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Carly Fiorina's Rough Ride - Part II

Wall Street Journal has published an interesting interview with Carly Fiorina .Carly talks about job cuts,Compaq, profit misses and tech's hard new reality. In Part 1, we covered Carly's views about the curent status of tech industry,and HP's approach in fostering growth. In this second and concluding part, we shall cover her views about problems being faced by HP, her approach towards management and HP's acquisition startegy. Excerpts ( with edits and my comments added):

On Why hasn't H-P been able to execute consistently? -" I've been pretty candid about the issues in our third quarter [when H-P missed financial forecasts, and fired three executives]. We had a set of systems migration issues [converting to software from SAP AG and other companies] in the U.S. Why did we think we could execute that one? Because we had executed 35 others just like that [in other countries]. We did 35 out of 35, and had issues with the 36th. We also had a set of issues over how to manage our indirect business [through resellers] in Europe, and some longer-standing issues about the number of sales specialists in the field around certain products. All of those issues came together in the third quarter, and came together when the economy had a little stutter step".[Over the last few years] we've missed two quarters in nine. I would rather be saying we hit nine out of nine, but it's important to keep it in perspective. The reality is, we have executed the integration better than most people thought it could be done.

On diverse product portfolio - I believe that every piece of the portfolio has to be competitive and healthy in its own right. We don't have this portfolio together to subsidize weak businesses with strong businesses. That's why we've said our PC business has to be competitive and profitable in its own right. [The unit currently is profitable.]
[With a large portfolio] we have much more opportunity for leverage. When we sell a naked [computer] box, our gross [profit] margin is far lower than when we sell a solution with software, hardware and services. We're providing more value to a customer, so we can drive more profit to the bottom line.Some people ask why we are both a consumer company and business-to-business company. I find that an interesting question because a lot of successful companies play in both -- in the banking industry, for instance -- and GE plays in both.If a business isn't healthy and competitive in its own right, you're not helping the value proposition. But we think we can get all parts of the portfolio profitable, and we're on a good path to do that.

On H-P not buying the consulting arm of PricewaterhouseCoopers before IBM bought it in 2002 - I don't regret my decision around PWC, and I actually made it eight times. I could have bought PWC at multiple price points between $18 billion and $3 billion. I had a meeting right in this office two weeks before IBM bought PWC for $3.5 billion, and I could've had them for $3 billion. I didn't make that decision because I believe the consulting industry broadly has a lot of transformation and consolidation left to do. It's a people business, and the reality is there are too many high-priced people in the wrong places. Customers don't want long projects with high-priced people.Our strategy is to narrow the focus of our consulting and integration business to those places where we have real expertise and intellectual property, so we can provide real value and make real money. We have deep expertise in the telecom industry and the manufacturing industry, for example, and we will partner with companies that we think complement our skills and capabilities.

On big layoffs coming at H-P - What we're doing now on an ongoing basis is making sure that we have the right number of people in the right places. So we're adding some people and taking some out of other places. The time of integration when we were taking out gobs of people -- that isn't how we need to do it anymore and it isn't how we're going to do it anymore.

About rumours that she is joining the republican party - "It's amazing to me in this information age that rumors still travel faster than fact. I was on Fox the other day and they threw up one I'd never heard before. They said, "We hear you're going to Disney." That was a new one! And no, I'm not doing that either".
Interesting - at the end of it, i am still not clear what HP counts for in the industry!!

Carly Fiorina's Rough Ride - Part 1

Wall Street Journal has published an interesting interview with Carly Fiorina . Carly talks about job cuts,Compaq, profit misses and tech's hard new reality. Part 1 Excerpts ( with edits and my comments added):

It's been a rough few years for technology companies. The Internet and telecom bubbles burst, provoking the steepest and longest decline in tech spending in decades. Then came a tepid recovery, which already appears to be losing steam. The 50-year-old Carly Fiorina has reshaped H-P since joining tech giant in 1999. First she centralized H-P's semi autonomous divisions. Then she staked her job on the contested $19 billion acquisition of Compaq Computer Corp., a move designed to turn H-P into a giant the size of industry behemoth International Business Machines Corp. The jury is still out on whether Ms. Fiorina's strategy is working. H-P's stock is down about 55% since her arrival, more than the 30% decline at IBM and 7% decline at Dell Inc. over the same period.This year has been particularly rocky for Ms. Fiorina. After H-P badly missed financial projections, analysts suggested she hire a chief operating officer or break up H-P's vast operations, which span printers, home and office personal computers, servers and services. Numerous high-level H-P executives departed under pressure. H-P recently reported solid fiscal fourth-quarter results but some employees are whispering that Ms. Fiorina may be the next to go -- perhaps for a career in Republican politics.

Carly's views on various issues around HP:

On the fact that technology become a utility-like industry, with permanently slower growth - "I think that the tech industry is going to grow at two times growth [in U.S. gross domestic product]. It was a five-times-GDP-growth industry in the late 1990s, and that was unsustainable. Now we've entered a period where tech is fundamental. When something becomes fundamental it involves a more important and complex set of decisions, so growth slows. By the way, two times GDP is an OK growth industry. But it's not what it used to be.I think there are changes that are yet to occur. The software industry still has some consolidation to go. [So does] the communication-technology side".

On How tech companies can manage this shift toward slower growth - We are focused on three pretty fundamental things.

- The first is that the focus on cost structure is ongoing and relentless. It's not a question of people tightening their belts once. It's a question of looking day in, day out at how do we get more efficient and effective. H-P, as an example, has had a discipline of outsourcing its manufacturing for 30 years. Now we apply that discipline to every part of our business.

- The second thing is: How do we grow our share of wallet with customers we already have? And in fact, that's a pretty big growth opportunity for us, and

- The third thing is: How do we grow new businesses by leveraging capabilities we already have? [Our new focus on] digital entertainment is an example of that. This is different from a rising tide lifts all boats, which is what the 1990s were like. People had the expectation that post-2001, that's what it was going to be like again. I don't think that's realistic in the tech industry anymore.

On falling HP stock prices - "There's no question that when we are inconsistent, that hurts us. But I think it's much more than that. When I came in to H-P in the latter half of 1999, this was a company that had missed nine quarters of earnings in a row in the middle of the biggest tech boom in history. We were growing at 2% to 3%. Even our vaunted imaging-and-printing group was earning less than half of what it is today. Then we announced the Compaq merger. Now we're in a period where we've integrated the company, and over the course of the last two and a half years, have produced $2 billion more in revenue than analysts estimated. But it hasn't been consistent performance quarter over quarter. So now we have to execute.

The New CIO Leader

Marianne Broadbent, Ellen Kitzis from Gartner,in their book, The New CIO Leader, provide a roadmap for the activities and results CIOs need to deliver to move from managing technology to leading a value creating IS organization. Two converging factors-the ubiquitous presence of technology in organizations and the recent technology downturn-have brought Chief Information Officers (CIOs) to a critical breaking point. They can seize the moment to leverage their expertise into a larger and more strategic role than ever before, or they can allow themselves to be relegated to the sideline function of "chief technology mechanic."
Based on working with hundreds of CIOs over the past six years, Kitzis and Broadbent concentrate on 10 actions that are characteristic of a CIO leader. Those are:

1) Lead -- get out in front of issues, creating solutions and contributing to the business.

2) Understand your environment -- as this sets the context for success and contribution

3) Create your vision -- have a view on the future and how you will realize it.

4) Shape and inform expectations -- they are the criteria by which results are really measured.

5) Create clear IT governance -- the way you make decisions determines the way you will create value

6) Weave together business and IT strategy -- the two must become one and build on each other

7) Build a new IS organizations -- one that recognizes the realities of sourcing and new technologies.

8) Build high performing IT teams -- they are the ones that deliver the results, you cannot do it alone for long

9) Manage IT risks -- these are increasingly business risks

10) Communicate performance -- measure where you are, what you've done and don't keep it a secret.

The book is written well and in easy to read format - a must read for all CIO's , aspiring CIO's and partners of professional service firms.

Economist - "lattenomics" scale

( Via Jeff Nolan ) Economist magazine has coined the term -"lattenomics",which shows whether currencies are at their "correct" level against the dollar by comparing the cost of a Starbucks tall latte around the world. The French capital now ranks as one of the most expensive cities in the world to buy a Starbucks coffee, with Bangkok qualifying as the cheapest, as the Thai currency is 31 per cent undervalued against the dollar . Starbucks,the café chain, whose green-and-white mermaid trademark is recognised in over 32 countries, has pursued a relentless overseas expansion policy recently after its near saturation of the US market began to undermine its ability to grind out new profits. This article talks about Starbucks plan to expand in Ireland. Last month Paris became the latest city to feature on what the Economist dubs its "lattenomics" scale( Very much like the Big Mac Index), which shows whether currencies are at their "correct" level against the dollar by comparing the cost of a Starbucks tall latte around the world. The French capital now ranks as one of the most expensive cities in the world to buy a Starbucks coffee, with Bangkok qualifying as the cheapest, as the Thai currency is 31 per cent undervalued against the dollar.

