Month: June 2004

Indian Paradox: Bumper Harvests and Rising Hunger

WSJ writes about the shift in strategy in tackling hunger in India:

The world is producing more food than ever before as countries such as India, China and Brazil emerge as forces in global agriculture. But at the same time, the number of the world’s hungry is on the rise — including in India — after falling for decades. Despite its overflowing granaries, India has more hungry people than any other country, as many as 214 million according to United Nations estimates, or one-fifth of its population.

The paradox is propelling a shift in strategy among the world’s hunger fighters. International agencies that once encouraged countries to solve starvation crises by growing more food are now tackling the more fundamental problem of rural poverty as well. The old development mantra — produce more food, feed more people — is giving way to a new call: Create more jobs, provide income to buy food.

“Increasing production is great, but we have to think about the whole chain,” says M.S. Swaminathan, the 78-year-old scientist who helped engineer India’s agriculture boom and whose foundation set up Mr. Manangatti’s taxi. India has been able to conquer its famine of food, he says. Now it is suffering from a “famine of jobs and livelihoods.”

In a typical year, the World Food Program distributes food to about 90 million people, many of whom are threatened with starvation in disaster situations such as drought. Most of the remaining 700 million live on isolated, stingy land, and have neither the money to buy food nor the ability to grow it. They’re beyond the reach of international feeding programs and also fall through national safety nets.

It’s virtually impossible to simply hand out food surpluses to the hungry because of the cost and complexity of distribution. It would also turn recipients into permanent wards of the world. “I believe in Gandhi’s strategy: Don’t turn people into beggars,” says Mr. Swaminathan.

Looking for solutions, countries are turning their attention to permanent development projects such as road building that can foster economic activity for the rural poor, and connect them to markets for their produce.

India Internet Action

A lot has been happening of late in the Internet space in India. First, Monster.com bought JobsAhead for Rs 40 crore (just under $9 million). Then Rediff announced 1 GB mail space. Next, eBay bought Baazee for Rs 230 crore ($50 million). A couple days ago, the leading portals got together to form an industry association. and targeted 100 million users by 2007, up from the current 17 million. So, is this a renaissance of the Indian Internet?

I think each of the four events needs to be seen independently. Monster needed to grow its presence and bought out one of its two competitors. JobsAhead was profitable, having clocked Rs 15 crore in revenue and Rs 3 crore in profit for the year ended March 31. eBay needed to get into India at some point of time. It was quite clear for some time that Baazee was going to be part of eBay’s predatory food chain as it expands internationally – the only thing not clear was the time and price. The price is not as high as it seems. Over $20 million was invested into Baazee., some of it is presumably still left. Baazee was the only one in its space, and had built a nice business.

Rediff had little option but to match Google on the disk space ofer, if it was going to keep a significant chunk of its user base, considering the Gmail invites floating around. What is still needs to do is to match Google on the features. It couldn’t possibly have waited till Google formally launched. The industry association is a good thing – at least there will be some lobby power to make the government do sensible things when it comes to things like bandwidth prices and duties on computers.

So, each of the events has a rationale – it just turned out that they cascaded together in the past month. The Indian Internet has a long way to go to match China. The online advertising market is only about $10 million, though expectations are that it could double in the coming year. eCommerce volumes are also quite small. What the Indian Internet is not necessarily buyouts but innovations to make the Net a utility in our lives. That needs the complete commPuting ecosystem to be rethought — the need is for low cost access devices, a broadband infrastructure at affordable prices, and relevant applications and content. There are only minor indications that all of these are happening.

But hopefully, the recent developments will once again see entrepreneurs and venture capitalists getting excited about the space. Because that’s more the new ideas and thinking will emerge.

Net’s Future

BBC News talks to Dr Paul Mockapetris, the inventor of DNS (Domain Name System).

Celebrating DNS’s 21st birthday he says: “Ten years from now, we will look back at the net and think how could we have been so primitive.”

All communication will be over the net, he predicts, and we will no longer need phone numbers, just web addresses.

“Ten years from now, we will wonder how it was so hard to find things on the network too,” he told BBC News Online.

“At best we are at the Bronze Age, we are not even at the Iron Age stage in the network.”

“It is quite possible that phone numbers will have disappeared and people will just use menus off their phone. I don’t think there is particular value in having them.”

