PM Profile

Business Standard looks at the first 10 weeks of Indian Prime Minister, Dr Manmohan Singh:

It has been 71 days since Manmohan Singh made the unexpected ascent to the countrys top job. During that time he has emerged as the most low-profile prime minister the country has ever had.

He has made one trip to Andhra Pradesh, a key Congress bastion, and another to Assam from where he has been elected to the Rajya Sabha. This week hes made his first trip abroad to Bangkok, for a meeting on regional trade and cooperation.

His advisors talk about long hours in the office, of a man who is poring through the files that the system throws up to him. Perhaps thats why some insiders say he is less dependent on his principal secretary than any other prime minister has ever been. Hes a hands on man. Be it foreign affairs, the economy, rural development or water, he likes to take a first account from the concerned secretary, says a senior bureaucrat.

One things for sure: Manmohan Singh is as different from A B Vajpayee as chalk is from cheese. He wants the detail (a 40-page memo on a complicated subject was welcomed and devouredwhich no one since Indira Gandhi would have done); he wants the total picture before making a move; and he wants to address the most difficult issues of development, not just make the flamboyant gesture or announce a grand scheme.

Its a harder road to walk, and it does not help that he runs a minority government with multiple handicaps. A decade ago Finance Minister Manmohan Singh put his indelible stamp on modern India. The jury is still out on whether Prime Minister Singh will be able to put a similar stamp on 21st century India.

Broadband in South Korea

ZDNet writes:

The Seoul government’s clearly articulated vision for modernising the country’s infrastructure stands in stark contrast to the regulatory morass that has stunted development in US telecommunications for several decades. South Korea’s policy — the cornerstone of a national technology initiative to help revive a devastated economy — has created true broadband competition, which in turn has helped prices fall and speeds rise.

Although its economy is still struggling, South Korea has made significant progress with many forms of digital technology. Citizens can get “video on demand” online, often even with high-definition video, for less than Americans pay to rent a DVD. Low-income students use high-speed Net connections to take free tutorials for the national aptitude test, an exam that can determine college admissions and future job paths.

Online gaming is a massive cultural phenomenon, with three TV channels dedicated to the subject and good players attaining the fame of American sports stars. In addition, South Koreans spent more than US$1.6 billion shopping online in the first quarter of 2004, or about twice as much per capita as US residents .

“The vision of a broadband society is already here in Korea,” said Eric Kim, executive vice president of global marketing operations at Samsung Electronics. “We are two to three years ahead in wireless broadband, and people are using it, too.”

Cumulative revenue from online content has similarly exploded. Companies that provide online games and services like the Cyworld blogging site have penetrated all segments of society and become a national obsession. Corporate executives chronicle their daily lives through blogs.

“The usage model is critical,” said MC Kim, general manager for Intel Korea. “Online gaming is one of the killer apps.”

In many ways, the most important question answered in the country’s grand broadband experiment has been one of demand. Broadband progress has long been delayed in the United States and other countries as a result of uncertainty about how much interest consumers would have in paying for the expensive infrastructure needed for high-bandwidth services.

As a result, entire industries have been paralysed for years by a classic Catch-22, as content companies and network carriers waited for one another to make the first move before investing in broadband products. Telecommunications start-ups tried to break that stalemate in the 1990s by investing large sums to offer rival high-speed connections to customers, only to be gutted in the dot-com bust.

What South Korea showed is that, if you build it, they will definitely come.

India needs a similarly aggressive approach to broadband.

Great Hackers

[via Slashdot] Paul Graham writes:

A great programmer might be ten or a hundred times as productive as an ordinary one, but he’ll consider himself lucky to get paid three times as much. This is partly because great hackers don’t know how good they are. But it’s also because money is not the main thing they want.

What do hackers want? Like all craftsmen, hackers like good tools. In fact, that’s an understatement. Good hackers find it unbearable to use bad tools. They’ll simply refuse to work on projects with the wrong infrastructure.

The fact that good hackers prefer Python to Java should tell you something about the relative merits of those languages.