However, such rapid international recognition has come at a price, with anti-globalisation and anti-war protesters regularly targeting the company as a symbol of US cultural imperialism.

eBay Pulse

eBay's just launched eBay Pulse, kinda similar to Google's Zeitgeist, but listing what particular kinds of trade eBay buyers/Sellers are getting into this holiday season. There's also some nice looks at the highest priced and most watched items. A good starting point to start trend-watching on eBay trades.

The Googlization Of Enterprise Software - Say Goodbye To Offshoring

Business2 publishes an article by Erick Schonfeld wherein he says,
on-demand enterprise software is ready to take its next step: Automating thorny business processes. Excerpts from the article( with minor edits and my views added.)

As against outsourcing your business processes to offshore locations,soon enough you'll be outsourcing them to an on-demand software service instead. At least that's what Net mogul Halsey Minor is betting on with his personal $50 million On Demand Venture Fund.
Minor, who was at the right place at the right time when he founded CNET Networksin the mid-1990s, is now a big believer in on-demand software that is delivered as a subscription service over the Web. Grand Central is a software-integration service that acts as a central hub for IT folks who want to connect different enterprise applications together without paying consultants millions of dollars to do so. Instead they pay Minor per megabyte of data that runs across Grand Central. Minor is also an investor in Salesforce.com, which offers customer-relationship management software as a service over the Web in much the same manner. What these two enterprise-software businesses have in common is that their customers incur no up-front costs and pay only for what they use. Minor likens it to a utility or a railroad, hence his company's name.

While this notion of software delivered as a service is gaining in popularity, Minor's fund is focused on the next logical step: Web-based software that automates business processes. A business process can be anything from the way a company pays its bills to how it approves travel expenses to the procedures it follows for interacting with suppliers. Mundane stuff, maybe, but a multibillion-dollar industry of so-called business-process outsourcing has sprung up over the past few years to take these rote processes off the hands of corporate managers. These are tasks like processing insurance claims or expense accounts. Too often, though, these outsourcers are tempted to throw cheap, foreign labor at the problem instead of using technology to improve the way the processes are handled.
Web-based software platforms can change all that. Instead of merely letting customers tap into some enterprise software over the Web, startups now have the opportunity to translate specific business rules into software and automate large swaths of the outsourcing industry. "I am just waiting for the entrepreneurs," Minor says. He has three rules for considering a business pitch:

- The startup must aim to make companies or industries more efficient by automating a business process,
- The software must work using Grand Central, and
- The would-be founders must build a functioning prototype. (If Minor doesn't like your plan, one could try Emergence Capital Partners, another venture firm looking to invest $125 million in this area.)

The resulting businesses, Minor believes, will lead to "the Googlization of enterprise software." He means that, just as Google only gets paid per click for ads that appear on its website, business-process software customers should only have to pay for each successful transaction. "Pay per success," he says, "lines up exactly with the way businesses want to buy. If I pick up the phone and the call doesn't go through, I don't pay. If the plane does not leave, I don't pay." Why should enterprise software or outsourcing services be any different? Software-based outsourcing services could be built for any noncore business process in practically any industry. (Consider the possibilities in accounting, human resources, legal documentation, and procurement, to name a few.) Anyone who has expertise in a widely applicable business process should be translating it into Web-accessible software and beating down Minor's door with business plan in hand. Outsourcing to India or China won't stop.
But ultimately, technology arbitrage will trump labor arbitrage
. And the days of throwing bodies at these problems, when bits can handle them much more effectively, will go the way of the abacus.

Monday, November 29, 2004

Intel At CrossRoads

NYTimes reports that Failed Hopes and Other Tales From Inside Intel has put Intel at crossroads. Excerpts:

Intel recently admitted its failure to successful enter the digital television market and is withdrawing from this market segment. A.M.D. has been so successful in stealing the spotlight from Intel lately that Kevin B. Rollins, the president of one of Intel's biggest customers, Dell Computer, said at a financial conference call this month that Dell was considering adding computers with A.M.D. chips to its product line. For two decades, Intel has been the most sure-footed of Silicon Valley companies. But lately, it seems to have lost its way.This all portends an interesting inauguration for Intel's 50-year-old president, Paul S. Otellini, the longtime Intel marketing executive tapped by the board this month to become only the fourth chief executive in the company's history.
Mr. Otellini will tell analysts that he plans to focus on four areas for growth:
-international markets for desktop personal computers,
- mobile and wireless applications,
-the digital home,
-as well as a new initiative aimed at large corporate computing markets that Intel is calling the Digital Office.

The strategy is a significant shift - a "right-hand turn," as Mr. Otellini likes to say - from Intel's long-term obsession with making ever-faster computer chips. Instead, the company is now concentrating on what he calls platforms: complete systems aimed at both computing and consumer electronics markets.Mr. Otellini insists that the recent missteps, including the premature introduction he himself made of the digital project, are simply a result of over-optimistic marketing.
Intel is still a technology giant, the global leader in semiconductors, with revenue last year of more than $30 billion. The company retains an unrivaled manufacturing capacity, control of a powerful desktop computing standard, and an enviable international growth rate which shows no sign of slowing anytime soon.But some of the company's marketing problems may become more acute before they are resolved. Until recently, selling Intel chips was easy: faster was better. Now, Mr. Otellini said, Intel intends to play the same game with the number of processor cores that can be embedded on a chip. The hope is that by breaking problems into parts that can be computed by separate cores simultaneously, chips will continue to offer better performance.The problem with the strategy is that so far Intel is trailing A.M.D., I.B.M. and Sun Microsystems, who all have their own aggressive multicore chip strategies. To combat the inroads in the microprocessor market being made by A.M.D. and other competitors, Intel is moving to add a growing array of functions to its microprocessor chips, a strategy that Mr. Otelleni refers to awkwardly as the "platformization" of Intel.

Currently, the company has 10,000 software developers and its new chip sets each ship with over a million lines of software code, largely hidden from the user. The clearest example of that strategy to date is the Centrino microprocessor for portable computers, which comes bundled with wireless abilities. "We don't talk about the chip, but the collection of attributes that Intel brings," he said. "That's the footprint in the snow for Intel's future." The ability to add software functions to its chips is a genuine opportunity for Intel but it also raises the possibility that it will reignite some of the tensions the company has faced in its more than two-decade-old alliance with Microsoft, which has intensely resisted Intel's software efforts in the past. And the two companies are increasingly likely to compete both in Intel's efforts to enter the digital home and its new effort to embed software that provides greater manageability in systems sold to the corporate server market.

Mr. Otellini said that despite the defeat in the digital television business, Intel still has some big bets that it hopes will pay off as lucratively as the PC industry once did. One of those big bets came into sharper focus last month when it announced it was investing in Clearwire, a digital wireless start-up being led by Craig McCaw, a cellular telephone pioneer. Clearwire hopes to capitalize on the unproven long-range version of the WiFi digital wireless standard called Wi-Max and Mr. Otellini clearly hopes the technology will be a disruptive one.If his vision is correct, the big losers will be today's voice telephone companies."Voice is going to be free as a result of all of this, which the carriers don't like to hear, but that's essentially where it's going," he said.What is in it for Intel? A cellphone-like wireless handset that works seamlessly both inside and outside the home throughout an urban area.That is a market that could easily mitigate any number of missteps and blunders - potentially a market that would remake the cellular phone world that so far has largely eluded Intel."Any market of 600 million small computers is not just important, but it's critical to us," Mr. Otellini said. Clearly , we shall witness the dawn of the New Intel shortly - in a much more competitive world - Intel has successfully weathered such challenges in the past and we have to see how it moves forward.

The Ralph Revolution @ General Motors

George F.Colony writes,Believe it or not, General Motors is setting a revolutionary IT pace. Historically General Motors is perceived to be slow in its IT initiatives. Not any more. Excerpts from the article ( with slight edits with my added views) :

In the 1980s, Roger Smith @ General Motors had the bright idea of buying EDS and outsourcing GM's information technology to the company. By 1996, the numbers had gone way off the tracks. GM had the highest IT costs in the car business and was behind in engineering and design technology. Enter Ralph Szygenda, former CIO at Texas Instruments and Bell Atlantic. Against much advice, Ralph took the CIO job at GM. Most predicted that Ralph would last a year at the most, suffocated by the bureaucracy of GM and stiff-armed by the all-powerful outsourcer (and corporate sister) EDS.

