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Tuesday, August 29, 2006

Positive Trends In Venture Financings

The just released trends in venture funding show growth and point to more activities.
U.S. venture industry related results for Q2 shows amongst other things:
- The amount invested by venture capitalists in the U.S. in 2Q06 was approximately $6.7 billion, against $6.4 billion in 2Q05 and $6.2 billion in 1Q06. The combined total of $12.9 billion for the first half of 2006 puts the industry on pace for its largest investing year since 2001.
- Acquisitions of venture backed companies in the U.S. in 2Q06 was approximately $7.1 billion in 92 transactions. This was a decline from $8.5 billion/97 transactions and $8.4 billion/103 transactions in 2Q05 and 1Q06, respectively, although the combined total of $15.5 billion/195 transactions for the first half of 2006 puts the industry on pace for its best acquisitions year since 2000.
- There were 16 IPOs of venture backed companies in the U.S. in 2Q06, raising $1.3 billion. The total of 29 IPOs raising $1.9 billion in the first half of 2006 puts the industry on pace to have its best IPO year since 2000, other than 2004 when 67 IPOs raised $5 billion.

Ofcourse these numbers by nature cover such a large variety of transactions bundling in all types of transactions – seed to late stage and leading to exits. It is clear that going by the activity levels , lot of startups are getting funded. The ripple effect could be felt continents away. While on this also look at the evolution and activity levels in a very hot market – India here and here . Battery ventures Mark Sherman believes that India would become one of the core venture hub shortly : silicon valley, Route 128, Israel etc. While there are some genuine concerns about what can come out of such a deluge of funds chasing the country, clearly good times lay ahead for entrepreneurs and the tech ecosystem. Also to note is that there is a clear private equity wave felt around the world.

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Monday, August 28, 2006

Enterprise Software: Consolidation, Innovation & Business Value

I wrote a note for the The Deep End column at Sandhill.com. While evryone today is busy talking about Enterprise 2.0,web 2.O, their current penetration into large business enterprises are nothing great to write about. I feel that the 2.0 Craze media coverage is ahead of reality. CIO's are preoccupied in managing the existing IT investements and hence the focus on enteprise software in the form it mostly exists today. Of late, traces of real innovation have been rarely spotted in the enterprise software sector - so complain a majority of stakeholders. If one were to think of the situation, it is clear that innovation, or lack thereof can be paradoxically seen to enjoy a well defined pattern of cause and effect relationship. This is clearly driven by the oft-heard maxim: consolidation is stifling innovation, and lack of innovation is driving consolidation. The raison d'etre for consolidation happens to be the ability to bring out positive outcomes based on bringing together supplementary and complementary offerings. In reality we are getting to see mega vendors racing to integrate acquired technologies into wide suites. This has an inevitable consequence - that of managing a maturing stack (which no doubt would consume significant efforts). With this lopsided approach towards gaining strength in the market, the mega vendors are forced to focus their energy and resources to integrating diverse and newly acquired technologies into so-called "best-in-class" enterprise suites. In reality it is seen that their original maturing IT stacks are holding back their powers of innovation as this absorbs substantial share of their R&D outlay. New ideas and new product development take a back seat - resulting in a slow pace of progress. This preoccupation of bringing together such new solutions as against developing new programs is certainly not a healthy trend. Owing to the consolidation frenzy, smaller firms are also focused on developing solution allied to mega vendors and larger brands and not necessarily focused on rolling out innovative products. Vendors tell us that customer demands, market dynamics, and technology advancements are pushing solution frameworks to be aligned towards an experience of end-to-end process fulfillment. This forces the vendors to acquire new functionalities faster and integrate them to increase the richness and appeal of their application stack. This leads to a situation where some tend to view that increasingly because of its value proposition getting based on its consolidated avatar, all enterprise systems are running the risk of being seen at its core as essentially the same. Of course, vendors would make us believe that there is so much of differentiation that provides an edge to their respective products. Leaving aside ROI assessments, feature and function comparison, market share or cost comparisons, vertical spreads, but seen from an end user perspective, mature enterprise software today seems to provide performance advantage just within a band. The hope for the future is based on the trends which show that componentized software products, interoperability standards and Internet technology will lead to a rich array of considered choices for enterprises to adopt. Software vendor's execution of their futuristic strategies would come into sharper focus as users would realize that migrating older instances and/or integrating them to other software will remain resource consuming and painstaking for some time to come. New solutions within enterprises shall find easy fitment to newly rearchitected products, capable of actualizing automation and transformation of processes end-to-end. Enterprises shall actively begin looking at new protocol adherences, standards and technologies in order to benefit from Web services/SOA frameworks. With large scale consolidations are happening within the industry, the basis of competition shifts from plain market muscle, promotions and fast moving abilities to providing future proof architectures and good support to business processes through repository centric integrated offering benefiting the business across the extended value chain. As I wrote recently , the enterprise software market will have to reflect and embark on an important restructuring and transformation to become more vibrant, broad based, innovative and bounce back as a serious contributor to the growth of the industry ecosystem and the business at large. Read the full note here.

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Consulting + Offshoring : Next On The Innovation Agenda?

I wrote in offshoring new technologies that even pure play consulting is increasingly getting offshored. I also brought out in february that amongst the innovations that indian headquartered offshoring firms are bringing,the ability to distribute work between various locations and the set of benefits that come along stands tall. Now we are seeing the benefits that offshoring has provided for technology solutions are getting extended to consulting as well. It is an age where increasingly we are seeing that western firms are getting more and more comfortable with offshoring vendor's technical and business process outsourcing capability. This means engaging them for technical and management consulting tasks — at a fraction of the cost of blue blooded consulting vendors say the Accenture's and IBM. (Note :Like all other posts this is my personal view and not in any way related to my employer.)The truth of the matter is technology's power and reach is becoming so entrenched that invariably it is becoming to be a case of technology and business consulting getting intertwined.

On the eve of Mr.Narayanamurthy’s retirement, he is being interviewed by the media and I found this one on the next in the innovation agenda for Infosys quite interesting:

What's next on Infosys' innovation agenda?
We are working on a huge initiative where we are bringing the power of our business model to activities which were hitherto thought unviable for (outsourcing). For example, the conventional wisdom is that consulting is an on-site activity, a customer-site activity. We're saying that there are many, many activities in consulting that can be delivered from countries like India. For example, preparation of the proposal, research, analytics, simulation. All of that can be done from India. It could be as much as 30 per cent to 40 per cent of the total effort.

I have heard Mr.Murthy saying this 3-4 years back. I see a few doing this in action now. There are some who have been doing this before that as well. It is very likely that Infosys itself does this in some form. May be he is talking about substantially scaling up the model here - which itself is a really tough thing to do and can be definitely seen as being innovative. Afterall, consulting is about delivered value and it is part of the solution -to-the solution conundrum. All these are happening while the traditional big consulting firms are happy featuring golfers!!

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Saturday, August 26, 2006

Amazon’s Elastic Computing Cloud

As the world is awaiting the vision of free bandwidth, computing & storage to become a reality, several players are making related moves. After Amazon storage,now is the turn of amazon computing. Amazon clearly walks the talk. Amazon's CTO Werner Vogels recently again highlighted the importance of Amazon Web Services. He pointed out that Amazon.com technology and data is made available through the AWS (Amazon Web Services) e-commerce services. This, he added is a free Web-services interface for developers, which they can use to build (and charge for) their own applications on top of Amazon and there are about 150,000 of these developers and Amazon considers them important customers. With AWS and Amazon E-Commerce Service (ECS) exposes Amazon's product data and e-commerce functionality to create storefronts on the fly.

