Carmel on Global Tech

Greentech Innovation in Israel

2012-02-08T16:53:00.000-08:00

This week I co-chaired a one-day symposium here at AU on Greentech Innovation in Israel. Greentech is a broad portfolio of technologies: renewables, energy efficiency, water conservation, and so on. Greentech is also commonly labeled as cleantech.

We were pleased at the turnout, in the hundreds. The rock star, as expected, was Better Place, the Israeli-American electric vehicle company.

Here is an abridged version of my opening remarks at the business panel:

What is the narrative for this symposium today? Why greentech in Israel? …why not Russia, or Sweden, or Chile? In order to answer that, let me start with a few impressive stories and stats to address the first part of the "Why"; and then point to two reasons that explain Why this happened.

First, is the success of this nation's industry. Israel has several hundred greentech companies along with about 50 serious startups bubbling up per year. Some of most innovative green ideas have been coming out of Israeli firms. I’ll give you 3 stories:

1. Netafim, the pioneer in drip irrigation, started in the Israeli Negev desert in the 1960s, found a solution by dripping water to plants instead of wasting water with sprinklers. Netafim, its name a play on the Hebrew word for drip, still today is one of the dominant global micro-irrigation providers with offices worldwide.

2. Better Place is the symposium keynote’s company with a great presentation by Mike Granoff. The firm aims to revolutionize automobile energy consumption by creating an ecosystem of replaceable batteries in specially design electric vehicles.

3. A recent start-up that strikes me as somewhat of a comic book super hero: Cura-pipe deals with the 25% of the world’s water supply that is lost in leaky pipes. The technology first identifies the leaky holes, then it launches a payload with a special viscous substance, that finds the hole in the pipe from inside the pipe, and plugs it up. video.

I’ll turn from the stories to the stats:

The Cleantech 100 is a list of the top global private companies in cleantech. Of these 100 in 2010, 8 of the firms were Israeli. Israel was second to the USA and ahead of Germany, Britain, Japan. On a per capita basis, with its population of 7 million Israel is first-- by a green kilometer. (note some Israeli firms were listed as US-based).
In business we measure success by where the money flows. Money is flowing into the Israeli greentech by venture capitalists and multinationals. Israel Venture Capital Association reported in 2009 that $80 million was invested in Israeli cleantech companies; this represented ~10% of global risk capital in this sector. The giant American multinational GE, handed out $100,000 grants in 2010 as part of its international challenge to companies to build the next-generation power grid: 2 of the 5 winners were Israeli companies.

Now, I turn to the second part of the WHY narrative: Why is Israel punching above its weight on greentech? I see two reasons:

1. Israel has few resources. One of the laments Israelis voice, in jest, is that when God gave his people a promised land, he placed them in one of the few areas of the Middle East without oil, and then to make it more challenging he made the land arid. That scarcity has driven Israelis: after all, necessity is the mother of invention.

2. Israel has become a startup nation. This is key-- I think. Israel has embraced the “Silicon Valley model.” The nation developed an entire innovation ecosystem dating back in the go-go dotcom 1990s. They’ve simply transferred some of that tech streetsmarts into greentech now. The smart people are drawn to technology —and then they have the knowhow to take it all the way through: they see a problem; look for a solution; they form a startup with their social network, they get funding, develop an initial market. This is why, every year, there are so many serious greentech startups sprouting up out of several thousand proposals presented to venture capitalists.

for more on the topic:

Chile wants to be a Start-Up Nation

2012-01-17T19:48:00.000-08:00

Chile wants to be the Latin American Silicon Valley. In Chile this month I visited ground zero of this dream: Start-Up Chile (SUP). Of my planned visits on this trip I was most eager to see this place given the buzz SUP accumulated, including by Vivek Wadwa, whom I enjoy reading (see WashingtonPost article 8/2011 here).

The SUP basics are: submit plan, get 40K USD seed money, no strings attached, to come to Chile for 6 months and start a business. That's it, essentially.

I am photographed in main room of SUP.
Scattered out of the frame were ~20 entrepreneurs
working on their computers.

Yes, with my students we picked holes in a few aspects of this deal…but anyone can pick holes in any scheme. The brilliance of the SUP initiative is that it achieves key national objectives: it puts Chile on the map as the aspirant to be a future entrepreneurial Valle del Silicio, in the new incarnation of the American garage.

see

http://nextmontreal.com/start-up-chile-is-a-great-experience-but-be-careful-too/

http://www.bbc.co.uk/news/business-15887000

The giraffe view of the Dutch professor

2011-12-08T04:11:00.000-08:00

Last week I was in The Netherlands, in the beautiful city of Delft, as a guest of the Delft University of Technology, the leading tech university in the Netherlands.

My visit – and my host -- got me thinking about improving the position of business professor in the United States.

The reason for my visit was this event: My colleague Dr. Rini van Solingen was promoted to (full) professor in Global Software Engineering. Here’s where it gets odd to an American academic: you see, it’s a full professorship, but on a part-time basis. One day per week for research and education plus four days in industry. That’s 1+4.

These professors have a “heart for research” (Rini’s words) but are also working in practice; in Rini’s case in a large Dutch I.T. consultancy. Rini referred to this as “the giraffe view:” Head in the clouds (for one day per week) but with all feet on the ground (for the other 4 days). Such a position nicely bridges business with academia. Mind you, these professors still need to pass all the official qualifications such as a Ph.D., significant h-index, publication track record, etc.

Rini supervises two full-time Ph.D. students that are partly financed by an industrial company with a large interest in their research findings and publications. Furthermore, he teaches one MSc elective class; an applied one, of course: Global Software Engineering, thus bridging industrial experience with teaching the future global software engineering workforce.

Why is this a good model for American business schools? In the USA we have institutionalized a hard separation between research and practice. This Dutch model would encourage ambitious business people to get a doctorate. Today, in American business schools we relegate people from industry to low influence adjunct professors, or if they become full time professors, we carefully obfuscate their tainted industry dealings as being un-scholarly. It’s hypocritical, especially in a business school -- of all places…

CleanTech is often InfoTech

2011-10-19T16:09:00.000-07:00

This week I was at Cleantech 2011 (here in Washington DC). I was quite surprised and interested in one slicing of the top 100 dynamic, exciting, innovative Cleantech companies. Of the 5 most admired Cleantech companies, 4 of them are basically IT companies.

The companies are: Takadu (uses data from power firms), Hara (software for energy and sustainability management), Silver Spring (smart grid), Opower (smart grid).

Why are these the most admired? I brought this up with an attendee who argued that these firms are lower risk, known technologies, with faster monetization of investment.

Brazilian-spiced agile

2011-09-29T18:47:00.000-07:00

Is there a Brazilian agile software development? A unique kind of software development that is done in Brazil? I've visited many countries where techies have boasted that they do something special; that they have some special national spice.

The backdrop to this vignette is agile. Agile is the popular approach to software development. It has become the aspirational standard around the world.

I traveled to Brazil this month. I speculated on a Brazilian-spiced agile after visiting three IT /software firms, all of them based on agile, and seeing nearly identical team rooms in each. The companies are ThoughtWorks and the media firm RBS in Porto Alegre, and Ci &T in Campinas. Here is a photo from Ci&T.

Is this the Brazagile way? Dr. Sabrina Marczak a Prof at PUCRS thinks so. Brazilian firms are looking for competitive advantage when competing globally. This co-located work environment, the antithesis of the far-flung American style, seems to be something they are coalescing around.

Infosys Connect 2011 in Las Vegas

2011-08-16T19:35:00.000-07:00

In 1999 when I began to visit and speak at outsourcing conferences, I first encountered the Indian managers, who rose from coders, engineers-- still so raw, still so foreign outside of India. These were the men at the sales booths. Infosys was already a big firm, though: already at 100 million USD.

Some years later, in 2005 I was a guest at Infosys, Bengaluru, the huge glittering campus. The company had just become a rockstar, propelled in part by Tom Friedman’s World is Flat. Consequently, it became the poster child for offshoring. Infosys had just crossed the 1 billion USD threshold. It had grown x10 in 6 years.

This month I attended the Infosys annual internal conference, Connect 2011, in Las Vegas. Now I sensed a confident global firm. Yes, still dominated by Indians (and the firm’s clique of founding fathers), but many non-Indians are represented at all ranks. The Indian-born managers are now clearly part of the global elite, jetting in from London and Switzerland to play golf in Las Vegas. The company’s managers are cosmopolitan and confident.

