deal architect

What does not kill you...

makes you stronger?

Ed Caso of Wachovia takes a group of investors to India each year. He was there last week when I was too and I suggested we meet. He offered some really inconvenient times. Now I see why.

In 4 days his group was with Cognizant, Infosys, Keane, Lionbridge. mPhasiS, Sapient, Satyam, Syntel, Tata Consultancy Services, Wipro and BPO providers EXL Services, Genpact (the former GE subsidiary GEICS), and WNS Global Services. These are spread across at least 4 major Indian cities.

I take clients to India for due diligence trips. But I am protective of their time, work around likely jet lag issues. Ed's approach is - who needs sleep? Pretty impressive.

Here’s his summary trip report. Bear in mind – some of what is music to investors is not necessarily good for buyers of such services.

SAW:  ACCELERATED PACE OF DEMAND.  We came away from our recent Field Trip to India with a strong sense that demand is much stronger than during our visit a year ago.  This was unexpected.  After a brief pause for the US Presidential election in H2 2004, the interest in offshoring seems only to be accelerating.  This also suggests easier "comps" in H1 CY2006.

SAW:  STEADILY BUILDING SUPPLY.  The Indian educational system is expected to double the number of graduates in the next three years, something they have done in the last three.  In addition, curriculums are increasingly being tailored to meet company needs, so necessary training time is reduced.

BPO SHIFT TO TRANSACTIONS FROM VOICE.  The message was clear.  The larger providers are rapidly moving away from the more contentious call center (voice) work to transaction-based relationships.  The end customer contact is less, the amount of third shift work is minimized, and the margin is better.

OPERATING MARGIN MORE STABLE THAN INVESTORS BELIEVE.  Pricing is flat to slightly up; new service offerings are at better margin; BPO shift is a plus; although wage increases for experienced hires remain in the 15% plus area, which is unchanged.  The offshore wage pressure is being offset, for now, primarily with G&A leverage.  Offshore utilization remains an untapped lever.  A recent turn in the Rupee-Dollar exchange rate helps take some pressure off operating margin in the December quarter, and possibly into 2006 as well.

For his full trip report, send me an email. And remember jet lag is only a good excuse for my clients.

Exotique

Over my career, I have traveled to 40+ countries. I have a cousin who has been to over 110!  He is 15 years older (and yet looks 15 years younger). Not sure I will ever catch up. 

But seeing Bush in Mongolia this week reminded me of a few places where business will likely never take me but I always wanted to go see for ruggedness, remoteness - or because the name is just so exotic. Mongolia has always been on my list.  Also  Burma,  S. Dakota, Tahiti, Tibet, Yukon, Zanzibar.  I have visions of these places even knowing  if I did go there would probably be disappointed.  And please, no need to remind me Burma has a new name or Tibet was annexed.

I asked my wife who has been to 30 +countries (very different list than mine) - and her wish list includes Lapland during Christmas, Galapagos Islands, the Brazilian Amazon, Alaska, Tanzania during the annual Serengeti migration.

Just yesterday, we renewed our National Geographic subscription. Closest we will get to many of those places. But with the world going flat, who knows?

Wiki Watching

Near where I live we have a magical place called Weeki Wachee - the city of live mermaids. To most corporate users wikis, blogs and podcasts are as real as mermaids, leprechauns and elves. So it is good to see podcasting at Whirlpool, blogging at GM, wikis at Dresdner. Pretty quick adoption for 3 words that my MS Office 2003 spell check does not recognize.

I always wanted corporate gatherings to sing the Unicorn song more than Kumbaya...

"Failure is not an option"

After I wrote about the Irish project last week, more press here on large IT project failures in the public sector. We can offer reasons - could just be the pig moving through the boa constrictor - since government is usually a late IT adopter, and the massive IT failures in the private sector in late 90s are finally showing up in this sector?  Could also be that governments are used to big public works projects and think they can handle large IT projects better than the private sector?

But as an industry, as we see Valley entrepreneurs show ridiculous economics in developing new "innovation"  technologies, how can we keep allowing governments to keep running over budget on more mature "utilities" projects? Forget about failure and overruns- even the economics to start with need to be scrutinized. Sounds like significant "crunching" opportunities in the sector. 

