The World Is Flat (12 page)

We often forget that the software industry started out like a bad fire department. Imagine a city where every neighborhood had a different interface for connecting the fire hose to the hydrant. Everything was fine as long as your neighborhood fire department could handle your fire. But when a fire became too big, and the fire engines from the next neighborhood had to be called in, they were useless because they could not connect their hoses to your hydrants.

For the world to get flat, all your internal departments-sales, marketing, manufacturing, billing, and inventory-had to become interoperable, no matter what machines or software each of them was running. And for the world to get really flat, all your systems had to be interoperable with all the systems of any other company. That is, your sales department had to be connected to your supplier's inventory department and your supplier's inventory department had to be seamlessly connected to its supplier's supplier, which was a factory in China. That way, when you made a sale, an item was automatically shipped from your supplier's warehouse, and another item was automatically manufactured by your supplier's supplier, and a bill was generated from your billing department. The disparate computer systems and software applications of three distinctly different companies had to be seamlessly interoperable so that work could flow between them.

In the late 1990s, the software industry began to respond to what its consumers wanted. Technology companies, through much backroom wrangling and trial and error, started to forge more common Web-based standards, more integrated digital plumbing and protocols, so that anyone could fit his hose-his software applications-onto anyone else's hydrant.

This was a quiet revolution. Technically, what made it possible was the development of a new data description language, called XML, and its related transport protocol, called SOAP. IBM, Microsoft, and a host of other companies contributed to the development of both XML and SOAP, and both were subsequently ratified and popularized as the Internet standards. XML and SOAP created the technical foundation for software program-to-software program interaction, which was the foundation for Web-enabled work flow. They enabled digitized data, words, music, and photos to be exchanged between diverse software programs so that they could be shaped, designed, manipulated, edited, reedited, stored, published, and transported-without any regard to where people are physically sitting or what computing devices they are connecting through.

Once this technical foundation was in place, more and more people started writing work flow software programs for more and more different tasks. Wild Brain wanted programs to make animated films with a production team spread out around the world. Boeing wanted them so that its airplane factories in America could constantly resupply different airline customers with parts, through its computer ordering systems, no matter what country those orders came from. Doctors wanted them so that an X-ray taken in Bangor could be read in a hospital in Bangalore, without the doctor in Maine ever having to think about what computers that Indian hospital had. And Mom and Dad wanted them because they wanted their e-banking software, e-brokerage software, office e-mail, and spreadsheet software to all work off their home laptop and be able to interface with their office desktop. And once everyone's applications started to connect to everyone else's applications-which took several years and lot of technology and brainpower to make happen-work could not only flow like never before, but it could be chopped up and disaggregated like never before and sent to the four corners of the world. This meant that work could flow anywhere. Indeed, it was the ability to enable applications to speak to applications, not just people to speak to people, that would soon make outsourcing possible. Thanks to different kinds of Web services-work flow, said Craig Mundie, Microsoft's chief technology officer, “the industry created a global platform for a global workforce of people and computers.”

The vast network of underground plumbing that made it possible for all this work to flow has become quite extensive. It includes all the Internet protocols of the previous era, like TCP/IP and others, which made browsing and e-mail and Web sites possible. It includes newer tools, like XML and SOAP, which enabled Web applications to communicate with each other more seamlessly, and it includes software agents known as middleware, which serves as an intermediary between wildly diverse applications. The nexus of these technologies has been a huge boon to innovation and a huge reducer of friction between companies and applications. Instead of everyone trying to control the fire hydrant nozzle, they made all the nozzles and hoses the same, creating a much bigger market that stretched across every neig

hborhood of the world. Then companies started to compete instead over the quality of the hose, the pump, and the fire truck. That is, they competed over who could make the most useful and nifty applications. Said Joel Cawley, the head of IBM's strategic planning unit, “Standards don't eliminate innovation, they just allow you to focus it. They allow you to focus on where the real value lies, which is usually everything you can add above and around the standard.”

I found this out writing my last book. Once Microsoft Word got established as the global standard, work could flow between people on different continents much more easily, because we were all writing off the same screen with the same basic toolbar. When I was working on my first book, From Beirut to Jerusalem, in 1988,1 spent part of my year's leave in the Middle East and had to take notes with pen and paper, as it was the pre-laptop and pre-Microsoft Word era. When I wrote my second book, The Lexus and the Olive Tree, in 1998, I had to do some of the last-minute editing from the computer behind the front desk at a Swiss hotel in Davos on a German version of Microsoft Word. I could not understand a single word, a single command function, on the toolbar of the German version of Word. But by 1998, I was so familiar with the Word for Windows writing program, and where the various on-screen icons were, that I was able to point and click my way through the editing on the German version and type my corrections with the English letters on the German keyboard. Shared standards are a huge flattener, because they both force and empower more people to communicate and innovate over much wider platforms.

Another of my favorite examples of this is PayPal, which enabled eBay's e-commerce bazaar to become what it is today. PayPal is a money transfer system founded in 1998 to facilitate C2C (customer-to-customer) transactions, like a buyer and seller brought together by eBay. According to the Web site ecommerce-guide.com, using PayPal, anyone with an e-mail address can send money to anyone else with an e-mail address, whether the recipient has a PayPal account or not. PayPal doesn't even care whether a commercial transaction is taking place. If someone in the office is organizing a party for someone else and everyone needs to chip in, they can all do it using PayPal. In fact, the organizer can send everyone PayPal reminders by e-mail with clear instructions as to how to pay up. PayPal can accept money from the purchaser in one of three ways, notes ecommerce-guide.com: charging the purchaser's credit card for any transactions (payments), debiting a checking account for any payments, or deducting payments from a PayPal account established with a personal check. Payment recipients can use the money in their account for online purchases or payments, can receive the payment from PayPal by check, or can have PayPal directly deposit the money into a checking account. Setting up a PayPal account is simple. As a payer, all you have to do is to provide your name, your e-mail address, your credit card information, and your billing address for your credit card.