Call Center Avenue of Manila

2011-05-28T17:58:00.001-07:00

24-hour food for call center workers

I paid a short visit in May to the Call Center Avenue of Manila. About 100 call centers are located along a short strip of tall office buildings along the fancy Emerald Avenue in Pasig City in metro Manila. But work hours are different here. Most employees come to work about 6 PM. With all these young workers working 24/7, the avenue has a wonderful concentration of fast restaurants open 24 hours a day. There are even two Starbucks (after all, one needs caffeine for those night shifts). Every Friday night at midnight, when the call centers are full, the busy avenue is closed to traffic and there’s a banchetto – a lavish street feast and party.

I was the guest of SPi, an impressive firm, now the largest contact center provider in the Philippines with 14000 employees (most at call desks) in 23 sites of which 11000 are in the Philippines.

Việt Nam High Tech and Offshoring

2011-05-28T17:58:00.000-07:00

I recently returned from my first tour of Việt Nam. Vietnam competes on low wages, hard work, and natural resources – but not yet on innovation. Nevertheless some early signs of its future competitiveness can be found in Saigon Hi-Tech Park SHTP, a huge parcel of land northeast of the city. It is home to Intel, a small Vietnamese incubator, and various other firms.

One firm that just moved into their new digs in SHTP is FPT. FPT is close to my heart, so to speak, because it is the largest Vietnamese IT Services provider (in other words, it is an offshore provider). FPT is the largest Vietnamese tech conglomerate, with many connections in high places—a must for this place. FPT Software, which is the offshoring provider, has $50 million in revenues, 3500 employees, and tries to be the Infosys of Vietnam. I particularly liked that it recognized the weak universities in Vietnam-- a national failure—and in 2006 stepped in to create FPT University. Tuition is cheap by any standard: $1000 for a degree. I was told that “all our graduates want to work in outsourcing.” Indeed.

Microsourcing in Vietnam and Philippines

2011-05-22T07:32:00.000-07:00

The microsourcing entrepreneurial pattern is remarkably consistent in four of the last five visits here in Vietnam and Philippines. Here it is:

Step 1: You work in a low paying job. Most knowledge economy jobs, including those requiring degrees, pay little, require long commutes, and are ridiculously tiny in salary when one measures them from the shores of America.

Step 2: You happen to hear about microsourcing marketplaces (see list below). You begin to moonlight (= work at night). You quickly make more in a few days doing work for Americans, Canadians, or Australians, than your regular monthly salary.

Step 3: You quit your day job

Step 4: You scale. You grow. You capitalize on your instinctive understanding of the market and farm out work to other local microsourcing workers (full time and part-time). You are now charging high rates for your personal work and you are taking good margins on work you manage for others.

Step 5: You are amazed at how far you’ve come in such a short time (18 to 30 months). Suddenly, you have money to get the latest gadgets, you may have enough to buy a car, you are financially much more comfortable, and you are supporting your extended family.

Step 6? Too early to tell what’s next. This microsourcing entrepreneurial economy is too young to see the next common step.

List of microsourcing marketplaces: eLance, Freelancer, Getafreelancer, Guru, oDesk, Vworker. Some others: 99design, Amazon Mechnical Turk, Clickworker, Cloudcrowd, Crowdspring, Innocentive, Innovation Exchange, Liveops, Maven research, Samasource, Topcoder, Utest

…Oh, one of the four is a Filipino firm that insisted I mention it explicitly! Mondex, with a virtual workforce spread around the Philippines, now with 59 full time and part time workers.

Clarification. Philippines has a large firm in the BPO space called Microsourcing. We see microsourcing as a special kind of outsourcing: sourcing to individuals and very small firms. The Filipino firm name is just a name... kind of like Microsoft.

Billionaire Microsourcers in Vietnam

2011-05-18T08:13:00.000-07:00

Saigon

It sounds easy to be a billionaire IT provider in Vietnam, with the dong worth about 20,000 per USD, a billion dong is just 50,000 USD. But in Vietnam, where the annual wage is 1000 USD and a fresher programmer makes just 150 USD per month, a billion dong is a nice take for a small firm.

So in Hanoi and Saigon I met two tech entrepreneurs practicing microsourcing that are near or exceeding a billion dong.

The two have lots in common: they quit their old day jobs making pennies (one was a professor… horrors!). Using online marketplaces (eLance, vWorker, freelancer, etc.) to get their foreign clients, they each created a virtual company of programmers, all working out of their homes. Both entrepreneurs have permanent and part-time employees (it is common to moonlight in Vietnam). With no offices, very little overhead, they are bidding on jobs in the US and elsewhere and asking 10-15 USD per hour. This is a fortune in Vietnam, but not much for an American client. Both have made more money in the last few years than they ever have. Both want to scale – they want to grow their business more.

But here is the challenge: how to scale this kind of virtual business? Elements that both of these firms lack are regular company functions. For example, both need a salesperson that is not the technologist in chief. Both need to formalize internal processes including methodologies. Both need to look at other virtual organizations, especially Open Source, for how to scale.

By the way, Vietnam is booming. There seem to be more cranes in Saigon/HCMC than in most US cities.

I gave a TEDx talk this week about the Internet and Time Zones

2011-03-25T11:07:00.000-07:00

I gave a TEDx talk this week (TEDx is the franchise of the big TED). The talk is about the Internet and Time Zones (click thru to watch it).

We’ve been conditioned by Moore’s Law to expect rapid changes in anything related to technology. But there’s no Moore’s Law for time zones. We are not making much progress. Global knowledge workers still need to timeshift when collaborating because I think we have two fundamental flaws as humans:

First, we still need proximity and interaction. When collaborating across time zones on tasks that are fuzzy, we still need synchronization. This synchronization needs to be interactive— in real-time. We need to sync for being creative, for resolving disagreement, and for clarifying differences.

Second, we’re still very much stuck with the cycle of sunshine and night time. As biological organisms we cannot beat our 24 hour Circadian rhythm. We need our sleep. It’s impossible to break out of this 24 hour rhythm. Yes, you can use a drug called Modafinil to stay awake for 48 hours, but I don’t recommend this for the everyday, ordinary, global knowledge worker that is struggling to overcome the time zone difference.

MBAs who became Leaders of Nations

2011-02-14T20:29:00.000-08:00

The charismatic flash leader of the Egyptian uprising has an MBA. Wael Ghonim, is a young Google Egypt executive. Perhaps he may become the leader of the largest nation in the Arab world. If so, he will become one of the few leaders in the world who have earned an MBA (or equivalent).

Ghonim brought me back to my interest in MBAs who later became world leaders. I first gave this attention when the first person with an advanced degree in business and management was elected back in 1996 to be the leader of a nation. As a business professor who teaches MBAs I paid attention.

Since the first one in 1996, I am aware of only one other world leader with an MBA. I would have expected more by now given that there are several million MBAs in the world. So, that’s a total of two so far. That’s it.

I predict that you cannot guess who was the first. It was Benjamin Netanyahu of Israel, with an M.Sc. in Management Studies from Sloan (1976) at MIT. He qualifies as the first. At the time there were few MBAs. Netanyahu’s degree was, in essence an MBA degree plus a thesis.

In 2000 along came George W. Bush (Harvard MBA, 1975).

Yes, there have been other prominent politicians in the last decade with MBAs. See this FT article.

But no more leaders of nations that I am aware of.

I present a few facts about the pair and then a bit about their early business careers right after their business degrees. Both men come from politically-connected families and once their business careers stalled, other opportunities came along and they never had to come back to business.

George W. Bush, MBA ’75, elected President in 2000, served 8 years. His business career in the late 1970s and early 1980s was in oil and then later as General Manager of the Texas Rangers baseball team. His career as an oil entrepreneur was … undistinguished.
Benjamin Netanyahu, M.Sc. in Management ’76, elected Prime Minister in 1996, served 3 years; elected again in 2009 and is currently Prime Minister for two years and counting. His business career was quite short. He briefly worked at the prestigious Boston Consulting Group in the US. In the late 1970s he worked for about a year in an Israeli furniture chain.

The real benchmark is how well did these MBA leaders do when in charge of a nation? Did they learn something from their “B school” days? Were they good leaders?, good managers?, good administrators? Did they manage teams well? Did they manage money well?

Well…

Let’s just hope that if Ghonim ascends to the top, he will do well.

The Myths of Global Tech. What do “Follow The Sun” & “Round The Clock” really mean?

2011-01-23T20:49:00.000-08:00

What does it mean when your operations do “Follow The Sun”? What about “Round The Clock”? Some of this is just empty marketing hooey. But, as global tech work matures, we need more precise terms for what companies really mean. I’ve been following these specialties since 1997 when I got a call from my colleague Ed Roche that IBM was doing something it cleverly labeled “Follow The Sun.” This week my visiting Brazilian research student, Rafael, compiled many instances of companies using the label “Follow The Sun.” The usage seems to have drifted quite a bit and this spurred me to write this. I’ve noticed managers’ confusion about these concepts. It is time to parse them up.