Great hackers also generally insist on using open source software. Not just because it’s better, but because it gives them more control. Good hackers insist on control. This is part of what makes them good hackers: when something’s broken, they need to fix it. You want them to feel this way about the software they’re writing for you. You shouldn’t be surprised when they feel the same way about the operating system.

Great hackers also generally insist on using open source software. Not just because it’s better, but because it gives them more control. Good hackers insist on control. This is part of what makes them good hackers: when something’s broken, they need to fix it. You want them to feel this way about the software they’re writing for you. You shouldn’t be surprised when they feel the same way about the operating system.

After software, the most important tool to a hacker is probably his office. Big companies think the function of office space is to express rank. But hackers use their offices for more than that: they use their office as a place to think in. And if you’re a technology company, their thoughts are your product. So making hackers work in a noisy, distracting environment is like having a paint factory where the air is full of soot.

Along with interesting problems, what good hackers like is other good hackers. Great hackers tend to clump together– sometimes spectacularly so, as at Xerox Parc. So you won’t attract good hackers in linear proportion to how good an environment you create for them. The tendency to clump means it’s more like the square of the environment. So it’s winner take all. At any given time, there are only about ten or twenty places where hackers most want to work, and if you aren’t one of them, you won’t just have fewer great hackers, you’ll have zero.

Great Hackers are what we need to build out the Emergic vision.

China and India

[via Paul Denlinger] Indian Express quotes a Morgan Stanley report which says that “in 13 yrs, India will be where China is today and China will be thrice as large.”

Not surprisingly, China scores over India in most segments of the economy. With one exception: notwithstanding the recent collapse of Global Trust Bank, the Indian financial system is healthier.

China leads on all other countsinfrastructure, consumption, trade. China spends eight times more than India on physical infrastructure. Its total capital spending in electricity, construction, transportation, telecom and real estate was $ 260 billion (20.3 per cent of GDP) compared with $ 31 billion (6 per cent of GDP) in India.

Specifically, while China has been investing around $ 24 billion on improving highways, Indias investment in the Golden Quadrilateral is only $ 12 billion. No wonder, the report stresses, the cost of infrastructure services in India is about 50-100 per cent higher than in China.

Apart from exports, Chinas domestic market for products is much bigger than Indias. Penetration rates and per capita consumption are higher in China for most broad-based manufactured consumption items, says Andy Xie of Morgan Stanley, adding that India will need 10-15 years to reach Chinas market size.

Also see:
China Daily: Software industry of strategic priority
Asia Times: Infosys chief warns of China’s growing clout

No-Frills CRM

Strategy+Business writes:

We think it is possible to reap some, even many, of the rewards of CRM without buying a specialized software package. We call our method Cheap CRM. It involves leveraging the customer data the company already possesses and most companies already possess a lot more customer information than they think.

The payoff from the kind of Cheap CRM we propose is significant. Managers can dramatically improve customer profitability and retention and reveal new opportunities without incurring the disadvantages.

Much of the data needed to implement Cheap CRM already exists, in fact, on the humble invoice. Most multinational companies have invested massively in mainframe enterprise resource planning systems. These have brought rigor to their sales administration, summarizing each months invoices at a customer or business unit level, but they dont necessarily provide transparency in sales reporting, thus leaving the organization blind to the richness of transaction-level analysis.

By downloading invoice data into a simple database tool such as Microsoft Access, however, company analysts can construct a revealing picture of the shape of the business. Which customers are delivered to, and where? Which supply points generate the most revenue, and which receive the most orders? With this data, managers are able to calculate profitability with a precision that occasionally leads to revelation. They can also monitor changes in profitability inside a given reporting period. This is of particular significance with products subject to variable supply prices and potentially volatile margins. Knowing the number and types of transactions, managers can allocate fixed administrative expenses effectively. They can then link the database to external factors that may be driving buying behavior, such as the weather or advertising. By subjecting this data to regression analysis, one can get very close to the heart of CRM: understanding the customers propensity to buy.

