Enterprise Resilience Management Blog

India Outsourcing to the U.S.

I have written a number of posts about the global commute -- a term used to describe how labor is changing to match the requirements of globalization [e.g., Updates on the Global Commute and More Stories About the Global Commute]. To succeed, globalization requires the movement of resources, capital, and people; but, in the information age, much of that movement is virtual. Last October I wrote about Americans joining the global commute by heading to India to train with Infosys Technologies [Americans Discover the Global Commute]. Anand Giridharadas provides an update on Indian outsourcing in an article in the New York Times ["Outsourcing Works, So India Is Exporting Jobs," 25 September 2007].

"Thousands of Indians report to Infosys Technologies' campus here to learn the finer points of programming. Lately, though, packs of foreigners have been roaming the manicured lawns, too. Many of them are recent American college graduates, and some have even turned down job offers from coveted employers like Google. Instead, they accepted a novel assignment from Infosys, the Indian technology giant: fly here for six months of training, then return home to work in the company’s American back offices. India is outsourcing outsourcing."

Other developing countries have taken notice how India has benefited from outsourcing and would like to apply the lessons learned there to their own economies. Indian companies, fearing that they may lose their edge, are trying to preempt competitors in such states -- by outsourcing.

"One of the constants of the global economy has been companies moving their tasks — and jobs — to India. But rising wages and a stronger currency here, demands for workers who speak languages other than English, and competition from countries looking to emulate India's success as a back office — including China, Morocco and Mexico — are challenging that model. Many executives here acknowledge that outsourcing, having rained most heavily on India, will increasingly sprinkle tasks around the globe. Or, as Ashok Vemuri, an Infosys senior vice president, put it, the future of outsourcing is 'to take the work from any part of the world and do it in any part of the world.' To fight on the shifting terrain, and to beat back emerging rivals, Indian companies are hiring workers and opening offices in developing countries themselves, before their clients do."

Infosys Technologies is not the only Indian company hiring foreign workers.

"In May, Tata Consultancy Service, Infosys’s Indian rival, announced a new back office in Guadalajara, Mexico; Tata already has 5,000 workers in Brazil, Chile and Uruguay. Cognizant Technology Solutions, with most of its operations in India, has now opened back offices in Phoenix and Shanghai. Wipro, another Indian technology services company, has outsourcing offices in Canada, China, Portugal, Romania and Saudi Arabia, among other locations. And last month, Wipro said it was opening a software development center in Atlanta that would hire 500 programmers in three years. In a poetic reflection of outsourcing’s new face, Wipro’s chairman, Azim Premji, told Wall Street analysts this year that he was considering hubs in Idaho and Virginia, in addition to Georgia, to take advantage of American 'states which are less developed.' (India’s per capita income is less than $1,000 a year.)"

Like the article that prompted my earlier post, this article focuses primarily on Infosys Technologies.

"For its part, Infosys is building a whole archipelago of back offices — in Mexico, the Czech Republic, Thailand and China, as well as low-cost regions of the United States. The company seeks to become a global matchmaker for outsourcing: any time a company wants work done somewhere else, even just down the street, Infosys wants to get the call. It is a peculiar ambition for a company that symbolizes the flow of tasks from the West to India. Most of Infosys’s 75,000 employees are Indians, in India. They account for most of the company’s $3.1 billion in sales in the year that ended March 31, from work for clients like Bank of America and Goldman Sachs. 'India continues to be the No. 1 location for outsourcing,' S. Gopalakrishnan, the company’s chief executive, said in a telephone interview. And yet the company opened a Philippines office in August and, a month earlier, bought back offices in Thailand and Poland from Royal Philips Electronics, the Dutch company. In each outsourcing hub, local employees work with little help from Indian managers. Infosys says its outsourcing experience in India has taught it to carve up a project, apportion each slice to suitable workers, double-check quality and then export a final, reassembled product to clients. The company argues it can clone its Indian back offices in other nations and groom Chinese, Mexican or Czech employees to be more productive than local outsourcing companies could make them."

Since the purpose of outsourcing is to take advantage of lower wages in places like India, the same strategy should work for Indian companies as they seek workers in areas with even lower wages. Although this strategy reinforces critics notions that globalization is only about exploiting cheap labor, there is an up side. Teaching workers in low cost countries skills that will help them join the information age can significantly improve their quality of life. It can help those low cost countries develop a middle class, which is critical for promoting sustainable economic growth. Some analysts wonder, however, if outsourcing back to higher wage countries (by establishing back offices in places like the United States) will really work. The article notes that this wouldn't be the first time such a strategy had been followed.

"Some analysts compare the strategy to Japanese penetration of auto manufacturing in the United States in the 1970s. Just as the Japanese learned to make cars in America without Japanese workers, Indian vendors are learning to outsource without Indians, said Dennis McGuire, chairman of TPI, a Texas-based outsourcing consultancy."

In a pretty good description of how the global labor market is shaping up, Giridharadas discusses how one Infosys project is working in Mexico.

"In one project, an American bank wanted a computer system to handle a loan program for Hispanic customers. The system had to work in Spanish. It also had to take into account variables particular to Hispanic clients: many, for instance, remit money to families abroad, which can affect their bank balances. The bank thought a Mexican team would have the right language skills and grasp of cultural nuances. But instead of going to a Mexican vendor, or to an American vendor with Mexican operations, the bank retained three dozen engineers at Infosys, which had recently opened shop in Monterrey, Mexico. Such is the new outsourcing: A company in the United States pays an Indian vendor 7,000 miles away to supply it with Mexican engineers working 150 miles south of the United States border. "

The article concludes by noting that Infosys now wins business because of its expertise in handling highly complex, multi-lingual processes and not just because it hires and trains low wage employees.

"In Europe ... companies now hire Infosys to manage back offices in their own backyards. When an American manufacturer, for instance, needed a system to handle bills from multiple vendors supplying its factories in different European countries, it turned to the Indian company. The manufacturer's different locations scan the invoices and send them to an office of Infosys, where each bill is passed to the right language team. The teams verify the orders and send the payment to the suppliers while logged in to the client's computer system. More than a dozen languages are spoken at the Infosys office, which is in Brno, Czech Republic."

One of the most interesting sidenotes contained in the article is the fact that Infosys mostly trains individuals with no software experience -- giving trainees the equivalent of a four-year bachelors degree in computer science in six months. The reason I found this tidbit so interesting is because it underscores why Enterra Solutions recommends a flexible framework for implementing Development-in-a-Box™ that includes training of local individuals, most of whom will have no prior technical skills. The fact that Infosys can train novices to become skilled employees who support work from and in developed countries is testament that this approach works.

Mobile Phone Software and Standards

A couple of my recent posts have discussed mobile phones and the benefits of standardization [Relief, Development, and the Digital Divide] and the challenges faced when such standards are lacking [see postscript to Two Sigma Solutions]. A New York Times article by Michael Fitzgerald talks about how software could provide the answer to the mobile phone standardization problem ["Software That Fills a Cellphone Gap," 23 September 2007].

