Open-Sourcing
Self-Organizing Collaborative Communities
Alan Cohen still remembers the first time he heard the word "Apache" as an adult, and it wasn't while watching a cowboys-and-Indians movie. It was the 1990s, the dot-com market was booming, and he was a senior manager for IBM, helping to oversee its emerging e-commerce business. "I had a whole team with me and a budget of about
$8 million," Cohen recalled. "We were competing head-to-head with Microsoft, Netscape,
Oracle, Sun-all the big boys. And we were
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playing this very big-stakes game for e-commerce. IBM had a huge sales force selling all this e-commerce software. One day I asked the development director who worked for me, 'Say, Jeff, walk me through the development process for these e-commerce systems. What is the underlying Web server?' And he says to me, It's built on top of Apache.' The first thing I think of is John Wayne. 'What is Apache?' I ask. And he says it is a shareware program for Web server technology. He said it was produced for free by a bunch of geeks just working online in some kind of open-source chat room. I was floored. I said, 'How do you buy it?' And he says, Tou download it off a Web site for free.' And I said, 'Well, who supports it if something goes wrong?'
And he says, 'I don't know-it just works!' And that was my first exposure to Apache . . .
"Now you have to remember, back then Microsoft, IBM, Oracle, Netscape were all trying to build commercial Web servers. These were huge companies. And suddenly my development guy is telling me that he's getting ours off the Internet for free! It's like you had all these big corporate executives plotting strategies, and then suddenly the guys in the mail room are in charge. I kept asking, 'Who runs Apache? I mean, who are these guys?'"
Yes, the geeks in the mail room are deciding what software they will be using and what you will be using too. It's called the open-source movement, and it involves thousands of people around the world coming together online to collaborate in writing everything from their own software to their own operating systems to their own dictionary to their own recipe for cola-building always from the bottom up rather than accepting formats or content imposed by corporate hierarchies from the top down.
The word "open-source" comes from the notion that companies or ad hoc groups would make available online the source code-the underlying programming instructions that make a piece of software work-and then let anyone who has something to contribute improve it and let millions of others just download it for their own use for free.
While commercial software is copyrighted and sold, and companies guard the source code as they would their crown jewels so they can charge money to anyone who wants to use it and thereby generate income to develop new versions, open-
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source software is shared, constantly improved by its users, and made available for free to anyone. In return, every user who comes up with an improvement-a patch that makes this software sing or dance better-is encouraged to make that patch available to every other user for free.
Not being a computer geek, I had never focused much on the open-source movement, but when I did, I discovered it was an amazing universe of its own, with communities of online, come-as-you-are volunteers who share their insights with one another and then offer it to the public for nothing. They do it because they want something the market doesn't offer them; they do it for the psychic buzz that comes from creating a collective product that can beat something produced by giants like Microsoft or IBM, and-even more important-to earn the respect of their intellectual peers. Indeed, these guys and gals are one of the most interesting and controversial new forms of collaboration that have been facilitated by the flat world and are flattening it even more. In order to explain how this form of collaboration works, why it is a flattener and why, by the way, it has stirred so many controversies and will be stirring even more in the future, I am going to focus on just two basic varieties of open-sourcing: the intellectual commons movement and the free software movement.
The intellectual commons form of open-sourcing has its roots in the academic and scientific communities, where for a long time self-organized collaborative communities of scientists have come together through private networks and later the
Internet to pool their brainpower or share insights around a particular science or math problem. The Apache Web server had its roots in this form of open-sourcing. When
I asked a friend of mine, Mike Arguello, an IT systems architect, to explain to me why people share knowledge or work in this way, he said, "IT people tend to be very bright people and they want everybody to know just how brilliant they are." Marc
Andreessen, who invented the first Web browser, agreed: "Open-source is nothing more than peer-reviewed science. Sometimes people contribute to these things because they make science, and they discover things, and the reward is reputation. Sometimes you can build a business out of it, sometimes they just want to increase the store of knowledge in the world. And the peer review part is critical-and open-source is peer review. Every bug or security hole or deviation from standards is reviewed."
I found this intellectual commons form of open-sourcing fascinating, so I went exploring to find out who were those guys and girls in the mail room. Eventually,
I found my way to one of their pioneers, Brian Behlendorf. If Apache-the open-source
Web server community-were an Indian tribe, Behlendorf would be the tribal elder. I caught up with him one day in his glass-and-steel office near the San Francisco airport, where he is now founder and chief technology officer of CollabNet, a start-up focused on creating software for companies that want to use an open-source approach to innovation. I started with two simple questions: Where did you come from? and: How did you manage to pull together an open-source community of online geeks that could go toe-to-toe with IBM?
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"My parents met at IBM in Southern California, and I grew up in a town just north of Pasadena, La Canada," Behlendorf recalled. "The public school was very competitive academically, because a lot of the kids' parents worked at the Jet Propulsion
Laboratory that was run by Caltech there. So from a very early age I was around a lot of science in a place where it was okay to be kind of geeky. We always had computers around the house. We used to use punch cards from the original IBM mainframes for making shopping lists. In grade school, I started doing some basic programming, and by high school I was pretty into computers... I graduated in 1991, but in 1989, in the early days of the Internet, a friend gave me a copy of a program he had downloaded onto a floppy disk, called 'Fractint.' It was not pirated, but was freeware, produced by a group of programmers, and was a program for drawing fractals. [Fractals are beautiful images produced at the intersection of art and math.] When the program started up, the screen would show this scrolling list of e-mail addresses for all the scientists and mathematicians who contributed to it. I noticed that the source code was included with the program. This was my first exposure to the concept of open-source. Here was this program that you just downloaded for free, and they even gave you the source code with it, and it was done by a community of people. It
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started to paint a different picture of programming in my mind. I started to think that there were some interesting social dynamics to the way certain kinds of software were written or could be written-as opposed to the kind of image I had of the professional software developer in the back office tending to the mainframe, feeding info in and taking it out for the business. That seemed to me to be just one step above accounting and not very exciting."
After graduating in 1991, Behlendorf went to Berkeley to study physics, but he quickly became frustrated by the disconnect between the abstractions he was learning in the classroom and the excitement that was starting to emerge on the Internet.
"When you entered college back then, every student was given an e-mail address, and
I started using it to talk to students and explore discussion boards that were starting to appear around music," said Behlendorf. "In 1992,1 started my own Internet mailing list focused on the local electronic music scene in the Bay Area. People could just post onto the discussion board, and it started to grow, and we started to discuss different music events and DJs. Then we said, 'Hey, why don't we invite our own DJs and throw our own events?' It became a collective thing. Someone would say, 'I have some records,' and someone else would say, 'I have a sound system,' and someone else would say, 'I know the beach and if we showed up at midnight we could have a party.'