Food and Development

The Economist writes that “global hunger is on the wane but it is still hampering the growth of people, and of economies.”

What hungry people need first and foremost is more food. But they also need better food. The most basic kind of malnutrition is called protein energy deficiency. In other words, a diet that is lacking in energy because of a deficit in all the major macronutrientssuch as carbohydrates, fats and proteins. Typically, though, such a diet will also be deficient in many micronutrients. As a consequence many lives are blighted for want of tiny amounts of iodine, iron, vitamin A and zinc. Micronutrient deficiencies are ranked eighth among the top ten risks to health worldwide by the WHO.

Many of the things that would ease hunger are worth doing anyway. Policies that promote economic growth or better education would be desirable even if they had no impact on nutrition. Democracy and freedom of speech are attractive in and of themselves. But it is also worth noting that rich, well-educated countries never go hungry, and that no democratic country with a free press, no matter how poor it may be, has ever suffered a famine. Unfettered reporters provide early warnings, and accountable governments know they have to respond to emergencies. The recent crushing of the independent media in Zimbabwe is one reason why the WFP expects trouble this year.

In other places, the battle against hunger is steadily being won. Better nutrition is making people cleverer and more energetic, which will help them grow more prosperous. And when they eventually join the ranks of the well off, they can start fretting about growing too fat.

TECH TALK: Tech Trends: 10. Emerging Markets as Drivers

The first phase of the technology revolution over the past few decades has touched the lives of the top of the global pyramid of consumers and enterprises. It is only in the past few years that technology has started making its way into the lives of businesses and families at the bottom of the pyramid in the emerging markets. Because of the lack of legacy and an inherent need, adoption of some technologies has turned out be extremely rapid. In India, about 300,000 computers are purchased every month, as compared to 2 million cellphones. Now imagine what would happen if computers were available at the price points of cellphones. We will then see annual computer sales at 12-15 million for many years to come, making India among the top three markets in the world. What does that mean for the global IT players for whom India has so far been a rounding off error in their revenues and profits? Emerging markets, by virtue of their large numbers, have the potential to be the hotbed for disruptive innovations. They are the new markets which can ignite growth at technology companies. But at the same time, they need solutions which need to be at different price-points from what the developed world has been paying. This is both a challenge and an opportunity.

The opportunity for emerging markets like India is to create solutions using the newest technologies to leapfrog the present infrastructure gaps. Emerging markets are where more than two-thirds of the world resides. They are the next 90% of the market. They are, in the words of CK Prahalad, the fortune at the bottom of the pyramid. Technology today offers the building blocks to put solutions together which can help build out the digital infrastructure of these countries at a fraction of the price point of that in the developed markets.

India Action: Build the Emerging Market Tech Utility

Business Week wrote recently about how technological innovations are helping the poor in rural India: No laptop, however cheap or durable, can compensate for India’s lack of a nationwide power grid, or a comprehensive network of highways. But digital technology can deliver information — information the rural poor desperately need — about crop conditions, fertilizer prices, health care, and more. Reliable information can help India’s poor stretch their resources — to plant the right crops, deal with bureaucrats more effectively, operate on a level playing field with customers and merchants. The digital revolution in India is largely an information revolution.

What India needs to do is build out the equivalent of an tech utility which makes available commPuting as a utility to the masses across the country. A centralised platform that makes available computing as a service and accessible via thin clients over a high-speed broadband infrastructure, neighbourhood computing centres that provide access on a pay-per-use basis, a community-centric content platform which makes available local information and helps SMEs connect with each other, investments in education and healthcare to make sure they reach rural Indians these are the elements of the tech utility. India can use the technology trends to its advantage by looking ahead. By making things work in India, entrepreneurs can open up new opportunities for themselves in other emerging markets also.

The world of technology, like time, does not stand still. Innovation and change are the only constants. Indian organizations have the opportunity to leapfrog by simultaneously leveraging many of the new innovations that the technology industry is making available. The force of digitisation is at once a threat and an opportunity. The choice is for each one of us to make.

