Subba’s Serendipitous moments

September 30, 2009

Vodafone takes the battle to the mobile phone vendors

A few months back one of analyst friends asked me whether it is possible for the mobile service provider to create their own App Stores and be successful. My opinion to him was they can do it or rather they should do it, else they have not even joined the battle for customer loyalty. The talk turned to Singtel which is one of the largest operator based out of Singapore and it has a global presence due to its joint ventures and acquisitions in many countries. I remember telling him that it should be one of the large operators who will have the reason to do it.

Now Vodafone has done it. Vodafone 360 is a mobile web service that provides music downloads, integration with Facebook and Twitter, and supports several handsets. In a way it is competing with Apple’s App Store, Nokia’s Ovi and other App Stores created by the mobile phone vendors.

Now Vodafone’s Telco 2.0 model (called efficient pipes) is nothing new. A lot of mobile service providers thought about that but shied away from taking the plunge. Now Vodaphone which has over 300 million consumers in over 30 countries has taken the challenge.

As Apple and Nokia increase their emphasis on the App Store and have made a success of it (Apple’s App Store’s success is chronicled here), the mobile service providers can’t afford to be silent spectators.

But whether the service providers with their current competencies would have the ability to build an App store and an application eco-system is a big question.

August 2, 2009

Underdogs can win

Underdogs win more times than we think, but is there a set approach that characterizes their win? I have always been intrigued by their winning approaches and the tipping points that gives them the decisive competitive advantage.

Having delved into business strategy research and practice for a while, I still couldn’t come across any clear framework that advises underdogs of how to take the battle against the more powerful opponent.

Malcom Gladwell (author of The Tipping Point, Blink and the more recent Outliers) writes a brilliant piece on how David can beat Goliath. The article is a bit long, but it makes compelling and instructive reading. It has several brilliant anecdotes written in the typical Malcolm style. What is amazing is how Vivek Ranadive uses the principles of real time information processing and the way he built TIBCO — a hugely successful software company, to coach his daughter’s school basketball team for the National Junior Basketball championship. Vivek never played basketball, nor was he a coach, yet his astute assessment of the game’s dynamics and mapping out to the real time information processing and how TIBCO became successful shows what a smart mind can do given a challenge. Vivek is also the author of the bestseller: “The Power of Now: How winning companies sense and respond to change using real-time technology”

Malcolm also draws from various other examples in sports, conventional wars to illustrate the following principles:

  1. First acknowledge your weakness and then choose an unconventional strategy.
  2. Choose not to play by Goliath’s rules.
  3. Be bold and do what could be even termed as “socially horrifying”— challenge the conventions about how battles are supposed to be fought.
  4. Do not be scared of being disapproved by the insider.
  5. Believe in the fact that a defender’s dilemma is very often the attacker’s advantage.


IBM girds itself against Cisco.

A few months back I wrote about Cisco’s game changing play and in the process declaring war on IBM and HP. I also indicated that an imminent realignment of alliances is likely. I have been following the subsequent developments with a lot of interest and here’s an update.

I have not seen HP do much in terms of launching an offensive to Cisco’s play. Either they do not believe in Cisco’s ability to build a carrier class digital IT infrastructure or they are tied up with other myriad issues.

IBM on the other hand has upped the ante with a series of moves. It entered into a fairly strong relationship with Juniper Networks. While IBM did mention that it was also bolstering its relationship with Cisco, for the discerning eye it was just PRspeak.

Brocade’s Fibre Channel over Ethernet (FCoE) will be offered as the IBM Converged Switch B32 and 10Gb Converged. This will strengthen the OEM agreement Brocade with IBM earlier this year to resell Brocade’s Foundry switches.

The battle for data centers will invariably shift to the cloud. And the shift may even be quicker than one can envisage. And the first vendor that are able to demonstrate that data can be moved from one cloud to another without a hitch, has a significant advantage. With the agreements with Juniper and Brocade, IBM seems to have a strong advantage over Cisco.

It looks like an interesting battle ahead between IBM and Cisco. To me, it looks like HP is still being hesitant.

May 24, 2009

Singapore and Israel — a study of contrasts

I had a chance meeting with a NUS don and we ended up discussing my post on whether East Asia can produce a Susan Boyle. While remaining neutral about the arguments that I put forth, he mentioned the reason about Singapore being “small”.

I have heard the argument of Singapore being “small” ad nauseam. Singapore uses that as a convenient excuse whenever there’s a short coming or if they have to justify any hard measure to contain order. They also use it to explain away many of the things where they have come short. But, if you turn around and ask them how Singapore achieved some wonderful things in specific areas despite its small size, the discussion has veered off into a different direction.

Size and stability may be good, but lack of size and stability is not a deterrent to be successful. This reminds me of the famous lines in the old classic The Third Man: ” For 30 years under the Borgias, they had warfare, terror, murder and bloodshed, but they produced Michelangelo, Leonardo da Vinci and the Renaissance. In Switzerland, they had brotherly love and 500 years of democracy and peace, and what did that produce? The cuckoo clock.”