"Vanu Bose is the son of a fabled engineer, but he garnered no mercy when he presented his big idea at a technical conference in 1996. Mr. Bose’s graduate work at M.I.T. involved using software to handle the radio function in a cellular phone. He remembers that after he successfully demonstrated his technology, an audience member stood up and dismissed it with: 'Congratulations! You've just invented the world's most expensive cellphone.' Mr. Bose, a personable man, shrugged off the criticism. He expected that over time, the increasing processing speed of chips would make such phones much cheaper. But he didn't want to make the phones. He wanted to remake the wireless base station, the guts of the world's cellular networks, by changing them from complex systems that incorporate hardware, software and the electronics needed for wireless communications into systems run primarily with software."

For consistent readers of this blog, you'll understand my interest in automated software solutions. What Bose is trying to do in the cellphone industry, Enterra Solutions is doing in other fields. Enterra Solutions' technology approach for enhancing service oriented architectures choreographs legacy systems using software to integrate data. Bose's approach is to use software to integrate legacy mobile phone standards.

"Most of us don't think of our cellphones as radios, but they are. Any wireless device uses a radio. Figuring out a way to operate the radio with software has obvious potential advantages: for one, it's easier and cheaper to upgrade software than it is to send field technicians to cellular towers to add components. And a software-based radio — the industry calls it software-defined radio — could handle multiple cellular signals at the same time, the way a computer can run a browser, a word processor and a spreadsheet all at once. So, in theory, letting cellular companies accommodate new spectrum or technologies by doing software upgrades could expand coverage and services while possibly reducing what we pay for them."

Two years after introducing his ideas at the MIT conference, Bose started Vanu Inc. The article informed readers that Bose had to use his first name for the company since his father, Amar, had already founded a company that uses the Bose family name. The article also notes that most of Bose's work has been for the military, which also has a standardization problem. "The armed forces typically use different kinds of radios but need them all to talk to one another, which has prompted two large research projects, Speakeasy and the current Joint Tactical Radio System." Bose, however, never forgot his original idea and has returned to it.

"As cheap semiconductor technology caught up with the needs of his software, he was able to pursue commercial markets. He now has several customers for the company's AnyWave wireless base stations for cellphone networks. Mr. Bose is not the first to pursue converting radios to software. The idea had been developed in the late 1980s, and Joseph Mitola, an engineer now at the Mitre Corporation, a research organization, is credited with being the first to discuss an effective software radio architecture, at a conference in 1991. Well-established companies like Motorola and Ericsson now use elements of software-defined radio for their base stations. But Mr. Bose was the first to come to market with software that could handle multiple networks with the same equipment. Software radio appears to offer an elegant solution to what has been a vexing problem: how to have a single handset, like a cellphone, communicate across multiple networks. For instance, the G.S.M. standard, for global system for mobile communications, is used broadly in Europe, and most notably in the United States by AT&T. But it does not work with phones built for the C.D.M.A. standard, for code division multiple access, that is used in the United States by Verizon and others and is popular in South Korea. Mr. Bose’s software makes it possible for the network to switch modes automatically."

As a frequent traveler overseas, I've had to pay for a couple of different cellphones in order to conduct business. Bose's invention could end all that. Bose could also make a lot of money if the idea catches on.

"While the AnyWave Base Station still includes components like wireless transmitters and receivers, the company ultimately would like to focus on selling its software to other businesses that build base stations. That would position Vanu to become 'the Microsoft of the wireless base station industry,' said Bruce Sachs, a general partner at Charles River Ventures, which recently put money into an $8 million funding round for Vanu. Mr. Sachs says that the market for base stations is worth billions of dollars by itself and that as cellular operators upgrade over time to technologies like WiMax or H.S.D.P.A., for high-speed downlink packet access, wireless markets worldwide will be open to Vanu. There is also potential for markets that are just emerging, like that for 'femto cells.' (In mathematics, a femto is a quadrillionth.) The cells will plug into a power outlet and bolster cellular coverage for a home or business. But that is in the future: Ian Cox, an analyst at ABI Research, projects that the market for software-based radio won't start to boom until 2012."

Where Vanu Inc. has taken hold presently is in rural cellular markets where local carriers make money when larger carriers pay to connect to their modest networks.

"The present is more modest, and it rests in rural markets like De Leon, Tex., home of Mid-Tex Cellular, Vanu’s first commercial customer. Toney Prather, the chief executive of Mid-Tex, said he was intrigued by the technology because the company makes a good deal of its money from roaming charges for people who aren’t already its customers, and Vanu would give him a way to add more networks without having to add expensive base stations. He first used Vanu's software to upgrade his existing network to G.S.M., and in the next few weeks he intends to add C.D.M.A. Rural cellularization may not sound like much, but Mr. Bose is a follower of Clayton M. Christensen, the management guru, who also happens to serve on Vanu’s board. Mr. Christensen told him that the best place to start a new business is where there isn't yet an established market. So Vanu is starting a project, its largest yet, in Alaska, and is involved with I.B.M, on a demonstration for a project to bring villages in India onto the cellular network. No longer, then, is Vanu Bose building the world’s most expensive cellphone. In fact, he may help make the cellphone possible everywhere."

This approach fits neatly into the philosophical framework of Development-in-a-Box™. Vanu Inc. focuses on standards, understands the economics of the bottom of the pyramid, appreciates the power of connectivity, and realizes that partnerships are the best way to move forward. Watching this progress over the next five years should be interesting, especially for global business people.

Developing Third World Seen as Big Business

When Tom Barnett and I first started discussing Development-in-a-Box™, we weren't sure if people would understand the approach or see a future for it. We needn't have worried. Global events have conspired to create a situation where big businesses are beginning to pay attention to regions that only governments and NGOs seemed to care about in the past. The latest confirmation of this is an article in the Wall Street Journal by August Cole ["Lockheed Looks Beyond Weapons," 24 September 2007]. The sub-heading to the article is telling, "Contractor Targets Growth With Services in Strife-Torn Areas."

"Lockheed Martin Corp.'s history is built on making jets, missiles and other weapons of war. But lately, its growth plans also call for securing more U.S. government contracts for an array of behind-the-scenes services throughout the world -- everything from managing military bases and embassies to helping write constitutions for developing nations. Lockheed is making its move through Pacific Architects & Engineers Inc., a little-known Los Angeles company it acquired last year. For more than five decades, PAE quietly worked on Army bases and provided facilities-management services to the State Department. That meant such work as maintaining fresh paint at the U.S. embassy in Moscow to providing logistics for African Union peacekeepers in Darfur, Sudan. Half of the company's revenue comes from the State Department."

The shift from destruction to construction should be welcomed, even by skeptics of the military-industrial complex. The shift in focus is taking place in what we refer to as the military-market nexus. As I've noted in other posts, the most interesting activities often take place at the intersections of activities where disparate groups find themselves interacting. Sometimes these interactions are cooperative and sometimes they are tense, but they are almost always interesting to study. Skeptics will undoubtedly argue that big businesses are not getting involved for the right reasons (that is, their motives are not altruistic). They should be glad of that. I agree that profit, not altruism, is the motive behind the shift in focus, and the reason I think that is a good thing is because it means that big businesses want to see developed succeed (so the profits will continue) and that they are committed to staying the course (at least more than they have been in the past).

