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Thursday, May 29, 2008

Despite Bill Thompson I love the cloud

Cloud computing – the technology that connects large groups of servers that often use low-cost consumer PC technology, to spread complex data-processing chores across them. Google's search engine and productivity applications are among the early products of efforts to locate processing power on vast banks of computer servers, rather than on desktop PCs. Microsoft has released online software called Windows Live for photo-sharing, file storage, and other applications served from new data centers. Yahoo has taken similar steps. IBM has devoted 200 researchers to its cloud computing project. And Amazon recently broadened access for software developers to its EC3 (Elastic Compute Cloud) service, which lets small software companies pay for processing power streamed from Amazon's data centers.

While estimates are hard to find, the potential uses are widespread. Rather than serve a relatively small group of highly skilled users, cloud computing aims to make supercomputing available to the masses. Reed, who's moving to Microsoft from the University of North Carolina, says the technology could be used to analyze conversations at meetings, then anticipate what data workers might need to view next, for example. Google, Microsoft, and others are also building online services designed to give consumers greater access to information to help manage their health care.

Enough stuff that makes for hype? Yes and it did raise a lot of dust. Bill Thompson of BBC cuts through some clutter.

“Because behind all the rhetoric and promotional guff the 'cloud' is no such thing: every piece of data is stored on a physical hard drive or in solid state memory, every instruction is processed by a physical computer and the every network interaction connects two locations in the real world…It is often useful to conceptualize online activities as cyberspace, the place behind the screen, but the internet is firmly of the real world, and that is one of the greatest problems facing cloud computing today….Under the US Patriot Act the FBI and other agencies can demand to see content stored on any computer, even if it being hosted on behalf of another sovereign state.”

Well, data protection concerns always remain when you host anything in the cloud. But how about the reduced costs of cloud computing v. licensed software that loads the customer with a 22% maintenance, cost of upgrades, consultants fee and running after patches just to stay live?


Sunday, May 25, 2008

When IT got boring

IT managers cutting across verticals and accepting even non-IT challenges. We know about Finance, Infrastructure and even entertainment businesses vying with IT for top talent. Earlier it was IT that lured people away from these sectors. Now IT companies themselves are letting their people migrate to other sectors, if possible within their own enterprise. WIPRO seems to be best positioned to pull the trigger with its diversified portfolio that has an equally aggressive posture (besides IT/ITES) in growing all its diversified interests—consumer care, lighting, technology, infrastructure, engineering and its professionals see strategic roles in emerging sectors. While IT is still the big daddy in terms of revenue or hiring numbers, quite a few functional leaders have made a comfortable switch to Wipro’s other businesses.

I would raise my glass to that. Why? It will eventually lead them to get some real business insights, think more in terms of `uncool’ old world terms like profitability and cost control. So far in IT they’d been kept well insulated from all that because of paucity of talent. If you've had a MCA/CS tag, can write a few lines of code and put on a couple years of experience, you make the cut. Now when they move into other realms where they have to deal with tough customers, competition, margin pressures (at the executive level, so far only the shareholders felt those pains) that threaten their very survival, they’ll earn their spurs.

Hope that will power them when their IT parent gears into consulting domain, where IT faces a test of its ultimate utility. Where it helps to cut down costs, reduces complexity of operations, helps minimize wastage, improves supply chain and delivers on ROI badly sought by clients. So far it has been only a standard covenant in SLAs signed by outsourcing vendors where they routinely promise cost savings and ROI without ever delivering on them (getting away with penalties). They’ve often been excused by many a client because (a) they can’t do it themselves at that cost; (b) the realization that when you get a first world job done by a third world, this is what to expect. They mostly resign to their fate until they bring back the work in-house or find a better vendor – not often easy. A few that built captives to get around this malady, paid heavily when wage inflation and attrition peaked and destroyed the edifice forcing them to put it up for sale.

It could also be that the IT managers don’t see much glamour if not future in pureplay IT any longer; or is it that they’ve just gotten bored - with no get-rich-quick stock option programs and a stagnant innovation in IT that gave it the early lusture ?

