Offshore Outsourcing in the Flat World

he World Is Flat: A Brief History of the Twenty-First Century is an international bestselling book by Thomas L. Friedman that analyzes globalization, primarily in the early 21st century. The title is a metaphor for viewing the world as a level playing field in terms of commerce, where all competitors have an equal opportunity. As the first edition cover illustration indicates, the title also alludes to the perceptual shift required for countries, companies and individuals to remain competitive in a global market where historical and geographical divisions are becoming increasingly irrelevant.

The book was first released in 2005, was later released as an "updated and expanded" edition in 2006, and yet again released with additional updates in 2007 as "further updated and expanded: Release 3.0." The title was derived from a statement by Nandan Nilekani, the former CEO of Infosys.

A free audiobook download was available after registration on the author's website until August 11th, 2008 as a promotion of the author's new book, Hot, Flat, and Crowded.
Contents
[hide]

* 1 Summary
o 1.1 Ten flatteners
o 1.2 Triple convergence
o 1.3 Proposed remedies
* 2 Criticisms
* 3 Editions
* 4 References
* 5 See also
* 6 External links
o 6.1 Reviews

[edit] Summary

In the book, Friedman recounts a journey to Bangalore, India, when he realized globalization has changed core economic concepts.[1] He suggests the world is "flat" in the sense that globalization has leveled the competitive playing fields between industrial and emerging market countries. In his opinion, this flattening is a product of a convergence of personal computer with fiber-optic micro cable with the rise of work flow software. He termed this period as Globalization 3.0, differentiating this period from the previous Globalization 1.0 (which countries and governments were the main protagonists in) and the Globalization 2.0 (which multinational companies led the way in driving global integration).

Friedman recounts many examples of companies based in India and China that, by providing labor from typists and call center operators to accountants and computer programmers, have become integral parts of complex global supply chains for companies such as Dell, AOL, and Microsoft. Friedman's Dell Theory of Conflict Prevention is discussed in the book's penultimate chapter.

Friedman repeatedly uses lists as an organizational device to communicate key concepts, usually numbered, and often with a provocative label. Two example lists are the ten forces that flattened the world, and three points of convergence.

[edit] Ten flatteners

Friedman defines ten "flatteners" that he sees as leveling the global playing field:

* #1: Collapse of Berlin Wall--11/'89: The event not only symbolized the end of the Cold war, it allowed people from other side of the wall to join the economic mainstream. (11/09/1989)
* #2: Netscape: Netscape and the Web broadened the audience for the Internet from its roots as a communications medium used primarily by 'early adopters and geeks' to something that made the Internet accessible to everyone from five-year-olds to ninety-five-year olds. (8/9/1995). The digitization that took place meant that everyday occurrences such as words, files, films, music and pictures could be accessed and manipulated on a computer screen by all people across the world.
* #3: Workflow software: The ability of machines to talk to other machines with no humans involved. Friedman believes these first three forces have become a "crude foundation of a whole new global platform for collaboration."
* #4: Open sourcing: Communities uploading and collaborating on online projects. Examples include open source software, blogs, and Wikipedia. Friedman considers the phenomenon "the most disruptive force of all."
* #5: Outsourcing: Friedman argues that outsourcing has allowed companies to split service and manufacturing activities into components which can be subcontracted and performed in the most efficient, cost-effective way.
* #6: Offshoring: The internal relocation of a company's manufacturing or other processes to a foreign land in order to take advantage of less costly operations there. China's entrance in the WTO allowed for greater competition in the playing field. Now countries such as Malaysia, Mexico, Brazil must compete against China and each other to have businesses offshore to them.
* #7: Supply chaining: Friedman compares the modern retail supply chain to a river, and points to Wal-Mart as the best example of a company using technology to streamline item sales, distribution, and shipping.
* #8: Insourcing: Friedman uses UPS as a prime example for insourcing, in which the company's employees perform services--beyond shipping--for another company. For example, UPS repairs Toshiba computers on behalf of Toshiba. The work is done at the UPS hub, by UPS employees.
* #9: In-forming: Google and other search engines are the prime example. "Never before in the history of the planet have so many people-on their own-had the ability to find so much information about so many things and about so many other people", writes Friedman. The growth of search engines is tremendous; for example take Google, in which Friedman states that it is "now processing roughly one billion searches per day, up from 150 million just three years ago".
* #10: Wireless: Personal digital devices like mobile phones, iPods, personal digital assistants, instant messaging, and voice over Internet Protocol (VoIP).

