Archive for January, 2008

Back to vortals

Remember vortals from the dotcom hey days? For those who dont recognize the term, it stood for vertical portals – go after a particular target group, and provide range of services to them – our first business before we gravitated to jobsahead was a “vortal” called zipahead for Indian youth!

Well, the vortal is back. I was at the alwayson media conference in new york yesterday, and a lot of companies seem to be building destination sites for particular target groups. It begs an interesting question of what has changed, and will the outcomes be any different this time around. Three things that have changed massively in favor are:

  • Critical mass of users on fairly targeted groups
  • Growth of online advertising to support such models
  • Maturity of community capabilities on the web

What has not changed though, is the difficulty of creating truly great content at one place, when the user has a choice to get best of breed content at different locations. In my view, that remains the single biggest challenge for such sites. So a college goer may use different sites for his academics need, versus dating, versus sports, and so on. The new model of aggregation of web content adds another dimension to these sites – they now have an opportunity to aggregate best of breed content, as well as syndicate out to wherever the user is (a la facebook). In some sense, the battle for the vortal is really a battle for the homepage.

Any thoughts on how you see this evolving?

The Death of Indian Outsourcing

“Are you kidding? No way!”

In 2008, the IT and IT enabled services (ITES / BPO) industries are supposed to be the major drivers of India’s economic growth. According to Nasscom, the two industries combined will employ 4 Million people, account for 7% of GDP, and 33% of foreign exchange inflow.

Death of this industry is far from anyone’s mind.

Let me tell you a story. <!–more–>

There is a tiny company in Silicon Valley called InsideView. It helps customers in sales lead generation, qualification and opportunity identification research using technology and a software-as-a-service (SaaS) business model.

In November 2007, InsideView acquired a company called TrueAdvantage which did the exact same thing manually, with a team of 150 people in India. TrueAdvantage had 2500 customers, all of which are being transitioned over to InsideView’s software-driven solution. All 150 people at TrueAdvantage have been laid off for no fault of their own.

The human tragedy may sound familiar to the Michigan auto-workers who have been losing their jobs to China, or the IT/Call-center workers in the US whose jobs have been off-shored to India. They have all been laid off for no fault of their own.

The reality is that wages are rising in India. The cost advantage for off-shoring to Indian used to be at least 1:6. Today, it is at best 1:3. Attrition is scary.

Jobs that are low-value-add and easily automatable should and will disappear over the next decade. People talk a lot about India moving up the value chain. Yes, some of that has indeed happened. An industry that started gaining momentum with the Y2K porting projects has blossomed beautifully into one that offers a much more comprehensive spectrum of services.

Yet, India, for all its glory, is still the world’s back-office. The IT / ITES industry is a “services” industry. In simple terms, the Indians don’t do the thinking. The customers do. India executes.

As a result, India has not learn’t to come up with technology products of its own. Barring a few exceptions, the huge amount of venture capital chasing India finds it difficult to be deployed. There is way too much money, way too few deals. Instead, tech-sector VCs are now diverting capital to retail, real estate, hotels, etc.

The $30 Billion IT / ITES services industry, meanwhile, is slowly and surely, losing its competitive advantage.

You see, most of the 4 Million people that the industry employs have already “arrived”. They have breezed through the milestones that their fathers had to toil all their lives to reach. A phone. A watch. A TV. A car. A house.

They are complacent. They will not take risks. They have “outsourced” thinking to their customers.

As the 1:3 cost structure becomes 1:1.5, it will soon become inefficient to use Indian labor. Why not Oklahoma or British Columbia? For many Europeans, Eastern Europe has already become more compelling than India. The pure labor arbitrage equation will no longer balance.

In a decade, what would happen to the newly minted affluent class created by the Indian IT boom?

Companies like Infosys and Wipro, assuming that they want to preserve their business momentum, will need to diversify their portfolios away from pure body-shopping and process competencies to technology driven advantages. The obvious place for them to go is Software-As-A-Service (SaaS). Their current market caps and cash reserves are high, so an easy way for this transition would be via acquisitions. Wherever SaaS and manual BPO services overlap, they should cut the manual and replace with SaaS to the extent possible.

To give you an accurate picture, none of this is happening quite yet. In fact, Infosys is hiring tens of thousands of new employees in India still. The mood is upbeat. The golden goose is still laying large, warm eggs, enough to feed the 4 Million and their families.

Meanwhile, the workforce is getting comfortable in their cubicle chairs, just as the turkey gets comfortable before Thanksgiving.

Is performance management an issue for startups?

This is performance review time (at least in US) and I have been posting about my thoughts on these on my blog. One of the topics that I deal with regularly is the need to grow the engineers and managers reporting to me to the next level, in a way manage their career according to my company’s needs but keeping their personal needs in mind. Having been in India office for my company for 4 years, I know companies of size >100 or so try their best to hire managers who are/can be people managers and keep that an important criteria for promotion and hiring. And I have seen benefits of doing(and perils of not doing) that because that helps us grow leads and managers from within the organization and provides better succession planning at all levels.

