Subba’s Serendipitous moments

September 23, 2009

Netflix’s “crowdsourcing” approach is a success

I have been following Netflix unique experiment to improve its Web site’s movie recommendation system. This week Netflix announced the winner of a three year contest with the winner BellKore comprising of statisticians, computer scientists, data mining experts netting a cool million dollars.

The rules of the competition was fairly straightforward. The qualification for the prize was that the winning team has to improve by at least 10% the prediction of what movies customers would like as measured against the actual ratings. The teams were grappling with a huge data set of more than 100 million movie ratings.

Over the past three years there have been 44,014 entries from 5,169 teams in 186 countries vying for the top prize

I think with this experiment and with Google’s experiment with crowdsourcing described here, there will be a significant shift towards innovation management. The fact that there exists more intelligence and wisdom and the collective effort outside the company’s eco-system has gained credibility. I expect many such organizations embarking on the contest mode to solve intractable problems.

There are a number of lessons that this contest brings about.

First, it indicates that there can be a marketplace for innovation where companies could post their product development challenges and for an interesting contest, the best brains are willing to compete. It sharpens their own abilities.

Second as the BellKore team and other teams demonstrated there is a willingness for disparate people to actively collaborate. While cooperation and collaboration within many organizations has been challenging, I wonder how such disparate people could come together and collaborate easily for a bigger goal.

Third, for people who believed in having an inhouse R&D and saw that as a competitive advantage, this experiment seeks to blow that myth away.

Note: Netflix Prize 2 would challenge competitors to recommend movies based on demographic and behavioral data.

August 4, 2009

Google and Apple are now confirmed rivals

If there was any doubt about the relationship between Google and Apple, the abrupt resignation of Eric Schmidt — Google CEO from the Apple Board should lay it to rest.

I wonder whether the FCC’s investigation of Apple yanking out Google Voice has something to do it. I wrote about their possible rivalry here, but before I could even conceive of possible actions, the resignation was announced. Coming to think of it, Google and Apple are bracing to compete with each other. Google’s Android which will soon be adopted by many device vendors will be in direct competition with Apple’s iPhone. And the Chrome OS will be competing with the Mac OSX.

But is this new? These moves have been going on for the past few years and while the conflict of interest wasn’t that sharp the yanking of Google Voice seems to have brought all that into the open.

I admire both companies. Both Steve and Eric are respected Valley veterans. They have been role models for me. Nonetheless I have to say they always had antithetical approaches to shaping the future of the consumer experience. Some day there was bound to be a conflict.

Apple believes in creating cool products, but being a walled garden. It has fans, not customers. Even though the iPhone is supposed to be open, every application must be approved by Apple. I had talked about the walled garden approach here and it seems to have worked very well for Apple.

Google has adherents. It believed in openness and its whole purpose (even for its Chrome OS) was to reduce the significance of devices in favor of applications that will reside in the cloud. And once the cloud becomes the organizing system, the devices — be it the phones or the laptops do not matter.

Google crowdsourced its innovation. Apple built an innovation value chain in-house. Both models were successful. Yet I think at the core there is a deep philosophical conflict which manifests as a fight between the open and proprietary approaches.  I wrote about it in the mobile phone industry here and hence am not surprised that a rivalry has come about.

The Google Voice episode is just the beginning. The FCC enquiry may reveal more.

And if the Google-Microsoft war and the Apple-Microsoft war, wasn’t interesting enough, we will see a third war — the Google-Apple war.

July 1, 2009

Social network for Government 2.0

Government 2.0 is clearly gaining momentum. I just stumbled on a social network platform to discuss government 2.0 initatives. GovLoop is the Premier Social Network for Government 2.0 connecting over 12,500 Federal, State, Local, Academics, and Good Contractors.

This is what I call tapping the wisdom of the crowd something that I have been strongly advocating. Some prefer to call it crowdsourcing.

