Archive for May, 2010

India’s Problems, a Source for Product Development Companies

Wednesday, May 26th, 2010

In Hinduism you always pray to Lord Ganesha (Deity) before you start any work, be it small or big.  I was wondering, if there is something similar which can be done while starting to write a blog.  Then it struck me, probably its good to think about Google, before you write anything, because a) Reminds you that you need to be innovative b) Google is watching you, and finally c) Google can punish you really bad. So to please the almighty, I decided to write something interesting that I had heard about Google from one of its top executives.

In one of my recent engagements, my team conducted a study to understand the Captive (R&D/IT/BPO) Landscape in India.  Apart from many things, we were interested in knowing the key drivers for MNC’s to set up their captive centers here in India and how they are shaping up with time.  Also what drives them to continue business in India and what challenges do they face?  For this purpose, I had interviewed country heads of various captives from various technology companies.

One of the very interesting and strikingly different conversations I had was with one of the top management leaders of Google (here after referred to as John in this post).  I started off the interview by introducing myself and posted the standard set of questions. It is a very well known fact that cost and talent pool are the key drivers for offshoring R&D activities to India.  I was just waiting for a similar answer, but I heard something different.  John’s answer to this question was a big NO.  I was surprised and asked for reasons.  He gave me a very interesting and a different perspective of globalization.

He said, “I don’t think there is any cost advantage as Google pays really well to their employees; the difference is very less.  Also in terms of talent pool, for the kind of work we do I think we can find better people in the US than in India. India has nothing. There is no advantage to do R&D related work out of India. I dont see cost or talent pool as the reasons. Even if they were, the ROI on these two factors is very minimal for us.”

“However what India has is a whole set of problems. Problems for which people still struggle to find solutions.  We are here in India in search of those problems and solutions for them.  These problems give us lot of scope of develop new products.”

“Take for example the Indian cities.  It is just impossible to locate a particular place.  Looking at India, it brought us the thought of Google Maps. India did not have maps for 90% of the cities.  We developed Google maps for 160 countries and India was the 57th country to be launched.  The strategy here is to look at the problems in countries like India and take it to a global level.”

“Another good example, is the translation tool that we developed.  It was released in 47 languages of which 42 were non-Indian.  But the inspiration was from the multi lingual culture in India. This product was very successful the first day of its launch in countries like Japan, US and Europe. Fortunately or unfortunately, the power users reside in the developed countries like US and the adoption is very fast.”

“The Indian users caught up with it only after 3 to 4 months. So for us the strategy has been to develop products for global issues by getting inspired by the problems in India. That is the reason why we are in India”

This was a completely new story with interesting insights giving a new dimension to my understanding of globalization.  My takeaway from this interview was a whole new set of questions.

How did Google come up with this as the reason for globalization? What stops other companies to think in this fashion? Can this model be used by other companies? Can small companies or companies new to globalization think this way? or Is it restricted to only the big players?

I will attempt to answer some of these in my next post.

Thanks for reading.

Author: Kartik Vittal, Consultant

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Posted in Globalization | 2 Comments »

Telecom equipments market and R&D avenues

Monday, May 17th, 2010

Global market for telecom equipments

The global market for telecommunication equipments, also including mobile handsets, is estimated to grow at moderate growth rates. Few of the key macro drivers fueling the demand for equipments are the growth from emerging markets, spread of internet and mobile communication, convergence of data, voice and video. At the same time, there are key areas of concern for TEMs* that may hamper the zeal to innovate and hence the market for telecom equipments are declining operator CAPEX spending. New 4G technologies like LTE and E-UTRA are leading the way in catering to huge demand for bandwidth guzzling applications. Some of the unique features that are driving huge investments in 4G enabled equipments are seamless connectivity, global access and interconnection, interoperability, business 24*7. Service providers will play a key role in minimizing the time and cost required for research and standardization of 4G related technologies. With 7 trillion devices expected to be connected in the near future, and an ever increasing proportion of operator revenues being attributed to wireless services as opposed to wireline, the world shall witness carrier operators opting for network evolution in the form of ubiquity and reliability and advanced technology deployment.