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Bus. Std: Of Black Swans and Google

My latest column in Business Standard:

I recently came across a report on search engines from 1999. Among the companies it discussed was Google. As I read it, I wondered if I (or anyone else) could have imagined then that five years later, this start-up would have so transformed the search space, build the worlds largest computing platform, and be getting ready to do an IPO that will create $25 billion of wealth for its founders, employees and investors.

What is remarkable about Google is that it flourished right under the noses of its competitors without being acquired or crushed. The likes of Yahoo and Microsoft did not do anything until it was too late to prevent Google from getting where it is now. That is the incredulity of it all.

A Google happens once in many, many years. It is almost impossible to predict before hand that such a company will at some point of time in the future occupy a position of great power and influence over not just across its vertical but across the industry. Because, if we knew, we would do something about it. Competitors would seek to put roadblocks and hurdles, or failing that, try and possibly acquire it. Even otherwise helpful partners may think carefully if they realise they are going to help in building the next big behemoth. In other words, events and circumstances which lead to the creation of the once-in-a-lifetime companies are rare and almost unpredictable.

That is what makes Google a black swan.

Nassim Taleb, author of Fooled by Randomness and founder-chairman of Empirica LLC, a research laboratory and financial products trading house in New York, has this to say: A black swan is an outlier, an event that lies beyond the realm of normal expectations. Most people expect all swans to be white because that’s what their experience tells them; a black swan is by definition a surprise. Nevertheless, people tend to concoct explanations for them after the fact, which makes them appear more predictable, and less random, than they are.

In a paper entitled The Black Swan: Why Dont We Learn that We Dont Learn, Nassim elaborates on the black swan notion: The Black Swan is defined as a random event satisfying the following three properties: large impact, incomputable probabilities, and surprise effect. First, it carries upon its occurrence a disproportionately large impact. The impact being extremely large, no matter how low the associated probability, the expected effect (the impact times its probability), if quantified, would be significant. Second, its incidence has a small but incomputable probability based on information available prior to its incidence. Third, a vicious property of a Black Swan is its surprise effect: at a given time of observation there is no convincing element pointing to an increased likelihood of the event.

Think a little about what made Google thrive to get to the point where it has reached now. One, it had only one round of venture capital investment, giving the founders sufficient management control on the future direction of the company including the right to refuse takeover offers. Second, they focused on an area which others had given up on search. When Google started up, search was a forgotten area in the Internet backwaters. They not only made search work well, but also created a business model around it via the text ads. Third, they built up scale rapidly over the years. Their use of commoditised hardware and open-source software at the backend gave them the platform to keep costs low even as they layered their proprietary algorithms on top of the GoogleOS.

What Google has done is to build an alternative computing platform. This is becoming obvious as it starts our to roll out various services which go beyond just search a shopping service, social networking, a blogging platform, email with a difference (not to mention plenty of storage), and a local search/yellow pages engine. Rick Skrenta had this to say: Google is a company that has built a single very large, custom computer. It’s running their own cluster operating system. They make their big computer even bigger and faster each month, while lowering the cost of CPU cycles. It’s looking more like a general purpose platform than a cluster optimized for a single application. While competitors are targeting the individual applications Google has deployed, Google is building a massive, general purpose computing platform for web-scale programming.

Tim OReilly takes it further: In a brilliant Copernican stroke, [Googles] gmail turns everything on its head, rejecting the personal computer as the center of the computing universe, instead recognizing that applications revolve around the network as the planets revolve around the Sun. But Google and gmail go even further, making the network itself disappear into the universal virtual computer, the internet as operating system.

We have seen the emergence of a black swan before our very years in the past five years. Can the next black swan in the technology space come from India? In an interview with The New Yorker, Nassim Taleb quotes Scottish philosopher David Hume: “No amount of observations of white swans can allow the inference that all swans are white, but the observation of a single black swan is sufficient to refute that conclusion.” Just because something has not happened before does not mean it is never going to happen in the future. It is for Indian entrepreneurs to prove Hume and Taleb right by envisioning a future very different from today and building it out. Ill be watching for a black swan in 2010.

