Subba’s Serendipitous moments

May 29, 2007

Open versus proprietary — Who wins?

Filed under: Business,Competition,Model,Strategy — Subbaraman Iyer @ 6:49 pm
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There’s always this interesting and never ending debate on what wins in the high tech software industry — the open model or the proprietary model.

The prevailing view is that the proprietary model not only wins, but is necessary when the industry is in a stage of shaping up. It becomes necessary because there is so much uncertainty in terms of the various parts working satisfactorily and also in terms of giving the consumer the necessary experience for it to get acceptance. There is enough anecdotal evidence right from the days of mainframes to even personal computers.

However once the industry matures and industry standards emerge, there begins a value chain and different players begin to focus on different areas and we get new and different value propositions based on price, value, usability, reliability, convenience, aesthetics etc. Again, the PC industry provides clear evidence with companies like Compaq and then Dell changing the industry model and acquiring industry leadership.

It is also common wisdom that once the industry becomes mature, sticking to the proprietary model may become suicidal. Apple which invented the personal computer continued with the proprietary model as opposed to the Wintel model and ended up just having 3% market share.

Now, what does this portend for the mobile phone industry?

Recently, RIM makers of BlackBerry made an announcement that is likely to have a significant impact on the high end mobile devices. It is introducing a software application that can make Palm Treos and other Windows-based mobile devices made by rivals work like a BlackBerry.RIM already offers a BlackBerry Connect e-mail application that can run on devices with other platforms, including Windows, Symbian and the Palm-based variation of the Treo from Palm Inc. The company is developing the new BlackBerry virtualization software to run on multiple platforms as well but declined to say which one would be released next.

All this goes to show that RIM is now adopting openness as part of its business and technology strategy as part of its pursuit for dominance.

Apple on the other hand has achieved success with its proprietary model. Apple made the iPod and together with iTunes provided the consumer with the reliability and ease of use. Now, despite the market having matured, Apple has been steadfast with the proprietary model which has been instrumental in Apple’s dramatic turnaround during the last few years.

Now, here’s where the battle gets interesting. With the launch of the iPhone (an iPod with phone features and more) and Blackberry being able to check not just email but also play the MP3s, the ideological battle becomes interesting.

RIM has taken the first step by abandoning its proprietary model and making their email service available to users of other devices. While Apple continues with the proprietary model spurred by the success of the iPod+iTunes combo.

Who is likely to win?

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Narayana Murthy’s shares his life lessons

Filed under: Business,India,Inspiration,Learning,Stories,Strategy,Winning — Subbaraman Iyer @ 4:59 pm
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Narayana Murthy’s talks on various occasions have always left me inspired. In this talk at the 2007 commencement ceremony at NYU Stern, he highlights the importance of the mind set amongst many things.

He quotes psychologist Carol Dweck and clearly distinguishes between a fixed mind set and a growth mind set. One critical factor that decides whether one can cultivate the growth mind set is the ability to continuously learn — be it from one’s own experience (as Mr. Murthy highlights) or through other sources. I have often found that the courage to reflect and see the experience through multiple view points as the key ingredient in shaping one’s mind set.

Most times we analyze failures not for what it offers as a source of learning, but more often to fix things. While fixing things is necessary, we often ignore what caused the underlying failure and the kind of mind set that led to it. No wonder, sometimes we repeat the same set of mistakes. Worse, few of us even bother to analyze success, because we take it for granted that it was due to one’s abilities. We are often in a hurry to replicate it, without having understood why we succeeded in the first place.

Mr. Murthy also talks about chance events shaping one’s future, something that applies to most of us, though few of us give credit to it.

It is also amazing how he adheres to simple age old values, has his courage of his conviction and does not hesitate to take the big bold step when needed. It is the faith in oneself and of the future that act as the catalyst.

All in all, his advice is relevant not just to the students, but to leaders and managers alike.

Truly spoken as a statesman.

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Google and Salesforce.com alliance?

