Have we really seen the climax of Cloud hype already? Why do I think so?
maybe they really underestimated data privacy, control and ownership issue on one hand and the passing of contractual risks through liablity and idemnity clauses for data protection...that will hinder growth of cloud...
so what about the high decibel and hig frequency campaigners of cloud have to say now....
1. IAAS: Data center consolidation....maybe we are likely to see the MIS glass house again...maybe now they just call MIS glass house with some dynamic provisioning of servers :-)..
2. PAAS: are we seeing the ISVs attempt to get back in business by trying to repackage themselves as provisioning a platform fizzled out...sybase now repositions itself as mobility ISV...oracle Forms/repoorts moving into open platforms with eclipse and java-based solutions...maybe force.com doesnt have all that horsepower as it claimed it did...nobody knows whats up here another 1-2 years down the line...
3. SAAS: we just have SFDC here....others are all our classical hosting solution providers...maybe oracle ondemand, SAp are all trying to reinvent themselves...maybe they are failing in ERP III :-)....for those who saw MRP I, MRP II, MRP III really renamed themselves to SCM....no idea where this is headed....I'm not sure if anyone is really ready for a multi-tenant, pay-per-use kind of offerings for enterprise systems yet....
What is all the fuss about utility computing through cloud? we are not going to see IT becoming like a power utility company split based on generation (H/w: IBM, HP, SUN,; S/W: Oracle, Salesforce.com, SAP, N/W: Cisco!!), transmission (ISPs and telecom service providers) and distribution (???)....and businesses out there dying to hire them on rental service for what they use....it seems to me most businesses are not even sure the value they are getting from such IT systems anymore....
What do you think?
Friday, September 23, 2011
Whats up with margins of network equiment solution providers (Ciscos and sycamores)
The margins of network companies (Cisco, Juniper, HP, Sycamore) post 2008 has dropped significantly to 15-16% from 20% just about a year ago...
1. is it due to lack of any differentiations in their core business of routers and switches leading them on a race to the bottom for their margins?
2. are we seeing the climax of hype for cloud computing whereby the growth for more businesses buying new routers and switches will not materialize....
3. Imagine if cisco has to focus only on Brics for growth...we in brics know fully well there arent enough potential to grow beyond ther 10% theatre growth cisco estimates in their analyst briefing...what about their strategy of focusing on public sector investments....we have heard enough of fiscal deficits and govt. debt burden already...
4. We see Huawei and ZTE up and coming....should we be seeing chinese domination for the next decade in this core switches and routers business....
The only way for them to get back on the margin game it seems is through software and services (cisco services growing steadily to 20%+ of their revenue for FY'11). What would it make these players something like IBM? Maybe we need another lou Gestner to make this elephant dance...Lou made the mammoth dance with his services strategy...it seems we may see cisco going the IBM way....
What do you think?
1. is it due to lack of any differentiations in their core business of routers and switches leading them on a race to the bottom for their margins?
2. are we seeing the climax of hype for cloud computing whereby the growth for more businesses buying new routers and switches will not materialize....
3. Imagine if cisco has to focus only on Brics for growth...we in brics know fully well there arent enough potential to grow beyond ther 10% theatre growth cisco estimates in their analyst briefing...what about their strategy of focusing on public sector investments....we have heard enough of fiscal deficits and govt. debt burden already...
4. We see Huawei and ZTE up and coming....should we be seeing chinese domination for the next decade in this core switches and routers business....
The only way for them to get back on the margin game it seems is through software and services (cisco services growing steadily to 20%+ of their revenue for FY'11). What would it make these players something like IBM? Maybe we need another lou Gestner to make this elephant dance...Lou made the mammoth dance with his services strategy...it seems we may see cisco going the IBM way....
What do you think?
Raodblocks/impediments to digitizing indian TV broadcasting
Indian broadcasting industry faces serious roadblocks to digitizing though KPMG survey estimates this to increase from 33% in 2010 to 64% by 2015. Nowadays, it is common to blame everything on corruption & politics...so it is not surprisingly true even here...the key impediments/roadblocks to quickly and profitably roll out digitisation:
1. Demand side effects: Subscriber costs will move up limiting slower uptake of services through Set-top-boxes/DTH. Subscribers have become too happy in paying Rs 200-250 for a boquet of popular channels through analog cables running. Probably the analog cable operators and franchisees can afford to provide these at such low cost due to underreporting of subscriber base by their franchisees :-)
2. Supply side: Increasing content development/delivery/marketing cost coupled with decreasing revenues in media (80% revenue comes from advertising in this industry but this would get strained probably due to other channels of communication) strains broadcasters margins & cashflows. This will make broadcasters wary of investing in digitization unless they are profitable. A sort of chicken-egg scenario....