"Lockheed, of Bethesda, Md., sees PAE as a vehicle to provide more crucial -- and lucrative -- services to governments and other entities. PAE has developed expertise in areas such as disaster relief, peacekeeping missions and election monitoring. Such work has historically been the State Department's turf. As the Defense Department's budget begins to plateau and U.S. forces are stretched thin, Lockheed needs to find ways to grow beyond big weapons systems. To capitalize on the changing nature of military activity around the globe, the company is seeking a role in everything from the occupation of Iraq to disaster response to antiterror efforts. 'We believe that the definition of global security is changing. Expanding, actually,' Lockheed Chairman and Chief Executive Bob Stevens said. Defense Department spending on service contracts rose 72% to $141.2 billion in fiscal 2005 from $82.3 billion in 1996, according to the Government Accountability Office, Congress's investigative arm. Meanwhile, spending has been growing at the State Department and other federal branches. Partly because of that shift, Lockheed and its peers have been building up its log of work not tied to the traditional military budgets that fund ships, tanks and fighters. Since 2001, Lockheed has acquired 18 companies toward this end. 'PAE is an interesting variation, but one variation on a theme,' Mr. Stevens said. Such work isn't without operational or political risks. PAE's employees work in far-flung corners of the globe in conditions that may be fraught with physical and ethical perils. Lockheed said it has the training and oversight to protect against these dangers. Scrutiny can be intense on contractors providing a government even seemingly innocuous support and logistics services, as proven by the difficulties former Halliburton Co. unit KBR Inc. faced in Iraq."

When Cole provides a quick overview of PAE's global portfolio, it becomes clear why PAE's acquisition by Lockheed Martin signals that the future will not be business as usual.

"PAE's parent division counts as customers the Social Security Administration, New York's Metropolitan Transportation Authority and the United Kingdom government's census. Countries familiar to PAE, such as Afghanistan and the Democratic Republic of Congo, are on the radar screen as potential buyers of domestic-security technology, government consulting or even postal services. An example of PAE's capabilities can be found in Africa, where the company has become the logistics backbone of the 7,700-strong African Union troops in Darfur under a State Department contract that also involved DynCorp International Inc. In Darfur, an area about the size of France, PAE provides 34 base camps as well as vehicle maintenance and telecommunications equipment. The contract was valued at $21 million when awarded and predates Lockheed's acquisition of PAE. The Department of State is spending about $400 million on such efforts in sub-Saharan Africa. ... PAE was founded in 1955 and specialized in construction and engineering work, expanding through U.S. government contracts during the Cold War and afterwards. While Lockheed's 'Skunk Works' engineers were working on advanced jets in the 1960s, PAE was working on building bases in Vietnam. Today, PAE's contracts include training police throughout the world on behalf of the State Department and election monitoring for the Organization for Security and Cooperation in Europe, also through a State Department contract. The company's employees helped write Afghanistan's constitution and set voting policies there. By buying PAE's know-how, Lockheed can leap ahead on the learning curve of how to do the tricky, often dangerous, work that goes along with countries emerging from war or those that are on the brink of it."

For years, my colleague Tom Barnett has been preaching that America needs to develop a "second half" game plan. It has demonstrated time and again that it can win conventional engagements (i.e., winning the war), but it has proved almost inept at winning the peace. Part of the reason is that winning the peace is difficult, expensive, and requires a broadbased public/private partnership. The pieces are only now starting to fall in place. Cole interviewed Tom for the article it reflects Tom's arguments.

"The U.S. military, which has proven it can quickly win conventional military campaigns, is looking beyond the occupation of Iraq and Afghanistan to other parts of the globe that risk becoming threats through economic, political or humanitarian crises. 'When you think about the engagements we have today, winning the war is just one aspect,' said Linda Gooden, executive vice president of Lockheed's information-systems and global-services division. 'There's considerably more resources attached to winning the peace.' Africa is one such place. The Defense Department is setting up a regional command this year that will include countries that have been devastated by bloody regional conflicts. While the continuing hunt for al Qaeda and other terrorist groups in places such as Somalia provides one imperative, economic-development and security-training have become increasingly important to U.S. strategy in the region. China is already establishing itself economically in Sudan. PAE gives Lockheed a shot at challenging incumbent firms such as KBR for that work. 'With our knowledge that we have gained through PAE working in Africa, we feel we're well positioned to support [the Department of Defense] as they open up the expeditionary bases in Africa,' said Ms. Gooden."

Cole did manage to work in a soundbite from Tom.

"'Lockheed doing this kind of thing is crucial to this process,' said Thomas Barnett, who is senior managing director at corporate and government consultant Enterra Solutions and an expert on how the military can deal with the developing world and ungoverned areas."

As I noted earlier, we have to move beyond military operations if peace and prosperity are going to be achieved and developing countries finally get to stake a claim in the future. Getting big businesses involved, especially those who, in the past, have concentrated more on conflict than development, is a step in the right direction. When businesses, governments, international organizations, and NGOs start working together in harmony, good things are bound to happen.

Radical Collaboration

Steve Hamm, writing in BusinessWeek's special section on innovation, discusses lessons learned from IBM's innovation factory ["Radical Collaboration," 10 September 2007 print issue]. The article is basically the short version of IBM's journey from an organization that viciously guarded its R&D pursuits to an organization that welcomes deep collaboration. The process (and the article) began in IBM's chip division that, despite heavy investment by the company, was losing money. John Kelly, head of the chip division, realized that something had to change or his job probably would. As a result, he confronted the closed culture that had been embraced by IBM over the years and got IBM decisionmakers to accept the idea that collaboration was necessary for survival.

"The tech giant already had a handful of alliances aimed at improving manufacturing and chip design. Several partners had come forward asking for deeper relationships, including collaboration with scientists working for IBM Research. ... Since then, IBM has built what it calls an 'open ecosystem' of chip R&D with nine partners, including Advanced Micro Devices, Sony, Toshiba, Freescale Semiconductor, and Albany Nanontech, a university research center. All told, in five separate alliances, IBM partners have contributed more than $1 billion to help expand the company’s facilities and buy the latest chipmaking equipment. But just as important, they're providing brainpower, including more than 250 scientists and engineers who now work in East Fishkill. As a result, IBM's chip operation boomed, and, even now, during a cyclical downturn in the chip industry, it's still making a profit."

Traditionally companies have held their R&D closely because they worried about commercial espionage. IBM was no different. Times, however, are changing.

"IBM is reinventing the way it innovates. At one time the tech giant was a true believer in go-it-alone R&D. The feeling was that if a technology wasn't invented by IBMers, it wasn't as good. Now the computer pioneer realizes that no matter how big an organization is, more smart people are going to work outside its walls than inside. So it courts R&D partners aggressively. 'We are the most innovative when we collaborate,' declares Chief Executive Samuel J. Palmisano."

According to BusinessWeek, IBM is not alone in this rush to collaboration. In the past, small businesses have been more likely to look for partners than large organizations because they knew that partners could help them grow faster. What's new is that now large corporations are starting to collaborate. Such companies used to pitch their customers by claiming, "Our company is better than our competitor's company." Today, they are pitching, "Our collaborative group is better than their collaborative group."

"IBM's decision to invite in outsiders and open up the innovation process reflects one of the most intriguing concepts in corporate strategy today. Many major companies have concluded that succeeding in the 21st century requires teaming up with other companies—or even individual researchers—to create so-called innovation networks. 'These networks allow companies to seamlessly weave internal and external innovation capabilities to optimize profits and speed products to market,' says Navi Radjou, an analyst with Forrester Research. Companies no longer compete simply against one another. Now alliances devoted to innovation go head-to-head. bt Group, basf, Boeing, Eli Lilly, Procter & Gamble, and IBM are the pioneers. They all have revamped their strategies to expand collaboration with outsiders. Forrester estimates that while most major companies are aware of innovation networking, only about 20% to 30% are experimenting with it, and a mere 5% have mastered the practice."