Now comes the news of Amazon Elastic Compute Cloud(Amazon EC2). This is a web service that provides resizable compute capacity in the cloud. It is designed to make web-scale computing easier for developers. Just as Amazon Simple Storage Service (Amazon S3) enables storage in the cloud, Amazon EC2 enables "compute" in the cloud. Amazon EC2's simple web service interface allows you to obtain and configure capacity with minimal friction. It provides you with complete control of your computing resources and lets you run on Amazon's proven computing environment. Amazon EC2 reduces the time required to obtain and boot new server instances to minutes, allowing you to quickly scale capacity, both up and down, as your computing requirements change. Amazon EC2 changes the economics of computing by allowing you to pay only for capacity that you actually use. Sun and Google are at itfor sometime. One can expect Google to follow suit with more vigour and focus. This has the potential to get trendy as well.

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The Magic Called Demographics

Adam Smith’s invisible hand seems to be working in the most visible way.
Malcolm Gladwell explains the global implications to countries and corporations owing to demographics. As he sees it, the US private pension system is now in crisis. General Motors, the country’s largest automaker, is between forty and fifty billion dollars behind in the money it needs to fulfill its health-care and pension promises. The key to understanding the pension business is something called the “dependency ratio” and these are best understood in the context of countries. In the past two decades, Ireland has gone from being one of the most economically backward countries in Western Europe to being one of the strongest: its growth rate has been roughly double that of the rest of Europe, courtesy largely of the dependency ratio submits Mr.Gladwell. This relation between the number of people who aren’t of working age and the number of people who are is captured in the dependency ratio. Ireland came free of the enormous social cost of supporting and educating and caring for a large dependent population over a period of time. It was like a family of four in which, all of a sudden, the elder child is old enough to take care of her little brother and the mother can rejoin the workforce. Overnight, that family doubles its number of breadwinners and becomes much better off. About a third of the East Asian economic miracle may be attributed to demographics. Dependency ratios may also help answer the much-debated question of whether India or China has a brighter economic future. Right now, China is in the midst of a “sweet spot.” In the nineteen-sixties, China brought down its birth rate dramatically; those children are now grown up and in the workforce, and there is no similarly sized class of dependents behind them. India, on the other hand, reduced its birth rate much more slowly and has yet to hit the sweet spot. Its best years are ahead.
The logic of dependency ratios, of course, works equally powerfully in reverse. If your economy benefits by having a big bulge of working-age people, then your economy will have a harder time of it when that bulge generation retires, and there are relatively few workers to take their place. For China, the next few decades will be more difficult. Thirty per cent of the Chinese population will be over sixty by 2050. That’s four hundred and thirty-two million people.” Demographers sometimes say that China is in a race to get rich before it gets old. Economists have long paid attention to population growth, making the argument that the number of people in a country is either a good thing (spurring innovation) or a bad thing (depleting scarce resources). But an analysis of dependency ratios tells us that what’s critical is not just the growth of a population but its structure. Major parts of Europe, Japan and singapore all are worried about the impact that demographics could potentially unleash on those nations. This demographic logic also applies to companies, since any employer that offers pensions and benefits to its employees has to deal with the consequences of its nonworker-to-worker ratio, just as a country does.

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Friday, August 25, 2006

The VC Money & Indian Entrepreneurial Growth

Sramana Mitra comes out with an amazing perspective about the VC and entrepreneurial maturity in the Indian ecosystem. With tech giants committing large investments in India and many VC firms upping their interest, she thinks that in today’s India, the commodity in short supply is good entrepreneurs. In VC parlance, fundable deals are few and far between. She points out that this goes back to India’s traditional role as the world’s back-office and the

“skill-set that has developed in India is that of engineering management and coding. The specifications are provided by teams elsewhere. Elsewhere, the market studies get done. Indian managers do not understand global technology markets. They have hardly had opportunity to learn this aspect of business. Entrepreneurs try to position products without knowledge of the product marketing discipline”

She thinks that with tech services being the forte of India – VC’s may think that the entry barriers are low and the strong players may get stronger and the investment appeal may go down. VC’s may like internet, mobile, travel, matrimonial type of sites and investors need are looking at other areas like retail, real estate etc.. and she concludes that due to a number of such reasons that the Valley would continue to be the hotbed of technology innovation, which Indian back-offices can then implement and scale. Charles has similar set of concerns and thinks that with all the VC money flowing into India, a new startup model for Indian companies may emerge.

My Take: Read my earlier note here wherein amongst other things I noted that more than 95%( again my estimates based on feel) of the web2.0 setups have primarily come from within the US. Kudos to the technology leadership that the US is showing here - Forget Asia or Europe - initiative, speed and zest for trying out in the tech sector still remain a US vestige - Good for America and by extension good for the world. As I see it, its time for action in places like India right now.
Some like CK.Prahalad expect China & India to dramatically change things in the years ahead. A recent delegation of venture capitalists visiting india while noticing infrastructural problems, also noted the ethos of circumventing such difficulties to carry on. While some investments are beginning to happen, the ground reality very much echoes what I covered earlier here. Vast majority of venture money tends to go into existing and later-stage businesses. There is little or no real VC money available in India for early startups. Companies that are receiving money in India are either spin outs from existing large businesses, captive units or second tier outsourcing providers that may lack the size or scale to compete with IT service giants and want the private equity money to grow through rollup and acquisitions. In the US, venture money goes into early stage, pre-product or pre-revenue companies , while in India, a majority of the private equity is going into late stage businesses. A friend upon seeing this post asked me when to expect the likes of next Google to come out of India. I had no answer to provide. Truth is that in general most indian enterprises are hardly innovation chasing entities, and the framework for VC entry & exits are poorly defined. Coupled with limited VC activity in the past and archaic regulations – these make it a tougher breeding ground for enterprises like that of what is seen in the valley. I agree with Sramana that the valley shall continue to be the springboard of innovation and technological advances for some more time to come and we may see some limited action in other parts of the world – we may see the activity in India to be the equivalent of say a Boston area or Texas area for springing up startups but valley shall remain the central node for technological advances. Lets hope breakthrough big deals and innovative enterprises spring out of this momentum. But, I am not in agreement with Sramana about few things: Entrepreneurism is not in short supply in India – I see an increase by multiple times in terms of aspiring entrepreneurs in India – While I agree that she is right in terms of lack of marketing mindset amongst Indian setups – it is changing fast – mostly what I see is that lack of capital had been a major reason. The scene is changing fast. The low cost PC solution is a case in point. I now see many India based entrepreneurs going around with brimming ideas – fact remains that VC’s are not so forthcoming in funding ideas as we see in the US market – understandable as they are in a new terrain. We are not hearing of VC’s closing deals in India all that fast as we see elsewhere. I also feel that even in traditional outsourcing there are lots of white spaces waiting to be invested by the VC’s. I do feel that the investment levels in pursuing mobile related opportunities are far too less in the country and I think it is still not a settled issue if Indian firms can be there – there are few more steps before ruling out the possibility. We are not seeing ambitions to build a next Cisco like firm in the mobile application space – fact is that we may not see a Socialtext, Google, SAP, Cisco to come out of India in the next 5 years timeframe but things are improving and are definitely slated to improve further in the coming years.

