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Sunday, April 30, 2006

Fostering Talent To Unlock Value

I just can't resist pointing to this article,that appeared in Strategy + Business magazine. In this increasingly services led world, enterprise’s future growth and competitiveness depend more than ever before on attracting qualified workers - an increasingly scarce resource - and helping them work efficiently together within the organization. I work in an industry where welcoming 250 new faces as colleagues every week is an accepted norm. After all there is a definitive connection between top performers and superior corporate achievement, as a few studies have brought out.While earlier, the Mckinsey framework recommended action along five dimensions Viz ("Embrace a Talent Mindset," "Craft a Winning Employee Value Proposition," "Rebuild Your Recruiting Strategy," "Weave Development into Your Organization," and "Differentiate and Affirm Your People"), this article highlights the need to have a new look at talent from an inside perspective. The premise of the article is that classifying employees by their role in the success of your business rather than by their function can improve the effectiveness of recruiting, staff development, and deployment. It is a telling observation that if companies managed financial assets as carelessly as they do human assets, shareholders, auditors, and regulators would come down hard on them for inefficient use of funds. Pointing out that companies are unable to measure or manage their employees’ contribution to corporate value, the article comes with a new framework - .classifying an organization’s roles into four broad segments -creators, ambassadors,craft masters & drivers.The key distinction here is trying to look at talent horizontally across the business - the differences among these four segments are expressed in terms of talent valuation - that is, such attributes as knowledge, experience, skills, and personal interaction capabilities - and not in terms of organizational structures (such as business units) or in human resources management terms (such as age, education, seniority, or compensation). In an age where the rules and procedures of an organization can be an obstacle to segmentation and a force for “averaging” the treatment of individuals’ roles, and in a situation where organizations need to offer very specialised services, definitely a radical new look at the way talent gets categorised, nurtured and reviewed needs definite fresh and dynamic approaches. After all winning the people war is a crucial determinant of success for any organization.

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Colorful Cultures, Languages & Singlish

I just received an invitation to meet a prime ministerial government delegation of a particular country – I have been asked if I can speak Spanish!. Working in the APAC- IMEA region is extremely exciting for the variety – almost some dozen plus different types of major languages (that’s on the lower side),I regularly carry some forty different country currencies in my pouch – those that I regularly use and every country/corporate are in different stages of maturity in terms of technology, in terms of understanding and myriad variety of local operational dynamics. Whether trying to understand Syanora in Japan to reverential submissions as the norm in Korea, to mainland china’s mystical ways. Hongkong and Taiwan’ very dynamic ways of doing business, matching Aussies loquacious manners, working and communicating with the Tan’s, Dato’s & Puan’s in Malaysia, to Khuns and Sawadeekaps in Thailand and innumerable customs in the middle east region and Africa, the opportunity to learn cross cultural issues and adopt them on the fly ( Luckily for me in most of these countries we have local offices and experts well versed in local customs helping as needed) is really exceptional. Needless to say the decision making speed/process in every country is markedly different.No regrets and am thoroughly enjoying, Of all the countries/cities, Singapore is unarguably amongst the most cosmopolitan city in Asia and the english spoken in Singapore is something to know about and practice . Vani, who writes brilliantly as Chennai Gal , has come up with a singlish dictionary , a very brusqe version of English that is spoken in Singapore.Over the last three years,I have definitely understood the style of working with intrepretors!!.

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Saturday, April 29, 2006

Private Equity Lawyers As Rock Stars

Private equity is back in fashion. From doing record breaking deals in new regions like India to a significant increase in the number of deals that get closed, the private equity cult is back in fashion. Asian giants like China & India are also attracting private equity in a big way. Even in emerging markets like India, recent large and prominent exits by venture firms & private equity firms are further spurring interest in the market.The technology market in the US is also beginning to attract lot of private equity interest. No wonder the NYTimes reports that private equity players in the midst of huge growth, are now desperately trying to hire lawyers with skill set in finance. The available positions range from associates and partners to general counsels at private equity firms. The pay scale ranges from $150,000 for junior associates to "very comfortable seven figures" for some partners and general counsels. At many firms, the compensation tends to be higher than for comparable lawyers who are not doing private equity. Private equity players attribute the growth to not only in the traditional US regions but are seeing terrific growth in global areas such as China, India and Europe. Look at the impressive numbers- some $163 billion in private equity funds financed 697 deals in 2005, another survey found that in the first quarter of this year, venture capitalists invested $5.6 billion in 761 deals, a 12 increase over the first quarter of 2005. I was flying back friday night with a software industry veteran - I asked him what his next moves are likely to be career wise. Prompt came the reply - Get into private equity space advising buyouts and sale- the equivalent of a managing partnerin venture firms.Vivek Paul is seen as being highly active in the related space of venture investments. Interesting times indeed.

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Friday, April 28, 2006

Apple, Adobe, Microsoft : The Jigsaw Puzzle

For Apple's Windows Strategy to Work, It Must Replace Microsoft Office and Buy Adobe Systems writes, Bob Cringley. Pointing out that apple needs to have an application strategy to go with this operating system strategy, because Microsoft's true power lies not in Windows, but in Microsoft Office. Added to that is the fact that windows rather than being an OS on the way up, as it was in the past, today Windows is the OS we tolerate. Office is how Microsoft makes most of its revenue, and Office is the bludgeon Microsoft uses to keep other software vendors in line. By embracing Open XML, Apple could get complete file compatibility with the new Office format. Now if Apple's old cross-licensing deal with Microsoft also gives them compatibility with the older binary Office formats, it could give them something not even Microsoft has at the moment - support for ALL Microsoft Office formats, past, present, and future. Since its relationship with Adobe is very pivotal as for its core media and graphics markets Apple is as dependent on Adobe as it is Microsoft for the general office market. So he propounds that Adobe may be a good buy for Apple to consider.

My Take : As I see it, this may be infeasible. Apple's Tiger is not exactly roaring - it does not seem to have got new customers to Apple( not even the disgusted windows customers. Look at the market cap of Adobe – above 22 billion USD, may be half of Apple’s market cap – Also I see that Adobe is stepping into the enterprise space – substantial push is happening within Adobe on this front. Also given the fact that a certain amount of windows customers still look at Apple, it needs to be thought through further. Seen from an adobe perspective, this may not be that easy, as I wrote earlier during adobe-macromedia merger,Adobe has moved sometime back from the desktop vendor player to enterprise vendor. For sometime, Adobe LiveCycle product line is offered as a server based enterprise offering enabling enterprises to use it as a secure document format helping in the full lifecycle information management sans direct storage facility - capture, collabaration & compliance. The average enterprise generates 300,000 business-critical documents a month, and is said to be promptly losing track of about 25% of those. 70% of Acrobat seats are now sold to businesses through Adobe's licensing division, not the traditional shrink-wrapped boxes. Adobe recorded 17 mln downloads of Reader 7, which represents 40% faster uptake than recorded for Version 6, weeksinto its lauch. In its new form, Acrobat becomes the hub between people, processes and policies as they commit business-critical information to the PDF format. Adobe is making this standard interoperable and may try and repeat the enterprise strategy with Flash. Though there were concerns about the pricing, net-net, Adobe seems to have gained more strength to explore emerging future opportunities with Macromedia. The mighty challenge before Adobe will be maintaining momentum & volume traction in software bundles, licensing, channel conflicts and direct sales and focus on interoperability issues, middleware and browser access(Flash & Acrobat together looks attractive to imagine) – in all these arenas – independent initiatives like firefox, novell, some macintosh third party software providers. So I think with Adobe focussed as scuh along these lines, a buy out from Apple at 22 billion marketcap looks highly impossible.