All of these interoperable banking and e-commerce functions flattened the Internet marketplace so radically that even eBay was taken by surprise. Before PayPal, explained eBay CEO Meg Whitman, “If I did business on eBay in 1999, the only way I could pay you as a buyer was with a check or money order, a paper-based system. There was no electronic way to send money, and you were too small a merchant to qualify for a credit card account. What PayPal did was enable people, individuals, to accept credit cards. I could pay you as an individual seller on eBay with a credit card. This really leveled the playing field and made commerce more frictionless.” In fact, it was so good that eBay bought PayPal, but not on the recommendation of its Wall Street investment bankers- on the recommendation of its users.

“We woke up one day,” said Whitman, “and found out that 20 percent of the people on eBay were saying, 'I accept PayPal, please pay me that way.' And we said, 'Who are these people and what are they doing?' At first we tried to fight them and launched our own service, called Billpoint. Finally, in July 2002, we were at [an] eBay Live [convention] and the drumbeat through the hall was deafening. Our community was telling us, 'Would you guys stop fighting? We want a standard-and by the way, we have picked the standard and it's called PayPal, and we know you guys at eBay would like it to be your [standard], but it's theirs.' And that is when we knew we had to buy the company, because it was the standard and it was not ours... It is the best acquisition we ever made.”

Here's how I just wrote the above section: I transferred my notes from the Meg Whitman phone interview from my Dell laptop to my Dell desktop, then fired up my DSL connection and double-clicked on AOL, where I used Google to find a Web site that could explain PayPal, which directed me to ecommerce-guide.com. I downloaded the definition from the ecommerce-guide.com Web site, which was written in some Internet font as a text file, and then called it up on Microsoft Word, which automatically transformed it into a Word document, which I could then use to write this section on my desktop. That is also work flow! And what is most important about it is not that I have these work flow tools; it is how many people in India, Russia, China, Brazil, and Timbuktu now have them as well-along with all the transmission pipes and protocols so they too can plug and play from anywhere.

Where is all this going? More and more work flow will be automated. In the coming phase of Web services-work flow, here is how you will make a dentist appointment: You will instruct your computer by voice to make an appointment. Your computer will automatically translate your voice into a digital instruction. It will automatically check your calendar against the available dates on your dentist's calendar and offer you three choices. You will click on the preferred date and hour. The week before your appointment, your dentist's calendar will automatically send you an e-mail reminding you of the appointment. The night before, you will get a computer-generated voice message by phone, also reminding of your appointment.

For work flow to reach this next stage, and the productivity enhancements it will deliver, “we need more and more common standards,” said IBM's strategic planner Cawley. “The first round of standards to emerge with the Internet were around basic data-how do you represent a number, how do you organize files, how do you display and store content, and how do you share and exchange information. That was the Netscape phase. Now a whole new set of standards is emerging to enable work flow. These are standards about how we do business work together. For example, when you apply for a mortgage, go to your closing, or buy a house, there are literally dozens of processes and data flows among many different companies. One bank may handle securing your approval, checking your credit, establishing your interest rates, and handling the closing-after which the loan almost immediately is sold to a different bank.”

The next level of standards, added Cawley, will be about automating all these processes, so they flow even more seamlessly together and can stimulate even more standards. We are already seeing standards emerging around payroll, e-commerce payment, and risk profiling, around how music and photos are digitally edited, and, most important, around how supply chains are connected. All of these standards, on top of the work flow software, help enable work to be broken apart, reassembled, and made to flow, without friction, back and forth between the most efficient producers. The diversity of applications that will automatically be able to interact with each other will be limited only by our imaginations.

The gains in productivity from this could be bigger than anything we have ever seen before.

“Work flow platforms are enabling us to do for the service industry what Henry Ford did for manufacturing,” said Jerry Rao, the entrepreneur doing accounting work for Americans from India. “We are taking apart each task and sending it around to whomever can do it best, and because we are doing it in a virtual environment, people need not be physically adjacent to each other, and then we are reassembling all the pieces back together at headquarters [or some other remote site]. This is not a trivial revolution. This is a major one. It allows for a boss to be somewhere and his employees to be someplace else.” These work flow software platforms, Jerry added, “enable you to create virtual global offices-not limited by either the boundaries of your office or your country-and to access talent sitting in different parts of the world and have them complete tasks that you need completed in real time. And so 24/7/365 we are all working. And all this has happened in the twinkling of an eye-the span of the last two or three years.”

Genesis: The Flat World Platform Emerges

We need to stop here and take stock, because at this point-the mid-1990s-the platform for the flattening of the world has started to emerge. First, the falling walls, the opening of Windows, the digitization of content, and the spreading of the Internet browser seamlessly connected people with people as never before. Then work flow software seamlessly connected applications to applications, so that people could manipulate all their digitized content, using computers and the Internet, as never before. When you add this unprecedented new level of people-to-people communication to all these Web-based application-to-application work flow programs, you end up with a whole new global platform for multiple forms of collaboration. This is the Genesis moment for the flattening of the world. This is when it started to take shape. It would take more time to converge and really become flat, but this is the moment when people started to feel that something was changing. Suddenly more people from more different places found that they could collaborate with more other people on more different kinds of work and share more different kinds of knowledge than ever before. “It is the creation of this platform, with these unique attributes, that is the truly important sustainable breakthrough that made what you call the flattening of the world possible,” said Microsoft's Craig Mundie.