I suspect that BusinessWeek's estimate that a "mere 5% have mastered the practice" really refers to collaborative innovation rather than collaboration alone. Collaboration, I suspect, is easier than innovation -- and either collaboration or innovation alone is easier than collaboartive innovation.

"There's no one-size-fits-all approach to collaborative innovation. What works best overall, strategy consultants say, is to think radically. Some companies turn suppliers of goods and services into something much more valuable—sources of ideas about how to design a product and its components. Boeing, for instance, tapped a global network of suppliers to produce much of the detailed design work for its new 787 Dreamliner jet. Other companies are busy prospecting for valuable new ideas from individuals and startups. Britain's bt placed scouts in India, China, and Silicon Valley to spot useful inventions and funnel them into its businesses. Yet another approach: Bring together a handful of companies to sharpen their competitive edge together. Businesses have been doing that sort of thing for more than two decades, but the alliances are different now. Increasingly, they are global, not national."

This global networking approach makes a lot of sense in an "always on" world. The article says, for example, that Boeing's global effort allowed it to trim twelve months off of the time to market for its Dreamliner. One of the interesting things that IBM is doing is removing as many silos as they can -- including silos between collaborating companies.

"In most chip plants, those who aren't employees typically wear different-colored bunny suits to distinguish them. Not so in East Fishkill. All the scientists and engineers—2,000 IBMers and hundreds more who work for partners—wear the same white outfits. They work together without regard to who issues their paycheck. Sometimes an IBM worker leads a team; other times it's somebody from AMD or Freescale. 'We don't work in silos,' says John Pellerin, the top AMD manager at the plant. 'We're a fully cross-mixed team.'"

The article points out that it wasn't just visionary people who saw the future of collaboration it was also accountants. Chip fabrication is so expensive that only a handful of large companies can go it alone. Even though collaboration might be the right thing to do that doesn't make it the easy thing to do.

"If the benefits of collaborative innovation are easy to spot, so are the pitfalls. Think how hard it is to get people in a single corporation on the same page. Now multiply that by a factor of three or five. Who's in charge? Who owns the innovations? ... Experts say the secret to successful alliances is agreeing on common goals and setting rules of engagement from the start. Then the partners should set up procedures for day-to-day interactions, including spelling out what can be discussed by people from different companies and what's strictly off limits. ... In some cases, to avoid conflicts companies target fundamental research they're willing to share, even with rivals. This approach is starting to catch on in the pharmaceutical industry."

The article goes on to point out that partnerships leading to innovation need not begin with R&D efforts. Proctor & Gamble, for example, uses a very different approach.

"Once P&G CEO A.G. Lafley set a goal of going outside to find half of all innovations, the people he put in charge realized they would have to set up an external department to cherry-pick innovations and bring them into P&G. An in-house team of more than 200 now sizes up more than 2,500 innovations a year. "You have to set up an internal structure so you can digest all this stuff," says Larry Huston of strategy consultancy 4inno, who formerly managed P&G's external innovation programs."

When collaborative efforts fail, the article notes, often it is because corporate interests start to diverge. Clearly, the same path doesn't lead to different destinations. Even when objectives remain similar, corporate cultures can clash. Sometimes the solutions are easy and sometimes they're not.

"At IBM, people typically reached decisions by discussing problems in open meetings. Toshiba's engineers preferred to see presentations, read reports, and make decisions later. IBM's dearth of reports made the Japanese engineers suspect they were being kept in the dark. The solution: assigning people to take notes on the meetings and issue reports later."

The concluding section of the BusinessWeek article is titled "Motto For the 21st Century: Network or Die."  Networking, of course, is at the heart of the information age.

"IBM's alliances with the likes of Albany Nanotech, AMD, and Freescale have paid off just the way its leaders hoped. Now, the company is expanding its innovation ecosystem to include suppliers of chip materials, chemical companies, and chip-design software companies. 'This is a model that will not only survive but will prosper, predicts [John] Kelly, who is now director of IBM Research. For pioneers such as Kelly ..., there's no turning back. For other R&D leaders, an open-innovation strategy is still new and risky. But as more companies embrace it, the pressure will be on the holdouts to reach across organizational borders in search of ideas and greater productivity. They can delay, but they could be left far behind if they don't play."

I'm a believer in collaborative innovation. My last post on the subject was back in July [The Medici Effect and New Design]. R&D efforts are generally more complex and difficult to work on than design collaboration, but the benefits can be even greater. Network or die isn't a bad motto.

Unreasoned Fear of Muslim Investment Again Raises it Ugly Head

The terrorist attacks of 11 September 2001 created a number of horizontal scenarios that changed the world forever. Anyone who travels bumps up against some of these changes on a routine basis. They also changed the security environment, where terrorism went from being a criminal activity to "war." They also changed many people's perception of Islam. Political Islam, which has successfully highjacked the agenda for an entire religion, is more and more often pointed to as the "enemy" confronting the developed world. Unfortunately, this stereotyping of Islam has also resulted in some irrational concerns on the part of many politicians. This was first demonstrated when Dubai Ports World attempted to purchase port operations in New York City. New York is certainly justified in being security sensitive, but the message that the uproar over DP World's plans created was clear -- we don't trust any Muslim.

If the Iraq war has taught the American public anything about Islam, it is that the Muslim world is not a homogenous group of people who all share the same political agenda or even religious agenda. Like Christians, Muslims are divided into feuding groups and there are both religious fanatics and non-practicing skeptics. There are illiterate Muslims and there are those that have PhDs. There are farmers and there are businessmen. There are Muslims who hate the United States and there some, like those in Kurdistan, who love the United States. Yet Muslims are often lumped into the same group. Anyone who has been to Dubai understands how different people living there are from those living in Sadr City or the frontiers of Pakistan. I have written a couple of posts about Dubai [On Becoming a Tiger and Attracting FDI and Creating a Brighter Future in Dubai]. The fact of the matter is DP World is one of the largest marine terminal operators in the world with 42 terminals and 13 new developments across 27 countries. Not all of those countries are in the Middle East. In fact, DP World is truly a global company that continues to be trusted around the world -- except, it seems, in the United States.

Now, a new storm is brewing over a different group of Dubai investors ["Dubai to Buy Large Stake in NASDAQ," by Joseph B. Treaster, New York Times, 20 September 2007].

"The government-controlled stock exchange in Dubai, the fast-growing Middle East business center, is expected to announce today in Stockholm that it plans to take significant ownership in the Nasdaq stock exchange in New York and the London Stock Exchange, people who have been briefed on the transaction said last night. If the deal is completed, Dubai would become the first Middle East government to own a large stake in an American stock exchange. It also is expected to become the largest single investor in Nasdaq. The deal by the Borse Dubai would give Dubai a stake of 20 percent to 30 percent in Nasdaq, the largest electronic stock market in America, and about 30 percent in the London Stock Exchange, according to people who have been briefed. In exchange, Dubai would hand over to Nasdaq the OMX Group, a stock exchange based in Stockholm that also operates in Helsinki, Copenhagen and several other countries in Scandinavia and the Baltic States."

On the face of it, this looks like a reasonable deal for NASDAQ, which lost a bidding war to obtain OMX to Borse Dubai. NASDAQ has demonstrated that it wants a European presence and this deal would make that dream come true.

