Updates on the Global Commute

Stephen DeAngelis

October 3, 2006

As I noted in an earlier blog [“Good Fences Make Good Neighbors?“], illegal immigration has been one of the hot topic issues during this election season. One of the fall-outs of all this attention is that growers in the western part of the United States are suffering from labor shortages [“Pickers are Few, and Growers Blame Congress,” by Julia Preston, New York Times 22 Sep 2006]. Globalization, as I have repeatedly mentioned, requires the relatively free flow of people, capital, and resources. Sometimes, like in the case of migrant workers, real bodies need to move across actual borders in order to get the right person in the right place at the right time.

There are good reasons for concern about illegal immigration, but demographic trends underscore why the movement of people will remain important. Birth rates in almost all developed countries are dropping. Some developed states are actually seeing a shrinking of their populations. In order to ensure economic growth, one of two things must happen. Either greater productivity must be achieved from fewer workers or new sources of workers must to be found. Where are those new workers located? The answer, as we know, is that they are found in more impoverished countries of the world. Most of these workers have little or no education, no training, and no experience beyond manual labor. That is one reason why a Development-in-a-Box approach is so important for the developed world. It helps raise the standards in countries that may be required to supply future labor forces around the world.

The Philippines is one example of a country that has an organized program that promotes the global commute. They send out temporary workers all around the world. As one web site notes:

No group of people, perhaps, could assimilate with other cultures better than the Filipinos do. No other group, perhaps, has spread across the globe as massively as the Filipinos have. There are Filipinos in every country, and chances are, there are Filipinos traveling in every known sea. … Today, almost all merchant ships crossing the oceans are manned by Filipinos. Anywhere on Earth, Filipinos have made their presence felt. They are active workers, helping rebuild cities and modernize economies. They are in the Middle East and Africa, working as engineers and construction workers; in Japan, South Korea and Taiwan as technicians, factory workers and entertainers; in Europe as hotel and restaurant employees; in Hong Kong and Singapore as managers, office personnel and household maids; in Australia and South America as professionals; and in the U.S. and Canada as doctors, lawyers and computer programmers. There are about seven million Filipinos (although an exact number cannot be determined) living, working and studying in other countries. In the U.S. and Canada alone, there are around three million residents of Filipino origin. And the number is still growing.

Admittedly, some of the Filipino global commuters are mistreated. The government is trying to ensure that doesn’t occur because this group provides billions to the Philippine economy. They are economic heroes back home.

Another well-known, but different, kind of global “commute” is outsourcing. The idea is that if the workers can’t get to you, take the job to the worker. Tom Friedman wrote an interesting column about how one man helped Uruguay become an unexpected destination of such outsourced work [“Anyone, Anything, Anywhere,” New York Times, 22 Sep 2006]. Friedman writes:

A tiny country of three million people, wedged between Brazil and Argentina, Uruguay has come from nowhere to partner with India’s biggest technology company, Tata Consultancy Services, to create in just four years one of the largest outsourcing operations in Latin America. Yes, when Tata’s Indian employees in Mumbai are asleep, its 650 Uruguayan engineers and programmers now pick up the work and help run the computers and backroom operations for the likes of American Express, Procter & Gamble and some major U.S. banks — all from Montevideo.

Friedman asks, “Why Uruguay?” What conditions existed there that permitted this small country to take advantage of the global commute? It begins, Friedman notes, with a vision and an educated population.

A retired partner from Ernst & Young who was raised in Uruguay [Gabriel Rozman], hatched the idea of partnering with Tata to make Montevideo a global outsourcing hub. He did not have a single client or employee when he approached Tata. He had just two things: a gut instinct that Uruguay’s quality education system had produced plenty of good, low-cost engineers and a gut desire to do something good for Uruguay — the country that gave his Hungarian parents sanctuary from Hitler. Four years later, TCS Iberoamerica can’t hire workers fast enough.

Friedman makes some interesting observations about the cultural shock that some of the Uruguayan technicians undergo when they begin working for TCS Iberoamerica. It reminds one of the cultural shock felt by US autoworkers when Japanese carmakers first set up business in America.

Most employees here are Uruguayans, but there are also lots of Indians sent over by Tata. It produces both a culture shock — Montevideo doesn’t even have an Indian restaurant — and a cultural cacophony. The firm runs on strict Tata principles, as if it were in Mumbai, so to see Uruguayans pretending to be Indians serving Americans is quite a scene. Said Rosina Marmion, 27, an Uruguayan manager, “Our customers expect us to behave like Indians — to react the same way.” Also, Latin culture, unlike Indian, is very nonhierarchical. “The Indians were not used to someone who says ‘no,’ ” explained Ricardo Zengin, 34, a systems analyst. But eventually, “they understand that you are not saying it to challenge their authority but because you think it can be done better another way. … In Latin culture, everything involves a discussion.”

Tata Consultancy Services, however, did not accept Rozman’s proposal simply because it was looking for low cost technicians. TSC was also looking to make itself more resilient.

It turns out that many multinationals like the idea of spreading out their risks and not having all their outsourcing done from India — especially after one big U.S. bank nearly had to shut down last year when a flood in Mumbai paralyzed its India data center the same day a hurricane paralyzed its Florida operation. And there is no risk of nuclear war with Pakistan here. … Another factor, added Mr. Rozman, was that multinationals that were depending on Indian firms alone to run their backrooms 24 hours a day were getting the third team for eight hours, since the best Indian engineers didn’t want to work the late-night shift — the heart of America’s day. By creating an outsourcing center in Montevideo, Tata could offer its clients its best Indian engineers during India’s day (America’s night) and its best Uruguayan engineers during America’s day (India’s night).

Resilient companies distribute assets, share information across the organization, take advantage of opportunities, and understand that globalization requires the free movement (real or virtual) of people, capital, and resources. Friedman’s column also points out a small country like Uruguay can establish standards — like educational standards — that foster the conditions which will attract foreign direct investment and create jobs. That is what our Development-in-a-Box™ approach is all about.