By 1993, the Internet was still just mailing lists and e-mail and FTP sites [file transfer protocol repositories where you could store things]. So I started collecting an archive of electronic music and was interested in how we could put this online and make it available to a larger audience. That was when I heard about Mosaic [the
Web browser developed by Marc Andreessen.] So I got a job at the computer lab in the
Berkeley business school, and I spent my spare time researching Mosaic and other Web technologies. That led me to a discussion board with a lot of the people who were writing the first generation of Web browsers and Web servers."
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(A Web server is a software program that enables anyone to use his or her home or office computer to host a Web site on the World Wide Web. Amazon.com, for instance, has long run its Web site on Apache software.
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When your Web browser goes to www.amazon.com, the very first piece of software it talks to is Apache. The browser asks Apache for the Amazon Web page and Apache sends back to the browser the content of the Amazon Web page. Surfing the Web is really your Web browser interacting with different Web servers.)
"I found myself sitting in on this forum watching Tim Berners-Lee and Marc Andreessen debating how all these things should work," recalled Behlendorf. "It was pretty exciting, and it seemed radically inclusive. I didn't need a Ph.D. or any special credentials, and I started to see some parallels between my music group and these scientists, who had a common interest in building the first Web software. I followed that [discussion] for a while and then I told a friend of mine about it. He was one of the first employees at Wired magazine, and he said Wired would be interested in having me set up a Web site for them. So I joined there at $10 an hour, setting up their e-mail and their first Web site-HotWired ... It was one of the first ad-supported online magazines."
HotWired decided it wanted to start by having a registration system that required passwords-a controversial concept at that time. "In those days," noted Andrew Leonard, who wrote a history of Apache for Salon.com in 1997, "most Webmasters depended on a Web server program developed at the University of Illinois's National Center for
Super-computing Applications (also the birthplace of the groundbreaking Mosaic Web browser). But the NCSA Web server couldn't handle password authentication on the scale that HotWired needed. Luckily, the NCSA server was in the public domain, which meant that the source code was free to all comers. So Behlendorf exercised the hacker prerogative: He wrote some new code, a 'patch' to the NCSA Web server, that took care of the problem." Leonard commented, "He wasn't the only clever programmer rummaging through the NCSA code that winter. All across the exploding Web, other Webmasters were finding it necessary to take matters into their own keyboards. The original code had been left to gather virtual dust when its primary programmer, University of
Illinois student Rob McCool, had been scooped up (along with Marc Andreessen and Lynx author Eric Bina) by a little-known company in Silicon Valley named Netscape.
Meanwhile, the Web refused to stop growing-and
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kept creating new problems for Web servers to cope with." So patches of one kind or another proliferated like Band-Aids on bandwidth, plugging one hole here and breaching another gap there.
Meanwhile, all these patches were slowly, in an ad hoc open-source manner, building a new modern Web server. But everyone had his or her own version, trading patches here and there, because the NCSA lab couldn't keep up with it all.
"I was just this near-dropout," explained Behlendorf. "I was having a lot of fun building this Web site for Wired and learning more than I was learning at Berkeley.
So a discussion started in our little working group that the NCSA people were not
英文荟萃网 http://www.ywhc.net answering our e-mails. We were sending in patches for the system and they weren't responding. And we said, 'If NCSA would not respond to our patches, what's going to happen in the future?' We were happy to continue improving this thing, yet we were worried when we were not getting any feedback and seeing our patches integrated. So
I started to contact the other people I knew trading patches. . . Most of them were on the standards working groups [the Internet Engineering Task Force] that were setting the first standards for the interconnectivity between machines and applications on the Internet... And we said, 'Why don't we take our future into our own hands and release our own [Web server] version that incorporated all our patches?'
"We looked up the copyright for the NCSA code, and it basically just said give us credit at Illinois for what we invented if you improve it-and don't blame us if it breaks," recalled Behlendorf. "So we started building our own version from all our patches. None of us had time to be a full-time Web server developer, but we thought if we could combine our time and do it in a public way, we could create something better than we could buy off the shelf-and nothing was available then, anyway. This was all before Netscape had shipped its first commercial Web server. That was the beginning of the Apache project."
By February 1999, they had completely rewritten the original NCSA program and formalized their cooperation under the name "Apache."
"I picked the name because I wanted it to have a positive connotation of being assertive," said Behlendorf. "The Apache tribe was the last tribe
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to surrender to the oncoming U.S. government, and at the time we worried that the big companies would come in and 'civilize' the landscape that the early Internet engineers built. So 'Apache' made sense to me as a good code name, and others said it also would make a good pun"-as in the APAtCHy server, because they were patching all these fixes together.
So in many ways, Bellendorf and his open-source colleagues-most of whom he had never met but knew only by e-mail through their open-source chat room-had created a virtual, online, bottom-up software factory, which no one owned and no one supervised. "We had a software project, but the coordination and direction were an emergent behavior based on whoever showed up and wanted to write code," he said.
But how does it actually work? I asked Behlendorf. You can't just have a bunch of people, unmonitored, throwing code together, can you?
"Most software development involves a source code repository and is managed by tools such as the Concurrent Versions System," he explained. "So there is a CVS server out there, and I have a CVS program on my computer. It allows me to connect to the server and pull down a copy of the code, so I can start working with it and making modifications. If I think my patch is something I want to share with others, I run a program called Patch, which allows me to create a new file, a compact collection of all the changes. That is called a patch file, and I can give that file to someone else, and they can apply it to their copy of the code to see what impact that patch has. If I have the right privileges to the server [which is restricted to a tightly controlled oversight board], I can then take my patch and commit it to the repository
英文荟萃网 http://www.ywhc.net and it will become part of the source code. The CVS server keeps track of everything and who sent in what... So you might have 'read access' to the repository but not
'commit access' to change things. When someone makes a commit to the repository, that patch file gets e-mailed out to all the other developers, and so you get this peer review system after the fact, and if there is something wrong, you fix the bug."
So how does this community decide who are trusted members?
"For Apache," said Behlendorf, "we started with eight people who really trusted each other, and as new people showed up at the discussion forum and offered patch files posted to the discussion form, we would
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gain trust in others, and that eight grew to over one thousand. We were the first open-source project to get attention from the business community and get the backing from IBM."
Because of Apache's proficiency at allowing a single-server machine to host thousands of different virtual Web sites-music, data, text, pornography-it began to have "a commanding share of the Internet Service Provider market," noted Salon's Leonard.
IBM was trying to sell its own proprietary Web server, called GO, but it gained only a tiny sliver of the market. Apache proved to be both a better technology and free.
So IBM eventually decided that if it could not beat Apache, it should join Apache.
You have to stop here and imagine this. The world's biggest computer company decided that its engineers could not best the work of an ad hoc open-source collection of geeks, so they threw out their own technology and decided to go with the geeks!