Filed under: Business,Innovation — Subbaraman Iyer @ 4:39 pm

There have been rumours of Salesforce.com being acquired by Google, which has been often proved to be untrue. The latest in the Valley is of a broad alliance between Google and Salesforce.com. While both are innovative companies who have blazed a new trail in their respective areas, I really don’t see what the alliance can bring to the table.

Google has been the leader for online search and advertising and have made their own APIs for theird party developers to build web based tools and applications. Their internet applications like email, messaging, online version of desktop applications like word processing and spreadsheets have seen adoption but are unlikely to pose any threat to Microsoft.

Salesforce.com specialize in CRM applications and recently moved into content management area. It has developed its own APIs on the APEX platform and count over 500 third party developers building diverse applications and these are offered on a subscription basis to SME and large enterprises alike.

While both organizations are leaders in their respective segments, they have many things in common. Both use the Internet as the delivery mechanism, are fiercely competitive and customer focused, yet I don’t see how an alliance can be mutually beneficial or benefit the industry as a whole.

Hence, I am inclined to see the alliance as just another rumour or another publicity stunt.

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Salesforce.com’s mixed results

Filed under: Business,Competition,Model — Subbaraman Iyer @ 4:27 pm

Salesforce.com which is the category leader for hosted applications or simply referred as SaaS has been breaking new ground every quarter. Every other software company from Oracle, SAP and even Microsoft now wants to offer their software on a hosted basis, after Salesforce.com proved that the model is scalable and customers like Cisco, Merrill Lynch and other Fortune 500 companies have become satisfied users.Its Apex platform has been a huge success with over 500 applications from third party developers.

Yet Salesforce.com’s results are below expectations for reasons which are difficult to understand.

The company has acquired close to 600,000 subscribers and serves more than 25,000 companies. It posted 75% revenue growth in fiscal 2006 and a higher growth in 2007. Yet, the company reported earnings of of just $0.5 million on revenues of $144 million in the March quarter.

Is the company intentionally sacrificing its bottom line for top line growth in view of the forthcoming competition?

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Does anyone have a view?

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May 21, 2007

Silicon Valley’s melting pot

Filed under: Business,India,Perspective,Winning — Subbaraman Iyer @ 3:21 am

Everyone knows Silicon Valley as a great melting pot. Lance Glasser illustrates this very well here.

He writes:

Like many in Silicon Valley high tech, I have faced the question of how we take advantage of globalization in technology development.  Last year, as part of pulling together my thoughts on this topic, I polled my immediate direct reports, that is the nine people who reported directly to me and whose performance reviews I filled out, but not including the people who reported to them or indirect (dotted line) reports.  Remarkably, together they speak or write 13 different languages: English, Farsi, French, German, Hebrew, Hindi, Italian, Japanese, Klingon, Mandarin, Portuguese, Spanish, Taiwanese, and Tamil.  If one were to go down another level in the organization there are, of course, even more languages.  I may not have had a great globalization plan, but I am sure I had a great globalization team!  How can anyone doubt that technology is global or that Silicon Valley is still magical?

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Three wise men and their conclusions

Filed under: Learning,Model,Perspective,Stories — Subbaraman Iyer @ 3:00 am

Three wise men set out on a journey for even thought they were considered wise in their own country, they were humble enough to hope that travel would broaden their minds.

They had barely crossed into a neighboring country when they saw a skyscraper in the distance. What could this enormous object be, they asked themselves?

The obvious answer would have been to go up and find out. But no, that might be dangerous. Suppose it exploded once they approached it? So, they decided it was wiser to decide what it was before they approached it.

Various theories were put forward, examined and on the basis of their prior experience, rejected. Finally, it was determined (of course based on their past experience and knowledge) that the object in question, whatever it was, could only have been placed there by giants.

This led them to the conclusion that it would be safer to avoid this country altogether. So they went back home having added something to their fund of experience and knowledge.

Assumptions affect observations, which in turn breeds conviction. Conviction produces experience, which generates behavior, which in turn confirms assumptions.

