Tuesday, 4 April 2006

A shift towards the east?

Each year Fast Company magazine names the "Fast 50". These are the people who, in the magazine editors minds, are going to play a big part in shaping the future for us mere mortals.

However, when looking at the list there's a certain trend that can be spotted. There's a definite shift towards the east. Of the 2002 winners, most of them (46) come from the North Americas. Then there are 3 from Europe and 1 from Asia. In this years list the most still come from the US (44), but only 1 from Europe and 4 from Asia and 1 from Africa.

This may not seem like a big turn of events, but this could signal a change. More and more companies are outsourcing to India and China and it couldn't be less of a surprise to anyone who's been paying attention. India has one of the best educated people in the world and is turning out 3 times as many engineers a year then the US. And those engineers are willing to do their work (mainly because of the lower living standard) for a lower wage then their US or European counterparts. And although China doesn't have a well educated workforce like India, the cost of labor is extremely cheap so manufacturing can be done at low costs. Both countries are also catching up when it comes to technology. Put that together with already established technology juggernauts like Japan and South Korea and you have a region which is highly attractive for companies. People in that region are willing to work more for less money and are (in some parts) as well or better educated as people in the US or Europe.

And on top of that they're getting boosts from companies from Europe and the US. Microsoft, Cisco, and Intell will reportedly invest millions over the next couple of years. Dell experimented with moving their customer service to India (although, that wasn't a success). More and more companies are willing to invest into Asia. Not only that, some companies in the region are getting into new markets, producing luxury items for example. Chinese fashion house Shanghai Tang is a good example of that. Lenovo, another Chinese company, bought the PC division of IBM and by doing that became one of the biggest PC producers of the world. Another newcomer that's rising fast is Wipro Ltd, an Indian technology firm, who do research for companies like Ericsson and GM. The time that only cheaply build gadgets came from the pacific region are over.

So what will this mean for industries and companies in Europe and the US? It is certain that many production jobs will move east because of the lower labor costs, thus minimizing jobs for lesser educated people. Also R&D will move there because of the high level of engineers which are available. Which leaves what? Maybe it will become time to move towards a knowledge economy. Or maybe this will be one of those predictions I blogged about recently. However an economic shift is in progress. How it turns out is anybodies guess.

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