Tech trends and business ideas

All things that motivate entrepreneurs

Monday, July 30, 2007

Buyout Fallout

Business Standard ran an Op-Ed - taking stock of the impact of global acquisitions made by Indian companies recently.

It goes that many of these big ticket acquisitions fail because they are peppered with large doses of high cost debt that affects the financial health of the combined entity adversely for years to come. It also suggests the benefits – faster go to market, instant expansion of market share, new geographical presence etc.

There is one more problem. Cross border acquisitions don’t increase market size. It’s an existing market that’s being serviced by a different owner. Coming from a different culture, the buyer runs the risk of cultural mismatch that fuels widespread distrust. Then there’s also the ethnic sensibilities resulting in dilution of a brand. Whyte & Mackay, the Scotch whisky brand when bought out by India’s UB group, is no longer owned by a Scotsman. The competitors immediately go to town with this noise and it takes enormous efforts to convince people of status quo in brew and taste. Eventually when the high cost of acquisition is sought to be serviced by incremental prices, the misery is attributed to the change at the top or worse, the ethnic gap.

Labels: ,

Friday, July 27, 2007

Virtual gets real

Not just being expensive and complex, Data centers have become unmanageable. Blade servers, created to allow more muscle to be packed into existing racks, will not meet demand on their own, because of their power requirements. Typical data centers provide around 2kW of power and cooling capabilities per rack. However, a rack full of new blade servers requires up to 15kW of power. In some data centers, the only answer is to space the blades throughout the building, which is easy to do when there are few blades installed. In power starved countries like India, where land price/rentals are also shooting through the roof, there’s an urgent need for an alternative.

Here’s a market problem and needs quick alternative solutions – enter Virtualization.

Virtualization software, among several uses, can make one computer function as if it were several. As a result, corporations are getting one file server to do the work of about five, on average, which cuts capital, labor and real estate costs at data centers. The energy savings alone can pay for the cost of the program in a year. Makers of virtualization programs lock in annual revenue on top of one-time license fees by selling maintenance and support contracts to almost all business customers. As for other software businesses, every $1 billion in licenses generates a highly profitable contracted revenue stream of about $200 million for maintenance. By 2012, maintenance revenue could exceed license revenue.

The biggest virtualization market, however, may be in consulting and management services. IDC estimates that the virtualization services market will grow to $11.7 billion in 2011 from $5.5 billion last year, as the technology becomes much more mainstream.

Do you know any Indian company specializing in virtualization field?

Labels: , ,

100 days of Jerry Yang

Free Advice galore for Jerry Yang of Yahoo who has replaced Terry Semel as CEO on June 18. Yang had indicated then that he would chart out his strategy for Yahoo in about 100days. The world can't wait. But will he make it like other founders that returned - Steve Jobs, Michael Dell... ? Too early to bet.

The ideas from a broad spectrum of Wharton professors, industry analysts, consultants include “focus internally”, “to hell with wall street”, “look for hits”, “bet big” et al. Yeah..sounds good.
I'll say this. "Hey Yang - if nothing works, just call it Google...."

Labels: , ,

Wednesday, July 25, 2007

Opsware goes to HP

Startup founders take note. Value creation through innovation should be supported by efforts in making others see that value. Take a look at this recent Hewlett-Packard's (NYSE:HPQ) $1.6 billion acquisition of Marc Andreesen’s Opsware (Nadaq : OPSW).

Sensing the need for a new approach to running modern datacenters and computer systems at high scale automation, Marc and his team started working with the view that expansion of internet was going to accelerate even more. Opsware was founded in 1999 (as Loudcloud) and it went public in 2001.

Analysts now find Opsware as a leader in "virtualization," which enables companies to run more than one operating system - like Windows and Linux - on a machine. Opsware provides the "broadest solution" for companies trying to cut costs by automating how they manage servers, networks and data storage. For example, when hackers discover vulnerabilities in a company's computer network, Opsware can save companies time when they need to install a software patch on computers running on various operating systems.