"Stock markets around the world are combining or buying stakes in each other to meet clients’ demands to trade shares of companies anywhere, at a faster pace, across different asset classes and for less money. Combinations also help them save costs in an industry where the largest expense is developing the technology to run trading platforms. But Nasdaq's efforts to expand have been rebuffed. It bought a 30 percent share in the London Stock Exchange, but its hostile bids to take over the entire London operation were rejected. Then in May, Nasdaq announced that it had reached agreement to buy the OMX Group for $3.7 billion. But in August, Borse Dubai, the parent company of the Dubai International Financial Exchange, which includes the former Dubai Financial Markets, came in with a higher bid."

Investors should be pleased that Borse Dubai is showing such confidence in NASDAQ, especially considering the weakness of the dollar, but the deal is not being judged on its economic merits.

"Reports of a possible deal brought questions last night from lawmakers in Washington about potential compromises to security in the United States. The concerns were similar to those raised more than a year ago when another Dubai-owned company, DP World, tried to buy a company that managed port operations around the United States, and in 2005, when the Chinese oil company, Cnooc, tried to buy its American rival, Unocal. Both efforts were abandoned under pressure from Congress. Dubai is the commercial and financial center of the United Arab Emirates on the Persian Gulf and has been cited as a transit point for money used to finance terrorism. Senator Charles E. Schumer, Democrat of New York, who helped lead the opposition to Dubai’s investment in the American ports, said last night that the deal, which would make Dubai a major player in New York finance, would 'raise serious questions that have to be answered. ... Should any government own any part of a major U.S. stock exchange?' asked Mr. Schumer, who is on the banking and finance committees in the Senate and is the chairman of the joint House and Senate economic committee."

The question that lawmakers should be asking is whether having Muslim investors committed to making America's economy stronger is going to make the country more or less secure. I would argue that it makes the country more secure. I can assure you that Dubai investors are like investors anywhere; they are not looking to lose money. Any terrorist attack that devalues the NASDAQ or damages the U.S. economy would have a negative impact on them. America would also be more secure because approving Muslim investors would be a welcomed first step in reconciling with the vast majority of Muslims who lament the fact that their religion has been highjacked by extremists. Another rebuff of Dubai investors for no other reason than the fact they are Muslims sends a terrible signal and only reinforces arguments being used by extremists claiming that the U.S. is at war with Islam.

Enterra Solutions' activity in Kurdistan has made me sensitive to these issues. For the vast majority of companies in the Middle East, business is business. I know that it is in America's best interests to help make northern Iraq more secure and prosperous. I believe the same holds true for the rest of the Middle East as well.

Complexity and Resilience

When I first founded Enterra Solutions, one of the emerging characteristics of the information age that intrigued me was its increasing complexity. It was clear to me that there was a growing complexity gap (i.e., the difference between complexity and the lack of tools organizations had to confront it). I became interested in rule set automation because I knew that it could help deal with complexity in ways that human intervention couldn't. The complexity of networks has been brought to light on numerous occasions and it is almost always the unintended consequences of failure that make those networks vulnerable. That vulnerability is the focus of an article by John Schwartz ["Who Needs Hackers," New York Times, 12 September 2007]. His article begins with the customs crisis at the Los Angeles airport in August 2007.

"Nothing was moving. International travelers flying into Los Angeles International Airport — more than 17,000 of them — were stuck on planes for hours one day in mid-August after computers for the United States Customs and Border Protection agency went down and stayed down for nine hours. Hackers? Nope. Though it was the kind of chaos that malevolent computer intruders always seem to be creating in the movies, the problem was traced to a malfunctioning network card on a desktop computer. The flawed card slowed the network and set off a domino effect as failures rippled through the customs network at the airport, officials said."

Yossi Sheffi in his seminal book Resilient Enterprises talked about the need for understanding and planning for disruptions in supply chains. Organizations whose primary commodity is information need to look at the supply chain for information in the same way that manufacturers look at their supply chain for product components. As Schwartz points out, this means more than simply protecting networks against hackers.

"Everybody knows hackers are the biggest threat to computer networks, except that it ain’t necessarily so. Yes, hackers are still out there, and not just teenagers: malicious insiders, political activists, mobsters and even government agents all routinely test public and private computer networks and occasionally disrupt services. But experts say that some of the most serious, even potentially devastating, problems with networks arise from sources with no malevolent component. Whether it’s the Los Angeles customs fiasco or the unpredictable network cascade that brought the global Skype telephone service down for two days in August, problems arising from flawed systems, increasingly complex networks and even technology headaches from corporate mergers can make computer systems less reliable. Meanwhile, society as a whole is growing ever more dependent on computers and computer networks, as automated controls become the norm for air traffic, pipelines, dams, the electrical grid and more."

One of the reasons that I started looking at critical infrastructure for implementation of Enterprise Resilience Management™ was that I realized that their networks were complex, vulnerable, and critical for the U.S. economy. Anyone who flies in a modern airliner is relying on automated computer programs to keep them safe. The same kind of care that goes into programming fly-by-wire systems needs to be taken when programming any critical infrastructure system. The challenge is understanding the underlying complexity that is generated by massive networks.

"'We don’t need hackers to break the systems because they’re falling apart by themselves,' said Peter G. Neumann, an expert in computing risks and principal scientist at SRI International, a research institute in Menlo Park, Calif. Steven M. Bellovin, a professor of computer science at Columbia University, said: 'Most of the problems we have day to day have nothing to do with malice. Things break. Complex systems break in complex ways.' When the electrical grid went out in the summer of 2003 throughout the Eastern United States and Canada, 'it wasn’t any one thing, it was a cascading set of things,' Mr. Bellovin noted. That is why Andreas M. Antonopoulos, a founding partner at Nemertes Research, a technology research company in Mokena, Ill., says, 'The threat is complexity itself.' Change is the fuel of business, but it also introduces complexity, Mr. Antonopoulos said, whether by bringing together incompatible computer networks or simply by growing beyond the network’s ability to keep up. 'We have gone from fairly simple computing architectures to massively distributed, massively interconnected and interdependent networks,' he said, adding that as a result, flaws have become increasingly hard to predict or spot. Simpler systems could be understood and their behavior characterized, he said, but greater complexity brings unintended consequences. 'On the scale we do it, it's more like forecasting weather,' he said."

The key to resilience is not only understanding how systems work but how they break. The cascading effects referred to in the article can produce unexpected results. Surprises are rarely the good kind when it comes to moments of crisis. The Skype case study is particularly intriguing.

"In the case of Skype, the company — which says it has more than 220 million users, with millions online at any time — was deluged on Aug. 16 with login attempts by computers that had restarted after downloading a security update for Microsoft's Windows operating system. A company employee, Villu Arak, posted a note online that blamed a 'massive restart of our users' computers across the globe within a very short time frame' for the 48-hour failure, saying it had overtaxed the network. Though the company has software to 'self-heal' in such situations, 'this event revealed a previously unseen software bug' in the program that allocates computing resources."