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Oh Microsoft!!

Microsoft stock gets battered post analyst reports says market reports. The 11% Friday drop on multiple downgrades after it reported earnings and guidance that that were below Wall Street forecasts is indeed a significant event that can’t be ignored. The company plans to up fiscal 2007 spending by about $2 billion to better compete with the likes of Google. I do not attach unduee importance to financial analysts report - I think in a majority of cases, they can do qualitatively better than what they do in terms of research and forecasts - but I recognise they play an important role and as such can't be ignored. As I see it, Microsoft, while trying to consolidate its strength in the windows centric desktop segment and work in a concerted way to gain marketshare in search and mobile spaces(It is losing in this space –for every advance that it reports, competitors seem to be moving far ahead), it has a huge opportunity in the enterprise space and it is clearly losing out by not investing in such areas – post the news of dropped out acquisition moves of SAP and the announcement of Project Green, besides some noise about Sharepoint & Dynamics, Microsoft has not done much. Microsoft can today become a significant force in the enterprise software -mid market segment and should be looking at offering on demand solutions centered around Great Plain, Navision, expand on Microsoft Dynamics series. Clearly its a testing time for Microsoft’s leadership. The world is truly changing - we do not need to look at any better example to demonstrate the case that history, cash & reserves are no more important compared to speed, innovation and dynamism.

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Thursday, April 27, 2006

CIO’s, IT & Business Value

In my morning flight, came across the newly developed IT Value Matrix published in the CIO Magazine. The article notes that this has been developed after nearly 18 months of work by dozens of CIOs, which illustrates the principles and practices essential to creating, identifying and communicating IT’s value to the enterprise. The matrix identifies approximately 130 components, grouped under three key practice areas :
- Stakeholder alignment,
- Communication and
- The CIO role.

I like the idea that it’s organized for drilling down from general to specific. For example, to achieve stakeholder alignment, CIOs need both knowledge and action. To learn what type of knowledge, you drill down one level and find four types: stakeholder analysis, political and cultural issues, technology trends and business dynamics. The key tenets of the framework are summarized as:

1] The primary goal of IT is to align with major enterprise objectives. Every initiative must be clearly tied in a provable way to business value.
2] Because all major business initiatives are dependent upon technology, the CIO must have a voice at the table at which key business decisions are made.
3] The CIO is responsible for understanding a business’s complexities, influencing peers and presenting technology strategy in terms the business can understand.
4] Technology leaders are agents of change. Transition is our stable state.
5] Communication and relationship building are as important to IT leadership as technology skills are.
6] Successful technology leadership must strike a balance between competing forces: short-term versus long-term, technology versus business focus, leading versus enabling.
7] The CIO is responsible for cultivating technology leadership at all levels.

A nice effort, one which would provide a breeding ground for the much talked about IT-Business connect and perhaps help in eliminating/reducing the mistrust between IT & Business. Some early developments related to the matrix shows some promise:

- CIOs who have come fresh to the finished matrix have already begun suggesting improvements, such as adding a social responsibility component.
- Case Western Reserve University’s plan to develop an MBA course based on the matrix.

Erik Brynjolfsson some time back reported that overall relationship between IT and productivity is positive. However, it's also evident that there's tremendous variation in performance among companies. To many skeptics asking me with such frameworks can business achieve full benefits, I would like to point to Erik’s statement that IT is only the tip of a much larger iceberg of complementary investments that are the real drivers of productivity growth. It is found thatfor every dollar of IT hardware capital that a company owns, there are up to $9 of IT-related intangible assets, such as human capital—the capitalized value of training—and organizational capital—the capitalized value of investments in new business-process and other organizational practices. As I see it, increasingly the CIO role is becoming one of the toughest responsibility to shoulder and IT is becoming amongst the top three important factors for success in any large enterprise. Every effort towards helping business relaize value from IT deserves commendation.

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Blogs, Social Responsibility & Public Movements

A medical course student from India, Prashant Anchalia Yerevan studying in state medical university in Armenia dies in university campus allegedly due to medical negligence and co-students complain of racial discrimination as well. While I do not the facts, the blogosphere coverage of the events clearly show the ham handed attitude of the Armenian academia. In fact if the postings in the blogs covering the events are indeed correct, Indians need to review going there for further studies or doing business with them. The blog world is taking up the issue quite seriously in a concerted way with posts covering the various protest moves and In fact an Armenian blogger, Onnik Krikorian is taking the lead here. While, I do not know where the events and coverage would progress into, but as I see it, clearly the pressure is building up inside the system to correct things and Blogosphere is playing a very useful & constructive role here.

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Wednesday, April 26, 2006

Gautam Ghosh On Corporate Blogging Initiatives

Some of my friends and colleagues tell me that Gautam’s talk was indeed well received. As you could have guessed, a lot of internal initiatives centered around KM and blogging are currently underway within Satyam and so no wonder it surprised Gautam to see so many assembled to hear him out. The slides that Gautam has used looks neat and quite informative.
Gautam : Am not based out of Hyderabad and so was not there.

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The Changing Landscape Of The Influence Game

James Governorwrites, bloggers and emerging non-traditional analyst firms are increasingly influencing technology and product strategies. In order to make money, many of the new blog influencers will try and make their way as paid trusted advisors. Some will do implementation work as well. They are the new influencers. He further points out that this is both a threat and an opportunity for "traditional AR". He further points to Duncan Chapple’s writing,"Analysts follow their own research agenda, and their findings are largely independent from the interests of the vendors they follow. Advisory consultants are often tied to commercial relationships. Blog influencers however, are likely to meld both approaches. Consultants and industry analysts are traditionally somewhat of a different breed, its important to note that the separation seems to be changing under the weight of the blogosphere. New variants are emerging, with new influence characteristics".
I do see that some tend to dismiss blogging as just another set of bored players/ ego boosting activities and most bloggers may not have a defined agenda. Vinnie Mirchandani holds the belief that few bloggers are beginning to be counted as significantly influential in the tech world. I wrote recently(after the famous Forbes article on blogging) that I have long felt the Forbes.com can never be even counted as a candidate for the regular best of the web picks that Forbes regularly publishes – that does not mean that we do not visit forbes.com site. Similarly in occasions when someone finds blogs to be a bugbear, the best thing is find out ways and means to launch a counteroffensive available within the system to neutralize - this can not be achieved by painting red with a broad brush. Big business needs to be innovative and forward looking in embracing and leveraging new movements like blogs. In this contribution economy powered by significant user involvement in corporate initiatives, undoubtedly blogs play a unique role. Every media of expression has its own purpose and objectives that it longs to fulfill – so why complain and moreover if the new media such as blogs are powered by technology, it is futile to raise a voice against. The power of the blogosphere is being increasingly felt – but this is not to say that the analyst community would go away – after all they are very important constituents of the ecosystem, but the quality and accountability of analyst firms would come into sharper focus.

