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Sunday, January 20, 2008

Is A New Sun Dawning ?

Jonathan Schwartz highlights about the revenue synergies of Sun’s acquisition of MySQL. Over 100 million copies of MySQL's open-source database software code have been downloaded for free since the product was first released more than a decade back. A number of business houses rely on MySQL's software. Clearly the acquisition has no cost synergies, given that most of the MySQL team works from their respective home(s). The question in the enterprise software industry is articulated well by MR about the acquisition here

So why would a veteran disruptor and ready-to-IPO MySQL sell to Sun? Perhaps MySQL heard some concrete, savvy thinking about how the deal would propel the combined entity to the top of the open source vendor ladder – something MySQL couldn’t do alone. Perhaps there was a bit of fear that the slowing U.S. economy would make its IPO less than stellar. Perhaps MySQL needed the financial security of a Sun to help it build its business away from the eyes of investor scrutiny"

Jonathan points out, Wherever MySQL is deployed, whether the user is paying for software support or not, a server will be purchased, along with a storage device, networking infrastructure - and over time, support services on high value open platforms. Last I checked, we have products in almost all those categories. He thinks that the single biggest impediment to MySQL's growth wasn't the feature set of their technology - which is perfectly married to planetary scale in the on-line/web world. The biggest impediment was that some traditional enterprises wanted a Fortune 500 vendor ("someone in a Gartner magic quadrant") to provide enterprise support. This reinforces Kim Polese view on opensource support models. Sun believes that it can augment MySQL's great service team with an extraordinary set of service professionals across the planet - and provide global mission critical support to business. Sun says support to Oracle & Postgres remains unchanged. In the past IBM had succeeded with such strategies but the go-to market strategy and field power of the two companies are not comparable. We now have to see this strategy win for Sun.

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Tuesday, January 15, 2008

Taking The World By Storm

I suddenly find that there is a greater appreciation of the business growth in the emerging economies amongst friends and colleagues. With foreign funds bailing out the US financial service giants, we are probably entering a new world order.
UNCTAD is turning its attention to the new shape of global business: investment now flows increasingly from south to north and south to south, as emerging economies invest both in the rich world and in less developed countries. By 2006 foreign direct investment (including mergers and acquisitions) from developing economies had reached $174 billion, 14% of the world's total, giving such countries a 13% share (worth $1.6 trillion) of the stock of global FDI. In 1990 emerging economies accounted for just 5% of the flow and 8% of the stock. Their slice of global cross-border M&A has been climbing. It reached 14% in value terms in 2006 . That year they spent $123 billion in more than 1,000 cross-border deals.
According to BCG, thousands of companies like these are expanding sales and production internationally.The combined revenues of the top 100 emerging giants will reach $3.3 trillion by 2010 and a massive $11.8 trillion by 2015. Their home markets offer several advantages. Rapid growth gives companies scale and spare cash to invest abroad. Costs are low. The difficulties of operating in an emerging market may make managers adaptable and resilient.
The new brigades are fanning out around the world using a selection of five strategies, according to BCG.
- The first is taking brands from local to global.
- The second strategy is to turn local engineering excellence into innovation on a global scale
- The third path to international success is going for global leadership in a narrow product category
- The fourth strategy: taking advantage of natural resources at home, and boosting them with first-class marketing and distribution.
- The fifth strategy is to have a new or better business model to roll out to many different markets.

A new world order is indeed emerging - unnoticed by many.

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Tuesday, January 08, 2008

Microsoft Set To Acquire FAST Search

Microsoft announces intent to acquire FAST search. FAST, one of the significant player in the enterprise search space post the Verity acquisition by Autonomy, now bites the dust. FAST has had some financial woes of late – but it has good technology capabilities and a large customer base. FAST specializes in enterprise search –particularly centered around unstructured data and has a enterprise scale application with good deployments to showcase. Microsoft has indeed made the right move. The valuation is at around 6X EV/Sales. Clearly, the acquisition of FAST bolsters Microsoft's positioning in the enterprise search market, making it that much more formidable in its enterprise search business against Google. Lets look at this –Microsoft can now span across the stack –covering the entire back-end infrastructure inside the enterprise and with collaboration tools and search – on paper, it shows formidable strength for someone trying to compete with it.

