TECH TALK: Envisioning the Future: Services Shift (Part 2)

The Internet is reducing the cost of communications and interactions between companies. This is facilitating the outsourcing of tasks to other companies who can do it better and more cost-effectively. This also concentrates the company better to serving the customer through innovative offerings. Outsourcing, which was earlier limited to functions like IT, is now being extended to business processes and RD. This is also where India, which has made a good start in the outsourced software services segment, has huge opportunities going ahead.

Large companies have been outsourcing IT and telecom functions for many years to companies like IBM and EDS. Companies like Cisco have even outsourced manufacturing. In fact, a significant component of the manufacturing of telecom and networking gear is being done by companies like Flextronics and Solectron.

This is now being extended to outsourcing business functions. What companies are realising is that the Internet can facilitate communications and collaboration easily, and hence the overheads of outsourcing become much lower. In some of the internal enterprise functions, employees are interacting with these services via the Web, so the back-office work can be handed over to specialist firms. In addition, companies can also get access to best practises by using these outsourcing companies.

Goldman Sachs has identified six categories of outsourcing:

  • Human resources – payroll, benefits administration, education and training, etc
  • Logistics/distribution – procurement, transportation, warehouse management, and material management
  • Sales, marketing, and customer service – telesales and marketing, database marketing, Web sales and marketing
  • Payment services – credit/debt card processing, check processing
  • Finance/accounting – accounts payable/receivable management, risk management, general accounting
  • Administration – tax processing, claims processing, document management

A newer trend in recent times is the outsourcing of RD. Given India’s engineering talent, it is expected to capitalise on this. Matei Mihalca of Merrill Lynch points out four reasons for outsourcing RD in his report on “India IT Services: Software meets Hardware” (April 20, 2001):

First, time to market, which is a function of competition. In many markets, deregulation has accentuated competition. The second is cost. India-delivered services can cost as little as a third of similar solutions in the US. Three, flexibility and focus: an offshore team tends to be more focused than an internal team, plus, clients don’t need to pay for RD failures. Four, intrinsic technology trends favour more technology development outsourcing. The rise of the Internet and mobility, the convergence of voice and data, and increasing dependence on software are all fundamental shifts that amplify the need to pool RD sources wherever they may be.

Also See:

TECH TALK: Envisioning the Future: Services Shift

Services have become an integral part of business, driven by two major trends: customers becoming more powerful and companies realizing that they need to change their business model to look beyond just products and at the life-time value of customers, and outsourcing.

Customers, armed with an amazing amount of information through the Internet, are now more knowledgeable and demanding. They are able to interact with companies through multiple channels, expecting that companies will know who they are and what they want. This can work well for companies also, as they can now tailor their offerings to what customers want. As the actual product offerings become more similar due to technology and knowledge diffusion, the differentiator comes from the services that companies are able to offer.

The product purchase is only the start of the relationship. Thus, a car company is not just selling a car, but offering a transportation service to the customer. Customers buying a washing machine actually want clean clothes. So, a company can actually craft a new service relationship with the customers. Andy Mulholland of Cap Gemini Ernst Young elaborates on this (as summarized in FTDynamo):

What kind of business model and what kind of machine might emerge from such thinking? Let’s call the business model “” and the product “the internet washing machine”. The machine has a display panel and is linked to the Internet. Faced with a wine-stained sweater and shirt on the morning after the office party, you do not need a handbook to work out the right setting. Key in the type of stain and the material and let the machine consult the manufacturer via the Internet, get a reply and set itself accordingly.

With the manufacturer in direct, interactive contact with the user in this way, other things become possible. Why not “pay as you wash” and avoid all the problems associated with owning and servicing a machine? This would be tantamount to outsourcing the washing process; to paying a fee to ensure the desired experience of ever-clean clothes.

The future model is thus “service and transactions”, which is profoundly different to the traditional “product and purchase” model. This is evident in many industries. For instance, banks and financial services companies now offer a multitude of options and services to better manage money, including home-delivery of cheques and drafts, extended banking hours, Internet and telephone banking and ATMs to suit the customer’s convenience. Courier companies are not just delivering packages but also providing precise information on where the package is at any instant of time. Airlines offer alert services on cellphones in case of flight delays.

In many of these service extensions, technology is helping either customers service themselves via online forms and personalised pages, or provide direct communications and interactions with customers without the need for human intervention. Even in the case of people-intensive service tasks, there is now a cost-effective option available: outsourcing.

TECH TALK: Envisioning the Future: Software as a Utility (Part 2)

Web services is this emerging area, where software moves into the Internet cloud. Writes Ludwig Siegele in The Economist:

In this new world, a payroll service, for instance, would be a combination of several other web services. A company would outsource its human-resources system to one provider, while another would keep track of the hours employees work. The payroll firm would also be hooked up to a service that delivers information about regulatory changes and, if the money has to be transferred abroad, with a bank offering foreign-exchange services.

The network thus becomes one huge distributed computer, just as Sun Microsystems, the leading maker of network servers, has been predicting for decades. And just like a mainframe or a PC, this mother of all machines needs an operating system, a platform on which all these services can be developed.

This is where the battle of tomorrow is being waged. Sun, Microsoft, IBM, HP and Oracle have their own visions of what the platform should be, from .Net to Java to e-Speak. One thing, though, all agree on is that the binding glue will be XML, an extension of HTML, which not only carries the document, but also information about the various fields within the document, making it easy for information to be exchanged and machines to interpret it.

Two other interesting developments in the software world which are enabling this move towards web services are peer-to-peer (P2P) computing and open-source. P2P enables the distribution of data and intelligence across computers connected on the network.

What is making this possible is the availability of high-speed and reliable bandwidth. So, instead of intelligence being at the core (on the server), it is spread across the nodes. New tools and applications are needed to extract and leverage these resources. Open-source is software which is the public domain, and thus, whose source code is available to all to use or modify. Linux is perhaps the best example of open-source software. As software becomes complex and mission critical, open-source and collaborative development may be the best way forward.