However, I am wondering if this is a problem for companies of size 1-100. In other words, are topics like ‘performance management’, ‘succession planning’, ‘leadership development’, ‘growing from within’ pertinent for companies of this size? If they are not, is it because the effects are not visible, or is it that the size of the company allows these problems to be solved in some very different ways (town hall meetings as communication mechanism, etc)? Has anyone faced any of these problems in companies of size < 100?

Career/Talent Management for individuals

One of the thought process I have been going through ever since I posted my previous (and only) post in June ’07(giving back to society in the area of education) is the notion of career/talent management for individual careers in Indian companies. Particularly, the fact that if you look at the talent lifecycle of an individual from start (say class X) to when he/she retires, there are may phases where right intervention in the form of counseling, training, education, or placement can make the difference between a great career and a mediocre one. In my mind, this will require an integrated ecosystem of career counseling, education systems (formal, vocational, short-term courses) and placement services. I have been blogging about it on my blog site and the first post describes these initial thought processes. Sanjoy had a different definition of career management here if you want to compare these two definitions.

After those initial thoughts, I have been spending time in understanding what these individual segments of industry in India are doing towards such an integrated eco-system and I am surprised by the data I have got (based primarily on internet search since I am currently in US):

  • There is very little traction on career counseling. As an industry, this seems very underdeveloped, and most of the references I found were of offline-presence only. Of those counseling companies, most seem to deal with education guidance part of counseling (“I am a B.Sc. in Bio-technology, what jobs can I get after this?” kind) and not on career-related problems (“My manager is difficult to work with because he is impatient, how do I ensure my career is in good hands?” kind).
  • Job portals (naukri, monster, etc) have very little presence in career guidance/counselling area, even though almost every site has a ‘career zone’. In my view, career counseling should be a strong point of these portals and a differentiating factor if done well, but I do not see traction on these sections of these portals. Most of them contain a few generic career guidance articles and then bunch of useless user-generated content.
  • Most of the short-term training course institutes are competing on price (“C# course in Rs. 1400/-) and not on how effective they are in getting you a job or make you successful in your existing job. I tried very hard to get some data, but it seems to be totally missing.
  • Even though there are lots of private colleges, I found very few of them getting into short-term vocational courses which get you job or make you successful in one. The model that works great in US is the notion of community colleges which provide reliable, affordable and targeted courses for various careers and this helps job-seekers and professionals alike, this seems to be completely missing.
  • These lead me to believe that if my definition of career management is correct, career management as an industry is pretty broken in Indian environment (when I tried to get similar integration data for US, it didn’t yield any better results, but my focus is India and hence the comment). Given that there is so much of talent shortage and demand for talent, it surprises me that there aren’t more innovative ideas coming up to solve it.

    I am wondering if it is lack of online data which leads me to this conclusion, or is it indeed the case? And if so, why aren’t startups/existing companies trying to do something about it? Or is the notion of career management=integrated eco-system a flawed notion?

    I will love to hear your opinion and comments on this, and if there is any data/resources you can point me to, it will be great.

Partnerships between startups

Hi ,

I have been thinking a lot about using strategic partnerships to generate the early customer traction. I feel a lot of startups can save costs if they go for a strategic partnership with another startup. That way they can easily cash on their common customers and would be a win win situation for all. I would like to know experiences of readers here. Have you ever tried such partnerships? Were you successful? What were the challenges?

Also , I would like to know how we can accomplish networking between startups looking out for such partnerships in an efficient way.

Eko- Beyond the Inner Circle

Our use of restricted stock to get advisors/talent has worked very well.

Plans at Eko are aggressively on track and we have had some exciting developments.

We will be closing our early employee restricted stock offering by Jan 31, 2008.

It is already closed for other categories such as advisors.

We have also worked on a compensation policy for FY 2008-09 to attract and retain the best talent where we will not be able to offer restricted stock.

If you are interested in joining the Eko team please check out the open positions on our website.

Harish Gandhi joins Canaan Partners

Happy to announce that Harish Gandhi has joined Canaan Partners’ India team.

Prior to joining Canaan Partners, Harish headed the Value Added Services (VAS) Business and the New Product Development team at Bharti Airtel. In his product development role, Harish was responsible for working with a number of VAS product, service and content companies as well as system integrators to bring several new products to the market for Bharti Airtel. Harish has also worked in the capacity of Vice President Business Strategy and Planning at Bharti Airtel where he was responsible for leading the 3G effort at Airtel.

Harish has also served as Director Marketing and Technology at Nokia and as Director Business Development for Dilithium Networks (a telecom start-up) in his earlier assignments.