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Microsoft threatens and then seemingly retracts

Filed under: Business,Competition,Model — Subbaraman Iyer @ 2:17 am

Microsoft clearly made threatening gestures against the entire open source community by making the claim that open source software like Linux violate Microsoft’s patents. It took a very aggressive stance towards open source and wanted royalties. The specific accusation was that the Linux kernel, the GUI, the Open office suite, the email all infringe Microsoft’s patents and hence royalties accrue to Microsoft.

Now, this is where it gets interesting – Will Microsoft sue the Linux distributors, the organizations who use Linux or the FOSS (free and open source software) which essentially is a community of developers? Well, they certainly can’t sue FOSS and Microsoft will find it difficult to get royalties from the Linux distributors like Novell and Red Hat because by virtue of being part of the FOSS, the distributors distribute Linux free and don’t have to pay any patent royalties. Suing the organizations who use Linux would be detrimental to Microsoft’s basic cause.

Clearly Microsoft has been building its patent arsenal for quite some time. Microsoft was emboldened to take this aggressive stance of demanding royalties, because in the recent agreement between Microsoft and Novell, Novell agreed to pay a percentage of  its Linux revenues till 2011, which some view as a tacit admission that Linux did infringe on Microsoft’s patents. What complicates this that Microsoft indirectly sells Novell Linux through a coupon system and hence subject to the GPL licensing policy, though Microsoft claims it is not subject to GPL licensing policy.

This has serious implications for Linux distributors as most users would end up buying their software from Novell itself and hence feel secure against any law suits coming their way. The sales of other smaller distributors and that of Red Hat would suffer.

Will Microsoft sue end users who are Linux users? It looks unlikely at this stage. But, the threat and possibility can’t be ruled out.

In a surprise move, just a couple of days after the Fortune interview, Microsoft representatives in an interview with IDG News service, seem to indicate the Fortune article did not "correctly represent their strategy." The Microsoft representative seem to indicate that it was not a threat issue, but was trying to resolve an intellectual property issue.

It may not come as a surprise, if the Linux and the FOSS supporters make a counter claim against Microsoft for patent violation. Should that happen, we are likely to see a prolonged litigation, which may harm the open source movement.

Clearly tumultuous times are ahead for the Open source movement. As it is many systems integrators are reluctant to propose / include open source software because of the impact it has on its revenue streams. Now, with this threat of law suits and sorting out of patent rights, the systems integrators will avoid open source software till some clarity emerges.

Unfortunately, that clarity may take a long time to emerge.

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May 20, 2007

Microsoft’s controversial quotes

Filed under: Business,Leadership — Subbaraman Iyer @ 10:18 pm

Microsoft’s most controversial quotes are here. It makes interesting reading, especially as Microsoft bashes its competitiors like Apple, Google, Linux and so on.

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May 17, 2007

The power of false information

Filed under: Business,Model,Stories,Strategy — Subbaraman Iyer @ 1:41 pm

We all know information is power. We also assume that information is correct and authentic, more so, when the information comes from credible sources like corporate email. Now, it seems not so, going by what happened last week at Apple.

A well known tech site Engadget (which I visit regularly) published an email  (that was actually sent to all Apple employees) that Apple’s revolutionary product iPhone was being delayed to October from June and the new operating system Leopard would not ship before January next year.

That news was enough for Apple stock to drop 5% that day (before it recovered)

Apple did come up with their version saying that the email wasn’t "authentic" and said that both iPhone and Leopard are on track.

Now here’s the impact: Between the 20 odd minutes that the "false email" hit the stock market and the communication from Apple that the email is fake, nearly 15 million shares (about 60% of Apple’s volume) were traded. Some one made a neat pile of money.

What is intriguing is how did someone manage to pull this deceptive trick, as an email coming from Apple and sent to all employees? How did the news spread around so fast? Have we moved to an era, where we react so fast to news, that it now provides scamsters an opportunity to exploit this weakness?

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All in the name of unlocking value!

Filed under: Business,Competition,Leadership,Model — Subbaraman Iyer @ 12:58 pm

Just look at what’s been happening at Avis from this story in New York Times. The story highlights how Avis has been brought and sold since its inception. "Since 1946, Avis has been sold or reorganized 17 or 18 times, depending on how you count. Each time Avis changed hands or structure, there have been fees for bankers and fees for lawyers, bonuses for the top executives and theories about why this was exactly what the company needed". The last paragraph in the article is a grim reminder of the world we live in!