This new world does not come without its challenges. Connectivity to the Internet remains a big challenge in most parts of the world. Security and Confidentiality of data, and Trust are other issues which need to be resolved from the user’s point of view. In addition, using the standardized, “one-size-fits-all” software may entail changes in business processes, which may be harder to do than customising the software (which defeats the utility model).

Thus, the initial adopters of the Software Utilities may actually be companies in countries who have long been ignored by the software companies, because they either could not pay or were too hard to reach. They have little legacy, are hungry to grow, cannot make large up-front investments, ad would dearly love to leapfrog to the latest technologies.

Also See:

TECH TALK: Envisioning the Future: Software as a Utility

Water, Telephone, Electricity, and now Software. Get ready for the next utility! Software is on its way to becoming a service, on a pay-per-use basis. What is making this possible is the Internet and availability of reliable bandwidth. The difference between the Local Area Network (LAN) and Wide Area Network (WAN) is disappearing, thus making it possible for storage and processing to be moved away from where the user is, with almost no deterioration in speed and quality of access.

This should be good news for the software companies. In some ways, the Napsterisation of software has been taking place for many years. In countries like India and China, software piracy has been rampant, limiting the incentive for local software development. Partly to blame are also the software companies whose “one software, one price” philosophy makes it prohibitively expensive for most individuals and companies, especially in the emerging markets. This model is about to change to one based on transactions or a monthly/annual subscription fee.

Making software available as a service is the business model of Application Service Providers (ASPs), who have not done as well in their first avatars. This is because the focus has been on taking existing packages and making them available on the Internet.

Not only are these packages not made for the Internet, but their costing also is being done in a manner which does not make it as attractive for the end users. The next generation of ASPs are the ones who are re-writing software for the Internet and building a model wherein lots of businesses would pay a few dollars a month for it use. Examples include NetLedger and Intacct in Accounting, for Sales Force Automation and Customer Relationship Management, and EmployEase for HR.

The problem is that the software being offered is still in silos, just as business is trying to integrate the various operations and information flows. What is needed is the ability to provide an integrated view of the enterprise such that data needs to be entered only once. This is what Oracle is trying to do with its eBusiness suite. While this integrated software utility model will be a tough sell to some of the larger companies who already have some applications already installed, it is ideal for some of the smaller and medium-sized enterprises who have little or no legacy, and are more willing to adapt their processes to the software.

TECH TALK: Envisioning the Future: Business Process Re-engineering (Part 2)

The key business processes that will need to be re-engineered for the Internet are procurement, supply chain management and customer interactions.

Procurement is moving on to the web, as companies either set up their own private marketplaces or participate in public, industry exchanges. Reverse Auctions are becoming increasingly common. The attractiveness of the Net stems from the ability to source a wider range of suppliers, eliminating rogue buying and decreasing the paperwork, all of which help in bringing down the cost of purchasing.

Supply chain management and optimisation is about making information about demand and supply to everyone in the chain, thus enabling decentralized decision-making and lower inventory costs. This means trusting suppliers and forging closer relationships with them, and not just increasing the number of suppliers based on who can supply at the lowest price.

Customer Relation Management is also changing because it is now possible to make greater information available to customers and have them interact directly with the company through the Internet (along with other channels). Companies can also do more targeted marketing to customers based on their previous history and profile, thus allowing for differentiation in the way customers are managed.

Besides integration of processes and information, the other big changes which are being brought about in business processes is the ability to get information in real-time across the organization. All entities can now access and interact with information. Employees can find out status of their various requisitions, suppliers can update the status of their deliveries, customers can track the status of their orders. The interesting change here is that the Web enables all of this to happen directly by the entity, via “self-service” forms.

The next few years are also likely to see increasing adoption of the Internet for business by the small and medium enterprises (SMEs), who form an important part of the supply chain for most of the larger organisations. For SMEs, the promise of using enterprise software to manage their processes from Application Service Providers (ASPs) offers an opportunity to get the functionalities of what so far has only been available to the larger companies.

As companies increasingly adopt eBusiness technologies, there will be a need for greater innovation – in products, processes and marketing. The ability to understand trends and bring about radical change will continue to be an art. Technology can create sameness, but cannot replace human creativity.

Also See:

TECH TALK: Envisioning the Future: Business Process Re-engineering

The first phase of the Internet revolution involved building out the infrastructure to get millions connected to the Internet, the setting up of websites to provide all kinds of information and services to serve the surfers and experimentation with lots of business models to see what works and what does not. This period of great innovation has laid the foundation for the next phase of the Internet: businesses talking to other businesses, and machines talking to other machines, to simplify and make more efficient processes within organisations.

This “Enterprise Era” will be driven by cheaper costs of communications and transactions, making information available across the value chain, and thus enabling rapid response to events and real-time decisions. This will also entail a radical overhaul of business processes.

An overview from Jon Ekoniak writing in Upside:

The first chapter of the e-commerce revolution — the explorer stage — has closed. The New World has been identified, and the second chapter will focus on conquering the newly identified territoryIn the next 12 months, we will see two very broad themes play out: the optimization of the entire value-chain process and the increased utilization and management of human capital.

Hundreds of millions of dollars have been spent automating individual departments within an organization and then connecting all those information silos together. Nonetheless, the investments stayed within the four walls of the organization. Businesses sought to be as strong and efficient as possible and to improve and manage what was directly under their control. Many businesses do not take into account how their internal processes directly impact the actions and efficiencies of upstream or downstream value-chain participants.

However, the business world is about to be turned upside down. A business will be viewed not as a single entity, but as a cog in a larger wheel known as the value chain. Success will be measured not by the contribution of one, but by the collective output of the whole. Success will be achieved when disparate groups or organizations work together and function as a single unit.

The next phase is about integration: not just of processes, but more importantly, of information about these processes. Being able to get visibility across the enterprise and the chain connected to the enterprise can help faster decision-making and reduce inefficiencies. A view from “e-Business 2.0: Roadmap for Success” by Ravi Kalakota and Marcia Robinson:

Traditionally, most companies separated their business applications, creating specialized functional areas: accounting, finance, manufacturing, distribution, and customer service. It’s a matter of divide and conquer: if a job can be defined specially enough, a specialized application can optimize functions in that particular area. And if all functional links in a company are optimized, the company as a whole will function optimally. In recent years, however, business theorists have challenged this best-of-breed strategy. They recognize that if a chain of processes is to perform at a high-level, the individual business functions and the applications supporting them must be tightly linked with other processes around them.

