January 21, 2004

Nanotech Stocks Boom

Boston Globe and WSJ write about the rising prices of nanotech companies.

Boston Globe: “The nanotech stock boom resembles past biotech surges because many shares have soared without much in the way of company revenues. It looks a little like the telecom stock boom a few years ago because the technology might improve on old products by dizzying degrees but it faces practical, real-world obstacles…Just like the Internet, biotech, and telecom, nanotechnology almost certainly will produce valuable new things, eventually. Making money off them may be another matter…Nanotechnology already enhances common products today, from pants that don’t wrinkle to lighter carbon graphite tennis rackets. But home-run potential lies in dramatically smaller integrated circuits and improved medical diagnostics and therapeutics.”

WSJ: “Nanotechnology favorites such as Nanogen Inc., Nanophase Technologies Corp. and Veeco Instruments Inc. all have doubled, tripled or more during the past year, even though they have no earnings and, for the most part, minimal revenue…Still, there are reasons to focus on the sector. In some ways, companies getting a head start on nanotechnology have a leg up on the Internet entrepreneurs because there are real barriers to entry in this world, as opposed to the Internet. Three guys with a garage and a business plan could get investors enthused during the Internet bubble, but real expertise is needed to get a nanotechnology company going.”

Nanotech is, according to WSJ, “a way to develop a substance, like teflon, or a component, like a computer chip, with building blocks as small as 10 nanometers (a nanometer is one-billionth of a meter). The idea is that once the substances are that small, they can be manipulated more effectively and sometimes aren’t as affected by forces such as gravity, giving them a range of new uses. In coming years, companies will use nanotechnology to improve everything from computer hard drives and chips to drugs and even suit pants.”

China’s Blistering 9.1% Growth

If we think India is growing fast, take a look at the numbers from China. WSJ reports that China’s 9.1% growth in 2003 (vs 8% in 2002) has pushed its per capita GDP above USD 1,000 for the first time.

Mr. Li Deshui, head of the National Bureau of Statistics, announced that the economy grew at a 9.6% rate during the third quarter…In Asia, China’s GDP growth rate is by far the highest. Second would be India, which in January said GDP grew 8.4% in the July-to-September quarter, raising hopes the country could register nearly 8% growth for its current financial year, which ends March 31.

Mr. Li and other economists warned, however, that certain industries and regions may be on the verge of overheating, which could affect prices. Industrial output accounted for nearly two-thirds of economic growth last year, with heavy industry — chiefly steel, petrochemicals and machinery-building — making up more than half of that output. Economists pointed to this as a telling imbalance in a country where the majority of the population still makes a living from farming. Also, high demand for raw materials has created bottlenecks and pushed up some costs. China now consumes one-third of the world output of coal and rolled steel. Prices for steel climbed 10% last year in China, while the prices of certain steel products jumped 26%.

Though consumer prices edged up 1.2% for all of 2003, the inflation rate appeared to be accelerating during the final months. Consumer prices rose 3.2% during December from a year earlier, and the increase in November also exceeded 3%. “The worrying thing is inflation,” said Jun Ma, a senior economist with Deutsche Bank in Hong Kong.

A second story in the WSJ writes about South Korea’s problem with household-debt which provides a warning that “doling out credit cards to boost consumer spending can juice growth in the short run, but the ultimate consequences — for financial institutions and the economy — can be dire.”

Web Services Shakeout

News.com surveys the market:

Now, a glut of Web services management companies are competing to be part of Web services applications that are becoming increasingly popular within big companies. Many smaller, specialized management tool players, like Infravio and AmberPoint, could be on a collision course with industry heavyweights that are now intent on being full-service providers.

Other established companies in the field include Confluent Software, Digital Evolution, Flamenco Networks, Actional and Blue Titan Software, each of which focuses on specific areas of Web services, such as delivering messages or monitoring Extensible Markup Language documents.

Analysts say the market is in such a state of flux, it’s unclear which of those companies have the best long-term prospects, given all the variables, including management, funding and customers. Managers of those start-ups expect that two or three will survive an anticipated shakeout. Analysts say those companies that do survive will need to stay several steps ahead of established companies, as they muscle into Web services management.

“We definitely see (that) 2004 will be make-or-break for all new entrants,” said Jason Bloomberg, an analyst at Web services research company ZapThink. “A couple of those (management) companies might survive, but five years down the road, they will be different companies.”

For Web services start-ups, “what’s critically important is not the technology as much as the customer acquisition,” said Martin Wolf, president of investment firm Martin Wolf Securities, who expects the field to thin out substantially during 2004.

Google Portal?

CNN suggests that Google may be planning an email service and morphing itself into a portal:

Adding an e-mail service would provide a potential boost to Google as its technology lead in the search market seems destined to narrow and it prepares to answer to growth-hungry shareholders, analysts said.

“I’m sure Google is getting more and more concerned about locking in users. It wouldn’t surprise me if they did something very sophisticated with e-mail,” said Danny Sullivan, editor of SearchEngineWatch.com, who tracks the industry.