To serious skeptics, I usually cite Israel (population of 7.2 million) as an example.

Israel since its independence in 1948 has fought a several wars with its neighbors. It is always in a state of military preparedness. Yet it ranks highest in terms of human development, freedom of the press and economic competitiveness amongst Middle East countries. It is a parliamentary democracy and the average span of Israeli government of 22 months. The governments have often changed for a number of reasons — political scandals, peace process with their neighbors and the role of religion. It has the highest level of civil and human rights comparable to any Western world democracy and the freedom of press has been ranked highest amongst the Southwest regions.

Economically it is rated 3rd in the World Economic Forum’s Global competitiveness report. It has the 2nd largest number of startups after the US and the most number of companies listed in NASDAQ. Many of the large technology vendors like IBM, Microsoft, Cisco have advanced development centers in Israel.

Contrary to the Singaporean thinking, the Israelis have used the small size of Israel as an advantage. A Israeli start up knows that is home market is limited and hence function as a “mini-multinational” from day one. A surprising thing among Israelis is that they are never scared of failure and if 5% of the start ups in US are headed by repeat entrepreneurs, in Israel the ratio is well over around 30%.

Now coming to creative arts, Israel music has influences from all over the world. The Israel Philharmonic Orchestra has been operating for over 70 years and performs over 200 concerts each year. It also has a vibrant theatre scene.

How does one explain these successes in so many diverse fields despite its size and lack of peace? My view is their ability to be an inclusive society and they valuing diversity. All Jews irrespective of their lineage are welcome and they constitute 75% of the population. Muslims are the largest minority and it equally welcomes Christians.

The difference between Singapore and Israel was neatly summed up by Guy Kawasaki in one of his recent visits to Singapore. He called Singapore an one-opinion town. His precise words were: Israel has 5 million people, six million entrepreneurs, and fifteen million opinions. Singapore has 5 million people, six entrepreneurs and one opinion. Yesterday Lydia Lim a political correspondent from Straits Times referred to this difference, but only to defend Singapore and make a statement that Singapore has more than one opinion.

Her effort was painstaking, but what she ended up doing was only to reinforce the Singapore’s stability mantra which gives the society the order, but fails to deliver the innovation and creativity that Singapore badly needs in these times of global slowdown.

March 18, 2009

Cisco declares war on IBM and HP

Filed under: Business,Competition — Subbaraman Iyer @ 4:26 pm
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Early this week, Cisco announced a major initiative which has the potential to shake up the overall server, storage markets completely.

Cisco announced a blade server ( Unified Computing system) that combines computing, storage and networking into a single layer all being managed by a specialized software being offered by BMC. It is increasingly becoming clear that virtualization is the primary driver.

This is a game changing play.

First, it puts Cisco directly in competition with their established partners like IBM and HP who have a lot of stake in the server and storage segments. Till now IBM and HP (especially with the EDS acquisition)  held the keys to the data center and now they will face a frontal attack from Cisco. My own view is that Dell may be least affected as they cater to the low end of the server segments. So, Cisco is up against their own partners and this partnership with IBM and HP is at risk.

Clearly Cisco which has not had a legacy in the data centre equipment of services business has created a new value proposition of building an “intelligent and carrier class digital” IT infrastructure. It would be difficult to ignore this value proposition as new data centers emerge.

There is an entirely new market opening up for mega data centers — the ones owned by Google, Amazon, Facebook etc. This market is poised to grow at over 30% over the next 3-5 years as digital data grows and as many companies go through the M&A process. My own estimate is  that one of every 5 servers (medium to high end) sold finds itself in a data center. So, Cisco is clearly addressing a potentially huge market.

But will this new customers accept Cisco’s proposition? Clearly Cisco is trying to own everything in the data center and many data center managers would resist lock in.

Apart from the fact that Cisco would treading into an unknown territory, the dynamics of competition makes the play interesting:

Cisco’s gross margins in the routing/switching market is around 62% while the typical server markets fetch close to 22%. Assuming the bundling (computing, storage and networking) finds acceptance, Cisco’s margins for this business may be around 40%. Hence this may lower the overall profitability. How Cisco manages their margins in this business would be interesting to watch.

HP emboldened by the success of ProCurve is likely to take a more aggressive stance. IBM will have to figure out how to fill the gaps in their product line up.

Both IBM and HP are likely to make a slew of acquisitions and companies like Juniper and Brocade make interesting candidates. Should any of these occur, Cisco might end up acquiring VMWare completely (currently it owns 2%) or might even attempt to acquire EMC to bolster its position.

Now, everyone is waiting for IBM and HP to come up with competing announcements. The battle for the data center is beginning and promises to be long drawn. Cisco would also need to make a lot of investments in getting their partner network ready and some of the Cisco partners also have relationships with IBM and HP.

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