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Gary Hamel, Google & Hype

I like Paul Kedrosky's take on Gary Hamel's commentary column on Google. Hamel while emphasising that Google's capacity to keep evolving as an organization as an important trait, over does this when he writes :

Google 1.0 was a search engine that crawled the Web but generated little revenue; which led to Google 2.0, a company that sold its search capacity to AOL/Netscape, Yahoo and other major portals; which gave way to Google 3.0, an Internet contrarian that rejected banner ads and instead sold simple text ads linked to search results; which spawned Google 4.0, an increasingly global entity that found a way to insert relevant ads into any and all Web content, dramatically enlarging the online ad business; which mutated into Google 5.0, an innovation factory that produces a torrent of new Web-based services, including Gmail, Google Desktop, and Google Base. More than likely, 6.0 is around the corner

Hardly a thing that one would expect of a management thinker to write like this. While few will be unimpressed by the slew of rollouts that Google has managed in the last few months - its downright silly to think that recent rollouts signify morphing of a new google with it. Sensational writing at its best - not even a Gary Hamel tag is helping to view this as anything else. I had been repeatedly highlighting that Google need to show a clear statement of direction - its factory visit or analyst meet slides not withstanding to be seen as worthy of the multibillion dollar marketcap that it currently commands. We see that when it comes to discussing its future plans, speculation overrides concrete promise. In Gary Hamel's parlance, not until Google 20.0, would one get to fuly understand what it stands for and its uniqueness in pursuing solutions outside search.

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Sunday, April 23, 2006

The Phenomenon Called MySpace

While, I am generally doubtful of the viability of the numerous web 2.0 startups, I definitely think that MySpace has an important place in the Web 2.0 ecosystem – besides being in the top three internet website in the world, its widget programs are beginning to foster a new ecosystem. With MySpace serving around 70 miilion registered users, it’s a real phenomenon. Bambi Francisco points to the upside potential for MySpace in terms of it s ability to monetize its page views much better & the opportunity is really big. The NYTimes article points out that the registered user base today is more than twice as many as MySpace had when Mr. Murdoch agreed to buy it — drawn by a simple format that lets users build their own profile pages and link to the pages of their friends. How does Myspace get so many new registered users? Besides its attractive utility value, it has tapped into three passions of young people: expressing themselves, interacting with friends and consuming popular culture. So much so that MySpace now displays more pages each month than any other Web site except Yahoo. It’s effort to expand the use of text ads is running into challenges in not being able to generate sufficient ads and is currently running tests with Yahoo, Google and several smaller ad providers and is seeking proposals from them for longer-term deals. The bigger opportunity, however, is not so much selling banner ads, but finding ways to integrate advertisers into the site's web of relationships. This means integrating content creators and users in lot more integrated manners depending on the profile, usage and preferences. Look beyond what exists today - integrating business models like that of Craiglist into Myspace may not look so difficult. That’s why I call MySpace a true phenomenon - representing for the first times in the recent few years the potential that can be relaised by fostering a community in the virtual world

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Saturday, April 22, 2006

Sun's Scott McNealy

I think that it time for a change at the helm at Sun. Its clear that after years of struggling financially, Sun Microsystems is facing such fierce pressure. There were news that Scott McNealy is considering taking Sun private with the help of Silver Lake Partners,the private equity fund. The signs the pressure is building inside to have a new team running Sun was always heard for sometime. The "dot in the dot-com" world needs fresh air and new thinking in this emerging web 2.0 world. The US tech industry has always benefitted by bringing in new order periodically - that may be the best solution for Sun's and by extension the tech industry's stakeholders.

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Friday, April 21, 2006

India & Leading Management Style

David Kirkpatrick who wrote some time back about India taking the education into the next generation seriously now writes( saw this courtesy of Rajesh),” The world's most modern management – is in India highlighting HCL’s scheme of putting employees first and a scheme where every employee rates their boss, their boss' boss, and any three other company managers they choose, on 18 questions using a 1-5 scale. Such 360-degree evaluations are not uncommon, but at HCL all results are posted online for every employee to see - David points out that such things are un-heard-of! He adds that to become a manager at HCL, a set of courses - that include negotiation skills, presentation skills, account management, and what they call "expectation management" - dealing with the expectations of both customers and employees needed to be passed. While I do not have access to data in support of the loop getting closed (that’s generally the toughest part - when data points to an influential executive, in general the process gets tossed out), it is indeed a significant framework – a few other innovative things being followed by other indian headquartered majors also are indeed innovative and commendable. It would also be interesting to watch the effects of such moves over a period of time - reflected in metrics such as turover ratio, revenue/employee, profit/employee - these assuming all other growth related factors are common amongst companies. Strange are the ways competitive forces shapes dynamics of corporates – with turnover a matter of concern for all enterprises –indian headquartered and big four ( accenture reported a turnover of 20% last quarter globally), companies are straining their nerves to be efficient and winning the war for talent is an important step.

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Big 4 Consulting Firms, Golfers & Changing Landscape

In my Friday midnight flight read the WSJ and spotted two prominent ads by Accenture & BearingPoint – as was the trend in the recent past, both ads featured golf champions. BearingPoint was congratulating Phil Mickelson on his victory in the Masters in Augusta: the intended message – Bearingpoint’s consultants provide their clients such top level of service and expertise. Accenture features Tiger Woods in their "Go on. Be a Tiger" series and their consultants helping their clients become a High Performance Business.Phil Mickelson and Tiger Woods are the No.1 & No.2 players earnings wise respectively. While it is debatable on the effectiveness of personality centric advertisements coming from consulting companies and associate leading golfers with that. It is interesting to see that BearingPoint has aligned with the No.1 player. We know that the golf ratings can slip very fast and may be the consulting industry is talking about the fast changing realities. With the changing landscape,it makes an interesting reading though. Contracts are getting shorter and work is being spread across multiple providers, and large outsourcing contracts signed in the 1990s are coming up for re-bidding. Look at this impending changes in outsourcing in 2005. In essence what this means is that the global industry is beginning to see industry consolidation and leadership changes, among other things and is on the verge of restructuring, resulting in a redistribution of wealth across the entire spectrum of suppliers, buyers and investors.

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Thursday, April 20, 2006

The Power Of The Blogosphere

I recently wrote about the plans/ impact of oracle’s consolidation schema. A Cnet columnist finds that shifting economics, industry consolidation and dwindling profits are forcing big software companies to build & market comprehensive product stacks. The idea is by offering a broad product set, software companies can maximize revenue from existing customers and maintain control over product development. Customers get "one throat to choke" for product support and better integration -long the bane of big companies attempting to assemble their IT departments from a hodgepodge of components. Broader adoption of industry standards, such as Web services protocols, is making product integration easier. In a way, customers are forcing the creation of stacks. Many corporations are seeking to upgrade their systems around a services-oriented architecture, or SOA, a modular software design that promises to make business applications easier to write and maintain.Dennis Howett points to Jeff Nolan’s post about how application vendor strategies are changing to reflect the new realities of the Internet economy and Dan Farber’s dissection of Jeff’s argument. Dennis highlights that traditional analysts/media can never provide the same effect that Jeff Nolan’s & Dan Farber’s is creating. No doubt that in the fast changing enterprise application space, bloggers are certainly creating good impact.

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Offshoring & Three Year Itch

Courtesy of Vinnie saw this article on offshoring titled, Offshore Outsorcing :The Three or Four-Year Itch. Obviously Vinnie has strong views on the costs of offshoring.