TECH TALK: Envisioning the Future: Low-cost Computing and Communications (Part 2)

Let us start with the computer. At the equivalent of a few hundred dollars for the base-level computer, it is still too expensive for most of the world to own and use. There are 2 ways to change this. One, to create low-cost devices which can connect to the Internet, and secondly, to create Internet community centres which serve a neighbourhood.

We have become accustomed to the big screen computer, with the latest processor, more storage space than we know what to do, multimedia and more. So, even as we do email, word processing (typing?) and browse the web, we are using a Rolls Royce to do the same. What we need is a scooter. And you cannot create a scooter by taking parts away from a Rolls Royce. The starting point has to be very different.

The form and function of devices like the Palm, Handspring and Blackberry offer that starting point. But the price is still way too expensive. What is needed is an Internet access device which costs less than USD 100 (and thus can be rented out for not more than USD 5-8 per month). It needs an RJ-11 jack to connect to the phone network, or an Infra-Red/802.11b (wireless Ethernet) interface so that it can connect to the Net through a server from a distance. In India, work is underway on the Simputer (Simple, Inexpensive, Multi-lingual computer) project.

The communications challenge is the next one which needs to be resolved. Voice over IP (Internet telephony) needs to be adopted for its potential to bring down the costs of phone calls. New, wireless technologies like GPRS will need money from data services to justify their investment (it is unlikely that people will upgrade their current GSM cellphones since they work just fine). Both of these offer the core infrastructure for building out a network of Internet and communications community centres across countries. Connectivity to these centres needs to be high-speed. People can either come to these centres, or use “last-mile” wireless solutions to extend the connectivity.

The vision of “Penny PCs” is not unreal: as computing becomes a utility, what is needed is an infrastructure which can make available the world of computing and the Internet for as little as 20-25 cents (Rs 10) per day. By working to put in place a low-cost computing and communications infrastructure, the benefits of computers and the Internet will reach people who have never before been touched by them.

Also see:

  • Mass Market Internet: (Tech Talk, by Rajesh Jain)
  • Grameen Bank website
  • Simputer Project
  • The Global Village: Aspirations and Opportunities for Developing Countries (V. Chandru and S. Manohar, 1998)
  • TECH TALK: Envisioning the Future: Low-cost Computing and Communications

    For all of us living in India, the computing and communications revolution seems very distant. Our computers cost too much, our phone calls cost too much, and high-speed means 64 Kbps. It is not surprising therefore that India still has only 5 million Internet users. The developing countries of the world (emerging markets) have all put together about 50-60 million Internet users, just about 1.5% of the combined population. If IT and the Internet are to make a big difference in the lives of the rest of the world, we need a low-cost computing and communications infrastructure: a mass-market Internet.

    Why is this infrastructure important? The Internet is an equalizer – of information, of opportunities. By making information easily available, it allows for more transparent markets through the diffusion of knowledge. This means that farmers can get better prices for their produce not through middlemen but by connecting to the trading markets. Villagers living in coastal areas can get information on the weather, and thus take appropriate precautions in the event of storms. Craftsmen can take orders for handicrafts from all over the world via the Internet. Small and medium-sized businesses can go beyond just their limited geographical areas in search of opportunities.

    The challenge lies in making this technology and the tools available to everyone. In doing so, it will be possible to raise the standard of living of people, and create opportunities for new enterprises. What is needed is the ability to think out of the box. In doing so, it does not just mean looking Westward for answers.

    An interesting non-tech case study favouring the “Local Solutions for Local Problems” approach comes through the success of Grameen Bank in Bangladesh. Writes Mark Skousen in Forbes (November 15, 1999):

    Grameen Bank is the brainchild of Muhammed Yunus, formerly an economics professor at the Chittagong University in Bangladesh. Yunus showed how to fight poverty–at a profit.

    The Grameen Bank started in 1983 by lending amounts ranging from just $30 to $200 directly to poor people in Bangladesh. Applicants didn’t have to be able to read or write; no collateral or credit check was required.

    The bank’s strategy was to lend money to entrepreneurs (or would-be entrepreneurs) who needed only a few dollars to buy supplies and tools. Borrowers might make bamboo chairs, sell goats’ milk or operate rickshaws.

    By avoiding the usurious interest rates of local moneylenders–often 20% a month–many of these villagers finally broke out of poverty. Their small businesses grew, and thousands of borrowers now own land, a home (often using a $300 Grameen house loan) and even a cell phone (through Grameen Telecom).

    By now, the Grameen Bank has made millions of these tiny loans, totaling $2.5 billion. Note that Grameen is a for-profit, private-sector bank that charges interest of 20% per year. Amazingly, Grameen’s loss rate is about 2%, largely because borrowers are bound together in small, local groups. If anyone in the group defaults, no one else may borrow more. That’s a powerful incentive.

    So, can we, in the words of an MIT Media Lab project, create “Penny PCs”?

    TECH TALK: Envisioning the Future: IT and the Internet (Part 2)

    Pam Woodall of the Economist puts the changes being brought about by IT and the Internet in context:

    In addition to plunging prices, computers and the Internet have four other noteworthy features:

    • IT is pervasive: it can boost efficiency in almost everything a firm does, from design to marketing to accounting, and in every sector of the economy.
    • By increasing access to information, IT helps to make markets work more efficientlyIt moves the economy closer to the textbook model of perfect competition, which assumes abundant information, many buyers and sellers, zero transaction costs and no barriers to entry.
    • IT is truly global. By reducing the cost of communications, IT has helped to globalise production and capital markets. In turn, globalisation spurs competition and hence innovation, and speeds up the diffusion of new technology through trade and investment.
    • IT speeds up innovation itself, by making it easier and cheaper to process large amounts of data and reducing the time it takes to design new products.

