Mar 31, 2007

"Guru Is A Sh** Film"

'Dhirubhaism' a book on the late Dhirubhai Ambani (founder of the Reliance group) authored by AG Krishnamurthy (founder of Mudra Communications) has been recently released. Mukesh Ambani provides a foreword. The book is a short swift read and is excellent value for money.

Crossword a leading bookstore hosted the author for a talk on the book today evening at Hyderabad's City Centre Mall. The author spoke in glowing terms about Dhirubhai, his vision, audacity to dream big etc. The book may not be voluminous but it has fifteen short and simple chapters each explaining Dhirubhai's remarkable work philosophy in fifteen bullets ('Roll up your sleeves to help', 'Think Big', 'Change your orbit constantly' etc).

To a question on whether the movie Guru really reflected Dhirubhai's life, the simple answer from the author was: "Guru is a sh*t film". RK Narayan the celebrated author also had similar feelings about the film version of his successful book 'The Guide'. Now both Guru and Guide were reasonably big hits at the box office. Wonder what happens when an original work gets crafted into a film version aiming to appeal for the masses.

Mar 28, 2007

A Billion Blues

The media is now crying hoarse about the dismal performance of India's cricket team. All the while the media and the marketer's greedily loved hyping up the 'Blue Billion' (Pepsi's pet phrase), but all went in vain as the team lost twice and failed to make it to the next round (Bangladesh and Ireland are two notables who made it).

Infosys founder NRN advises the cricket establishment to follow processes and not mock it (referring to the massive political interferences plaguing selections and engagements). The system is so riveted by indiscipline, greed and corruption that it does not let good players emerge. Even the so called stars take it easy once they begin to enjoy power and money. Finally there are some calls for big and struggling stars like Sachin Tendulkar to retire. These stars are resting on past laurels and pulling along to keep their batting averages against minnows like Namibia, Kenya and Bermuda [see Shekhar Gupta's editorial in Indian Express and Ian Chappel's call to Sachin to retire]. Real performers like VVS Laxman who have won tough matches against strong teams have languished for not playing the political game.

This sorry state of cricket reflects that of sport in general in India (see this list of the Athens 2004 Olympics medals per million population). And believe me this cricket loss will simply pale in comparison to the performance India puts up in the upcoming 2008 Beijing Olympics. China will leverage the platform to the hilt showcasing its new wealth and the tens of medals it will win to proclaim its rise in the World. Don't be surprised if they even overtake America's medal tally. Our establishment will be happy if we bag a single medal (like in the 2004 Athens Olympics), or may be not even bother.

HYSEA's Technology Day

Today at the Hyderabad Software Exporter Association's Technology Day, there were a few interesting talks.

IT Services
Sudin Apte of Forrester opined about the rapidly polarising IT Service's industry. The Top 3 players are growing rapidly (40-50% CAGR) while the smaller companies are getting left behind. The rest of Top20 grew at half the Top3 rate and have profit margins in the 18-19% range compared to 24-25% of Top3. The rest outside the Top20 had margins in the 12-13% range. Three years ago the Top3 were 26% of the industry but now they are 41%. The ABN Amro deal made big news last year with TCS and Infosys winning huge chunks but it is a less known fact that six smaller Indian firms got kicked out ABN at the same time. The smaller companies look set to be vaporised by the bigger ones without even too many acquisitions owing to trends on the demand side and supply side!

The so called 'Billion Dollar babies' - companies which recently grossed $1B in annual revenues - HCL, Satyam, Cognizant will have an year ot two before they either graduate to bigger league or stagnate and lose industry position. A Tier-2 player just cannot aim to succeed by attempting to be a mini-TCS or a mini-Infosys, offering all kinds of services to a small set of clients. The IT services industry has just gotten tougher to enter and a startup cannot achieve unless it executes to a carefully nurtured niche.

Web 2.0
Ramesh Loganathan of Pramati gave an excellent post-lunch talk on Web 2.0 and later ended up giving a pitch on his companies new Web-Desktop integration offering Dekoh ('look' in Hindi). The product sounded cool but there was nether a live demo nor a canned demo. Later I checked Pramati's website and they actually have some cool Web 2.0 demos but no mention of Dekoh.