3. Extraneous factors: Cables are run by politicians in some states...In others they are controlled by local goons who control which channel can be transmitted...the other interesting thing is politicians fear that digitization will bring accountability, and transparency removing any discretionary powers of state to control information reaching mass....so we will see lot of irrelevant non-issues being posed as reasons such as employment opportunities denied, poverty, last mile-connectivity, rural population affordability, minority issues, etc.
MIB has published a deadline to phases out analog transmission by 31st Dec 2013 and later created a phased roll out for cities and it seems it is delayed further... we can possible see a festering can of worms bred by unholy nexus here....
1. Demand side effects: Subscriber costs will move up limiting slower uptake of services through Set-top-boxes/DTH. Subscribers have become too happy in paying Rs 200-250 for a boquet of popular channels through analog cables running. Probably the analog cable operators and franchisees can afford to provide these at such low cost due to underreporting of subscriber base by their franchisees :-)
2. Supply side: Increasing content development/delivery/marketing cost coupled with decreasing revenues in media (80% revenue comes from advertising in this industry but this would get strained probably due to other channels of communication) strains broadcasters margins & cashflows. This will make broadcasters wary of investing in digitization unless they are profitable. A sort of chicken-egg scenario....
3. Extraneous factors: Cables are run by politicians in some states...In others they are controlled by local goons who control which channel can be transmitted...the other interesting thing is politicians fear that digitization will bring accountability, and transparency removing any discretionary powers of state to control information reaching mass....so we will see lot of irrelevant non-issues being posed as reasons such as employment opportunities denied, poverty, last mile-connectivity, rural population affordability, minority issues, etc.
MIB has published a deadline to phases out analog transmission by 31st Dec 2013 and later created a phased roll out for cities and it seems it is delayed further... we can possible see a festering can of worms bred by unholy nexus here....
Saturday, June 18, 2011
Why are IT services firm so confused and mess up when they sell their home-grown products and IT service?
IT services companies agents do miserably in pricing, selling and delivering their home-grown IT products and associated services. Why does this happen?
1. The sales and marketing team often sell IT software product like services instead of selling the products and then add-on services
2. The solution architects simply dont get how to solution and postion the services and IT Software product separately
3. The marketing folks are confused on how to price the licenses and support for the IT software products effectively and competetively in the market.
4. The delivery team often dont get the fact that you need to run the IT software products business like a product company and not like services. For example they need a Engineering team, development team, dedicated resources who can work on products, processes and methodologies for product development in line with what is used in the industry, professional services arm which focuses on services, which is seperate from the core products team, incentives and motivation for the team in line with industry standards, nurturing and influencing the ecosystem of the IT products through investments and participation, having a support team which focusses on providing ongoing support, a release and program management and product management team that works with cross-functional team and vendors out there to drive features,/functionalities/releasesetc.
The above are only a few, but the biggest challenge often is how do IT services companies solution and price these products?
So what is the right model to sell Home grown IT software products and associated service. To answer this lets look at what SAP and Oracles of the world do and learn from them:
SAP and Oracle charge a Software update and Product support yearly fee of ~25% of their license fee. Ofcourse, this can be negotiated. The software Update and Product support comes with free maintenance packs/patches, ongoing vendor support for product issues. If you keep applying the regular patches and maintenance packs and have done no bespoke RICEF customizations it is as good as upgrades. But this is seldom the case as any enterprise application will require you to build RICEF to work with other IT systems in organization that’s where IT service providers like us fit in.
Given the above background, if you are selling home-grown Software product, client is expecting you to provide this software update and product support. But this doesn’t come free; you have to charge client with a yearly fee a.k.a. 25% of software license fees. I don’t know what is the standard that is charged for the home-grown software product update and software support . You should provide ongoing Software updates/fixes to the product as this is home-grown software and you would have roadmap of future releases that enhances the product based on some charge. Over and above this you need to also clearly separate AM work for client like the way IT services firms do for SAP/Oracle and estimate this work and provide this as a separate service.
So your overall pricing = Home-grown software product license fees + Implementation Fees + Ongoing product and Software support fees + Application maintenance fees.