To give you a feel of its perceived value –

Tiny Opsware - which ranked 148th among Silicon Valley's 150 biggest companies last year based on its $102 m revenue, saw its first-quarter loss grow to $10.6 million. It has about 350 customers, including Microsoft, Goldman Sachs, Comcast and the Defense Department. Its sales rose at a 28 percent pace, but No. 1-ranked HP has the clout to raise awareness of the products and sell them through its huge, established corporate marketing machine.

"HP has a first-class opportunity to define the architecture and be the major vendor of infrastructure - hardware and software - for the huge Internet build-out of the next 10 years," says Andreessen in his blog post.

Hewlett-Packard's $1.6 billion (15.68x 2006 Revenue) deal for Opsware on Monday is widely being seen as Goliath hiring David to throw rocks at an even bigger Goliath - IBM.
Now you know how to sell a $102 m company for $1.6 b ? Get going...

Labels: , ,

Hack Exchange

Go find a bug. Invite bids; sell it to the highest bidder. Cool?

Big IT vendors like CISCO, MS, IBM, Oracle all engage in-house snooper teams to do vulnerability research on their software – to find bugs and fix them. While these employees were highly paid, outside freelancers/users had to settle just for credits if they did it.

The newly opened auction site, WabiSabiLabi, doesn't require buyers to work with vendors on a fix before disclosing the flaw. Operators of the site say they try to validate both buyers and sellers -- for example, requiring copies of passports and bank account information -- but many people remain skeptical. The suspicion that there existed a thriving black market for this knowledge is vindicated. Now the question – is WabiSabi turning it legit?

Wabi-sabi seeks to represent the implicit imperfection of IT security and to contribute to its improvement, as claimed by the site. It seeks to achieve this goal by completely re-designing the traditional security research cycle, introducing for the first time ever a market-driven approach to correctly value the security researchers contributions.
Stoking up extortion? Well, this site would eventually be a hack exchange besides helping many crooks and a few enterprising samaritans figure out the FMV of their `find’ and/or its `patch' … Next what? A Hack index and Daily moving average?
To me that’s bad news…crunch time for FBI sleuths, I guess !

Labels: ,

Tuesday, July 24, 2007

Target practice

It seems online ad spend supported by behavioral targeting (BT) works.

“Behavioral targeting” is a strategy in which marketers analyze consumers' online activities to figure out who is most likely to be interested in its product - and then place ads on whatever sites those consumers are visiting. While it helps marketers reach a more engaged audience with fewer ad impressions, publishers monetize their “long tail” pages that otherwise remain unsold or goes cheap (remnant inventory). For users, ads targeted by their actions seem relevant and are often welcomed.

The effectiveness of focused strategies can be gleaned from the rapid pace of deals for Ad-networks. Four deals in 35 days — Google-DoubleClick, Yahoo!-Right Media, WPP Group-24/7 Real Media, Microsoft-aQuantive and now AOL-Tacoda — are a clear indication of the onrush of brand-focused advertisers onto the Web.

Now the question that begs answer is scalability. It involves several factors, including the broad reach among Web sites either thro portals or ad networks, needed to allow fine-tuned segmenting and yet maintain a reasonable size for each slice of the audience. Another element holding back BT growth is the technology itself, which despite its benefits still seems counterintuitive to many advertisers - that they need to pay nearly the same rate for a remnant page as they would for a contextually targeted page placement, goes against the grain.

So far as India is concerned, I would lay my bets on wider user adoption of www. That would leave us enough time to learn from others' mistakes and to develop a suitable strategy based on our market segments and its online behavior. Here's an insightful op-ed piece by Jeremy Liew of Lightspeed Venture Partners I found interesting.

Labels: , ,

Thursday, July 19, 2007

Can't poach this scalp

Name : Rishad Premji
Age : 29
Qualification : MBA (Harvard)
Work Exp : GE (US), Bain & Co. (UK)

Recently WIPRO hired this well endowed candidate in its Special Projects and Consulting (Financial Services) division.

Head hunters beware. Try coming within a mile of this guy, risk getting blacklisted by WIPRO. Last names matter after all…

Labels: , ,

Indeed Remarkable...

