Daily Archives: November 9, 2003

Blogs Future

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Two comments to ponder over:

Dave Winer: “Weblog software is going to be like mail servers. Lots of ways to deploy, every niche filled. For the masses, services like Yahoo, MSN and AOL. Blogging servers for corporations, inside and outside of the firewall. For schools, for the military, specialized systems for lawyers, librarians, professors, reporters, magazines, daily newspapers. The next President will have a blog. Writing for the Web, the prevailing form of publishing in the early 21st Century, will come in many sizes and shapes, flavors and styles. It won’t be one-size-fits-all. Open formats and protocols will make this possible. I’d bet on the formats and protocols we’re using now, RSS 2.0, OPML and the Blogger API.”

Marc Canter: “Writing for the Web to ‘normal’ people will mean the three R’s: Resumes, Recipes and Reviews. And Calendar Events as well. For THESE new kind of micro-content stdnards to evolve, we need more than just token statements about ‘open formats and protocols’…RVW and ENT are all examples of SPECIFIC open formats and protocols.”

Microsoft’s Wallop

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Wired News writes about Microsoft’s effort to blend various tools to put together a social networking platform, built around instant messaging:

Wallop is Microsoft’s venture into the red-hot social-networking arena, using the common Microsoft tack of piecing together existing technologies and packaging them for the novice user. Those technologies include Friendster-style social-networking capabilities, super-simplistic blogging tools, moblogging, wikis and RSS feeds, all based on Microsoft’s Instant Messenger functionality.

Lili Cheng, research manager for Microsoft’s social-computing group, said Wallop enables users to build online social networks in a more realistic manner than Friendster, the popular social-networking website…Cheng says building an online network starting with your buddy list makes the networking process more natural. And instead of becoming immersed in a network the size of a city, Wallop would maintain its intimacy by automatically moving friends to the forefront and background of your network based on how often you interact with them.

Cheng hopes Wallop can address the biggest problem facing services like Friendster: sustainability. Users of these services often invest a lot of time setting up their networks, only to abandon them when they become too large, impersonal and unwieldy. And sites that focus on a specific task like finding a job or a mate have little value once the user’s goal is met.

Forrester analyst Charlene Li thinks Wallop may be able to overcome the sustainability problem, in part because it’s based on instant-messaging functionality.

“I like that it uses an existing tool (IM) that people already have as its foundation,” she said. “When you ask consumers to take on an entirely new behavior, that market, by design, would be smaller.”

One of the ideas we have thinking about is to combine social networking with the PubSubWeb ideas to put together two of the services we want to create: IndiaMirror and an SME Information Marketplace. More on this soon.

India Shining

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Rediff features a presentation made by Umesh Kumar, Joint Secretary (Department of Industrial Policy and Promotion), Ministry of Commerce & Industry. He listed the key reasons why India is a great place to invest, how the nation has liberalised norms for foreign investors, and what is on offer for foreign investors.

It is an excellent overview of the positives happening in India (there is still a lot more to do). The presentation is in the form of 10 slides. I have compiled the entire list below:

1. YOU NEVER HAD IT SO GOOD:
India is the 4th largest economy, in terms of purchasing power parity. Tenth most industrialised economy.
Strong macro-economic performance.
Political stability and broad consensus on reforms. Liberal and transparent foreign investment regime.
Well developed banking system. Vibrant capital market. National Stock Exchange third largest, Bombay Stock Exchange fifth largest in terms of number of trades.
Strong and independent judicial system.
Among the highest rates of returns on investment. Profitability of US investments in India: 19.33% in 2000 (according to US Department of Commerce).

2. INCREDIBLE SKILLS ON OFFER:
Strong pool of scientific and technical manpower. Prowess of IITs, IIMs well known.
255 Fortune 500 companies getting services.
2nd largest English-speaking population.
Abundant, high-quality, cost-effective, competitive manpower. Over 100,000 IT professionals added each year.
India rated as the most attractive destination for offshore business processing by global consultancy A T Kearney.
IT Industry $14 billion; growing at 50% p.a.
Exports $12 billion; 2008 exports target: $60 billion, to be 35% of India’s total exports.
Job creation: a million direct & 2-3 million indirect.