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Thursday, August 24, 2006

Currently Reading - EIMONA

Am curently reading the book EIMONA, written by G.B.Prabhat. It is quite fascinating to read - set in the context of the changing lifestyle and value owing to prosperity and new found economic freedom where the normal is now the abnormal, and the abnormal, the normal. The novel attempts to bring forth the conflict between the old India that is struggling to retain its essence, and the new India of stock options, freshly minted millionaires, prenuptial agreements and layoffs. And the style of the book - superb and indeed gripping. Shall be posting a detailed review shortly, after full reading of the book. In the meanwhile, go to the booksite for additional buying information and reviews.

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India Anchored Service Providers See Huge Growth Ahead

First it was Stephanie Moore. Gartner's Partha also sounded optimistic. Now, Dana Stiffler from AMR has come out with an excellent perspective on the state of affairs of India Inc. I liked Dana’s term of calling India Inc companies as Indian headquartered companies/India anchored companies. She points out that things are on fire – tremendous growth opportunities are being felt by these majors. The scalability shown by these players are real record of sorts. Dana makes a studied observation here –while all players are seeing increase in their cost structure, seen from a customer perspective - the benefits still outweigh the costs. They have no intention of backpedaling on their outsourcing and offshoring strategy. Another interesting thing to watch in Dana’s chart is the revenue/employee comparison between the global and Indian players. As I wrote recently, sourcing relationships actually encompass a wide array of choices given the dynamic nature of business and the intersections of various levels of capabilities that lay within enterprises and service providers. The increasing expectations associated with outsourcing are becoming difficult to meet. With a wide range of functions getting outsourced, the ability of the outsourcer to bind and manage all these functions meets with a varying degree of disruption. On the other hand, the service providers are coming under huge pressure to improve operational efficiencies and to maintain and enhance margins. So in essence, seen from a customer perspective, offshoring strategies need to be dynamically re-evaluated as the business needs, strategies, models and execution methods keep changing. Clearly for the foreseeable future, despite the higher salaries experienced in India and other offshore markets, customers can continue to work with their chosen offshore service provider out of the existing locations to maintain the cost advantage besides reaping a set of other known higher-order benefits in offshore outsourcing opportunities.

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Tuesday, August 22, 2006

IT Is Business

So much of travel and limited time to write in the last 3/4 days. George Colony points to the fact that from a time when computers were used to track business and help with retrospective results, it has now come to a point where companies would stand to lose millions if technology stops working and therefore proposes that the term IT be replaced with BT and he thinks this conveys the fact that business is technology and technology is business.

George is right – but he is too late. After all the technology investments in the world consume almost half of the capital investments made by business. I think we have reached this situation when the ERP systems began to get implemented within large enterprises. Global rollouts, instances consolidations all made this provide IT with unimaginable importance within enterprises. Its impossible to think of the birth of some sectors like what we see today without conceding a central role to IT. A Fedex, Walmart or trading rings as we see them today, can’t be even thought of without IT. The web has stroked the fire and the dot.com companies( or their peak valuations in ther heydays!!), no doubt made people sit . I heard someone say that if their enterprise systems fail to perform for a few days, their entire annual earnings would be wiped away. Sensible boards insist on a credible CIO to get hired and no wonder we see that CIO’s also get fired faster. As I see across verticals, increasingly the competitive edge is just going to come out of Innovation and IT would play much more significant role in making this happen. In practice, I see that firms that are underinvesting in technology lose their edge over a period of time. I am not saying that every major initiative would directly contribute to competitiveness, but not trying would definitely harm them.Seen from a business perspective, Innovation need not not be always of the disruptive type but every type of Innovation counts. In today’s hypercompetitive world ,simply put innovation is non-negotiable and innovation streak is of very high value to enterprises and of course much of this would be mainly based on leveraging IT. Business and Technology are getting so integrated, calling by a different name simply does not matter. Absolute truth needs no attorney or an analyst to argue its case.

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Sunday, August 20, 2006

Shenzhen & Sriperumpudur : China & India

Businessworld writes about the evolution of India’s first high tech ecosystem – in a way aping the fabled chinese city of Shenzhen. Interestingly for quite some time , shenzhen is trying to acquire a software city status like Bangalore. Sriperumpudur (almost chennai), from India’s Dallas where a former prime minister was assassinated, is now slowly emerging to be the Indian equivalent of Shenzhen. Nokia, Flextronics, Motorola, Foxconn all have invested here to manufacture telecom equipments here. There are three types of operators that have come to invest here – The OEMs like Nokia, Motorola, The EMS’s like Flextronics & Foxconn & the component manufacturers who work with the OEM & EMS players. In less than an year, the expectation is that 50% of shenzhen’s volume of mobile related components would begin to get rolled out of Chennai. (Shenzhen’s capacity is 50 million handsets an year)
Shenzhen,less than an hour by air/train from Hongkong makes laser printers, mobile phones, set top boxes etc. Shenzhen, so close to Hongkong, was China’s first SEZ, gets some 30 billion in FDI, contributes 9% to china’s GDP. Shenzhen is home to some of China's most successful high-tech companies, such as Huawei and ZTE and most of Apple Ipod devices get manufactured/assembled here.

For India, a country which is about to clock record number of mobile phone subscriber additions in the world, having domestic manufacturing facility was the first step – and there Nokia made the first step and the rest followed. Already in Chennai, global telecom majors – the likes of Ericcson, Cisco,Telecordia etc are doing some research/software work – there is a fair expectation that related software work that can be done locally will see a huge swell, and to bring manufacturing costs lot of the suppliers may move in as well, creating in the process, a complete ecosystem. This may become the first high tech manufacturing cluster in India as well as it tries to emulate Shenzhen. After all Chennai is the nearest commercial mega port closer to the SEAsian tigers(and there is a nearby state of the art Ennore Port) and being almost the gateway to south India – provides lot of locational advantage and sriperumpudur is less than 200 miles from Bangalore as well. Thousands and thousands of engineering graduates come out of colleges in the province as well. But infrastructure support (water included) and further government support in not impeding things would be the key to build on this momentum. After all Shenzhen is what it today, owing to the push that started all the way from the top. It had the benefit of billions of dollars in investments by the chinese government and it is way ahead now, making comparison an uneven one. It will be very interesting to watch the development of Sriperumpudur in the next 3/5 years.

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The Private Equity Party

Wherever I go, whichever part of the world, whatever be the context, in business meets, in the last three- four months, the most talked about thing is investment and more particularly private equity. In the US market itself, it is getting reported that the buyout business booms, with a total of $404 billion worth of deals done this year, double the pace seen a year ago ( The year before the number is said to be 180 billion dollars). I can recollect having seen atleast 4/5 cover stories in business magazines (not specialist finance magazines) that I came across in the same period – not counting the numerous article(s) that I have come across on the topic. In its elemetnts, for those not clear about what private equity is all about - a set of firms, the private investment bank or private equity company - that include well known names like the Carlyle Group, Bain Capital, Kohlberg Kravis Roberts (KKR) etc, are setting the business climate in fire. These companies huge coffers, swelling from pension funds and private investors, specialize in acquiring a variety of companies, taking them private, "reengineering" them/stripping them/ extending them and then, usually, cashing out with a new stock offering or a sale to another company. I probably spend more time meeting people compared to the time that I spend to read/write(one of the reason that the volume of posts are coming down), I can confirm that based on mindshare and the type of players involved and deals that are being talked about, certainly private equity is almost in the centrestage of global business economy today. I have also written about private equity centered activities several times – just to point a few : here, here, here, here and some more. Now comes the news that Siemens business services may be grabbed by private equity folks. The key thing to remember here is that practically every business in the world today can get related to privtae equity plays - this can relate to business transacations of myriad natures - buy/sell/merge etc.