As Mary J Foley points out, Microsoft’s enterprise-search strategy is focused on SharePoint Server, a family of back-end servers and services which includes content-management and search. Microsoft also offers a Microsoft-hosted version of SharePoint, known as Office SharePoint Online, which is currently targeted at companies with more than 5,000 seats. After all Microsoft viewed Sharepoint as thenext big operating system from Microsoft. – sharepoint is aggressively muscling inside enterprises.

Seen at another level, this is part of consolidation streak and clearly almost all companies aged upwards of six-seven years in the <200 Mn$ sales are surefire hurts/beneficiaries in the consolidation fever and almost all software enterprises less than 500 Mn$ would be evaluating options, except for very niche players and those seeing growth. We can now expect some action from other big players here – to storm into a fast growing enterprise search space. This wave of consolidation is not necessarily a great development from a customer perspective - in terms of pricing and support. I also believe that this would unleash a lot more entrepreneurism in the market - people and money are floating out now. Players upwards of 1 Bn$ sales would be looking at this from a different perspective of identifying the potential catch - I guess the name of the game is changing.

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Monday, January 07, 2008

US Dollar Rally Possible ?

While Bush find that the US economy has problems, here comes the view that the beleaguered dollar may rally back.
The foreign exchange market is not yet pricing in slower global economic growth, says Jim McCormick, head of currency research at Lehman Brothers in London. He says the main consideration in the market has switched from whether or not to be in carry trades to macroeconomic themes, as heightened concerns about a US recession, combined with the sharp slowing taking place in Japan and nascent signs of slower exports in Asia, make it clear the global economy is turning down.
“At the same time, the growing gap between easing swap spreads and rising corporate spreads suggests that while central banks have gained control of the extreme financial market stress, it has come too late to avert a significant slowing in growth.” The dollar, he concludes, “will eventually benefit as the weakness in growth spreads to other parts of the world”. But the economy troubles may be more due to misaligned current account deficit owing to bubbles in asset prices than to a misaligned dollar.

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Saturday, January 05, 2008

The Format Wars : Inflection Point?

Toshiba, the big player behind HD-DVD is surprised at Warner Bros decision to fully backup Blu-ray standard.Today, there are more hardware companies making Blu-ray players than HD-DVD. Major Blu-Ray brands such as Panasonic, Samsung, Pioneer, Sharp, Sony, LG, etc...

Last year, an undecided Warner Bros. Entertainment, announced it would release films on the Blu-ray format as well. Last month, Warner committed to supporting both standards. For starters, look at this comparison note. As i wrote , earlier In the near future, movie goers can have the same interactive experience typically available in multiplex. Blu-Ray technology can enable viewers go from watching an action movie to participating in an interactive game based on the movie, or he could switch to a 3-D version of a particular scene. Massive storage capacities up to 200 gigabytes supported by Blu Ray- provide an almost endless capacity for add-ons by home audiences. Blu-Ray provides incredible backup possibility. Other than video files, all personal data (documents, music, photos, and what not) would fit in a couple dual-layer Blu-Ray disc quietly. Sony, the main technology muscle behind Blu-ray stated that in fact, part of the justification for acquiring MGM was the profits to be realized from reissuing the 4,100 films in MGM's library in the Blu-Ray format. Sony has a critical mass of movies that it can release on Blu-Ray. Aside from its own titles, Disney, 20th Century Fox, and Lions Gate have agreed to release their titles on Blu-Ray. Paramount, DreamWorks and Universal support HD-DVD.

As I wrote before, the situations of Sony and Toshiba are not symmetrical. For Sony, the Blu-Ray is an integral part of its overall strategy. For Toshiba, the HD-DVD is just another product they manufacture. A company reaching an accommodating deal on licensing fees could also end up making money by manufacturing the Blu-Ray DVDs.We now need to see how the major markets react to these developments from the consumer side – markets may have a decisive say as well. Toshiba claims that HD DVD players and PCs have outsold Blu-ray in the US market in 2007. Remember - in the DVD Vs DIVX war, may studioes supported DIVX against DVD initially. DVD prevailed - DIVX is nowhere in sight now. This time thhe Bluray camp looks lot more formidable and credible as well - so that makes this emerging development lot more interesting.