3. HIGHLY COMPETITIVE ENTREPRENEURSHIP:
Prevalence of foreign technology licensing – Rank 1 in the world.
Availability of scientist and engineers – Rank 2.
Quality of management schools – Rank 9.
Firm level innovation – Rank 12.
Firm level technology absorption – Rank 16.
Company spending on R&D – Rank 32. (Source: Global Competitiveness Report, 2003)
India amongst the leading entrepreneurial hotbeds globally. (Red Herring clubs India with Israel)

4. GREAT MACRO-ECONOMIC SHOW:
India among world’s fastest growing economies.
Average GDP (gross domestic product) growth of 5.4% during the 9th Five-Year Plan (1997-2002).
Exports registered growth of over 19% in 2002-03.
Foreign exchange reserves at an all-time high of over $90 billion.
Increase in forex during the fiscal year in 2002-03: $20 billion.
India’s economic growth is sustained.
The nation’s GDP is expected to grow by over 7.0 % this year.

5. EASY INDUSTRIAL LICENSING POLICY:
Under the Industries (Development & Regulation) Act, 1951, industrial license is needed only for items:
– Falling under the list of compulsory licensing. Reserved for small-scale sector. If location attracts restriction.
– All industries exempt from industrial licensing required to file an Industrial Entrepreneur Memorandum.
– No approval is required; Only notification need.
Industries retained under compulsory licensing under the Industrial (D&R) Act, 1951: Distillation and brewing of alcoholic drinks, Cigars and cigarettes of tobacco and manufactured tobacco substitutes, Electronic aerospace and defence equipment, Industrial explosives; Hazardous chemicals.

6. MAJOR FINANCIAL SECTOR REFORMS:
Setting up of the Competition Commission; Amendments to Companies Act, Fiscal Responsibilities, and Securitisation Act for creditors’ security.
Board for Industrial & Financial Reconstruction to be repealed. Computerisation of Customs interface.
Stable tax regime. Only 3 rates of indirect tax. Trade facilitation measures introduced.
Foreign Exchange Management Act, 1999 provides a liberal regime; forex procedures eased.
Stocks can be sold on the without prior approval.
Profits, dividends and capital investment can be repatriated.
Royalties can be paid by wholly owned arms to parent companies.

7. TRADE POLICY RATIONALISATION:
Trade policy liberalised. Most items on Open General License.
Policies fully compatible with WTO.
Functioning of the Director General Foreign Trade (DGFT) computerized:
All 33 locations are Web-enabled.
70% of the total transactions of exporters/importers are Web-enabled.
Transaction time has reduced to just 6 hours.
On-line banking fully integrated.

8. A PROACTIVE FDI POLICY:
FDI under Automatic Route, except in areas:
Attracting compulsory licensing; or for acquisition of shares in an existing company.
Sectors not open to FDI. (Gambling, lottery, et cetera.)
Investor can bring automatic route cases for Foreign Investment Promotion Board approval.
Foreign technology collaborations freely allowed under automatic and government approval routes.

India FDI Outlook
India rated best destination for outsourcing and 6th most attractive destination for FDI, according to AT Kearney.
Global competitive report ranks India at first place in terms of prevalence of foreign technology licensing.
Among top 10 tourist destinations. Major destination for foreign venture capital funds.

9. GREAT INFRASTRUCTURE, AND A HELPING HAND:
$12 billion Highways Development Programme. Over 13,000 Kms of Highways being developed.
The Electricity Act, 2003 in place to facilitate reforms in power sector. Permits trading in electricity, captive generation freed from prior approval.
Upgradation of airports at New Delhi and Mumbai.
Sagar Mala, a major programme aimed at developing ports and shipping sector at an estimated investment of $22 billion.
Major advances in telecommunications sector. Bandwidths of terabit available. Sharp decline in telecommunications costs.
Foreign Investment Implementation Authority helps solve foreign investors’ problems. It meets periodically with investors to sort out operational difficulties and facilitates implementation.
An Empowered Sub-Committee of the National Development Council set up on creating an investor friendly climate and removing regulatory barriers to investments.
Modernisation of legislations on intellectual property. All IPR Laws are TRIPS compliant. Intellectual Property Appellate Tribunal functional.
Simplification and re-engineering of work procedures.