However this article points out some interesting points about the private equity cult:
The private-equity firms are piling debt on to the companies that they buy, and then often using the cash that the loans generate to enrich themselves rather than putting it toward improving the companies' financial health. It warns that debt can grow too big for the companies to handle _ not so much for the buyout firms themselves, but for everyone else from workers to suppliers to banks with even the most remote ties to the companies. Pointing out that there has been more than $38 billion in dividend recaps so far this year, up from about $7.7 billion in 2004. While this is guaranteeing the private-equity firms cash in their pockets, the added debt means higher loan payments, which not every company will be able to manage. That's especially true in an environment of slowing economic growth and rising interest rates. Credit rating reports suggests that in a sample set they find the default percentage to be about about 6 percent compared to about 3.7 percent default rate in normal cases. All these definitely merits thought and discussion.

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Saturday, August 19, 2006

The 2.0 Craze : Coverage Ahead Of Reality

Peter Rip finds that 2.0 is now in common usage.There is Web 2.0, Where 2.0, Business 2.0, Office 2.o,Enterprise 2.0, Advertising 2.0, Voice 2.0, Lunch 2.0, Business Development 2.0, Hindsight 2.0.

Let me add identity 2.0 ,Mobile 2.0,Mobile web 2.0, BPM 2.0, SaaS 2.0, SOA 2.0 to the list. Ofcourse, at this time it is wrong to talk about Kiko, but would be better off by looking at Gartner sanctifying web2.0. It is better to point to Microsoft’s(perhaps the largest software company) brilliant move to match the 2.0 phenomenon and it finds that it is time for it come with buyback scheme. If you are still bored - you are encouraged to look at Web 3.0, or if you are an analyst, you can be researching why web2.o is not mobile 2.0. But seriously speaking, the details therein and the energy & enthusiasm shown in building such apps are amazing – clearly pointing to the fact that a new niche is getting created – one that would get stronger and stronger in the days to come. I continue to hold the view that clearly the web2.0 movement is gaining momentum - though the coverage seems to be ahead - calling for a reality check. In it own waythe web2.0 ecosystem is beginning to be felt, albeit a small niche now.

Category :The 2.0 Phenomenon,

The Changing ECM/WCM Landscape

Recently I wrote that more consolidation of ECM space appears plausible – that would be bringing together platform/infrastructure players, portal players, ECM players together. This was written based on Opentext buying Hummingbird and IBM offering to takeover Filenet. When the Filenet news came, I wrote that this is now going to bring into shaper focus the competition between the major players in the ECM/WCM space. Once can expect more action centered on acquisition by the majors – Oracle, HP, EMC & may be Microsoft( actually it has a different approach in terms of the product play than rest of the players – but ironically, in my view, if anybody they must be acquiring the likes of filenet – if not for anything else atleast for the customer base! And gain a firmer foothold). Almost all players in the ECM/WCM space may now be looking at merger/exit strategies that may include the well known players like Vignette, Interwoven, Stellant etc.. besides BEA. John Newton, co-founder of Documentum and the main force behind Alfresco writes on IBM buying Filenet as signifying that consolidation is truly on its way. He also confirms my earlier view that clearly, the reason for these mergers is not for technology, but for market share and customer base. As he sees it with the level of overlapping technology in these systems, the problems inherent in consolidating the repositories must be outweighed by the desire to consolidate customers. Alluding similarlity to the developments in late 80s and early 90s in the relational database industry when Oracle took on DEC’s RdB products and IBM purchased Informix, he says that these acquisitions can only accelerate the continuing consolidation of the industry. He too does not foresee Vignette & Interwoven to continue as standalone players for long. He further expects that the standardization process shall get accelerated - all the major vendors - IBM, Oracle, and EMC - have a reason to create a standardized way of accessing their repositories. it helps customers to access each other’s repositories and further provides a consistent way of accessing their own repositories. His insight : In the relational database world, standardization preceded consolidation, but in the content management world, it seems to be happening the other way around. Look for more action in this space in the months to come.

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Friday, August 18, 2006

Connexion Grounded

Oh Its not an internet bubble in the sky that crashed. I am talking about Boeing’s decision to disband the connexion initiative.Apparently, travellers inside the united states did not subscribe to this service in good numbers – generally transcontinental flights seem to have shown some traction in using the service. This also brings into question - the ability to bring associated on-demand services. But in-flight entertainment systems may step-in and provide some solutions. Think crazy - how about these systems also providing browsing facilities? I think every flight with a flying time for more than three hours should have this facility and probably its time to look at different ways of charging customers. A flat fee may not be the right model for this service – For someone like me doing a lot of transcontinental or long distance flights, Connexion is a dream come true and Boeing has a good chance to make this a good money earning service – in fact this may potentially become a very profitable revenue stream for Boeing moving forward if managed lot more imaginatively(variable pricing, loyalty points, co-branding etc) and promoted with lot more focus and aggression – for example flights fitted with connexion can carry a separate logo etc.. I definitely see the revival/rebirth of a similar service in future – the fundamentals – any analyst can compute and give – no. of laptops that fly every day – even 5 to 10% were to use .. we are talking about astronomical numbers here.

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Offshoring : More Insights

For sometime, people have been complaining about rising costs. Many have joined the chorus and some went to the extent of saying several things like India’s offshoring market share may go down from 80% to 10% in the next 4 years!! As I wrote recently, there are sustainable advantagefor indian headquartered majors. I was surprised to know that many of them who feel Indian is overheated and to my surprise, I noted that some of them who were so vociferous have not even visited the country.

The accompanying chart(for some strange reason -blogger is not allowing upload now - shall do so shortly - but some quick numbers to note summarizing monthly location costs for ITS- Vietnam - 6131USD, India - 9896USD, China- 10095USD etc..)(average entry level costs) settles the case on the cost dimension. India scores the highest when assessed from cost & suply situation. Of course, offshoring is not just cost arbitrage - many factors that influence the choice includes talent pool, cultural affinities, geographical proximities, cost structure and ability to scale etc. The sustained growth of offshoring is non-debatable. I would like to point out that many are soft on the emerging locations for offshoring – as I see it many of them do not attach the same importance when they write about key issues like attrition and scaling up. For example, people in the business know the alarming attrition and higher costs base when it comes to looking at China for offshoring, while I do certainly expect most of the emerging locations to increase the volumes, in reality I am not sure if any one country(other than china) can be the miniature equivalent to India – even on a scale of 1:XX in a sustained way. Also to be noted is that there are larger issues at interplay : The focus now needs to shift to improving productivity & yield converting into better business value as can be seen by executing faster and providing better business solutions. As I wrote recently, sourcing relationships actually encompass a wide array of choices given the dynamic nature of business and the intersections of various levels of capabilities that lay within enterprises and service providers. The increasing expectations associated with outsourcing are becoming difficult to meet. With a wide range of functions getting outsourced, the ability of the outsourcer to bind and manage all these functions meets with a varying degree of disruption. On the other hand, the service providers are coming under huge pressure to improve operational efficiencies and to maintain and enhance margins. So in essence, seen from a customer perspective, offshoring strategies need to be dynamically re-evaluated as the business needs, strategies, models and execution methods keep changing. Clearly for the foreseeable future, despite the higher salaries experienced in India and other offshore markets, customers can continue to work with their chosen offshore service provider out of the existing locations to maintain the cost advantage besides reaping a set of other known higher-order benefits in offshore outsourcing opportunities.