    A number of parallel innovations are riding on the IT-Internet bandwagon. Cellphones are making us reachable everywhere. Technologies like Bluetooth and 802.11b will ensure that the multitude of devices we will have around us can communicate without wires, thus solving the “last few feet” problem. Innovations will increase battery life, so these devices can work longer in between being charged. Even in biotechnology, the time it took to decode the human genome was reduced dramatically due to the computing power available, and the ability for researchers to share their knowledge rapidly due to the Internet.

    One thing which we have learnt in the past year is that what does not change are the laws of economics and markets. Profits and growth are what companies need to survive and thrive. There will be very few survivors from the thousands of Internet companies that have been created worldwide. Eyeballs are important, but as even Yahoo has realised, paying customers are the ones on which all great companies are built upon.

    A recent study by Merrill Lynch of the revenue growth of publicly traded technology, software and services companies between 1981-2000 provides an amazing statistic: only 1 company (Cisco) provided over 30% revenue growth for 10 years in a row. (Microsoft was the only software/services company whose revenue grew over 20% sequentially for 10 years). The conclusion: Sequential revenue growth over a period of years is the rare exception – not the rule…Software companies grow more rapidly and for a shorter period of time than the average technology company. However, it is equally difficult for software and other technology companies to sustain 20%, 30% and 40% sequential growth.

    What of the future? Write Stephen Cohen, Brad DeLong, and John Zysman (December 1999):

    There is a chance – a very good chance – that 100 years from now people will look back at our current wave of technological innovation and conclude that they are “tools.” The tools of the industrial revolution amplified muscle power: you didn’t have to rely on a human or a horse anymore. The tools being forged today are powerful: you don’t have to rely on human memory, or on human eyes scanning pages and pages of poorly-sorted information, to remember or organize things. The technological tools that are being forged today will be used to calculate, sort, search, organize-amplify what we might as well call brain power in an analogy to the industrial revolution’s amplification of muscle power – in every economic activity in which organization, information processing, or communication is important. And organization, information processing, or communication is important in every single economic activity.

    Clearly, this revolution is still in its early days. One of the biggest challenges in the years ahead is to bridge the digital divide: 95% of the world is still not connected to the Internet. What is needed is to think about putting together a low-cost computing and communications infrastructure which can envelope the world to create a ubiquitous, pervasive network.

    Also see:

    TECH TALK: Envisioning the Future: IT and the Internet

    In the past 250 years, technology has been at the centre of each of the three previous revolutions. In the 18th century, it was the steam engine which powered the Industrial Revolution. In the second half of the 19th century, the railways and telegraph bridged distances and opened up new markets. In the last part of the 19th century and the first half of the 20th century, electricity was the first “e” in people’s lives. The automobile gave people the flexibility to cover large distances quickly by themselves, thus giving greater control on their lives. We are now in the midst of the Last Revolution, being brought about by Information Technology and the Internet.

    It is still too early to pass judgment on the magnitude of change that will finally be brought about, but what we have seen so far has been amazing. Computers have become embedded in much of what we do. India’s economic resurgence in the last 10 years is as much due to the economic reforms as to the IT services that companies like TCS, Infosys, Wipro and Satyam offer. The Internet has in the short timeframe of 8 years reached over 350 million people worldwide. In the next 3 years, it is expected that more than 1 billion people will be connected to the Internet. Nothing what we have seen so far has had as rapid a rate of acceptance. Writes Pam Woodall in The Economist (September 21, 2000):

      Thanks to rapidly falling prices, computers and the Internet are being adopted more quickly than previous general-purpose technologies, such as steam and electricity. It took more than a century after its invention before steam became the dominant source of power in Britain. Electricity achieved a 50% share of the power used by America’s manufacturing industry 90 years after the discovery of electromagnetic induction, and 40 years after the first power station was built. By contrast, half of all Americans already use a personal computer, 50 years after the invention of computers and only 30 years after the microprocessor was invented. The Internet is approaching 50% penetration in America 30 years after it was invented and only seven years since it was launched commercially in 1993.

    The real power of the IT and the Internet lies in its ability to cut costs of processing and transmission of information. Email has become the killer application on the Internet, allowing us to communicate for almost nothing with people anywhere in the world. As information is digitised and the ability to store, process and transmit it goes up exponentially (computing power doubling every 18 months, bandwidth doubling every 9 months), new applications become possible. In the words of Brad DeLong, an economist at the University of California at Berkeley: “IT and the Internet amplify brain power in the same way that the technologies of the industrial revolution amplified muscle power.”

    TECH TALK: Envisioning the Future: Envisioning the Future

    The six themes I intend to talk about:

    • Information Technology and the Internet: Both will continue to impact businesses and consumers for the next few decades. This revolution is just beginning. It is the fourth big revolution of the past 250 years, after the industrial revolution, powered by the steam engine, the railway age which shortened distances and opened up new markets, the electricity age. The age of information technology started with the advent of computers in the 1950s, but took off with the proliferation of PCs in the 1980s. The Internet has helped in linking these computers, and thus the people and companies.
    • Low-cost Computing and Communications: Most of the world cannot afford thousand-dollar computers. But the world needs computing. Even though the cost of computers has fallen by an average of 35% per annum over the past 30 years, they are still unaffordable by the vast majority of the world. The communications revolution has also cut down costs, but the new set of technologies just coming out will create a “ubiquitous, unbounded, untethered” world – connectivity where we want it, and how we want it, and affordable by the mass market.
    • Business Process Re-engineering: What began with the focus on business processes in the early 1990s is continuing. The added variable now is the Internet. As intelligence can now move to the edge (in networks and in companies), how decisions are made and how enterprises interact is changing. This will not just impact the big businesses, but also the small and medium-sized businesses, who make up 80% of the supply chains in the world. How enterprises interconnect and bring down transaction costs by not just smarter e-procurement and distribution, but also outsourcing is what “eBusiness” is all about.
    • Software as a Utility: The enterprise software revolution is going to its logical conclusion. As software becomes increasingly critical, it is becoming like electricity: it will be available on tap, and we will pay for what we use. The first-generation of Application Service Providers may not have succeeded, but what they have pioneered will radically change the way companies worldwide think of, use and pay for software.
    • Services Shift: Nearly 60% of the US GDP now comes from services-oriented businesses. Technology is already bringing about similar shifts away from agriculture and manufacturing to services. It does not mean that we need less food and products. It is just that the contribution of services (healthcare, finance, media and entertainment, for example) is increasing and there are more people involved in these areas.
    • Emerging Markets Opportunity: Two-thirds of the world’s people live in the so-called developing countries. The rich countries have had it great: with 15% of the people, they have accounted for 90% of the spend on IT and 80% of the Internet users. This will change going ahead, as the world’s “poor” get online, and leapfrog intervening generations of technology. Witness for example the adoption of cellular phones in China, India, Mexico and many other countries.