A more unified system of identification could mean people do daily tasks, like paying bills, more easily and conveniently.

Searching and finding people are certainly the two areas that still need to develop further, according to Dr Mockapetris, and replacing numbers with web addresses will help that, he says.

“We have to make it an everyday system. We have to make it so that people don’t see it, so that the surfing experience just happens,” he thinks.

Although advanced countries are at the point where most people have net access in one form or another, much still needs to be done so that every man, woman and child on the planet has it all of the time, he says.

Eric Raymond’s Latest

Eric is a noted open-source advocate. Here, entitled “Get the FUD.”

Let’s review what Microsoft is doing. Huw gives us five bullet points:

1. Claim that linux isn’t free.
2. Pretend that Shared source is the same as Open Source
3. Make a big deal about the migration costs of moving to Linux
4. Use the Forrester report to claim that Linux is insecure
5. Belittle the quality of the toolset available on Linux

I’ll take on all of these, but in reverse, saving the most interesting for last. Do I even need to point out that most of the factual claims are blatant lies brought to you by the same people who got caught faking video evidence in their Federal antitrust trial?

Belittling the quality of the toolset available on Linux actually reduces to a TCO (Total Cost of Ownership) argument, because what a poor toolset means to a manager is that he’d have to hire more administrators to cover the same number of machines. I’ll have more to say about winning the TCO argument in a bit.

Use the Forrester report to claim that Linux is insecure. Huw didn’t give a link to Red Hat’s counterargument. It’s a good one, and I’ll build some recommendations for action on it later on.

Make a big deal about the migration costs of moving to Linux. Beating this one is easy. All you have to point out is that migration costs money once, but per-seat Microsoft licensing fees are forever. Unless Linux TCO is substantially greater than Windows TCO, the sooner you switch, the more money you save. (Yes, this remains true even given discounting of future expenses, unless you peg the conversion cost absurdly high.)

The really interesting and novel lines are Huw’s report of arguments 1 and 2: Claim that Linux isn’t free and Pretend that Shared Source is the same as Open Source. Though these have been foreshadowed elsewhere, we haven’t seen these used as headline arguments before, and they add up to nearly a reversal of the position Microsoft has taken in the past. Whereas Microsoft has before tried to claim that its products and licensing are different from and better than and more innovative than Linux’s, now they’re reduced to arguing that you should stick with Microsoft because shared source is just the same as open source. Really. Ignore the attack lawyers behind the curtain.

Linux isn’t free. Hello? If there is actually anyone still left on the planet who thinks the term free software was a good idea, I hope they’re paying attention. Because what Microsoft is doing here is exploiting the old familiar gratis/libre ambiguity of the word free in yet another way. They’re setting up for a claim that free software advocates are lying or deluded because Linux has a nonzero TCO. Therefore, goes the implication, you can’t really trust them about that other freedom thing, can you?

Semantic warfare struggles over the meanings of words as proxies for political or market positions is just like other kinds of warfare; you want to fight it on the other guy’s turf, not yours. Every minute we spend arguing with Microsoft flacks about what free means is a win for them and a lose for us.

This is also why we need to attack the shared in their shared source rather than defending the open in our open source. Fortunately this is easy. We can ask why they call it shared source when they’re not giving up the right to sue people who share it for IP violations. Are they giving anything away except the opportunity to be hauled into a courtroom the next time you do something that Microsoft thinks is competitive with it?

Wind River’s Turnaround

Forbes writes:

Wind River Systems may be the rare software company that survives, maybe even thrives, after turmoil that threatened to sweep it downstream.

Wind River makes so-called embedded software, a guiding force behind everything from remote controls to check-out scanners and digital cameras. Other technology connects non-PC devices (think refrigerators, televisions and alarm clocks) to the Internet. It’s geeky stuff for most people, but to the companies developing almost anything with a microprocessor in it, it’s critical.

The 23-year-old company grew steadily until 2001, when sales began drying up and losses mounted. Since then the company has replaced its chief executive, laid off employees and reorganized. Its new CEO, Kenneth Klein, on the job for six months, says Wind River is perfectly positioned to capitalize on a multibillion-dollar opportunity that is just now starting to materialize.

There are hundreds of thousands of electronic devices–everything besides PCs–that require this type of software. But only a small percentage of their makers buy it. Instead, they choose to spend resources developing it themselves. Klein believes that’s a waste of money and engineering talent that could be better spent on other projects.