eLearning, Open Source & Litigations

I wrote about the dim prospects of e-learning riding the open source wave. The post evoked some strong reaction – perhaps more than most other posts would normally invite. Someone wrote to me whether I have ever been to any institution to write about them. Well elearning is evolving very fast indeed. I was in a major presentation on a global elearning initiative a few weeks back and I saw significant amount of interest shown in open source – that included discussions around Moodle and Sakai as well. I have seen quite a few commercial elearning packages getting implemented. I read with interest this development : Blackboard, a leading package claimed patent rights on certain tools/aspects of learning management systems. Blackboard claims that the patents only cover narrow company-created innovations. The open source community believes that Blackboard would leverage the patent to force competitors into expensive licensing agreements, thereby increasing costs and reducing innovation. The No Patent Wiki lists issues relating to the patents claimed by Blackboard. Theoretically speaking, leading edge open source applications can be best developed in the academic community – but I very much doubt that we can get together so may thinking hats in a sustainable way to come with a steady pace of consistent applications. The more I began to look at solutions like Moodle /Sakai, amongst the well known applications, the more I realized that one may need to do a lot more to make these global class live applications( just my views here). I do not necessarily subscribe to the notion that open source fosters innovation. Larry Mcvoy once wrote- “It is simply not possible for an innovative software company to sustain itself using an open source business model. For the record, I do not look at patenting as the same as innovation. Mcvoy says bitkeeper believes if the product is open sourced ,we would be out of business in six months .To build a financially sound company needs well-trained staff, who need to be paid well. If everything is free, how can I make enough money to keep building that product for you and supporting you? I can’t agree more.

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Thursday, August 17, 2006

The Evolution Of The IT Worker

eWeek has an interesting note on the future of the IT Worker.With technology’s critical support to business getting more and more pronounced, The IT manager isn't going extinct. The next chapter for the IT worker could be promising, argues the authors of the book – “The IT Manager’s Handbook” and they believe that :
Outsourcing has a diminishing luster & the magic has worn off. It's switching one headache for another one—managing the outsourcer.
IT workers will enjoy global demand for their services. While fear of being outsourced dominates, a global marketplace is emerging. That fact means workers could hang a shingle and become global players on their own.
Thomas Malone believes that we're headed for equilibrium in the global wage market.It may take a decade or two, but at some point, people capable of doing work will get paid roughly the same amount wherever they are. It will happen a lot faster than people think," Malone said. He earlier wrote,"Four decentralized organizational structures—loose hierarchies, democracies, external markets, and internal markets—that will be enabled by technology but centered around enduring human values shall be the dominant model. The shift from "command-and-control" management to "coordinate-and-cultivate," and the new skills that will be required to succeed would become critical to succeed. A framework for determining if a company’s situation is ripe for decentralizing and which organizational structure would be most effective would evolve".
• New architectures need multiple skills. Technology may play a subordinate /supportive role to processes
• Technology will spur organizational evolution. IT provides a hugely rich medium for organizational innovation and Malone sees people who stick it out in IT in the lean years will be well-positioned when the world wakes up and realizes that they need them. I recently saw a chart that showed that there are parts of the world where BPO/ITO work can happen at discounts ranging from 75% to 40% of US average rates on a sustainable basis. Seen from that perspective, it looks like a tall order for the above to materialize, considering the magnitude of change predicted - But still, I beleive that we shall moving along the lines predicted by Thomas Malone - how about you?

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The New Rules For Web 2.0 Startups

There are some interesting new trends on the Web, and it's the nature of a phrase like Web 2.0 that adheres to them, says Paul Graham. He finds that a lot is different now from 1998. Web sites look different. Startups operate differently. People use the Web in different ways. The changes were gradual, but if you have a gradual change of sufficient magnitude, it starts to become a different worldSome CEO’s of Web 2.O Companies respond to questions ranging from revenue models, marketing, competition and a whole host of issues. Interesting to read – given my call for a reality check there but the enthusiasm, initiative and energy seen in the web 2.0 ecosystem is indeed amazing. This is an interesting set of response :

Question 1: How does (or how will) your company make money?
- Browster (Peter Milener): Paid search in its various forms - PPC, search traffic, comp shopping, search clouds, etc. - delivered in a valuable way to users.
- JotSpot (Joe Kraus): We’re a subscription business model. The hosted version of JotSpot is used primarily by small to midsize businesses. We’ve got over 2000 paying companies and 30,000 paying users. In addition, we’ve got a downloadable version of JotSpot for use by larger enterprises. This is also sold on a subscription basis.
- Texasgigs (Mike Orren): Local advertising. We will sell on “traditional” web models like CPM. Not much CPC, because a click usually isn’t the right metric for local. We have a model whereby users can register a credit card (or multiples) with us in order to get instant discounts on purchases at our local advertisers, as well as a rebate to the local charity of your choice. We can then take ad revenue on a pay-per-swipe basis.
- Piczo (Sonya Prybutok): Today we are based on an advertising model with plans to diversify our revenue streams as we grow.
- ProductWiki (Omar Ismail): In the short term 100% of revenue will come from price comparison advertisements on our product pages.
And for some comic relief…
- Rapleaf (Auren Hoffman): Selling pet supplies

No doubt - there are some smart people quoted herein - my views remain unaltered. I just finished reading this - Readers can draw their own conclusions.

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Wednesday, August 16, 2006

The Consolidation Jigsaw Puzzle : Customers Beware

Post IBM's proposed buyout of Filenet, the buzz about the consolidation in the ECM market is getting more & more shrill. For players like IBM, its 16 billion software business now contributes even more profit to the bottom line than services, and it's just now emerging as the $91 billion company's most dependable growth engine. (Actually this is insightful - The Annex Research estimates for 2006, software will account for 20% of IBM's revenues but 37% of its profits. Meanwhile, services, which represent 53% of revenues, account for 35% of profits, and systems and technology (mostly hardware products), which represent 24% of revenues, account for just 12%. IBM's software unit enjoys gross margins of 84.2%, compared with 35.9% for hardware and 27.7% for services). For players like HP, it’s a catchup game. BI Vendors could be buying out ECM players says this article,predicting more twists in the content management space. Bizarre, to say the least. If such a thing would happen, this would throw the BI players/ECM players into an awkward situation – they will lose their identity . Look at this BI operates on structured data and too often ECM players operate on unstructured/hybrid data. BI mostly operates on data built on transactions – It cant be said of ECM to the same degree. Look from a buyer perspective – what would he get out of such a combined play – NOTHING, TO SAY THE LEAST. Also it may be technically possible (though not so easy), to combine these together – this would be a heavy duty investment for any enterprise and would definitely not be more flexible or friendly to operate/extend and integrate with other applications. More consolidation of ECM space appears plausible – that would be bringing together platform/infrastructure players, portal players, ECM players together . The early results of acquisition of proximate space play show that this strategy is not delivering, well enough. The future of enterprise software lies in partnering meaningfully, consolidating where there is a clear rationale, but not to come together for the sake of coming together!!.

