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September 27, 2007

Flattener #5: Outsourcing (Y2K)

Filed under: Uncategorized — yoddha @ 8:31 pm

Here, Friedman emphasizes the role that outsourcing played in flattening the world by making it possible the emergence of developing countries such as India and China.

It all started when Y2K computer crisis (the problem of confusing 2000 with 1900) threatened to shut down the computers around the world. To come out of this crisis, America needed huge manpower with good skills but at cheap source. India emerged as a popular candidate for this and there was no looking back for India after this.

Countries like India not only advantaged from IT boom but also advantaged from IT bust. Because of IT boom, huge investments poured in fiber optics and thus India got connected to the whole world. With IT bust, India not only could use the fiber network cheaply but also earned business from American companies, which wanted to get work done cheaply. Institues such as IITs ensured that the work delivered was not only cheap but also good in quality. All these factors encouraged American companies to outsource business to India rather than bring human resources to America.

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