FollowTheSun and RoundTheClock are the great seductions of global work and time zone differences. While you sleep, we are working and getting the job done! Or: when your shift in New Jersey goes home for the evening, the Singapore shift is just getting started. Wonderful, isn't it? Time zone differences can be an advantage. Hand-off work from one site to the next as the world turns.

There are two trajectories to this, which are surprisingly different.

First, there is FollowTheSun collaborative work. Here, unfinished work, often software work, is handed off on a daily basis from one distant site to the next. And then there is RoundTheClock work. These are the global trading desks in financial markets, the global help desks, the global support centers, and more.

All dazzling, yes, but there are key differences:

FollowTheSun is about speed – cutting project duration.

while

RoundTheClock is about 24 hour coverage – running an operation in all shifts.

Yes, both of these concepts use time zone differences to design shifts. But for very different purposes --and with very different kinds of tasks and coordination challenges. A FollowTheSun task example is rapid prototyping. This is a creative/ constructive task where the daily coordination challenge is the hand-off. That is the passing of the baton of some piece of unfinished work.

RoundTheClock work examples are Helpdesk, or Tier 1 support. It is an operation with many tasks each of which is highly granular, perhaps even measured in just a few minutes. Thus, there is very little coordination challenge in handing-off work between the various global sites.

FollowTheSun is a term tends to be overused quite a bit. “We do FollowTheSun” is often heard in global technology when there is little actually behind it. “RoundTheClock” is quite common, but it is also misleading in some companies as they use a cheap Asian workforce to work during their night shift - rather than having them work during their day shift.

Together with my colleague Alberto Espinosa, we are finishing a book, due out in 2011, that summarizes a decade of research on this topic. The working title is I’m Working While They’re Sleeping: Coordination Across Time Zones.

The Science of Interruptions & Multitasking

2010-11-30T18:15:00.000-08:00

Digital distraction journalist, Matt Richtel of the New York Times was interviewed on our local radio station today [interview here]. Richtel does a marvelous job of explaining the new era of distractions that we have all just entered into in the last few years. This is interesting to me on two levels. First, as a teacher, how to keep students engaged when they are constantly being distracted in the classroom -- and outside.

The second is in my area of study -- time zone separation. It connects to the interesting findings from my research this year on collaboration between Brazilian software engineers and their distant collaborators north of the equator. We heard numerous times of the importance of "quiet time." The global digital collaborators, in Brazil in this case, were wired to each other synchronously during the workday, but really crave that quiet time at the beginning of the Brazilian morning before the North Americans come to work and begin to distract them. It seems that in global collaboration we all strive for connectivity and very tight synchronicity, but are overloaded and need that quiet time.

The Microsourcing Economy: Students get it

2010-10-27T10:40:00.000-07:00

Since 2005 I require my students to source a small project through one of the microsourcing marketplaces. I usually suggest they use Vworker (formerly known as Rent A Coder). My MBA students recently completed their projects. More on this in a moment.

Microsourcing takes place when buyers can source small projects or fractional tasks. Microsourcing is still a small slice of the global sourcing landscape, yet hundreds of thousands of individuals around the world buy and sell microsourced services every year -- and hence this is the “long tail” of sourcing. In 2008, Kaganer estimated this space to generate $250 million a year. And it's growing fast. Given what one hears at Crowdsourcing 2010, the number could well be double.

What to call it? I continue to tussle with my colleague Evgeny Kaganer (of IESE) what to call this sector. Should it be microsourcing as I labeled this back in 2008 (in this blog)?; or should it be online sourcing marketplaces as he labeled it? Or should it be crowdsourcing, which includes projects like Wikipedia-- which have no buyers. Or is it the elance economy, coined in 1998?

Back to my student projects. See summary of their microsourcing experience in this Google spreadsheet. The stats here are typical of what I've seen in previous semesters.

I usually suggest that the students spend about $15. So, as you can see, the bid acceptance converges on that (low) figure. Notice the short duration (median of 3.5 days) of the outsourced project from start -- all the way to project delivery. This is incredibly fast. Notice also the high number of bids (median of 16) that each student receives for his/her project. The students select a provider, typically an individual freelancer. I urge students to select offshore so that they experience dealing with a distant supplier, far away. Hence there are usually few Americans on the list. This semester the number of providers from the Indian subcontinent was the highest ever. 10 providers were from Bangladesh, Pakistan, or India.

The students love this course assignment. In my many years of teaching there are some projects that all the students really embrace. This is one of them. The experience of microsourcing is rewarding. Students learn to specify their work; they learn to filter the (many) bidders; they are instructed to reduce risks and reflect on how they do that. And the results usually are rewarding as well: this semester one student received 23 very creative logos to choose from for his needs—all for $15. Many students tell me that they plan to use microsourcing in the future in their work and in their personal life. (Class alumni out there: did this catalyze something in your future work?).

Some business professor colleagues also now use this assignment regularly: Levina at NYU; Oshri/Kotlarsky at Warwick, UK; Walden at Texas Tech; Carswell at UMUC; Kaganer at IESE. Spain (soon). There are certainly others (message me, I’ll add you).

We are also creating a micro course economy….

Does Time Zone Proximity Matter? The case of Brazil

2010-09-14T05:54:00.000-07:00

I’ve been interested in how time zone issues affect global collaboration for many years. This year I was able to look at this issue at the country level: The case of Brazil. The study we conducted was widely distributed in Brazil this summer: "Does Time Zone Proximity Matter for Brazil? A Study of the Brazilian I.T. Industry" .

Nations now compete in their time zone position. Indian IT has long positioned itself as ideal in time zone geography, claiming that, essentially, “we get the work done while you're sleeping!” Consequently, since the beginning of this decade the Brazilian IT industry, in order to differentiate from India, has proclaimed: we are accessible and easy to work with because we're working while you're working. In other words we can talk to you at a normal time.

Some background numbers: We analyzed the marketing literature of Brazil’s leading IT firms and found that 38% of Brazilian firms boast about time zone. Since nearly all the IT/software partners of Brazil are in North America and Europe (and not Asia) then nearly 100% of Brazil's IT export clients have time zone overlap with Brazil.

It is an overlap of convenience for both sides. It allows both sides to conduct more of their work interactively rather than as a highly-structured process. This overlap facilitates dense synchronous communications and helps to foster warm relationships between the Brazilians and their foreign partners. More on all this in the report itself.

I conducted this study with Prof. Rafael Prikladnicki of Pontifícia Universidade Católica do Rio Grande do Sul -- PUCRS. The study quickly traveled around industry and policy circles -- and in August Prikladnicki was flown to Brasilia to present our findings to the Ministry of Science and Technology. Brasscom, the Brazilian analog to the Indian Nasscom, representing the Brazilian tech industry association, summarized the report: A prova do fuso horário

Rural Sourcing in Israel

2010-08-19T05:43:00.000-07:00

Rural Sourcing means that the client is sourcing to a provider that is from a lower-cost and somewhat remote region inside one’s home country. This type of outsourcing represents a new way that the sourcing marketplace is able to finely slice new offerings for each client’s palette. Much as consumers at the supermarket expect to find dozens of yogurt types, rural sourcing is a relatively new flavoring. Its product features are: low cost, closer to home, with special socio-cultural dimensions (perhaps double bottom line), and perhaps also a bit of patriotism sprinkled into the blend. And, significantly, rural sourcing is a reaction to the threat of offshoring.

This summer I visited two of the leading Rural Sourcing IT providers in Israel: an Arab provider and an Ultra-Orthodox (UO from hereon) Jewish provider. Why these demographics in Israeli IT companies? These are the “developing” (poorer) socio-economic sectors in Israel. I’ve heard Israeli visionaries argue that this “Startup Nation” could possibly catapult itself into the top 15 nations in the world if these two sectors—which together make up 25% of the workforce-- could upgrade their economic participation in the national economy: the UO “haredi” Jews of Israel and the non-Jewish Arab Palestinians.

Neither of my interviewees had heard of the term Rural Sourcing-- and one of them was even uncomfortable with its meaning. “We’re not rural!” she grimaced. More comfortable words instead were the Israeli jargon words, in Hebrew, of: the center and the periphery (peripheria in local parlance). The Center is the wealthy, high-tech coastal areas, primarily Tel Aviv and Haifa. The peripheria, where these firms are located, is not far in this tiny nation. One firm is merely on the outer fringes of Metro Tel Aviv. The other firm is in the north of Israel; but with Israel’s new fast roads, it is hardly remote, reachable in 90 minutes from Tel Aviv. (The firms are not named here because my interviews were done as part of an academic study).