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Tuesday, August 15, 2006

Baidu & Brewing Controversy

Roger Ehrenberg points to a simmering click fraud issue similar in potential and nature to the google adclick issue - this time the issue centers around the chinese search engine Baidu search engine. Roger points to interesting posts laying out the basics - one poster laid out a pretty damning fact pattern indicating that Baidu might have internally boosted click results for a paid-search client costing that client millions of yuan (hundreds of thousands of US$). Apparently another post suggested that Baidu advertisers were protesting against supposed click fraud. While clearly Google has also taken steps to address this issue by providing data on click fraud it catches, and reporting these figures to advertisers , we have to see how Baidu responds to this . Roger points out that on issues involving Baidu, on a search, Baidu came back with only about 6,700 returns, while Google's count was closer to 45,000 (- 7x the number of Baidu). Something is brewing there in the middle kingdom – Baidu is so popular in China, I know for a fact that Google comes a close second to it in terms of popularity and usage within china.

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Monday, August 14, 2006

Managing Asia Pacific

Asian cultures, business and economic environments are very different and can be quite paradoxical - some of the best developed cities/countries -in terms of hard infrastructure may be the most difficult places to navigate through the business ecosystem and get business done effectively. In some developing nations, the pace of business/ mechansim of decision making can be back breaking. In some countries in Asia, government linked entitities may have the upper say/act as key influencers.. You have to realign your decision parameters for doing business for every country/every opportunity. Understanding and working in Asia Pacific markets, are quite tough, demanding and more of an art. Chris Traub rightly points out that Asia is now largest end market for semiconductors and other electronics manufacturing services. For any software that supports manufacturing, Asia is arguably one of the two most important markets in the world (along with the US).Some of the complexities that Asia brings out, as Chris rightly point out centered around geographical, cultural diversities - There are more than a dozen primary languages spoken in the region with numerous dialects and myriad regulations are in force varying from country to country besides logistical and infrastructural concerns. I wish someone had said this earlier – Chris is spot on - managing Asia Pacific is much more difficult than managing the U.S. as one market. Each nation is different from selling to managing to marketing - it is very complex. It is a unique skill to be an Asia Pacific manager. On a regional basis, the Asian manager needs to be above all else, a human "cultural systems integrator". This person must integrate the needs and vagaries of all of Asia's diverse markets. They must integrate the wide-ranging capabilities of professionals and managers with capabilities that are frequently immature relative to U.S. standards. Software vendors must assume that the regulatory environment in most Asian countries is complex (with the exception of Hong Kong and Singapore.) Japan, Korea, China, Taiwan and India all create very confusing circumstances with their diversity. There is significant favoritism which encourages local dominant players. I have not so far met him, but I understand from his profile that he has stayed for long in china - so read his views about china and its potential as a market and its other capabilities more closely – I can say that its definitely insightful . One point where, I disagree with chris is his view of open source in china but he is correct in his assessment of limited adoption of on-demand in Asia. I would also loved if he had included his perspective about the type of people including their background (could be from other industries as well), joining the technology industry, besides additional coverage of the indian ecosystem. Read more of his well thought out views on must-haves for leading in Asia.

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Sunday, August 13, 2006

Apple : Moving Ahead

The just concluded, Apple’s worldwide developers conference saw an interesting keynote address, bringing forth a near WOW effect centering on new forms of innovation. At a time when the world is seeing a challenging phase ahead for wintel with IBM PC’s which just completed its 25TH anniversary last week, Apple continues to chug along. The numbers say it all: Some reports suggest 17 million visits to Apple Stores. Of the 1.33 million Macs sold in the previous quarter, 50% were first time Mac buyers. US$500 million of third party software was sold through Apple stores. The growth rate for Macs was reported as faster than that of the PC market, and Apple's notebook market share had doubled (from 6% to 12%).. A good coverage of the event is available here.
With the introduction of Apple’s new Leopard Operating System along with a much lovable Time Machine,Apple is marching forward. Two of the Leopard features demonstrated for the first time at WWDC, Time Machine and Spaces, are new user interfaces for basic and commonplace technologies. Time Machine is a backup program; Spaces is a virtual desktop implementation. Definitely Apple is maintaining its progressive course, despite some listing related issues that its facing now – good news for Mac users and in general the PC world – after all what’s there in Mac would in some form sooner ot later move into the non-mac PC world as well.

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Saturday, August 12, 2006

The Indian Headquartered Service Players : Sustained Lead

Stephanie Moore writes that major global service providers continue to lose ground to large Indian firms, especially in the application services market. She finds that the tier one Indian providers have continued to thrive while most legacy service providers have posted minimal to negative growth and goes on to assert that Indian firms will continue to grow — and not just because they are a lower-cost option but they have caused a fundamental and structural change in the service provider/client relationship. More importantly, she nails the fact that offshore providers have taught clients to expect transparency, efficiency, and accountability in service delivery. Stephanie, well known in the analyst community/industry for her superior understanding of the Indian offshoring phenomenon earlier wrote how Accenture & Cap Gemini are scaling/distributing/perfecting their global delivery models.
Better delivery is ensuring that Indian headquartered companies are growing better than the global majors with offshore presence says this article. Due to their focus and operational efficiencies, Indian headquartered vendors are winning more deals than traditional players. Gartner's Partha Iyengar is quoted therein in support of this observed trend.A few months back, while acknowledging the impressive ramp up of offshore presence of global majors, I wrotethat more and more opportunities are beginning to get won in large numbers and most of the indian big players are anyway hiring big six veterans to help strategise better to go after bigger deals. An acquisition of the big players may be the final assault on the dominance of big six – but this could mean that the Indian companies may need to have a different mindset to manage –(with limited margins and more long term in their outlook).It may disrupt the traditional economics of the indian players, but nonetheless would be a move much needed in time. Infosys in their recent analyst meet again emphasized that acquisition for scale is not an approach aligned with the disruptive business model for the offshore players but niche/special expertise may be the drivers for acquisitions. Certainly, I expect that atleast one/two acquisitions would be made by indian players in the mega deal outsourcing players space in 2006/early 2007. This is possible, as adaptability and speed of operations have always characterized their growth in the last decade – the important thing is to not lose sight of humongous opportunities that lay in front and go after them as aggressively as they used to do while growing. Its still not game even -the gap may seem to be narrowing but even then, Indian HQ players have a lot more advantages sitting on their side but this is not to underrate the significant strides that multinational players are making with their India centric plans. The collective share of the offshore players business in the global outsourcing industry is still very small, but they are gaining marketshare rapidly.The services industry is by itself a very different type of industry governed by an entirely different set of drivers.

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Thursday, August 10, 2006

Filenet Gets Acquired : One More Knock !!

Filenet gets acquired. The US$1.6 Billion deal, is said to be IBM’s biggest in three years and fourth-largest to date. It is the latest in a string of acquisitions to boost software sales, the most profitable of IBM's three main product lines. I wrote atleast two months back about the likelihood of Filenet getting acquired. Filenet is a good match for at least two other majors – HP & Oracle. Earlier rumors suggested that Oracle could be an interested player to buy Filenet out.

