Indian Software Services Companies

Almost every Indian publication is writing about the woes of India’s software industry. “The Software Party is Over”, “End of Part 1” are some of the headlines. This follows the results recently by companies like Infosys and Wipro which signalled increasing price competition, lower margins, and hence, lower growth rates. The reality sunk in: the era of 30-50% growth rates for software services companies was over. It was now just another industry with growth in the 10-15% range.

So, what can Indian’s software services companies do to re-ignite growth? I think the answer lies in creating products and focusing on emerging markets. Both require a change of mindset – so far, the focus has been on services and the developed markets. Will they do it? I don’t think so. The reaction is likely to be an increased focus on services of all sorts (business process outsourcing and the ilk) with an emphasis on “volumes”. The Walmart model applied to services. Of course, the problem is that none of the big Indian companies has the scale – their key resource (people) are available aplenty across all the leading companies. The ones who have succeeded have managed their people and customers better than the others.

The present situation should have been anticipated. With the astounding level of details these companies give about their billing rates and margins, it would have been naive not to expect their customers to negotiate on the amount of profit they can make! When GE sells an engine, it is hard to get an idea of the profit margin. By contrast, when Indian software companies are selling their services, everyone knows their costs and margins!

The irony is that India’s software companies have all got plenty of cash. The top few, thanks to their Nasdaq IPOs and cash-generating businesses, probably have a few hundred million dollars in the bank apiece. The only use of the money I see is in building up bigger and bigger campuses, since few of the companies (except Wipro) have shown a penchance for acquisitions.

The services strategy needs a complement. The companies need to take some risk to create products. The world is ripe with opportunity. This is a great time for new ideas. The decision-makers at these companies should start reading people like Kevin Werbach and Tim O’Reilly, and look at “alpha geeks“. Spend time in the world of bloggers to get a sense of the future. There are plenty of new things happening which will make a big impact in the years to come. What is needed is a mix of ideas and imagination. Will India’s software services firms take up the challenge? How much ever I’d like them to, I feel they will not.

Global Software Development

Jon Udell writes that “as programming talent proliferates worldwide, dynamic development frameworks are bringing developers together using collaborative technologies and open source.”

With U.S. enterprises increasingly looking to offshore talent to reduce costs, the American programmer has become, in bottom-line speak, a fungible asset. As the globalization of software development unfolds all around us, it’s clear that dollars-per-line-of-code is but one of the equation’s variables. Other factors influencing this view include time to market, the speed with which project teams and resources can be assembled, and the rate at which tools and techniques can be transferred between offshore outfits and U.S and European companies.

Spam Predictions

Kevin Werback writes definitively:

Spam isn’t going away. It’s one of those things that will always be with us, like junk mail or pirated software.

In a few years, perhaps sooner, the spam problem will go away. Spam will be a minor irritant like, well, junk mail and pirated software.

Things will get better through a combination of responses, none of which will be a magic bullet. This will include legislation, enhanced filters for end-user software and ISPs, widespread use of challenge or whitelist mechanisms, and enforceable codes of conduct for legitimate commercial emailers.

Spam solutions that involve fundamentally changing email, such as charging to receive messages, will never catch on.

Just as the scourge of email spam subsides, spam to mobile phones will start to become intolerable.

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Innovation Continues

Kevin Werbach comments (post O’Reilly’s Emerging Technologies conference):

Contrary to popular belief, innovation hasn’t stopped. There are exceptionally exciting technologies and companies out there. Some are solving new problems, while others have new approaches for big old problems that haven’t gone away. Why did we ever think the NASDAQ index was a proxy for the health of the technology industry?

The exciting innovations are inter-related, in ways we don’t yet have words for. Social software, Weblogs, rich Internet applications, Web services, unlicensed wireless, grid computing, digital identity, broadband media. We keep seeing more connections pop up everywhere. I believe decentralization is the most useful prism with which to understand these developments, but it’s not the only one.

We’re experiencing a generational shift. “Yesterday” now means the emergence of the Web, not the PC industry. It’s time for a new crop of innovators, leaders, and conferences. Of course, some of those who grew up in the prior era will make the transition and offer their valuable experience. But the reference points have changed.

I think the combination of interesting work going on and the dissemination about that work are both critical factors in giving us the feeling that innovation continues. Today, thanks to the Internet and especially weblogs, it is easier to find us quicker about new developments taking place. Basically, our sources of information have been amplified dramatically in the past few years, allowing us to track multiple areas, find out about new developments quicker and also be able to correlate and connect ideas faster.

Apple’s Digital Music Foray

Music is a universal attractor. That simple fact is what has perhaps prompted Steve Jobs to lead into creating the iTunes Music Store. Fortune writes:

The iTunes Music Store is as simple and straightforward as anything Jobs has ever produced. Apple users get to the store by clicking a button on the iTunes 4 jukebox, available for download when the service made its debut on April 28. You can listen to a 30-second preview of any song and then, with one click, buy a high-quality audio copy for 99 cents. There’s no monthly subscription fee, and consumers have virtually unfettered ownership of the music they download.

