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Imminent slowdown – Blame the “YouTube effect”

Posted by Arun Uday on September 19, 2007

It appears that after nearly 3-4 years of frenetic activity, VCs, entrepreneurs and technologists are entering a phase of self reflection. Ref. – Fred Wilson’s piece, Read Write Web et al. The dampening impact of the sub prime crisis is already too well documented for further elaboration. The big question now is whether and to what extent will the spill over to the tech world happen. (Worth mentioning here that real estate and financial institutions happen to be big advertisers on the net and needless to say that both of these sectors have been thoroughly whipped by the current turn of events). Coincidentally, I was watching an interview of Henry Blodget, one of the alleged villians of the previous dot com bubble (along with some others of his Analyst/IB ilk such as Frank Quattrone, Jack Grubman, Mary Meeker etc – all employed by blue chip Inv Banks on Wall St.). And he admits there that back in the 1.0 heydays, things had gotten so hyped up and the whole air so full of pretension that everyone “understood” what was happening, that for someone to seem unbelieving or doubting was like signalling to the world that they had fallen out of tune with the times. In such situations, it takes a proverbial simpleton to call the bluff on the emperor’s new clothes. While VCs aren’t particularly incentivized to play that role (if anything they are highly incentivized to do exactly the opposite), I have decided to take that risk in any case. Consequently, I have to admit here that as far as YouTube goes, I “still don’t get it”. I will in fact go a step further and say that some of the froth we see today has been an indirect consequence of this “YouTube effect”. And I say this with full realization of the fact that the emperors we are talking of here are no ordinary ones either – one of the most revered VC firms on the planet – Sequoia and the world’s largest “startup” with a $160 bn mkt cap – Google.
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Best places in the world to do business in the wired world

Posted by Arun Uday on August 30, 2007

Be surprised (like I was) to see what tops this list of cities do business in the wired world according to Business2.0. Click below.
Best tech cities according to Business 2.0

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Media measurement – In a state of perennial mess

Posted by Arun Uday on August 27, 2007

“Lies, damn lies and statistics” is an expression that aptly fits the media measurement industry across the board cutting across all media types. Right from the oldest media form – print to the newest – internet and all the intermediate ones (television, outdoor etc), procuring precise statistics for audience related information has been as fruitful an exercise as chasing a mirage on the hot desert sands. What’s even more surprising is that this is getting progressively worse and not better with technology advancements. Lets just focus on the two most important ones here – television and internet.

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Posted in internet, media, media ratings industry, technology, television | Leave a Comment »

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 »

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 »