This deal is in a way a natural choice for IBM, which can now push consulting and integration services to companies that buy FileNet's software used to store, sort and manage information such as text, graphics, video and audio files across enterprise. Filenet today has enhanced document management capabilities and had always claimed a pioneer status for its BPM offerings as well. For Filenet, under increasing competition from the likes of EMC & IBM, this is a welcome acquisition. For IBM, this is not a technology acquisition play but a customer/marketshare acquisition play – it has most of this technology already in place through its content manager system. Filenet’s customer base is very high –particularly in the BFSI, Healthcare & Government sectors – all growing sectors and one where substantial investments happen. This may give IBM an exalted status of being the market leader. This is now going to bring into shaper focus the competition between the major players in the ECM/WCM space. Once can expect more action centered on acquisition by the majors – Oracle, HP, EMC & may be Microsoft( actually it has a different approach in terms of the product play than rest of the players – but ironically, in my view, if anybody they must be acquiring the likes of filenet – if not for anything else atleast for the customer base! And gain a firmer foothold). Almost all players in the ECM/WCM space may now be looking at merger/exit strategies that may include the well known players like Vignette, Interwoven, Stellant etc.. besides BEA. Expect more action in the enterprise space in the coming weeks. Like all posts in this blogs, these are completely my private views - want to emphasise given that I regularly interact/work with almost all the companies mentioned herein quite closely.

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Wednesday, August 09, 2006

The Web & eLearning 2.0 Phenomenon

The effect that web technologies can be having on commerce, media, and business are indeed quite significant – sometimes it can border close to being revolutionary. I have to agree with Richard McManus on the fact that outside of the 'edublogosphere', there's been little coverage of the impact it is having on education. Across different regions, I definitely see that the potential of blogs, media-sharing services and other social software are getting integrated within e-learning frameworks successfully – all these have the effect of greater empowerment for all involved in elearning. I have been reasonably involved in a few leading edge elearning initiatives to confirm this. Steve O’Hear elaborates –"The traditional approach to e-learning has been to employ the use of a Virtual Learning Environment (VLE), software that is often cumbersome and expensive - and which tends to be structured around courses, timetables, and testing. That is an approach that is too often driven by the needs of the institution rather than the individual learner. In contrast, e-learning 2.0 takes a 'small pieces, loosely joined' approach that combines the use of discrete but complimentary tools and web services - such as blogs, wikis, and other social software - to support the creation of ad-hoc learning communities. Look at these :Blogging is getting leveraged by students – both for individual publishing to focused community efforts like even book publishing. Even podcasting seems to be gaining significant currency. Apple, focusing substantially on the education sector has tied up with Stanford to create the Stanford iTunes University - which provides a range of digital content (some closed and some publicly accessible) that students can subscribe to using Apple's iTunes software. What’s novel herein - Swap 'user-generated content' for 'learner- generated content' and you soon get the picture.Flickr is also finding use in the education community – students/instructors use the features of annotating and discussing on Flickr. Myspace has almost gained the status of a must for students all over and videosharing sites like Youtube are beginning to get used. No wonder why Google worked out this deal. Clearly education/elearning would look very different within a decade – opening the gates for new technologies, players and techniques.

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Tuesday, August 08, 2006

Dilbert’s Mission Statement Generator

With new wave of entrepreneurism all around, organizational consultants of all kinds generate record levels of business. Dilbert can’t be left behind. Here he is – with a mission statement generator. It can amazingly combine range of adverbs, verbs, nouns & adjectives – a well compiled list is available therein. A sample mission statements looks like this :

We envision to dramatically coordinate principle-centered paradigms so that we may assertively network high standards in methods of empowerment to exceed customer expectations.

Scott Adams is simply superb.

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Microsoft & Its Priorities

Nial Kennedy leaves microsoft. He joined a few months back as part of the rejunevated Microsoft's Windows Live division ,to create a new product team around syndication technologies such as RSS and Atom and build a feed syndication platform leveraged by Microsoft products and developers all around the world. The reason for his departure and the inside information(which most in the external world anyway thought was happening inside Microsoft) he shares makes disturbing but insightful reading:

The Windows Live initiative got off to a huge start, with lots of new services created and an "invest to win" strategy in the new division. There were so many new programs created and headcount opening up Microsoft told Wall Street it would be spending $2 billion more than anticipated in the short-term to cover these new costs including over 10,000 new hires over the last fiscal year. The stock plummeted on the recent announcement Microsoft did not have its costs under control. Windows Live is under some heavy change, reorganization, pullback, and general paralysis and unfortunately my ability to perform, hire, and execute was completely frozen as well. If we had the resources I truly believe we could have tackled the number of users Hotmail, Messenger, Spaces, or even Internet Explorer might supply, and then ask for more by opening up the platform to the world. I was able to borrow resources here and there, but there was no team being built around the platform in the foreseeable future. I could have stayed at Microsoft, waited for the other 85% of the company to ship their products, and then hope support for my group might be back on track again, but I didn't want to sit around doing little to nothing until Vista, Office, and Exchange ship.

As I see it, It’s a telling statement to make : "It's easier to get funding outside Microsoft than inside at the moment, so I am stepping out and doing my own thing." If anything Microsoft should be funding , in my view dozens of such initiatives –particularly those centered around the web – no point in just saying that it would improve its presence and offering on the web. Seasoned corporate observers would know that exits like this or statements like this may not be entirely relied upon for making judgments on a corporation, but here several things point to the possibility of this being more real than otherwise. Somebody said Microsoft is increasingly behaving more like IBM ( am talking about slow pace of innovation and giant letting emerging opportunities pass by)– Its probably proving to be right. These are the things that aggregated Microsoft R&D expense chart would not show.

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Monday, August 07, 2006

Open Source For The Enterprise: Not Yet

Last week's SandHill.com Op-Ed by Guy Smith doomed the enterprise software industry to a future dominated by open source. A collective rebuttal by the Enterprise Irregulars to the argument asserts that any obituary of enterprise software is premature indeed as can be seen here. Excellent read from various set of people – each of them quite involved in the enterprise software industry in different ways.

I was particularly intrigued by two recurring themes in Guy's piece – Enterprise software is almost commoditized and that most of the IT needs of enterprises can be met through open source. As I see it, while the hype and recall value of open source is high, in reality the software ecosystem has not changed much sans some minor changes. The limitation of the open source movement is its failure to communicate in good measure the propensity to help enterprises foster innovation and help them create differentiated solutions. The lack of stratified solution/support and the one size fit-all solution offering shall not carry conviction as a dependable approach in the enterprise space. The business model paradigm of open source players minus the much-touted entry price difference is hardly anything to write about.(In reality, there may not be much difference from a total-cost-of-ownership perspective - the delta, if seen, can be directly attributed to the stratospheric licensing and maintenance fees of commercial enterprise software players.) Software requires so much of associated work to be adopted for effective usage within enterprises adopting them - these can certainly not be coming form a commoditized family let alone coming from a mere standardized family. Enterprises adopt software to cater to support/enablement of differentiated processes and create distinctive value and a mere set of standardized mass developed software amenable for customization would hardly qualify to be called a solution fit for enterprise adoption.