'Let a Million Markets Bloom'

IBM in collaboration with the Economic Times organised a session titled "Let a million markets bloom: How Innovation is Fuelling India’s Growth Engine” last week in Hyderabad. It was ostensibly aimed at CEOs and CIOs but the audience had just a few of them. However it was impressive to see first hand IBM continue its juggernaut in India, reinforcing its branding around the Innovation theme. No wonder IBM is snapping up huge billion dollar plus deals with Indian Telecom Companies (Bharti Airtel, Idea and now even Hutch). All this while the Indian IT service players still struggle to strike large ($100+ million dollar) deals in the global arena. And did you know that IBM shares revenues with Airtel? It is accountable for its client's business outcomes! Something that the Indian IT players are only now talking about for their Fortune 1000 customers. IBM is coming into India in a big way, building a huge Indian work force and winning Indian business.

IBM showcased its recent study on innovation trends across the globe and a speaker shared the findings which were threefold:

  1. Business model innovation matters (focus on products, services, markets & operational innovation). CIOs should plan for scalability of IT to match and promote business growth.
  2. External collaboration is indispensable. CIOs should plan for applications which facilitate internal and external collaboration.
  3. Business & Technology integration is imperative.
I was surprised to see the distribution of priorities assigned by Global CEO/CIOs between various kinds of innovation to be exactly as the Indian counterparts voted. One would think that in an fast emerging market like India, a CEO would be focused on building scale and market presence; whereas in a developed market the focus would be on optimising the business model and wringing out cost efficiencies.

The subsequent panel discussion was a very good one. Sivaram Tadepalli (IT Lead for the GMR International Airport at Hyderabad) did a good job explaining how technology integrates with their business. He later explained how the new airport is rapidly getting built and was excited about the outcomes. Sangeetha Reddy of Apollo Hospitals made some good comments and IBM's India Head Nipun Mehrotra provided a good summary. So in all a good event despite the live cricket telecast they briefly showed of the India vs Srilanka match which India ultimately lost and got kicked out of the Cricket World Cup.

Mar 17, 2007

Geni For Your Family Tree

Last week I wrote about the 10x factor in the price to cost ratio for service bluechips. Now a different 10x struck more, one much more exciting: Geni an internet startup that raised $10m of venture capital in late-February was able to take it itself to a $100m valuation. Obviously some seed and angel money went in before that $10m but what an amazing rise!

That prompted me to go to Geni and play with it - I found it really cool. I have been searching for a good Family Tree software for some time and Geni seems the perfect fit. The usability of the site is a real 'wow' factor. Any Internet business builder can learn several lessons in designing a simple and beautiful UI that rocks. I am curious to see how easily it merges family trees that two related people build out separately.

One funny thing on the My Profile page though - you get to mark a checkbox that says whether you are living or not and then enter many posthumous details about yourself!

Mar 8, 2007

Pushing Startups To The Fringes

In his latest Budget the Indian Finance Minister has proposed Fringe Benefit Tax on stock options that employees exercise starting April 1, 2007. Now it may appear a great way to collect additional taxes (assuming FBT = Marginal Tax of 33%), but the long term impact will be stifling innovation and increasing employee churn in the Indian economy. Startups will find it even more difficult to attract/retain talent with ESOPs as the net gains post exercise are diminished.

Employees with vested options are now forced to exercise them which means no more exit (quit) barriers. Though an option grant typically takes 4-5 years to vest, the total lifecycle is much longer. Vested options take another 5 years to expire which means a manager conserving cashflows will tend to stick around that much longer, almost a decade. Now a decade is a long time, and often committed managers is all that separates a stunted SME to one that really grows wings to become a bluechip. Just look at the number of 'major' IT Services companies in the early nineties, that have now fallen by the wayside.

For now, look for increased attrition at mid and senior levels across industries, rising wage inflation (employers will have to compensate for unattractive esops) and one more setback to the nascent startup-ecosystem in India. Unless the government realises the total impact and pegs FBT at a reasonable 10-12% range.

Mar 5, 2007

10x For A BlueChip Service Company

Last evening after a dinner at an upscale restaurant (part of a blue chip, publicly listed firm), I was surprised to see a line item in the final bill. Now I rarely visit a five star hotel for a personal appointment, but this was one of those rare occasions. So the matter of surprise was this - a plain bottle of mineral water, normally available in the market for Rs 10 was being charged almost Rs 100 tax included. The rest of the food was fine and I can make myself to understand value pricing and all that stuff. But 10x times for a bottle of mineral water?

Extend the argument to IT Services industry: new hires at entry level get paid an average of Rs 200,000 p.a. and given the offshore rates basically are billable at about Rs 2,000,000 (typical Tier-1 provider). So we have another 10x formula going!

Now I am not comparing fresh software engineers with mineral water bottles (some would argue both are commodities), but from a pricing standpoint we really have something going here. When you as a company, are able to charge customers 10 x times the input cost (thanks to all those intangibles), you have truly arrived as a Blue Chip!