deal architect

The Revolt of the Corporate Consumer

David Bank at WSJ wrote about how corporations are squeezing technology vendors - he quotes me about the pressure on software maintenance.

He is a tech savvy (helps to be in Bay Area) journalist for a mainstream business publication. Over the years we have talked about open source, software, offshoring and other technology issues.

Go on. Be an Infosys.

Accenture has had a very successful ad campaign around Tiger Woods for a while now ("Go on. Be a Tiger").

Infosys, a relative pipsqueak with less than a tenth of Accenture’s revenues, has its own campaign challenging the entire IT services industry to change. Cocky, self-serving – for sure - but Infosys (the 2^nd biggest Indian services firm behind TCS) has an amazing track record over the last decade of growth, margins, quality, customer satisfaction.

The similarities between Accenture and Infosys – beyond money for advertising – are striking. Both are organic, grow-from-within cultures (Infosys made a small Australian acquisition last year for cash, but has not used its highly valued equity for acquisitions).

Both tend to be rigid in their use of proprietary methods and home grown staff teams. Both have invested heavily in campuses and recruiting/training engines (and I mean engines which can process hundreds of thousands of applicants a year). Both tend to be premium priced in the markets they choose to focus on. Infosys has been public longer than Accenture and could teach it a thing or two about financial metric management. But then, Accenture could teach Infosys a thing or two about client boardroom relationship management.

But enough praise. As with Accenture, I can find buyers quite a bit of fat in Infosys contracts. As with Accenture, Infosys has a growing set of executive fans who are willing to pay a premium - costing their companies 10 to 30% more than they should. Go on. Get Infosys or Accenture.  But at your terms! You will be able to afford several front row Masters tickets from the savings.

GE and offshoring

Till the Wall Street Journal wrote on March 23 about GE’s role in India’s IT and BPO success, few in the US appeared to know the extent of offshoring at GE.

http://www.itpaa.org/modules.php?name=News&file=article&sid=1521

4 years ago I took a client from a major non-US GE competitor on a due diligence trip to India. As we visited various vendors I started to add up likely GE project staffing at each of the vendors and did some  rough calculations. By my estimation GE had a $ 1 billion dollar a year advantage over this company through its sophisticated use of offshoring.

GE has been masterful in its offshore program and vendor management – going through waves of preferred vendors to keep rates in check, astutely picking up equity stakes in these  vendors to lower long term investment, tying its business unit CIO bonuses to specific offshore (v/s onsite) team metrics,  pushing its Six Sigma philosophies through its offshore vendor ecosystem, building parallel captive units in addition to outsourcing and so on. 

It is a remarkable story. GE’s offshoring rigor is a best practice other companies should emulate. Of course, there are people who take a narrow view of such offshoring. They need to see the other side of the coin - GE recently announced that 60% of its growth will come from developing countries in the next decade versus about 20% for the past ten years.

Open Source Applications

Interesting how SAP is trying to commoditize the database layer by use of open source  MySQL instead of Oracle. Oracle in turn is encouraging Linux servers over its traditional hardware partners. The focus is on reducing TCO in the rest of the technology stack while obviously preserving their own margins.

So why are the systems integrators not  recommending open source enterprise applications like Compiere and Cream CRM? Most have never heard of them...Even offshore vendors with their cost focused message have done little with Open Source applications.

For the Open Source movement to really take off the enterprise applications layer needs to mature...otherwise it will be a marginally interesting tools/web server kind of market. Remember in the client/server market in early 90s, tools like PowerBuilder and "open' databases like Sybase really took off as enterprise applications like PeopleSoft started to mature. 

Software Maintenance Pricing

I have been saying for a couple of years software maintenance is over priced - and working with buyers to re-negotiate maintenance contracts.  Here are some techniques  Manufacturing Business Technology magazine cataloged after an interview with me

http://www.mbtmag.com/current_issues/2005/feb/[email protected]

They did another article on the  use of third party providers for the maintenance service

http://www.mbtmag.com/current_issues/2005/jan/infra7.asp

For a more complete list of maintenance negotiation techniques and trends, feel free to email me...

"Building" a "Buy" culture

I wrote this article for Silicon  India magazine and aimed it at Indian vendors and at software vendors setting up shop in India, but broadly our industry could do a much better job with procurements and M&A

Download siliconindiafeb.pdf