Clearly, Joe Drouin & Jonathan Beyman are getting it mostly right – they are demonstrating how to make the offshore model work. While the article captures the general views about offshoring demanding attention and why it needs constant attention, it in my view sounds hollow on multiple fronts – in particular its perspective on captive option. While captive option may look attractive for some software product vendors in a limited way – see my note on offshore product development. In reality, we see that captive option falls short on one most important dimension – arresting turnovers, repeatedly cited as a matter of concern, The ability to support a wide range of operations may also be doubtful with captive models.
Those who look at offshoring as just a means to shave off some costs and hope to improve on savings with passing time would definitely fail to achieve their goal measured over a period of time, unless they manage to work on ability to manage it in a concerted way. In my experience that includes a case repeatedly referred to in the article, I find that maximizing productivity & minimizing risk - seems to be the most prudent option that enterprises choose to pursue while attempting Offshoring. The process of offshore outsourcing may be more evolutionary and a determined pursuit to engage more wide and deep would be a sure way to reap consistent benefits.Conventional ways of measuring productivity may be slightly spotty and hence the emphasis on specific prodictivity metrics for different type of operations. Obviously, different enterprises are taking different routes towards offshoring services.Some keep the differentiating core processes insourced and the commoditized context elements outsourced and offshore and some companies look at retaining high value-add activities onshore while offshoring low value-add activities. Even while offshoring, some enterprises ponder about having captive units while most look at outsourcing partners and a few manage by balancing these options. But increasingly the drivers of offshoring centered on cost, productivity, speed, risk all can be addressed only by collaborative and concerted management attention. Like managing any business, constant attention and means to improve on the results are permanent in the agenda of offshoring. The pioneers and major beneficiaries of offshoring have understood this and are benefiting adequately. Look at the ever increasing numbers of offshore vendors outsourcing multiple millions of work every year - that number is showing a consistent upward trend for several years at a row - one best source of data could be the quarterly/annual reports of Top Tier India headquartered vendors to study this. Like well managed companies managing to reap better returns in business, well managed offshoring strategies shall fetch better returns.

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My extensive travel for the past several days -last destination in the trip was Vietnam - got bogged down into a number of meetings in Hanoi & Ho Chi Minh city (Vietnam is preparing to host Bill Gates shortly, everywhere in the country – from the communists to the commoner besides businessmen, were talking about this) – that meant almost limited time for catching up with other things, blogging included. The country is buzzling with young people and motorbikes. I could find very strong pro -US sentiments across cross sections of society. It is indeed incredible to see top ranked communist party officials talking proudly about Intel planning to invest several hundred million dollars in the country shorly.The top rated hotel in Ho Chi Minh city could not give me an internet connection uninterrupted for more than thirty minutes – am back in Singapore to travel again in a few hours and the next seven days look ahead schedule looks equally packed – I should also be in India for a very brief trip.Shall try and post as frequently as possible. For those asking my views on Vietnam as possible offshore service location - I endorse the view that its several decades away, if at all it can happen. I shall try and write in detail on another occassion on this.

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Wednesday, April 19, 2006

SaaS : TimeTo Dispel Myths

While hollow sounding reports abound on the increasing importance of SaaS, Jeff Kaplan thinks that SaaS may have
staying power. In tyring to debunk myths about SaaS he writes how SaaS applications differ from the te ASP framework.

Myth #2: SaaS is just another version of the failed application service provider, or ASP, and hosting models of the past, and will suffer the same fate as its predecessors.While SaaS isn't a new idea, the economic climate and rapid advancements in application development tools have combined to make today's SaaS providers more successful than their predecessors. The ASPs and hosting companies of the dot-com era failed for two reasons.
- First, they did not fundamentally change the architecture of their software applications, but simply resold legacy applications to organizations that didn't want to house them on their own systems. The up-front and ongoing costs of hosting legacy applications proved to be too much for the ASPs to withstand.
- The second reason the ASPs and hosting companies failed: Only a small segment of the market was willing to outsource their application needs to relatively untested outfits because most companies during the dot-com era felt that their IT operations and business applications were a strategic asset

Today's economic and competitive pressures make nearly any form of outsourcing fair game. Dennis looks at business value of SaaS while Jason Wood thinks that the greatest myth that needs to be busted is the is the opposite notion, that somehow SaaS is going to be the death knell of traditional enterprise software the world over. (I fully agree with Jason on this point). Erik Keller pointed out that SaaS can't change the borken model of enterprise software and pointed out that Salesforce.com and RightNow Technologies, two of the most well-received companies with a SaaS delivery and revenue model, both spend nearly 50 percent of their total revenue on software sales and marketing. Most importantly Erik brought out that it is also far from clear how far and deep SaaS can be extended into buyer organizations. I wrote earlier, the trend to offer software as a service with payments over time and based on usage is emerging. The big spenders like Telco’s, Banking and Financial Services, Healthcare, Transportation players may not find hosted solution a natural fit. The business drivers force them to get cutting edge solutions that would improve competitiveness and not necessarily something that looks to have good architecture and seems logical or fashionable. It will take more time to see what percentage of customers will find the software as service offerings attractive, change their buying habits and move to annuity contracts.The application architecture, schema, the business model including dealing with channel partners and switching costs for existing customers are major impediments. Overwhelming organizational changes would have to be managed in the transition to on demand model-It is highly unlikely that existing software vendors could manage the transition smoothly. It is also too early to make a conclusive call on whether the software vendors are going be more comfortable with annuity revenue stream not to speak about the hit professional service firms may be forced to take – In all, not a very easy path lay to embrace Software-as-a-Service model.

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The Enterprise Software Industry : Broken Model

Erik Keller writes a seminal article where he points out that the enterprise-software industry business model is broken. The mega players - IBM, Microsorft, Oracle and SAP hardly represent the diversity of functional solutions, vertical and niche markets, innovation and business processes that are fulfilled by a growing base of companies. Yet most small companies are struggling for their survival today. By examining the financial results of "Enterprise 11" as well as that of SAP and Oracle, he brings out interesting facts. (The Enterprise 11 companies are Aspen Technology, BEA, IBS, Indus, Hyperion, Manhattan Associates, PTC, QAD, Software AG, SSA and Vignette). His review of the data shows up interesting information. :
- The E11 has greater G&A spending than either Oracle or SAP yet generates a half or less revenue than either.
- The E11 spends much more on S&M as a percentage of total revenue than do either SAP or Oracle.
- The G&A spending of the E11 nearly equals their corporate profits.
- SAP and Oracle are much more alike than either would like to admit

Clearly the E11 is significantly more inefficient than either SAP or Oracle thus facilitating consolidation as well as the emergence of new business models. The Enterprise software overhead-to license ratios defy logic – in early 1990’s typically over two thirds of total revenue were new software license sales. Today due to changing realities, only one third of total revenue is from software licenses. In the meanwhile companies mostly have not flipped their overhead model to accommodate for this change in revenue mix. The fact that on average smaller software companies spend nearly two-thirds more in overhead for every software license dollar than their larger brethren puts them in a race that will be difficult to win as a publicly traded company. To succeed in the future small software companies must throw out the old play book and start with a new one.

