THE WORLD IS FLAT Chap 1: Thomas Friedman visits Global Edge, an Indian software design firm in Bangalore. The company made a cold call to the VP for engineering of a U.S. company, trying to drum up business. As soon as Mr. Rao introduced himself as calling from an Indian software firm, the U.S. executive said to him, "Namaste," A few years ago nobody in America wanted to talk to us.” Said Mr. Rao. More and more American and European companies are outsourcing significant research and development tasks to India, Russia, and China. According to the information technology office of the state government in Karnataka, where Bangalore is located, Indian units of Cisco Systems, Intel, IBM, Texas Instruments, and GE have already filed 1,000 patent applications with the U.S. Patent Office. Texas Instruments alone has had 225 U.S. patents awarded to its Indian operation. GE over the years has frequently transferred Indian engineers who worked for it in the United States back to India to integrate its whole global research effort. GE now even sends non-Indians to Bangalore. Vivek Paul is the president of Wipro Technologies, another of the elite Indian technology companies, but he is based in Silicon Valley to be close to Wipro's American customers. Before coming to Wipro, Paul managed GE's CT scanner business out of Milwaukee. At the time he had a French colleague who managed GE's power generator business for the scanners out of France. He ran into him on an airplane and found out that he had moved to India to head up GE's highenergy research there. An Indian who used to head up GE's CT business in Milwaukee but now runs Wipro's consulting business had his former French colleague moving to Bangalore to work for GE. That is a flat world. There is a company called B2K, with a division called Brickwork, which offers busy global executives their own personal assistant in India. Let’s suppose you are running a company and you have been asked to give a speech and a PowerPoint presentation in two days. Your "remote executive assistant" in India, provided by Brickwork, will do all the research for you, create the PowerPoint presentation, and e-mail the whole thing to you overnight so that it is on your desk the day you have to deliver it. Because of the time difference with India, they can work on it while you sleep and have it back in your morning. Having your own personal remote executive assistant costs around $1,500 to $2,000 a month, and given the pool of Indian college grads from which Brickwork can recruit, the brainpower you can hire dollar-for-dollar is substantial. Their main clients come from two main areas. One is American health-care consultants, who often need lots of numbers crunched and PowerPoint presentations drawn up. The other is American investment banks and financial services companies, which often need to prepare glossy pamphlets with graphs to illustrate the benefits of an IPO or a proposed merger. In the case of a merger, Brickwork will do the lower-end work i.e. research, reports and prepare charts on trends and summarize in a standard format where it can be used. Friedman then flew to Tokyo where he met Mr. Ohmae whose company; Ohmae & Associates outsources low-end Japanese jobs to Japanese-speaking call centers and service providers in China. Dalian has become for Japan what Bangalore has become for America and the other English-speaking countries: outsourcing central. About one- third of the people around Dalian have taken Japanese as a second language in high school. So all the Japanese companies are entering the region. Ohmae's company primarily does data-entry work in China, where Chinese workers take handwritten Japanese documents, which are scanned, faxed, or e-mailed over from Japan to Dalian, and then type them into a digital database in Japanese characters. When you negotiate with the customers in Japan for building a house a floor plan will be sketched – however, most of these companies don’t use computers. So the hand-drawn plans are sent electronically to China, where they are converted into digital designs, which then are e-mailed back to the Japanese building firm, which turns them into manufacturing blueprints. GE, Microsoft, Dell, SAP, HP, Sony, and Accenture- to name but a few-all are having backroom work done here in Japan to support their Asian operations, as well as new software research and development. Because of its proximity to Japan and Korea, each only about an hour away by air, its large number of Japanese speakers and its abundance of Internet bandwidth - Dalian has become an attractive locus for Japanese outsourcing. Japanese firms can hire three Chinese software engineers for the price of one in Japan and still have change to pay a roomful of call center operators. The mayor of Dalian explained that most students graduate with engineering or science degrees, and even those who don't, those who study history or literature, are still being directed to spend a year studying Japanese or English, plus computer science, so that they will be employable. In 2004 , Friedman was in Colorado where he heard about a low-fare airline , Jet-Blue that outsourced its entire reservation system to housewives in Utah. To confirm he dialed JetBlue and was answered by the grandmotherly voice of Dolly. David Neeleman, the founder and CEO of JetBlue Airways Corp calls this home sourcing. JetBlue has four hundred reservation agents, like Dolly, working at home in the Salt Lake City area, taking reservations-in between babysitting, exercising, writing