When consulting with large corporations, I encourage the use of alternative future discussions that focus on challenges outside the corporation that could impact processes within the organization. Hindsight is easy. Realizing that Microsoft, which still dominates the operating system world, could do something that could have a major negative impact on operations reliant on that operating system should have been a predictable event. Foresight, however, is not as easy as hindsight. Corporations that can find people who can think out of the proverbial box and see potential challenges before they emerge need to hang on to them -- they are corporate treasures. People like Peter Schwartz of Global Business Networks has made a remarkable living by being able to imagine the unthinkable. As a result, he has made many a company more resilient and prepared. Back to John Schwartz' article:

"As computer networks are cobbled together, said Matt Moynahan, the chief executive of Veracode, a security company, 'the Law of the Weakest Link always seems to prevail.' Whatever flaw or weakness allows a problem to occur compromises the entire system, just as one weak section of a levee can inundate an entire community, he said. ... [T]he precursor to the Internet known as the Arpanet collapsed for four hours in 1980 after years of smooth functioning. According to Dr. Neumann of SRI, the collapse 'resulted from an unforeseen interaction among three different causes' that included what he called 'an overly lazy garbage collection algorithm' that allowed the errors to accumulate and overwhelm the fledgling network. Where are the weaknesses most likely to have grave consequences? Every expert has a suggestion. ... Dr. Bellovin at Columbia said he also worried about what might happen with the massively complex antimissile systems that the government is developing. 'It's a system you can't really test until the real thing happens,' he said. There are better ways. Making systems strong enough to recover quickly from the inevitable glitches and problems can keep disruption to a minimum. ... The best answer, Dr. Neumann says, is to build computers that are secure and stable from the start. A system with fewer flaws also deters hackers, he said. 'If you design the thing right in the first place, you can make it reliable, secure, fault tolerant and human safe,' he said. 'The technology is there to do this right if anybody wanted to take the effort.' He was part of an effort that began in the 1960s to develop a rock-solid network-operating system known as Multics, but those efforts gave way to more commercially successful systems. Multics' creators were so farsighted, Dr. Neumann recalled, that its designers even anticipated and prevented the 'Year 2000' problem that had to be corrected in other computers. That flaw, known as Y2K, caused some machines to malfunction if they detected dates after Jan. 1, 2000. Billions of dollars were spent to prevent problems. Dr. Neumann, who has been preaching network stability since the 1960s, said, 'The message never got through.' Pressures to ship software and hardware quickly and to keep costs at a minimum, he said, have worked against more secure and robust systems. 'We throw this together, shrink wrap it and throw it out there,' he said. 'There’s no incentive to do it right, and that's pitiful.'"

It seems to be human nature that our perspective shifts only after a crisis. Undoubtedly a network crisis will eventually shift corporate perspectives about network robustness. In other words, the crisis will supply the incentive for which Dr. Neumann is looking. Unfortunately, it will have to be a large crisis and will generate huge disruptions. I can't predict what that disruption might be -- perhaps something to do with the global transfer of money -- but a network disruption is likely to occur and let's hope it doesn't put anyone's life at risk. Enterprise Resilience Management was developed with the intention of helping identify and prevent or mitigate such crises and I'm sure others will eventually develop similar approaches. Let's hope they are implemented and the dire predictions of a big crisis are proven false.

A Few Good Signs for Africa

The United Nations Children's Fund recently announced that for the first time since 1960 (when records started being kept) the annual death total for children around the world has dipped below the 10 million mark ["Child Mortality at Record Low; Further Drop Seen," by Donald G. McNeil, Jr., New York Times, 13 September 2007]. Considering how much the global population has grown over the last 50 years, that statistic is all the more remarkable. McNeil contributes the drop in the mortality rate to a number of actors.

"The most important advances, Unicef said, included these:

• Measles deaths have dropped 60 percent since 1999, thanks to vaccination drives.
• More women are breast-feeding rather than mixing formula or cereal with dirty water.
• More babies are sleeping under mosquito nets.
• More are getting Vitamin A drops.

In 1960, about 20 million children died annually, but the drop since then has been steeper than 50 percent because the world population has grown. If babies were still dying at 1960 rates, 25 million would die this year."

The reason that analysts believe the mortality rate will drop even further is because the data just released was all collected in 2005. Since then there has been a "huge influx of money that has poured into third world health ... from the Global Fund to Fight AIDS, Tuberculosis and Malaria; the Gates Foundation; and the Bush administration’s twin programs to fight AIDS and malaria."  As in many other things, the news is not as good for Africa as other regions.

"There are still wide disparities. The highest rates of child mortality are found in West and Central Africa, where more than 150 of every 1,000 children born will die before age 5. In the wealthy countries of North America, Western Europe and Japan, the average is about six. The most rapid progress has been made in Latin America and the Caribbean, in Central and Eastern Europe, and in East Asia and the Pacific. Despite the improvement, two sets of countries have worsened, Unicef said: those in southern Africa that have been hit hardest by AIDS, and those that have been at war recently, like Congo and Sierra Leone."

But even across Africa there is some good news. Morocco has made particularly rapid progress since 2000 cutting its child deaths by more than one-third. Madagascar did even better cutting its deaths by 41 percent despite going to the brink of civil war in 2002, and São Tomé and Principe beat the rest of the world by cutting its deaths by 48 percent. Ethiopia has also made great strides by training "30,000 community health workers for tasks like weighing babies, advising on breast-feeding, giving shots, testing for malaria and handing out mosquito nets." A similar grass roots program approach is taking hold in the Congo ["In the land of the blind," The Economist, 1 September 2007].

"Self-sufficiency is a way of life in the Democratic Republic of Congo's rural expanses. It has to be. Even the most accessible of the many villages that dot the dense rainforest—the ones connected to regional towns by spindly tracks that pass as main roads—get little government support. Yet in these unpromising conditions, one of Africa's more successful public-health programmes is not only surviving but thriving. The idea is to harness people's existing culture of self-help and get subsistence farmers to carry out simple medical tasks which are beyond the capacity of a pathetically inadequate health system. In Congo alone, the organisation has recruited more than 35,000 community workers for its river-blindness project; they get nothing for their labours except the knowledge that they are protecting their families from disease. Volunteers from each village are taught how to measure out the annual drug doses, fill in the obligatory record forms, and watch out for side-effects. WHO supplies the drugs and the villagers do the rest themselves. WHO was forced to devise the strategy after it received an offer from Merck, a pharmaceutical firm, of free supplies of a drug to people at risk of river blindness. For the Geneva-based masters of the World Health Organisation (WHO), encouraging self-help (by people with no formal training in medicine or nursing) is at once a lofty principle, to be expounded in academic journals and conference papers, and the only approach that has a hope of succeeding in chaotic circumstances like those of Congo. For a decade, WHO has been applying the concept of self-help to one specific problem: the elimination from Africa of river blindness, or onchocerciasis, a disease caused by parasitic worms, spread between humans by blackflies. But if the lessons were properly applied, the idea could have a much broader application for places where war, anarchy or simply poverty make it impossible to set up a formal medical system."

Clearly, if volunteers can handle a single preventive medical program, they can be trained to handle multiple pro-active healthcare problems. At some point, such people change from being unpaid volunteers to valuable, compensated members of the community. Such a shift would not only improve health it would create jobs. This sounds great, but the article points out that making this vision a reality has its challenges.