We wrote about the changes happening in GM’s IT in JULY. Ralph staged a rebuild of GM that is just coming to fruition now. At the risk of oversimplifying what has been a large, complex effort, Ralph moved IT away from a technology focus to a process focus. If you think about it, the way companies make money is through process — simply stated, the way they do work. By focusing on process, Ralph got IT out of the technology-for-technology's-sake trap and into the business of using technology to improve how GM builds, markets, and finances vehicles. There was resistance from the GM culture. The company is organized into car brands — Buick, Chevrolet, et al. — and regions — Europe, Australia, etc. Since the time of Alfred Sloan, the way to the top of the company was to run one of these divisions and build an empire. So when Ralph said, "Hey, let's run a standard design process, manufacturing process, or supply chain across the company," the refrain was, "No, we do it differently at Cadillac or Saturn or in Europe." Ralph's comeback? "From where I sit, it looks like all of you are building cars and trucks — how different can the process be?"

So the Ralph Revolution didn't take hold until Rick Wagoner, the company's present CEO, came on the scene in 2000. Rick embraced the process focus and has been a strong advocate and participant (he's even taken on the role of the exec in charge of standardizing sales and marketing process across the company). Unlike other CIOs who Rick had worked with, Ralph spoke the language of the business (e.g., better supply chain), rather than techie jargonese.

FACTS on the impact: The company has taken $1 billion out of IT costs each year. It has taken significant cost out of its design process while doubling output. GM cars quality is not so bad anymore, with GM quality now exceeding DaimlerChrysler and Ford and rivaling Toyota and Nissan, according to J.D. Power. On the engineering front, the company recently designed a truck chassis completely in software (the company uses Unigraphics for CAD) and took it straight to production, without ever going through the expensive step of prototyping. The result: great ride, high crash-test scoring, low cost.Perhaps the biggest payoff has been enabling GM to be a truly global company, capable of quickly sharing design, process, and information across the world. While Toyota still has most of its design engineers in Japan, GM is able to get high output from its 19 design centers located all over the world. This capability enabled the company to transform its Daewoo product into the GM small car for all world markets. The process focus pervades all that Ralph touches. The EDS deal expires in 2006, so GM will be awarding outsourcing contracts worth $3 billion per year. To prepare for a new world of multiple outsourcers, GM is documenting 24 IT processes (e.g., change management and asset management) and will require all outsourcers to hew to these processes. This will make the outsourcers easier to manage, guarantee standard IT process across all of GM, and make it easier to plug-and-play outsourcers. Most important, it keeps GM in control.

What It Means No. 1: IT in many companies has become mistrusted, expensive overhead that's disconnected from the business. A Ralph Revolution that reorients IT away from technology and toward process can reverse that trend. Trust will follow, as well as promotions and recognition.

What It Means No. 2: Reality has caught up with the hype. As Ralph and team report, all of the promises of the Net revolution have finally been delivered, and they have made the revolution at GM possible. The Internet is not about selling books and CDs online — it's about making cars, pills, and jet engines more efficiently.

What It Means No. 3: The vendors lose one of their favorite weapons. Vendor CEOs love to run into large user shops like GM and start screaming about the newest technology — VoIP!! RFID!! — in the hopes of extracting dollars. When companies have a strong process orientation, they can ask simple questions: Will this new technology improve how we do our work? Will it improve our product quality? Will it improve customer satisfaction? If so, how?The Ralph Revolution is not over, and it is not fully proven.

If Szygenda walked out of GM today, there is some question as to whether the revolution would head forward with the energy and vigor that has propelled it to this point. And it's hard work — just ask one of the process information officers (PIOs) who are down in the trenches every day trying to keep GMers "on process." But get into a new Cadillac. The high quality and cool design have a lot to do with the IT organization and the revolution that Ralph has led at GM.

From Wikipedia To WikiNews

Wired reports about the recent foray of wikipeia creators into creating a new wiki based news platform.
After revolutionizing the way an encyclopedia can be built and maintained, the team behind Wikipedia is attempting to apply its collaborative information-gathering mode to journalism. Through a new effort, Wikinews, members of the open-source community who write and edit Wikipedia's encyclopedia entries are encouraged to test their skills as journalists. The news site follows a similar set of rules as the encyclopedia, which allows anyone to edit and post corrections to entries, so long as each change is recorded. The current rendition of Wikinews is an experimental version that, according to Wikipedia co-founder Jimmy Wales, offers just a taste of what's to come when the news effort builds momentum. Although Wikipedia already posts entries tied to current events, Wales said the Wikinews effort employs a different writing style and approach. "Wikipedia has always been very strong for background articles on things that are in the news," Wales said. "But on Wikinews, each story is to be written as a news story as opposed to an encyclopedia article." In an online vote that concluded Nov. 12, members of the Wikimedia Foundation, which operates Wikipedia, decided by a wide margin to support launching the news site, described on the project discussion board as an effort "to collaboratively report and summarize news on all subjects from a neutral point of view."Unlike Wikipedia, Wikinews will present original material rather than just compiling and summarizing information found elsewhere, according to the news site's organizers. For future submissions, organizers also want to set up a system for accrediting Wikinews reporters who have actively participated in the project. Both Wikinews and Wikipedia run on Wiki software, an application that allows users to collectively author web documents. Each page on the site contains an "edit" link, which users can click to edit passages created by other writers.

Wales believes the process of collaborative editing has allowed Wikipedia -- which contains more than 1 million entries in more than 75 languages -- to maintain a neutral tone on a wide variety of controversial topics. He expects the same process to prevent bias in Wikinews coverage."The incentive for behavior in a wiki is to write in such a way that your writing can survive," he said. "The only way it can survive is if your writing is acceptable to an extremely wide audience."
Alex Halavais, graduate director for the informatics school at the University at Buffalo, said that Wikinews has much in common with two other efforts at citizen journalism, Indymedia and South Korea's Ohmynews.

RFID : Science Fiction Vision To Reality

Express Computers publishes an article by Dr.Sanjay Sarma CTO of OATsystems. Dr Sarma writes, what would have been the stuff of science fiction, RFID or radio frequency identification technology is swiftly turning this vision into reality. Excerpts:

Imagine if your microwave oven could read the instructions on a packet of frozen food and cook it accordingly. Imagine sitting in your office and being able to track who is buying your product from the store, and even gauging the rate at which your product is selling. Once this would have been the stuff of science fiction, but RFID or radio frequency identification technology is swiftly turning this vision into reality. Although RFID technology has been around for at least three decades, it has come of age only in the last few years. New applications developed in American tech research labs, and supported by industry, have given RFID a new lease of life, spearheading a technology revolution that is changing the way global businesses monitor their supply chains and operations.

RFID technology is used to track everything from pets to airline baggage. It is also used to prevent store theft and counterfeiting. Some of the world's largest businesses and multinational corporations, including Wal-Mart, Gillette, Coca-Cola and Procter & Gamble, are developing plans to deploy solutions based on RFID to monitor their global supply chains. In fact Wal-Mart joined the Auto-ID Centre in 2001 in order to put industry's weight behind research. And last year the corporation mandated that its 100 top suppliers would have to send all products for RFID-tagging from 2005.As supply chains become global in nature'with materials being sourced in one country, manufactured in a second and sold in a third'time lags and distances often compound these inefficiencies. For instance, retail giants such as Wal-mart and Metro often have global supply chains, with the starting point in resource-rich developing countries like India. However, studies of the global retail industry have shown that up to 65 percent of inventory records in retail environments are wrong. In addition, products are out-of-stock approximately 10 percent of the time, resulting in 4-5 percent lost sales that's worth about $100 billion annually. On the other hand, too much inventory can result in billions of dollars of locked-up capital, high transportation costs, and other problems.
RFID-EPC technology can dramatically improve supply chain management efficiencies by providing real-time visibility into what's on the store shelves. Because RFID tags are unique, a product can be individually tracked as it moves from location to location. The vision of the EPC movement is to create near-perfect supply chain visibility, where businesses have the ability to track every item anywhere in the world securely and in real time. Using RFID-EPC, one will be able to count how much inventory there is on the store shelf, and other information unique to each product, such as its expiration date. RFID can therefore be utilised to build faster supply chains and improve the planning and execution process, all of which provide financial pay-offs.

Sunday, November 28, 2004

Comparing tool popularity on job search sites

(Via Scoble) Joe Martini points out to portal tool poularity through notified requriements in job search sites - Surrogate indicator of popularity at best!!. Too Often, sharepoint portal is seen to be a non starter, while Steve ballmer claims revenue of US400 Million product for Microsoft and claims that Sharepoint is one of the fastest products ever to get to that point for the company.