    The challenge lies in being able to put these trends together and create new and innovative businesses, which require a base not in the Silicon Valley but in countries like India and China. As we solve some of our local problems, these solutions can now be transplanted in other countries just like us. Their people may not all speak the same language, but the language of business and innovation is identical.

    TECH TALK: A Technology Agenda for India: An Agenda for Indian Government

    The Indian government can play a strong pro-active role in technology adoption and dissemination across the country. The last 10 years have seen India emerge as a hub for outsourced software services, and that was in no small measure due to the tax-free status given to earnings from software exports. Intelligent steps by the government and its various agencies can help jumpstart the technology revolution within India, and not leave it only as an export-driven success.

    • Remove Regulations on Telecom and Internet: This is perhaps too drastic and too wide-ranging a demand to make. But, unless we realise that the building blocks for tomorrow’s success will be a state-of-the-art telecom infrastructure and ubiquitous Internet accesss across India, it will be impossible to make rapid strides. In telecom, we take one step forward and then two steps back. What technology is permitted, which companies should be allowed to provide access – these are not questions which the government should decide. Let the marketplace and consumers decide. One of the first steps in fact which the government can take in to legalise Voice-over-IP (Internet telephony). Bring down the costs of communications and see how innovation takes off.
    • Computerise India’s financial and legal systems: The turmoil in the Indian markets over the past 6 weeks have proved that nothing much has changed in the last 10 years. People still know how to manipulate the system which relies on pushing paper. This is an excellent opportunity to computerise processes and bring in transparency – for both the financial and legal systems. We already have the Indian software companies which have more than adequate resources (in terms of trained power) which can be deployed for this – this also helps offset the effects of the global slowdown in technology. Money for this can come from the divesture of the government stakes in the various public sector undertakings (PSUs).
    • Integrate Databases: At present, various departments build their own databases. We need to be able to integrate these, and make information available to decision-makers in real-time. The government, thus, needs to become the ultimate real-time, event-drive enterprise. This will entail giving each citizen a unique identifier (like the Social Security number in the US), and ensuring that people have permanent email addresses. In all government applications forms, there should be a field for email address; status updates should be available on a website and notifications should be sent out via email or voice mail.
    • Free Investment Flows: The government should offer unrestricted flow of capital – in and out of the country. In today’s world, decisions have to be taken rapidly – there is little time to file forms and get approvals. Let individuals and companies make their own investment decisions. This may mean some short-term pain but over time, it will also create the best opportunities in India. We need to be part of the international marketplace fully.

    These are some starting measures. If each government department can think of how it can use technology and the Internet to better do its own business, it will create a technology wave over the next 2-3 years in India which will definitely take us to the forefront internationally. It will also create a spiraling effect in terms of investments by corporates. It will help in making India, Inc. that much more competitive and innovative. And that’s the kind of revolution which will create not just opportunities but also wealth for the next generation of Indians.

    TECH TALK: A Technology Agenda for India: An Agenda for Indian Citizens

    The Net and technology have empowered individuals. As consumers and citizens (in India and outside), we too can make a difference in India’s quest to become a leader in technology in the next decade. Here is what can be done.

    • Get an Email Address: All of us should get a permanent email address, which can be used for communications. This is the fundamental building block for creating an information infrastructure in India. Email accounts are free, let us make use of them. There are many Internet browsing centres across India. Greater usage of these will help grow this and offer a solution to making the Internet a utility in our lives.
    • Stop Tolerating Inefficiencies: It is amazing how many companies and government entities lack proper information systems. The result is that we are forced to live with inefficiencies – processes take longer, time is wasted, information lies unused. We are quite used to the mediocre in India, and that needs to be stopped. Let us take some examples. At the Immigration counter at airports in India, there are ridiculously long queues. Why cannot we use technology to shorten them? Use a wireless LAN and a handheld to service people faster. No person should have to wait for more than 10 minutes – that should be a metric of efficiency. Call up Jet Airways tele-check-in and every time one is asked for seat preference and contact number, two pieces of information which do not change for most frequent flyers. MTNL still gives one bill per telephone line, why cannot it aggregate based on an organization and give one consolidated bill? If Domino’s can integrate the phone company database with a person’s order history, so can other companies. Unless we insist, most won’t.
    • Refuse to Enter Data Twice: India is a country of forms. We thrive in making people duplicates and triplicates. Information should be entered once. Even some of the more technology savvy places don’t seem to have taken note. Last week, at an IIT Hostel Alumni day, the same personal information had to be entered on paper twice – once for the centre and once for the hostel! This, when networked computers were not more than a few feet away. Companies and institutions need to be forced to integrate their databases and present a single view to the customer.
    • Fight Queues: India is also a country of long lines. Time seems to have little value as we are prepared to stand in queues – for driving licences, to book tickets, at passport offices. Can there be more efficient ways to minimise queues? For example, if people have email addresses, then notifications can be sent out electronically. Status of applications can be updated on a website so one doesn’t have to call or stand in a queue.
    • Demand Better Information: As the number of users on the Internet in India rise, it will automatically create opportunities for more relevant and localised information. This is where some of the failing dotcoms could re-orient themselves. India does not need 20 cricket sites, but maybe it needs a website for every neighbourhood.
    • Share Experiences: For the first time, our voices can be heard. The Net can be used as a bulletin board to share experiences – of good and bad experiences. This is democracy and free speech at its best. It will force suppliers and service providers to constantly improve.

    Many of the services which need to be offered will require software and websites to support regional languages and speech as a form of input. This will spur innovation and help in create a mass market Internet in India. Technology has to touch the lives of every Indian: if we can ensure that, we will also create technologies which solve local problems. And let us also remember that there are another 3 billion people like us in the world!