By moving into e-mail — the Web’s most-used program — Google would open up a huge new market for its lucrative “sponsored links” advertising business that delivers ads tied to keywords in Web searches or on content pages, analysts said.

“If they were to go the e-mail route they’d have to provide an offering that competes with free [e-mail]. Anti-spam is one form of strong differentiation,” said Jim Pitkow, chief executive of Moreover Technologies.

Google’s ambitions are obviously increasing. It needs to cover as many bases as possible before its IPO. The temptation is now to do many things – what else would one expect from a company which is likely to have USD 2-4 billion in the bank shortly? I feel that these are distractions – there’s plenty to be done on Search itself. I will be writing a Tech Talk series on Seacrh from the Indian market perspective next week.

Infosys and Disruptive Innovation

Business Standard (Manjari Raman, a Boston-based management writer) discusses the issues facing Infosys with Clay Christensen of HBS and co-founder, chairman and chief mentor Narayan Murthy:

The good news is: Infosys is a disrupter. Says Christensen: Infosyss business model is disruptive relative to the IT services industry in North America and Europe.

What made Infosyss Global Delivery Model (GDM) disruptive was its framework for distributed project management, the ability to deploy multi-location, multi-time-zone teams to execute projects efficiently and at low cost.

Like all disrupters, Infosys moved up the value ladder by deploying the model better, faster, more efficiently and in more areas.

The company evolved from writing small bits of code offshore at its Bangalore office to IT consulting to business process outsourcing. Now the company is gearing up for the next level, a new initiative called Thousand Board-Room Consultants.

Says Murthy: We have to transform our people so that from reactive problem solvers, they become proactive problem definers. We want our people to go to a CEO and say: I have looked at your organisation. Things seem to be all right today, but you will run into this problem two years from now. Infosys can provide you a solution today.”

Moving up the ladder has not only improved Infosyss margins but it has also helped the company integrate more with its customers needs.

Its exactly the right strategy for Infosys to follow. It does have to move up the ladder, says Christensen.

However, while the move to create Infosys was a disruptive innovation, all the improvements in Infosyss ability to execute faster, better and more complicated IT solutions are sustaining innovations. As it moves up the ladder and becomes more and more integrated, Infosys needs to create something that has a proprietary interdependent architecture inside its product offering.

for Infosys to become a global giant it will need to overcome at least three hurdles posed by its innovation strategy: Sustenance from sustaining innovations, limited to the low-end, and the trap of too little, too late.

Separately, News.com has an interview with Infosys CEO Nandan Nilekani on outsourcing.

TECH TALK: India.com 2.0: The New Information Platform

The biggest change for me in the past few months has been how little I use the browser to access content. I am getting information from 10 times more sites, but the time I spend has not changed. Instead of my going to these sites, the incremental updates from these sites (including weblogs) are delivered to me in my email client. As a result, I now have subscriptions to over 150 websites and weblogs, which deliver about 500 items into my mailbox. It takes me about 45 minutes to scan these items, and keep aside a handful for thinking and detailed viewing (in the eventuality that the full article is not available as part of the item). This revolution has been made possible by the magic of RSS (Rich Site Summary; an XML format for syndicating content), and it is RSS which is at the heart of the next web that is being created the Publish-Subscribe Web. Together, they form the foundation for the New Information Platform.

Consider the evolving nature of content and publishing from the users point of view:

Beyond Pull: Users would like to get content delivered to them, rather than having to go to sites to see what is new.

Beyond the Browser: Users would like to access content from multiple devices like cellphones and PDAs, rather than just their computers.

Beyond Search and Bookmarks: Users would like to track sites they have visited once via search ,so that each time they like a site, they do not have to worry about adding it to an ever-growing list of bookmarks.

Beyond Broadcast: Users would like content personalised, with related links based on past history and interests.

Beyond Reading: Users would like to be able to publish their comments, ideas, reviews, and be part of the community.

Beyond Text: Users would like to get access to a granularity other than a largely text-based webpage. On one side, it could just be the incremental change (the new content), while at the other it could be an image or audio/video clip.

Beyond Big Media: Users would like multiple voices from others like them.

Beyond Pop-Ups: Users would like ads which are relevant to what they are reading.

Beyond Anonymity: Users would like to see what their friends are discussing.

Beyond Global: Users would like to know more about what is happening in their neighbourhoods that is where they spent much of their life.

Beyond Delays: Users would like to get the content they are interested instantly.

The definition of what content is and how it is accessed has changed over the past few years. Users expectations have evolved, even as the sites that serve them have barely changed. This is the information discontinuity. The world of Internet content and portals, especially in emerging markets like India where habits are not yet completely formed, needs disruptive innovations.

The solution lies in taking Push, a Microcontent Client, Subscriptions, Narrowcast, Writing, Multimedia, Blogs, Contextual Ads, Social Networks, Localisation and Real-Time Updates into a common framework. Think of these as the elements that make up the New Information Platform.

Tomorrow: The New Information Platform (continued)

Continue reading TECH TALK: India.com 2.0: The New Information Platform