novels, and cooking dinner. He is a Mormon and believes that society will be better off if more mothers are able to stay at home with their young children but are given a chance to be wage earners at the same time. So he based his home reservations system in Salt Lake City, where the vast majority of the women are Mormons and many are stay-at-home mothers. In the fall of 2004 on a tour of hot spots in Iraq. A soldier who was carefully monitoring all the images from a laptop explained to Friedman that a U.S. Predator drone-a small pilotless aircraft with a high-power television camera-was flying over an Iraqi village and feeding real-time intelligence images back to the laptop and flat screen. This drone was being flown by an expert who was sitting back at Nellis Air Force Base in Las Vegas, Nevada and the video images it was beaming back were being watched simultaneously by the 24th MEU, United States Central Command headquarters in Tampa, CentCom regional headquarters in Qatar, in the Pentagon, and probably also at the CIA. The different analysts around the world were conducting an online chat about how to interpret what was going on and what to do about it.Their conversation that was scrolling down the right side of the screen. Technology has essentially “flattened" the military hierarchy. In Missouri the drive-through order of McDonald's is taken in a call center in Colorado Springs, more than 900 miles away. Cheap, quick and reliable telecommunications lines let the order takers in Colorado Springs converse with customers in Missouri, take an electronic snapshot of them, display their order on a screen to make sure it is right, then forward the order and the photo to the restaurant Chap 2 : Flattener 1: Flattener 2: By the mid-1990s, the PC-Windows network revolution had reached its limits. The next phase was to go from a PC-based computing platform to an Internet-based platform. The second flattener is a combination of technologies that gave us access to what we now know as the World Wide Web. In the late 1980s and early 1990s, using the Internet required considerable computer expertise and was often conducted over black and white text terminals. In the early 1990s, a scientist at CERN named Tim Berners Lee created the programming language for writing web-pages (called HTML) that allowed authors to do things like make “links” from one page to another and to store and share images. He put up the first Web site in 1991, in an effort to foster a computer network that would enable scientists to easily share their research and other scientists and academics had created a number of browsers to surf this early Web. In mid-1994, James Clark, the founder of Silicon Graphics, had joined forces with Marc Andreessen, , who had just headed a small software project that created the first browser Mosaic to form a new company named Mosaic. James Barksdale was approached by a headhunter to become the CEO of this new company, which would quickly be renamed Netscape Communications. They created the first mainstream browser for the general public called Netscape. The company went public on August 9, 1995, and the world has not been the same since. Earlier individuals who had e-mail and companies that had internal e-mail could not connect very far as the corporate networks at the time were proprietary and disconnected from each other, each one had its own formats, data protocols, and different ways of doing content. It was not uncommon for the computers in a business’ accounting division to be unable to communicate with the computers in the sales division. And as the Internet emerged as a public, commercial venture, there was a real danger that it would emerge in the same disconnected way. Netscape took the HTML language and put it in the background, making the foreground the pretty combination of images, text, and links that we think of today when we browse the Web. Netscape made the Web user friendly, it brought the Internet alive and made it accessible to everyone from five-year-olds to eighty-five year-olds. Consumers wanted to do different things on the web, so they began to demand computers, software, and telecommunications networks that could easily digitize words, music, data, and photos and transport them on the Internet to anyone else's computer. This demand was satisfied by another catalytic event: the rollout of Windows 95, a user friendly operating system that gained vast adoption. In addition, Netscape was available for every major operating system: Microsoft Windows, Apple, and UNIX. In addition to the Netscape browser, other standardizations such as email (SMTP and POP), file transfer (FTP), and secure data transmission (SSL) further simplified communications among computers. All of this standardization dramatically increased the ability of computers, and their users, to share information over vast distances. Without the standardization, that information would have been forever marooned in the tiny networks scattered within businesses and universities. Now, the sales department can receive an order on the web and within seconds the order has been routed to accounting (to create a bill) and to shipping (to send it to the consumer).Netscape eventually fell victim to overwhelming competitive pressure from Microsoft. The free Internet Explorer, given away as part of its dominant Windows operating system, combined with its ability to throw more programmers at Web browsing than Netscape, led to the increasing slippage of Netscape's market share. In the end, Netscape