    TECH TALK: A Technology Agenda for India: An Agenda for Indian Educational Institutions

    In the knowledge-driven India of tomorrow, it is critical for our people factories (schools and colleges) to be modernised also. Some things are obvious: like high-speed Internet connectivity, emphasis on English, Maths and Science, and computer training from the early days. But a lot more needs to be done at our educational institutions, especially at the graduate and post-graduate levels.

    • Emphasise Faculty-led Research: To train students well, it is necessary to attract good faculty. One of the motivations for faculty is the ability to do research in their chosen areas. The other advantage of driving research is in the creation of intellectual property, which can be licensed to industry and generate recurring income for the institution. Institutions should make 3-4 areas where they want to focus, and build “centres of excellence” around these areas.
    • Increase Industry Interaction: In India, there is very limited industry-academia interaction. This has to change. Industry can contribute RD funds but the academic institutions need to be ready to receive them! This means ensuring that for industry-sponsored projects, there is someone willing to take responsibility and the projects are completed on schedule. Again, for this, the lead needs to taken by the faculty. Students will come and go, but the projects need to endure with a longer-term focus. Increasing the interaction with industry will also lend a “practicality” to what students learn ad experience.
    • Nurture Entrepreneurship: Some educational institutions like IIT-Bombay are setting up incubators on campus to encourage entrepreneurship. That is not enough. There needs to be formal training to students, not just the availability of space and technology infrastructure. Interested students and researchers need to also be taught the softer skills which are needed for setting up and building companies. Faculty needs to be allowed to co-found or own equity stakes in start-ups. There is venture capital available in India. By using educational institutions as hubs, a strong base for entrepreneurship can be created.
    • Leverage Alumni: Institutions need to build a skillset database of their alumni, who can be encouraged to put up their personal backgrounds and technical skills, and areas where they can mentor teams/projects. Each person coming from abroad should aim to give talks at least 2 institutions during the India visit. This is the one way we can get people here to get a feel for what is happening internationally and what the real state-of-the-art is.
    • Set up Distance Learning: Institutions need to create online programmes in many core areas for professionals to learn and upgrade their skills through the Internet. As technologies change and evolve, it has become imperative for professionals to re-tool along their careers. This interaction with educational institutions can also help facilitate closer industry link-ups.

    To make it all work together is at least a 5-year commitment. We need to use the educational institutions as anchors, not just in a single city, but across the country. We need constant interactions with people from industry visiting from abroad. We need investments in bandwidth and infrastructure. Money will be the least of the worries if we can put together a programme with good, committed people heading it in India and internationally. The need to build a technology foundation at our educational institutions is critical if we are going to emerge as an IT superpower and hotbed on innovation in the next decade.

    TECH TALK: A Technology Agenda for India: An Agenda for Indian Corporates

    Indian corporates need to lead the charge to create a local technology infrastructure and industry. Within India among corporates, usage of technology is still quite poor. It is very necessary for Indian corporates if they are going to counter global competitive challenges. Creating a bigger domestic market will also help in widening the pool of companies doing work and provide them with an alternative revenue stream. In addition, it also increases the talent we have in India working on technology. So, what can corporates do to adopt technology at the core of their business?

    • Integrate the Internet Internally: Email and Internet Access for all are the building blocks. Email does not work if half the company has it and the other half does not! This also requires a cultural change: people must read and reply to emails quickly. Combining Instant Messaging and email for communications can also dramatically bring down the cost of communications. It also helps in faster flow of information within the company. Providing access to the Internet for everyone helps create a Net culture. Yes, there will be some misuse but over time, the advantage far outweighs the downside. The next step here is to web-enable internal processes, like leave applications, travel arrangements and reimbursements. Any process which has a form can be put on the Intranet of the company.
    • Set up an Extended Collaboration Network: This is at the heart of setting up an eBusiness. Think how the company’s processes would be different if Internet technologies were to be at their core. Think how providing real-time information to employees, partners, customers and suppliers can change the way you do business. This will create opportunities to rethink about what your business should really be doing. A logical extension is the creation of a private marketplace where a company’s value chain can interact. Here, the challenge is as much cultural as technological: companies need to be more open and transparent in their dealings internally and externally.
    • Invest in Analytics: The information that will be generated by the real-time connected enterprise will dramatically increase. It means investments in data mining, data warehousing and analytics software to focus on exceptions, trends which may not easily be obvious and providing customized information to the interested entities. Think for example how would your business be different if you could find out in near real-time the market response to your advertising campaign? Think what you could do if you knew who your best (and worst) customers are.

    Some of the other derivative steps companies will need to take will involve training the workforce, setting up eLearning and investing in educational institutions. This positive feedback can lead to a spiraling effect in terms of not only creating a domestic market for technology, but also in making companies more efficient and competitive, and therefore, more profitable. The Internet is a discontinuity, and it will lead to upheavals. Look at the music industry worldwide and how Napster has caused turmoil in it. The challenge for India is to ensure that the Napster-equivalents in eBusiness can orginate from here.

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    TECH TALK: A Technology Agenda for India: A Technology Agenda for India

    It is easy to confuse what is happening to technology stocks worldwide in the markets with a supposedly lessening of the impact of technology in our lives. That would be a mistake. The technology stock price bubble has burst, but in no way means that technology is going to be any less important. If anything, the next few years will see an even greater influence of technology – with the building out of the infrastructure for the ubiquitous Internet (combining wireless, broadband and devices), and the progress being made in the area of biotechnology and life sciences, following the mapping of the Human Genome.

    What does it take for India to be a leader in the development and deployment of new technologies worldwide? In this context, it is imperative for India – corporates, educational and research institutions, citizens and government – to understand the impact of technology, and put in place an agenda to ensure that we can leverage it appropriately. The revolution being wrought by technology is disrupting many industries, even as the actual economies and spends on technology slow. This can offer significant opportunities provided we can come together with a vision of how we want the future to be, and can work together to accomplish that.

