Horse Power, Wind Power • World: Large to Medium
Globalization A macro view: Country to Country Affair • Where does my country fit into global competition? • How can I go global and collaborate with others though my country?
Globalization • Force driving: Multinational Companies • Went global for markets and labor • Decrease in Transportation Cost • Decrease in Communication Cost • Multinational Companies’ Affair • Where does my company fit into global economy? • How can I go global and collaborate with others though my company? • Individual Affairs • Where do I fit into global competition? • How can I, on my own, collaborate with others globally?
Infosys: software designing company • Infosys : Producing specific software programs for American or European companies • Virtual Meeting We could be sitting here, somebody from New York, London, Boston, San Francisco, and maybe the implementation is in Singapore, so the Singapore person could also be live here
Infosys Overview • End-to-end IT Consulting Services company • Pioneer of industry-defining Global Delivery Model • Most respected company in talent-rich India • Annual revenues of $ 754 Million for FY 03, Revenue of $216 Million for Q4 FY 03 • ~15,000 employees; 345 clients; 87.5% repeat business (for Q4 FY 03)
Outsourcing --- Tax preparation • Jerry Rao • Owner of an Indian accounting firm, MphasiS • MphasiS • Do outsourced accounting work from any state in America and the federal government • Have tied up with several small and medium-sized CPA firms in US • http://www.naukri.com/gpw/mphasis3/index.htm
Outsourcing --- Tax preparation US India Accountants Accountants SCAN DO the WORK A Computer Sever • Data protection and privacy • The Indian accountants • can see the data on his screen • cannot download or print out the data • are not allowed to take a paper and pen into the working place
Outsourcing --- Tax preparation • Can you imagine what will happen in a decade? • You will assume that your accountant has outsourced the basic preparation of your tax returns.
Outsourcing --- Reuter News Bulletins • Raw data • Speed matters • Not much skills • Analysis & Comments • Value-added work • skills • experiences • connections
Raw data • Outsourcing to India • Quality guaranteed • 20% discount on cost Outsourcing --- News Bulletins • By the summer of 2004, Reuters has 300 staffs in Bangalore, aiming eventually for a total of 1,500
Outsourcing --- Call Services • US Accent • UK Accent • Canadian Accent http://www.247customer.com/
Outsourcing --- Call Services Satellite • "24/7 Customer" call center • “Outbound”: selling everything, i.e. credit cards • “Inbound”: solving problems, i.e. lost luggage US India “Outbound” Operators “Inbound” Operators Customers
Jobs in Indian call center High-wage High-prestige Competitive 700 applications/day 6% are hired Currently, about 245,000 Indians are answering phones or dialing out to all over the world. Outsourcing --- Call Services
A manager of 24/7 said A lot of American industry has come into Bangalore I can work for a multinational sitting right here. In the flat world I can stay in India, make a decent salary, and not have to be away from families, friends, food, and culture. Outsourcing --- Call Services
Outsourcing --- Remote Assistant What can they do? • Information collection • PowerPoint presentations • Research
Outsourcing --- Remote Assistant Why choose them? • Efficient • Usually be done overnight • High Quality • Cheap • $1,500-$2,000USD/month • Fresh graduates’ salary are 3-4,000USD/Month in the U.S
Outsourcing --- Remote Assistant • Hire your assistant here http://www.b2kcorp.com/meetourpeople.html
10 Forces changed the World (1) 11/9/89 (Fall of the Berlin Wall) (2) Netscape (the internet) email, and web browsers (3) Work Flow Software (4) Open-Sourcing (In 2006, retitled 'Uploading') (5) Outsourcing (6) Offshoring (7) Supply-chaining (8) Insourcing (9) In-forming (10) Amplifying technologies, or "steroids"
Flattener 1: Berlin Wall • Constructed in 1961 • Built during the post World War II period of divided Germany • A long separation barrier between West Berlin and East Germany, • permanently closed the border between East and West Berlin for a period of 28 years
The Fall of Berlin Wall: 1989 NOVEMBER 9
How it helped flattening the world? • Liberated captive peoples of the Soviet Union • Free market capitalism and energies from people in India, Brazil, China • Away from centrally planned economies, toward free-market- oriented governance • Opened the way for more people to tap in others’ knowledge pools • Global view of future
Flattener 2: Netscape • Created the 1st mainstream browser and the whole culture of Web browsing for the general public • Netscape went public on 9th August, 1995 • The world has not been the same since
Digitization • Words, music, data, films, files, and pictures • Turned into bits and bytes-combinations of Is and Os • Stored on a microprocessor, or transmitted over satellites and fiber-optic lines.
