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.
The content management system market seems to be on the course of a rebound. - Amadeus Capital Partners and Northzone Ventures, together with Peter Larsson (founder of Protect Data, mobile security tech startup acquired by CheckPoint for $585M last year) have acquired a majortiy stake in EPiServer. It is a later stage deal for two VCs known for early stage. - There are already about 1300 CMS firms in the market - Service spend :The industry average ratio was 1 to 5 (for every one product dollar there's five dollars for services (This requires a discussion – high end system implementation may not possibly follow this pattern) The matrix gives an idea about the features of EpiServer. This is a space, where surprisingly hosted vendors have not made huge progress thus far. The reigning wisdom in the corporate world is to avoid building a Web content management system in-house. It will be costly and pose problems with maintenance, enhancements, connectivity and migration in the long term. In this era of digitization, content management systems are becoming a fixture in every enterprise. Homegrown systems come with a huge disadvantage. It may not be optional for every enterprise to maintain its own long-term road map for multiple and complex systems in a constantly evolving ecosystem.The dawning wisdom is for such costs to be better spread over a number of implementations by vendors whose survival depends on committing greater resources to the effort than any one enterprise can sustain.
Intel is coming back - quite impressively. Paul Otellini talks about the tick-tock model, the analogy being a clock, you know, a pendulum, so that every year, there’s something new. The cadence between microarchitecture and the silicon cycle is referred to as the "tick-tock" model . The term "tick-tock" comes from the steady recurrent ticking sound made by a clock. Each "tick" represents the silicon process beat rate, which has a corresponding "tock" representing the design of a new microarchitecture delivered in a cycle approximately every two years. This model minimizes the risk associated with the introduction of new silicon processes and microarchitectures by alternating the focus from silicon to microarchitecture. So every year, something substantial gets better. And it gets better in a big way. And either it gets faster, it gets cheaper, it gets smaller, it gets cooler, it gets more power-efficient. And that really brings the might of Intel to bear on delivering a very predictable cadence into the marketplace. Paul talks about a wide range of issues in the FT interview, with amazing insights. Some excerpts with edits: On the need to change and the creativity comes from the outside : Intel has multiple teams, not so much in competition with each other, but parallel to each other, being able to implement new ideas. And this model of leapfrogging now, where we use one site to develop a product, and then the next site, you know, jumps on the next product, and the next site. And then they leapfrog each other. They’re building on each other’s cumulative experience. Internal competition is very healthy and as Paul sees it, things get better by competing internally than externall, and have these good ideas come from within. - Communications as an integral feature to a computer, particularly around platform architectures, is absolutely essential to what we’re doing. And so I tend to look at things from sort of the machine or the user backwards, as opposed to the products outwards. - Every television in every living room in the world is going to be connected to the internet at some point in time and it’ll happen first in mature countries, and then –and then spread to others. But the internet as a source of content, particularly user-driven content, is emerging. - Healthcare is ripe for productivity, but it’s also slow to change for a whole bunch of reasons having to do with privacy and infrastructure. So this one is going to be a long – a longer hike than some of the others. - The products that Intel builds need to consume less and less energy per desk. But we also need to drive the performance up to be able to do more things with computers. And so that’s been the focus of our energy efficiency, particularly – and it’s obvious in handhelds and notebooks - The new generation of products that intel is designing are carbon negative!! Read this the Spectrum of Risk Management in a Technology Company Paul summarizes this : Our business is such that in the digital – particularly in the microprocessor side of the house, you must constantly reinvent yourself. And you know, we have a – if we do the math, almost – you know, 90 percent of the revenue that we get in December of any year is from products that we weren’t shipping in January of the same year. So if you don’t have this constant upgrade cycle, replacement cycle, built into your mindset, not planned obsolescence, but improvement to the point of driving a need for or a desire for someone to upgrade their computer, then there’s no future. And people could just – you know, it’s kind of like if we stopped building at the Pentium or something, and that was the last product we ever built, computers would not have gone any farther, and people wouldn’t be buying new computers, because they wouldn’t do anything new. So this desire to make things better, to improve, is really built into the DNA of the company. And I think has allowed us to embrace change in a very aggressive fashion, which I think is why we’re – we’ve been able to thrive.
John Dvorak writes about Bubble 2.0. To me his perspective looks shallow. Growth won’t be linear everytime and it is sees growth and adoption takes a journey similar to the S –Curve. In such a scenario amidst, failed realization, comes out a few shining success stories. As I see it, the industry is stabilizing and maturing and resource allocation is getting done with more sound reasoning. Technology continues to evolve and angel and VC investments may not be fully rational(that’s the way these have got to be). There would be some failures but not enough to paint the doomsday for the the industry with a broad brush. Look at this carefully : The previous dot com bubble has very little to do with disappearing markets or businesses going bankrupt. The bubble was all about people that would blindly invest in internet stocks and businesses. After awhile when the overvalued internet companies started to fail, and all that stock was worthless, it caused a huge impact on the economy. Today people are more judicious in their choice of investments and seldom chase unproven web businesses. We still have that WWW rush as we see more and more services move to the web and the first adopters start to mature - see Wikipedia and Google Maps as second generation web services versus movie rentals like Netflicks, which are a relatively new experiment. The money, on the other hand, is there but everyone is considerably more controlled about their investments. Today investors definitely seek a solid business model or more likely a working implementation first, before large swathe of funds get allocated. All the net majors today are following this – starting from Google, MySpace to Facebook.