10. BOOMING SECTORS & OPPORTUNITIES GALORE:
Roads: Capacity enhancement of highways. 7000 kms of National Highways being offered during the current year. Many more opportunities in the States. Opportunities for equipment manufacturers. technical support.
Urban Infrastructure: Development of townships for the rapidly growing, increasingly affluent urban middle class. City level infrastructure. roads, bridges, IT Parks, sanitation and water supply, etc. Consultancy in urban planning.
Ports: Government of India’s initiative of developing ports Sagar Mala’ with an investment of $22 billion. Development of Ports. Shipping. Upgradation and operation of cruise terminal. Operation of Dry Port at Mumbai.
Power: Addition of 100,000 MW required over the next 10 years. Installed capacity 106,000 MW. Hydro-electric initiative to develop 50,000 MW. Detailed project reports to be prepared to facilitate private investment.
Telecommunications: Cellular phones increasing @ 1.5 million every month. To increase by 20 million this year. Figure to rise to 100 million in the next 3-4 years. Telephone connections to rise to 75 million by 2005 and 175 million by 2010. Investment Opportunities. Setting up manufacturing base. Value-added services.

Offshoring and Process Transformation

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McKinsey Quarterly (via News.com) takes a closer look at the business-process offshoring that is moving jobs from the US to countries like India, arguing that:

Companies are leaving billions of dollars in savings behind when they “offshore” back-office functions and service jobs. Such companies are merely replicating what they do at home, where labor is expensive and capital is relatively cheap, in countries in which the reverse is true.

What is needed? Nothing less than a total transformation of business processes to harness the new environments potential. And by undertaking such a transformation, many companies will find that the resulting lower cost structure releases massive new revenue opportunities even more valuable than the savings.

Merely replicating processes developed at home, however, is not the way to realize offshorings full potential. Wages represent 70 percent of call-center costs in the United States, for instance, so these operations are designed to minimize labor by using all available technology. But in low-wage India, that makes little sense, since wages represent only 30 percent of costs, and capital equipment (to provide telecom bandwidth, for example) is often more expensive than it is at home.

The way to reduce the cost of offshore operations even further is to reorganize and reengineer operations to take full advantage of these differences. In a low-wage country, the capital infrastructureincluding office space, telecommunications lines, and computer hardware and softwareshould be used as intensively as possible. For a call center, this approach can reduce costs by an additional 30 percent to 40 percent, boosting total savings to as much as 70 percent of the cost of onshore operations. The potential value for other functions moved offshore, like data entry, payroll processing and financial accounting, is similar.

Companies can boost their capital productivity in low-wage environments in three ways:

– Round-the-clock shifts
– Cheaper capital equipment
– Reduced automation

One of the examples given is from the Indian auto sector:

In India, domestic car companies have reduced the need for automation throughout the manufacturing process: They use more manual labor to load and change dies in pressing, to weld bodies, handle materials and do other functionswhile suffering no discernible loss of quality in the finished product. In this way, these companies manage to cut their assembly costs by 4 percent to 5 percent or even more and save themselves millions of dollars annually.

The new cost position can also be used to develop cheaper products for consumers in emerging markets. Consider the experience of one of India’s own local companies. The Indian automaker Tata Motors (formerly Telco) designed the low-cost Indica car for the domestic market. The Indica sells for roughly 10 percent less than cars from global OEMs and breaks even on a volume of 150,000 units, a fraction of the number global companies need. That Indicas have fewer features accounts for a small part of the cost savings.

Most of the savings come from a lower level of automation in assembly, a reengineered process, and the use of very low cost local labor to develop the car (at a quarter of what a global OEM would have spent to develop something similar). As a result, the company has grown from virtually nothing to capture a quarter of the Indian market in its segment during the past four yearsdisplacing Suzuki Motor, Hyundai and other global brandsand is now under contract to export 100,000 Indicas to the United Kingdom and Continental Europe.

This is what IBM calls “business transformation outsourcing”. In a story on IBM, Barrons takes a closer look at IBM’s approach:

The consulting piece of IBM’s services grew by nearly 50% with the acquisition of PricewaterhouseCoopers. Management consultants in that unit help demonstrate to customers the connection between computing and business outcomes. “There’s been a shift in this industry,” says Ginni Rometty, who runs IBM’s consulting business. “Customers are not just looking for advice but for business results, and they’re holding their partners accountable for showing business results.”

A direct way of showing results is to take over the business itself — or at least a piece of it. One of Rometty’s fastest-growing initiatives is “business transformation outsourcing,” IBM argot for a deal in which a customer outsources departments other than info technology. So far, IBM is offering to take over finance, procurement, human resources and customer call centers.