IBM "initiated contact with me, as I had a somewhat public speaker role for Apache," said Behlendorf. "IBM said, 'We would like to figure out how we can use [Apache] and not get flamed by the Internet community, [how we can] make it sustainable and not just be ripping people off but contributing to the process. . .' IBM was saying that this new model for software development was trustworthy and valuable, so let's invest in it and get rid of the one that we are trying to make on our own, which isn't as good." John Swainson was the senior IBM executive who led the team that approached Apache
(he's now chairman of Computer Associates). He picked up the story: "There was a whole debate going on at the time about open-source, but it was all over the place. We decided we could deal with the Apache guys because they answered our questions. We could hold a meaningful conversation with these guys, and we were able to create the [nonprofit]
Apache Software Foundation and work out all the issues."
At IBM's expense, its lawyers worked with the Apache group to create a legal framework around it so that there would be no copyright or liability problems for companies, like IBM, that wanted to build applications on top of Apache and charge money for them. IBM saw the value in having a standard vanilla Web server architecture-which allowed 90 heterogeneous computer systems and devices to talk to each other, displaying e-mail and Web pages in a standard format-that was constantly being improved for free by an open-source community. The Apache collaborators did not set out to make free
英文荟萃网 http://www.ywhc.net software. They set out to solve a common problem-Web serving-and found that collaborating for free in this open-source manner was the best way to assemble the best brains for the job they needed done.
"When we started working with Apache, there was an apache.org Web site but no formal legal structure, and businesses and informal structures don't coexist well," said
Swainson. "You need to be able to vet the code, sign an agreement, and deal with liability issues. [Today] anybody can download the Apache code. The only obligation is that they acknowledge that it came from the site, and if they make any changes that they share them back." There is an Apache development process that manages the traffic, and you earn your way into that process, added Swainson. It is something like a pure meritocracy. When IBM started using Apache, it became part of the community and started making contributions.
Indeed, the one thing the Apache people demanded in return for their collaboration with IBM was that IBM assign its best engineers to join the Apache open-source group and contribute, like everyone else, for free. "The Apache people were not interested in payment of cash," said Swainson. "They wanted contribution to the base. Our engineers came to us and said, 'These guys who do Apache are good and they are insisting that we contribute good people.' At first they rejected some of what we contributed.
They said it wasn't up to their standards! The compensation that the community expected was our best contribution."
On June 22, 1998, IBM announced plans to incorporate Apache into its own new Web server product, named WebSphere. The way the Apache collaborative community organized itself, whatever you took out of Apache's code and improved on, you had to give back to the whole community. But you were also free to go out and build a patented commercial product on top of the Apache code, as IBM did, provided that you included a copyright citation to Apache in your own patent. In other words, this intellectual commons approach to open-sourcing encour-
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aged people to build commercial products on top of it. While it wanted the foundation to be free and open to all, it recognized that it would remain strong and fresh if both commercial and noncommercial engineers had an incentive to participate.
Today Apache is one of the most successful open-source tools, powering about two-thirds of the Web sites in the world. And because Apache can be downloaded for free anywhere in the world, people from Russia to South Africa to Vietnam use it to create Web sites. Those individuals who need or want added capabilities for their
Web servers can buy products like WebSphere, which attach right on top of Apache.
At the time, selling a product built on top of an open-source program was a risky move on IBM's part. To its credit, IBM was confident in its ability to keep producing differentiated software applications on top of the Apache vanilla. This model has since been widely adopted, after everyone saw how it propelled IBM's Web server business to commercial leadership in that category of software, generating huge amounts of revenue.
As I will repeat often in this book: There is no future in vanilla for most companies in a flat world. A lot of vanilla making in software and other areas is going to shift
英文荟萃网 http://www.ywhc.net to open-source communities. For most companies, the commercial future belongs to those who know how to make the richest chocolate sauce, the sweetest, lightest whipped cream, and the juiciest cherries to sit on top, or how to put them all together into a sundae. Jack Messman, chairman of the Novell software company, which has now become a big distributor of Linux, the open-source operating system, atop which Novell attaches gizmos to make it sing and dance just for your company, put it best:
"Commercial software companies have to start operating further up the [software] stack to differentiate themselves. The open source community is basically focusing on infrastructure" (Financial Times, June 14, 2004).
The IBM deal was a real watershed. Big Blue was saying that it believed in the open-source model and that with the Apache Web server, this open-source community of engineers had created something that was not just useful and valuable but "best in its class." That's why the open-source movement has become a powerful flattener, the effects of which we are just beginning to see. "It is incredibly empowering of individuals," Brian Behlendorf said. "It doesn't matter where you come from or where you are-someone in India and South America can be just as effective using this software or contributing to it as someone in Silicon Valley." The old model is winner take all: I wrote it, I own it-the standard software license model. "The only way to compete against that," concluded Behlendorf, "is to all become winners."
Behlendorf, for his part, is betting his career that more and more people and companies will want to take advantage of the new flat-world platform to do open-source innovation. In 2004, he started a new company called CollabNet to promote the use of open-sourcing as a tool to drive software innovation within companies. "Our premise is that software is not gold, it is lettuce-it is a perishable good," explained
Behlendorf. "If the software is not in a place where it is getting improved over time, it will rot." What the open-source community has been doing, said Behlendorf, is globally coordinated distributed software development, where it is constantly freshening the lettuce so that it never goes rotten. Behlendorfs premise is that the open-source community developed a better method for creating and constantly updating software. CollabNet is a company created to bring the best open-source techniques to a closed community, i.e., a commercial software company.
"CollabNet is an arms dealer to the forces flattening the world," said Behlendorf.
"Our role in this world is to build the tools and infrastructure so that an individual
-in India, China, or wherever-as a consultant, an employee, or just someone sitting at home can collaborate. We are giving them the toolkit for decentralized collaborative development. We are enabling bottom-up development, and not just in cyberspace . . . We have large corporations who are now interested in creating a bottom-up environment for writing software. The old top-down, silo software model is broken. That system said, 'I develop something and then I throw it over the wall to you. You find the bugs and then throw it back. I patch it and then sell a new version.' There is constant frustration with getting software that is buggy-maybe it will get fixed or maybe not. So we said, 'Wouldn't it be interesting if we could
英文荟萃网 http://www.ywhc.net take the open-source benefits of speed of innovation and higher-quality software, and that feel-
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ing of partnership with all these stakeholders, and turn that into a business model for corporations to be more collaborative both within and without?'"
I like the way Irving Wladawsky-Berger, IBM's Cuban-born vice president for technical strategy and innovation, summed open-sourcing up: "This emerging era is characterized by the collaborative innovation of many people working in gifted communities, just as innovation in the industrial era was characterized by individual genius."