Can SaaS change this – unlikely as it looks - Salesforce.com and RightNow Technologies, two of the most well-received companies with a SaaS delivery and revenue model, both spend nearly 50 percent of their total revenue on software sales and marketing. It is also far from clear how far and deep SaaS can be extended into buyer organizations. Co-ops look like an interesting model. Rather than pushing products out to the market, a new generation of companies is beginning to pull customers in via a combination of open source or "free" basic products that can be downloaded over the web as well as "for-charge" enhanced products and support. He thinks that is likely that a combination of SaaS, open-source offerings, overhead efficiency, group selling and enhanced services will become the core of the future enterprise-software business model. Indeed a very interesting article. Vinnie thinks that the state of the industry is such that its as if The red cross spends just ten percent on charity. As I wrote earlier, a careful examination shows that well evolved industries move towards a decentralized/tiered model – currently the enterprise software industry is highly integrated vertically and its ecosystem is not well set today. In this changing world, going beyond the packaged solutions, extend the idea a bit – enter the idea of SOA & Composite applications - the applications can be mashed up in multiple ways to create new frameworks that can be assembled as & when needed to make business in an always ready-to-respond mode towards changing external conditions. The composite applications address more complex business scenarios by combining discrete functional applications or service modules and encompass business processes that typically cross departmental silos synchronizing in the process varied information for effective functioning of the enterprise. BPM, Portal applications – early entrants of such frameworks inside enterprises and these core technologies will continue to act as the forerunners for adoption of composite applications. Application as a concept neatly disappears with SOA. I also see that composites can bring about a huge change in the setup of the ecosystem – we can see leading edge applications coming in from mega vendors & startups alike. Product engineering too shall also see a positive influence - facilitating development of software in modular pieces, enabling rapid delivery of new functionalities. Several independent developers could start writing specialized programs that plug into the composite apps framework. Professional services, sales network can begin to take a different shape far different from the vertically integrated model that we see today. The partnership between the product vendors and system integrators shall also change – the emerging equation may put more demands on the integrators and force product vendors to spend more on developing vertical solutions. Composites will potentially change the landscape –of enterprise market and the dominant business model (form & structure included) of the enterprise software industry will change as well. Please read the full note here.

(pic courtesy : sandhill.com)
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Tuesday, April 18, 2006

The Expanding Opportunity For Offshore services

Some mailed me asking me to justify my belief in the growth of the Indian offshore players. One of the reasons that my upload is very sporadic and limited in the past few days is owing to my travel to Vietnam. Unlike most others, I had been to practically all corners of the world that matters in the world of IT services and offshoring and coupled with the responsibility that I carry as part of a leading offshore player, I get the chance to develop a unique perspective. I do know considerable number of people who matter in the industry and I constantly exchange notes - that includes CIO’s, technology partners, analysts etc. Business processes and traditionally outsourced - but not offshored - IT services will be the main driversof offshoring growth in the near future. While the global market for offshored IT services and business processes has nearly tripled in the last four years, the service providers have so far captured only 10 percent of a $300 billion opportunity. Over the next five years, the market will grow by an additional $80 billion. The drivers of future growth are likely to shift somewhat in IT-outsourcing services but will remain largely the same in business processes. A Mckinsey analysis suggests that, during the next five years, more traditionally outsourced - though not offshored - IT services, such as hardware and software maintenance, network administration, and help desk services, will account for 47 percent of the addressable market for offshored IT services. The global market for business process offshoring has grown by 49 percent a year since 2001 and appears likely to continue outpacing the market for offshored IT services. While the global addressable market for offshoring is a stunning $300 billion, the pace of adoption will be shaped by the interplay of three forces:
- supply (the capacity and quality of offshore locations),
- demand (the rate at which companies adopt offshoring),
- and the actions of industry players.
A model built to study this interplay and to evaluate various scenarios for different industries shows that approximately 35 percent of the work that could potentially be offshored, worth $110 billion and divided equally between IT services and business processes, actually will be offshored by 2010. Mckinsey believes that India's offshoring industry, which has captured two-thirds of the current global market for offshored IT services and almost half of the global market for offshored business processes, can maintain its leadership position.

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Monday, April 17, 2006

Oracle Phase III Consolidation : Across The Stack Offer Services On Demand

As an extension of oracle’s consolidation strategy (may be this should be called phase III, given that recently we heard of a Phase II that has sprung up recently ) in the FT interview, Larry shares his aspiration to build and sell an end-to-end software stack – starting from OS to verticalised apps. The idea is that even in a SOA centric loosely coupled world, unified databases, messaging , workflow would be amore desired compared to bringing together point solutions – typically best-in-the-breed. This essentially means that in the stack space where Oracle is not present, namely at the OS level, we can see it moving –One attractive way is to buy Novell and adopt SuSe Linux. In a way Larry could deliver a punch to Jboss & Redhat – a day before the Jboss acquisition happened, I heard rumors that Novell could be considering buying it. Larry says quite perceptively, "Now that Red Hat competes with us in middleware, we have to re-look at the relationship – so does IBM. I don’t think Oracle and IBM want another Microsoft in Red Hat". (It is not IBM's or Oracle's birthright to dominate the middleware space!!) He adds that he was pushing Oracle further into hosting software on behalf of customers, relying on regular subscription payments rather than upfront revenue.Lets look at this further – this means that if and when Oracle Fusion is rolled out, there can be an offering for hosting solutions that covers the entire stack, in a manner precanned, frozen and certified, so to say. Then what happens to all the mouthwatering annual maintenance revenue stream – many acquisition were justified based on this stream of revenue and would customers be comfortable in locking their entire IT infrastructure & applications with ONE VENDOR AND HAVE IT HOSTED. License model goes, in comes service model and transaction based pricing.. This way what happens to the existing customers and the new customers/prospects who could be considering oracle solutons between now and the day when this grandiose vision becomes reality. Well in an ideal world anything can happen and in a real world everybody can dream and call it a vision.

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Indian IT Ecosystem : Signs Of Renewed Confidence

While the Indian IT firms are rolling out impressive, results and are poised for more aggressive growth in the new financial year starting Apr 1 2006, comes the news of a major leap in private equity flow into its ecosystem. The size of the deal is indeed significant and marks a new high in the asian context. I recently wrote that despite a lack of established VC culture, this time around things are happening within the country, while the pitfalls were apparent, the growth momentum is indeed palpable.
Kohlberg Kravis Roberts, the New York private equity firm, is buying out85 percent of stake the Indian software maker Flextronics Software Systems in what would be the largest leveraged buyout in India vakued at around 900Million USD. KKR will buy the stake from the singapore based software maker's parent, Flextronics International, widely known as the world's largest maker of electronics for other brands, including Microsoft Xbox video game consoles and Dell computers. The Indian arm specializes in the software embedded in electronic equipment, including the highly specialized, cutting-edge software that allows people to send multimedia messages over their mobile phones. For starters, what started as a software unit for Hughes Electronics and was sold to Flextronics and is now all set to become a stand alone company. Private equity flow (aiming for higher returns) into Indian ecosystem signifies the potential of its growing software industry. Major private equity players like Blackstone Group, Carlyle Group, General Atlantic Partners, Warburg Pincus and Temasek Holdings are active in the market. The trend of private equity flow into the country is showing a huge raise and in a way is an important barometer for the sector and country’s health

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Sunday, April 16, 2006

The Enterprise Software Industry : Consolidation Effects

Courtesy of Rajesh saw this perspective on the consolidation wave felt in the enterprise software industry and its implication on the ecosystem. The article highlights, looking solely at the economics, software buyers will be the short-term losers from this merger activity. With fewer companies vying for sales, the industry’s traditional 80 percent discounts, which large companies can count on for volume purchases, will be a thing of the past.Solutions include reducing complexity in application portfolios- that is, by eliminating redundant programs and refocusing data acquisition activities specifically on information needed to enhance competitiveness -executives can rein in maintenance costs and increase the amount spent on new development, more felxible architectures etc. Pricing concerns will drive more cooperation among software buyers. Software purchasers may indeed pay a price for consolidation. But in the end, consolidation could cost the large enterprise software suppliers the most. For a short-term gain in revenue, they may end up having to adjust to a new software landscape that emphasizes customer flexibility; more efficient delivery mechanisms; open standards; the rise of smaller, niche data-centric applications; and greater simplicity. More commonplace will be 50 percent off list price. But the good news is that while in the short run,higher prices will hurt the purchasing companies that depend on enterprise software to coordinate their activities. But in the long run, pricing pressure could change the dynamics of the buyer–supplier relationship and initiate a profound shift in how software is delivered and in the types of programs companies implement. Software purchasers who understand this and take advantage of the opportunity to leverage changing industry dynamics will have the most to gain.
I shall post an update to this with my detailed views later - currently am travelling.