The BusinessWeek InfoTech 100 list makes interesting reading.
Reinvention is the common theme noticed by BWeek that unites the companies on the 2007 Information Technology 100, the magazine’s ranking of the top tech performers. The report also notes the convergence effect that the internet is forcing on the telecom players - it is effectively shattering the boundaries between formerly siloed industries like cable and telecom. The methodology of selection: Companies whose stock price has dropped more than 75%, whose sales shrank, or where other developments raised questions about future performance were eliminated from contention. Companies were ranked on four criteria: return on equity, shareholder return and revenue growth (which were given equal weight), and total revenues (which was weighted). Then the top 100 companies were reranked as a group.
Some of the exceptional stories of growth :
Nokia is recognized for its phenomenal growth: It has become the leading handset maker in India and China and is seeing strong growth in Africa and Latin America.
Amazon.com is seen as the ultimate example of transformation. First it moved beyond selling books to other media, then to electronics, and just about everything else. The next move is working on the next diversification play: offering other businesses spare computing and storage capacity, as well as leftover space in Amazon's huge distribution centers. The strategy has yet to deliver meaningful revenues, or any profits – reflecting a never-ending need to search for the next source of tech growth.
Notable Dropouts: Dell & SAP – Both of them dropped down significantly.
DELL : DELL was still the world's biggest PC maker in 2006, when Dell ranked No. 15 in the list. Since then, HP as bumped it aside, stealing sales and market share with clever advertising and crowd-pleasing products. Dell's traditional strengths - a low-cost model of selling gear over the Internet, a strong U.S. corporate customer base, and an emphasis on desktop computers- suddenly look like weaknesses in a world where laptops dominate and sales growth is strongest in U.S. consumer-oriented stores and in developing nations. Dell's preliminary 2006 sales totaled about $57.1 billion, up just 2% from 2005. That compares with a 19% growth rate in 2004.
SAP : A new line of software from SAP will let customers tap into programs on an SAP server and use SAP functions without installing and maintaining them on their own computers. The strategy could appeal to small and midsize companies that don't have big IT departments. But it also puts SAP into more direct competition with companies such as Salesforce.com and could suck sales from SAP's traditional software lines. Investors are nervous, knocking SAP's stock price down 12% since January and pushing it off the list, down from No. 39 last year.
The point to note here is even these two laggards, are also trying to reinvent themselves – so clearly the tech sector is undergoing a sense of transformation from within. As Fortune notes,the IT adoption of technology across the developing world is going to create a huge opportunity for growth for the tech players. Intel, Microsoft - all are gearing to tap the next wave of growth. Interesting times lay ahead for the tech sector.
I listened to Gen.Powell speak in a private meet few days back - he said amongst other things that barring Iraq, around the world, things are beginning to look manageable and promising and hoped that with the impending change in the US administration, even the situation in Iraq could change. On my travel back to Singapore read this thought provoking article about the futility in dealing with the Middle East. I quote:
We devote far too much attention to the middle east, a mostly stagnant region where almost nothing is created in science or the arts—excluding Israel, per capita patent production of countries in the middle east is one fifth that of sub-Saharan Africa. The people of the middle east (only about five per cent of the world's population) are remarkably unproductive, with a high proportion not in the labour force at all. Not many of us would care to work if we were citizens of Abu Dhabi, with lots of oil money for very few citizens. But Saudi Arabia's 27m inhabitants also live largely off the oil revenues that trickle down to them, leaving most of the work to foreign technicians and labourers: even with high oil prices, Saudi Arabia's annual per capita income, at $14,000, is only about half that of oil-free Israel. And global dependence on middle eastern oil is declining: today the region produces under 30 per cent of the world's crude oil, compared to almost 40 per cent in 1974-75. In 2005 17 per cent of American oil imports came from the Gulf, compared to 28 per cent in 1975, and President Bush used his 2006 state of the union address to announce his intention of cutting US oil imports from the middle east by three quarters by 2025.
The only city that is making some forward looking moves apppears to be Dubai - see the video about the construction activities in Dubai. Unless compelled by immediate danger, the world says, Edward Luttwak should therefore focus on the old and new lands of creation in Europe and America, in India and east Asia—places where hard-working populations are looking ahead instead of dreaming of the past.