“It used to be 100,000 lines of code a few years ago and now it’s a million lines,” says Klein. “It’s a buy-versus-build argument, and they must buy.”

Klein envisions the kind of transformation that occurred in enterprise applications, when large companies shifted from custom, in-house development to buying ready-made software from companies like Siebel, PeopleSoft and others.

Richard Williams, analyst at Garban Institutional Equities, says the market for embedded software should reach several billion dollars in a few years, up from about $750 million today. Wind River is the largest player, with about a 30% market share, but the market is very fragmented.

Yahoos Terry Semel Speaks

Excerpts from a WSJ interview with Yahoos CEO:

WSJ: Yahoo today is in much better shape than when you arrived. What was the toughest part of the turnaround?

Mr. Semel: The single biggest set of fires at the beginning really related to people. Unfortunately, there were layoffs. But there was the need, I felt, for even more people in certain core businesses. I didn’t want the company to fall behind. At the same time, I had to think about what were the two biggest opportunities on the Internet at that moment and what would they perhaps look like going forward.

I looked at the Yahoo flowchart, and I saw it had 44 business units and realized neither I nor anyone else could ever manage 44 different business units. It had to be much clearer. It turned out to be six business units, which ultimately became four.

Of the two biggest opportunities in the Internet in ’01, one was access. Two of our competitors [the America Online unit of Time Warner Inc. and Microsoft’s MSN] were doing a terrific job by being Internet service providers. That was a business Yahoo was not in. The opportunity for Yahoo had to come in broadband, and that led early on to the conversations that ultimately became the partnership with SBC. [Yahoo provides co-branded high-speed Internet service with SBC Communications Inc.]

On the other side, Yahoo had and still has great scale, a very large consumer base. That speaks well to an advertising business. We would bring in people who could run a sales company. What we had to do initially was to change the entire experience and the relationship both with our consumers and with advertising agencies and advertisers.

WSJ: What did you de-emphasize?

Mr. Semel: Lots of small things, things like FinanceVision, [which provided business-theme Webcasts]. … I thought it was a cool idea, but I thought it was ahead of its time, and I didn’t see it as an essential. There were many other things like FinanceVision that were not playing to a large portion of Yahoo users. What I kept saying is let’s focus on the things people use Yahoo the most for.
When I would think quietly, I would think core strength: scale; big opportunity, not small.

WSJ: What is the future of search?

Mr. Semel: We’ve probably just finished phase one as an industry. Initially, the great need was to amass all of the information and to provide it in the most efficient and effective way so that users could access that information. What we are going to see, in phase two, will be much more specific. The same information could be presented taking into account your location, so that if you are looking for a plumber or a pizza parlor it doesn’t turn out to be 3,000 miles away from where you are searching but rather several miles from your house. In our case, it is also about integrating the very large communities and groups who represent millions of people who have very specific interests and spend a lot of time on Yahoo expressing those interests through chats and through groups and communities. The advantage that Yahoo has is that we are providing a lot of those services outside of search today.

RFID Rollout

The Economist writes that smart tags are indeed happening:

In 2002, the Auto-ID centre, a partnership between academic researchers and business based in Cambridge, Massachusetts, came up with a standard for a new, stripped-down RFID chip that stores just 96 bits of informationenough to give every object in the world a unique number. With tag readers plugged into a computer network, this number can be used to look up detailed information about the object, such as its origin, age and expiry date. At the same time, the Auto-ID centre also challenged manufacturers to produce a five-cent tag. Several start-ups, including Alien Technology and Matrics, said they could do so. Suddenly, there was huge interest and talk of a potential mass market.

Last June, Wal-Mart, the world’s biggest retailer, said it would require its 100 top suppliers to put tags on pallets and cases of products for shipment to a cluster of its supercentres in northern Texas. (Those press-ganged suppliers were later joined by 37 volunteers.) Tesco, Britain’s biggest retailer, also decided to introduce the technology. This year Metro, a German retailer, and Target and Albertsons, two other American ones, announced tag mandates for their suppliers. On June 17th, Wal-Mart said it would extend its RFID roll-out to its top 300 suppliers and to more shops.