Cyberport and Hong Kong's Future

Dan Gilmor visits Hongkong and the much talked about Cyberport and files this interesting report. Excerpts(with slight edits and my comments at the end):

Too bad John Chu, this city's king of movie special effects, can't actually clone himself and his company. If he could make his digital magic work in the real world, perhaps he could turn a high-profile development called Cyberport into a huge hit. Planned as a miniature version of Silicon Valley, the often-maligned project isn't the abject failure some had predicted. But it's clearly not matching its backers' early visions, either, at least not so far. There was always a certain amount of wishful thinking in the Cyberport vision -- or, if the cynics are right, a different intention all along.Cyberport was conceived back in 1999, shortly before the technology stock bubble started to deflate. Hong Kong's government announced its intention to create a tech hub on prime land nestled along Hong Kong island, a dream setting where tech companies would thrive and provide economic fuel for a city facing big challenges in a new century. Hong Kong is a cartel economy, where key industries are controlled or at least strongly guided by the Li family and a few others and awarding this project to the family was crticised at inception. The multibillion-dollar Cyberport was planned from the start as a combination of office space and high-end housing, plus some glitzy stores. The office space is renting slowly. The luxury housing is selling like hotcakes. The government will own the office space, which isn't close to breaking even yet. Li's company will make big profits from the residential part, according to published reports, though the government shares in some of the proceeds as well.Most of the space in the first two office buildings is under lease to several dozen companies. One tenant is Microsoft, which also has space in Hong Kong's downtown area, called Central.

On a visit last week,to Cyberport 3, the third commercial phase of the project, one could find that most of the space is empty with silence in the middle of the day. But on the eighth floor of one part of the structure, the employees at Chu's Centro were working on a variety of special-effects and animation projects. The Plan is to move into new kinds of creative endeavors, including producing feature films entirely in-house rather than just working for others. Moving higher on the digital media value chain is what Hong Kong must do, said David Chung, Cyberport's senior manager for information technology operations, a few floors below in the Cyberport Digital Media Centre, a government-run operation that provides tools for developers working in audio, video, animation, games and other media.

Cyberport has some serious regional competition for digital media production and other office space. Singapore's government has poured resources into a media center. South Korea is becoming a hotbed of digital development. Shanghai has designs on the field, too. The bigger question is whether a government-sponsored project of this nature -- a "build it and they will come" scheme -- is a fundamentally flawed notion at the outset. Malaysia's "Multimedia Super Corridor" outside Kuala Lumpur hasn't exactly set the region on fire economically.It's way too early to predict such a fate for Cyberport. But few here will be surprised if it's ultimately better known for its luxury housing than its commercial space. In Hong Kong, residential development has a way of overshadowing other economic activities.The units in Cyberport's initial residential tower, Bel-Air, are said to be stunning, not least in views of the water and nearby islands. Oh, and they have super-fast Internet connections. Asian countries are mostly driven by government vision and what one government does, the neighbouring country tries to imitate killing viability - the winner is always one with efficiency in execution and one showing true business friendliness. Currently China , and earlier Japan, Taiwan and Korea could plan bigger and show some sucess. The much talked about India has no such ambition and happy with its creeked roads, choked airports, poor infrastructure that could get more worse when monsoon comes everytime - The net result is the same - Govt funded/conceived/run initiatives in emerging areas fail over time - some may show early success - but thats it. In emerging high-tech areas, it is entrepreneurism, innovation and unconventional way of working often helps enteprises/industry to hit the sucess mark. On a related note, this story (though not directly related) makes interesting reading.

eWeek : 2004 explosive for VoIP

In a nice rounup the prima donna of VoIP, Ellen Muraskin of eWeek, has a fast read recap of 2004 and VoIP developments in 2004. Excerpts from her article:

The major telecom vendors have pledged their compliance with the SIP (Session Initiation Protocol) signaling standard and continued on that road, with more and more beginning to implement the presence aspect of SIP into their phone systems. This meant that PBX players, large and small, either built or OEMed servers that integrated buddy-status-conscious instant messaging with voice and video calling.She calls into question the enterprise market and asks where the future lies drawing out the need for the ability to cross connect multiple networks. This would enable companies like Stealth Communications perfectly poised for this type of effort. It also means that technologies like MPLS from Cisco and others will be rolled out to maintain the QoS and deliver the services that already work in the PSTN/PBX world correctly.

One example is Caller ID. When a call originates from CallVantage line from an SBC landline or T-Mobile mobile phone all works perfectly. However, there are issues about call origin location details.Something as simple as how the signaling data moves will be important. US enteprises and by extension the world shall begin to embrace VoIP as these things are put in order.

Saturday, November 27, 2004

Israeli Intelligence And Innovation

Stacy Perman @800ceoread.com writes,Innovation is the lynchpin of business success. In the case of Israel, a nation that has been on a war-footing since it was established in 1948, it has also served as the foundation for its own defense and security. Here the military-intelligence complex plays a singularly exceptional role. With infinite challenges and threats and limited resources and manpower, Israel’s particular set of geopolitical and historical circumstances has shaped a very distinctive kind of innovative thinking and its military has in many respects become its most vivid expression. The Israel Defense Forces and a number of its elite technological intelligence units have become an enormous incubator for entrepreneurialsm, creativity and innovation. Daring missions of military and intelligence have become Israel’s calling card. Spilling over into the civilian world is the nation’s world-class high tech industry much of which was forged in Israeli’s unique military machinery. As the saying goes, business is like war and in Israel, that appears especially so. Excerpts from the book, Spies Inc.: Business Innovation from Israel's Masters of Espionage is available here .

Semantic Memory and Episodic Memory

( Via NovaSpivack)An interesting new brain study reveals processing differences between Semantic Memory and Episodic Memory in human brains. Nature performs these functions differently, and there is probably a good reason why that is so. On the Web we don't really have an equivalent of Episodic Memory or Semantic Memory yet... but we're working on it!Excerpts from the interesting article :

The Rotman Research Institute at Baycrest Centre for Geriatric Care reports that,
over a period of several months prior to the brain scan, volunteers documented dozens of unique events from their personal lives on a micro cassette recorder (episodic memories). At the same time, they recorded statements about personal facts of their lives (semantic memories). The researchers played these recordings back to the volunteers while their brains were being scanned with FMRI. A few brain imaging studies have already found differences in the brain between factual and episodic autobiographical memory. However, the participants in those studies were asked to recollect memories that were usually several years old, and it was impossible to tell how often they had been rehearsed over the years. This new study, on the other hand, used episodes from daily life that were only a few months old. The volunteers made dozens of event recordings within minutes or hours of the actual event. Only a fraction of these were selected at random for use in the study, so volunteers had no idea which ones they were until they heard them through the headphones in the scanner. The recordings created a very rich recollective experience, enabling scientists to tease out more easily the different brain regions associated with factual (semantic) and episodic autobiographical memories.

Legendary venture capitalist looks ahead

News.com interviews Don Valentine as the grandfather of Silicon Valley venture capital.Since founding Sequoia Capital in 1972, he's helped nurture some of the Valley's biggest successes, including Apple Computer, Cisco Systems, Electronic Arts and Oracle. In all Sequoia, which now manages a $3 billion fund, has helped start and finance more than 500 companies that include webvan and eToys. Excerpts from the interview:

- Nanotech is overhyped,probably in part because of the huge amount of technology press coverage of what is sort of a lab fascination with the chemical process. People don't talk about particular applications, like making Pentium chips 50 times faster or curing diabetes.

-What is phase two of Internet? - Phase II internet means - Now we're really into solid applications, problem solving and business. Look at how much advertising is moving to the Web portals. It's a reconstitution of the way Madison Avenue needs to play best.

- Computer industry's greatest challenge in the next three to five years - If you look at the personal-computing industry, only a fraction of the world has participated in this arena. I think it's a huge, huge unit market. Companies like Dell, Microsoft and Intel--they're the primary members of that environment. It's an unfortunate situation that only Intel and Microsoft really make money. The rest, with Dell as an exception, don't make any money. I think the challenge for Intel and Microsoft is to find some other platform in which to grow, other than the personal computer.

- VC view on the upheaval in the business-software industry - Things constantly evolve in capabilities and directions that didn't exist before. Why would software be any different? There will always be new ideas that large entrenched companies don't think of.

- On the claim by (Oracle CEO) Larry Ellison that the industry will consolidate around a few big players, namely Oracle, Microsoft, IBM and SAP? I'm in the Marc Andreesen camp against the Larry Ellison-Hasso Plattner camp. If you look at their offerings, neither has a flagship product in the customer relationship management market--10 years later. So I think they are like all big companies, filled and riddled with not-invented-here. They are unable to recognize innovation and they are very late to do what they claim they're going to do. DiCarta, iMany--there are all these small, flourishing companies started in late '90s that are doing very fine, thank you very much. That said, Oracle is interesting and one of my favorite companies. . But also, I'm a great admirer of the kind of raw-boned entrepreneur that Larry Ellison is. He is willing to speak out even if he's wrong occasionally.

- On SAP’s ability to dominate the global market - It's an interesting company, located intellectually in central Germany. It has the historic flexibility of the Teutonic character. They do it their way, and the customer has to do it and buy it the way they make it. They are a "do it my way or forget it" company and the prices are astronomically high. They're hard to do business with, and when in doubt they deal in FUD (fear, uncertainty and doubt). SAP is the noisiest non-participant in the business. However, the founders are largely out of that company. It will be interesting to see how or if they change with those guys gone. The same with Microsoft when Gates and Ballmer are gone.