Making it easy to launch a new enterprise is one of the many ways in which the U.S. has led the world in fostering a dynamic entrepreneurial class. Other structural factors, from bankruptcy laws to tax policies and employment regulations, help small businesses thrive here. And those moves have been copied into the playbooks of other nations eager to see their homegrown entrepreneurs create jobs and spur economic growth. Geoff Lewis in a Fortune Small Business article reports on his search to find the most entrepreneurial nations. “Our quest for startup-friendly countries began with the World Bank's doing Business reports (doingbusiness.org), which every year measure the entrepreneurial climate of 175 nations in two ways: starting and operating a business. But the lists give an incomplete picture. France, for example, ranks in the top 10% for ease of starting a business and in the top fifth for operating one, but it has notoriously low rates of entrepreneurship. Global Entrepreneurship Monitor (GEM), an annual study produced by Babson College and the London Business School. Its 2007 High Growth Entrepreneurship Report provides a glimpse at national rates of high-expectation entrepreneurship - how many American-style entrepreneurs a country produces.” Amongst the other things that the report finds is that the world’s two largest emerging economies, China and India, exhibit significantly different levels of high-expectation and high-growth entrepreneurship. Emphasizing on the role models that young people adore in all countries, one of the quotes indside the article points out "Every high school kid in the United States knows who Sergey Brin and Larry Page are". Now this cultural revolution is spreading to China, where newly minted billionaires such as Zhengrong Shi, chairman of Suntech Power Holdings (suntech-power.com), are becoming folk heroes. Read - Who in the world is entrepreneurial?. As i see it,These surveys typically ignore how majority of people get things done –engaging specialist firms and taking expert advice may substantially alter the cycle time – but in some cases, it can be worse than what has been published. For instance, am surprised at the better ratings given to Thailand over other asian countries. Business friendliness also need to be assessed along the lifecycle of the business. Martin wolf wrote a couple of days back that asian countries are creating their own course of progress chart, and they are so successful that multilateral agencies like IMF are getting thrown out of business and the multilateral bullying institutions are cut to their size and are getting more and more irrelevant to most of the world’s population. While there is no doubt about the rise of asia in a big way, its attractiveness index for entrepreneurs need to go up – substantially. I do believe that in general the entrepreneurial cult will get more and more strong in the days to come – around the world. Seeing the rapid change that is happening all over the world, I can safely say that this list would look different five years from now and much more different in a decade.
Wherever I go in any whichever country I hear the buzz - lets invest in education and internet/computing technologies - our future would be prosperous. It makes eminent sense to understand where things stand on soem of these dimensions. European countries and Singapore have surpassed the United States in their ability to exploit information and communication technology, according to a new survey. The United States, which topped the World Economic Forum's "networked readiness index" in 2006, slipped to seventh. The study, largely blamed increased political and corporate interference in the judicial system. The Report is produced by the World Economic Forum in cooperation with INSEAD, the leading international business school, and is sponsored this year by Cisco. The report is jointly edited by Soumitra Dutta of INSEAD, and Irene Mia of the World Economic Forum. As Klaus Shwab points out, policymakers and business leaders recognize the need to create an enabling environment to support the adoption of technologies and spread their benefits across all sectors of society.The importance of networked readiness, especially at the national level, has achieved prominence on the public policy agenda, with the realization that the tools provided by ICT can help countries fulfill their national potential and enable a better quality of life for their citizens.
The index, which measures the range of factors that affect a country's ability to harness information technologies for economic competitiveness and development, also cited the United States' low rate of mobile telephone usage, a lack of government leadership in information technology and the low quality of math and science education. The Report uses the Networked Readiness Index (NRI) to measure the degree of preparation of a nation or community to participate in and benefit from ICT developments. The NRI is composed of three component indexes which assess: - environment for ICT offered by a country or community - readiness of the community's key stakeholders (individuals, business and governments) - usage of ICT among these stakeholders.
Thierry Geiger, one of the Forum's economists responsible for the 361-page report, points out that the U.S. market environment remains the best in the world in terms of how easy it is to set up a business, get loans and have access to market capital. The two emerging giants have interesting rankings here. India is ranked at 44 & China is ranked at 59. Nordic countries - traditionally strong in all surveys conducted by the Geneva-based Forum - dominated the top of the rankings. Denmark edged Sweden for the top spot, while Finland was behind in fourth. Singapore, which topped the poll in 2005, was the top Asian nation in third. Rounding out the top 10 were Switzerland, fifth; Netherlands, sixth; Iceland, eighth; Britain, ninth; and Norway, 10th.The report covered 122 countries, with Chad, Burundi, Angola, Ethiopia and Bangladesh at the bottom. The network readiness index is available here.
Sadagopan's Weblog on Emerging Technologies, Trends,Thoughts, Ideas & Cyberworld "All views expressed are my personal views are not related in any way to my employer"