Pockets of Growth

All IP based wireless, along with optical infrastructure and end devices are poised to precipice the growth momentum, expecting double digit growth rates, in the otherwise more plateau-like ~5% annually growing telecom equipment industry . Few designated areas may be video conferencing, VOIP or IP telephony solutions, Optical amplifiers, nodes, modems and gateways, GigaBit Ethernet, etc. More than 100 operators are now deploying HSPA, with a coming wave of HSPA+ upgrades, WiMAX, and LTE, all to handle the skyrocketing mobile data traffic. Few technology focus areas for TEMs are robust video delivery through open networks, collaboration and web 2.0 technologies, improving service quality – consolidated billing and security, fixed and mobile broadband through CDMA-EVDO, WiMax, LTE-A, HSDPA/HSPA+, and rationalizing mature lines such as 2G products (CDMA 1x and GSM), ATM, ADSL and DLC, mature optical platforms. The biggest challenge faced by the TEM incumbents is the stiff competition from global challengers like Huawei, ZTE in China along with other emerging players who are able to provide comparable or even better quality solutions at better cost points. The legacy structure of such incumbents doesn’t allow them to restructure so easily. Also, their inability to as easily comprehend emerging market (future growth geographies) needs can hit back hard.

R&D services growth avenues

The Global Telecom M&A space has seen increased activity in the recent past, in turn creating a huge opportunity for R&D Services in area of re-engineering and value engineering. Consolidation of OEM’s will drive the need for innovative and cost effective solutions and hence will drive R&D Services growth. Service providers will play a key role in minimizing the time and cost required for research and standardization of 4G solutions. Moreover, interoperability at the network, device and content levels, the efficient management of spectrum to facilitate the emergence of new wireless technologies, and the availability of content. All this places demands on new embedded system solutions to realize these concepts. For TEMs, demand for convergence from operators means increased complexity and additional requirements for development teams. Some of these include taking advantage of new open-standards technologies without sacrificing previous investments in core intellectual property, run-time environments, and development tools. Whether it is about keeping up with the latest hardware advancements and standards or it is about having the flexibility to use best-of-breed solutions for a variety of projects (e.g. maintaining middleware across multiple platforms), convergence of devices and services definitely  impacts the R&D on the embedded solutions. The market is starting to see development of next generation networks beyond 3G, which will enable a single mobile handset to access a growing array of mixed mobile networks. This is only practicable by a heavy use of Embedded Systems, as also the trend for evolving consumer patterns on content, convergence of services on mobile phones, evolving user interfaces, cellular broadband, etc.

Conclusion

Over time, less attention on “equipment” and more focus on “solutions” could lead to new opportunities for TEMs. Such a transformation requires alterations to the core, TEMs will need to enter into new partnerships with more flexible business models, achieving improved time-to-market through the adoption of commercial-off-the-shelf (COTS) components, pre-integrated solutions and proven, standards-based software protocols acquired from third-party suppliers. OEMs have started to re-position themselves to serve the increasing demand for telecom devices  supporting aforementioned technologies and trends. Hence, for R&D service providers, it is an opportunity to actively partner with OEMs in helping them meet their customer requirements, who are in a mad race to serve the end consumer demand for richer and more real time applications.

Thanks

*TEM – Telecom Equipment Manufacturer e.g. Ericsson, Nokia Siemens Networks, ZTE

Author: Devay Gupta, Consultant

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Posted in Globalization | 1 Comment »

