Is Muzimei Really the Internet Revolution?

Edward gets it exactly right. The changes wrought by the Internet in China are not confined to Muzimei, Hailey Xie, and Liu Di (the ‘stainless-steel mouse’) . The real and far reaching transformative implications of the Internet are occurring elsewhere, particularly in the capacity of companies to hire and connect people for low wages via better technology. Edward referred to this as the human version of Moore’s Law: but instead of transistors per integrated circuit doubling every couple of years, it’s now low paid employees connected to their employers and each other via broadband.

Don’t get me wrong. I read blogs from all over and am excited about the capacity of the Internet to connect us, expand our world, and change the way we communicate. I’ve taken a look at Muzimei. I relied on Chinese blogs for information about SARS when it hit the mainland. But there’s a whole other aspect to the Internet and I think it’s from there that the most change will emerge.

It’s been happening for a long time. Well before the Internet revolution, way back in the 1960s, US companies sent container loads of raw data to the Caribbean where operators punched holes in cards for massive mainframes. By the 1990s, as computer communication globalised the service sector, even the Caribbean had become too expensive and offshore back-office work (or these days ‘offshore business processing’ – OBP) started going elsewhere. Over a decade ago, a report funded by the World Bank stated that the Philippines had cornered the market on specific services and had 2,000 keystations producing over 100 billion keystrokes a year.” (It's grown since then: you can walk into warehouses in Manila these days with 3,000 employees punching in data). To the Philippines you now can add India, Bangladesh, Malaysia, Thailand, Cambodia, Korea, Vietnam, Mongolia, China. In fact, according to UNCTAD’s recently released E-Commerce and Development Report 2003, outsourcing of business operations via the internet could earn some of the world's poorest countries billions of dollars over the next few years.

Whether it’s abstracting and indexing, data capture and processing, data warehousing, electronic publishing, legal transcription, litigation support, mailing list management, medical records management, medical transcription, remote secretarial services, technical writing, telemarketing, teleservices, or web site design and management, OBP has meant a fundamental change in the way many places do business. As places like Barbados became too expensive, and countries like the Philippines got contracts to compile the computerised catalogue for the new national library in Paris, even China got in on the act. Although some OBP requires operators to comprehend English (medical transcription, for instance – a great deal of which goes to India), much does not. Thus with its low wage rates, China has been attracting English-language data where same text is “input separately by two or even three workers, and then automatically compared for errors.”

China has attracted other work too. The Hong Kong and Shanghai Banking Corporation (HSBC), the world’s 7th largest bank, has for example been shifting its customer transaction and data processing functions to locations where costs are a fraction of those borne in the London or Hong Kong offices. With centres already in Hyderabad and Bangalore catering to London business, HSBC recently expanded or opened data processing hubs in Guangzhou and Shanghai to service Hong Kong. Relocating from Hong Kong to Guangzhou provided savings in the order of 90% on the wages bill alone. Numerous other companies located in Hong Kong have moved data processing to the mainland (with most of the big banks like Standard Chartered and Hang Seng following HSBC). Shipping companies have followed (an acquaintance has spent the last year setting up a data inputting centre in Guangzhou for the Hong Kong office one of Japan’s largest shipping companies).

I attended a seminar last year in Bangkok on this and some interesting examples came up.

A Swiss-based company that develops smart credit cards outsources the work to programmers Vietnam (a rising star in the computer programming world (the number of overseas Vietnamese working in California’s Silicon Valley now ranks third, after Chinese and Indians).

A Singapore-based operator of charter flights in Asia contracts maintenance to a company in Vietnam. Technicians in Hanoi relay diagnostic information online to supervisors in Singapore who manage servicing remotely.

Bangkok has become the regional hub for 3-D animation. Large studios in the US outsource work to companies based there, as do advertising agencies.

Large amounts of drafting work are now completed offshore. Singapore architect firms have outsourced this work online for over a decade (much of it to China). One interesting case of CAD work involves a Finnish firm of architects working with a Spanish company to design shopping malls in Russia. Drafting work was outsourced to Hong Kong, from where it was bumped to Mongolia (presumably because staff there could read Russian).

IT-enabled technology has also profoundly changed the way goods are manufactured. Li & Fung is one of Hong Kong’s oldest and largest trading companies. It manages the logistics of producing and exporting private label consumer goods across many producers and countries. The catch is that it does so through a database of over 7,000 suppliers (most of which are in Asia, many in China). The logistics management entailed in taking the design and specs from San Francisco, bringing together the material, cotton, buttons and zips and then putting them together in three factories across Asia for a turnaround time of 45 days from the time of order only occurs by having the capacity to hire and connect people for low wages via better technology.

I love blogs, and the access to information in China and other parts of Asia is incredible. And I think we’re on the cusp of something large and exciting. But I also think that if we want to see where transformations are taking place online we need to look beyond Muzimei. Having said that, even I concede that reading about someone else’s sex life online is usually more interesting than tracing outsourcing chains.

Stephen Frost is a Research Fellow at the Southeast Asia Research Centre at the City University of Hong Kong and editor of Asian Labour News.