The American government is becoming a big user of the new tags, too. Last October, the Pentagon said it would require its suppliers to put tags on cases and pallets shipped to its warehouses. It expects suppliers to have the technology working by January. The Food and Drug Administration wants drug manufacturers, distributors and retailers to adopt the new RFID technology to combat counterfeiting.

Alien Technology says that its current production line can assemble 2m chips a month. By the end of this year, it will have a second-generation line, able to assemble 2 billion chips a year. By 2006, it plans to introduce two third-generation production lines, each able to assemble ten billion chips a year. For orders of 1m, Alien Technology now sells its tags for 20 cents each. When the third-generation arrives, says Tom Pound of Alien Technology, we believe that our best customers will be able to order finished tags for prices approaching five cents. Established manufacturers, such as Texas Instruments and Philips, are also entering the market.

So why all the gloom? Much of it stems from suppliers who feel they are being forced to pay for an investment that saves retailers money. Wal-Mart, for instance, is using tags to track goods from when they leave suppliers, through its warehouses, docking doors and supercentre stock rooms, to when they leave the back rooms for the supermarket shelves. Even more gallingly, the only time suppliers are likely to hear from Wal-Mart is when they make mistakes. At least the Pentagon, which last year sent a delegation to Wal-Mart’s headquarters in Bentonville, Arkansas, to learn about RFID, plans to pay for its own tags.

Another problem is that the industry does not yet have a single hardware standard. The work of the Auto-ID centre produced two competing tag standards. EPCglobal, one of the successor bodies to the Auto-ID centre, is now working on a single superseding second-generation standard. Within EPCglobal four warring factions of manufacturers recently shrank to two. EPCglobal has promised to deliver the new standard by the end of this month, which should spur investment.

As investment rises, prices should fall further. Meanwhile, many firms hope that item-level tagging will soon make sense, particularly in Europe, where more efficient supply chains mean that there is less scope to reduce costs by other means.

News.com writes about Microsoft’s RFID plans.

The Future of Advertising

The Economist writes that more people are rejecting traditional sales messages, presenting the ad industry with big challenges:

The advertising industry is passing through one of the most disorienting periods in its history. This is due to a combination of long-term changes, such as the growing diversity of media, and the arrival of new technologies, notably the internet. Consumers have become better informed than ever before, with the result that some of the traditional methods of advertising and marketing simply no longer work.

There are plenty of alternatives to straightforward advertising, including a myriad of marketing and communications services, some of which are called below-the-line advertising. They range from public relations to direct mail, consumer promotions (such as coupons), in-store displays, business-to-business promotions (like paying a retailer for shelf-space), telemarketing, exhibitions, sponsoring events, product placements and more.

Separately, AOL bought Advertising.com for $435 million. Advertising.com accumulates data from Web sites, search providers and e-mail publishers to give advertisers a wide-ranging group of online marketing alternatives. AOL said its advertising inventory, combined with Advertising.com’s network, will enable advertisers to appeal to more than 140 million Internet customers and allow AOL to offer advertisers more customized services.

Microsoft’s Starter Windows

Microsoft is going to start offering Windows XP Starter Editions in local languages in many Asian countries, according to WSJ.

Ms. Chian said that the Starter Edition software sold in Thailand and Malaysia will be in local languages, and not in English, making it doubtful that the software could compete with products sold in developed markets like the U.S.
The name of the new software — a product Microsoft officials have previously hinted was in development — was reported Wednesday on a technology Web site called Neowin.net.

Ms. Chian, in Singapore, declined to offer details about what features the software will include and what it might cost. She also couldn’t confirm exactly when the Starter Edition would debut, though Thai Prime Minister Thaksin Shinawatra said in a radio address this month that it would be available in his country in September.

The software could offer fewer features for a lower price.

Microsoft has been experimenting with offering software through cut-rate government programs in places like Malaysia and Thailand, where authorities are also offering cheap Linux machines to their citizens. In Malaysia, consumers can now purchase a Microsoft-loaded PC with a processor from Intel Corp. for about US$300, including a monitor.

That’s a significant discount from prices paid by consumers in the U.S., and it raises questions about how Microsoft will be able to maintain its traditional, more uniform pricing structure if it offers selective discounts in some countries, analysts say.

Microsoft has noted that it already offers some discounts to customers like schools and says its price cuts in the developing world are similar.

This can be seen as a response to piracy, growing competition from open-source applications and pressure for more affordable solutions. It is not clear what options will be available in India.