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Thursday, May 22, 2008

Beethoven symphony by car mileage

Woof… A car giving 250 km/litre of petrol? Innovation by a bunch of young smart kids from Ropar in Punjab.

Seven engineering students from Rayat Institute of Engineering and Information Technology, Ropar today claimed to have developed a concept car with an amazing mileage of 250 km per litre after putting in five months of hard work. They hope to display at the World Super Mileage competition being held at Michigan in USA from June 5 to 6 where contestants from 35 countries including USA, UK and Bahrain will present their exhibits. They say the car has a 92 cc engine with TCI ignition system. The frame of the 65 kg car has been developed by using special grade aluminum 6063 T6.

I wish them lots of luck. With crude at $135 per barrel, the news (and the kind of mileage) is Beethoven symphony to my ears. But when I told this to my daughter, she asks me to check whether the car runs with a dysfunctional odometer :)

Bringing in Ron Reagan. "Trust – but verify!"

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Wednesday, May 21, 2008

Microsoft is too fidgety with all that cash

Now that Microsoft has backed off from $47 billion yahoo bid, it squirms and fidgets with all that cash hoard. It has to find another better way to squander the dough. So why not give it away? Not to shareholders, that's boring straight. New idea – pay people that search through Microsoft live and complete a transaction.

Despite Redmond's best efforts, Microsoft Live Search remains mired in a distant third place, behind Google and Yahoo, as the reference of choice on Web, and not content to pin its hopes for growth on increased relevance or innovation, Microsoft is resorting to the most basic of incentives: money. Today the company introduced "Live Search Cashback,"

You certainly don’t cast off Single Era Conjecture, do you…?

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Dump a captive - necessity or smart strategy?

Companies set up captives – wholly owned subsidiaries set up to pro­vide services only to the parent company – when they feel a need to isolate non-core, back office services (like primary research, data analytics, product research, IT Maintenance and support, after sales service etc.) to focus on their core revenue earning activities. Besides there are a host of other reasons too –

a) Lack of mature service providers;
b) Desire for direct control / concern over IP protection;
c) Regulatory restrictions (especially in financial services);
d) Risk mitigation;
e) Service delivery cost;
f) Scale of operations;
g) Corporate culture.

Of late, the parent companies are realizing that the captive models are cracking. Rampant inflation in emerging markets drive up wages in offshore destinations, high attrition, lack of talented manpower, poaching by mainstream service providers that makes it impossible for running a stable captive operation. So they want to get rid of them. There are several mainstream outsourcing vendors that are interested in buying these struggling captives as they help build their book. But when more and more parents divest captive outfits, there is also a speculation whether it is a pre-planned strategy – outsourcing by another name, in the process the parent making some money as well!

I think the speculation is well founded. In the normal outsourcing scenario, the parent company comes in as a client of the service provider. In this case, the parent company is the “seller” and the outsourcing vendor is a “buyer”. It’s like *buying* an order (for a price), not taking it.

But on second thoughts, it’s not so simple as it seems.

It takes a lot of time, effort and cost to set up a captive. Recruitment, training and maintaining a bench is hell as outsourcing vendors acknowledge. Finally when the operations go on stream, people leave, processes come unstuck, projects get delayed and blame game starts - when the regular fire fighting begins. The very purpose for setting up captives, to have an in-house, efficient service provider that frees up a lot of quality time for management to focus on core operations of the parent company remains an illusion because now they also have to manage the captive from a distance. Being a wholly owned sub, their financials are to be integrated into the parent company balance sheet as well - its losses tarnish the parent company performance as well.