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Friday, January 04, 2008

Dot.com’s : Whats Up In 2008?

Greg Linden foresees a major dot.com crash in 2008. He contends that the crash will cut deeper than what happened in 2008 and even established players could be affected. I do not think that the scenario may be so bad – while conceding some consolidation and winding up of wannabe startups is bound to happen. We just saw the massive J.P.Morgan report assessing what lay ahead for the larger players.

As I wrote almost several months back, Web 2.0 is overdue for a reality check. As I wrote here, I am not so unduly optimistic about the Web 2.0 movement – I had been calling for a reality check for some time. But the enthusiasm shown in building this movement is indeed amazing and some of applications show promise of success. I do know that this web 2.0 is managing to attract a new bunch of entrepreneurs who are generally well regarded for their capabilities and enterprise. Sure the list in the Web 2.0 hall of shame will be longer than the Web 2.0 hall of fame, but still the movement needs some positive consideration. What do the readers think – feel free to comment here/mail me.

Update : Just after publishing this noticed - kevin fox, google's user experience expert leaving google to join a startup and puudingmedia announcing closure of 8 million series A funding.

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The Competitive Strategy

I am a big Michael Porter fan. Porter returns to reaffirm and extend this classic work of strategy formulation, which includes new sections showing how to put his analysis into practice. In the last few years, Michael Porter has brought economic rigor to the study of competitive strategy for corporations, regions, nations, and, more recently, health care and philanthropy. “Porter’s five forces” have shaped a generation of academic research and business practice. Porter contends, if the competitive forces are intense, as they are in such industries as airlines, textiles, and hotels, almost no company earns attractive returns on investment. If the forces are benign, as they are in industries such as software, soft drinks, and toiletries, many companies are profitable. How else do we explain the fact that some fast-growth businesses, such as personal computers, have been among the least profitable industries in recent years. A narrow focus on growth is one of the major causes of bad strategy decisions.
He anchors his premise on industry structure that drives competition and profitability, not whether an industry produces a product or service, is emerging or mature, high tech or low tech, regulated or unregulated. While a myriad of factors can affect industry profitability in the short run—including the weather and the business cycle—industry structure, manifested in the competitive forces, sets industry profitability in the medium and long run. Over two decades, Michael Porter has remained consistent as well as developmental – avoiding the standing still syndrome. With competitive strategy , Porter extended the competitive forces analysis to the point of view of industry itself going beyond looking through the prism of markets or of organizational capabilities. Porters framework , after more than two decades since it got into mainstream thinking on competition and strategy.

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Wednesday, January 02, 2008

Nothing But The Net – 2008 : Look For More

A friend of mine passed on the impressive J.P.Morgan 2008 report on the internet sector - titled, "Nothing But Net". Techcrunch has also written about the report. I see that Imran Khan and his fellow equities research team at JPMorgan predict the major publicly traded Internet publishers, portals, commerce sites and search engines will continue to outpace the performance of the overall stock market by wide margins through 2008. While revenue growth for the online sector is expected to "decelerate" slightly, the team expects the earnings of Internet companies to grow more than four times faster than those of the overall stock market during 2008. The report notes that internet stocks delivered almost three times the returns of S&P stocks in 2007.
The report sees correlation between broadband penetration and ecommerce revenues. Khan expects online ad CPMs (cost per thousands) to "accelerate" during 2008 due to two big factors: a "tighter" supply of advertising inventory from major offline media outlets; and "better monetization techniques" from online publishers. The report revises the outlook for the global search advertising marketplace in 2008, predicting worldwide search revenues will rise to $30.5 billion from $26.2 billion in 2007. He attributed the growth to "strong volume trends, better-than-expected monetization, and continued robust growth in Continental Europe." Khan said search advertising will grow at an annual rate of 28% over the next four years, and would reach $60 billion by 2011. More sectoral M&A and consolidation is predicted as stronger companies shall get to do better and earn more cash. The report adds, traffic, technology and transactional volumes would drive such consolidation. Like every other tech players, international markets generate more than 50% of revenues for the players. With global GDP expansions global accelerating faster than that of the US – the revenue gap will further widen. Gobally well spread internet companies would benefit a lot. The report points out that Amazon, eBay, and Google all get about half their revenues from international markets. Yahoo gets only a quarter of its revenues from abroad. This should put at rest speculations centered on Yahoo – atleast for now, given the upside potential. Good news all around – the report sidesteps issues centered around potential global slowdowns.