After reading `the Dip’ by Seth Godin, I felt Seth read my mind too well.

Here he has my attention yet again while defining `how to be remarkable’. Ben Casnocha has guided me to one of Godin's older posts.

I quote my favorite one -

“What's fashionable soon becomes unfashionable. While you might be remarkable for a time, if you don't reinvest and reinvent, you won't be for long. Instead of resting on your laurels, you must commit to being remarkable again quite soon.”

Can’t agree more, Seth…bang on !

Labels: ,

Tuesday, July 17, 2007

Vinod Dham on outsourcing

Vinod Dham, the father of Intel's famed Pentium microprocessor, once again is making news in Silicon Valley.

This month, Dham, now a venture capitalist, closed on $189 million in funding for his newest venture capital fund, the NEA IndoUS Ventures fund. The fund focuses on India-based businesses and is a partner with the New Enterprise Associates venture firm in Menlo Park.

Dham believes that the number of jobs destroyed by the advance of technology through creations such as the Pentium is far greater than the number of U.S. jobs destroyed through outsourcing. He also believes that outsourcing is helping create a middle class in India that is consuming American products. In that sense, the rising wealth of India could lift all boats, Dham said.

Remember the backlash we faced in India when technology destroyed so many jobs earlier? We patiently withstood that and adopted it in a big way. Now when it shows its flip side, hell can't break loose. Shut up, Lou Dobbs and thank you Dham - for that darn straight insight…

Labels: , ,

Sunday, July 15, 2007

A decade of blogs

Tunku Varadarajan of WSJ pays a tribute to by far the largest opinion democracy in the internet - blogosphere - on arguably its 10th anniversary. Tunku worries about the squiggles beneath the expression `blogs’ in MS-word. Easy boy... it doesn't make blogs unpopular one bit, it will reflect as Microsoft's poor updating processes. Of the twelve commentators - including novelist Tom Wolfe, Newt Gingrich, the SEC's Christopher Cox and actress/blogger Mia Farrow - some laud it, others lament it. Cox finds it useful since it helps corporate governance by putting all information on public domain and get feedback with almost real-time efficacy.
Interesting that Tom Wolf calls bloggers `narcissistic shrieks’ even as he wafts generously about his, just his wikipedia avatar…. Is his Royalty getting hit? Probably... that's one thing that makes professional writers grieve…Tom Wolfe is no exception. Read some interesting comments under Paul Kedrosky’s post here.
Democratization of a private domain invariably undermines some privileges that had gone unquestioned for long. Was all that getting published in the mainstream media authentic and of superb quality? Too much focus on `US' has been in fashion ever since mirror got invented. If that's narcissism, so be it. But don't expect that to go out of fashion any sooner - mirrors never do.
Should we care is the question… TIME magazine ranks YOU as `person of the year'… Stay tuned !

Labels: , , ,

Friday, July 13, 2007

"It's a Sony"...yeah...!

Last week when my daughter tried to download some music from a rookie site, I explained her how such acts can damage the system. Charily she gave in to my caution but not before extracting my word to get her a safer, branded CD that wouldn’t hurt the system.

I gave her the word alright, but will I be able to keep it after reading this? Imagine a Sony doing it, in its enthusiasm to invoke DRM…!

As painstakingly analyzed by Mark Russinovich on the Sysinternals blog, the CDs secretly plant a rootkit on Windows PCs. As David Berlind explains at ZDNet, “Rootkits generally latch themselves onto the foundation or ‘roots’ of an operating system in a variety of ways that not only prevent their detection, but also their extraction”.

Russinovich concludes: “The entire experience was frustrating and irritating. Not only had Sony put software on my system that uses techniques commonly used by malware to mask its presence, the software is poorly written and provides no means for uninstall. Worse, most users that stumble across the cloaked files with a RKR scan will cripple their computer if they attempt the obvious step of deleting the cloaked files.”

I'd rather tell my kid - “Excuse me, hun…this is one word that I’d better not keep. Will make it up to you in some other way....It's a Sony, yeah...” Hoping that she relents !