- Which technology CEO most respected - Steve Jobs. Steve has managed to simultaneously run two entirely dissimilar companies--Pixar, and he is also running the resurging Apple Computer.

- Which company or technology is most underrated but has or will have a huge influence? - I've always been mystified by the critically important disc drive industry, without which the PC is a useless device. You have to be brilliant in electronics, you have to be brilliant in magnetics and you have to be brilliant in mechanics to get all that memory capacity in a very little place and do it for next to nothing. That market has never been rewarded financially for its brilliance. Yet the contribution is huge. Cell phones, handheld products, PCs...they all go nowhere without that fundamental storage capability.

- Lessons learnt from the dot-com bubble - Will we make mistakes again? Yes. But we'll make different mistakes. The people that started all those dot-com companies? That's over. Most people will remember not to make that mistake again. Nothing in silicon vallwy is revolutionary; it's evolutionary. Look the sequence of Intel microprocessors. It's all predictable. The nature of silicon and software and storage go hand in hand. In the case of software, you just have to be more clever about the nature of the application. So all these things kind of tick along, feeding off each other.

SAP Shall Be The Next CISCO -SAP's Moment(Part II)

In Part I , we saw that SAP is likely to dominate the enterprise software markets with a likely marketshare of around 70% shortly. In this second part of this series, The Road Ahead we shall see the actions to come form SAP and its future growth areas. Excerpts for the second part:

SAP, WITH A MARKET VALUE of $55 billion, was founded in 1972 by five former IBM executives in Germany, including the legendary programmer Hasso Plattner, who stepped down as co-CEO in May 2003. Kagermann has been running day-to-day operations for several years, and Plattner has compared his stepping down to a similar move by Microsoft Chairman Bill Gates, who relinquished his CEO title CEO to Steve Ballmer in 2000. Today, Plattner remains chairman of the supervisory board, a non-management advisory panel unique to German corporate structure. Kagermann, has certainly been taking notice of Ellison. In fact, Ellison's bold bid for PeopleSoft nearly pushed SAP into the arms of Microsoft. With consolidation suddenly a front-burner issue in software, it was only natural that SAP and Microsoft should consider hooking up. Both Kagermann and Ballmer acknowledged that the companies were in serious talks, but the SAP chief says those discussions have since gone cold."We...thought it was a good idea," Kagermann says of the proposed union. And it's easy to see why: With Microsoft dominating the desktop and creeping into the lower end of enterprise computing, and with SAP supplying the corporate behemoths, the two companies barely overlap and would have created an unfathomable force had they tied the knot.While SAP and Microsoft haven't gotten married, they appear to have moved in together, the two have tightened their business ties and increased their technical and product integrations. More than 60% of new SAP installations are on Microsoft's Windows operating system, and SAP supports certain Microsoft programming tools for developing next-generation applications. That adds up to some of the benefits of a merger without the disruption. SAP's greatest opportunity lies beyond Microsoft -- in a change taking place in the buying habits of corporate technology chiefs.

Many of them no longer have the patience, or lavish budgets, for the costly wares of smaller, more specialized competitors. And they want "fewer necks to choke" when technology malfunctions. A report on tech spending released last week by Goldman Sachs noted that businesses are "still in the upswing part of the trend toward fewer, larger vendors." SAP has been able to gain market share by steadily increasing the breadth and depth of its offerings. That's attracted new customers and given existing ones reasons to order more software. Some companies have shown their allegiance by ripping out their specialized "best of breed" applications and replacing them with comparable SAP offerings.

SAP has hired some 2,500 people this year to take advantage of the trend, boosting its total headcount by 9%, to more than 30,000. Although costly, larger sales teams could prompt customers to spend more. The company hopes to wean customers from its proprietary offering for clusters of linked personal computers, known as R3, and sell them on the benefits of its Web-enabled mySAP system -- which lets workers in different locations tap into their companies' various business-software applications via the Internet. By using mySAP, companies also can implement a larger assortment of SAP's latest business applications.The other big new product is NetWeaver, which is a stack of software built on an application server-plus, as Kagermann describes it. Application servers allow different applications, or software flavors, to talk to each other via the Internet. While most of SAP's products in the past were written in proprietary code, NetWeaver uses a more open code that works with software from other companies. For example, PeopleSoft human-resource applications can interact with SAP accounting software. NetWeaver also provides Internet portals for accessing information, and data-warehouse and "business-intelligence" capabilities for analyzing trends.The stronger sales from transitions to mySAP and installments of NetWeaver should lead to greater application sales to big corporations. SAP is also making inroads into the wide-open middle tier by launching more affordable solutions for small and mid-sized companies. In all, Goldman's Sherlund expects SAP to increase its global market share among the top five enterprise vendors to 64% by the end of this year. Other than Cisco in networking, the only tech outfit with that kind of market dominance is Microsoft.

SAP harnessed the energy of the dot-com boom to improve its products and make them more user-friendly. SAP's e-business solutions weren't always as good as the others, but they were good enough -- and they continued to get better with every new version, at a methodical, steady pace that is a trademark of the German software maker. SAP kept plugging away through the technology downturn of 2000 through 2002, continuing to improve and market its new initiatives. Today, SAP's customer-relations management software outsells the products of Siebel Systems, which pioneered such software nearly a decade ago. SAP also has taken the lead in supply-chain management and other functional specializations once considered beyond its domain. Some analysts contend that SAP needs to go on an acquisition binge in order to expand into fertile new areas, such as business intelligence and perhaps even security. But SAP is likely to resist mergers, as it has in the past, and concentrate on internal growth. This is a key cultural trait that will be closely watched as the industry lurches toward consolidation.

Jeff Nolan recently wrote after SAP announced its q3 results that SAP is one of the best managed technology companies in the world with over 128 quarters of financial results and only 1 of them in the red. Jeff adds,

- The SAP market share is greater than Oracle, Peoplesoft, Microsoft, and Siebel combined.

- The maintenance revenue, which is a staggering $907m for the quarter, up 10%. By the way, maintenance and license revenue don't necessarily move in lock step because not all maintenance agreements come due in the same period of time, so while license revenue was up 13% it should not be expected that maintenance rev would be up by the same amount. In fact, because of natural attrition with customers taking old products off maintenance, it's not unexpected to see maintance stay flat during a period. What the maintenance revenue indicates is that customers are seeing value in their maintenance relationship with SAP, and that the support products the company is providing are comprehensive. Too many software companies look at maintenance as the ATM of the business model, they just make sure they have telephone support covered and do a few patch releases to cover the bases and it's golden.

- The product lines continue to fire well (especially in CRM where SAP has overtaken Siebel (rolling 4 quarter share is now at 135% of Siebel's revenue), vertical market focus is working well, and finally new markets in the SMB sector are showing results. Combine all of the above with expense containment and the results are going to be good, in fact the operating margin actually increased 1% to 26% Indeed an impressive juggernaut,that the SAP engine is.

SAP Shall Be The Next CISCO -SAP's Moment(Part I)

Barrons magazine writes that SAP is likely to dominate the enteprise software market with a likely marketshare of around 70% shortly. Excerpts of the article to be published in two parts:

Henning Kagermann, chief executive of the German software giant SAP, on industry domination: "I think it is always a good position to be in." Good, indeed. SAP, with annual sales of nearly $10 billion, now accounts for a stunning 56% of the worldwide revenues of the top five players in business software -- and that figure looks headed to 70%. SAP has been grabbing market share hand over fist for sometime. SAP has positioned itself to thrive in a new era of Web-based computing, where corporate workers can exchange data across departmental, physical and geographical barriers. SAP's successes have lifted its stock nicely. They now trade at about 30 times estimated earnings for 2005, a premium of more than 25% to Oracle, Microsoft and some other competitors. But SAP may well be worth it. The fact is, Kagermann & Co. soon could hold sway over the corporate-software market to the same degree that Cisco Systems came to rule the Internet- router business in the 1990s. Cisco, after realizing it had become the preferred supplier of the most vital picks and shovels of the Internet gold rush, unleashed a sales and marketing blitz like few others, crushing the competition and becoming the predominant provider of networking gear.

The opportunity before SAP over the next two to three years is not very different. The overwhelming trend among corporations is to use fewer and fewer software providers to run all their main functions -- from payroll to manufacturing to customer relations. Once the client makes the decision that he has to consolidate with SAP or somebody else, 95% [of the time] we win," Kagermann says.As a result of such victories, SAP's licensing revenue, the key benchmark for software sales, jumped some 17% in the third quarter. And, even though the company has been spending heavily on product development, sales and marketing, profit margins are holding up well. Operating margins actually climbed in the third quarter, to 27% from 26% a year earlier. And SAP officials say 30% could be the norm in two or three years. Kagermann says,"The idea is first to look for market-share growth, And I think once we achieve this, [we'll] be sure to get a good margin." Margin growth, he added, "comes automatically" after market share, as incremental revenues pile up.