"[C]ommunity workers ... could do a lot more; they could distribute vitamin supplements, deworming drugs, vaccines and malaria treatments to villages that have hitherto been deemed beyond the reach of medical help. This approach would free up paid health staff to do the urgent or complex work that needs special training. ... Margaret Chan, WHO's director-general, has said as much herself. She has given vocal support to what she calls “horizontal” approaches that improve general health in poor countries—as opposed to glamorous top-down programmes that focus on one disease. ... Putting more emphasis on general health and 'amateur' care might sound like common sense, but advocates like Dr Chan or Dr [Uche] Amazigo [who runs the riverblindness program] may well have some tough arguments ahead. For some African governments, single-disease efforts may seem like a more tempting focus when hard choices have to be made. And the self-help school has problems. To train, and maintain, hundreds of thousands of community workers takes time, patience and money. APOC's mandate is for river blindness alone; it lacks the funds to expand the project to other diseases. Only if African governments endorse the idea will it have any future. Some have; in Uganda, where APOC has operated for over ten years, the government was impressed by the ability of community workers to supplement the health system, and has changed its policy accordingly. APOC stopped providing any funding two years ago, but the Ugandan authorities stepped in and kept the network of community workers going."

I've discussed the value of public-private partnerships and communities of interest before. Grass roots healthcare in Africa is just one example of how successful they can be. Other intriguing approaches to improve health are also being tried. A Malaysian-based non-governmental organization, WorldFish Centre, is helping people in southern Africa fight AIDS by developing fish ponds ["Fish versus AIDS," The Economist, 1 September 2007].

"The WorldFish Centre has helped 1,200 families who have lost breadwinners to AIDS to dig and run fish ponds in southern Malawi's Zomba district. The small landlocked southern African country relies heavily on subsistence farming. But HIV/AIDS, erratic rains, overpopulation and soil erosion are taking a big toll, making it hard for farmers on tiny plots to survive. With Malawi's main lake overfished, people are losing a big source of protein. In the 1970s they ate 14 kilos of fish per person a year; now they consume just four kilos. The ponds, which are easy to maintain, cost only $200 to make and $10 to stock with fish. They are filled from the water table or by nearby streams; rain keeps them going. The fish are fed from farm waste and by-products, such as chicken manure and maize bran. According to WorldFish, families with fish ponds have doubled their income and now eat 150% more fresh fish. Malnutrition among children under five has apparently dropped from 45% to 15% in three years. Mrs Kanyema passes on the training she has received on fish-breeding and on how to use her pond for agriculture to her neighbours. Pond owners sell most of their fish and vegetables locally, where there is enough demand to keep everything fresh. But they are also being taught to smoke fish, which keeps it for two weeks. Daniel Jamu, WorldFish's regional director, says that the next step is to help farmers club together to market their produce in the towns, where prices are higher. Many poor farmers are starting to view aquaculture as easier and cheaper than raising cattle. WorldFish is expanding the project to reach another 26,000 families in neighbouring Mozambique and Zambia, as well as Malawi."

Interesting things are also happening on the economic front in Tanzania now that it has abandoned its failed socialist experiment ["President Kikwete's hard road ahead," The Economist, 1 September 2007].

"Two years into his presidency, Jakaya Kikwete is being heralded as one of Africa's rising stars, while Tanzania, after decades of sluggish growth and near-bankruptcy, is at last being lauded as a modest success. Its economy is expected to grow by 7% this year and perhaps a bit more next year. Thanks to sounder management and Mr Kikwete's embrace of the free market, foreign donors and investors have started to put in more cash. The country is feeling perkier."

As I have so frequently noted, when a country establishes the right conditions for attracting foreign direct investment good things start to happen. When Tanzania received its independence in 1962, it was led by its ardently socialist founder, Julius Nyerere, who ran the show until 1985. His successors have slowly moved the country away from that failed legacy and inched toward development. Kikwete is taking the next steps forward. He sees a great need to create jobs and that means attracting investment. The current push is to build up Tanzania's gold mining production. The country also has an agricultural sector (although it is mostly subsistence farming), as well as diamond mining and, of course, tourism. President Kikwete is also investing in infrastructure. On a recent presidential trip reported on in the Economist, Kikwete opened "new roads, cattle stations, cotton gins, gold dealerships, co-operative banks, clinics and a Chinese-built project costing $85m that pumps water 170km (106 miles) from Lake Victoria." But is he also investing in Tanzania's human capital.

"The most striking development is in education. In the past year, the government boldly claims that no fewer than 187 secondary schools have been built in Shinyanga region alone. In the few that Mr Kikwete opens, he particularly encourages girls to stay on in education—to seek opportunities, not to make babies. Some of these new schools have been paid for by foreigners. But, as a mark of trust in the relative probity of Mr Kikwete's government, many of Tanzania's biggest donors, led by Britain, now give their money directly to support the budget."

Despite all that is going well, problems do persist in Tanzania. "Tanzania's budget is only half-covered by state revenues. Nearly half of Tanzanians are under 17. Unemployment is rife."  Corruption also remains a problem. Connectivity, however, is on the rise.

"Another hopeful development is the faster flow of information, especially to Tanzania's poorest communities. Mr Kikwete's own mobile phone is a good example. Even in Bukombe, with its streets of dust and brothels lit with kerosene lamps, the presidential phone, set on silent, lights up like a firefly with text messages, several of which he reads out at random."

Speaking of mobile phones, I wrote a recent post about Relief, Development, and the Digital Divide that discussed how mobile phones are being used in relief operations. In that post, I noted how important standards were so that mobile phone users could connect with one another. A recent note in BusinessWeek points out that mobile phone standards are not what they could be ["Global Glitch," by Elizabeth Woyke, 17 September 2007].

"Is it possible to make a truly global phone? Perhaps not, based on the frustrations of some who bought the new BlackBerry 8830 'World Edition' phone. Sprint Nextel and Verizon Wireless promote it as perfect for globe trotting because of features allowing it to negotiate conflicting cellular standards. 'Get ready to take on the world,' proclaims Verizon's ad. The catch? The phone actually works only in limited fashion—or not at all—in several major business hubs, including Japan, India, and South Korea. Verizon and Sprint say customers should check for coverage areas on their Web sites. But that hasn't kept some, like Neil Kozarsky, who took his 8830 to Tokyo, from griping they were misled."

Those are the kinds of problems you face when you don't have truly international standards. I've run into similar problems in my journeys overseas. Such is life. Let me close with one final story about Africa from the pages of The Economist ["The transcendental crusader," 1 September 2007]. It is a story about one man's investment in South Africa's human capital.

"In his early years there was little to suggest that Taddy Blecher would end up in Johannesburg's inner city, surrounded by youngsters from poor backgrounds. An actuary turned management consultant, Mr Blecher first stepped into a township by mistake. 'I was terrified and thought I was going to die,' he remembers. In 1995 he was on the point of emigrating to America, but at the last minute he decided to stay and make a difference. He spent the next four years teaching transcendental meditation in township schools. This was quite a stretch from his upbringing as a 'white Jewish guy in Johannesburg', but he describes it as the best time of his life. He and three partners then started CIDA City Campus, an almost-free business university for students who cannot afford mainstream higher education. (Students are charged only $21 per month in tuition, and some also receive additional financial help.) In a country where poverty and poor skills remain endemic, he has become a local hero."

I mentioned communities of interest above. That is exactly what Blecher managed to do -- set up a community of interest around his university.