[edit] Triple convergence

In addition to the ten flatteners, Friedman offers "the triple convergence," three additional components that acted on the flatteners to create a new, flatter global playing field.

1. Up until the year 2000, the ten flatteners were semi-independent from one another. An example of independence is the inability of one machine to perform multiple functions. When work-flow software and hardware converged, multiple functions such as e-mail, fax, printing, copying and communicating were able to be done from one machine. However, around the year 2000, all the flatteners converged with one another. This convergence could be compared to complementary goods, in that each flattener enhanced the other flatteners; the more one flattener developed, the more leveled the global playing field became.
2. After the emergence of the ten flatteners, a new business model was required to succeed. While the flatteners alone were significant, they would not enhance productivity without people being able to use them together. Instead of collaborating vertically (the top-down method of collaboration, where innovation comes from the top), businesses needed to begin collaborating horizontally. Horizontalization means companies and people collaborate with other departments or companies to add value creation or innovation. Friedman's Convergence II occurs when horizontalization and the ten flatteners begin to reinforce each other and people understand the capability of the technologies available.
3. After the fall of the Berlin Wall, countries that had followed the Soviet economic model—including India, China, Russia, and the nations of Eastern Europe, Latin America, and Central Asia—began to open up their economies to the world. When these new players converged with the rest of the globalized marketplace, they added new brain power to the whole playing field and enhanced horizontal collaboration across the globe. In turn, Convergence III is the most important force shaping politics and economics in the early 21st century.

[edit] Proposed remedies

Thomas Friedman believes in order to fight the quiet crisis of a flattening world the United States work force should keep updating its work skills. Making the work force more adaptable, Friedman argues, will keep it more employable. He also suggests that the government should make it easier to switch jobs by making retirement benefits and health insurance less dependent on one's employer and by providing insurance that would partly cover a possible drop in income when changing jobs. Friedman also believes there should be more inspiration for youth to be scientists, engineers, and mathematicians due to a decrease in the percentage of these professionals being American.

[edit] Criticisms

In a 2007 Foreign Policy magazine article, Pankaj Ghemawat (professor at Harvard Business School), argued that ninety percent of the world's phone calls, Web traffic, and investments are local, suggesting that Friedman has grossly exaggerated the significance of the trends he describes: "Despite talk of a new, wired world where information, ideas, money, and people can move around the planet faster than ever before, just a fraction of what we consider globalization actually exists".[2][3] However, criticizing the tiny number of participants engaged in flattening the world fails to note their out of scale significance as witnessed by UNCTAD's Handbook of Statistics 2008 and the challenges that inhibit the flattening process, which are noted in the 2008 Global Trade Report. A mechanism that exemplifies this enters into action when a global trader makes a phone call to India to order a product - this first call generates potentially hundreds more local phone calls to make and sell the product. The Flat World may be connected by a small and slowly expanding highway, but global trade happens at many scales of operation and the web has accelerated the process and taken it to grassroot levels.

The book is perceived to be written from an American perspective. Friedman's work history has greatly been involved with the New York Times and this may have influenced the way in which the book was written - some would have preferred a book written in a more "inclusive voice".[4]

Nobel Prize winning economist Joseph Stiglitz has also been critical of Friedman's book. In "Making Globalization Work", Stiglitz writes:

Friedman is right that there have been dramatic changes in the global economy, in the global landscape; in some directions, the world is much flatter than it has ever been, with those in various parts of the world being more connected than they have ever been, but the world is not flat [...] Not only is the world not flat: in many ways it has been getting less flat.