The striking thing about the intellectual commons form of open-sourcing is how quickly it has morphed into other spheres and spawned other self-organizing collaborative communities, which are flattening hierarchies in their areas. I see this most vividly in the news profession, where bloggers, one-person online commentators, who often link to one another depending on their ideology, have created a kind of open-source newsroom. I now read bloggers (the term comes from the word "Weblog") as part of my daily information-gathering routine. In an article about how a tiny group of relatively obscure news bloggers were able to blow the whistle that exposed the bogus documents used by CBS News's Dan Rather in his infamous report about President George
W. Bush's Air National Guard service, Howard Kurtz of The Washington Post wrote
(September 20, 2004), "It was like throwing a match on kerosene-soaked wood. The ensuing blaze ripped through the media establishment as previously obscure bloggers managed to put the network of Murrow and Cronkite firmly on the defensive. The secret, says Charles Johnson, is 'open-source intelligence gathering.' Meaning: 'We've got a huge pool of highly motivated people who go out there and use tools to find stuff.
We've got an army of citizen journalists out there.'" That army is often armed with nothing more than a tape recorder, a camera-enabled cell phone, and a Web site, but in a flat world it can collectively get its voice heard as far and wide as CBS or
The New York Times. These bloggers have created their own online commons, with no barriers to entry. That open commons often has many rumors and wild
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allegations swirling in it. Because no one is in charge, standards of practice vary wildly, and some of it is downright irresponsible. But because no one is in charge, information flows with total freedom. And when this community is on to something real, like the Rather episode, it can create as much energy, buzz, and hard news as any network or major newspaper.
Another intellectual commons collaboration that I used regularly in writing this book is Wikipedia, the user-contributed online encyclopedia, also known as "the people's encyclopedia." The word "wikis" is taken from the Hawaiian word for "quick." Wikis are Web sites that allow users to directly edit any Web page on their own from their home computer. In a May 5, 2004, essay on YaleGlobal online, Andrew Lih, an assistant professor at the Journalism and Media Studies Centre at the University of Hong Kong, explained how Wikipedia works and why it is such a breakthrough.
"The Wikipedia project was started by Jimmy Wales, head of Internet startup Bomis.com, after his original project for a volunteer, but strictly controlled, free
英文荟萃网 http://www.ywhc.net encyclopedia ran out of money and resources after two years," wrote Lih. "Editors with PhD degrees were at the helm of the project then, but it produced only a few hundred articles. Not wanting the content to languish, Wales placed the pages on a wiki Website in January 2001 and invited any Internet visitors to edit or add to the collection. The site became a runaway success in the first year and gained a loyal following, generating over 20,000 articles and spawning over a dozen language translations. After two years, it had 100,000 articles, and in April 2004, it exceeded
250,000 articles in English and 600,000 articles in 50 other languages.And according to Website rankings at Alexa.com, it has become more popular than traditional online encyclopedias such as Britannica.com."
How, you might ask, does one produce a credible, balanced encyclopedia by way of an ad hoc open-source, open-editing movement? After all, every article in the Wikipedia has an "Edit this page" button, allowing anyone who surfs along to add or delete content on that page.
It starts with the fact, Lih explained, that "because wikis provide the
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ability to track the status of articles, review individual changes, and discuss issues, they function as social software. Wiki Websites also track and store every modification made to an article, so no operation is ever permanently destructive.
Wikipedia works by consensus, with users adding and modifying content while trying to reach common ground along the way.
"However, the technology is not enough on its own," wrote Lih. "Wales created an editorial policy of maintaining a neutral point of view (NPOV) as the guiding principle . . . According to Wikipedia's guidelines, The neutral point of view attempts to present ideas and facts in such a fashion that both supporters and opponents can agree . . .' As a result, articles on contentious issues such as globalization have benefited from the cooperative and global nature of Wikipedia.
Over the last two years, the entry has had more than 90 edits by contributors from the Netherlands, Belgium, Sweden, United Kingdom, Australia, Brazil, United States,
Malaysia, Japan and China. It provides a manifold view of issues from the World Trade
Organization and multinational corporations to the anti-globalization movement and threats to cultural diversity. At the same time malicious contributors are kept in check because vandalism is easily undone. Users dedicated to fixing vandalism watch the list of recent changes, fixing problems within minutes, if not seconds. A defaced article can quickly be returned to an acceptable version with just one click of a button. This crucial asymmetry tips the balance in favor of productive and cooperative members of the wiki community, allowing quality content to prevail." A Newsweek piece on Wikipedia (November 1, 2004) quoted Angela Beesley, a volunteer contributor from
Essex, England, and self-confessed Wikipedia addict who monitors the accuracy of more than one thousand entries: "A collaborative encyclopedia sounds like a crazy idea, but it naturally controls itself."
Meanwhile, Jimmy Wales is just getting started. He told Newsweek that he is expanding into Wiktionary, a dictionary and thesaurus; Wikibooks, textbooks and manuals; and
Wikiquote, a book of quotations. He said he has one simple goal: to give "every single
英文荟萃网 http://www.ywhc.net person free access to the sum of all human knowledge."
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Wales's ethic that everyone should have free access to all human knowledge is undoubtedly heartfelt, but it also brings us to the controversial side of open-source:
If everyone contributes his or her intellectual capital for free, where will the resources for new innovation come from? And won't we end up in endless legal wrangles over which part of any innovation was made by the community for free, and meant to stay that way, and which part was added on by some company for profit and has to be paid for so that the company can make money to drive further innovation? These questions are all triggered by the other increasingly popular form of self-organized collaboration-the free software movement. According to the openknowledge.org Web site, "The free/open source software movement began in the 'hacker' culture of U.S. computer science laboratories (Stanford, Berkeley, Carnegie Mellon, and MIT) in the
1960's and 1970's. The community of programmers was small, and close-knit. Code passed back and forth between the members of the community-if you made an improvement you were expected to submit your code to the community of developers. To withhold code was considered gauche-after all, you benefited from the work of your friends, you should return the favor."
The free software movement, however, was and remains inspired by the ethical ideal that software should be free and available to all, and it relies on open-source collaboration to help produce the best software possible to be distributed for free.
This a bit different from the approach of the intellectual commons folks, like Apache.
They saw open-sourcing as a technically superior means of creating software and other innovations, and while Apache was made available to all for free, it had no problem with commercial software being built on top of it. The Apache group allowed anyone who created a derivative work to own it himself, provided he acknowledge the Apache contribution. The primary goal of the free software movement, however, is to get as many people as possible writing, improving, and distributing software for free, out of a conviction that this will empower everyone and free individuals from the grip of global corporations. Generally speaking, the free
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software movement structures its licenses so that if your commercial software draws directly from their free software copyright, they want your software to be free too.
In 1984, according to Wikipedia, an MIT researcher and one of these ex-hackers,
Richard Stallman, launched the "free software movement" along with an effort to build a free operating system called GNU. To promote free software, and to ensure that its code would always be freely modifiable and available to all, Stallman founded the
Free Software Foundation and something called the GNU General Public License (GPL).