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Tuesday, January 01, 2008

The Gold Standard In Search

With about 65 percent marketshare, Google continues to lead the mass search space. In the UK market, Google has over 85% marketshare. The marketshare numbers are not mere numbers for the sake of numbers - these correlate to revenue potential. It is estimated that Google translates each point of market share into about $100 million in annual revenue.
Peter Norvig, Director of research oversees about 100 computer scientists as they work on projects as diverse as medical records management and machine translation. In this interview he talks about the directions of search in Google.

TR: You claim that Google's accuracy is pretty good. How do you know how good it is, and how do you make it better?

PN: We test it in lots of ways. At the grossest level, we track what users are clicking on. If they click on the number-one result, and then they're done, that probably means they got what they wanted. If they're scrolling down, page after page, and reformulating the query, then we know the results aren't what they wanted. Another way we do it is to randomly select specific queries and hire people to say how good our results are. These are just contractors that we hire who give their judgment. We train them on how to identify spam and other bad sites, and then we record their judgments and track against that. It's more of a gold standard because it's someone giving a real opinion, but of course, since there's a human in the loop, we can't afford to do as much of it. We also invite people into the labs, or sometimes we go into homes and observe them as they do searches. It provides insight into what people are having difficulty with.

TR: Where do you see Google search in two to five years?

PN: You'll see integration of various kinds of content. We're getting into speech recognition and all the kinds of interfaces on phones, where you have a tiny screen and awkward keyboard. You'll see that gaining in importance. You'll see integration of our various properties. We used to put the onus on the user and ask them if they wanted Web search or image search or video search. Now we're trying to solve that for them and serve up the results in a way that makes sense.

Simplicity in thinking and good execution to support scale characterises Google and so ling as it sticks to these as minimum goals in all of its inititaitves - it is bound to suceed further.

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The Phenomenon Called Tagging

So many of us complain about information overload and end up spending significant time in information retrieval Tagging has become extremely powerful and popular as well in the last few years. I read this interesting note on ways to use tagging. Also read there – why the newest craze is ma.gnolia for bookmarking and a few more things. Has yahoo done anything at all post the acquisition of Del.icio.us?
At the elements, tag classification, and the concept of connecting sets of tags between web/blog servers, has led to the rise of folksonomy classification over the Internet, the concept of social bookmarking, and other forms of social software. In real life we see that larger-scale folksonomies tend to address some of the problems of tagging, as astute users of tagging systems will monitor/search the current use of "tag terms" within these systems, and tend to use existing tags in order to easily form connections to related items. The result : evolving folksonomies define a set of tagging conventions through eventual group consensus, rather than by use of a formalized standard.
Although "tagging" is often promoted as an alternative to organization by a hierarchy of categories, more and more online resources seem to use a hybrid system, where items are organized into broad categories, with finer classification distinctions being made by the use of tags. For a long time, I was wondering why one can’t tag locally stored objects. Then came the not widely known capability of Windows Vista to provide tagging support at the desktop level for local objects.
Windows Vista has built in functionality for letting users tag files with keywords and other metadata, making it lot easier to find. With custom created “virtual folders” based on saved searches for explicit keywords of the files tagged, already having different virtual folders for different projects can be brought under the tagging ambit.. Some of the formats that are currently supported include :

• TIFF and JPEG files.
• MP3 files.
• XPS, Microsofts equivalent of PDF.
• MSI installer files. Windows Media Audio and Windows Media Video files
(It is windows – so one cant’t tag acrobat files!!) Good idea of what tagging is all about – read here. No doubt, am again falling in love with tagging.

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