The global Marketing & Sales organization

Tuesday, May 4th, 2010
As referenced in my earlier entry about globalization of corporate wide functions:
Research & Development
Marketing & Sales – Covered in this blog
Finance & Accounting
Human Resources
Internal IT
Procurement
End Customer Services & Support
This entry will focus on the globalization aspects and the newer models in marketing & sales.
To classify broadly Sales consists of Sales Management (Customer profiling, proposal documentation, cross/up selling, sales force planning etc.) and Sales Support (account management, customer relationship management, training, database management etc.) and Marketing consists of Marketing & Brand Management (Advertisements, collaterals, media planning & strategy, public relations, events & campaign management) and Market Intelligence (Market research, competitive analysis, market segmentation & sampling, business analysis)
With every company small and large going global these days bits and pieces of the above are probably done out of every corner of the world. Statistically speaking, companies typically spend 22 – 30% of their net sales on marketing & sales which accounts for 30 – 35% of the total headcount. In this function the cost per resource is considerably low since globalization here is an imperative here and not an option if companies want extended customer reach and better market understanding.
A company with say 100,000 employees has about 30,000 – 35,000 of its employees working in Marketing & Sales spread out in scores of countries. Interesting thing to know is what exactly these resources are doing. With sales support and market intelligence being the relatively more people intensive groups, the math would suggest that a significant chunk of these folks would be working for these activities. Each location would need a bunch of people into these activities to effectively cater to that that market but in reality these majority of these resources perform redundant tasks and are under-utilized which makes us question their presence in the first place.
In the wake of this reality and popularization of a model, which I am sure most of the readers of this blog are aware of, called Shared Services, companies are increasingly exploring to offshore their Marketing & sales teams in this model.  To narrow down on the scope of offshorability, Sales Management and Marketing & Brand Management are relatively harder to segregate out given their close ties to the HQ and multiple other stakeholders.
The sales organizations of technology product companies typically drive sales through multiple ways: Direct Sales, Channel Sales, OEM Sales etc. and this is a tightly knit network and pulling these people away from each other would be nothing short of committing a corporate suicide.
So the beauty of this Shared Services Model (without going into the finer details) is that redundant tasks can be eliminated, resources can be fully utilized and the best part is they can work in an offshore model (at least a few of them) – ergo, cost optimization.
Some quick analysis of a bunch of companies that actually are well into this model shows that the ones with revenues less than USD 5 billion have about 3 shared services locations and the ones between USD 5 – 20 billion have about 5 locations and the ones above USD 20 billion have about 7. Having spoken to the senior management teams of these companies, on an average they have been able to realize about 15 – 20 % cost savings in this model.
I think this as a trend would continue to rise in the coming years, primarily because the highly offshorable/ transaction driven functions like R&D and F&A are pretty much under cruise control for most of the companies and M&S is the next logical thing to look at.

Author: Anand Tatambhotla, Consultant – Globalization Advisory

As referenced in my earlier entry about globalization of corporate wide functions:

  1. Research & Development
  2. Marketing & Sales – Covered in this blog
  3. Finance & Accounting
  4. Human Resources
  5. Internal IT
  6. Procurement
  7. End Customer Services & Support

This entry will focus on the globalization aspects and the newer models in marketing & sales.

To classify broadly Sales consists of Sales Management (Customer profiling, proposal documentation, cross/up selling, sales force planning etc.) and Sales Support (account management, customer relationship management, training, database management etc.) and Marketing consists of Marketing & Brand Management (Advertisements, collaterals, media planning & strategy, public relations, events & campaign management) and Market Intelligence (Market research, competitive analysis, market segmentation & sampling, business analysis)

With every company small and large going global these days bits and pieces of the above are probably done out of every corner of the world. Statistically speaking, companies typically spend 22 – 30% of their net sales on marketing & sales which accounts for 30 – 35% of the total headcount. In this function the cost per resource is considerably low since globalization here is an imperative here and not an option if companies want extended customer reach and better market understanding.

A company with say 100,000 employees has about 30,000 – 35,000 of its employees working in Marketing & Sales spread out in scores of countries. Interesting thing to know is what exactly these resources are doing. With sales support and market intelligence being the relatively more people intensive groups, the math would suggest that a significant chunk of these folks would be working for these activities. Each location would need a bunch of people into these activities to effectively cater to that that market but in reality these majority of these resources perform redundant tasks and are under-utilized which makes us question their presence in the first place.

In the wake of this reality and popularization of a model, which I am sure most of the readers of this blog are aware of, called Shared Services, companies are increasingly exploring to offshore their Marketing & sales teams in this model.  To narrow down on the scope of offshorability, Sales Management and Marketing & Brand Management are relatively harder to segregate out given their close ties to the HQ and multiple other stakeholders.

The sales organizations of technology product companies typically drive sales through multiple ways: Direct Sales, Channel Sales, OEM Sales etc. and this is a tightly knit network and pulling these people away from each other would be nothing short of committing a corporate suicide.

So the beauty of this Shared Services Model (without going into the finer details) is that redundant tasks can be eliminated, resources can be fully utilized and the best part is they can work in an offshore model (at least a few of them) – ergo, cost optimization.

Some quick analysis of a bunch of companies that actually are well into this model shows that the ones with revenues less than USD 5 billion have about 3 shared services locations and the ones between USD 5 – 20 billion have about 5 locations and the ones above USD 20 billion have about 7. Having spoken to the senior management teams of these companies, on an average they have been able to realize about 15 – 20 % cost savings in this model.

I think this as a trend would continue to rise in the coming years, primarily because the highly offshorable/ transaction driven functions like R&D and F&A are pretty much under cruise control for most of the companies and M&S is the next logical thing to look at.

