The world is flat

For BPO practitioners, I recommend a great book called "The World is Flat, A Brief History of the Globalized World in the 21st Century" by Thomas Friedman, a three-time winner of the Pulitzer Prize. I call it BPO 101.

At first I thought I flunked my high school geography class where we learned that Magellan proved that the world is round. What Friedman really meant was that there is now a leveling of the playing field – where the small guys can compete with the big boys and the big boys can now move as easily as the small guys. The author cited 10 major forces that converged to make this happen; he called them "Flatteners."

Flattener 1. Fall of the Berlin Wall and Windows going up. 11/9/89 was the day the Berlin Wall fell, opening up a whole new world of previously captive people of the Soviet Union. Where there used to be centrally planned economies, democratic, consensual and free-market economies blossomed. No longer was autocratic rule welcome but open systems were required. India’s economy was one of the major economies transformed by this event. At the same time, Bill Gates’ Windows operating system was becoming ubiquitous, as the PC had grown to a critical mass since its launch in 1982. The author also noted the eerie coincidence to that other date: 9/11/2001.

Flattener 2. 8/9/95, Netscape went public. This was both a boon and a bust to the world. Netscape was a browser that helped convince people that you did not have to be a rocket scientist to be part of the Internet. Building on the existing platform of millions of installed PCs, Netscape had an instant family of users. The stock closed with double the opening price. This event led to the Internet bubble and with it the arms race by fiber-optic cable companies like Global Crossing and others. Because of overcapacity, these fiber companies would later fail but their fiber-optic highways stayed to continually and dramatically drive down the cost of both voice and data communications.

Flattener 3. Work flow software. Given the economies of scale of millions of PC users and a common browser to exchange e-mail and pictures and messages, brilliant computer scientists developed applications that worked together. They developed computer ordering systems, where Boeing can buy from its thousands of suppliers for its hundreds of customers. They developed applications allowing doctors in Bangalore, India to read x-rays taken in Bangor, Maine. They developed applications like PayPal, where eBay buyers once needed checks to pay for each purchase, now they only need an e-mail. Transactions are now digital and automatic, and this will continue to evolve.

Flattener 4. Open sourcing software. The author talked about how IBM, the billion-dollar computer company with all its billion-dollar research and development budget, could not out-program a free shareware (software that is for sharing) like Apache for Web server management. The open-source community is a community of thousands of programmers who agree to share their software discoveries for free, which leads to just better software for the world.

Flattener 5. Outsourcing Y2K. Starting in 1998, the Y2K craze consumed most industrial nations but there was not enough programming talent in the US to solve the Y2K issue. India produces thousands of programmers from its 1951 decision to build IIT (Indian Institutes of Technology). With the convergence of the overcapacity in fiber-optic highways and the need for Y2K programmers, India was able to get through the door to US clients to show their programming prowess cheaply. In marketing a service like IT programming, once in the door, it is hard to change programmers. India just kept expanding its service offerings to include other IT-enabled services like call center and BPO.

Flattener 6. Offshoring. China used to be just a destination of lower cost labor. But ever since Deng Xiao Ping’s vision of "to be wealthy is glorious," China is no longer content in being a factory worker. China is now driving toward the higher end of the value chain through companies like TCL, the Chinese consumer electronics firm which bought Thomson, the maker of Zenith TVs, for its brand and technology. There were recently aborted forays into buying Unocal and Maytag by Chinese companies. They will not stop.

Flattener 7. Supply chaining. Walmart is the retailer that delivers quality goods at super low prices. Using its leverage as a big buyer, it not only reduces cost by asking for a lower price but also uses supply chain efficiencies. Supply chaining is looking at every step of the supply chain to squeeze out the systematic cost to reduce the landed cost of a product. This would include a higher level of coordination with your suppliers. Walmart represents a big chunk of America’s economy, which means the rest of America is now focused on supply chaining as well.

Flattener 8. Insourcing. UPS (United Parcel Service) used to deliver parcels dependably. Today, it has evolved into a third-party logistics company with outsourcing services. For example, UPS not only picks up and delivers Toshiba laptops but now also repairs them at its Louisville hub using Toshiba-certified UPS repair teams. Insourcing is the outsourcing of various segments of the supply chain to companies like UPS where small companies cannot afford the fully integrated supply chain of WalMart.

Flattener 9. In-forming. With Google, Yahoo, MSN and other Web-based services, the individual is given the tools to increase his knowledge supply about anything in the world. The individual is empowered to serve himself from a knowledge cafeteria. A clear statistic of this strong direction for knowledge is that Google used to just process 150 million searches per day three years ago; today it processes one billion searches.

Flattener 10. The Steriods. Digital, mobile, personal and virtual. Wireless has released the otherwise tethered PC. The mobile phone and the PDA (personal digital assistant) are enabling the individual to access applications and the Web through a more mobile appliance and with a reduced entry cost than a PC. Ubiquity will only lead to bigger user base that will lead to more advances in applications. From B2B (business-to-business) applications, there will be more P2P (person-to-person) applications like eBay. In fact, there is now a P2P betting site which may soon be called the eBay of betting (check www.xchangebet.com). What will they think of next?

The author concludes that with the convergence of all the 10 flatteners, and with three billion new participants from India, China and Russia, the world will be a more competitive place. The writer is American, and he is concerned that America is falling behind this ever-flattening world in terms of bandwidth infrastructure, declining math and science scores of young Americans, and legislative myopia toward outsourcing. He writes that China and India are soon catching up if America does not get its act together.

If America is behind, then where is the Philippines? The Philippines is rich in natural resources and human capital. Our workers are in demand abroad. Why then are we behind Singapore, Hong Kong and Taiwan, which have no natural resources to talk about?

My Two Cents. There is an African saying which goes: "Every morning in Africa, a gazelle wakes up. It knows it must run faster than the fastest lion or it will be killed. Every morning a lion wakes up. It knows it must outrun the slowest gazelle or it will starve to death. It doesn’t matter whether you are a lion or a gazelle. When the sun comes up, you better start running." Unfortunately, the Philippines is not even crawling.

My Second Two Cents. Many thanks to Nokia and this paper for being sponsors of the Michael Buble concert last Oct 12.

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Dickson Co is the CFO (C is for Cheap) for Dfnn, Intelligent Wave Philippines and HatchAsia.com. For comments or suggestions, e-mail [email protected].