was sold for $10 billion to AOL, which never did much with it. Netscape was profitable almost from the start and according to Barksdale it started the dot-com bubble, an enormous rise (and, in 2000, an enormous fall) in the stock prices of technology companies that had anything to do with the Internet. The bursting of the bubble in 2000, with the resulting highly publicized bankruptcies of many “dot com” corporations, led a lot of people to believe that the bubble was a failure. Booms and bubbles may be economically dangerous; they may end up with many people losing money and a lot of companies going bankrupt. But they also often do drive innovation faster and faster, and the sheer overcapacity that they spur can create its own unintended positive consequences. It began the digitization revolution. Digitization is that magic process by which words, music, data, films, files, and pictures are turned into bits and bytes combinations of Is and Os-that can be manipulated on a computer screen, stored on a microprocessor, or transmitted over satellites and fiber-optic lines. Another important positive outcome of the bubble was the laying of miles and miles of fiber optic cable, which could carry billions of times more information than the previous medium: the twisted pair copper wire that is inside telephone lines, which dramatically drove down the cost of making a phone call or transmitting data anywhere in the world. The laying of global fiber highways flattened the developed world, it helped to breakdown global regionalism, create a more seamless global commercial network, and made it simple and almost free to move digitized labor-service jobs and knowledge work-to lower-cost countries. Unlike other forms of Internet over-investment, it was permanent: Once the fiber cables were laid, no one was going to dig them up and thereby eliminate the over capacity. So when the telecom companies went bankrupt, the banks took them over and then sold their fiber cables at huge discounts, which continued to operate them, profitably, which they could do having bought them extremely cheaply. Flattener 3: This flattener talks about work flow and its integration (using a standard platform which can be used to achieve communication and interaction among people and applications around the world). He gives an example of different companies like wild brain which is an animation company which uses the internet- (VPN) virtual private network. The designers, actors work from different places and integrate their efforts towards a final product, here an example of an animation series (Higgletown heroes) is used to explain how flat the world really is. New technology crept in (XML,SOAP) which augmented the existing IP/TCP protocols which helped bring out a uniform platform which enabled application – application interaction. Digitized data, words, music, and photos to be exchanged between diverse software programs so that they could be shaped, designed, manipulated, edited, reedited, stored, published, and transported-without any regard to where people are physically sitting or what computing devices they are connecting through. More like using standard hoses and nozzles which can be used to connect to all the hydrants. Once this is done then companies compete on the basis of quality of the hoses and the trucks. Examples like Microsoft Word which has evolved to provide a standard platform for creating and editing documents which have led to information being shared across the world. Shared standards are a huge flattener, because they both force and empower more people to communicate and innovate over much wider platforms. Paypal an innovative initiative led to the boom of C2C e –commerce. One could literally transact with other buyers/sellers if only one had an e-mail id and a credit card. All of these interoperable banking and e-commerce functions flattened the Internet marketplace so radically that even eBay was taken by surprise. E-Bay finally had no recourse but to take over PayPal as most of its customers (20%) were using PayPal. Work flow platforms are enabling us to do for the service industry what Henry Ford did for manufacturing. Flattener 3 provides the basis for providing a foundation for other technologies like open sourcing, outsourcing etc. Flattener 4 In this flattener the focus is on Lan Cohen when he hurt Apache- a “shareware program for Web server technology.” The shareware program is produced by geeks without asking for money; users can downloaded easily for chatting, but no one supports it when it goes wrong, it’s just works. Geeks are designing new software and then upload it to the world, and they show their own opinion, songs, videos, news, and their own review books on Amazon.com. Flat world platform individually let users to upload files to the world; they send products and ideas for free. There are three types of uploading: the community developed software movement, blogging, podcasting and wikipedia. The community developed software takes its ID from the understanding that source code should be available online and anyone can download it. The source code is managed by Concurrent Versions System, and in term of everything should be reliable and trusted, the Apache started with eight people who really trusted each other. People from Russia to South Africa use Apache to create Web sites because it is free and successful. Wikipedia- the people’s encyclopedia - is started by Jimmy Wales. Many pages started to show up on Wikipedia, by the end on 2005; 2.5 billion