Challenges to SAP :– Many, SAP is heavily dependent on corporate tech spending, and that has been tepid lately. Some surveys show that outlays for this year will be up only 3% or 4%, no more than the economy as a whole. And 2005 may not be much brighter. SAP also must contend with the ever-rising value of the euro, which hurts profits since customers in the huge U.S. market pay in dollars. Finally, the company must shake the vestiges of a reputation for creating overly complex, difficult-to-use software. That image dogged SAP for years, and may be tough to bury for good.Kagermann appears to be handling all this adroitly. The company has been making enormous strides with its technology, winning accolades throughout techdom. "They've done an incredible job," says Marc Benioff, chief executive of Salesforce.com, which competes with SAP at the lower end of the business market. He goes so far as to hail Kagermann as "the smartest guy in software, except perhaps Bill Gates." Though not nearly as well known as Microsoft, SAP is unquestionably the first name in business, or enterprise, software. More than 24,000 companies around the world, including 49 of the 50 largest, use SAP software to manage their bookkeeping, supply chains, customer relationships, product planning and more. By contrast, Oracle, the No. 2 player in the enterprise field, serves just 13,000 companies. SAP also provides specialized systems for companies in more than 25 industries, from the oil patch to banking to the auto market. Stacked up against the makers of all types of software, SAP ranks No. 3, after Microsoft and Oracle (counting the latter's core database business, which is distinct from the enterprise market). And SAP is by far the biggest software maker based in Europe.
Right now, the company's most impressive growth is coming from the U.S. And SAP has told analysts it expects its U.S. share to surpass 50% reasonably soon and then head toward the company's global share. SAP may soon be the next Cisco, which now commands 70% to 80% of the router and switch businesses. Cisco split its shares eight times in the 'Nineties on the way to its current market capitalization of $130 billion.

(Part II Shall follow).

Good News About Poverty

NYTimes has come out with an article extolling the benefits of globalisation to the developing world -particularly in eradicating poverty, based on a recently releases WorldBank report. Excerpts from this well written article:

we're in the 11th month of the most prosperous year in human history. Last week, the World Bank released a report showing that global growth "accelerated sharply" this year to a rate of about 4 percent. Best of all, the poorer nations are leading the way. Some rich countries, like the U.S. and Japan, are doing well, but the developing world is leading this economic surge. Developing countries are seeing their economies expand by 6.1 percent this year - an unprecedented rate - and, even if you take China, India and Russia out of the equation, developing world growth is still around 5 percent. As even the cautious folks at the World Bank note, all developing regions are growing faster this decade than they did in the 1980's and 90's.

This is having a wonderful effect on world poverty, because when regions grow, that growth is shared up and down the income ladder. In its report, the World Bank notes that economic growth is producing a "spectacular" decline in poverty in East and South Asia. In 1990, there were roughly 472 million people in the East Asia and Pacific region living on less than $1 a day. By 2001, there were 271 million living in extreme poverty, and by 2015, at current projections, there will only be 19 million people living under those conditions. Less dramatic declines in extreme poverty have been noted around the developing world, with the vital exception of sub-Saharan Africa. It now seems quite possible that we will meet the United Nations' Millennium Development Goals, which were set a few years ago: the number of people living in extreme poverty will be cut in half by the year 2015. As Martin Wolf of The Financial Times wrote in his recent book, "Why Globalization Works": "Never before have so many people - or so large a proportion of the world's population - enjoyed such large rises in their standard of living."

As other research confirms, these rapid improvements at the bottom of the income ladder are contributing to and correlating with declines in illiteracy, child labor rates and fertility rates. The growth in the world's poorer regions also supports the argument that we are seeing a drop in global inequality. Globalization explains the progress being made.. Over the past decades, many nations have undertaken structural reforms to lower trade barriers, shore up property rights and free economic activity. International trade is surging. The poor nations that opened themselves up to trade, investment and those evil multinational corporations saw the sharpest poverty declines. Free trade reduces world suffering. It's worth reminding ourselves that the key task ahead is spreading the benefits of globalization to Africa and the Middle East. It's worth noting this perhaps not too surprising phenomenon: As free trade improves the lives of people in poor countries, it is viewed with suspicion by more people in rich countries.

Friday, November 26, 2004

Predictions For The Integration Market For 2005

Integration Consortium releases the Predictions for integration trends for year 2005. we recently covered the transition happening Move Over EAI, Move In WebServices, explaining the shift in trend from pure play EAI to webservices. Excerpts:

Four key areas of focus for the year ahead feature in this forecast - Service oriented architecture (SOA), the battle for Enterprise Service Bus (ESB) market share, the package vendors’ struggle with their integration strategies and the drawing together of business intelligence and business integration.

Trend 1 - the move of service-oriented architecture (SOA) from concept to reality. SOAs demonstrate a method of building software infrastructures where IT components are gathered into ‘loosely-coupled’ business services that can be invoked without knowledge of where they will run or on what technology base. The value of an SOA stems from the fact that it enables reuse and introduces the ability to combine services together to underpin new business processes. The result is that business operations can be changed faster, more cheaply and with less risk. 2005 will see an increasing number of SOA deployments, as more and more companies start to comprehend an SOA’s impressive advantage. SOAs are not new – the basic concepts have been around for ten years. However a combination of technologies has added considerable momentum to SOAs, namely web services and the enterprise service bus (ESB).

Trend 2 - 2005 will see package vendors struggling over their integration strategies. Web services was seen by many end users as the ideal interface to services offered by application packages, increasing the leverage from the investment in the package in question. There was a hope that package vendors would offer web service interfaces to all their processes, but this did not meet with overwhelming approval from the package vendor community. 2005 should see a lot more clarification in this area as key vendors announce their intentions.

Trend 3 - the struggle between vendors of ESBs and those of traditional Enterprise Application Integration. The ESB concept has been widely accepted over this past year, with new ESB providers gaining traction within the industry. The battle will now take place between incumbent vendors in the space who will not give up any part of their market shares without a fight, and as a result the majority of these companies have now introduced their own ESB offerings. The outcome is an increase in market conflict which will become increasingly aggressive in 2005. Market churn may result, with some of the smaller members being acquired, but in the final analysis it is likely to be excellent news for integration software buyers – ESBs are typically cheaper than traditional EAI implementations and this will have the effect of bringing down prices in the industry.

Trend 4 - 2005 shall see the worlds of business integration and business intelligence draw much closer together. Already the concept of BAM (Business Activity Management) allows key performance indicators to be set within integrated environments to give management some business performance-based control of operations, but this is only the tip of the iceberg.

The market is now realising that by combining the sophisticated techniques of the business intelligence market with business process integration, it should become possible to build a new generation of ‘smart’ business services that become increasingly able to automatically and iteratively change the way that they operate based on business intelligence information. Vendors are working to bring these technologies together, and 2005 should see the emergence of early projects where this combination dramatically improves business agility and effectiveness against competition.”

Michael Kuhbock, Founder and Co Chairman of the IC adds: “Key areas that will influence the integration industry in 2005 include;
- a clearer understanding of Sarbanes Oxley (SOX) and how integration facilitates compliance,
- a broader adoption and the refinement of RFID technology, the evolution of business/IT alignment as it relates to enterprise integration strategy and communication,
-the continued development of global integration standards, and the advancement of the Global Integration Framework (GIF).” The Integration Market shall see a huge surge in the Year 2005 - This shall assume centerstage in the IT Landscape in enteprises.

"The China Price"

Businessweek writes, A massive shift in economic power is under way due to chinese manufacturing prowess affecting US industry competitiveness. Excerpts from a well written article:

When the U.S.-China Economic & Security Review Commission, a congressionally appointed panel, convened on Sept. 23, it was not to discuss power but decline. One after another, economists, union officials, and small manufacturers took the microphone to describe the devastation Chinese competitors are inflicting on U.S. industries, from kitchenware and car tires to electronic circuit boards.We have faced competition in the past. What is dramatically different about China is that they are about half the price.

"The China price." They are the three scariest words in U.S. industry. In general, it means 30% to 50% less than what you can possibly make something for in the U.S. In the worst cases, it means below your cost of materials. Makers of apparel, footware, electric appliances, and plastics products, which have been shutting U.S. factories for decades, know well the futility of trying to match the China price. It has been a big factor in the loss of 2.7 million manufacturing jobs since 2000. Meanwhile, America's deficit with China keeps soaring to new records. It is likely to pass $150 billion this year. Now, manufacturers and workers who never thought they had to worry about the China price are confronting the new math of the mainland. These companies had once held their own against imports mostly because their businesses required advanced skills, heavy investment, and proximity to customers. Many of these companies are in the small-to-midsize sector, which makes up 37% of U.S. manufacturing. The China price is even being felt in high tech. Chinese exports of advanced networking gear, still at a low level, are already affecting prices. And there's talk by some that China could eventually become a major car exporter.

