Managing Quality while Outsourcing: How much needs to be compromised? - Aseem Jain

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Anybody awake knows Moore's Law--or should. At a constant price point, computer chips get twice as good every 18 to 24 months. That's not exactly what Gordon Moore wrote in 1965 when he laid down his law. Physicists don't use words like "good." No, Moore was thinking about transistor densities on silicon chips. But during the 1980s, thanks to the amazing rise of the personal computer, Moore's Law took on a larger meaning. It became the symbol for exponential gains in technology. For example, I bought my first hard-disk drive in 1984. It stored 20 megabytes and cost $500. A few weeks ago I bought a disk drive that stores 2,000 times more data than my 1984 model did. Yet it costs only $399. Even better, Apple throws in the music player for free. It's my iPod, you see.

Moore's Law has a flip side. It goes like this: At a constant performance point, tech prices tend to drop 30% to 40% per year.

Recall the Intel 486 chip? It was blazing fast in 1987. It sported a premium price to match--$750--and ran PCs costing $4,000 (about $7,000 in today's dollars). Where are those 486-class chips today? They're running BlackBerrys, Treos and the like and sell for $25.

The flip side of Moore's Law is the reason China will surpass the U.S. next year in Internet users. This is what happens when decent PCs and handhelds can be had for less than $500.

Amid the piles of gushing words written about the Internet during the 1990s, I recall none about cheap tech's lifting poorer countries out of poverty. Now it's a fact, yet we're of two minds about this. We delight that so many lives are being improved, but we're not always thrilled with the sudden new competition. John...