Tuesday, October 27, 2009

The World Is Also Flat in Malaysia

I have read 176 pages of “The World if Flat”, and I absolutely love it. Yes, I have only read a couple of chapters, but I still think that the author, Thomas L. Friedman, is a brilliant writer. The entire book is about how technology and innovation enables companies to work faster, cheaper and more efficiently across borders. Whilst we all have heard of the word globalization in our everyday lives, Friedman dubbed this phenomenal turn of event “A Flat World”, which in a way is ironic given how decades ago scientists argued, some at the expense of their lives, that this world we live in is indeed spherical instead of a flat one as popularly believed by the Church back then.

In this book, Friedman presented his argument that this world is flat by using examples of how major companies in the US are outsourcing work and offshoring plants to Bangalore as a cost-efficient solution to an increasingly competitive economy. Initially, this outsourcing phenomena started with the IT industry, whereby local Bangalore firms were paid, cheaply in the US but competitively in India, to take over the task of re-setting computers in the US for the then so-called impending “Y2K-bug”, which in retrospect were proven to be nothing more than another new year! Having proven to be capable of such task, words began spreading and companies began realizing that these are effective measures of reducing overheads/OPEX (operating expenditures) without compromising output quality. And over the years, many more companies have taken a much bolder step by offshoring plants onto the Indian soil, thereby further enhancing their cost competitiveness. Major companies like IBM, Shell and many more have offices in Bangalore to take advantage of this low cost operating environment, compared to the conventional US/Europe locations. This not only benefitted those Western companies but also the local Indian individuals as they were not only paid competitively in India with much more perks than what they are used to getting, but exposed to the global business model.. What only started off as a 24/7 IT call centre soon evolved into a major industrial hub for the services and manufacturing economy, at a surprisingly fast pace. India as a country has benefitted tremendously from this as their economy began to prosper.

In addition to that, Friedman also argued that Dalian is to Japan what Bangalore has become to the US and other English speaking countries, mainly because the people of Dalian (a port city in China) speaks perfect Japanese. At this point, it got me thinking, what made Dalian and Bangalore an attractive location for major companies to outsource or offshore to is the fact that they have sufficient local talent, who could perform a task cheaply and most importantly speak the same language that these companies speak in.

Now, Malaysia as a country would obviously benefit a lot from such investments. Ideally we should aspire to be the outsourcer instead of the outsourcee, if there is such a word. But realistically, we are a developing nation and our companies are not in a major multinational position to outsource/offshore. However, even if we do have a Malaysian-based large international company (I suppose Petronas and Proton could fall under this category) the country would benefit more if these companies were to keep the work in-house but still providing for the international market in order to generate the local economy. So, because we are still developing we should do all we can to be the most attractive location amongst other developing nation so that we are the preferred outsourcee.

To be an excellent outsourcee, we need to make sure our graduates are sufficiently competent, and this is achievable by improving our education system, not just tertiary education, but also our primary and secondary schools as they form the basis of university education. Secondly, we have to be relatively cheap, which comparatively we are. And finally, our talents must speak fluently in the language of the market that we cater our talents for. So if we aspire to provide services to the Japanese, then our graduates will have to be able to speak Japanese fluently. If we are targeting the US and Europe, then English should be the language our graduates are taught to speak in. And I think that our graduates should be taught to communicate in English, instead of Japanese or German etc, simply because it increases our chances of becoming an outsourcee given the relevance of English globally. It’s a simple law of probability..the more opportunities you open yourselves to, the more chances of you striking a hit! But I guess now that we have gone back to teaching Math and Science in Malay is an indication that we are hoping to serve the Indonesian market ? Unless those fellow ministers in the cabinet foresees Indonesia turning into a developed nation in the near future and becoming a major outsourcer, then unfortunately I see a bleak future looming ahead!

A parting word of advice, read this book!

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