[edit] Editions

* 1st edition, Farrar, Straus and Giroux, 2005, ISBN 0-374-29288-4—The original jacket illustration, reproducing a painting called "I Told You So" by Ed Miracle, depicting a sailing ship falling off the edge of the world, was changed during the print run due to copyright issues.[5]
* Audio book, Audio Renaissance, 2005, ISBN 1-59397-668-2
* 2nd edition ("Updated and expanded"), Farrar, Straus and Giroux, 2006, ISBN 0-374-29279-5
* 2nd revised and expanded edition ("Further Updated and Expanded: Release 3.0"), Farrar, Straus and Giroux, 2007, ISBN 0-374-29278-7

[edit] References

1. ^ Warren Bass (April 3, 2005). "The Great Leveling". Washington Post. Retrieved on 2007-09-06.
2. ^ Pankaj Ghemawat (March/April 2007). "Why the World Isn't Flat" Foreignpolicy.com. (Subscription). Accessed 2008-04-03.
3. ^ Pankaj Ghemawat (October 2007). Why the world isn't flat. Growth Strategies. Accessed 2008-06-04.
4. ^ Peter Begley (2006). "The World Is Flat: A Brief History of the Twenty-First Century". (Accessed 18-04-2008).
5. ^ Fox, Justin (October 17, 2005). "A Painter Is Flat-Out Flimflammed". Fortune Magazine. Retrieved on 2007-10-21.

[edit] See also

* Outsourcing
* Globality
* World economy
* Passion quotient
* Murray, Warwick E. (2006). Geographies of Globalization. New York: Routledge/Taylor and Francis. ISBN 0415317991.
* Sirkin, Harold L.; James W. Hemerling; and Arindam K. Bhattacharya (2008). GLOBALITY: Competing with Everyone from Everywhere for Everything. New York, Business Plus. ISBN 0446178292.
* Wolf, Martin (2004). Why Globalization Works. New Haven: Yale University Press. ISBN 978-0300102529.

[edit] External links

* Video: Thomas L. Friedman at MIT talking about his book
* Summary of The World Is Flat - wiki summaries of the book's chapters.
* Friedman and The World Is Flat - a webliography on Friedman and debate & critics of the book. On Modkraft.dk/Tidsskriftcentret.
* Author's website

[edit] Reviews

* The World Is Flat at Metacritic
* The Great Leveling. Review by Warren Bass, The Washington Post. April 3, 2005.
* The Wealth of Yet More Nations. Review by Fareed Zakaria, The New York Times. May 1, 2005.
* Inside the new superpowers. Review by John Kampfner, Guardian Unlimited. May 15, 2005.
* Falling flat. Review by Roberto J. Gonzalez, San Francisco Chronicle. May 15, 2005.
* Confusing Columbus. Review in The Economist. May 31, 2005.
* The World is Spiky. Critical essay by Richard Florida in Atlantic Monthly. October, 2005, pp. 48-51.
* But the world's still round. Review by Siddharth Varadarajan, The Hindu. August 2, 2005.
* Flathead - The peculiar genius of Thomas L. Friedman. Review by Matt Taibbi in the New York Press, Vol 18 (2005), No. 16
* A Flat World, A Level Playing Field, a Small World After All, or None of the Above?. Review and economic critique by Ed Leamer, UCLA, April 16, 2006.
* Ten forces that flattened the world Thomas Friedman
* Interview with Ronald Aronica and Mtetwa Ramdoo, Authors of The World is Flat? - A Critical Analysis of Thomas L. Friedman's New York Times Bestseller. Interviewed by Spincycle in the Blogcritics Magazine,(January 24, 2007).