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Saturday, April 15, 2006

The Reality Check For Organizations To Embrace Web 2.0

There is a new wave of business communication tools including blogs, wikis and group messaging software - dubbed collectively, Enterprise 2.0 - that allow for more spontaneous, knowledge-based collaboration. These new tools,Andrew McAfee contends, may well supplant other communication and knowledge management systems with their superior ability to capture tacit knowledge, best practices and relevant experiences from throughout a company and make them readily available to more users. While the World Wide Web put a multimedia printing press and a global distribution network in the hands of almost everyone & millions of people and companies took advantage of this opportunity, hundreds of millions of people did not, however, even though they had Internet access. The important question for business leaders is how to import these three trends from the Internet to the Intranet - how to harness Web 2.0 to create Enterprise 2.0.
Andrew points out that current technologies offer/support :
- Simple, Free Platforms for Self-Expression
- Emergent Structures, Rather than Imposed Ones. (Instead of imposing their own ideas about how the platforms should be structured, they started working hard to avoid such imposition, and to build tools that let structure emerge).
- Order from Chaos (Besides building platforms for self-expression and overcoming their previous tendencies to impose structure, the technologists of Web 2.0 are providing a third valuable service - they’re rolling out tools that help us filter, sort, prioritize, and generally stay on top of the flood of new online content).
The paradigm is best captured as SLATES (search, links, authoring, tags, extensions, signals). Deploying these technologies, argues Andrew, can lead to highly productive and highly collaborative environments by making both the practices of knowledge work and its outputs more visible. A set of ground rules for implementing the new technologies is proposed.
- First, it is necessary to create a receptive culture in order to prepare the way for new practices.
- Second, a common platform must be created to allow for a collaboration infrastructure.
- Third, an informal rollout of the technologies(Toby Redshaw spoke about silent launch of blogs/wiki's within Motorola) may be preferred to a more formal procedural change.
- Fourth, managerial support and leadership is crucial. Even when implanted and implemented well, these new technologies will certainly bring with them new challenges.
Nick Carr had some relevant comments to make on this – "Managers, professionals and other employees don’t have much spare time, and the ones who have the most valuable business knowledge have the least spare time of all. (They’re the ones already inundated with emails, instant messages, phone calls, and meeting requests.) Will they turn into avid bloggers and taggers and wiki-writers? It’s not impossible, but it’s a long way from a sure bet".

Andrew has responded to this (which I think looks more realistic) – he writes,"The spread of Enterprise 2.0 technologies is definitely not a sure bet". He highlights three reasons for this:
- One reason why employees might be less likely than Web surfers to use blogs, wikis, tags, RSS, etc.: they’ve got too many other things to do.
- Second,most companies might not have a sufficiently long tail.
- Third reason to be pessimistic about Enterprise 2.0, is culture, especially as it’s defined and shaped over time by business leaders. If these leaders signal that they really don’t want open, freeform, and emergent collaboration, they really won’t get it. The diffusion of these tools is going to sharpen differences among companies as some work to foster the new styles, modes, and practices of collaboration and others work (subtly or overtly) to squelch them. A timely article worth reflecting upon.

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Friday, April 14, 2006

Innovation At The Centerstage Of Business Success

Innovation is the hottest topic today, after all it intersects business, technology and society.BusinessWeek & The Boston Consulting Group have published their second annual ranking of the 25 most innovative companies . Sam Palmisano is quoted as saying,"The way you will thrive in this environment is by innovating - innovating in technologies, innovating in strategies, innovating in business models". Today, innovation is about much more than new products. It is about reinventing business processes and building entirely new markets that meet untapped customer needs. Most important, as the Internet and globalization widen the pool of new ideas, it's about selecting and executing the right ideas and bringing them to market in record time. In the 1990s, innovation was about technology and control of quality and cost. Today, it's about taking corporate organizations built for efficiency and rewiring them for creativity and growth. Some of the key companies finding a place in the list have been trailblazers in fostering innovation:

- Business model innovation created by Virgin Group Ltd., which applies its hip lifestyle brand to ho-hum operations such as airlines, financial services, and even health insurance.

- Process innovation by Southwest Airlines ,a whiz at wielding operational improvements to outfly its competitors.

- Apple used no fewer than seven types of innovation to launch iPod – that included networking (a novel agreement among music companies to sell their songs online), business model (songs sold for a buck each online), and branding (how cool are those white ear buds and wires?). Consumers love the ease and feel of the iPod, but it is the simplicity of the iTunes software platform that turned a great MP3 player into a revenue-gushing phenomenon.

- Toyota known for its manufacturing process innovation is now seen as a product innovator. With its Value Innovation strategy, rather than work with suppliers just to cut costs of individual parts, it is delving further back in the design process to find savings spanning entire vehicle systems.

- P&G’s connect & develop model of co-opting stakeholders in fostering innovation

The survey finds that managers tended to look to the U.S. and Canada for idea generation, while a lower percentage looked to Europe for the same tasks. Confirming the prediction that innovation shall get cheaper, the survey finds that India and China are still seen as centers for product development. An excellent article – in these times of intensified competition, only focussed innovation fostered globally, exceling in all dimensions of idea, timing, execution in most aspects of business is the only way to ensure business success.

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Icerocket Gets Acquired

Icerocket gets sold. Serial entrepreneur Marc Cuban does it again. Icerocket, an integral part of the blogosphere, operates a real time search engine that focuses on blogs and RSS. It recently started providing the latest in top news, business, technology, health, and sports stories etc, and added multimedia search in a limited way. Think Partnership’s Litmus Media's Valid Click network and PrimaryAds' affiliate marketing network would now co-opt icerocket community – a step in integrating popular medium into the world of business. Think partnership recently closed the acquisition of Litmus media ( less than ten days back). The ValidClick Search Network serves pay-per-click search advertising, local search advertising, shopping comparison and coupon content to over 1,000 search engines and web directories processing over 90 million searches per month.
As I see it, there comes a stage in a company's life when different strategies might be needed to foster growth in new dimensions -particularly when competition more or less catches up over a period of time. Icerocket had many choices in front of it : expand aggressively provide support for tags, folksonomy etc or increase the search to include new arena's beyond the original plan of tracking blogs & RSS, extend into vertical search like others, spin of its feed burning service etc. Compared to Technorati, Icerocket had always been ice cool - very reliable and simple to use.Too often the value of community built is spoken of as very high and in this case it appears that Icerocket is taking efforts to capitalize on this. Watch for developments at Technorati and clearly lot more action is ahead in the blogsophere

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The TPI Quarterly Index – Interesting Trends

I listened to the Wachovia sponsored TPI quarterly index webcast. The trends highlighted in the presentation and discussions are worth closely following:

- The quarter is witnessing a lot of outsourcing deal restructuring with BPO deals outnumbering outsourcing deals. Strongest quarter for mega deals in the past three years
- Average contract duration is impacted by the more commodity like nature of the ITO contracts and the more transformational nature of the BPO contracts (1/3rd of the BPO deals are said to be transformative).
- Retaining Incumbency is an increasing Challenge.
- More contracts were signed than in any other first quarter and more associated TCV was awarded than in any first quarter since 1999.
- Mega deals - $1billion plus TCV are doing well as well as 50 million size deals.
- Bullish observation is tempered by the fact that restructurings continued
to account for a growing number of contracts and their TCV
- More than $22B in Pipeline Value;About $6B up for Award in Next Three Months
- The forecast that annualized revenue of the ITO market will decline by 3-4% while BPO will increase by double digits in 2006
- Many small deals actually take longer to negotiate and close than large deals due to learning curve effects
- FS deals are little less than 50% Of BPO deals, procurement and HR follow in terms of share of business.
- The IT Outsourcing segments is seeing a large number of players. Only the largest firms (IBM, Accenture &EDS) operate on both the IT Outsourcing and BPO arenas.
- Big 4 North American firms are gaining more share and Indian firms have a miniscule share of business.