If the iTunes Music Store or something like it takes off, that could change how new music is released, marketed, and promoted. Until recently the chief fear in the music industry about letting people buy individual songs via the Internet was that it would kill the album by enabling consumers to cherry-pick their favorite tracks. Music company executives now bravely say that a singles-based business might actually revive sales.

The Music Store is his latest effort to diversify Apple’s sources of revenue beyond Macs. With Apple’s share of the desktop computer market stuck at less than 5% in the U.S. and less than 3% worldwide for several years, the iPod is the most obvious new line of business, steering Apple onto the home turf of consumer-electronics giants like Sony and Matsushita. Now Apple makes almost as much operating profit on each iPod it sells as it does on each iMac, even though the iPod costs a fraction as much to manufacture. So it should come as no surprise that Jobs is releasing three new versions of the iPod in conjunction with the Music Store.

Next Tech Action

Fortune writes:

There’s a new kind of growth in Silicon Valley; it benefits customers more than investors. And in the long run it could improve the quality of life and boost productivity and profits in ways that the dot-commers only promised.

Companies like Google and Salesforce.com have figured out the new order and are making it work. The key for companies is to think beyond their products–to get in their customers’ doors to help remake their work, their way of doing business, and their industries.

companies that are succeeding today are abandoning the box. The biggest innovations are coming not in hardware but in software and what is loosely called services–everything from outsourcing deals to sophisticated methods for applying old technology in new ways.

“We’re moving from an era of killer apps to an era of killer systems, killer business models, and killer businesses,” says Bruce Harreld, chief strategist at IBM. “Just spending money on IT never creates any value. It’s what you do differently in terms of business processes that matters.”

The article mentions WiFi, VoIP, Linux and Open Source, the new Connectedness, selling Software as a Service, Broadband to the Home and E-Commerce and E-Marketing as the next drivers.

TECH TALK: Constructing the Memex: Whats Missing

In our daily quest for information, a few years ago in the early days of the Internet, we used to go to Yahoo, navigating through the multiple levels of its directory to reach the site(s) we wanted. As time passed, we started using search engines – first Altavista and Excite, and now Google, which has become our other memory. It can, in fact, be thought of as a knowledge operating system, according to Elwyn Jenkins of Microdoc News:

In general terms, an operating system is a management system. The operating system that runs your computer manages the demands that each of the different programs you are running at the same time, handles your filing system, hard drives, printers and more. Applying the concept of “operating system” to Google, a Knowledge Operating System (KOS) manages your knowledge activity on the Internet. Google, as a KOS, manages your requests for information, indexes your web pages, responds to applications you may be running on your computer that interface to it via the Google APIs, and integrates knowledge and information from millions of computers into a single large managed database.

Website owners and webmaster who build more static websites do not gain the same degree of operating system-ness of Google, as do bloggers who have a closer relationships with Google. I can write a page today, and have my page indexed and readily available for recall in the Google Database within a day.

This is like a massive disk drive directory — only there is a time lag between when I saved the file and when it is accessible. As Google becomes more adept at sending Googlebot around to collect new pages, this sense of “saving something to disk” will increase, thus making Google not only indispensable for others to find my pages, but also, a great tool for me to locate my own pages.

Already I use Google as a bookmark manager. No longer do I remember URLs – it is much simpler to remember how to obtain a site’s listing by remembering a word to locate that siteI go to all my favorite sites with a single word or two-word combination.

What are the benefits of considering Google an operating system? From a user perspective, it places Google in a position of centrality to my tasks. It is where my knowledge is indexed, it is where I locate new knowledge, and it is the system that underlies my writing in Word, preparation of weblogs, and so on.

Yahoo and Google, in some ways, represent the two extremes. Navigating through directories like Yahoo has its limitations. There is a single global directory (or at best, country-level directories). Also, they do not take us to the document – they will leave us at the site’s home page. Most of the directories are also not scalable because of their centralisation and manual updation process. In fact, this is what created the opportunity for automatons like Google – the web had simply grown too big.

In relying on Google so extensively now, we are also losing out on something important. Of course, it is reasonably accurate in what we are looking for most of the time. Or at least that is what we think because we have no way to tell. But the results are the same irrespective of who does the search. We do not have an easy way of specifying clusters of documents to search, or a time period. In short, what is missing is a “context” for the search.

Google has centralised search, which is good, because we do need a single place to turn to. But the Web and the people who have built it are much more complex and distributed. Documents and websites have associated people and ideas with them. As search has become narrower and we have focused on Google to provide our results, the wider view of the world which a directory used to offer has been somewhat lost.

What the Web and Google have done is exposed us to the amazing richness and depth of information that is out there. This has only us hungrier for creating a memory which extends our own and is our own.

Tomorrow: Imagine

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