How it helped flattening the world? • 1st broadly popular commercial browser to surf the Internet • Stimulated a massive growth in network • Student: download it for free • Individual: Free trial and encourage to buy • Company: Free trial for 90 days and encourage to buy
How it helps flattening the world? Netscape brought the Internet alive and made the Internet accessible to everyone • Internet-e-mail-browser phase Helped globalization!!!
Flattener #3 Work Flow Software How can these works operate? Ans: By internet How can they do this over the internet? Ans: Application of Work Flow Software
Example of Work Flow Software • Production of animated films via a global supply chain Recording session – near the artist, in NY and LA Design and direction – San Francisco Writer network – London, NY, Chicago, LA…… Animation and Editing – Bangalore and San Francisco
Flattener #3 Work Flow Software • Combination of PC and e-mail Window-enabled PC – ability to create and manipulate digital content likes words, data and pictures
Flattener #3 Work Flow Software • It also standardized the business process. • Internet connection • Internet banking
Suddenly more people from more different places found that they could collaborate with more other people on more different kinds of work and share more different kinds of knowledge than ever before. • We were not just able to talk to each other more, we were able to do more things together.
Work flow platform are enabling us to do for the service industry what Ford did for manufacturing. • We are taking each task apart and sending it around to whomever can do it best, and then we reassembling all the pieces back together at headquarters.
Flattener #5: Outsourcing • having another company perform some specific, but limited function reintegrating their work back into overall operation.
Flattener #5 Outsourcing • India
Flattener #5 Outsourcing Four stages: 1.Before mid-1990s • Have many talented engineers • From Indian Institutes of Technology • Cannot provide good jobs for them • excellent engineers go to America to work • Fiber-optics line built in 1996
Flattener #5 Outsourcing 2. Late 1990’s • The scare of Y2K bug • Urgently need computer remediation (Huge, tedious) • Only India get enough software engineers to complete this task. • Most important: at very low price
Flattener #5 Outsourcing 3. Early 2000 • dot com bubble had not yet burst • Engineering talent was scarce • Start to turn to Indian Companies →Delivery of complex system with great quality 4. After the dot com bust • American IT companies suffered in the boom • Reduce the cost for the same work • Increase outsourcing knowledge work to India • Can find surplus English-speaking engineers at any price
Research institute at Tsingtao could connect to Lucent’s computers in America over night. • No additional cost • In past, different countries, different things • Kids in India with a cheap Pc learn the same operating system that is running in some of the largest data centers in America.
What can be outsourced? • Any activity where we can digitize and decompose the value chain, and move the work around, will get moved around. 01101 Value chain 01101 01000 00100 11010 01011 01000 00100 11010 01011
What can be outsourced? • Goods are traded, but services are consumed and produced in the same place. • And you cannot export a haircut. But we are coming close to exporting a haircut, the appointment part. • What kind of haircut do you want? Which barber do you want? All those things can and will be done by a call center far away.
1960s-1970s • ‘eat all of your dinner. Kids in India could not have enough foods” • 2000s • ‘do your homework. Kids in India are waiting for your job.”
Flattener #6: Offshoring • Moves the whole factory to other countries produces the very same product in the very same way • Only with cheaper labor, lower taxes, subsidized energy, and lower health-care costs.
China • Every morning, a gazelle wakes up • It knows that it must run faster than the fastest lion or it will be killed • Every morning, a lion wakes up. • It knows that it must outrun the slowest gazelle or it will starve to death. • It does not matter whether you are a lion or a gazelle. When the sun comes up, you better start running.
Before joining WTO At 1977 • China first opened its tightly closed economy • An incredible market for export • Western manufacturers wanted to sell a great amount of goods to Chinese people • get a great loss
Before joining WTO Reasons of loss: • Not subject to world trade rules • Free to adopt Various trade and investment barriers • sheer bureaucratic and cultural difficulties of doing business in China
Before joining WTO At the beginning of 1980s • “why don’t we use china’s disciplined labor to make thing there and sell them abroad?’ • get profit • the interests of China's leaders • Risky • Policy may be changed in next day
China is threat, a customer, and an opportunity. • You had better internalize china • You break down your business and think about which part of the business you would like to do in china, which part you would like to sell at china, and which part you want to buy from china.
Fortune (2004) estimated that cheap import from china since the mid 1990s have saved Us roughly $ 600 billion • Japan can recover the recession • China is the number one importer of Japanese products.