Technology, Venture Capital, Private Equity

Perspectives from an Indian VC

Archive for July, 2007

Loudcloud and Exodus – A tale of two companies

Posted by Arun Uday on July 31, 2007

Those who have been following Marc Andreessen’s blog (which btw is a must read for those interested in tech and entrepreneurship) would have read about the recent acquisition of his company Opsware by HP for $1.6 bn. Opsware is actually a reincarnation of an earlier company, Loudcloud, which went bankrupt during the dot com bust. Its fate was similar to another similar company, Exodus Communications, which many of us may have heard in different contexts. Read the rest of this entry »

Posted in Exodus, Loudcloud, Opsware, technology | 2 Comments »

An economist’s viewpoint of the Indian IT industry

Posted by Arun Uday on July 28, 2007

The preceding posts on Infy have set a good base for me to discuss something that I had intended to, which is the concept of “value creation” in a capitalistic system. We often come across this phrase “value chain”, a common platitude that we get to hear all the time being – “we are trying to move up the value chain”. It is important to therefore understand what this “value chain” means, who defines it and how one really moves up this “value chain”. I’ll need to delve a little into the fundamentals of economic theory here to make my point and like to apologize beforehand for the atypical long post.
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Posted in India, Indian IT industry, technology | 1 Comment »

Infy – Time to “grow up” (Part II)

Posted by Arun Uday on July 27, 2007

My earlier post on this topic (where I had suggested that Infy should take the lead in jacking up offshore billing rates) had evoked a lot of discussion, including one of the readers, who had some adverse remarks on it suggesting that mine was the “worst analysis” of Infy’s results. I had responded by saying that it won’t be long before the managements of likes of Infy will come under pressure to buck their billing rates up. Well, guess what. The ET has an article today on just that. Actually, the title itself says it all – “Password to crack the new IT matrix: Pricing power”. To quote from the article:
“Investors and analysts now want the industry to learn two new words: Pricing power…. Most companies are negotiating a price increase of 1-2% on contracts up for renewal… “

Madhu, you may be a PhD from IIMB, but I haven’t spent my years in this industry for nothing.. 😉

Posted in infosys, technology | 4 Comments »

11 immutable laws of internet branding, now 9?

Posted by Arun Uday on July 25, 2007

I recently picked up a book at an airport bookstore called “The 11 Immutable Laws of Internet Branding”. Completed it over a couple of flights. The part interesting and part disappointing aspect of the book, as it turned out was that this was a pretty old edition. From the pre-Google era, so to speak. So, it was disappointing since I was expecting to read some contemporary stuff. But, the interesting bit was that it was a little like going back in time and get insights into the thinking back then. Read the rest of this entry »

Posted in internet | Leave a Comment »

Why private equity is going public

Posted by Arun Uday on July 18, 2007

The recent Blackstone IPO and forthcoming KKR IPO has got the whole world speculating on the reasons why PE firms are going public. Various folks have conjured numerous theories, some authentic, some not so authentic. These range from PE firms trying to exploit the liquidity in global equity markets to senior partners cashing on the high valuations that these firms are now able to command etc. Before I share my $0.02 on this, a quick question to the reader – which is the largest well known public principal investor (clue: it is not a fund house)? Answer – Goldman Sachs. This brings us to an important theme which is playing out in the global financial world today, which is the obliteration of the line between the principal and agent, something that has not been as well analyzed by most (in the context of PE firms going public) as it warrants (IMO).
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Posted in blackstone, KKR, private equity | Leave a Comment »

Globalization and innovation (Part 3)

Posted by Arun Uday on July 16, 2007

Came across this article on Economic Times over the weekend, which talks about some of the work that the Honeywell Research Center in Bangalore is doing. It mentions some of the innovations of the exact same nature that I have been discussing over the past few posts on the the topic of innovation in developing markets such as India. For instance, Honeywell has developed a water sensor for farmers in India, which caters to the local needs here, and hence is much cheaper than the ones used in other markets. This can now be taken to other markets. Hmm… so, that means, I am thinking on the right lines 🙂

Posted in emerging markets, honeywell, India, innovation, technology | 5 Comments »

Infy – Time to “grow up”

Posted by Arun Uday on July 12, 2007

Infy’s results y’day was the big talking point in the Indian business world as it missed its guidance after a very long time. Infy is of course known for its policy of issuing conservative guidances and for their mantra of “underpromising and overdelivering”. In fact, some people in the past had questioned this approach since analysts anyway over  time started marking up the management’s guidance nos for arriving at the actual estimates. Hence, the fact that they missed even their own conservative nos implies that certain business parameters are changing faster than even what they had anticipated. In my opinion, Infy’s next moves in the coming couple of years will be critical not only to it’s own future, but also to the entire Indian IT industry. Read the rest of this entry »

Posted in infosys, IT, technology | 14 Comments »

Globalization and innovation (Part 2)

Posted by Arun Uday on July 9, 2007

In my last post on the same topic, I discussed how technology development centers in emerging (and typically low cost) markets could play an important role in nurturing disruptive technologies. In this post, I’d like to present the flip side, which is that globalization also has the opposite effect on innovation, of shrinking the window of opportunity for technology companies to earn a premium for innovative products, before the market gets swamped by replicas and imitations from low cost producers. But, before doing that, , it will be helpful to study the typical revenue pattern for a technology company. The typical price curve for any technology product/service is depicted in the figure below. Read the rest of this entry »

Posted in globalization, technology | 5 Comments »

Globalization and innovation (Part 1)

Posted by Arun Uday on July 3, 2007

One of the most common ways in which one tends describe technological innovation is that it is “disruptive”. Ask an entrepreneur what he is upto and chances are he will say that he is working on a “disruptive idea”. Ask a VC what his funding theme is and he’d probably say that he is looking to invest in the next “disruptive technology”. Yet, not too many people really understand what this concept of “disruption” actually stands for. One is generally inclined to believe that anything that is cutting edge or novel is “disruptive”. However, thats not the case. The phrase “disruptive technology” has a specific connotation and was actually coined by a Harvard professor, Clayton Christensen, which he later elaborated on in his book “The Innovator’s Dilemma”. It was borne out of a study conducted by him, which tried to ascertain why established companies found it hard to keep pace with innovation. He concluded that it was not poor management or even the failure to detect technology trends in big companies that prevented them from nurturing these new technologies. It was the fact that the economics for building a successful business on such new technologies was unviable under their present cost structures that made such the commercialization of these new technologies difficult. Such “disruptive” technologies are typically inferior to existing technologies to start with and hence command a far less price as compared to existing technologies. Therefore, the market for these relatively inferior low cost technologies is not the one that consists of existing customers of large companies but a new one, which is less attractive to such companies. However, with time, such “disruptive” technologies undergo dramatic improvements to the extent that they become capable of threatening even the established hi-end technologies. Therefore, these technologies present a great conundrum to managers. How should companies go about transitioning from a sustaining to a disruptive technology?

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Posted in christensen, disruptive technology, technology | 1 Comment »