*Unless specified Views/Opinions Expressed in the blog are those of an Individual Consultants.

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Posted in Globalization | 2 Comments »

Benchmark Philosophy

Monday, May 3rd, 2010

Author: Chandramouli C S, Director – Globalization Advisory

We recently launched our benchmarking services in the areas of R&D, FA, HR, M&S functions.  The focus of the benchmarks is to help companies understand what is the optimal level of investments, globalization leverage, SLA’s to be measured, best practices etc.  In the last few weeks we have found good traction for this study and we are all excited about this.

We conceptualized the service offering post Confluence 2010 and I happened to meet Vijay Swaminathan, Co-founder Zinnov in Sanfrancisco to discuss the finer aspects of service offering.  Though our discussions started with the business model, operations plan etc. we quickly moved on to talk about the need for benchmarking services in real life scenario.  The following blog is an excerpt of our discussion.  At a philosophical level the idea was to identify the underlying need for benchmarks/baselines among humans and also to build a conviction in our mind about the huge untapped opportunity this underlying need presents in business.

Flight Experience:

This is a flight experience which i witnessed few days ago.  I don’t think this is any different from what you have experienced during long travels.  Half way through the flight take-off, there was lot of turbulence in mid air and all the passengers started panicking on the flight.  Some of the less frequent travelers started relating this scenario to the worst that’s happened in the past.  Few of them started talking about instances where they lost their dear ones in flight accidents.  This triggered the thought process of many others about the worst that is looming on them.  Few of the elder passengers start praying and helplessly search for courage within themselves.  While few others start thinking about how the world for them is coming to an end.  Amidst these moments of uncertainty and panic there is one voice in the cabin which made a difference.  And the best of all the comfort word is from a benchmark.  He mentioned that “There are more deaths due to road accidents in US than in the air.  We will be alright”

Suddenly there was a positive energy in the cabin.  This one line was enough to console us that we are safe.  We compared the worst that happens on road and felt we are better off.  The statistics behind this benchmark helped but the guidance which we got was timely.  It helped us understand how vulnerable we are on roads and this is relatively safer.  I would emphasize on the word relative later on.

Just few minutes later there was an announcement in the cabin by the pilot.  He said “This is not the worst of the turbulences we have faced in our experience.  We will sail through it safely, we would request you all to sit back and relax (Or something in these lines)”.  This again provided the comfort we were seeking for.  Just the fact that this is not the worst helped us build the confidence and courage.

Again the power of baselines and benchmarks was proven.

Moral: Human’s by nature are fragile and cruel, we tend to seek the baselines of the past to predict the future.  When the baselines are worse than the situation, we find comfort in it.  Contrary we identify our status is worse compared to the stimulus we panic further.  In either ways we need baselines and benchmarks.  We like it or hate it this is reality of life.

Doctors doctrine:

This is an example of very caring parents.  You can relate to this if you are parent.  The parents I am talking about are blessed with a healthy child and based on what I know this kid is definitely privileged with good health, moral values and IQ.  In one of those routine check-ups the parents take the child to a doctor.  Doctor examines the kid on the regular parameters and then declares the kid is healthy and doing fine.

However, As usual the parents are worried if the kid is under-weight, is he eating growing normally.  The point is parents are expecting to hear some words of wisdom which can soothe their anxiety (In other words they are seeking for benchmarks).  This is where the doctor/physicians expertise comes into picture.  The doctor I am talking about is a smart cookie.  He says “Your son is doing great, your son is among the top 75%ile of the kids I have examined in the last few years”.  The point is that the doctor is statistically right.  He may have all the data and experience to prove this.  But the comfort which he is able to generate to the parents is unbelievable.  That one statement gave the parents months of sleepful nights.

Moral: Humans want to know their position in relation to the world.  And the frequency of it is regular.  It is not a onetime phenomenon/data with which you can quench your thirst for relativity.

There are many more business analogies we can derive.  The point is that we need baselines/benchmarks to know how well/bad we are doing and we need this dose frequently.

After this conversation I was thrilled about the opportunity.  An opportunity which is based on the fundamental premise of existence.  Numbers don’t matter, all I know is that there is money to be made.

P.S: Nassim Nicholas Taleb may disagree with this philosophy, If he does thus proves the Black swan theory

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Posted in Benchmarkig services | No Comments »