[I would like to thank Chetan Parikh of CapitalIdeasOnline for introducing me to Nassim Talebs concept of black swans.]

Learning English

I was speaking to a friend of mine who is keen to make an English language learning website (on a non-commercial basis) for non-English speakers in India. Any suggestions of (a) sites that exist (b) software / learning programs / books that make it easy for learning English?

Growing Internet Ad Dollars

WSJ writes that “a new report from Jupitermedia’s JupiterResearch predicts that dollars spent on online advertising — defined as a paid message featured on a Web site, online service or other interactive medium, such as instant message or e-mail — will match dollars spent on magazines by 2007, then surpass them in 2008.”

Web offerings have become “more targeted and much smarter” about how they measure their audience, says Gary Stein, a Jupiter senior analyst. Driving the money, he says, is the burgeoning popularity of paid-search advertising, which allows marketers to link their names to very individual Web activity. Also important: The spread of high-speed broadband connections will spur more use of ads that are more like TV commercials, creatively using video and sound. Meanwhile, Internet display ads have shown new momentum this year. The report calls for usage minutes and ad dollars to cluster around four top properties: Yahoo, Google, Time Warner’s AOL and Microsoft’s MSN.

InfoWorld Security Report

Here. “Faced with a seemingly endless onslaught of virulent Internet worms, spam, and e-mail scams, less than half of IT professionals report strong confidence in the security of their enterprise networks, according to the results of the 2004 InfoWorld Security Survey.”

Microsoft, Goldman Sachs and IQ

A fascinating story by Rich Karlgaard about a talk he had on aflight with Bill Gates 11 years ago:

Halfway through the flight, Mr. Gates closed the book, shut his computer off and we talked. Out of nowhere, he told me that he had recently figured out who his competition was. It was not Apple, Lotus or IBM. He waited a couple of beats. “It’s Goldman Sachs.”

“Is this a scoop? Is Microsoft getting into investment banking?”

“No,” he said. “I mean the competition for talent. It’s all about IQ. You win with IQ. Our only competition for IQ is the top investment banks.” During that trip, I must have heard Mr. Gates mention “IQ” a hundred times.

The obsession with smarts is embedded deep in Mr. Gates’s thinking and long ago was institutionalized at Microsoft. Apply for a job and you’ll face an oral grilling that probes for IQ. It is oral and informal because of Griggs v. Duke Power, the 1971 Supreme Court ruling that banished written IQ tests and “tests of an abstract nature” from job applications. But Microsoft knows what it wants. It wants IQ. And Microsoft always has been savvy at getting what it wants.

Or at least it used to be. Today Microsoft is struggling to figure out what attracts and motivates the most talented employees within capitalism’s free-agent system.

Guess where all the smarts are going today.

TECH TALK: Tech Trends: India Action: Build Infrastructure to Support BPO

While it is a good start, the way we have been looking at BPO in India is not necessarily the way it is likely to be in a few years. First, many of the BPO operations are concentrated in cities where the cost of operations are high. But given the problems with infrastructure, companies have little choice at this point. Second, the people being employed in the BPO sector are among the upper end of the educated pyramid who are attracted by the high salaries. Given the mundaneness (and in some cases, the hours) of the work, they quickly tend to get bored this is reflected in the high attrition rates at most of the BPO companies. Going ahead, if India is to build a deep backend in outsourced services, both these factors need to be addressed.

India has 784 cities and towns with population greater than 50,000. BPO needs to spread outside the top few cities into the hinterland. But for this to happen, the infrastructure in terms of power and telecom has to improve dramatically. The same applies for education. Indias Tier 2 and 3 cities need to the ones where the new BPO centres need to come up. In fact, if one looks at the US, this is what has happened outsourcing centres are in low-cost and relatively less wealthier states and cities. India too will go along the same path. But for that, a concerted effort needs to be made to improve the infrastructure in these cities. Today, in fact, other than Mumbai and Delhi, most Indian cities do not even get reliable 24×7 power! Theres a lot of work to be done if the BPO dream is to be sustained.