pages a month. And it has been expanded to dictionary, wikibooks, digital textbooks, etc… Wikipedia sometimes cannot control itself because any user can upload what they have, but if their information was wrong. Blogging and Podcasting Blog is personal described soapbox; you can tell the world what you really think about any topic. Blogs are created quickly as one new blog every seven second. There is also audio version of blog called podcasting, and video sharing on Youtube. Flattener 5 The fifth flattener is outsourcing. Friedman quickly details how the United States benefited from India’s seven Institutes of Technology (IIT), created in 1951. These highly-competitive schools, which are subsidized by tax dollars, churn out highly-qualified, highly-skilled professionals in need of jobs. Y2K created jobs for Indian software engineers because a large number of techs were needed to remedy the millennium bug. Moreover, the fiber optic boom, which occurred at the same time, allowed any “service, call center, business support operation, or knowledge work that could be digitized” to be outsourced. Thus, the dot-com bust resulted in jobs for Indians, who would work for less money than Americans and could perform the tasks in India because of their education as well as the technology of the PC, the Internet, and fiber optics. In short, India is a country withvirtually no natural resources that got very good at doing one thingmining the brains of its own people by educating a relatively large slice of its elites in the sciences, engineering, and medicine. Given India's 1 billion-plus population, this competition produces a phenomenal knowledge meritocracy. It's like a factory, churning out and exporting some of the most gifted engineering, computer science, and software talent on the globe. This, alas, was one of the few things India did right. Because its often dysfunctional political system, coupled with Nehru's preference for pro-Soviet, Socialist economics, ensured that up until the mid-1990s India could not provide good jobs for most of those talented engineers. So America got to be the second buyer of India's brainpower! If you were a smart, educated Indian, the only way you could fulfill your potential was by leaving the country and, ideally, going to America, where some twenty-five thousand graduates of India's top engineering schools have settled since 1953, greatly enriching America's knowledge pool thanks to their education, which was subsidized by Indian taxpayers. By the late 1990s, though, Lady Luck was starting to shine on India from two directions: The fiberoptic bubble was starting to inflate, linking India with the United States, and the Y2K computer crisisthe so-called millennium bug-started gathering on the horizon. As you'll remember, the Y2K bug was a result of the fact that when computers were built, they came with internal clocks. In order to save memory space, these clocks rendered dates with just six digits-two for the day, two for the month, and, you guessed it, two for the year. That meant they could go up to only 12/31/99. So when the calendar hit January 1, 2000, many older computers were poised to register that not as 01/01/2000 but as 01/01/00, and they would think it was 1900 all over again. It meant that a huge number of existing computers (newer ones were being made with better clocks) needed to have their internal clocks and related systems adjusted; otherwise, it was feared, they would shut down, creating a global crisis, given how many different management systems-from water to air traffic control-were computerized. This computer remediation work was a huge, tedious job. Who in the world had enough software engineers to do it all? Answer: India, with all the techies from all those IITs and private technical colleges and computer schools. And so with Y2K bearing down on us, America and India started dating, and that relationship became a huge flattener, because it demonstrated to so many different businesses that the combination of the PC, the Internet, and fiber-optic cable had created the possibility of a whole new form of collaboration and horizontal value Flattener 6 Offshoring is known as the sixth flattener in Mr. Friedman’s book ‘The World Is Flat’. The internal relocation of a company's manufacturing or other processes to a foreign land to take advantage of less costly operations there is known as offshoring. In late 2001 China joined the World Trade Organization, in other words, from now on China would follow global rules regarding: governing imports, exports and foreign investments. Unlike outsourcing, where companies outsource limited tasks, offshoring is when a company completely relocates its factory to another country. For example, a car manufacturing company in Germany relocates its factory to China. Many companies choose to relocate and offshore factories. One of the many benefits of offshoring is that companies are able to pay cheaper salaries. In turn the company spends less on employees and spends more on things such as R&D (Research and Development). Take China for example; China's entrance in the WTO (World Trade Organization) allowed for greater competition in the playing field. Now countries such as Malaysia, Mexico, and Brazil must compete against China and each other to have businesses offshore to them. Flattener 7 Supply-Chaining is when a company takes products from many different places and sells them in one place using technology to streamline item sales, distribution and shiping Making stuff is easy. Supply