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Emerging nations & competition

Posted by Michael Bloch in ecommerce (Tuesday May 2, 2006 )

Through their “World Ahead” program, Intel has announced plans to spend over 1 billion dollars over the next 5 years to provide computer hardware, training and online connectivity in emerging markets.

They’re not just talking dialup connections; but WiMax, which provides speedy broadband connections over long distances.

This is great news – there’s still so many people in our world not able to afford or have access to the web and I applaud Intel for their World Ahead initiative.

These newcomers will bring a wealth of added information and skills to our collective online experience.

There is also possibly a “downside”. I’m not stating this to be selfish or xenophobic, but it is a reality that we’ve seen occur before – and it’s really only a downside if you choose to view it that way.

It’s called competition :).

Bear in mind that many of these emerging nations won’t be shopping online with any real purchasing power for a long time to come – but they will quickly build up programming and webmaster skills, such is the nature of their existence which causes them to be extremely competitive and focused.

This will create increased pressure on Western programmers and developers in relation to their rates. It will also create more competition for online merchants and site owners for top organic (free) ranks in search engines as the new arrivals pick up optimization skills.

For example, let’s take on-site contextual advertising that pays the site owner X per click. The more traffic to the site, usually the more clicks on ads as they are relevant to the content.

While $10 a day in revenue may be nothing to us, that amount can amount to a day’s pay or more in many emerging nations. This makes search engine traffic worth competing *fiercely* for, hence more sites, more splogs (spam blogs) and similar. That’s not to say that there’s not Western sploggers around, there’s plenty of those too. :)

Online merchants in emerging nations will also have direct links to local suppliers and manufacturers in their countries. They will be able to source products much more cheaply, have slimmer profit margins and these savings will be passed on to online shoppers.

These sorts of issues were hotly debated topics amongst some aspiring web developers I was training some years ago; their fear of overseas outsourcing and certain countries rapidly making their online presence felt – and where it would leave them.

I encouraged them to think outside the box a little and to reinvent themselves. Sure, they could be replaced with a $5 per hour programmer, but there would always be a need for people to act as the go-betweens in projects – where West meets the rest :). Given their existing skills and knowledge of Western business and culture, they could co-ordinate entire teams of overseas programmers – and get the pay rates that they want. All it meant was learning more about the types of people they’d be working with – and relationships where you can learn are very easy to strike up online.

Since that time, outsourcing overseas has indeed become very popular, but some companies have also discovered that cultural, communication and work ethic differences have sometimes caused more headaches than the cheap labor was worth. They’ve then either returned to using local programmers or hiring co-ordinators who *understand* these outsourced overseas workers. Wheras they may have been able to complete a project with two local programmers previously, they might now have one programmer acting as a co-ordinator and two overseas programmers; yet they still save money.

Even though we’re going to see a lot more competition on the web in the years ahead from emerging nations, don’t see it so much as a threat, but an opportunity. Embrace these new arrivals, take them under your wing where you can, do business with them where you can and we’ll all be the better for it – just be prepared to make a few changes in what you considered to be your “patch” perhaps. Resistance and ostracization is futile :)

Thinking of outsourcing locally or overseas? Learn more.


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