The GPL specified that users of the source code could copy, change, or upgrade the code, provided that they made their changes available under the same license as the original code. In 1991, a student at the University of Helsinki named Linus Torvalds, building off of Stallman's initiative, posted his Linux operating system to compete with the Microsoft Windows operating system and invited other engineers and geeks
英文荟萃网 http://www.ywhc.net online to try to improve it-for free. Since Torvalds's initial post, programmers all over the world have manipulated, added to, expanded, patched, and improved the
GNU/Linux operating system, whose license says anyone can download the source code and improve upon it but then must make the upgraded version freely available to everybody else. Torvalds insists that Linux must always be free. Companies that sell software improvements that enhance Linux or adapt it to certain functions have to be very careful not to touch its copyright in their commercial products.
Much like Microsoft Windows, Linux offers a family of operating systems that can be adapted to run on the smallest desktop computers, laptops, PalmPilots, and even wristwatches, all the way up to the largest supercomputers and mainframes. So a kid in India with a cheap PC can learn the inner workings of the same operating system that is running in some of the largest data centers of corporate America. Linux has an army of developers across the globe working to make it better. As I was working on this segment of the book, I went to a picnic one afternoon at the Virginia country home of Pamela and Malcolm Baldwin, whom my wife came to know through her membership on the board of World Learning, an educational NGO. I mentioned in the course of lunch that I was
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thinking of going to Mali to see just how flat the world looked from its outermost edge-the town of Timbuktu. The Baldwins' son Peter happened to be working in Mali as part of something called the GeekCorps, which helps to bring technology to developing countries. A few days after the lunch, I received an e-mail from Pamela telling me that she had consulted with Peter about accompanying me to Timbuktu, and then she added the following, which told me everything I needed to know and saved me the whole trip: "Peter says that his project is creating wireless networks via satellite, making antennas out of plastic soda bottles and mesh from window screens!
Apparently everyone in Mali uses Linux. . ."
"Everyone in Mali uses Linux." That is no doubt a bit of an exaggeration, but it's a phrase that you'd hear only in a flat world.
The free software movement has become a serious challenge to Microsoft and some other big global software players. As Fortune magazine reported on February 23, 2004, "The availability of this basic, powerful software, which works on Intel's ubiquitous microprocessors, coincided with the explosive growth of the Internet. Linux soon began to gain a global following among programmers and business users . . . The revolution goes far beyond little Linux . . . Just about any kind of software [now] can be found in open-source form. The SourceForge.net website, a meeting place for programmers, lists an astounding 86,000 programs in progress. Most are minor projects by and for geeks, but hundreds pack real value . . . If you hate shelling out $350 for Microsoft Office or $600 for Adobe Photoshop, OpenOffice.org and the Gimp are surprisingly high-quality free alternatives." Big companies like Google, E*Trade, and Amazon, by combining Intel-based commodity server components and the Linux operating system, have been able dramatically to cut their technology spending-and get more control over their software.
Why would so many people be ready to write software that would be given away for free?
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Partly it is out of the pure scientific challenge, which should never be underestimated. Partly it is because they all hate Micro-
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soft for the way it has so dominated the market and, in the view of many techies, bullied everyone else. Partly it is because they believe that open-source software can be kept more fresh and bugfree than any commercial software, because of the way it is constantly updated by an army of unpaid programmers. And partly it is because some big tech companies are paying engineers to work on Linux and other software, hoping it will cut into Microsoft's market share and make it a weaker competitor all around. There are a lot of motives at work here, and not all of them altruistic. When you put them all together, though, they make for a very powerful movement that will continue to present a major challenge to the whole commercial software model of buying a program and then downloading its fixes and buying its updates.
Until now, the Linux operating system was the best-known success among open-source free software projects challenging Microsoft. But Linux is largely used by big corporate data centers, not individuals. However, in November 2004, the Mozilla
Foundation, a nonprofit group supporting open-source software, released Firefox, a free Web browser that New York Times technology writer Randall Stross (December 19,
2004) described as very fast and filled with features that Microsoft's Internet
Explorer lacks. Firefox 1.0, which is easily installed, was released on November 9.
"Just over a month later," Stross reported, "the foundation celebrated a remarkable milestone: 10 million downloads." Donations from Firefox's appreciative fans paid for a two-page advertisement in The New York Times. "With Firefox," Stross added,
"open-source software moves from back-office obscurity to your home, and to your parents', too. (Your children in college are already using it.) It is polished, as easy to use as Internet Explorer and, most compelling, much better defended against viruses, worms and snoops. Microsoft has always viewed Internet Explorer's tight integration with Windows to be an attractive feature. That, however, was before security became the unmet need of the day. Firefox sits lightly on top of Windows, in a separation from the underlying operating system that the Mozilla Foundation's president, Mitchell Baker, calls a 'natural defense.' For the first time, Internet
Explorer has been losing market share. According to a worldwide survey conducted in late November by OneStat.com, a company in Amsterdam that analyzes the Web, Internet
Explorer's share dropped to less than 89 percent, 5 percentage points less than in
May. Firefox now has almost 5 percent of the market, and it is growing."
It will come as no surprise that Microsoft officials are not believers in the viability or virtues of the free software form of open-source. Of all the issues I dealt with in this book, none evoked more passion from proponents and opponents than open-source.
After spending time with the open-source community, I wanted to hear what Microsoft had to say, since this is going to be an important debate that will determine just how much of a flattener open-source becomes.
Microsoft's first point is, How do you push innovation forward if everyone is working for free and giving away their work? Yes, says Microsoft, it all sounds nice and chummy that we all just get together online and write free software by the people and for
英文荟萃网 http://www.ywhc.net the people. But if innovators are not going to be rewarded for their innovations, the incentive for path-breaking innovation will dry up and so will the money for the really deep R & D that is required to drive progress in this increasingly complex field. The fact that Microsoft created the standard PC operating system that won out in the marketplace, it argues, produced the bankroll that allowed Microsoft to spend billions of dollars on R & D to develop Microsoft Office, a whole suite of applications that it can now sell for a little over $100.
"Microsoft would admit that there are number of aspects of the open-source movement that are intriguing, particularly around the scale, community collaboration, and communication aspects," said Craig Mundie, the Microsoft chief technology officer.
"But we fundamentally believe in a commercial software industry, and some variants of the open-source model attack the economic model that allows companies to build businesses in software. The virtuous cycle of innovation, reward, reinvestment, and more innovation is what has driven all big breakthroughs in our industry. The software business as we have known it is a scale economic busi-
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ness. You spend a ton of money up front to develop a software product, and then the marginal cost of producing each one is very small, but if you sell a lot of them, you make back your investment and then plow profits back into developing the next generation. But when you insist that you cannot charge for software, you can only give it away, you take the software business away from being a scale economic business." Added Bill Gates, "You need capitalism [to drive innovation.] To have [a movement] that says innovation does not deserve an economic reward is contrary to where the world is going. When I talk to the Chinese, they dream of starting a company. They are not thinking, 'I will be a barber during the day and do free software at night.'. . .
