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Four Fundamental Fuels of The Flight Offshore ...

Benefit From Gray Arrow Kaytek IT Offshore Consulting Insights

The Flight Offshore (as it is commonly called in the media) is fuelled by four fundamental, neither faltering, nor failing principles of the fast forward tech industry.

Most of us techies (both computing and communication guys and gals) would have heard of atleast three of these four principles.

(If we haven't, shame on us. Back to school.)

What are these ?

Ever Eternal (so far) principles devised by four far-sighted fellows - Moore's law, Gilder's law, Metcalfe's law and Coase's law.

Moore's law first.

It states that " Every 18-24 months, computing power doubles, while costs stay constant."

We as penny-pinching and dollar-demanding consumers have rejoiced at higher PC capabilities but lower PC prices every year.

Moore's law has prevailed persistently in the IT Computer Hardware industry for the past few years and will continue to do so.

George Gilder in his book 'Telecosm' formulated the second law - " Every 12 months, optical fiber bandwidth doubles" while talking of the 'Ubiquitous Interconnected Global Economy'.

An example. Right here in Mumbai (Bombay) a telecom company - Reliance Infocomm is planning to create the largest metro Voice / Data Broadband Ethernet Network in the world connecting upto a Million Commercial and Residential Buildings.

Similarly, the South Korean Government has set up a broadband application rich network for half a million small enterprises.

Global Telecom costs have crashed and will continue to go southwards in the near future. (Hey ! How come my home telephone bills are still so high ? Must ask my wife tonight (:-))

The third law is Metcalfe's law.

It states that "The utility of a network is equal to the square of the number of it's users." In dumb-dumber terms, it means, more the merrier. Come join the party !

It basically states that when any network is twice as large, it becomes four times more valuable.

It holds true for both voice (our telephone) networks and data (our computer) networks.

Our telephone conference call with two other people simultaneously, makes that connection nine times more valuable because all three of us can interact with each other independently.

Multiply the Maths Merrily !

The last and the fourth law is Coase's law.

This is maybe a tricky one.

It states " As transaction costs decrease, the complexity of the firm diminishes.

A firm tends to expand till the cost of organizing that extra transaction within the firm become equal to the cost of organizing the same transaction from the open market. "

In plain English, what it fundamentally states that if your colleague in the next cubicle is playing office politics with you and refusing to co-operate to meet common goals, the Net today gives you the option to search for a smartie somewhere outside your office walls who can help you meet that next payraise (and still look smart in front of the boss !)

This so far unknown law to many of us was highlighted by Don Tapscott in his book 'Digital Capital'.

It is also believed to be the foundation for the Open Source software movement driving the LINUX revolution.

Essentially, what do these four laws state ?

Phones, PC's and networks between them are becoming more powerful, cheaper and spreading globally at negligible costs.

Networks cause their own dynamics.

The last law dictates as to why in the earlier days, companies used to be vertically integrated, doing everything under the sun.

Today, that business model deserves to be in a dino-dump in Jurassic Park.

When the brain of unseen experts anywhere on the globe can be tapped much easily via just a PC and a phone call, why not leverage the same for mutual benefit ?

Are there further Laws shaping force beyond the above fours ?

Wait and watch !

Gray Arrow Email Us : Can we help in your Offshore Outsourcing Strategies ?

This article was first published as an Offshoring Weblog from India on a global technology knowledge sharing website.

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Updated on 8th January 2009
Posted on 17th February 2005

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