chain, now that is really hard. The most important thing, is achieving “global optimization,” which means making sure that reliability and cost are balanced; it’s not about cheap here and there, it’s about managing the dynamics of total cost, disruption, and demand. Cheap doesn’t matter if it’s not on time, or to specification, or delivered to the wrong place, or there is no more demand. Getting this right requires mastery of one key thing: information. And this is what Wal-Mart has mastered. As an example, Friedman considers Wal-Mart, the world’s biggest retail company. Wal-Mart has become the world’s largest and most profitable retailer by buying from its suppliers at the deepest possible discounts. . It made sense for Wal-Mart to create its own distribution network and then to buy all of its products directly from its suppliers. This distribution network has been integrated with information and communications technologies to the point that each supplier knows exactly when and where one its products has been sold as soon as a Wal-Mart cashier scans the bar code Wal-Mart does not manufacture anything. For example During the Christmas season, HewlettPackard sells four-hundred thousand computers each day through Wal-Mart’s four thousand stores Stores like Wal-Mart are great for consumers because they keep costs very low. This is done using a combination of inventory control and shipping management to streamline its operations and manage costs. The moment an item is scanned at the check-out, a replacement is being ordered. As your product is loaded into your cart and you walk out the door, a factory somewhere is getting ready to make another one. Friedman calls this “the Wal-Mart Symphony.” Friedman also addresses the negative consequences of Wal-Mart’s obsession with efficiency. Because everything about Wal-Mart is aimed at keeping prices as low as possible, store managers are under tremendous pressure to keep labor costs low. Some of Wal-Mart’s more well-known infractions include locking overnight workers into its stores and contracting illegal immigrants to work as janitors. \ Flattener 8 Insourcing is the cessation by a company of contracting a business function and the commencement of performing it internally. Insourcing is the opposite of outsourcing. Insourcing is a business decision that is often made to maintain control of critical production or competencies. Insourcing is widely used in production to reduce costs of taxes, labour and transportation. Freidman says insourcing bridges the gap between the companies’ and the customers ‘requirements. He takes United Parcel Service as a prime example for Insourcing. UPS not only provides delivery services but also repairing, logistics, etc. Insourcing is also defined as bringing a third party outsourcer to work inside a company's facility. For example, an IT outsourcing provider will be hired to service a company's IT department while working inside the company's facilities. In addition to contracting an entire team of workers from an outsourcing provider, outside experts are sometimes hired as consultants (to improve certain processes etc.) and the internal staff thereafter implements their recommendations. It may also refer to bringing in foreign nationals to do jobs at lower wages. An example would be a coal mine which lists a foreign language (ie Mandarin Chinese) as a job prerequisite that citizens tend not to study. Since the labour pool does not have the listed skill a foreign worker permit can be obtained allowing the importation of Chinese workers. Insourcing also includes a company assigning a project, be it services, R&D or manufacturing, to a subsidiary or to another company that is within the same country of the company’s location; this is also referred to as "Outsourcing". However, the term Outsourcing usually refers to a project that was being performed in-house but now will be performed by another company; either within or outside the company’s country. Whereas, Insourcing can be any project that is required by the company to meet its needs; the project is not necessarily being performed in-house. Insourcing also includes the “reshoring” of projects when a company brings home projects that are performed in another country and now will be performed in the company’s country; either inside or outside the company. United Parcel Service of North America, Inc., typically referred to as UPS, is an American global package delivery company headquartered in Sandy Springs, Georgia, United States in Greater Atlanta. It delivers more than 15 million packages a day to more than 6.1 million customers in more than 220 countries and territories around the world. When Thomas Freidman toured the UPS Worldport distribution hub adjacent to the Louisville International Airport, he noticed a special clean room, where UPS employees replacing motherboards in broken Toshiba laptops. Toshiba had developed an image problem several years ago, with some customers concluding that its repair process for broken machines took too long. So Toshiba came to UPS and asked it to design a better system. UPS suggested that instead of them picking up the machine from their customers, bringing it to their hub, then flying it from their hub to the Toshiba repair facility and then flying it back to their hub and then from their hub to the customer's house, they would cut all the middle steps. So UPS, would pick it up, repair it themselves, and send it right back to the customer. It was now possible to send the Toshiba laptop in one