When you have a security crisis in your [software] system, you don't want to say,
'Where is the guy at the barbershop?'"
As we move into this flat world, and you have this massive Web-enabled global workforce, with all these collaborative tools, there will be no project too small for some members of this workforce to take on, or copy, or modify-for free. Someone out there will be trying to produce the free versions of every kind of software or drug or music.
"So how will products retain their value?" asked Mundie. "And if companies cannot derive fair value from their products, will innovation move forward in this area, or others, at the speed that it could or should?" Can we always count on a self-organizing open-source movement to come together to drive things forward for free? It seems to me that we are too early in the history of the flattening of the world to answer these questions. But they will need answers, and not just for Microsoft.
So far-and maybe this is part of the long-term answer-Microsoft has been able to count on the fact that the only thing more expensive than commercial software is free software. Few big companies can simply download Linux off the Web and expect it to work for all their tasks. A lot of design and systems engineering needs to go around it and on top of it to tailor it to a company's specific needs, especially for
英文荟萃网 http://www.ywhc.net sophisticated, large-scale, mission-critical operations. So when you add up all the costs of adapting the Linux operating system to the needs of your company and its specific hardware platform and applica-
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tions, Microsoft argues, it can end up costing as much as or more than Windows.
The second issue Microsoft raises about this whole open-source movement has to do with how we keep track of who owns which piece of any innovation in a flat world, where some is generated for free and others build on it for profit. Will Chinese programmers really respect the rules of the Free Software Foundation? Who will govern all this?
"Once you start to socialize the global population on the idea that software or any other innovation is supposed to be free, a lot of people will not distinguish between free software, free pharmaceuticals, free music, or free patents on car designs," argued Mundie. There is some truth to this. I work for a newspaper, that is where my paycheck comes from. But I believe that all online newspapers should be free, and on principle I refuse to pay for an online subscription to The Wall Street Journal.
I have not read the paper copy of The New York Times regularly for two years. I read it only online. But what if my daughters' generation, which is being raised to think that newspapers are something to be accessed online for free, grows up and refuses to pay for the paper editions? Hmmm. I loved Amazon.com until it started providing a global platform that wasn't selling only my new books but also used versions. And
I am still not sure how I feel about Amazon offering sections of this book to be browsed online for free Mundie noted that a major American auto company recently discovered that some Chinese firms were using new digital-scanning technology to scan an entire car and churn out computer-aided design models of every part within a very short period of time. They can then feed those designs to industrial robots and in short order produce a perfect copy of a GM car-without having to spend any money on R & D. American automakers never thought they had anything to worry about from wholesale cloning of their cars, but in the flat world, given the technologies that are out there, that is no longer the case.
My bottom line is this: Open-source is an important flattener because it makes available for free many tools, from software to encyclopedias, that millions of people around the world would have had to buy in order to use, and because open-source network associations-with their
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open borders and come-one-come-all approach-can challenge hierarchical structures with a horizontal model of innovation that is clearly working in a growing number of areas. Apache and Linux have each helped to drive down costs of computing and
Internet usage in ways that are profoundly flattening. This movement is not going away. Indeed, it may just be getting started-with a huge, growing appetite that could apply to many industries. As The Economist mused (June 10, 2004), "some zealots even argue that the open-source approach represents a new, post-capitalist model of production." That may prove true. But if it does, then we have some huge global governance issues
英文荟萃网 http://www.ywhc.net to sort out over who owns what and how individuals and companies will profit from their creations.

Flattener #5
Outsourcing
Y2K
India has had its ups and down since it achieved independence on August 15, 1947, but in some ways it might be remembered as the luckiest country in the history of the late twentieth century.
Until recently, India was what is known in the banking world as "the second buyer."
You always want to be the second buyer in business-the person who buys the hotel or the golf course or the shopping mall after the first owner has gone bankrupt and its assets are being sold by the bank at ten cents on the dollar. Well, the first buyers of all the cable laid by all those fiber-optic cable companies-which thought they were going to get endlessly rich in an endlessly expanding digital universe-were their
American shareholders. When the bubble burst, they were left holding either worthless or much diminished stock. The Indians, in effect, got to be the second buyers of the fiber-optics companies.
They didn't actually purchase the shares, they just benefited from the
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overcapacity in fiber optics, which meant that they and their American clients got to use all that cable practically for free. This was a huge stroke of luck for India
(and to a lesser degree for China, the former Soviet Union, and Eastern Europe), because what is the history of modern India? In short, India is a country with virtually no natural resources that got very good at doing one thing-mining the brains of its own people by educating a relatively large slice of its elites in the sciences, engineering, and medicine. In 1951, to his enduring credit, Jawaharlal Nehru, India's first prime minister, set up the first of India's seven Indian Institutes of
Technology (IIT) in the eastern city of Kharagpur. In the fifty years since then, hundreds of thousands of Indians have competed to gain entry and then graduate from these IITs and their private-sector equivalents (as well as the six Indian Institutes of Management, which teach business administration). 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.
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"The IITs became islands of excellence by not allowing the general debasement of the
Indian system to lower their exacting standards," noted The Wall Street Journal (April
16, 2003). "You couldn't bribe your way to get into an IIT . . . Candidates are accepted only if they pass a grueling entrance exam. The government does not interfere with the curriculum, and the workload is demanding. . . Arguably, it is harder to get into an IIT than into Harvard or the Massachusetts Institute of Technology. . . IIT alumnus
Vinod Khosla, who co-founded Sun
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Microsystems, said: 'When I finished IIT Delhi and went to Carnegie Mellon for my
Masters, I thought I was cruising all the way because it was so easy relative to the education I got at IIT.'"
For most of their first fifty years, these IITs were one of the greatest bargains
America ever had. It was as if someone installed a brain drain that filled up in New
Delhi and emptied in Palo Alto.
And then along came Netscape, the 1996 telecom deregulation, and Global Crossing and its fiber-optic friends. The world got flattened and that whole deal got turned on its head. "India had no resources and no infrastructure," said Dinakar Singh, one of the most respected young hedge fund managers on Wall Street, whose parents graduated from an IIT and then immigrated to America, where he was born. "It produced people with quality and by quantity. But many of them rotted on the docks of India like vegetables. Only a relative few could get on ships and get out. Not anymore, because we built this ocean crosser, called fiberoptic cable . . . For decades you had to leave India to be a professional. . . Now you can plug into the world from
India. You don't have to go to Yale and go to work for Goldman Sachs [as I did.]"
India could never have afforded to pay for the bandwidth to connect brainy India with high-tech America, so American shareholders paid for it. Sure, overinvestment can be good. The overinvestment in railroads turned out to be a great boon for the American economy. "But the railroad overinvestment was confined to your own country and so too were the benefits," said Singh. In the case of the digital railroads, "it was the foreigners who benefited." India got to ride for free.