The Druvaa Story – II

[ I was planing a small musing and then saw a post from Sumeet, so thought of completing it. ]

Almost two months back, Druvaa hit its lowest … and merely 1 month from our first few paid deployments we were holding heads in hands with no clue how to proceed further. Low on resources, we could feel our holding capacity blowing up. But, luckily we did what we do best – “Worked on it”. Seriously, persistence is _the_ most underrated attribute of entrepreneurship.

We are now hopefully out of the situation and working 24×7 to achieve upcoming targets.

I would like to point out some the mistakes we made as a team. I believe learning from others mistakes is better than learning from their power packed success recipes. These points are _not_ directly pointed at any individual

1. There are these 4 dimensions which every startup should follow like a polar graph – People, Market, Product, Captital,

We knew this rule, but probably failed to apply it … ..We over-engineered the product .. missed some market essential features, were late to raise money and approached wrong people. Never ever loose focus from customer/consumers and keep it simple. Cut any feature, any piece of code, marketing effort which doesn’t suit 80% of the customers/consumers you are directly interacting with. Blow this horn every now and then in front of your team.

2. We quit our jobs before we started, but left of some commitments alive ……

Once you are reaching the summit your oxygen supply goes low and so does your holding capacity. And I guess, it becomes extremely important to let go any extra burden you are carrying.

Quit all jobs and promises. Say your wife and parents a goobye and donate the kid.

3. We got got some wrong people on board …

The founding team should have that killer startup bug everythig else is secondary. And it never takes 20,30 or 100 people to make a product .. Just 3/4 good ones.

4. We were Too late to raise the money …

Always overstock money and good people. You never know when you are going to need them.

And now, a few tips which i think worked for me … i am not going to put any claims on them -

  1. Get the first round of startup fund to reach your first milestone yourself.
  2. Prepare a business plan which explains a your business in simplest form. Get that money before you need it.
  3. Talk to your consumers.
  4. When in trouble, work hard.

I have seen people making millions of dollars making use of nails of dead animals. I am just selling software. :)

I learned quite a lot from this community, send me an email if you think i can be of any help. And a small initiative to give back.

Domestic BPO market – next big opportunity?

Avendus has a report out on the domestic BPO sector. With the decline of the dollar and the expansion of the India domestic market in all spheres, could this be the next big opportunity?

Historically, the outsourcing market in India has been export focused and most participants have been focusing their energies in building businesses catering to US and European clients. However, with the emergence of India as one of the largest economies in the world, the Indian domestic outsourcing market is also emerging as an attractive target market.

To enable various participants of the outsourcing market to understand the Indian domestic BPO market better, we are publishing a report titled “Indian Domestic BPO Market – An Emerging Opportunity”.

While it is a US$1.8Bn market and expected to reach US$6Bn by FY2012 (CAGR of 35%+), we expect the third party segment of this market to grow much faster at 53%, taking the third party share from 18% in FY2008 to 30% in FY2012. Dominated today by call center activities from Banking, Telecom and Insurance, we expect this business to also show growing demand in the back office processing activities as the market and vendor sophistication grows.

Contrary to popular belief, the Indian domestic BPO business, despite its relatively lower pricing levels, has better (or at least equal) profitability margins as compared to the companies catering to global customers.

We believe the Indian domestic BPO market is a strong potential opportunity for both financial and strategic investors looking at making attractive investments in this space.

Last, but not the least, we also believe that the existing players in the Indian domestic BPO market will stand to gain from the years of credibility and referencibility they have built in this space, with the infusion of structured capital into this market.

Inflection point for Mobile VAS?

ET had an interesting article a couple of days ago on declining SMS usage in India -http://economictimes.indiatimes.com/Indians_dont_just_talk_less_…

While the absolute number of SMS’s sent continue to grow (simply because Indian operators continue to add subs at a mind-boggling rate), the average SMS message per user fell significantly in the Sep. quarter relative to the June quarter – a trend that apparently began in late 2006, according to the article. While a number of possible explanations are put forth for the decline, I think the biggest factor is that with over 200m mobile subscribers we’re now well past the 70-80m subscribers who are English literate (I’ve seen some numbers as high as 100m for the English literate population). With over 50% of the user base unable to send/receive a “standard” text message, is it any wonder that SMS usage is falling? The bigger question in my mind, is when the operators will wake up to the fact that Value Added Services beyond SMS (yes, operators treat SMS as a “VAS”, simply because its non-voice, rather than a source of differentiation) is not something they can continue to soft-peddle if they want to stem the inevitable decline in ARPUs. Operators also need to take a long and hard look at their revenue sharing arrangements (in India 60-70% of VAS revenue goes to the operators vs. 25-30% in most other countries) since that’s leading to a chicken and egg situation – smaller share of the VAS pie stifles innovation in VAS and lack of compelling VAS applications means operators continue to milk whatever they can from SMS based quasi-VAS services. On a related note, the opportunity for non-text based as well as multi-lingual applications is real, and compelling. There are 3-4 companies in this space, but there’s room for many more. Would love to hear thoughts from others.