day, get it repaired the next, and have it back the third day. The UPS repairmen and -women were all certified by Toshiba, and its customer complaints went down dramatically. Flattener 9 In-forming refers to the dramatic change in how easy it is to obtain information. The World Wide Web provides users with a depth and breadth of information never before seen. But all that information is useless unless you can find what you’re looking for. The Web search engine Google contributes to in-forming because it enables people to find web pages that are more relevant to their searches than any other search service. Google is based on the idea that web pages can be ranked by the number of links pointing to them. If one webpage on Spiderman has 10 links pointing to it while another webpage on Spiderman has 400 links Pointing to it, Google will rank the second webpage higher when it displays results for a search on “Spiderman”. Google combines this ranking system with a way to analyze page content to reduce false positives. It now processes over 1 billion searches per day, up from 150 million three years ago. Larry Page, Google’s co-founder, says that one piece of evidence that Google is a flattener is its user base: only 1/3 of searches are U.S.-based and less than 50% are in English Says Sergey Brin, Google’s other co-founder, “whether a kid in Cambodia, the university professor, or me who runs this search engine, all have the same basic access to overall research information that anyone has. It is a total equalizer”(p. 178). Google puts more power in the hands of individuals by letting them do their own research. Colin Powell told Friedman that when he took over as Secretary of State in 2001, he would often wait minutes or hours for an aide to find information for him. “Now I just type into Google ‘UNSC Resolution 242’ and up comes the text”. One new risk in the flat world is that Google is allowing people to find out more about you than was ever possible before. As more information goes online (high school newspapers, crime logs, etc.), Google puts more of that information in people’s hands. It’s not uncommon for prospective employers or romantic partners to Google their prospects. Dov Seidman, who runs a business ethics consulting firm, writes “In this world you better do it right –you don’t get to pick up and move to the next town so easily. In the world of Google, your reputation will follow you and precede you on your next stop. It gets there before you do…Reputation starts early now” Whereas Google connects users with information and media, Yahoo! Groups connects people with similar interests to each other. Yahoo! Groups currently has about 13 million individuals participating every month in 4 million active groups. You can now communicate with like-minded people in private, semi-public, or public discussions regardless of time or distance. All the mountains, valleys, and scheduling conflicts separating you from others have been flattened. Flattener 10 This flattener focuses on the advent of technology and gadgets invading a common man’s life. Thomas Friedman here describes this flattener about the development of new technologies which he calls them as “steroids”. It is called as steroids because it amplifies and turbocharges all other flatteners. As describes it as a fast moving world things around the world tend to move in the even phase. In the words of Carly Fiorina former CEO of HP “digital, mobile, personal and virtual.” Put it in her speeches and thereby enhancing it and making the world flatter day by day. It includes everything being digitalized form common house hold stuff to the high end machines which by the way of processing and easy understanding. By ‘mobile’ she meant wireless technology and ‘personal’ it can be done just by the user. In an interview with Billy Brood president of johns Hopkins, he claimed that one of their doctors developed the state of art standard cure for prostate cancer surgery, all developed through technology. As Friedman analyses this flattener he divided them as six steroids The first steroid: Computing power. In 1971, the Intel 4004 microprocessor contained 2,3000 transistors. Intel's Titanium processor has 1.7 billion transistors in 2006. The second steroid: Breakthroughs in instant messaging, peer-to-peer networks and file sharing. The third steroid: Breakthroughs in making phone calls over the Internet (VOIP) -- Skype. The fourth steroid: Videoconferencing -- people can collaborate, "communicate their thoughts, facial expressions, feelings, ire, enthusiasm, and raised eyebrows." The fifth steroid: Advances in computer graphics. "Video games are particularly important in this regard, because in addition to their very realistic visual images and great sound, they are highly interactive and increasingly collaborative." The sixth steroid: Wireless technologies and devices. In Japan, you can get uninterrupted wireless internet service on your computer or cell phone while traveling on the bullet train at 150 mph. According to Tamon Mitsuishi, senior VP at DoCoMo, the Japanese cellular giant, " the mobile phone will become the essential controller of a person's life. For example, in the medical field it will be your authentication system and you can examine your medical records, and to make payments you will have to hold a mobile phone. You will not be able to lead a life without a mobile phone, and it will control things at home too. We believe that we need to expand the range of machines that can be controlled by mobile phone."