Indian companies also need to start addressing the internal SME segment for outsourcing. This is where the opportunities are far greater and a market that hasnt really been addressed. IT services would be a good place to start. By using the commoditisation of IT and a near zero-cost of communication through VoIP (Skype, for example), Indian companies can provide the IT backend for the millions of US, European and Japanese SMEs. What is needed is standardisation of the offerings and solutions by industry. This is where the real benefits of the Internet start getting used to substantially reduce operating costs for SMEs. In addition, Indian companies can also help create new opportunities whether it is by offering outbound marketing services or attending to customer calls. This twin strategy using IT to automate and streamline business processes, and then helping them grow their business can open up new business opportunities for Indian companies.

Tomorrow: Emerging Markets as Drivers

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Financial Fitness for Entrepreneurs

Fred Wilson points to Brad Feld who writes about “some fundamental financial tenets that all early-stage entrepreneurs should be aware of, understand, and heed”:

1. Cash is king
2. Put in real financial systems from day one
3. Measure everything
4. Build an annual operating plan
5. Use your vendors to fund your business
6. Use your customers to fund your business
7. Be careful of personal guarantees
8. If it sounds too good to be true, it probably is
9. Finance your business appropriately for what you are trying to create
10. Choose professionals carefully
11. Dont take anything for granted
12. Pay your taxes on time

7 Things RSS Is Good For

JD Lasica enumerates:

1. Saving time
2. Convenience
3. Access to a richer pool of material
4. Zero in on the info you want
5. RSS can serve as an alert service
6. RSS levels the playing field
7. RSS drives conversation

JD adds:

Why is RSS useful to publishers and corporations? Here are …

5 Reasons Why Companies Should Publish an RSS feed:

1. Multiple gateways. It’s another doorway or distribution channel for getting your content in front of readers.

2. Self-syndication. It allows publishers to syndicate content without the involvement of third parties.

3. The predictability principle. By far the most important reason is this: Just as with newspaper subscriptions, RSS subscriptions mean your content is guaranteed to be seen on a regular basis rather than via sporadic pull behavior. On a typical news site, a reader stops by an average of three times per month.

4. Loyalty. RSS can forge a closer relationship with readers if done in conjunction with a weblog or community feedback tools.

5. Future revenue streams. RSS could be a great way of distributing classified advertising and other targeted marketing opportunities as long as the user requests it and finds it useful.

Meta-Mail Need

John Reynolds gives an example of why Meta-Mail is needed:

A real example from my exciting life:

* One of our consultants (Srikanth) discovers that he cannot file a support incident with a vendor. Our service contract has lapsed, and he is stuck.
* Srikanth sends me (John) email, asking me to get the service contract renewed. He is stuck, so he marks the email as “urgent”.
* My inbox is relatively empty, so I actually read the email (within an hour or so).
* I reply to Srikanth, and forward the email to my boss (Sam).
* Sam replies to me, and directs a request to the head of the group that “owns” our contract with the vendor (Amy).
* Amy sends email to the team member who works regularly with the vendor (Mary).
* Mary sends email to the vendor.
* The vendor replies to Mary with terms for renewal.
* Mary forwards the terms to Amy for purchase approval.
* Amy approves the purchase, and emails our purchasing department (to issue a purchase order).
* Our purchasing department issues the PO to the vendor.
* The vendor emails Mary the new support keys.
* Mary emails Amy, Sam, John, and Srikanth the new support keys.
* Srikanth uses the keys to file the support incident.

I’ve actually left out a few steps here, and I’ve fudged the outcome. We’re still waiting for terms on renewing the support contract (it’s been a couple of weeks so far).