    For example, if we need to make a mark internationally in IT beyond the offshore services model, it is important to build a deeper domestic industry. We need more companies to start adopting technology across the enterprise. We need government to start using it a lot more. We need to make computing much more affordable for the mass market. We need to nurture entrepreneurship. We need to improve the quality of teaching at the educational institutions, encouraging innovation and research. We need to be able attract overseas Indians not only to return back but also invest in and contribute their expertise back in India.

    We need to learn some of the lessons from the way countries like Japan, South Korea and Singapore built up their economies on the basis of export-led growth. We need to take some of those learnings and fit them for knowledge and technology-led growth to power India in the next decade. This will not come just by setting export targets or by offering tax incentives. Changes are required across many entrenches practices if we are to make India a real technology superpower in the next 10 years. The opportunity is there. The game is ours to lose. In the past, we have managed to easily fritter away advantages. But just as 2001 is shaping up to be the year Indian sport comes of age, perhaps this decade can shape up to the one in which India can capitalize on its strengths to truly make a difference globally.

    TECH TALK: Gaming: Let the Games Begin

    Divya Sampath
    Gaming, for all the attention and coverage it receives today, is still a nascent phenomenon, not truly a mass market idea like the movies or television. Or rather, it’s not yet a mass market idea like movies or television. But enough clues and indicators exist to suggest a truly astonishing future for a field that has thus far remained mainly the province of kids and geeks.

    The word convergence is much used and abused in the context of technology; yet nowhere is it more appropriate than in the case of gaming. In fact, it’s no longer just enough to talk about the future of gaming: it’s the future of “interactive entertainment”, to use the marketing pitch of E3, the industry’s largest Exhibition/Convention. (See

    E3, or the ‘Electronic Entertainment Expo’, the annual extravaganza held in May, has for the last two years, been much more than just a place for the PC or console gaming community to gather: it is also a meeting ground for representatives from Hollywood, the broadband industry, the music and publishing industries, and the internet industry. E3 is where these diverse worlds meet.

    It’s interesting to look at three important elements that will contribute to make gaming a really mass market industry, and how these elements are beginning to impact the scene today: namely,
    the Internet, entertainment, and education.

    1. The Internet

    “The games industry clearly suits the Internet. By its nature, like the web, it is interactive. Besides, the Internet brings something extra to computer games. After 20 years of enforced solitude, gaming is once more becoming the social activity it used to be. As it is changing in this and other ways, it is becoming an increasingly important part of the entertainment business. Hollywood, which has tended to look down on the games business, may find that it has to start deferring to it.”
    – The Economist, October 2000

    The success of shared gaming worlds like Sony’s Everquest, or EA’s Ultima Online, which was touched upon earlier this week, is just the tip of the iceberg. The potential to build online entertainment communities is limitless. In addition, distribution over the Internet will be increasingly popular even for simpler, single player games, which don’t have a steep learning curve. The current generation of second standard children will probably be going online five hours a week to play new games by themselves or against other opponents by the time they enter their teens.

    2. Entertainment:

    Immersive entertainment may be the wave of the future: imagine being able to play your favourite movie character, say the hero in Ridley Scott’s Gladiator, Maximus Decimus Meridius, and fighting in a Roman arena. But in your version, you can make sure the hero doesn’t die at the end. Or better still, the hero is wearing your face, not Russell Crowe’s.
    All of these are possibilities with technologies available today. Unfortunately, despite the example of Disney and Lucasarts Entertainment, which unfailingly
    turn every single one of their hit movies into a game franchise From 101 Dalmatians, to Indiana Jones and Star Wars), Hollywood still hasn’t caught on to the fact that adults are a compelling audience for gaming, as well as kids.

    For that matter, here in India, we haven’t even begun to address the potential for entertainment-based gaming, in a nation which has the second biggest movie industry in the world!

    There have even been cases of games crossing over successfully to film, as in the case of two movies which will be released this summer: the live action “Tomb Raider”, starring Oscar-winner Angelina Jolie as Lara Croft, from Eidos Interactive’s best-selling franchise for consoles and PCs; and the fully CGI animated “Final Fantasy”, based on a leading Japanese-designed console game. These are certainly not the first game to movie transitions – there have been various others launched to mixed success, from “Mortal Kombat” and “The Mario Brothers” to “Wing Commander”. However, the entertainment industry still hasn’t grasped that gaming is getting more and more mainstream; otherwise, at least two of the major box-office and Oscar successes of the last year would have spin-off games attached to them: namely, ‘Crouching Tiger, Hidden Dragon’, and ‘Gladiator’.

    3. Education

    Imagine a game version of the movie “Fantastic Voyage” or “Innerspace”: the player can navigate an entire human body from the inside, in a tiny space ship. What an interesting way for students to learn about human biology, not to mention a reason to remember where the Islets of Langerhans are located…

    Simulation has long been an accepted training technique in areas requiring high motor and mental skills: for instance, in training fighter pilots. Using newer, cheaper technologies, gaming can be used an educational tool for every age and skill group from kindergarten to architectural school.

    Finally, it is appropriate to say that we are just seeing the tip of the iceberg. Considering the explosion of delivery mechanisms (consoles, PCs, handhelds, mobile phones) and models (single player, gaming rooms, shared online worlds, customizable games,) that are emerging, gaming may just be the most pervasive part of entertainment industry some day.

    Interesting online articles:

    Microsoft gets playful:

    Hollywood just doesn’t get it:

    Wake up and smell the virtual coffee:,1284,42417,00.html

    Old wine, new bottle:

    TECH TALK: Gaming: Online Gaming

    The Internet is making inroads into the world of gaming. Online gaming is becoming popular because, in the words of Susumu Tsubaki of The Boston Consulting Group (quoted in the Wall Street Journal), “players can hook up with other gamers at a distance to play adventure or sports games together. When gaming becomes a community activity, that’s when it really gets interesting.” The value proposition for the gaming companies is also attractive. Says Mr Tsubaki, “Online games also offer the opportunity to charge users monthly fees in addition to one-time payments for game machines or packaged software.. That makes the idea attractive to companies such as Sega and Sony that have suffered in the past from the volatility of their revenue.”