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Thursday, April 13, 2006

Google Calendar : End Goal Is Office Killer ?

Courtesy of TechCrunch saw a review of the Google calendar and Mike Arrington called it "fast, slick and stable". As I see it, Google Calendar has a nice and simple UI, does what you need it to do in terms of easily jotting down events, busy time, etc., and, most importantly, allows one user to share their calendar with other s in the world – with API’s open to the rest of the Internet. This ought to extend to support multiple timelines .Now for the customary part –will google launch an microsoft office killer application. Post writley acquisition this gotten more intense.
Richard McManus writes,"With email and calendar now firmly in place and integrated, word processing (a key office application) on the books, ominous signs of an all-purpose database in the form of Google Base, other pieces waiting to fit into place (Page Creator, Reader) and Google Desktop to underpin it all with search - Google is well on the way to building a Microsoft Office killer! As I see it, this could be the long term vision for Google. I could not find anything close to an intent of acquiring footprint in the desktop office market space. All it said as one of the five strategic priority is for building new products & services for publishers of information. However, something tells me from me within that Google may eventually bite the bullet and… the rest could become history.



Accenture India – Movement At The Top

Here comes the news that Chaitanya `Chet' Kamat, head of Accenture's delivery operations in India, quit his position recently citing personal reasons. Kamat was instrumental in building Accenture's delivery network capability in India from scratch over the past five years. Accenture as I recently covered was seen to executing very well in terms of building the offshore capabilities and independent reports wrote that Accenture has done a brilliant job in adopting to the changing reality and has built good delivery mechanisms centered on India. I wrote recently about new entrepreneurial forces emerging out of the Indian offshoring enterprises (I wrote therein that I expect more activities - strongly pronounced ,to emerge from this ecosystem moving forward), those were meant to come form indian headquartered firms. While I do not know the specific reasons behind such exits, It is common knowledge that top level changes are not necessarily good for a growing organization ( the depth of residual talent can mitigate to an extent) and here's wishing the new management all the best.

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The Hottest Job In America

The hottest job in America is software engineer says, Money magazine. Explaining why it's great, the article goes on to state that software engineers are needed in virtually every part of the economy, making this one of the fastest-growing job titles in the U.S. Designing, developing and testing computer programs requires some pretty advanced math skills and creative problem solving ability. The potential to grow in the job, with experience into consulting and management is cited as an added attraction. A profession that is less then four decades old – reaching the top notch position is indeed impressive. More so when the discussions about foreign labour admission are at its height, comes this news – shows the potential for opportunity and growth in the profession

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Wednesday, April 12, 2006

Oracle Acquires Portal Software

Oracle had always been eyeing the telecom market. Here comes the news that Portal, the billing and Revenue Management solution provider for telecommunications and media markets is being acquired by oracle. The acquisition price is set at $220 million. On the face of it Oracle eBiz suite, Siebel CRM & Portal billing and revenue management nicely supplement each other. Telecom billing is not part of core offerring for any standard enterprise player.Billing solutions are seen as a critical infrastructure for telco service providers and this is a fast growing high yielding market.Portal covers the entire gamut of billing creation, mediation and rating functionality with support for wireline, wireless, broadband, cable, voice over IP, IPTV, music, and video. The telecom industry itself is in the midst of massive transition. Besides heighthened M&A activities, the dyanamics and metrics of operator offerings towards end consumers are changing with numerous cross selling, up selling package options. With the increasingly felt trend of converegence of publishing, media, and entertainment services converge, a unified /homogeneous solution for billing, customer interaction, and management of digital services and content is indeed an attractive proposition. Chuck Phillips in an earlier interview said that oracle would help users move from writing code to deploying solutions around packagess- may be it would happen as we move furtehr down. This time around oracle has acquired an existing package solution player.This is an acqusition if played well can work out well for Oracle. Few things to note here :
A. Several telcos buy solutions as a package deal - so oracle may be forced to work well with multiple partners here.Best of breed may still be seen as a viable option.
B. There is a view that telco billing software could be a prime canditate to be offered as a hosted solution for telecom players. We have to see how oracle manages this.
C. Several Telco's may make investments in different solutions like billing, intermediation etc at various points in time and may overlook the benefits of an integrated suite therein
D. The switching costs of software infrastructure is seen as very high by Telco's and too often they postpone moving away from existing set of applications.
Telecom systems are highly specialised and in many cases support specific set of processes and hardware - Looks like Oracle has picked up a good find that too at an attractive proce. The key now is how oracle builds on this advantage for mere additions of portfolio alone won't do - as we see that in case of many large players the peripheral solutions never take off all that well- like oracle's internally developed web portal products

Update : Jeff points to a SAP Perspective about the deal.

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Tuesday, April 11, 2006

The Industry Has Changed But The Analysts Haven’t: Chuck Phillips

I have been highlighting the lukewarm response of the market towards Oracle’s performance. As I pointed out earlier, despite oracle's massive acquisitions & encouraging financial results,the stock is trading at its 15 year low P/E levels. Charles Phillips outlines Oracle’s acquisition strategy now in its second phase (think smaller) and his plans to develop vertical expertise in key industries. As I see it,some of his response in this interview are indeed insightful – but interestingly I did not see him talking anything about value from the customer perspective and how its recent strategy had helped customers, reduced TCO, portfolio rationalization, continued support etc. I firmly believe that the world would begin to look at oracle from a different lens, only if they begin to relate acknowledged customer benefits arising out of their grandiose strategy. Excerpts from his response with some edits with comments added:

- He believes that by making $2 billion more in pretax profit than two years ago, given the fact revenue is up, a better brand name and more customers and if the stock hasn't moved, it's an opportunity. If the last 1,000 years of markets are correct, the expectation is that sooner or later the stock will respond.(The issue is on future growth - one that comes out of already existing business, the second stream of business coming out of business from bought out components, third newer set of customers embracing oracle owing to all their acquisitions and changed startegy)

- We did change our strategy and change is viewed as a potential risk on Wall Street. (Agreed - most of oracle's moves are indeed gusty and trend setting)

- Oracle’s acquisition strategy is same but in a different phase now. Phase one was about getting scale, which allows you to charge less but still be more profitable (need more demonstrable facts here). Phase two is about going forward and adding industry dimensions that no one is dominant in.

- Industry applications are dominated by a bunch of niche players or [applications built] in-house and the space is wide open. Collectively, some vertical customers are spending way more on [home-grown systems] than they are on ERP [enterprise resource planning]. Oracle’s strategy is to harness four or five big industries with packaged applications and get telecom companies and banking companies to quit building their own systems. Banking spends $30 billion a year on IT and a lot of that is building stuff, and a lot of them are tired of doing it. Others are telecom, the public sector, health care, high tech and retail. ( Call this a strategy for an acknowledge player in the packaged application space!! I see for example packages like Siebel, acquired by Oracle have verticalised aggressively – one would like to see how this is plan to be leveraged, also SAP is heavily into verticalization for a long time.)