Multinationals have accelerated the mainland's industrialization by shifting production there, and midsize companies that can are following suit. The alternative is to stay at home and fight -- and probably lose. Ohio State University business professor Oded Shenkar, author of the new book The Chinese Century, hears many war stories from local companies. He gives it to them straight: "If you still make anything labor intensive, get out now rather than bleed to death. Shaving 5% here and there won't work." Chinese producers can make the same adjustments. "You need an entirely new business model to compete." America has survived import waves before, from Japan, South Korea, and Mexico. And it has lived with China for two decades. But something very different is happening. The assumption has long been that the U.S. and other industrialized nations will keep leading in knowledge-intensive industries while developing nations focus on lower-skill sectors. That's now open to debate. "What is stunning about China is that for the first time we have a huge, poor country that can compete both with very low wages and in high tech," says Harvard University economist Richard B. Freeman. "Combine the two, and America has a problem."

By outsourcing components and hardware from China, U.S. companies have sharply boosted their return on capital. China's trade barriers continue to come down, part of its agreement to enter the World Trade Organization in 2001. Big new opportunities will emerge for U.S. insurers, banks, and retailers. China's surging demand for raw materials and commodities has driven prices up worldwide, creating a windfall for U.S. steelmakers, miners, and lumber companies. The cheap cost of Chinese goods has kept inflation low in the U.S. and fueled a consumer boom that helped America weather a recession and kept global growth on track.

But there's a huge cost to the China relationship, too. Foremost is the question of America's huge trade deficit, of which China is the largest and fastest-growing part. While U.S. consumers binge on Chinese-made goods, the U.S. balance-of-payments deficit is nearing a record 6% of gross domestic product. The trade shortfall -- coupled with the U.S. budget deficit -- is driving the dollar ever downward, raising fears that cracks will appear in the global financial system. We earlier wrote about this and its impact on the US economy in the article Stephen Roach Predicts Economic Armaggedon. By keeping its currency pegged to the greenback at a level analysts see as undervalued, China amplifies the problem.

On a practical level the U.S. is now so dependent on Chinese suppliers that resurrecting trade barriers would just raise costs and diminish the real benefits that China trade confers. Also, unlike Japan 20 years ago, China is a much more open economy. It continues to lower tariffs and even runs a slight trade deficit with the whole world -- which makes the U.S.'s deficit with China all the more glaring. China's low wages are reflected in the entire supply chain -- components, office workers, cargo handling -- you name it. Can China dominate everything? Of course not. America remains the world's biggest manufacturer, producing 75% of what it consumes, though that's down from 90% in the mid-'90s. Industries requiring huge R&D budgets and capital investment, such as aerospace, pharmaceuticals, and cars, still have strong bases in the U.S. "I don't see China becoming a major car exporter in the foreseeable future," says GM China (GM ) Chairman Philip F. Murtaugh. "There is no economic rationale." Murtaugh cites high production costs and quality issues at Chinese car plants, as well as just-in-time delivery needs in the West, as impediments.

The eBay Way -On Philantrophy

Businessweek writes about Pierre Omidyar unique approach towards philantrophy. We earlier covered in this blog -Paul Allens article on perptual philantrophists, where he wrote about,Pierre Omidyar,founder of eBay,who in 2002 publicly said he would give away 99% of his wealth over the next 20 years, much of it to the Omidyar Foundation. Excerpts from the Businessweek article :

After becoming one of the richest 31-year-olds in history, eBay Inc founder Pierre Omidyar cleared out his cubicle, sold his modest home, and set off for his native Paris with his wife, Pam. It was a change born partly of the Omidyars' need to escape Silicon Valley's bubble frenzy of 1999, when they got mobbed at cocktail parties and endlessly hit on by business-plan-pushing MBAs. The Omidyars had already vowed to give away virtually all their wealth. The next part was harder: how to spend their billions and have an impact as immense as eBay's.

Omidyar's thoughts about his philanthropy have matured , Just as his vision of the perfect marketplace revolutionized commerce, so too are his ideas about philanthropy likely to disrupt the rules of traditional giving. Omidyar is at the forefront of a new trend that is starting to blur the old church-state divisions between the for-profit and non-profit worlds, creating structural shifts that could lead to a new, hybrid philanthropy. The Omidyar Network would house both a foundation and an arm that would also invest in for-profit companies. All the money made from the stakes in those companies -- chosen by Omidyar and his team of due-diligence specialists for their emphasis on open information, giving power to the little guy, and fostering social capital -- would flow back into the investing arm to leverage into yet more charitable giving. In many ways, Omidyar is the anomaly among BusinessWeek's Top 50 givers. Philanthropists like Bill Gates, Gordon Moore, and Michael Dell went beyond old-school giving, where you give your money to a foundation, which then doles it out for you. Instead, the new superphilanthropists applied the same brilliance that built their businesses to their philanthropic causes. They are deep on vision and heavily hands-on.

Omidyar is pioneering a third way, a philanthropy that's fanatically bottom-up. It's anti-vision. Anti-dictate. And, in a sense, Omidyar isn't even choosing how his $10 billion is given away -- or to what causes it goes. He wants you to do that. How? For starters, there's omidyar.net, where Pierre and Pam recently opened up a conversation with the world to discuss the direction of their philanthropy. People already engaged in solving social problems know a lot more about how to fix them, they figure, than a cloistered elite ever could.Secondly, the foundation arm of the Omidyar Network, which still hands out the vast bulk of the money, focuses on grants to individuals who are already creating social change through their nonprofits. The critical tool of these mostly smallish groups is the Internet, which enables people to take tiny ideas and give them a global launch, in much the same way Omidyar created what fans call the "first truly democratic marketplace" after selling, among other things, his broken laser pointer online.

By taking out the middleman and shifting decision-making power from experts to practitioners, Omidyar believes something more efficient and innovative -- and with a far bigger impact -- will happen. With conventional giving, whether it be to the Red Cross, United Way, or small local charities -- once you write your check, you're often clueless as to any particular outcome achieved. What's unique about Omidyar's projects is that, like eBay, there's often a transparent system in place that allows donors to monitor where their money goes and who receives it.

Technology in Turmoil

David Kirkpatrick , writes in Fortune that the Technology Industry Is In Turmoil. Excerpts from this interesting article:

Microsoft and Sun face open source, Intel seems weakened, outsourcing threatens services players—these are just a few of the recent shifts in the firmament.
The technology business is in a state of turmoil that was unimaginable just a couple of years ago. Industry icons are under threat, market leaders are at risk, and the whole pantheon of tech greats seems to be under renovation. Microsoft is struggling to justify its business model in the face of an open-source onslaught. The newly released open source Firefox shows continued signs of taking market share from Microsoft in the critical browser business - potentially the software giant's most valuable chokepoint. Firefox gained another couple points of market share just in the last few weeks—giving it something like 8% to 9% of the total market. Intel, the other duopoly partner at the top of the industry, also seems suddenly weakened. AMD stock has risen about 70% since it was published. Dell CEO Kevin Rollins has made unprecedentedly friendly remarks about the possibility the PC-maker may soon use AMD chips. And by inking a deal with giant chip-fabricator Chartered Semiconductor Manufacturing, AMD has ensured it will have enough of its impressive new 64-bit chips for almost any conceivable burst of demand. AMD has surged exactly as Intel has stumbled.

Then look at Sun—it wasn't long ago that everyone assumed the company was toast. Now nobody seems sure either way. What does it mean that Sun is making its crown jewel, the Solaris operating system, open source? It could certainly make governments in the ever-more-important developing countries more amenable to using the software. They love Linux because they can see exactly what they're getting. Now with Solaris, they can get the same thing with an industrial-strength operating system. And Sun, which was a proprietary hardware company only yesterday it seems, is now one of AMD's most important allies. To complicate matters further, there's that fascinating and yet-unexplained Sun-Microsoft alliance.

Then over in the enterprise software business, dogged little Salesforce.com continues to define an entirely new approach to using technology—so customers can merely think of what they're getting as functionality. Who cares if it's called software or not? Scores of other companies are more quietly proving the same thing.. But it's all bad news for the incumbents—Siebel, PeopleSoft, Oracle, and yes, even SAP. It lends additional surreality to the endless saga of PeopleSoft-Oracle. In services, the new globalized business model pursued by companies like Infosys pose gigantic threats to incumbent services players, particularly those that aren't sufficiently diversified, like Cap Gemini, Ernst & Young, EDS, and Accenture. As Infosys CEO Nandan Nilekani asks, how will these players compete in a world where their customers have the option of vastly lower prices for comparable services from Indian companies? How quickly can they shift their own employee base to the lower-cost model?

