The Egyptian government's Internet service blackout cost the economy somewhere around $90 million over five days, according to the Organization for Economic Cooperation and Development (OECD). How much would it cost your company if it happened in China? How would the company's manufacturing supply chain run, notify suppliers of changes, and alert logistics companies?
Although unconfirmed by the Chinese government, at least one law enforcement officer watching the flow of information across the Internet tells me China has been developing a self-sustaining Internet. Most supply chain executives doing business in the country know government-run companies and Chinese-friendly companies in and around China are favored. Not difficult to imagine, given the troubles Google (Nasdaq: GOOG) has faced in recent years and the strength Chinese search engine Baidu gained.
Long-term shifts in the global economy and changes in governmental infrastructures will put pressure on supply chains. Sixty-eight percent of global executives responding to a recent McKinsey survey said supply chain risks will increase in the coming five years.
A self-sustaining Internet would allow companies operating within China to continue in the event of a disruption but limit communication to the outside world. I'm not suggesting this will occur, but recent events in Egypt suggest the possibility, especially in an authoritarian country where companies require technology to run businesses and profits. It's not as likely for this to happen for those manufacturing in Vietnam or India, because these governments have not set up infrastructures like China's.
The Internet block in Egypt was lifted Wednesday, Feb. 2, but OECD estimates the daily loss to businesses at about $18 million. Telecommunications and Internet services account for between 3 percent and 4 percent of Egypt's GDP, according to a spokesperson for the OECD.
The spokesperson said one thing that struck organization officials about this outage has been its global impact. The Internet outage in Egypt affected customer service calls in New Zealand for mobile phone operator Vodafone, for example. He explains that Vodafone has a call center in Egypt with 180 staff that was unreachable when the Internet stayed down. They had to hire 100 new workers in New Zealand to handle their usual call volume.
The OECD warns that the long-term impact of the service disruption could become greater because the Egyptian government had cut off domestic and international high-tech firms that provide services globally, making it more difficult in the future to attract foreign companies and assure the network would remain a reliable business tool.
There had been workarounds -- not for email and business communications, but to disseminate information from within the country to those on the outside about the protests and unrest. Engineers from Twitter, along with Google and its newly acquired social company, SayNow, built a service that launched Monday. The speak-to-tweet service lets people post Twitter messages via a landline phone. Messages are tweeted using #egypt by leaving a voicemail on a Google-supplied international phone number.
Would your company be willing to spend the money to build a workaround in China? What does your redundant back-up plan look like? And are you ready for manufacturing and shipping prices to rise?
Looks like there many reasons for the internet to go down. From a government holding to power, through natural disasters to possibly terrorist attacks. Yes, we are relying on its functionality possibly too much and we need redundancy everywhere.
Nice article and thought provoking one. I feel this threat is real and might happen anytime soon.
I am sure Chinese government will be watching these developments keenly as repetation of Egypt like event happening in China is very high. If at all this event happes i think it will create havoc among global business community, as most of the goods is either produced in either China or India. I think this is where Advantage India comes into play. Manufacturing business will slowly shift from China to India.
As for back up plans, I don't think many companies have thought that this was a viable problem until now. The worldwide exposure and problems caused by Egypt have opened many peoples eyes. Most people are aware that China along with a few other countries police their internet. This is not surprising given these countries governments. It does concern me that China is talking about a self sustaining web. If they choose to segregate themselves, this would alienate large masses. With China being such a vital part to the world’s current economy, many investors are going to be left wondering about China’s future.
Alternative plans are necessary if companies want to keep products and services flowing through their supply chain.
Last week servers unrelated to the trading system on the NASDAQ in the U.S. were hijacked, the company that owns them confirmed Monday. People seem to think just because the Internet is always there it will remain there. The Secret Service and FBI are keeping the details quite because this is the not first time in recent months it has happened.
Disruptions in the Internet and Web sites are more common than most people think.
What I find striking are the implications of a Chinese self-sustained Internet. If true, it indicates to me China doesn't really intend to engage in the global economy the way other regions do. At the same time, they'd be "shooting themselves in the foot" to limit contact with their biggest customers--us.
As much I would love to say, "oh, you're being silly, this is something that'll never happen," etc.... the reality is that I really do think this is a valid concern.
To be honest, though, I do not currently have much of a backup plan for this situation.
I know, I know, that's really bad.
Obviously the worst case scenario is that China turns off outside Internet traffic for an extended period of time, but there are much more realistic and practical reasons for coming up with redundancy and building systems to workaround such a potential issue: I suppose we've been lucky with the reliability of International Internet service just in general. Even if China doesn't actively shut off outside access, who knows? A major cable could get accidently cut, there could be some sort of hacker attack, a sudden spike in activity could bog down servers, etc. Or what about wide-spread power outages in China due to a natural disaster or something like that?
It's very easy to think, "oh, the Internet connection will always be there" because it generally is.
As much as I don't want to, this is probably something supply chain professionals should spend more time thinking about.
I don’t know what US companies are doing for the workaround, but I think it is good.
We are trying to infer structure of the Chinese internet from unconfirmed reports. They need to do some guessing too. Giving away redundant communication plans defeats the purpose.
EBN Dialogue enables and encourages you to participate in live chats with notable leaders and luminaries. Not only editors and journalists, but the entire EBN community is able to comment and ask questions. Listed below are upcoming and archived chats.
Archived Dialogues
Thailand Stages a Comeback Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Euro-Crisis: What It Means for High-Tech Firms Join EBN Editor in Chief Bolaji Ojo and Contributing Editor Jennifer Baljko on Thursday, July 12, at 10:00 a.m. EDT for a Live Chat on high-tech and Europe's economic difficulties.
Microsoft Surface: Potential Winners & Losers What are the implications for the electronics industry supply chain of Microsoft Corp.'s decision to launch its own tablet PC? Join industry veteran and EE Times' systems and OEM expert Rick Merritt on Tuesday, July 3, at 12:00 pm EDT for a Live Chat on this subject.
Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Peter Drucker famously said "Trying to predict the future is like trying to drive down a country road at night with no lights while looking out the back window." Yet in the razor's-edge world of electronics—with a lean supply chain and just-in-time demands—the need to know the future is vital.
While no one really can accurately predict the future, we can take guidance from another Drucker saying which is the best way to predict the future is to create it.
You've heard the saying "the No. 1 supply chain risk is your people." That hasn't always been the case. But today's complex global supply chain requires a new type of multitalented employee. It's one who understands, finance, marketing, economics, is savvy with technology, graceful with relationships and can think analytically.
Where are these people? Are universities properly preparing the next generation supply chain professionals? How do train your existing workforce for these new, demanding positions?
Brian Fuller, editor-in-chief of EBN, will lead a 60-minute Avnet Velocity panel discussion that will ask and answer these and other questions swirling around today's supply-chain talent challenges.
To save this item to your list of favorite EBN content so you can find it later in your Profile page, click the "Save It" button next to the item.
If you found this interesting or useful, please use the links to the services below to share it with other readers. You will need a free account with each service to share an item via that service.
Tweet This