Labels: , , , ,

Tuesday, July 10, 2007

Chinese surplus

China's trade surplus rose 73 percent in May from a year earlier, increasing pressure on the Chinese government to allow faster currency gains.

The gap widened to $22.5 billion, since surging exports spurred economic growth of 11.1 percent in the first quarter and drove forex reserves to a record $1.2 trillion. The median estimate of 18 economists surveyed by Bloomberg News was for a $19.5 billion surplus. For the first five months, the surplus grew 84 percent to $85.72 billion.

A stronger yuan would ease tensions with trading partners and help prevent the world's fastest-growing major economy from overheating. China's boom in overseas sales fuels asset bubbles at home by flooding the financial system with cash. The government last month increased a share-trading tax to cool the stock market. It has also increased interest rates, ordered banks to set aside larger reserves to rein in lending and investment, invested in hedge funds and sold bills to soak up cash.

But then why is the chinese currency artificially kept down? You never know. Perhaps, it’s got to do with the fear of losing the appeal behind its brand name `Chinese prices’ and `Chinese quality’….

Labels: , , ,

Sunday, July 08, 2007

Making do with less

Short supply of quality engineers in India is old news. The scarcity is spreading fast. Acute shortage of skilled professionals across different sectors including medicine, IT and aviation may dampen the Indian economy's growth rate, industry body Federation of Indian Chambers of Commerce & Industry (FICCI) warns.

India will have a shortage of over half a million doctors and engineers each and thousands of pilots by 2012, according to a study by the chamber. In aviation there would be a requirement of 5,400 pilots soon and thereafter 150 pilots would be required each year to balance retirement and attrition. Currently between rival aircraft suppliers Airbus and Boeing, there’s a dog fight over the Indian market.

Imagine going under the surgeon’s scalpel without being numbed by an anesthetist.... Or being flown by half-a-pilot !

Labels: , , ,

Saturday, July 07, 2007

One man's meat...

High time someone showed Indian forex spenders (importers, travelers, students abroad) some love. The disparity of India's fiscal policy of favoring exporters must have tempted even providence - that pushed the $$ mercilessly down.

I don’t need be a great economist to bring some hedging sense here. When the IT service providers earned billions of $$ and booked huge profits because of a depreciating Rupee, the big boy exporters were quick to paint it as their business profit. It boosted their EPS, their stock prices soared and the shareholders walked away with lavish dividends. None cared to ask `what if' rupee appreciates back then.
Their grief would’ve been much less now had they anticipated a trend reversal and opted to credit those *abnormal gains* to a separate Exchange Stabilization Reserve account (ESR) and use those credits to set off future losses from trend reversals. The logic – earnings will get hit only to the extent such exchange losses overflow ESR credit. Over time, the fiscal `astuteness' would translate into higher stock prices as well.

Enough of forex prudence. My newfound status - a one-man-lobby for importers / outbound tourist…I’m loving it already. Any backers…?

Labels: , ,

Thursday, July 05, 2007

A costly bargain !

Cheapskates of the world, wait ! Not yet time to buy that iPhone.

Apple, always secretive and tight-lipped about its supply-chain and manufacturing arrangements, almost never says anything in public about its suppliers, not even to disclose names. So it's left to teardown firms such as Austin-based Portelligent, to sleuth out not only who supplies all the parts but what it costs to make a device.
Early strippers that took the iPhone apart found out it just costs $265.83 to make the high-end model priced at $599 – a juicy margin of more than 55% for Apple [apparently net of tax and SGA adjustments]. Let Apple enjoy while it lasts. Soon some rundown Chinese firm will figure out how to make it at 1/10th cost and start sucking those margins out.

Talking of Chinese handsets, the bargain doesn’t just stop at cheap rates. You also get more `functionalities’ thrown in than you had asked for. Shopping around for Chinese bargains can get serious, like this Motorola customer who had to pay with his dear life - courtesy, a pyrotechnic fatality offered by a cheap battery. Lucky if the scar's just nipple deep.

Sad, really sad…

Labels: , , , ,