- While saying that the larger deals are probably behind them , he highlights that for most part of what's left to be bought for its strategy in verticalised areas are smaller companies- the plan is to take pieces of technology and quickly become a big player in those areas.

- He maintains that the declining growth in Oracle's core database may be an aberration but future shall see more growth. The unit volume is even faster than the dollar growth and those turn in to big deals later once you seed the customer and they start using your technology.

- Today’s industries require new models of analysis – The old model of 70% of the revenue stream coming from license sale may not be valid. It was just under 50% in the last quarter because the industry has evolved. He highlights having a very larger customer opportunities provides oracle with lot more opportunities – (One can hear investors asking for more data and customer asking for enhanced benefits owing to this).

- On Demand, or Software as a Service, may not happen in the next five years, maybe even 10. These systems take a long time to change and the shift in that direction but very slowly.( I agree)

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Hottest Job In China Is To Be A Recruiter

Forbes writes, "China's economic boom and attendant surge in intellectual property theft and financial crimes are taxing the skills of personnel departments. The demand for those skills is making personnel into one of the hottest careers in China today". Mercer assessment shows, wages in China for top HR executives of multinational companies grew 20% in each of the last two years to $97,000-in a country where per capita income is 1% of that figure. The article points to the risk of a bad hire and corporate-snooping outfits are thriving as clients demand more background checks on their partners and employees. Due to historical reasons, there are no good national databases for checking employment histories, education credentials and criminal records. The cost to check out a potential or past hire can range from $100 to $5,000, more than in the U.S., where criminal, legal and credit databases are more easily checked. Not surprising - this is known to those associated with china related sourcing opportunities. I earlier pointed to the disappointment that foreign enteprises publicly aired in terms of scaling up resources in china. Amongst the problems : A lack of bilingual Chinese IT professionals, for jobs such as team leader, is also holding back expansion. From a service provider perspective, one English and Chinese speaking programmer is required to oversee a team of four local developers who speak only Chinese. Because there is only a small number of bilingual programmers, they can command a salary premium of 30-40 per cent. These labour market deficiencies have not gone unnoticed among customers in the US, which is the biggest market for Indian IT. Companies cannot quickly and inexpensively employ locally in response to a sudden burst of project-based work, which is a feature of the industry. In particular, there is a lack of suitable local applicants for jobs as project managers and quality control managers.As I see it, with all these bottlenecks, it may well be the case that China is not a big force in software services. A recent sandhill survey on offshore product development showed that just 5% share went to china for offshoring. Looks to me china for pan chinese market may hold out to be a good value proposition - if skill base can be harnessed and a lot of people are trying to develop - they are trying hard.

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Bollywood Stars As Mercenaries

Amjad Maruf highlights that the Indian government spent Rs. 40 crores on the Bollywood stars for an eleven-minute show at the recently concluded Commonwealth games in Melbourne. Assuming this to be true, I fully agree with him. He ads," the government had spent even a fraction of that amount on the athletes who participated in the event then we would have had some more medals in the countrie's Kitty. It is really shameful that the government gives step motherly treatment to the sports and sportsmen and spends crores on Bollywood actors that has no connection with sports world at all". As I see it,Indian sports need good administration, facilities that are 100X better and bigger than waht the country has today, professional management and a rewarding environment. It's a pity that even the medal winners at the Commonwealth games will not receive even one percent of what Bollywood stars like got for simply waving to the crowds & dancing for a couple a minutes. It's high time that the sports adminsitration get its priorities correct. Splurging on bollywood stars when the basic sports setup is so crunched for resources is downright ridiculous. To those bollywood stars - We demand that you return back these ridiculous professional fees back again to the sports federation(s)and earn your grace and goodwill back.

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Lionbridge & Microsoft

There had been much speculation about the buyout of Lionbridge.Someone even pointed me out to something like this as well. Lionbridge localizes a broad range of Microsoft products and content in as many as 60 languages. Lionbridge with presence in many countries delivers a wide range of cost-efficient global outsourcing services including localization, development and testing. Lionbridge localization services enable organizations to release products and content in all markets globally. Across industries, global organizations rely on Lionbridge services to increase international market share, speed adoption of global products and content,to enhance their return on enterprise applications and IT system investments. Microsoft said Lionhead will create games exclusively for the Xbox 360 console and the Windows operating system. The deal involves Lionbridge's hosted service offering, including its Logoport translation memory. Lionbrdge had earlier confirmed that Microsoft has sent hundreds of translation memories to Lionbridge for sequencing. Earlier these TMs were managed by Trados.I see this deal in a way as a reflection of Microsoft’s new learning – to co-opt and if necessary but them out. Peter Molyneux, Lionbridge’s founder joins Microsoft as part of the deal. As some see it – he fits Microsoft well, not only because he never meets a deadline (see Windows Vista delay), but also because he promises more than he delivers (see the history of Windows!!. Digs apart, seriously this is a great move - coming together.

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Monday, April 10, 2006

Red Hat Buys JBoss

Red Hat buys Jboss in a 350 million dollar deal. After a near marriage with Oracle,which failed surprisingly on price considerations, comes the news of JBoss acquisition by Redhat.JBoss middleware along with the linux centric Redhat would form a combination to become a truly open source centric application server that would potentially compete with the likes of BEA, IBM & Oracle. The Common Bond of Open Source has brought these together more than anything else. Gartner predicts that the Application Integration and Middleware and Portal (AIM) markets for license revenue is preliminarily estimated to more than $6.5 billion in 2006. Together with Red Hat's proven portfolio of enterprise solutions, the combination, once consummated, is expected to help accelerate the shift to SOA by making innovative, powerful solutions available to developers and customers that seek to lower development and deployment costs.This acquisition is expected to accelerate enterprise adoption of open source infrastructure .The acquisition would be seen as revenue neutral for the combined entity assessed from an annual perspective. This could solidify the opensource grip on the lower end of the infrastructure gap. It would also be interesting to see what shape JBoss rules, Jboss Messaging, JBPM 3.1 takes in the days to come.

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The US & The Fear Of Chinese Products

Randall Stross has busted the myth about Lenova on multiple fronts in an excellent thought provoking article in New York Times titled “Looking at the Free Market, and Seeing Red”. Pointing to the latest Lou Dobbs rant on state departemt’s plan to buy Lenovo PC’s. The State Department seeks secure network communications, it "turns to Communist China," and thus renders the United States "perhaps more vulnerable than ever” so says, Lou Dobbs. Lenovo recently won a competitive bid to sell the State Department $13 million worth of personal computers. Michael R. Wessel, a member of the U.S.-China Economic and Security Review Commission, an advisory body to Congress, said that the State Department would use the Lenovo computers in offices around the world, potentially providing China access to "some of our deepest secrets," a "treasure trove of information they could use against us. Technological correctness apart, it needs to be noted, I.B.M. and three American private-equity firms are big investors in Lenova and the largest block of shares is owned by public shareholders. (Its shares are traded on the Hong Kong exchange.) Lenovo is headed by an American, William J. Amelio — a former senior vice president for Dell, as it happens. The geography of the globalized supply chain that underpins the computer industry does not respect power blocks. All players, even the "100 percent American-owned" vendors, have a major presence in China. The PC’s are getting assembled in the US , says the article. Essentially these forces by parading nebulous concerns centered around “security issues” a new form of protectionism is being attempted – and in the process make a global company operating in an increasingly commoditized space take the hit. Time to set aside such things guys – the time that these forces spend discussing on such things –china and other nations are working hard to create more and more value added stuff creating surplus on other things- eventually the debt of rich nations get funded through such means.

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