The first company was one of the new breed of Israeli-Arab I.T. firms. Visiting the company offices, it looks and feels like any other high tech firm in Israel except that this firm is in the heart of the Arab Galilee region. The firm draws from the underemployed Arab engineers who find it difficult to find employment (or hit glass ceilings) in the mainstream software startups or IT organizations. “Internally our values are integration: we have Muslims, Christians and Jews,” noted one executive.

The second, even more exotic firm, is the UO firm employing several hundred UO women. These women have many religious boundaries, even though all have technical training, often in software engineering. The women walk the gleaming hallways in their religiously-constrained dress of long skirts, long sleeves, and head covering, though some fashionable women wear a wig instead of a hat. “Israeli firms are using us instead of going offshore. The firms keep the high-end activities in-house and then the lower level work is either offshored or comes to us,” said a key executive.

For comparison, McKinsey's recent article is instructive:
IT services: The new allure of onshore locales

Brazil, InfoTech -- and Soccer Distractions

2010-06-03T09:37:00.000-07:00

In early June, just two weeks before the World Cup. I conducted a study trip to Brazil (to examine global coordination; more on this at a later post; see early news mention).

In Brazil football is not a sport, it is a religion. …and the World Cup is its holy holiday. (BTW, here football = soccer). With that in mind, we asked software/I.T. managers how they were preparing for the World Cup given that their tech teams deal with partners (clients, bosses) in the US and Europe.

We were a bit surprised that most had not done any planning for this. But everyone had answers. To begin with, managers have to think about how to prepare their foreign partners for the World Cup disruption. “I explain to the Americans to imagine Super Bowl for an entire month,” said one high level manager who had lived in the US. She nailed it, I would say.

Next, managers have to plan for the operational issues on the days Brazil has Cup games. It was self-evident that all work will stop and all will watch the game on the TV screen. One manager had studied the schedule and explained: “the first Brazil game is at 11:30 AM. What do we do [with the workday]? If we lose, no one will be able to work afterward. But, if we win, then everyone will run to the streets to celebrate. The second Brazil game is 14:30 (2:30 PM). On that day work will end at 14:00.”

Finally, our choice for Most-Brazil-Friendly is clearly Petrobras in its USA offices (this is Brazil’s national oil company and the largest firm in all of LatAm). One IT source told us that the firm already has vacations on both American and Brazilian holidays and now, for the World Cup, the employees will also take soccer holidays.

Notes: this research is in collaboration with Rafael Prikladnicki of PUCRS in Port Alegre. The quote on Brazil’s religion is adapted from Robert Janssen. The other quotes are anonymous as part of the study.

Is the US still innovating? A small sample from student projects.

2010-04-27T19:15:00.000-07:00

Here, in Washington, we continually examine whether the US is (still) innovating enough. One of the debate leaders is a Washington-based tech advocacy group, ITIF, that recently took the stance, once again, that Government should take an active role in spurring innovation by “picking winners” (in policy-wonk-speak). ITIF contends that our government shouldn’t let the market operate completely unfettered, but must place bets on some strategic technologies http://www.itif.org/publications/once-and-all-lets-agree-government-can-and-should-pick-winners

Since this is the end of the semester and my students present their technology projects, I was wondering how American innovation was reflected in a rather random collection of my students' technology projects. My student teams chose 14 technologies.

A quick examination reveals that the majority still are largely developed in the US (though their exact pedigree requires considerable more sleuthing). All of these technologies seem American-grown: a home energy monitoring system, Telepresence (HP and Cisco); Trauma medical imaging system (TIME); two projects on BI software packages, Tableau and Microsoft Pivot; Rich Presence Technologies (team chose IBM’s Sametime), car weather tracking system; Consumer presence tracking for supermarkets (called PASTA from IBM); Natal body controlled gaming is from Microsoft.

Several technologies have no clear fathers/owners: 4G; Desktop virtualization; Cloud. The latter two are in the global innovation ecosystems, though they are still largely anchored in US firms. The next technology, OLED (Organic Light Emitting Diode), was developed globally over many decades, is now commercialized in Japan. The last of the 14 technologies was from a team led by a Japanese student which chose the Sekai augmented reality.

Results: roughly 2/3 of the technologies are (mostly or largely) American. The rest are from the global innovation ecosystem or from Japan.

If the US is still the home of more than half of the innovations (and certainly more than half the commercializing firms), this is good-- from an American perspective.... nevertheless, I am still supportive of the government playing a wiser and more active role in technology.

Predicting the Future of Outsourcing & Offshoring: A Retrospective

2010-02-26T18:52:00.000-08:00

How good were past predictions on the growth of Outsourcing & Offshoring? I’ve become interested in Futuring and so I look back at how we once grasped the future of Outsourcing & Offshoring.

[Assessing futurists predictions is an entertaining sport. I like Andy Hines 2009 retrospective assessment of predictions made by several well-regarded futurists in 1997. Futures Forecasting: More Accurate Than You Might Think, World Future Review October-November 2009. Another example-- while not a full retrospective assessment -- this next site represents a nice predictions compilation from the heady days of the rise of the internet in the early 1990s. Imagining the Internet, the Early 1990s Predictions Database, the Pew Internet Project http://www.elon.edu/e-web/predictions/early90s/ ]

Now, to my study on Outsourcing & Offshoring-- or O&O as I like to call this pair. O&O are interesting to study retrospectively because they are transformational phenomena: Outsourcing shrinks the structure of the firm; Offshoring reallocates work globally – across borders.

In this study we assemble forecasts/ predictions from professional analysts (e.g., McKinsey, Gartner, and Forrester), advocacy organizations (e.g., national associations, lobbyists), and various others (e.g., economists). We have close to 100 already.

I am particularly interested in the Heroic & Original predictions: Heroic means looking way into the future; 6+ years; original meaning early on.

There are two predictions in the offshoring area that I labeled -- Mother of All Offshoring Predictions:

• McKinsey in 2002 predicted that by 2008 India’s outsourcing market (IT and ITES) will reach $57 billion. McKinsey assumed a 40% growth rate for 6 years. This was a fantasy vision. But alas, McKinsey’s prediction was very good. I will give it an A. The actual number was $47 billion in 2008. In the world of predictions, missing by just 25% on this kind of prediction is commendable.
• Forrester Research, in 2002, forecast that by 2015 a total of 3.3 million American service jobs will move offshore, most of these in IT-enabled services. This is hard to assess not only because I write this in 2010, but because in most cases we cannot point to a job that has truly been displaced. Interestingly, the Forrester prediction, had the unintended consequence of accelerating the future. The press picked up on the 2002 prediction and by 2003 American media were running stories about the threats of outsourcing. By 2004 it became a political issue during the U.S. presidential election campaign. Every manager in America was thinking “what’s this India thing?” and then considering doing it.

There are other interesting predictions on jobs. Alan Blinder’s study from 2007 looked at how many US jobs will be offshored. 22% to 29% are offshorable by 2022, he predicts. Gartner predicted in 2004 that by 2020 50% of US IT jobs will move offshore. On the other hand, in 2005 the lobby group ITAA (now TechAmerica) predicted, perhaps with a tinge of bias, that by 2010 387000 jobs will be created in USA because of offshoring.

Some have predicted the demise of labor arbitrage! Wages for knowledge work will move toward some global equilibrium! A flat world? Labor arbitrage will disappear in less than a generation? Yes, by 2027 predicted AT Kearney in 2007. Sometime after 2019 predicted Everest in 2004. I am surprised by these predictions. Those who made such predictions have probably not been to India or China or Vietnam to see for themselves the hundreds of millions of who live in poverty on a dollar or two a day and who help drive down wages.

In going through our database of predictions we assess the accuracy, the methodologies and assumptions used; we evaluate systematic biases; finally we assess what we can learn about predicting the future of Outsourcing & Offshoring. Please send us your favorite predictions.

The Routinization of Offshoring – some reflections

2010-01-03T21:28:00.001-08:00

In late 2009 I published an academic article on the routinization of offshoring (see Carmel et al below) What prompted this? I’ve been around offshoring for a while: having followed offshoring basically from its inception in the 1990s and having written the 2005 book Offshoring Information Technology. So, it is with some intimacy that I observe how routine this process has become in recent years.

Offshoring was once viewed as a managerial innovation. Should it still be considered an innovation? Innovation is a new way of doing things.

In the article we analyzed the giant IT consulting company EDS, which is now, of course, part of HP. We spoke to many EDS executives. Our discussions happened to take place before the HP acquisition.