The point of this example is that a business process is being conducted via email. Each message is a step within our ad-hoc “renew a support contract” process. I am certainly not bragging about the details of our process, but it should seem pretty familiar (and pretty scary). Each email is distinct and unrelated to the others except for the likely inclusion of the email thread within the body of the message. There is no easy way to track the progress of the process (except to send follow-up emails), and it doesn’t take much for the process to stall.

John also points to Roundup, an Open-Source tool that incorporates some of the concepts of meta-mail.

Motorola’s WiFi+GSM Cellphone

WSJ writes about the CN620:

The device could be the first mobile phone that combines wide-area GSM cellular technology with shorter-range technology known as Wi-Fi, or wireless fidelity, could open the floodgates for users to steal away significant minutes from cellular networks and place free calls over the Internet.

Motorola says its new device will still work after leaving the Wi-Fi “hot spot,” because the call will simply hand over to the regular cellular network, using the wireless technology called GSM. That means that a user — instead of having a cellular number and a work number, for instance — can have just one. Though the phone will be initially aimed at business users, Motorola envisions the technology working in consumers’ homes as well, allowing people to take a single phone number with them wherever they go.

The new device is the latest example of a sea change in the telecommunications industry: a shift of power away from telephone companies that run networks to equipment providers such as Motorola and Cisco that are rapidly designing new products that can allow consumers to tap the Internet.

Microsoft and Linux

Business Week suggests that Microsoft should embrace Linux and recommends an MS-Office port to Linux. “Building an Office for Linux might actually enhance Microsoft’s hold on the productivity-software market over the long term. In fast-growing emerging markets, such as China and India, piracy of Microsoft products is so rampant that legitimate copies are the exception rather than the norm. And those markets have proven resistant to Microsoft’s pricing strategies.”

TECH TALK: Tech Trends: The Future of Services

Business Week writes that services is moving beyond outsourcing:

While doing a lot of work in low-wage countries is a necessity for most tech-services outfits, it’s not the only way to trim labor costs. Smart companies are coming up with creative ways of automating their operations, reusing valuable technology, and streamlining business processes. In this most labor-intensive part of the tech industry, they’re reducing the number of bodies they need for everything they do — whether it’s operating data centers, consulting, writing software, or running their clients’ customer-service and accounting operations. The changes not only make them more efficient, they result in more effective services.

Writing software traditionally has been a productivity sinkhole for services outfits. Now, rather than starting from scratch with each new project, companies are using Web technologies to package complex pieces of software into reusable components — like so many Lego pieces. Project leaders can pull the pieces they need from online libraries, mix and match to produce a desired set of functions, and get their work done with much less effort.

Even business processes themselves can be packaged and used over and over again. This is crucial in the fast-growing corner of the services world called business-process outsourcing. When companies take over human resources, customer service, and accounting for their clients, they routinely promise that they can do the same work for 25% to 40% less money.

The trick for services outfits is to automate their operations without alienating their customers.

IBMs David McQueeney talks to Business Week of the new science of services:

A new science is being invented, which is an outgrowth of computer science but also an outgrowth of research and project management and a bunch of other things. In a few years we’ll look back and say this was the beginning of the scientific and technical base underneath services.

Clients always want the maximum value from their investment in information technology with the minimum need to be IT experts. It used to be they had to have huge inside IT staffs. They had to know every detail of all the plumbing. But over time as we as an industry get better and move up the stack of technology abstractions, we can give them the power to change their business and require them to be less and less the experts — and focus their energy on the things that are higher in the food chain.

This is a big step in making all the things we offer to our customers more coherent, more clear in terms of its value, and its impact on the business. Our customers are telling us to solve more of the details, and to do it for them in a way that creates the end result without them having a lot of expertise.

The goal is not to replace people. The people are where the creativity comes from. But you take the repeatable, standardizeable pieces and put them in software that we deliver either as products or as specialized services. The humans can apply more of their creativity to the piece that only humans can do.

The emergence of Web services is the technological base and the lingua franca that makes the idea of a services stack possible. You have to somehow bridge the world of software to the world of business processes.

Tomorrow: India Action: Build Infrastructure to Support BPO

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