May 15, 2009

President Obama’s tax plan — A retrograde step

Filed under: Business,Leadership,Strategy — Subbaraman Iyer @ 4:09 pm
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President Barack Obama announced a plan that seeks to close loopholes used by companies and individuals to avoid paying taxes. In particular, the President Obama wants to make companies pay the proper tax rate on overseas profits.The goal, he said, is to end a “tax scam” by shutting down overseas tax havens that let U.S. multinational corporations and some individual taxpayers avoid paying U.S. taxes while ordinary Americans take up the slack.

Payments by US companies who create jobs overseas are treated as normal expenditures – but the new law (if passed by both Houses of Congress) will entail companies to pay tax on these expenditures as well (increase of almost 50%).
The White House says that some jobs go abroad because American companies are lured there by tax loopholes which, if closed, would bring the jobs home. This is just marginally true.

This and the related tax proposals are often referred to as “Say No to Bangalore, yes to Buffalo”.

At one level, this protectionist policy will do little to change the job losses in the US. It may hurt the US more than India. While Bangalore got mentioned, I am sure the theme applies to China as well which has been a dominant supplier to the US.

Now, if indeed it is the differential tax rates that President Obama is trying to fix, the gains would be marginal as US companies pay a tax of 33% in India as against 35% in the U.S.

Outsourcing boom was all about better quality at lower cost; I don’t think the US can provide either for many sectors including outsourcing.  Most of the big companies save 75% of their cost by outsourcing and the number goes higher for high-end BPOs.

In my view, it is simple rhetoric and grandstanding.

May 13, 2008

HP acquiring EDS — Mark’s new challenges

Filed under: Business,Competition,Model,Strategy — Subbaraman Iyer @ 2:19 pm
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Just saw the news that Hewlett Packard is in talks to acquire EDS. The announcement is here.

This may be Mark Hurd’s biggest and risky bet to carve out a bigger space in the IT services market. As anyone can see, Mark will face 2 key challenges with this acquisition. Unlike the earlier acquisitions, this one is a big move and hence there is the imminent integration challenge between these 2 companies with different cultures. Given that EDS has a higher market share and also been in the IT services business longer than HP, they are unlikely to submit to the HP model easily. Till date HP has shown distinct conservatism in the services market, by just managing the infrastructure around its own product platforms where as EDS has been more of a risk taker given its background and history. It also has done more higher-end work like complex application design. So, who would call the shots — HP as the acquirer or as EDS with a big client list and a track record of delivering higher value services? We just have to see how this unfolds.

Second, Mark has to transition the combined entity to the right cost structure by shifting significant resources to a low cost countries like India. At least in India both EDS and HP have operations and their merger may not create much problems.

I believe the only way to amount the challenge to IBM would be to set this up as an independent business operation and go after the high margin business. It is only then that the acquisition makes sense. Whether IBM gets affected or not, I can see this impacting Accenture, Cap Gemini and a few others feeling the pressure.

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April 18, 2008

Wave 3 model for Indian IT service providers

Filed under: Business,India,Strategy — Subbaraman Iyer @ 4:59 pm
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Sudhakar Ram of Mastek writes an interesting perspective on the growth options for Indian IT service providers here.

While I agree with his basic premise that most shifts are non-linear, and that they follow the S-Curve, it is not clear what the Wave 3 work would be! He just characterized that as strategic, value-added and non-linear. The examples that he gives — frameworks, components etc. don’t lend themselves to easy monetization. And I guess, that’s one aspect of the dilemma.

The other aspect of the dilemma is that some of the Indian IT service providers did attempt to move up the value chain by providing consulting services. Companies like Infosys and Satyam went that route only to discover that there are critical tensions between managing a IT service outfit and a consulting fit under the same umbrella. The measurement metrics like productivity, bill rates, price realization, competitive positioning done typically by the IT service provider cannot be applied in the same way to consulting. The net result has been that most of the standalone consulting teams in these companies have more or less disappeared.

Hence while there’s an opportunity and a business imperative to move to Wave 3, I am not sure whether the Indian IT service providers can overcome the execution handicaps.

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