During the early 2000s EDS faced a dramatic shift in the competitive landscape with the rapid rise of the Indian IT firms. EDS quickly moved a large share of its global operations offshore. EDS even coined Best-shore to brand this.

At EDS offshoring became assimilated into daily operations. One indicator is that the company set up a unit called an “assessment and migration organization.” We liked to call this an offshore triage— where all projects are funneled through this unit’s decision making. All projects that can be offshored are urged to offshore. The unit also helps to perform the knowledge transfer to the offshore locations quickly and effectively.

From a theoretical perspective in the article we used innovation theory, especially Rogers’ class Diffusion of Innovation theory to examine the routinization question. Rogers’ model has 5 stages: Agenda setting, Matching, Redefining/restructuring, Clarifying, Routinizing. Offshoring has certainly moved through all five by now, though the last two may not have been comprehensive yet.

And the speed of this routinization? From initial setting of the innovation agenda through routinization, the speed of this innovation diffusion at EDS was about 7 to 10 years. This diffusion -- from innovation to routinization—was fast.

“Not in smaller [or medium size] firms,” said one of our CIO panelists at a recent SIM event (see CIO Symposium below) Indeed, there is some statistical data and some anecdotal data that shows that larger firms have routinized offshoring faster and more comprehensively than smaller firms.

Nevertheless, offshoring has come a long way in a very short time. So much so, that in the typical hype cycle of our tech industry, it is changing its name and is now called global sourcing.

Is routinization of offshoring a good thing? I am not making a value statement here. You will have to read some of my other blog postings to get my position on that. Rather, here I have made an observation. Like it or not, offshoring is now routine.

· Carmel, E., Dedrick, J., and Kraemer, K. Routinizing the Offshore Choice: Applying Diffusion of Innovation to the Case of EDS, Strategic Outsourcing an International Journal, 2009.

· CIO Symposium panel on Outsourcing & Offshoring @ the International Conference on Information Systems ICIS 2009

MBTA -- Management By Timeshifting Around

2009-12-02T05:18:00.000-08:00

How do good managers stay in touch? How do they coordinate? First came MBWA, then MBFA, and now it is MBTA. Here’s the story:

One of our profession’s perennial problems is that managers become complacent and lose touch. In traditional hierarchical organizations managers risked losing touch by relying on layers of intermediaries. Later, in the age of information systems, managers risked losing touch by relying entirely on computer generated data.

Thus, MBWA: Management By Wandering Around. MBWA is a management method relying on interpersonal (face to face) contact. The manager gets “into the trenches” with the workers. MBWA managers are widely thought to be more effective than managers who do not wander around. MBWA, also known as Management By Walking Around, was first publicized by HP’s David Packard in the 1940s. It was revived and became broadly recognized due to the highly influential book In Search of Excellence (Peters and Waterman, 1982).

With the dawn of widespread distributed/virtual organizations and teams in the 1990s, MBWA was clearly impossible and had to be substituted with new management approaches. In 1999 I wrote about MBFA, Management by Flying Around, in my book “Global Software Teams” (Carmel, 1999). I did not coin this term, though my book played an important role in publicizing it. I learned this new acronym from pioneering virtual managers at IBM.

In the 1990s, we all believed that the dominant work configuration was that of clustered locations in which co-located tech workers cluster together in an office. For example, American workers were in an office building in Reston and the Irish workers in an office building in Stillorgan, and the Swedish workers in Kista, the Chinese workers in a skyscraper in Pudong, and so on. Therefore managers were able to fly from location to location in order to meet with the local team members.

One decade later there are now several million knowledge workers involved in international distributed work groups. Technology has become much friendlier since the 1990s. However, travel is prohibitive for most of these teams and thus, MBFA is impossible.

Instead, today we see MBTA, Management By Timeshifting Around. Managers stay in place, but timeshift to different locations by adjusting or scattering their work day. Timeshifting means adjusting one’s work hours to accommodate another’s schedule. For example, Sarah, a timeshifting tech manager in the Virginia tech corridor near Washington, timeshifts to her 10 team members’ work time in Germany. She starts work at 06:00 local time and overlaps half her workday with her German colleagues. This allows her to interact synchronously with her German counterparts.

My conceptualization of MBTA came about from more than a decade of research including hundreds of formal and informal interviews with managers all over the world. This research is conducted, in part, with my colleague here at AU, Alberto Espinosa. In these time zone-separated work groups we have found one management/coordination solution prevalent nearly everywhere: timeshifting.

MBTA managers can potentially achieve many of the advantages of MBWA and MBFA. They can have one-on-one intimate conversations via Skype or their mobile telephone. They can coordinate “together” with others examining work products. They can tell a joke. They can develop key personal relationships and trust.

Carmel, E., (1999), Global Software Teams. Upper Saddle River, NJ: Prentice Hall.
Peters, T., Waterman, R. (1982), In Search of Excellence: Lessons from America's Best Run Companies, Harper and Row, New York, NY, .

IT workforce immigration & knowledge-worker visas

2009-03-19T11:26:00.000-07:00

Watching the nasty debates between two well-meaning colleagues highlights the difficulty of finding a policy solution. Check out this vicious exchange between Vivek Wadhwa of Duke University and Ron Hira of the Rochester Institute of Technology on CNBC on this subject (BofA Shunning Foreign MBAs?)

I never watch Vivek and Ron spar without the irony that both gentlemen are patriotic Americans and both are of Indian descent -- where INDIA is always the subtext in the contours of debate. Vivek is an immigrant and Ron is a first-generation American. I've come to know both and contend that both care deeply for America and take their strong positions from that core value.

Vivek believes that importing smart people will make America more successful. Ron believes that importing cheap people distorts the economy (and only helps the corporate elites) by displacing American-born workers.

Liaison – A job title for globally dispersed tech teams

2008-12-05T19:04:00.000-08:00

Like the old cliché ... Eskimo have many for words for snow, in the IT business, we have many names for the person who is a liaison in globally distributed IT work. In these types of work structures, it is critical to have a person who bridges time zones and culture. In fact, these global teams would not able to function without the liaison.

The liaison is typically a mid-level manager, such as a project manager. He/she is the one who stays up late at night to make their critical telephone calls. He/she is the one who is able to speak across cultures and across languages.

All the successful technology companies that I've encountered over many years have liaisons -- either formally or informally. I encountered them in Indian companies, and American companies, and Chinese companies, and in Israeli companies, and many more.

So, here I document some of the many names that we give to this important person.

· Liaison -- in the book Global Software Teams (Carmel, 1999).

· Window men – from China (submitted by Yu, Yanjun).

· Point person (Lee et al 2006).

· OC - On-site Coordinator -- in the Indian IT company Infosys (Carmel, 2006).

· Bridge

· Go-between

· Boundary spanner. This is more of an academic term that comes out of the technology management literatures. It describes a person who straddles inter- and intra-organizational lines. This isn’t strictly a liaison, but close.

· Linking pins (Harvey, et al 1992) refers to inpatriation in global corporations from the host-country. Again, close, but not exactly the same.

Please send me additional names and full citations where possible.

References:

· Carmel, E. Global Software Teams: collaborating across borders and time zones, 1999. Published by Prentice Hall-PTR.

· Carmel, E. Building your Information Systems From the Other Side of the World: How Infosys manages time differences. MIS Quarterly Executive, 5(1), 2006.

· Harvey; M Cheri Speier; Milorad M. Novicevic, The role of inpatriation in global staffing The International Journal of Human Resource Management, Volume 10, Issue 3 June 1999 , pages 459 - 476

· Lee, G. W DeLone, JA Espinosa Ambidextrous coping strategies in globally distributed software development projects - Communications of the ACM, 2006

What is the Caribbean model for competition in IT offshoring?

2008-10-03T21:13:00.000-07:00

I was invited to speak this month in Barbados about the place of the Caribbean in IT offshoring. It was the first time I had reason to examine this region carefully. The Caribbean and Barbados need to be seen in context of the competitive landscape: there has been remarkably rapid maturation of offshoring nations in just a few years -- from India, cascading to Brazil, Philippines, and on to smaller players like Egypt and Costa Rica.

How will the Caribbean nations compete in IT? Whether separately -- or as some collective under CARICOM? First, let’s be clear that we’re setting aside Cuba and Haiti in the rest of this analysis. Then, note that one must really distinguish between the larger nations, Jamaica (3 million) and DR (9.5 million) versus the smaller ones, like Barbados – with a population of 250,000.

If you use any framework to get some indicators on the situation (such as my “Oval model”), the Caribbean nations have few factors that could enable them to surge forward in IT. Yes, they have good "Quality of Life," they are stable locations, and they are business-friendly. But, what the region lacks is human capital in size and high quality that can be the foundation for an IT exporting industry.