Sure, some long-time industry stars are unmoved, or even higher in the sky. Dell, for instance. Cisco, for another, even though smaller rivals Juniper and Huawei both look feisty. There's enough business in networking for everyone,perhaps. And IBM seems to be weathering the shifts fairly deftly, considering its vast scale. In many ways the changes we're seeing across the industry conform to one of the bedrock early assumptions of the Internet age—that power would flow from the big to the small. Tthe giants, can't be written off though. These companies have survived amazing trials before.The HighTech industry looking interesting!

Newspapers Should Worry

Adam Penenberg writes in the Wired magazine that Newspapapers may not have any future in the emerging digital world. Excerpts:

Publishers of newspapers and magazines like to corral readers when they're young. If you can shape kids' info-seeking habits when they're in their teens or twenties, so the thinking goes, you'll nab them for life. Because brand loyalty isn't just about offering the best product for the best price, as it is with, say, minivans or socket wrenches. It's also about image: Are you a New York Times guy or a Washington Post aficionado? Do you read The Wall Street Journal, The Economist or Fortune? Do you subscribe to Newsweek or Time? Is Wired more than the way you feel after a double espresso at Starbucks? Your choice says a lot about you.

Young people reload various RSS subscriptions and spends a half-hour reading stories or blogging on their own, "so that people who use one as a content aggregator can get their news fix."As news-reader (programs) improve and become more widely used, adding the sort of auto-filtering and smart-sorting capabilities of a decent e-mail client, their popularity will snowball.It ia also predicted that print media, which the younger generation has largely rejected in favor of digital dissemination of news, will die off within 30 years, "when the dead-tree readers will die off." What this world will look like is anyone's guess, but it probably won't include The Washington Post thudding on anyone's doorstep at 5 in the morning.

Outsourcers Lose Luster -Part II

Informationweek has published the annual outsourcing survey results. We covered in Part I the rankings of Delloite Consulting,IBM,EDS,HP etc. In this second part, we shall cover the role of India headquartered software companies besides other global big players. Excerpts from this important survey:

It may be no coincidence that there's something of an inverse relationship between a service provider's market share and customer satisfaction. ACS is the fifth-largest U.S. outsourcer by revenue; IBM and EDS rank first and second. They simply may be getting too big. "Meeting service levels becomes a challenge as you get bigger," says Atul Vashistha, CEO of outsourcing advisory firm NeoIT. Part of the problem for the big vendors is finding enough qualified staffers to meet service obligations, Vashistha says.

About a quarter of IT services spending among survey respondents went offshore to low-cost locations such as India, or near shore to Canada and Mexico. Some outsourcing business went to far-flung operations of U.S. companies. Accenture, for instance, provides Dynegy with application-development services in India. Moffitt likes the cost savings, but he concedes that the time and cultural differences present management challenges. "It does increase complexity," he says.Offshore providers hardly represent a panacea. The three Indian companies in our survey-Infosys Technologies, Tata Consultancy Services, and Wipro Technologies-all ranked in the lower half of the results. Offshore service providers are generally perceived as offering the best price because they can draw upon an inexpensive labor pool, but only Tata received a notably high score (7.0) for value. Outsourcing isn't always done at the expense of IT jobs. Nearly a third of the organizations surveyed increased IT jobs in the past year, even though they outsourced some work. Many businesses farm out technology work because their own staffs are working at full capacity. Ceridian Canada hasn't reduced its IT head count since striking its deal with IBM. Rather, the company turned to the service provider as a means to launch quickly a new project with skills it lacked in-house. "We wanted to get to market quickly because we knew a competitor was coming out with something similar," Clement says.

Outsourcers Meeting Expectations - By far the largest number of survey respondents, 47%, pointed to operational expertise as one of the most important reasons to partner with an outsourcer. More people cited expertise over cost savings (35%), which could reflect a general upswing in the economy. In 2002, cost savings was the reason respondents most frequently cited for outsourcing. The shift means businesses may be thinking more strategically about IT. That a good outsourcing partner can deliver revenue-generating business enhancements, and not just cost savings, may partly explain why outsourcing spending is rising. In 2002, 51% of businesses InformationWeek surveyed spent $1 million or more on outsourcing, and only 20% allotted more than $10 million. Now, nearly 60% earmark $1 million or more, and 25% spend more than $10 million.

Outsourcers Lose Luster -Part I

Informationweek has published the annual outsourcing survey results. Excerpts from this important survey:

Two years ago, Dynegy Inc. debt was mounting, and the entire energy industry faced punishing scrutiny in the wake of Enron's blowup. Dynegy, with 2003 revenue of $5.8 billion, has since resolved most of its legal troubles, and it has cut debt by about two-thirds.Dynegy's decision last year to outsource the bulk of its IT operations to Accenture is a big contributor to the turnaround, says Steve Moffitt, Dynegy's CIO and a senior VP. "We were stuck with a technology infrastructure built to support a $40 billion company, and that's not where Dynegy was anymore," he says. Accenture has taken over systems management, help desk, application development, and most of Dynegy's other major IT operations. The result: The company has cut its IT costs by up to 30%. What's more, by outsourcing, Dynegy is better positioned to integrate operations from a recent $1 billion acquisition of Exelon Corp.'s power-generation plants. "We're shifting to a global model, and Accenture has the means to support that," Moffitt says.

Worldwide spending on IT services increased 6.4% in 2003 to $570 billion, according to research firm Gartner. Despite that growth, IT executives aren't overly satisfied with their outsourcing partners. A recent InformationWeek Research survey of more than 300 business-technology professionals shows an average customer satisfaction rating of 6.4 on a scale of 1 to 10, where 1 is "not at all satisfied" and 10 is "extremely satisfied." That's down from 7.1 in InformationWeek's last survey of outsourcing buyers two years ago. And nearly 30% say their outsourcer hasn't met their expectations. The survey also asked respondents what they seek in outsourcing providers, rating them in 10 categories, including reliability, reputation, cost/value, and vertical-industry knowledge. No. 1 outsourcer Deloitte Consulting, which scored 7.4, was the only provider to score above 7 in the satisfaction ranking. Deloitte also ranked No. 1 in nine out of the 10 categories. That's partly because some of the expertise and best practices housed in the auditing side spills over to its outsourcing business, says IDC analyst Alexander Motsenigos. The firm insists it doesn't pursue outsourcing engagements with its audit clients. Still, Deloitte's connection to a big auditing firm is "a differentiator that others in the market don't have," Motsenigos says.Deloitte also is the only outsourcer in the group that isn't publicly traded, and it attributes part of its success to the fact that it answers to customers, not Wall Street. "Outstanding," is how one customer describes Deloitte's reliability and responsiveness. Its revenue from systems integration, application outsourcing, and consulting increased 5% from 2002 to 2003 and now stands at $5 billion a year, Motsenigos estimates.

Accenture and Capgemini tied for second in our ranking, with overall scores of 6.8. Accenture's flexibility is a strong trait, Dynegy's Moffitt says. Under the deal, the energy company owns its servers and software, and its employees have direct contact with Dynegy's internal IT staff when problems arise. "We wanted to maintain a lot of control internally, and they supported that," Moffitt says.In last and next to last place, respectively, are two of the industry's most dominant players, IBM Global Services and EDS. Respondents gave IBM a mediocre 5.3 out of 10 for reliability, and IBM and EDS landed at the low mark of 5.4 for innovation.

IBM doesn't pay enough attention to its smaller contracts, says Brian Clement, delivery manager for human-resources and payroll-services firm Ceridian Canada. "They were being a bit lackadaisical and taking our business for granted," he adds. Ceridian has a multimillion-dollar contract with IBM to host its PowerPay payroll-management application from its data center in Toronto, which was recently renewed despite some performance setnacks.Nevertheless, Ceridian Canada wants to fix the relationship rather than ditch the vendor. Repairing the situation should be less of a hassle than engaging a new outsourcer, he says. While Nextel has been satisfied with EDS's service levels, there are concerns about its fiscal problems, CIO LeFave says. While Nextel has been satisfied with EDS's service levels, there are concerns about its fiscal problems, CIO LeFave says.EDS's poor showing illustrates that the onetime powerhouse may have to work harder and faster at making the organizational and management changes demanded by CEO Michael Jordan, and delivering on its new IT road map to provide customers with a utility computing and mainframe migration strategy, even as it continues to try to solve some challenging financial issues. Another prominent vendor, Hewlett-Packard, turned in a good performance, but its fifth-place tie with BearingPoint is a comedown from its first-place ranking two years ago. HP's professional-services revenue grew 13% year over year in the fourth quarter. The growth isn't coming at the expense of customer service, insists Joe Hogan, marketing VP for HP's outsourcing group. "You don't grow unless you have a high level of customer satisfaction," he says.
(Part II shall be published shortly)

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