So in the end parent company has more trouble to deal with. That makes it divest the captive to a mainstream service provider if not the captive desires to go out on its own. Who will compensate the parent for developing a functional business model and transferring it out of its inventory? It bore the pain for so long. Imagine the level of information they carry. SLA compliance headaches will be fewer since the parent knows what to expect from a former captive. In fact, it can be trusted better because there is a quid pro quo between the parent and the captive for long term associations. Then make other benefits by way of tax savings from carried forward losses of captives available for set offs against the profits of buyer count as well.
I think it’s a good strategy for both buyer to buy and seller to divest a captive than to outsource directly, where the outsourcing vendor will have to outbid the competition by squeezing its own margins. In a sellout, the seller deals with a known devil, the buyer gets the benefit of "a bunch of former buddies" that call the decision makers of the client by first names. Then if the buyer is smart enough, it can soon morph the captive into its mainstream (low) SG&A format and flog it at will.
Now isn't that a viable proposition...? I guess so.

Hat Tip : Basab Pradhan’s post. Read my comments under that.

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Monday, May 19, 2008

Single Era Conjecture and the shareholder

Randal Stross stresses on the “Single Era Conjecture” – a putative law that makes it impossible for a company in the computer business to enjoy pre-eminence that spans two technological eras.

Stross talks about the gradual decline of Microsoft’s fortunes and puts across some supporting statistics, particularly in its online businesses that have lately been doing worse than ever. He narrates in detail about the IBM era upstaged by Microsoft outwitted by Yahoo done in by Google now. Somehow he leaves out much on other enterprise software firms like Oracle, SAP and of course the IT outsourcing vendors that consume hardware, software and the networks. But let’s presume all are included under the broad umbrella of “companies in computer business”, nobody escapes the single era conjecture.

I am in India, a shareholder in one of India’s leading outsourcing firms and nothing matters to me more than the fortunes of Indian vendors. Now the question how to foresee the coming terminal illness? I saw one when IBM, Accenture and EDS set up their outfits in Indian shores and started mass hiring armies of Indian coders. They scaled up pretty fast and even cornered hundred million $$ plus outsourcing contracts from Indian companies like Bharti marching over smug Indian IT vendors that were looking westward. Later when dollar took a drubbing, our IT vendors realized their folly. By then it was too late but they are somehow coping.

I scan the ability of software majors to scale up in areas other than ADM - to sustain the momentum logged in new service offerings — such as infrastructure management, testing, engineering services and business process management and consulting. Here is where they could be victims of IBM, Accenture roadkills. May be they are trying, trying hard, but I don’t see it in their balance sheets that I receive annually. Neither do I see their seriousness by way of increased R&D spends.

Anyway, I am not here to evangelize or promote Indian vendors. Why only IT, any business that is arrogant enough to neglect the need for change or stupid enough not to have recognized it deserves to die. Future descends equally on everyone and the ones that survive will be those that keep striving hard and pushing the limits. My interest is in capital appreciation and shareholder returns that they give. Single Era Conjecture or not, if my holdings don’t appreciate, I will press sell. So will most other shareholders – including some founders, like that of Infosys who just hold under 14% now after cleverly diluting their stakes in the guise of boosting liquidity in Nasdaq thro successive sponsored ADS offerings.


Thursday, May 15, 2008

Yahoo syndrome?

The lust for internet deals, it seems got rekindled after Microsoft’s recent tryst with Yahoo. Otherwise why am I reading Jana Partners lusting for CNET that owns a few cult portals with too many visitors and not as much revenue? And further CBS racing on to stage a $15 billion (yes Billion it is!) rescue even in these hard times for liquidity and cheap credit. Geez….
In the end, it all leaves me dazed. Extend the Yahoo metaphor further. Could CNET be suffering from Yahoo Syndrome – an affliction characterized by an inability to convert healthy traffic into nutritious profits? If so why would corporate raiders want a piece of a laggard? Do they see a pattern in starting up a proxy war and cashing out handsomely?
Lastly, has Les Moonves of CBS gone mad? When you know how to make $15 billion, then not knowing how to keep it is a sure sign of insanity.

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Wednesday, May 14, 2008

"Mr.Jerry Yang, call up Ballmer before you run out of luck"

Yahoo’s troubles seem far from over. It’s getting knocked all over the place. If Steve Ballmer and team destroyed Jerry Yang’s peace for over the last few months, now it’s the turn of his investors training his guns on him for screwing the deal. Carl Icahn is throwing in his might as well.