Business Process "Angioplasty"

Ross Mayfield's post The end of process last week has stirred quite a bit of commentary around process.  I had a book proposal last year with the title of this post and the outline is still gathering dust. Hopefully, I can more gradually express my thoughts over a series of blogs.

Business processes are arteries, highways, rivers. They keep corporations and cities running - but need to be kept clean of different types of "plaque". They periodically need dredging and angioplasty.

In 1990, Michael Hammer wrote a seminal Harvard Business Review article "Reengineering Work: Don't Automate, Obliterate". It was powerful - a look at business process from a customer's eyes. Hammer wrote what Ford Motor did after studying Mazda's accounts payable process. If a customer would not pay for a task in a process, consider eliminating it. To a customer, process is like spell checking software. He can tell when you did not utilize it, but he is unwilling to pay much for it. In that sense Ross is right. Process should be un-intrusive. But look what we have made it.

Somehow, Hammer's work got mixed up with ERP software (he himself did a series of seminars with SAP and Deloitte). The thinking was the emerging client/server ERP software reflected best practice processes. Did not matter that it mostly changed the user interface and the database from previous generation transaction engines - the check processing, the credit approval and other steps did not change much. Implement it and magically you became "world class" was the thinking. It would get you Toyota's Lean and GE's Six Sigma - without the discipline and the investment. It was a fad diet. After ERP, we moved to SCM, CRM and other business applications.  Technology is like cholesterol - the good kind and not so good kind. As I have written throughout my blog, "tiger teams" are showing huge payback from small, creative technology deployments. On the other hand, the payback from large enterprise applications in many cases has been questionable.  Not too many companies did what Ford did - obliterated the process, not just automate it. We allowed software vendors and consultants to define what process should be - not the customer.

Worse, the technology created a bubble of demand for a new category of worker who could speak SAP, Siebel and wanted to be paid for that special skill.

Then post 2001, we have been burdening our processes with security steps. Security is clearly important but you just have to see TSA at airports to know that some types just adds cost and time to processes. I do not feel any safer when driver's licenses and boarding passes are checked 3 times within a distance of 500 feet.  The ratio of hangers-on to screeners is way too high. Do you feel any better about security around financial records just because the credit card call center asks you 5 personal data points before they answer a basic account question? We are letting a different kind of consultant - the Giuliani kind - define process, not the customer. Much as I admired him as mayor, I am more cautious about him as a security consultant.

Then we have compliance. SOX across the board. By industry - HIPAA, FDA validation and others. Most reflect opportunistic laws from politicians.  OK, so Enron got clever. There were plenty of opportunities for politicians and auditors to lasso it not just enact SOX as a reaction. The laws then get converted in to half-baked guidelines from bureaucrats. They are interpreted by auditors who really do not understand the impact on supply chain and other non-financial business processes they are asked to opine on.  We are letting a different kind of consultant - the Big 5 audit kind - define process based on internal controls,  not the customer.

So between 1990 when Hammer wrote his classic and now, we have clogged various processes with 4 types of "plaque" - questionable technology, people costs tied to that technology, over-zealous security and opportunistic compliance.

And while we have been clogging our processes, we have been patting ourselves on the back. Many corporations benchmark themselves using data like that found in Hackett Group's databases. Hackett has some of the best process benchmarks around but till recently mostly had data on Western corporations and Western labor rates - not the new economics emerging from China and India. Even the first-quartile performers in Hackett's benchmarks look sluggish in this global race.

Some companies have seen the light and are looking at business process outsourcing (BPO) options to lighten their processes and lower transaction costs. But even there many tie the BPO provider's hands - make sure your transaction engines are of the Oracle 11i variety. The results are what should matter, not the brand of the technology.

Time to go back to the customer's POV. He/she will pay a premium for product innovation or customer intimacy, but not for the prettiness of your checks or your credit approval process.  When the Chinese and the Indians catch up with us on product innovation/customer intimacy over the next decade, we can only pray they will have learned bad process habits. Otherwise, we may have to obliterate our processes in a hurry.

Better to start now...with a "why" attitude. We should be asking that early and often of our software vendors, our systems integrators, our auditors and our politicians. Don't Accept. Obliterate.

Author's Note: a couple of readers  read my BPO comment as my "solution".  Actually, my preferred solution would not be BPO. I pointed it out as a path companies are choosing but even then not letting go of their technology platform.

