Tech trends and business ideas

All things that motivate entrepreneurs

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.



Post a Comment

Subscribe to Post Comments [Atom]

<< Home