My friend Dr. Ananth hits the nail on the head when he says "Here is something grotesquely wrong with the world of captalism inasmuch as it has given such an exalted role and status to Finance. Paper shufflers vs. Paper makers.The bad news is that it is unlikely to change. The tail is the DOG and the DOG is nowhere to be seen except in lucid articles such as the one below".

The whole article is reproduced below:

N 1946, Warren E. Avis (who died last month at the age of 92) had an idea: rental cars should be available at airports. So he founded Avis Airlines Rent-a-Car. In 1954, he sold the company to another businessman, Richard Robie. Two years later, in 1956, Robie sold Avis to an investment group led by a company called Amoskeag. In 1962, the investment banking firm Lazard Frères bought Avis. In 1965, Lazard sold Avis to the giant conglomerate ITT Corporation.

Since 1946, Avis has been sold or reorganized 17 or 18 times, depending on how you count. Each time Avis changed hands or structure, there have been fees for bankers and fees for lawyers, bonuses for the top executives and theories about why this was exactly what the company needed.

In 1972, ITT spun off Avis as a publicly traded company. Then, in 1977, the company was bought by another giant conglomerate, Norton Simon. In 1983, a company called Esmark (formerly Swift & Co.) bought Norton Simon. In 1984, Esmark was bought by Beatrice Foods, and in 1986, Beatrice was bought by the leveraged buyout firm Kohlberg Kravis Roberts & Company.

Kohlberg Kravis Roberts immediately sold Avis to an investment group called Wesray. Wesray sold Avis’s fleet leasing business to a company called PHH Group. Then it spun off Avis’s foreign operations and took them public as a company called Avis Europe P.L.C. And then, in 1987, Wesray sold Avis to its employees under an employee stock ownership program. Wesray more than tripled its money in 14 months.

Two years after the stock ownership deal, the company sold General Motors a complicated security that effectively gave it a 26 percent stake in Avis. Apart from that, Avis’s employee ownership experiment lasted nine years, until 1996, when Avis sold itself to a company called HFS. Employees got an average of $26,000 each. Eighty or 90 current and former Avis executives got an average of $1.75 million each.

A year later, in 1997, HFS took Avis public. (The initial public offering raised just over $330 million. The banker Bear Stearns charged $15 million for its services.) In 1999, Avis bought PHH. Remember PHH? That was the company Avis sold its fleet leasing operation to in 1987. PHH was owned by Cendant, a company that had been formed in 1997 by the merger of HFS — right, the company that had spun off Avis in 1997 — and another company called CUC. HFS had retained 19 percent of the company’s stock when it took Avis public. With the stock portion of Avis’s purchase price for PHH, Cendant now owned 34 percent of Avis.

A couple of years later, Cendant bought the roughly two-thirds of Avis that it didn’t already own and made Avis a wholly owned subsidiary.

In 2006, Cendant split itself into four independent companies, one of which was the Avis Budget Group. (Somewhere along the line, Cendant had also acquired Budget Rent a Car.) The Avis Budget Group became the parent company of Avis Budget Car Rental.

Modern capitalism has two parts: there’s business, and there’s finance. Business is renting you a car at the airport. Finance is something else. More and more of the news labeled "business" these days is actually about finance, and much of it is mystifying. Even if you can understand — just barely — how it works, you still wonder what the point is and why people who do it need to get paid so much. And you strongly suspect that the swirl of financial activity around Avis for the past six decades has had little or nothing to do with the business of renting cars.

Last September, a week after the Avis Budget Group began trading on the New York Stock Exchange, The Wall Street Journal reported that the new company was "ripe for the picking." Carl Icahn, another wily financier from the 1980s, had acquired a $100 million stake in the company and would not comment about his intentions.

The Journal warned, "If a buyout or acquisition deal doesn’t materialize for Avis, stock and bond investors will have to focus on the fundamentals of its car-rental business." Goodness! Anything but that!

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