A bold move could address this. What the region needs is an aggressive labor importation model. Without it, the region cannot be competitive in high-value IT/software work. After all, Americans, Canadians, Australians, Singaporeans, and Irish have aggressively imported talented tech labor that has made a difference to their technological success. If these economic leaders have done so, why can’t the Caribbean nations?

Interestingly, a Barbados-based firm, PRT, was a pioneer of this idea. At its peak around 1998, PRT imported 400 programmers into Barbados, mostly Indians, to work on nearshore jobs for American corporations (including blue chip Wall Street firms).

But PRT was not sustainable and it fizzled soon after the downturn of 2001.

[the photo on the right shows the building in which PRT was once housed, in the business section near the port entrance. The PRT building now has many satellite dishes on its rooftop.]

I talked to two former PRT employees, Pamela Abbott, now a British assistant professor, and Stephen Broome, who later co-founded and now runs one of the island’s largest IT firms, SCL. Both did not warm to the idea. “We tried it at PRT and it failed” was the refrain. Partially this was for cultural reasons—managing so many new migrant workers was just too hard.

Meanwhile, Barbados Minister Boyce, who opened our ministerial conference, had come in from awarding diplomas to 100 graduates of a certificate in medical transcription. Young Barbados workers will be listening to American doctors’ notes and carefully transcribe them to text. This is an example of the growth in IT enabled Services (ITES) in Barbados and elsewhere in the Caribbean. There will soon be 100,000 call center workers in the region according to Zagada.

However, such jobs are often fleeting and may be made obsolete in the coming years from better voice recognition technologies. The rise of Caribbean ITES may also be diverting limited energy that may have been better funneled at software and IT. What is a sustainable model for small island nations?

My talk was the 6th Caribbean Ministerial Strategic Seminar on ICT organized by the Caribbean Telecommunications Union (CTU).

Microsourcing

2008-07-08T16:19:00.000-07:00

Is this the eventual global sourcing landscape?

Definition: sourcing knowledge work from an ecosystem of very small providers, most of which are contracted with over the net. Micro-sourcing is the opposite of mega-sourcing, which is the classic outsourcing approach in Fortune 500 firms where billion-dollar multi-year contracts for IT services are signed.

I coined this term to encompass an emerging smorgasbord of sourcing trends that I've observed: person-to-person, online programming marketplaces (e.g., Rent A Coder, Top Coder, eLance), globalization of consumer services, crowd-sourcing, multi-sourcing, commoditization of process, and open source.

Micro-sourcing is allowing clients to choose from a supermarket of providers for increasingly small, granular tasks and processes.

In the area of IT, Rent A Coder is a very successful case. I’ve followed this firm since 2003 and enjoy the thrill my students get when they’ve purchased something from this e-marketplace. I’ve also used Rent A Coder in a number of my studies.

I thank my colleagues at the NYU conference on “Global Delivery of Professional Services” May 2008, for helping me select this term.

On Israeli high-tech

2008-03-11T08:55:00.000-07:00

In March 2008 I chaired the Technology, Innovation, and Start-Ups panel in the "Israel Biz at 60: Lessons and Directions in Israel's Business and Economy” that was held at American University. http://american.edu/israelstudies/businessconf/index.cfm

Here is a condensed version of my opening talk.

How many of you are old enough to remember that the industry that Israel was once known for was citrus products – Jaffa oranges? Today it’s high-tech.

Israel became the darling of the high-tech boom – that is -- in the last high-tech boom -- in the 1990s. The new darling is India.

I study global technology… I’ve been studying this area for many years. I’ve seen it become quite democratic. Whereas once a tiny cabal of elite nations did high-tech, now there are more than 100 countries exporting software products services / high tech services. I stopped counting when my Dutch co-author came back from a tour of North Korea’s software export firms.

With so many countries entering high tech, Israeli high-tech is no longer in the spotlight. It’s been somewhat forgotten. Yes, every once in a while Businessweek or The Economist run one of those articles, about how Israel has been successful in high-tech, but…

As a kick-off to this panel, let me take you on a quick tour of Israeli high-tech, noting Israel’s key success indicators along the way.

1. Israel high-tech has been very inventive. Important artifacts came from Israel in the last decade; some examples: the software firewall, the ingestible camera (for medical diagnostics); design of many Intel semiconductor chips that we use in laptops and other devices -- come in whole, or part, from Israel; Instant messenger (IM).

2. The US NASDAQ stock exchange. About 100 firms are Israeli, mostly tech startups; in numbers this is the second largest of foreign nations after Canada.

3. Israeli tech startups make up more than 2% of Israeli GDP; which is larger than the percent in the USA.

4. Venture capital investment in Israel in 2007 was a respectable $1.2- 1.8 billion, (depending on source). Most of the money is going to networks/communications, semiconductors, software, internet including web 2.0, and some to life science,

5. What do the giant foreign companies think? Major tech MNCs came into Israel decades ago -- and have bought-- not 1 Israeli firm -- but rather, they are serial investors, buying more and more Israeli tech firms. These global foreign tech companies have huge investments in Israel.

o IBM kicked-off 2008 with a $300m acquisition of the Israeli storage firm XIV.

o HP is a big eater of Israeli firms: Indigo (2001 for $800m); Scitex (2005 for $230m), Mercury (2006 for $4.5b).

o Intel has 7000 employees in Israel and made several acquisitions.

o Cisco, Applied Materials each has made several acquisitions. And the list goes on.

6. The biggest Israeli firms – the Top 5 – the 5 biggest Israeli firms in sales. All are tech-oriented and heavy exporters. First is Teva – $8b Pharma firm, leader in generics; Second is Amdocs -- 16000 employees, $4b in sales, the largest Israeli IT firm. Third and fourth are Machteshim and Israel Chemicals – both in chemicals and agri-tech. Fifth is IAI - Israel Aircraft Industries.

Having briefly reviewed what’s working well in the Israeli technology sector, then besides Israeli tech being slightly forgotten, is there anything wrong? -- worrisome trends?

The turning point was the year 2000. In and since the year 2000, a trifecta of blows hit the Israeli tech sector: the NASDAQ dot.com bust (there was no foreign country as closely linked the tech bubble as Israel); the Palestinian Intifada that began in late 2000; and since 2000 many American firms began shifting attention in offshoring/ sourcing to India and China.

There are other problems and issues to watch.

The 1^st -- and probably most threatening problem -- was summed up in 2005 by Hemi Peres, head of Pitango, largest Israeli venture capital firm, and son of Israeli President Peres, He said that R&D will move offshore-- if Israel doesn’t invest in Education and R&D. Indeed, in late 2007 we saw two low points in Israeli education. A 3- month teachers strike in secondary schools and a 3-month strike of professors at major universities.

The second issue is wages. While Israeli tech has not competed on low wages (Israel, as a middle-income nation, always had higher wages than developing nations like India). But, Israeli wage costs have risen: in 2007, for the first time since the era of the biblical King David, the shekel has gone up 20% against the US dollar.

The third issue is that Israeli tech is offshoring its own work. Since 2000 Israelis themselves began sending work offshore to cheap countries. Israelis source to India, Eastern Europe, now China. By 2005, 4 of Israel’s BIG5 IT firms were offshoring to India: Amdocs, Comverse, Mercury, Ness.

Back to Israel vs India. Recall that I had said that Israel lost its global prominence to India in high-tech.

Let’s do some rough comparisons. The middle class in India is 50 times larger; employment in high-tech plus ITES in India is 40 times greater than Israel (roughly 1.6 million v 60,000). Yet, annual exports of high-tech are very roughly in the same range $30b-50b (depending on assumptions).

Whereas India continues to have advantages due to its size and low wages. Israel’s high-tech advantages remain its creative, innovative, entrepreneur tech culture – a culture of startups for high end innovation.

In fact, many Israelis are more worried about competition with China than India.

And rather than India or China, Israel needs to be compared globally to other small successful island economies: Singapore, Ireland, and Taiwan.

Let me conclude by making an observation about the trajectory of Israel’s tech sector.

First the good news: large amounts of VC in 2007 continue to flow into the same super-successful sectors that were big in the 1990s. Most funds are targeted, as I’ve noted already, to networks/comm, semiconductor, software, internet including web 2.0. This is an indicator of Israel’s profound strengths in these areas.

Now the bad news: This blessing is also cause for some worry-- because it means that in the next IT downturn, which may have just begun, Israel again will not be diversified and will be hit hard.

FOLLOW-THE-SUN: A call for more research and experimentation.

2007-09-01T04:12:00.000-07:00

In late August 2007 I was the opening keynote speaker at ICGSE - International Conference on Global Software Engineering, in Munich, Germany.