The first 2 components will be SI and does not concern your ongoing IT services. The last 2 is where you need to separate this our clearly and charge client as you are both the software vendor and application maintenance/management vendor. IT services companies often muddle up the last two components as they don’t have an existing shared services based support team which people like Oracle and SAP does so they often get confused and muddle up the scope of ongoing product and software support with application maintenance. My submission would be to scope and separate this out clearly and position this to client team so they can pitch it to client.
1. The sales and marketing team often sell IT software product like services instead of selling the products and then add-on services
2. The solution architects simply dont get how to solution and postion the services and IT Software product separately
3. The marketing folks are confused on how to price the licenses and support for the IT software products effectively and competetively in the market.
4. The delivery team often dont get the fact that you need to run the IT software products business like a product company and not like services. For example they need a Engineering team, development team, dedicated resources who can work on products, processes and methodologies for product development in line with what is used in the industry, professional services arm which focuses on services, which is seperate from the core products team, incentives and motivation for the team in line with industry standards, nurturing and influencing the ecosystem of the IT products through investments and participation, having a support team which focusses on providing ongoing support, a release and program management and product management team that works with cross-functional team and vendors out there to drive features,/functionalities/releasesetc.
The above are only a few, but the biggest challenge often is how do IT services companies solution and price these products?
So what is the right model to sell Home grown IT software products and associated service. To answer this lets look at what SAP and Oracles of the world do and learn from them:
SAP and Oracle charge a Software update and Product support yearly fee of ~25% of their license fee. Ofcourse, this can be negotiated. The software Update and Product support comes with free maintenance packs/patches, ongoing vendor support for product issues. If you keep applying the regular patches and maintenance packs and have done no bespoke RICEF customizations it is as good as upgrades. But this is seldom the case as any enterprise application will require you to build RICEF to work with other IT systems in organization that’s where IT service providers like us fit in.
Given the above background, if you are selling home-grown Software product, client is expecting you to provide this software update and product support. But this doesn’t come free; you have to charge client with a yearly fee a.k.a. 25% of software license fees. I don’t know what is the standard that is charged for the home-grown software product update and software support . You should provide ongoing Software updates/fixes to the product as this is home-grown software and you would have roadmap of future releases that enhances the product based on some charge. Over and above this you need to also clearly separate AM work for client like the way IT services firms do for SAP/Oracle and estimate this work and provide this as a separate service.
So your overall pricing = Home-grown software product license fees + Implementation Fees + Ongoing product and Software support fees + Application maintenance fees.
The first 2 components will be SI and does not concern your ongoing IT services. The last 2 is where you need to separate this our clearly and charge client as you are both the software vendor and application maintenance/management vendor. IT services companies often muddle up the last two components as they don’t have an existing shared services based support team which people like Oracle and SAP does so they often get confused and muddle up the scope of ongoing product and software support with application maintenance. My submission would be to scope and separate this out clearly and position this to client team so they can pitch it to client.
Friday, June 17, 2011
Why IT service providers are not successfull in selling home-grown software products?
Have you ever wondered why pure play IT services companies are a utter failure in selling a home-grown software product to clients? They are good at providing services and sometimes service large product vendors like Oracle and SAPs of the world to create world-class products, but they fail miserably in either creating industry leading IT software products. Even if they have one they are unsuccessful or rather pathetic in making their products successful in the market. Some of the reasons I believe are:
1. They often dont have the R&D budgets to create and sustain the products in the market over long term.
2. They lack the pricing and delivery acumen to run the Product Update and Software support leaving the clients high and dry with poor future release road maps and upgrades
3. They fail to understand that product support is critical as no IT software product can work independently without configuration, but rather a part of the larger ecosystem requiring ongoing support and maintenance.
4. Since Software product licensing and selling is not their core competence it often takes lesser priority both in budgeting and resource allocations in the firm.
5. They look at every new client opportunistically and when they sell their products they also end up selling part of their critical resources (manpower) into services work leading to lack of competent people to providing ongoing support to product development.
6. The incentives and motivations for for sales and delivery of software products are not commensurate with the risks and efforts of the team. Often they see their services counterparts have better incentives and well motivated.
7. It requires commitment, patience and diligence on part of management to make the software product successful, which they often lack. They take the easier and quicker route of generating the same by selling services.
What can a IT services player do to make their software product successful:
1. Hive-off a separate software product Legal entity rather than subordinating it to the larger services organization. With this you also end up having dedicated management that reports independently to board, separate books of finance, separate HR policies, separate budgets and commitments to make it a successful business.