And now the latest. Imeem has taken over Yahoo's throne by becoming the No. 1 streaming music site in the United States. In what could become another blow to Yahoo, imeem has opened its massive media catalog to third parties with an API that allows outside developers to create music apps that access its library. It's said to be expanding its relationships with music blogs over the next several months. Yahoo, which had acquired large music sites like Broadcast, Launch Media and Musicmatch in order to become the top-ranked music-streaming site in the country, has slipped into second place behind imeem in Compete's list of the top 20 U.S. streaming music sites for March.

I say this to poor Jerry. “Mr.Yang, I suggest you call up Steve Ballmer and ask him to cut that check for $47 billion. You could use some luck if he hasn’t changed his mind completely”.
Know why? By the time this is all over, we may just see Jerry Yang run weeping into the embrace of Steve Ballmer like he was a long-lost brother. Dealing with Carl Icahn, the corporate world's most annoying back-seat driver, can change a man, make him do things he wouldn't ordinarily do. And now that Icahn has piled up $1.3 billion in Yahoo stock and is seeking FTC clearance to double that, CEO Yang and his brain trust are facing an opponent who makes Microsoft's Ballmer look warm and fuzzy. Jerry Yang will look better in bed with Ballmer than with Icahn.
I wish him good luck.

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Monday, May 12, 2008

Spot Zuckerberg, keep Rs.10,000

Here is the announcement by Techgoss. Techgoss will offer Indian Rs. 5000 for the first, exclusive photos of Mark Zuckerberg in India. Another Rs. 5000 for a detailed story on his stay in India. No questions asked. Anonymity guaranteed.

Now what the hell is Zuckerberg doing in India? Seeking some peace after the flutter amongst the Facebook pigeons created by entry of ex-Google fat cat Sheryl Sandberg? Has she begun thinning the ranks at Facebook? Heard that co-founder and CTO Adam D’Angelo, a long time pal of Zuckerberg is leaving the company. For the record, D’Angelo is feeling tired and burned out and wants to take some time off. Oh, really? You hardly take time off when you are in your twenties. Not from the company that relocated itself from Boston to Palo Alto just because D’Angelo was studying computer science in Caltech.

Now is this a sign of good or bad times for FB? Ask Zuckerberg when you spot him around some Bangalore tech alley.

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Tuesday, May 06, 2008

IT has local grounds to cover

Ever noticed the long gaps (yeah, more than a day is long enough) between posts in this blog? I started this blog to write about latest tech trends and potential business ideas. But the pace of innovation in technology itself has become too slow to write anything about. All one could find is incremental innovation – nothing generic or earth shaking. So I chose not to fill cyberspace with mundane muck. Not for me all that Microsoft-Yahoo soap opera that stuffs every tech blog.

I’ve been writing about the need for Indian IT vendors to focus on local customers. The Rupee appreciation has made it all the more necessary and some vendors at least threw open some divisions as well. But there has been no customer survey or market size assessment done officially. Now I found one here. There is no new business idea. But certainly it’s a kicker for IT CMOs that are not so sanguine about local markets.

It says “The use of information technology (IT) by businesses increases profits by 30 per cent and profitability by 3 per cent, says a study by the India Development Fund (IDF), Microsoft and LexisNexis Butterworths India…..Despite India's IT export prowess, there is an alarmingly low internal consumption of technology. A case in point is that about 80 per cent of software produced in the country is towards export. We have discovered that despite documented evidence proving the benefits of technology, investment in manufacturing and domestic businesses still have low adoption rates.”

Now with dollar demand going up because of fatter oil bills, the Rupee has slipped to new lows (Rs.40.98 to the $$). Time for India’s IT vendors to boost their revenues from domestic market. Hope their priorities are in right alignment - their pricing, in particular. You can't expect to sell well-worn packaged software, depreciated over decades for $300 to an Indian SME. [Good that Microsoft is one of the sponsors of that study]. Here they won't pay more than $15 for such stuff because they have a better choice - turn to an assembler and get it all preloaded :)

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