The core of my talk examined the goal of FOLLOW-THE-SUN, also called: 24-hour development and Round-the-clock development. The idea is simple: Hand-off work from one site to the next as the world spins (USA to India, for example). This way you reduce the total time of development by 50% if you have two sites, and by 67% if you have three sites. Follow-the-sun is about speed!- Cycle-time reduction, Time-to-market reduction, Duration reduction.

This is where the community of specialists on global software engineering can make an impact – in using the special advantage of time zones to increase speed. After all, we’ve already achieved cost reduction and other goals, as a result of global software development.

Because of the hype, exaggeration, and myths of Follow-the-Sun, I offer Carmel’s rigorous definition: Follow-the-Sun must satisfy all 5 conditions.

At least 2 sites substantially separated by time zones.
High dependency between sites
Project is set up with the objective of reducing duration
Successfully achieving duration reduction.
Successfully achieving duration reduction using objective measures.

Coordinating Knowledge Work Across Time Zones

2007-05-10T15:11:00.000-07:00

They’re Sleeping While We’re Working

By Erran Carmel & Alberto Espinosa

Alberto and I wrote this short piece in March 2007. A condensed version appeared in Intercultural Management Quarterly, 2007

---

Sitting here in Washington, India is 9.5 hours away. I am stuck on the task, so I write an email. Then the delay begins. She, in India, asks for clarification the next day. Then she has to wait. I clarify the following day. Then I wait. 3 days have gone by and then, another delay, it’s October 2^nd, Mahatma Gandhi's Birthday, a holiday in India. I didn’t know about this holiday, so I got angry at her lack of response.

The unfortunate problem of time zones is that it is inherently not solvable. We human beings work during the daylight hours due to hard-wired biological reasons. So, once the number of time zones between global collaborators is larger than about 8 hours, the time zone gap is not solvable! Fancy video-conferencing doesn’t help -- no matter how high the pixel density or how small the image transmission latency. The time zone problem can be mitigated somewhat, but it cannot be eradicated.

Today, precisely because of speed expectations, time differences have become the principal obstacle to efficient coordination across distances. In fact, in recent decades, coordination across time zones has become a greater problem, not a diminishing one.

Since 2003 we have been researching global collaboration across time differences. We uncovered time difference best practices. Our studies have found that experienced global workers have a bag of time zone tactics.

Synchronous tactics

It is clear that distributed global teams do not treat time differences as static, but rather adjust and adapt to them. The synchronous window can be adjusted with changes in work schedules. The 10.5-hour difference between New York and Chennai (India) is not “fixed” in that sense. This is called time shifting.

For example, European staff may start late and work late, in order to create overlap with their American counterparts. Conversely, the Americans may start early, either everyday, or at least on some weekdays, in order to expand the overlap time with Europe. In Asia, many of the new tech companies are staffed with young, ambitious software engineers that work long hours, often late into the night, creating overlap windows with Europe and America.

Regular time shifting is practiced by only some of the distributed teams we have studied—particularly the managers, team leaders, and liaisons. Liaisons are the glue that keeps global teams working across time zones. The liaisons work all kinds of odd hours. They are always on call. And of course, they complain about the impact on their personal lives.

In one case we studied a large software team with engineers in Britain, Germany and India trained Indian software engineers in Europe for several months to serve as liaison engineers. These liaison engineers returned to India and then permanently time shifted to be on European time.

Time shifting solves some of the problems associated with temporal differences, but it can also create others. For example, one multi-site team we studied spanned 7 time zones. The team members organized their work so well that they had what they called a “circular” meeting schedule that went around the clock, depending on who had to meet with whom. This required so much time shifting that the co-located teammates in the home project location never saw each other. In other words, the team had created artificial co-located time zones because some team members started very early and others stayed very late.

Asynchronous tactics

Work involves disruptions. Research has shown that same-time communication-- particularly in meetings-- has substantial “production losses.” This is because only one person is talking during any time slot while everyone else is listening. Hallway spontaneous encounters are very effective for coordination, but they also cause a lot of disruptive interruptions and distractions.

A silver lining of time differences is that you have “quiet time.” There are less telephone calls, meetings, and instant message requests. People can concentrate on “getting their work done.” Effective global workers maximize this time without interruptions and this seems to work well with simple tasks with fairly routine activities that can be programmed mechanistically (e.g., work plans, project schedules, division of labor).

We found that because of lack of overlap talk time, the work global workers perform needs to be formalized. They try to send messages so that the text conveys information in a more effective manner, so that there will not be a need for clarification which is very costly in delays. The global workers become formalized in other ways: they carefully define the collaboration workflow, tasks, owners, and deliverables in order to reduce the need to coordinate via real-time interaction. Finally, we found that global teams that do not formalize are by and large going to fail: they will be late, or quality will suffer.

Awareness tactics

Many young workers are not attuned to working across time zones and require mentoring. They are not used to computing the direction of the time difference (“Is it +7 hours or -7 hours?”). They do not know to recall when their counterparts shift to daylight savings time (it is different in every country). Small reminders and coaching help address this problem. A simple tactic is to post hours and time differences on the common team web site. Also, tell everybody about timeanddate.com.

Other tactics

An important trick is knowing to “break the e-mail chain.” The e-mail chain begins as we described in the opening paragraph: one worker initiates a message; the receiver, on the other side of the globe, does not understand it fully and asks for clarification; the original sender attempts to clarify; the receiver then interprets it incorrectly and responds accordingly; the receiver then sends another clarification. Meanwhile, an entire week has gone by. Experienced globalists stop this chain early “by picking up the phone” to clarify the message. However, this gets into the cultural problems because many cultures are reluctant to break with protocol or hierarchy.

Other popular practices are very effective but often involve “heroics” that can cause team burnout. These include: being available around the clock; carrying mobile communication devices at all time; frequent travel to other sites to develop team knowledge and bonding and resolving critical issues; more rigorous, structured and disciplined project processes; and over documentation to minimize the need to clarify issues.

Costa Rican high-tech

2007-04-06T22:17:00.000-07:00

I landed in Costa Rica at 2:30 and within three hours I was in the audience listening to the President of Costa Rica, Oscar Arias, the 1987 Nobel Prize winner.

Arias came to speak to a big tech elite meeting here at this upscale suburb of San José called Escazú. Arias repeated the familiar refrain that Costa Rica does not have a military. In the context of hi-tech this is significant because, while much of Latin America spends billions on military, Costa Rica ends up spending more on education. Arias promised to raise spending on education from 6% to 8% of GDP. I was impressed that he later toured the booths for a good half hour asking questions. (It was refreshing to see how little personal security there was around him).

Costa Rica is a high-tech star due to billion-dollar tech investments by Intel and a huge IT/ITES center of HP. Intel employs 5500 in country and HP is (or will soon be) bigger. The decade old boom in high-tech has led to the usual high-tech labor crunch in labor with escalating salaries. This is a small country, after all: 4 million.

An indication of the hot labor market is that at the lower end of the labor market, most laborers, construction crews, maids, cleaners, and cooks, are recent immigrants from Nicaragua, just across the border. Little Costa Rica is the rich neighbor. Finally, there is truth to its name. While there has been massive immigration out of Nicaragua, Guatemala, El Salvador-- not Costa Rica.

A critical element in human capital is English. In every country I visit I find that locals tell me: our young engineers speak excellent English. In most countries this is an exaggeration. I found quite a range in Costa Rica. Some middle aged managers (older generation) spoke poor English. Younger engineers were generally better, but few were excellent.

I detected some sourness that too much of the high-tech boom is fueled by foreign MNCs like Intel and HP -- and too little from indigenous Costa Rican firms. This lament is also not unique to Costa Rica. I’ve heard variations on this elsewhere. The largest indigenous IT Services firms are in the size of perhaps 300 people: Too small to make a mark in global competition. There is some risk capital (venture capital, incubators support) that is appearing, but there is far less money sloshing around as in Ireland, India or Israel.

The interesting element for me is how Costa Rican policy makers see this little country competing against that formidable giant called India.

The Costa Rican organization that organized this event, Procomer, the government unit to encourage investments, brought in representatives from neighboring nations. I met software managers from Guatemala, El Salvador, Colombia, Venezuela, Nicaragua, Panama, Ecuador; even from Trinidad and from Jamaica. The idea driving the invitations to foreign companies and associations is that Costa Rica can benefit by creating a collaborative industrial network in Central America, together with its neighbors, in order to compete with far-larger India.

I headed a panel of three industry CEOs on the topic of “Nearshoring 2.0.” The focus was on how local companies can compete more effectively. You can read my speech on this blog.