    The two biggest online gaming hits have been Sony’s “EverQuest”, with about 300,000 people paying up USD 10 a month, and Electronic Arts’ “Ultima Online”, which has a user base of about 200,000. This year will see the launch Electronic Arts launch “Majestic” and “The Sims,” in which gamers create characters they control.

    To get a sense of the future of online gaming revolution, one has to look at Korea. Here’s Bruce Shelley in the Red Herring:

    The big thing in Korea is Internet gaming rooms: there are between 15,000 and 20,000. You put that in perspective, the Korean population is a sixth that of the United States.

    There are twice as many Internet gaming rooms per capita as there are McDonalds in the United States. You can play games online for a dollar an hour anywhere within a couple of blocks of where you’re standing. Gaming is much more of a mainstream entertainment. There are 20 to 40 cable stations in Korea that broadcast game tournaments being played live with commentaryYou can go to school to study playing games. There’s different curricula, the way you can set up your curricula in education in Korea, and you can actually study to become a top game player.

    The Internet is only part of the revolution. The other big enabler is likely to be the cellphone. Writes Stan Draenos in Upside (October 2000):

    The spread of mobile Internet devices, including cell phones, with game-playing capabilities may expand the market dramatically. Graham Stafford, head of publishing and mobile entertainment for Nokia says that offering games is part of Nokia’s overall strategy to spearhead the “mobile-information society.” Nokia projects that, by the end of 2003, more people will be connecting to the Internet via mobile devices than through the fixed-line PC, with games definitely being part of the picture. “The games,” Stafford says, “are for when you have five minutes of downtime.”

    So, as the say, let the Games begin!

    TECH TALK: Gaming: Console Battles

    The big battle in video games will be fought this year, between Sony, Nintendo and Microsoft. At the heart of this battle is the console. Between Sony and Nintendo, the installed base of video game consoles exceeds 110 million. Microsoft is a late entrant, but armed with plenty of cash and near-infinite staying power. Like what Microsoft has done so well in the past, it has focused its efforts on the developer community – in this case, the game creators who create the “blades” to be used with the razor (the console).

    The console battle is important because the game console can tomorrow become not just the gateway to the Internet, but also the centre for home entertainment. With wireless and broadband infrastructure coming into place, it is also possible that gaming will go outside the core and become much more of a mainstream application.

    Writes Henry Blodget of Merrill Lynch on Micrsoft’s strategy:

    The video game market has network effects that provide significant advantages to the first mover within each generation of consoles. Sony, with the Playstation 2, has first mover advantage in 128-bit game consoles. We believe that this, combined with Sony’s installed base of PS1 users, gives Sony a major advantage. The success of game consoles is heavily dependent on the quality and quantity of the games available to run on them. As long as Sony’s installed base of PS2s is much larger than Xbox’s, game developers will be incented to build games for the PS2 platform, simply because they can sell into a larger addressable market.

    Microsoft will attempt to offset this “second mover disadvantage” by leveraging Xbox’s superior technical specifications and more “friendly”development environment. In the video game business, games drive console sales. Microsoft has signed up 200 developers, and expects to have 20 games available at launch. In contrast, Sony has 100 titles today for the PS2, and expects 188 by March 2001 and 500 titles by March 2002. Xbox clearly has some ground to make up. However, Xbox’s PC-based development environment (which is easier to use than the proprietary environments of Sony and Nintendo), along with its leading technical specifications, should draw developers into the fold. Moreover, quality of titles is arguably just as important as quantity. If only a handful of the 20 Xbox games turn out to be hits, then Xbox may be able to erase much of its second mover disadvantage. Yet even if the Xbox experience is truly “better” for developers and gamers, however, we believe that overcoming Sony’s installed-base advantage will be challenging.

    So, to win the consoles battle, Microsoft needs to ensure availability of “killer” games. This is a different situation from the PC market, wherein Intel made the chips and Microsoft the software. In this case, Microsoft is “Wintel” combined, but up against formidable incumbents.

    TECH TALK: Gaming: The Business of Gaming

    Video Games are big business. Let us understand how this business works. Games can be played on PCs, via game consoles (examples are Sony’s Playstation, Nintendo’s N64 and GameBoy, Sega’s Dreamcast) or in arcades. The bigger market is via the game consoles. Sony, Nintendo and Sega sell the consoles at a discounted price, and make their money from the games, which are incompatible with other consoles. So, the strategy here is the razor/blade: companies lose money selling the console, and make money and profits from selling the games. This strategy has already claimed a victim: Sega is getting out of the consoles business, and focusing only on making the software. This is the market Microsoft is targeting with its Xbox console.

    How big is the pie? Sony’s Playstation consoles have an installed base of about 75-80 million, while Nintendo’s N64 consoles have a base of about 30 million. Both have hundreds of titles written for each of them. Sony and Nintendo generated about USD 11 billion in sales, and over USD 2 billion in operating profits. The total market is estimated to be about USD 15-20 billion, growing at about 15-20% per year.

    Why is this so attractive? The feeling is that besides being an immensely profitable business over time, video game consoles can become the hub for all interactive entertainment. As consoles get connected to the Internet, revenue opportunities can multiply in the form of selling monthly subscription services to gaming networks. The Internet represents an opportunity which is only now being tapped into, and opens up the vista of multi-player gaming in a very big way. Another example of the changing world of gaming is Sega’s new game, Shenmue, which was created over 4 years, and cost USD 80 million, and over 350 programmers. Writes Dean Takahashi in the Red Herring:

    The player assumes the role of Ryo Suzuki, a young man who must unravel the mystery behind the murder of his father. He explores an entire Japanese city, which is faithfully reproduced down to every detail. Every scene in the game is interactive, allowing the player to go into a convenience store and buy something to eat, or go into the arcade and play a game of darts or ride a motorcycle game. The player can open drawers, make phone calls, and talk to hundreds of characters in the city. All of it is rendered in beautiful 3D graphics with subtle lighting effects that depict everything from snow to leaves falling from trees.

    Can you imagine the richness of a Mahabharata or Ramayana brought out in the world of Gaming? Indian mythology which has so far been limited to TV serials and a handful of movies could lend itself extraordinarily well to the creation of Net-based games.