"Mr Blecher turned to local companies for help. A bank made its old office building in downtown Johannesburg available free. Mr Blecher's former employer gave him a desk and a phone line at its offices. CIDA City Campus opened its doors in 2000. Today 80% of CIDA's income comes from donations, amounting to about 50m rand ($7m) a year. Sponsors include Dell, JPMorgan, Sir Richard Branson and Oprah Winfrey, plus an impressive list of local firms. Students help to run the school, providing them with experience and keeping costs down. Many teachers are professionals who offer their services free. Today about 1,500 students are enrolled at CIDA. The business school offers a general Bachelor in Business Administration (BBA) course, as well as practical specialities such as information technology, construction and entrepreneurship for those who qualify. In July CIDA's School of Investments opened its doors, complete with a simulated trading room. But the central philosophy is to provide a lot more than education. Mr Blecher describes CIDA as 'a whole ecosystem created to support kids.' Many students come from very poor rural backgrounds, and moving to Johannesburg means a huge adjustment and often extreme financial hardship. Some start with a residential one-year foundation course to plug academic holes before enrolling in the BBA degree. Counsellors are provided and a wardrobe is also at hand for those who need to smarten up for job interviews."

Blecher wants others to catch his improving-the-world-one-person-at-a-time vision and he is starting with those he is helping.

"Students are ... required to volunteer for community work when they go back home during the holidays. Some teach, while others mentor teenage orphans responsible for looking after younger siblings. But all of them have to give something back to their communities, furthering Mr Blecher's dream of healing South Africa. Often the first members of their families to go to university, graduates then step into a life that was previously out of reach. The former actuary points out that CIDA's graduates will collectively earn 150m rand in salaries this year, which by his calculations amounts to a net present value of 5 billion rand over their 40-year careers."

These students represent the a new cadre of people moving from poverty into what is becoming known as the lower middle class -- an economic group that is essential for sustaining economic growth in developing countries. There are fears, however, that Blecher's dream will die when he departs.

"Mr Blecher's odd mixture of new-age earnestness and hard work has made CIDA a beacon of hope, both at home and abroad. As well as adding further specialist courses, CIDA hopes to open new schools elsewhere in South Africa. But behind its success linger some concerns. CIDA remains intimately associated with its founder and chief executive, and there are questions about whether it would survive without him. ... CIDA's fast growth has overwhelmed its administrative systems. And although the specialist degrees are by most accounts excellent, some employers are said to have been disappointed by the general BBA graduates they have hired. The quality of education will need to improve if CIDA's degree is to compare with that of mainstream universities. There is no shortage of goodwill or ability within the school to sort these things out. But sorted out they must be, if CIDA is to live up to its inspiring vision."

With the reams of bad news coming out of Africa, it is refreshing to read about the good things that are happening there. Problems certainly remain, but a growing number of people are starting to see hope and opportunity where once only chaos and heartbreak could be found.

Recovering the Spoils of Corruption

I have written before about the negative effects that corruption has on struggling economies [for example see my post Corruption, Development-in-a-Box, and Global Resilience]. It's not just that corruption siphons off sorely needed resources into the bank accounts of nefarious political leaders and bureaucrats, corruption makes all government processes less efficient, the business climate less trustworthy, and chances for progress slight. The World Bank and the United Nations are now reported to be working together to help developing countries recover funds that been stolen as a result of corruption so that they can be properly invested in the country from which they were taken ["World Bank and U.N. to Help Poor Nations Recover Stolen Assets," by Warren Hoge, New York Times, 18 September 2007].

"The World Bank and the United Nations announced Monday that they were setting up a system to help developing nations recover assets stolen and sent abroad by corrupt leaders that amount to an estimated $40 billion a year. 'There should be no safe haven for those who steal from the poor,' Robert B. Zoellick, the bank’s president, said in presenting the plan with Secretary General Ban Ki-moon. Mr. Zoellick estimated that the overall cross-border flow of global proceeds from criminal activities, corruption and tax evasion was $1 trillion to $1.6 trillion annually, and said that even a small portion of that could provide financing for much-needed social programs. He said that every $100 million recovered could pay for immunizations for four million children, or provide water connections for 250,000 households, or finance treatment for a year for more than 600,000 people with H.I.V. and AIDS. The problem of stolen assets is most acute in Africa, where an estimated 25 percent of the gross national product of states is lost to corruption, he said."

Imagine the devastating effects that a 25 percent decline in America's GDP would have on it. As bad as that situation would be, the U.S. economy is highly resilient compared to those of most African states. That is why this new program is so important. The program is not aimed at recovering the money for the countries involved, but building up their capacities to track it down and provide the international backing they need to get it returned to national coffers.

"The new system will work to build the capacity of developing countries to track stolen money going overseas and to emphasize ways that financial centers can better detect and deter money laundering. 'This is not just a developing-country issue because the funds inevitably end up in developed countries,' said Danny Leipziger, the bank's vice president for poverty reduction and economic management. The bank intends to assist countries in devoting recovered money to proper development use 'to make sure it is not stolen twice,' Mr. Leipziger said. The program is being developed in partnership with the United Nations Office on Drugs and Crime, whose executive director, Antonio Maria Costa, said the initiative came at a time when the sophistication of financial transactions made recovery an increasingly complex process requiring expert assistance. Ngozi Okonjo-Iweala, the former finance minister of Nigeria, who oversaw the return of $505 million to her country from Switzerland, said the new plan would help countries like hers by denying corrupt officials a foreign place to hide the money. 'It means that people who are corrupt will know that any money sent out will be sent back to the countries from which they came,' she said. Ms. Okonjo-Iweala said that at the time that she was working to repatriate Nigerian money in 2005, the campaign had to be conducted with no international backing and did not produce timely results. 'There are some countries — I don’t want to name them — whose legislation only allows them to freeze the assets if they are discovered, and there is nothing that says they should repatriate them,' she said. That has changed since the United Nations Convention Against Corruption went into effect in December 2005, obliging countries that ratified it to cooperate."

The article concludes by noting that 98 countries still have not ratified that convention, including Canada, Germany, India, Israel, Italy, Japan and Switzerland. Hopefully, these countries will get on board and the new program will work well enough to discourage corrupt leaders and encourage those with integrity. The change is unlikely to happen overnight, but there are come encouraging signs. More on that in another post. According to the 2006 survey by the Berlin-based organization Transparency International, "Finland, Iceland, and New Zealand are perceived to be the world's least corrupt countries, and Haiti is perceived to be the most corrupt. The index defines corruption as the abuse of public office for private gain and measures the degree to which corruption is perceived to exist among a country's public officials and politicians. It is a composite index, drawing on 12 polls and surveys from 9 independent institutions, which gathered the opinions of businesspeople and country analysts. Only 163 of the world's 193 countries are included in the survey, due to an absence of reliable data from the remaining countries. The scores range from ten (squeaky clean) to zero (highly corrupt). A score of 5.0 is the number Transparency International considers the borderline figure distinguishing countries that do and do not have a serious corruption problem."

Not a single African country rises above the 5.0 level.

Country rank	Country	2006 CPI Score
1.	Finland	9.6
	Iceland	9.6
	New Zealand	9.6
4.	Denmark	9.5
5.	Singapore	9.4
6.	Sweden	9.2
7.	Switzerland	9.1
8.	Norway	8.8
9.	Australia	8.7
	Netherlands	8.7
11.	Austria	8.6
	Luxembourg	8.6
	United Kingdom	8.6
14.	Canada	8.5
15.	Hong Kong	8.3
16.	Germany	8.0
17.