One of the panelists, Mario Chavez, CEO of Avantica, illustrated the desired organizational and engagement network structure that Costa Rica strives for. First, Avantica recently opened a second development center in lower-cost Peru. Second, Avantica middle managers are sourcing a deal for a Silicon Valley firm where the development team is in Argentina

For more on Costa Rica and high-tech

http://www.cinde.org/eng-sectores.shtml

http://www.camtic.org/EN/camtic/sobre_nosotros/

http://www.americas.org/item_25906

my student’s site: http://www.american.edu/initeb/jn0859a/costarica.htm

Nearshoring 2.0

2007-04-05T09:52:00.000-07:00

Erran Carmel speech in “Costa Rica Technology Insight 2007”

in San Jose Costa Rica on March 29

Organized by Procomer

http://www.procomer.com/SoftwareTIC_07/SitioING/PaginaIng.html

I come from Washington DC. My university is just 7 km from the White House. In the parlance of this panel, we are nearshore to El Presidente.

I start the panel discussion with a true story of nearshoring and the sea. In early 2005 two tech entrepreneurs announced the idea of Sea Code. They will buy a cruise ship. Anchor it off the coast of Los Angeles in international waters – but just outside the US maritime territory. Then they will build cubicles and install computers where the dancing floor used to be. Then they will hire 300 software professionals from around the world and have them write software code for American clients.

Why this idea of a Love Boat for software engineers? Nearshoring! of course.

What is nearshoring? in my recent article that I wrote with my colleague Pamela Abbott, we defined nearshoring as:

…sourcing service work to a foreign, lower-wage country that is relatively close in distance or time zone (or both). The customer expects to benefit from one or more of the following dimensions of proximity -- geographic, time, cultural, linguistic, economic, political, or historical linkages. [definition adapted]

So, why is SeaCode nearshoring?

Short travel time. An LA client needs only a comfortable boat from the docks of Marina Del Rey in Los Angeles.
Time. There is no time difference
Linguistic. Implicitly, this melting pot of a boat will have only one binding language- English
Cultural. The software professionals who choose to spend some their careers on this ship choose a culture that is influenced by the client, the Norte Americano client.

Sea Code has still not sailed and may never sail, but it demonstrates the power of the notion of nearshoring.

Yet, We have been inundated with rhetoric that the world is miniaturized, virtual, flattened, that distance is irrelevant. That distance is dead.

Ladies & Gentleman, distance is not dead! to paraphrase a famous book by a journalist from the Economist. Distance still matters!

COSTA RICA’s location as a nearshore country is strategically important and will continue to be so.

History

The first mention of nearshoring in the context of global knowledge work and software is probably the case of PRT, a company founded by an American and established in the Caribbean island of Barbados. The labor was imported from India. the clients were on Wall Street. the clients enjoyed visiting. Barbados is only 1 time zones ahead of NYC.

In 1999, in my first book, called Global Software Teams , I told the story of PRT and was one of the first to use the term nearshoring.

Nearshoring languished for a for few years, the dot.com collapse, the September 2001 massacre, then, according to our literature scan, there is a big pick-up in 2003 and then again in 2004 in the use of the term nearshoring. To the point where by 2006 we found 51 nations that label themselves as nearshore! That is more than a quarter of the nations of the world! There are basically three giant clusters of nearshore locations. One wraps the USA and Canada. One wraps the wealthy nations of western Europe. And the last one wraps Japan and Australia. The Japanese nearshore to Dalian in China; Germany nearshores to Belarus …. and so on.

In our content analysis we found that almost three-quarters of the sources (71%) used nearshoring as a differentiator from offshore/farshore outsourcing. what is this thing—farshoring?! it is the opposite of India, of course. India is very far away. Many time zones away from USA. Very far culturally from USA.

India claims that distance is dead. Distance is not dead! Distance still matters!

Location Advantage / Gateway

We can learn more about distance by examining what economic geographers have studied for years: locational advantage. just like the corner store that is in a great location – where everyone gets off the bus, at the corner of two important roads, near lots of cafes, where there is lots of foot traffic. Location has advantages.

We find two small hi-tech countries with locational advantages: Ireland and Singapore. both of these countries have very small population. The Republic of Ireland is the same as Costa Rica, 4 million. Singapore is 4.7 million

Both of these countries are seen by global corporations as gateway locations. These countries are regional hubs of IT Services: both IT and ITES

Ireland has become, not a low-cost provider, it is no longer low-cost. But it is the preferred location for companies’ European Operations Center. All of the following have their European Operations Center: Google Yahoo Amazon eBay Overture Ask Jeeves MSN Paypal. Apple

What is in such a European Operations Center? The generic components are:

Supply chain management: Order entry all the way through delivery.
Vendor management
Data centers
Financial accounting, A/R A/P, GL, Treasury for all of Europe.
Tech support
Sales center
European legal and contract
Localization

Here in Costa Rica you have begun implementing elements of being a regional Operations center -- with HP’s large shared services center for its customer P&G.

Quality of Life

The labor pool in the gateway locations is too small. Ireland’s workforce is too small for large scale operations. So Ireland has encouraged immigration. There are now hundreds of thousands of new irish. Ireland offers Quality of Life / Quality of Place. As the well-known scholar of hi-tech labor markets, Richard Florida, has argued for some years, the highly educated ambitious “creative types” are drawn to quality of place. Talented professionals tend to concentrate in desirable locations, where there are three things. 1. Quality of Place -- natural, recreational, lifestyle amenities. 2. A thick labor market. 3. Environmental quality.

This is why the best talent go to high-cost-of-living clusters, to Ireland, to Singapore and – of course here in Costa Rica.

Nearshoring 2.0

Andrew Bolton and Mario Chavez coined the term Nearshoring 2.0 in the preparation of this panel. You know, that we are now in the peak of this new phase called web 2.0, so now everything is 2.0

Nearshoring 2.0 is about first, improving nearshoring 1.0 and second, positioning Costa Rica as a key part of a regional and global network

Let me recap what nearshoring is about – the 4 key dimensions --

· Travel time. In contrast to time to travel to India where a non-stop flight is 15h.

· Time zones. Time zone means delay, miscommunications. Bangalore is 9.5h from Boston.

· Language. The offshore provider needs to speak the client’s language – fluently, in contrast to some Asian groups that don’t speak English well.

· Culture. The offshore provider knows the subtleties of when not to say for the 10^th time in 10 minutes, I know this is very frustrating for you Mr. Carmel…

So let’s explore what Nearshoring 1.0 was and what nearshoring 2.0 will be for you here in Costa Rica. And I have only been here 24h, I don’t have all the answers quite yet

In our study we found that 59% of sources link nearshoring to geographic closeness, such as travel time. In Nearshoring 2.0 Costa Rica can reduce door2door travel time. Non-stop flights to multiple North American cities, quick clearance in airport. I just cleared the airport yesterday and found that you’ve already done this.

We found that 47% of sources in our survey link nearshoring to linguistic closeness,

and 41 % link nearshoring to cultural similarity.

For Nearshoring 2.0 more work needs to be done on English. even more emphasis on English. English should be the official language in firms. there should be increased student rotation to USA during college years. More English in schools. English courses in Science and Technology universities.

Make use of the 100K American ex-pats. Encourage others to come. This is an excellent labor pool.

In Spanish language, for regional clients, similar steps are necessary. bring in labor from all over Latin America.

We found That 31% of sources in our survey Link Nearshoring to Time Closeness, Costa Rica is the same TZ as Texas. you are already in a good place. So, what can COSTA RICA do for Nearshoring 2.0 for time zones?

Build more flexible organizational life that encourages Time-shifting, work-from-home, longer hours to overlap with all Norte time zones.

BTW, in my study of time zones and software with my colleague Alberto Espinosa, we found that your advantage is working with the US west coast because slight delay means that urgent tasks can still be done same day.

We found that 28% of sources link nearshoring 1.0 to Political/ Economic – closeness. democracy, free market.

What do you do for Nearshoring 2.0 for political /economic ? sign CAFTA is one move that you know.

In conclusion

The second part of nearshoring 2.0 is positioning COSTA RICA as a key part of a global network

1. COSTA RICA firms are in a good position to be a Gateway location, a regional hub for Central and South America to take advantage of locational advantage.

2. in 2007, we also see nearshoring 2.0 as part of offshoring 2.0 and the current thinking about multi-shoring. From a client perspective this reduces risk and maximize the comparative advantages of each location. this means that COSTA RICA will increasingly link up with diverse locations, not just with North America, but with locations such as India, Poland, and Argentina to serve large clients in the North.

In closing, let me repeat that -- Distance is not dead! Distance still matters! but Costa Rica needs to be proactive in moving to nearshoring 2.0!