It is fun to talk to Indians who were around at precisely the moment when American companies started to discover they could draw on India's brainpower in India. One of them is Vivek Paul, now the president of Wipro, the Indian software giant. "In many ways the Indian information technology [outsourcing] revolution began with
General Electric coming over. We're talking the late 1980s and early '90s. At the time, Texas Instruments was doing some chip design in India. Some of their key designers [in America] were Indians, and they basically let them go back home and work from there [using the rather crude communications networks that existed then to stay in touch.] At that time, I was heading up
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the operations for GE Medical Systems in Bangalore. [GE's chairman] Jack Welch came to India in 1989 and was completely taken by India as a source of intellectual advantage for GE. Jack would say, 'India is a developing country with a developed intellectual capability.' He saw a talent pool that could be leveraged. So he said,
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'We spend a lot of money doing software. Couldn't we do some work for our IT department here?'" Because India had closed its market to foreign technology companies, like
IBM, Indian companies had started their own factories to make PCs and servers, and
Welch felt that if they could do it for themselves, they could do it for GE.
To pursue the project, Welch sent a team headed by GE's chief information officer over to India to check out the possibilities. Paul was also filling in as GE's business development manager for India at the time. "So it was my job to escort the corporate
CIO, in early 1990, on his first trip," he recalled. "They had come with some pilot projects to get the ball rolling. I remember in the middle of the night going to pick them up at the Delhi airport with a caravan of Indian cars, Ambassadors, based on a very dated 1950s Morris Minor design. Everyone in the government drove one. So we had a five-car caravan and we were driving back from the airport to town. I was in the back car, and at one point we heard this loud bang, and I thought, What happened?
I shot to the front, and the lead car's hood had flown off and smashed the windshield-with these GE people inside! So this whole caravan of GE execs pulls over to the side of the road, and I could just hear them saying to themselves, 'This is the place we're going to get software from?'"
Fortunately for India, the GE team was not discouraged by the poor quality of Indian cars. GE decided to sink roots, starting a joint development project with Wipro. Other companies were trying different models. But this was still pre-fiber-optic days.
Simon & Schuster, the book publisher, for instance, would ship its books over to India and pay Indians $50 a month (compared to $1,000 a month in the United States) to type them by hand into computers, converting the books into digitized
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electronic files that could be edited or amended easily in the future - particularly dictionaries, which constantly need updating. In 1991, Manmohan Singh, then India's finance minister, began opening the Indian economy for foreign investment and introducing competition into the Indian telecom industry to bring down prices. To attract more foreign investment, Singh made it much easier for companies to set up satellite downlink stations in Bangalore, so they could skip over the Indian phone system and connect with their home bases in America, Europe, or Asia. Before then, only Texas Instruments had been willing to brave the Indian bureaucracy, becoming the first multinational to establish a circuit design and development center in India in 1985. TI's center in Bangalore had its own satellite downlink but had to suffer through having an Indian government official to oversee it-with the right to examine any piece of data going in or out. Singh loosened all those reins post-1991. A short time later, in 1994, HealthScribe India, a company originally funded in part by
Indian-American doctors, was set up in Bangalore to do outsourced medical transcription for American doctors and hospitals. Those doctors at the time were taking handwritten notes and then dictating them into a Dictaphone for a secretary or someone else to transcribe, which would usually take days or weeks. HealthScribe set up a system that turned a doctor's touch-tone phone into a dictation machine.
The doctor would punch in a number and simply dictate his notes to a PC with a voice card in it, which would digitize his voice. He could be sitting anywhere when he did
英文荟萃网 http://www.ywhc.net it. Thanks to the satellite, a housewife or student in Bangalore could go into a computer and download that doctor's digitized voice and transcribe it-not in two weeks but in two hours. Then this person would zip it right back by satellite as a text file that could be put into the hospital's computer system and become part of the billing file. Because of the twelve-hour time difference with India, Indians could do the transcription while the American doctors were sleeping, and the file would be ready and waiting the next morning. This was an important breakthrough for companies, because if you could safely, legally, and securely transcribe from
Bangalore medical records, lab reports, and doctors' diagnoses-in one of the most litigious 108 industries in the world-a lot of other industries could think about sending some of their backroom work to be done in India as well. And they did. But it remained limited by what could be handled by satellite, where there was a voice delay. (Ironically, said Gurujot Singh Khalsa, one of the founders of HealthScribe, they initially explored having Indians in Maine-that is, American Indians-do this work, using some of the federal money earmarked for the tribes to get started, but they could never get them interested enough to put the deal together.) The cost of doing the transcription in India was about one-fifth the cost per line of doing it the United
States, a difference that got a lot of people's attention.
By the late 1990s, though, Lady Luck was starting to shine on India from two directions:
The fiber-optic bubble was starting to inflate, linking India with the United States, and the Y2K computer crisis-the 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 creation: outsourcing.
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Any service, call center, business support operation, or knowledge work that could
英文荟萃网 http://www.ywhc.net be digitized could be sourced globally to the cheapest, smartest, or most efficient provider. Using fiber-optic cable-connected workstations, Indian techies could get under the hood of your company's computers and do all the adjustments, even though they were located halfway around the world.
"[Y2K upgrading] was tedious work that was not going to give them an enormous competitive advantage," said Vivek Paul, the Wipro executive whose company did some outsourced Y2K drudge work. "So all these Western companies were incredibly challenged to find someone else who would do it and do it for as little money as possible. They said, 'We just want to get past the damn year 2000!' So they started to work with Indian [technology] companies who they might not have worked with otherwise." To use my parlance, they were ready to go on a blind date with India. They were ready to get "fixed up." Added Jerry Rao, 'Y2K means different things to different people.
For Indian industry, it represented the biggest opportunity. India was considered as a place of backward people. Y2K suddenly required that every single computer in the world needed to be reviewed. And the sheer number of people needed to review line-by-line code existed in India. The Indian IT industry got its footprint across the globe because of Y2K. Y2K became our engine of growth, our engine of being known around the world. We never looked back after Y2K."
By early 2000, the Y2K work started to wind down, but then a whole new driver of business emerged-e-commerce. The dot-com bubble had not yet burst, engineering talent was scarce, and demand from dotcoms was enormous. Said Paul, "People wanted what they felt were mission-critical applications, key to their very existence, to be done and they could go nowhere else. So they turned to the Indian companies, and as they turned to the Indian companies they found that they were getting delivery of complex systems, with great quality, sometimes better than what they were getting from others. That created an enormous respect for Indian IT providersf.] And if [Y2K work] was the acquaintanceship process, this was the falling-in-love process."
Outsourcing from America to India, as a new form of collaboration,
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exploded. By just stringing a fiber-optic line from a workstation in Bangalore to my company's mainframe, I could have Indian IT firms like Wipro, Infosys, and Tata
Consulting Services managing my e-commerce and mainframe applications.