Look at it from a service provider perspective: a contractual obligation binds them to offer services that could encompass delivery of solutions to a set order and scheme and to a definitive budget and time frame. Any consulting firm commits to delivery to its customers based on relationships and experience of deploying similar/ related solutions centered around the technology/supplier products - the risk, responsibility and rewards are in a tacit/direct way co-shared depending on the working arrangement. With open source solutions, the service providers/consultants need to take a massive leap of faith - more so with massive/time-compressed/aggressive/critical deployments planned - one that would be seen from first principles to be fraught with fundamental risks. Read more in The Deep End blog.

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Sunday, August 06, 2006

Seth Godin’s Small Is The New Big

Seth Godin’s new book: Small is the New Big makes an interesting reading - seth provides explanation on what makes an idea take shape and attain meaning. As he sees it, for an idea to be spread, it needs to be sent and received and bothe sender and receiver must have specific differentiated reasons to do so and ofcourse this needs to be done effectively and be seen as value adding to both. Case in point : No one “gets” an idea unless:
1. First feel is good and the necessary background is in place for them to understand those.
2. The sender is seen to be one of repute and if it is clear that time ivested could be worthy enough.
In other words, the point to note is that success depends on the value to be perceived by the receiver and the form in which the information is packaged. No doubt as Guy says, this is like a polygraph test for web 2.0 entrepreneurs. Read this in tandem with the operational metric, so important for entrepreneurs.
Let’s examine the form part of it : Sensational wins have been traditionally centered around communication and miniaturization – PC, iPod, Walkman etc. This is a book where Godin compiles entries from his popular blog. Many are only a few paragraphs long, though he also adds longer entries, from his Fast Company column, to the mix. As if it prove his idea in action, he arranges the articles in the book alphabetically rather then sequentially – making to easier for readers to access relevant articles. As he sees it the first key to successful marketing is to produce something remarkable and let it grow. "If your idea is great, people will find you," he advises. "[I]f your target audience isn't listening, it's not their fault, it's yours." He urges people to take control of their creative lives by taking responsibility for tough decisions and pushing themselves to make bolder choices. Seth’s writings are generally inspirational - the book is a huge bowl of inspiration that you can gobble in one sitting or dip into at any time. As Godin writes in his introduction: “I guarantee that you'll find some ideas that don’t work for you. But I’m certain that you're smart enough to see the stuff you’ve always wanted to do, buried deep inside one of these riffs. And I’m betting that once inspired, you’ll actually make something happen.” This is quite relevant in the age of The Long Tail - small players, as Chris shows, can collectively make up a market that rivals the giants.

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Saturday, August 05, 2006

The Entrepreneur, Business & (Operational) Numbers Obsession

Tom Evslin comes out with a brilliant post. He replies to the query :

“What is the one thing you do daily which is the key to your success as an entrepreneur?”


Pointing out that in the past he has seen mixed results in terms of success as an entrepreneur and while noting that a successful entrepreneur imbibes factors like irrational exuberance, hard work, leadership, and contrary thinking - he is clear that these are not there to be seen on a daily cycle. He thinks the entrepreneur’s pulse of the business lay in the numbers and the type of metrics that he/she is monitoring is critical. Instead, he claims that it’s an obsession with the daily metrics of whatever business one happens to be in. The numbers obsession meant that one knows about all problems - usually - before customers did and helped understood the business and, by example, created a culture of attention to the metrics and the rhythm of the service. I fully agree with him - numbers can be set to show both lead and lag indicators and matte-of-fact can be disaggregated and rolled up to get different perspectives, depending on the situation at hand. It may also be true that different entrepreneurs may tend to take a different set of view based on same numbers, but, nonetheless, without these no doubt there can never be a sustainably profitable and growth business. The best part of the note is not to have an obsession with daily metrics like watching stock price. I do know of few cases where entrepreneurs/executives focused on just the stock market( after all over a perios of time, the stock price would rely mostly on business performance –barring the once-in-a-while blips) failing to comprehend the signals and losing the critical ability to sense, track & respond to the business needs – in fact I argue that without these, no business can ever hope to be successful.

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The Mighty Google & Tiny Acquisitions

Courtesy of Google Blogoscoped came across this interview of
Eric Schmidt. I listened to the interview as well.

Reporter: How many acquisitions do you do?
Schmidt: “It’s one or two a week it seems. Most acquisitions: They are very small. 1-2-3 people and you never, never hear about them.”
“Why would you want to be acquired?” Schmidt asked reporters rhetorically.
“The venture guys have so much money, you don’t need to get acquired by us for capital.
“The reasons…that they (start-ups) would choose be to be acquired are not what you might think. There is so much capital. And many of these businesses require no capital.
“The reason to be acquired is that Google gives them (Web entrepreneurs) a platform that they might otherwise not be able to get. As markets consolidate these little companies often cannot get enough ‘mindshare,’ even though their technology is really good. Any one of these people are a reasonable (acquisition) candidate.”

Also listen to Eric talking about how some thought that Google is run by idiots and how it too faces problems like every other enterprise.

I certainly feel that Google Hype need to be watched more carefully, but I can give it- that they have been very sensible about their acquisitions. They have not taken(so far), throw money and grab that share/space approach(mostly). Instead they had been trying to take the business as growth platform approach, atleast in their core business. I was looking at the analyst reports about as few companies that I watch – where acquisition concerns abound. Recently, I was talking to a good friend, who was not decided on an opportunity that would have meant that he would be earning almost twice in a company of better stature and bigger size - he said that one concern that was holding him back was that the other company had made a series of acquisitions in the recent past and the information is that the integration is taking time and proving to be painful. The general refrain is that acquisitions destroy value. Generally speaking, as many as two-thirds of all acquirers fail to achieve the benefits planned at the outset of an acquisition. In part, this is thought to be due to the fact that too many acquirers are more concerned about size and top-line growth than value creation. Ofcourse there are exceptions – well crafted acquisition moves can help charter the road to success. Only a handful turn out to be a long-term win for shareholders. Smaller acquisitions in contrast are easily integrated and where successful definitely creates value. That’s why seen through the lens of Eric Schmidt, Google's acquisition strategy stands out to be sensible – on an industry where , every growing company looks attractive. In the enterprise space, SAP Acquisition strategy also looks lot more sane at a time when acquisitions galore and it could even be threatening the ecosystem.

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Sony To Sell Its Tokyo Headquarters Building

Sony, the second largest consumer electronics player is forced to play catch-up in critical electronics products such as MP3 digital music players and flat-panel TVs. Despite its profit in the AMJ quarter, fact remains, Sony’s problem remains quite deep. Sony’s first non-japanese CEO Howard Stringer has ordered 10,000 job cuts by March 2008, of which 9,600 have occurred. That amounts to about 6 percent of Sony's global payroll of 158,500. Sony has already sold off 113 billion yen of assets and lowered its stake in a Japanese retail chain that sells candy, cosmetics and other trinkets unrelated to electronics. It also scrapped its Aibo pet robot division and stopped making plasma TVs. Now comes the news that Sony may after all choose to sell its historic headquarters building in Tokyo besides some of its properties in Shinagawa Ward,Tokyo, where the company was born. Selling corporate headquarters building is an emotional issue and particularly if it is in costly Tokyo city. Sony is one of the wonders of the 20th century - hopefully under Howard's steering, it turns around and regain its lost glory.

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