2. Operate the IT software product business as per the norms of the industry rather than that of a services firm. Eg: Professional services arm instead of full fledged services focus, engineering team for product, R&D budgets for future product releases, participation in Software standard bodies to influence the standards, etc.
3. Have the software licensing and support model in line with the IT products industry norms.
4. Have an arms length transaction in sales, delivery and services around the Software product.
1. They often dont have the R&D budgets to create and sustain the products in the market over long term.
2. They lack the pricing and delivery acumen to run the Product Update and Software support leaving the clients high and dry with poor future release road maps and upgrades
3. They fail to understand that product support is critical as no IT software product can work independently without configuration, but rather a part of the larger ecosystem requiring ongoing support and maintenance.
4. Since Software product licensing and selling is not their core competence it often takes lesser priority both in budgeting and resource allocations in the firm.
5. They look at every new client opportunistically and when they sell their products they also end up selling part of their critical resources (manpower) into services work leading to lack of competent people to providing ongoing support to product development.
6. The incentives and motivations for for sales and delivery of software products are not commensurate with the risks and efforts of the team. Often they see their services counterparts have better incentives and well motivated.
7. It requires commitment, patience and diligence on part of management to make the software product successful, which they often lack. They take the easier and quicker route of generating the same by selling services.
What can a IT services player do to make their software product successful:
1. Hive-off a separate software product Legal entity rather than subordinating it to the larger services organization. With this you also end up having dedicated management that reports independently to board, separate books of finance, separate HR policies, separate budgets and commitments to make it a successful business.
2. Operate the IT software product business as per the norms of the industry rather than that of a services firm. Eg: Professional services arm instead of full fledged services focus, engineering team for product, R&D budgets for future product releases, participation in Software standard bodies to influence the standards, etc.
3. Have the software licensing and support model in line with the IT products industry norms.
4. Have an arms length transaction in sales, delivery and services around the Software product.
Friday, April 29, 2011
Are IT sourcing Third-party advisors losing steam?
IT Third-party Advisors for sourcing were viewed as trusted advisors and facilitators of IT decions by several large client. We have seen several TPA both global and niche players in the last decade 2000-2010 offering services such as soucring/legal advisory, facilitating bids for clients through their standardized templates/process, information reports, etc. They had played a crucial role in helping clients in making the righ sourcing decisions on the buy side and providing a good marketing/information service for the sell side clients. Hence their role as information intermediaries for the IT industries had worked extremely well.
With the IT industry maturing and their outsourcing services getting commodotized the large question comes to mind if their sourcing services are helping discover value for the outsourcing clients?
The clients on the buy side have the following percpetion about these intermediaries:
1. Makes the bid process expensive due to the long buy cycle
2. Generalist mentality pushing procurement process, legal diligence, etc. while losing the larger focus on bringing value to the businesses that sponsor the outsourcing decision in long run
On the sell side the Being in the IT industry have the following perception:
1. Paper pushers whose primary drive is in filling templates and lack of transparent rating process leaving the IT vendor confused on client buyer values
2. Make the entire sourcing process driven from legal standpoint rather than really driving value-buy decisions for client.
We have been seeing sever TPA in the market either closing shops or getting acquired by larger TPAs (a.k.a consolidation drive). As most of the IT outsourcing services are getting commoditized leaving us with few questions:
1. Are the TPA really adding value to Client buyers and IT vendors?
2. Should client be paying TPA for sourcing advisory services considering most of the information are in public domain?
3. Can this be a free service offered to clients rather than a paid service?
With the IT industry maturing and their outsourcing services getting commodotized the large question comes to mind if their sourcing services are helping discover value for the outsourcing clients?
The clients on the buy side have the following percpetion about these intermediaries:
1. Makes the bid process expensive due to the long buy cycle
2. Generalist mentality pushing procurement process, legal diligence, etc. while losing the larger focus on bringing value to the businesses that sponsor the outsourcing decision in long run
On the sell side the Being in the IT industry have the following perception:
1. Paper pushers whose primary drive is in filling templates and lack of transparent rating process leaving the IT vendor confused on client buyer values
2. Make the entire sourcing process driven from legal standpoint rather than really driving value-buy decisions for client.
We have been seeing sever TPA in the market either closing shops or getting acquired by larger TPAs (a.k.a consolidation drive). As most of the IT outsourcing services are getting commoditized leaving us with few questions:
1. Are the TPA really adding value to Client buyers and IT vendors?
2. Should client be paying TPA for sourcing advisory services considering most of the information are in public domain?
3. Can this be a free service offered to clients rather than a paid service?
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