"Once we're in the mainframe business and once we're in e-commerce-now we're married," said Paul. But again, India was lucky that it could exploit all that undersea fiber-optic cable. "I had an office very close to the Leela Palace hotel in Bangalore,"
Paul added. "I was working with a factory located in the information technology park in Whitefield, a suburb of Bangalore, and I could not get a local telephone line between our office and the factory. Unless you paid a bribe, you could not get a line, and we wouldn't pay. So my phone call to Whitefield would go from my office in Bangalore to Kentucky, where there was a GE mainframe computer we were working with, and then from Kentucky to Whitefield. We used our own fiber-optic lease line that ran across the ocean-but
英文荟萃网 http://www.ywhc.net the one across town required a bribe."
India didn't benefit only from the dot-com boom; it benefited even more from the dot-com bust! That is the real irony. The boom laid the cable that connected India to the world, and the bust made the cost of using it virtually free and also vastly increased the number of American companies that would want to use that fiber-optic cable to outsource knowledge work to India.
Y2K led to this mad rush for Indian brainpower to get the programming work done. The
Indian companies were good and cheap, but price wasn't first on customers' minds-getting the work done was, and India was the only place with the volume of workers to do it. Then the dot-com boom comes along right in the wake of Y2K, and
India is one of the few places where you can find surplus English-speaking engineers, at any price, because all of those in America have been scooped up by e-commerce companies. Then the dot-com bubble bursts, the stock market tanks, and the pool of investment capital dries up. American IT companies that survived the boom and venture capital firms that still wanted to fund start-ups had much less cash to spend. Now they needed those Indian
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engineers not just because there were a lot of them, but precisely because they were low-cost. So the relationship between India and the American business community intensified another notch.
One of the great mistakes made by many analysts in the early 2000s was conflating the dot-com boom with globalization, suggesting that both were just fads and hot air.
When the dot-com bust came along, these same wrongheaded analysts assumed that globalization was over as well. Exactly the opposite was true. The dot-com bubble was only one aspect of globalization, and when it imploded, rather than imploding globalization, it actually turbocharged it.
Promod Haque, an Indian-American and one of the most prominent venture capitalists in Silicon Valley with his firm Norwest Venture Partners, was in the middle of this transition. "When the bust took place, a lot of these Indian engineers in the U.S.
[on temporary work visas] got laid off, so they went back to India," explained Haque.
But as a result of the bust, the IT budgets of virtually every major U.S. firm got slashed. "Every IT manager was told to get the same amount of work or more done with less money. So guess what he does? He says, 'You remember Vijay from India who used to work here during the boom and then went back home? Let me call him over in Bangalore and see if he will do the work for us for less money than what we would pay an engineer here in the U.S.'" And thanks to all that fiber cable laid during the boom, it was easy to find Vijay and put him to work.
The Y2K computer readjustment work was done largely by low-skilled Indian programmers right out of tech schools, said Haque, "but the guys on visas who were coming to America were not trade school guys. They were guys with advanced engineering degrees. So a lot of our companies saw that these guys were good at Java and C++ and architectural design work for computers, and then they got laid off and went back home, and the
IT manager back here who is told, 1 don't care how you get the job done, just get it done for less money,' calls Vijay." Once America and India were dating, the
英文荟萃网 http://www.ywhc.net burgeoning Indian IT companies in Bangalore started coming up with their own proposals.
The Y2K work had allowed them to interact with some pretty large companies in the
United States, and as a result they began to understand the pain points and how to do 112 business-process implementation and improvement. So the Indians, who were doing a lot of very specific custom code maintenance to higher-value-add companies, started to develop their own products and transform themselves from maintenance to product companies, offering a range of software services and consulting. This took Indian companies much deeper inside American ones, and business-process outsourcingletting
Indians run your back room-went to a whole new level. "I have an accounts payable department and I could move this whole thing to India under Wipro or Infosys and cut my costs in half," said Haque. All across America, CEOs were saying, "'Make it work for less,'" said Haque. "And the Indian companies were saying, 'I have taken a look under your hood and I will provide you with a total solution for the lowest price.'" In other words, the Indian outsourcing companies said, "Do you remember how
I fixed your tires and your pistons during Y2K? Well, I could actually give you a whole lube job if you like. And now that you know me and trust me, you know I can do it." To their credit, the Indians were not just cheap, they were also hungry and ready to learn anything.
The scarcity of capital after the dot-com bust made venture capital firms see to it that the companies they were investing in were finding the most efficient, high-quality, low-price way to innovate. In the boom times, said Haque, it was not uncommon for a $50 million investment in a start-up to return $500 million once the company went public. After the bust, that same company's public offering might bring in only $100 million. Therefore, venture firms wanted to risk only $20 million to get that company from start-up to IPO.
"For venture firms," said Haque, "the big question became, How do I get my entrepreneurs and their new companies to a point where they were breaking even or profitable sooner, so they can stop being a draw on my capital and be sold so our firm can generate good liquidity and returns? The answer many firms came up with was:
I better start outsourcing as many functions as I can from the beginning. I have to make money for my investors faster, so what can be outsourced must be outsourced."
Henry Schacht, who, as noted, was heading Lucent during part of this period, saw the whole process from the side of corporate management.
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The business economics, he told me,became "very ugly" for everyone. Everyone found prices flat to declining and markets stagnant, yet they were still spending huge amounts of money running the backroom operations of their companies, which they could no longer afford. "Cost pressures were enormous," he recalled, "and the flat world was available, [so] economics were forcing people to do things they never thought they would do or could do ... Globalization got supercharged"-for both knowledge work and manufacturing. Companies found that they could go to MIT and find four incredibly smart Chinese engineers who were ready to go back to China and work for them from
英文荟萃网 http://www.ywhc.net there for the same amount that it would cost them to hire one engineer in America.
Bell Labs had a research facility at Tsingdao that could connect to Lucent's computers in America. "They would use our computers overnight," said Schacht. "Not only was the incremental computing cost close to zero, but so too was the transmission cost, and the computer was idle [at night]."
For all these reasons I believe that Y2K should be a national holiday in India, a second Indian Independence Day, in addition to August 15. As Johns Hopkins foreign policy expert Michael Mandelbaum, who spent part of his youth in India, put it, "Y2K should be called Indian Inter-depedence Day," because it was India's ability to collaborate with Western companies, thanks to the interdependence created by fiber-optic networks, that really vaulted it forward and gave more Indians than ever some real freedom of choice in how, for whom, and where they worked.
To put it another way, August 15 commemorates freedom at midnight. Y2K made possible employment at midnight-but not any employment, employment for India's best knowledge workers. August 15 gave independence to India. But Y2K gave independence to Indiansnot all, by any stretch of the imagination, but a lot more than fifty years ago, and many of them from the most productive segment of the population. In that sense, yes,
India was lucky, but it also reaped what it had sowed through hard work and education and the wisdom of its elders who built all those IITs.
Louis Pasteur said it a long time ago: "Fortune favors the prepared mind."
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