Having seen IT outsourcing for 2 decades, I firmly believe in the adage  "make a process efficient before you outsource". With many business processes so broken just handing over to BPO provider will not magically fix them. Besides, the economics of many western BPO providers would burden the processes even more.

Technology Innovation and Aging Workforces

Much recent press has been going to the next generation of technologists and technology consumers - social networking, mobile commerce, new media focus on the elusive eyeballs of the young consumer, India's young workforce (median age of 25).

Just as big an opportunity lies in either transitioning aging populations or continuing to make them productive as their mental and physical faculties evolve.

How big is the aging problem?

An article in Government Technology says "Sixty-four percent of Washington's workforce is eligible to retire between now and 2015. The figure for Maine is 59 percent, for Tennessee 58 percent, for Michigan 56 percent and for Pennsylvania 54 percent".  It is happening across the developed world. This in England. And this in Australia

Opens up at least 3 opportunity areas

a) Accessible technology

To allow aging workers to continue to be productive. As this National Academies Press publication shows as we age visual, cognitive, auditory abilities deteriorate that many technologies take for granted.  Steve Wildstrom at  BusinessWeek has an article on "Boomer-friendly" gadgets here - from magnifying text to speech recognition to tremor monitoring. See also  Microsoft's white paper here on the challenge and about emerging technology solutions.

b) Knowledge transition

Documenting and transitioning knowledge - capturing nuggets of best practices and industry knowledge, training the next generation staff - is another huge opportunity. Knowledge capture/playback, documentation and training software come to mind.  IBM Global Services has even established a practice focused on this. Offshore vendors have shown an uncanny ability to capture knowledge and transition it to their teams thousands of miles away, may with some re-positioning be able to help with similar transitions around aging workforces.

c) Keeping retirees connected

While there is obviously a whole body of technology going in to health care  (topics for separate posts) it is also nice to see the technology world focus on allowing retirees to stay at home rather than at care facilities - as in the Intel research and this Washington Post article about keeping seniors connected. For many companies they will continue to represent a useful. part time work force.

As we age, it is good to see technology allow us to offset our growing deficiencies and to allow us to continue to stay connected - and to transition what we know to the next generation of workers.

Technology Innovation and Flight Tracking

I still remember a flight in 1989 - Swissair from Zurich to Nairobi, Kenya. I remember it because the plane was being refurbished and the supposed business class cabin still had old, uncomfortable seats. As I tossed and turned on that redeye, I was glad for the live flight map on the big screen. It was an early version of the GPS-enabled tracking maps most international flights now offer on personal entertainment screens at each seat. I am surprised, though, the software and content has not evolved much in the decade and half since. Be nice to see it integrated with the likes of Google Earth. When flying over Isfahan, Iran, on my trip last week, it would have been nice to see a short film on the town's tradition of fine rug making (most folks are nervous flying over that part of the world - some positive images would clearly help) or of Vienna's coffee houses.  Or a super imposition of local weather Dopplers on the flight maps. 

On domestic flights, Jetblue and Song offer live TV and flight tracking. On other airlines, you can always carry your own mobile GPS unit. (Not every airline or every pilot allows its use - check this list). I sat next to a guy on a Southwest flight and his GPS unit fed his cursor as we watched the plane on his mapping software - it was neat to see the major streets of cities and towns we were flying over - not to mention our speed, altitude etc.

Of course, there is the good old fashioned voice information shared by the pilots (ever wonder why sound systems on planes do not seem to improve even as other technology does?)  I quite like talkative pilots, but in recent years seems like they talk less on planes and more via blogs! Also, they know their passengers are starting to have much better resolution maps and flight and weather information on their laptops in the back than they do up front! In a surreal experience, passengers on the Jetblue flight which recently had a landing gear problem watched live TV coverage of their emergency landing.

Flight information sharing has become far more sophisticated for people on the ground awaiting passengers (or departing passengers checking to see how the in-bound flight is tracking) - or aviation enthusiasts who just love to monitor airspace.  Most airlines now offer to page, email, SMS you about specific flights and show (limited) flight specific information on their web sites. Third party sites like FlightAware, FlyteComm, FlightView show an unbelievable range of data on flights in transit, airlines, airports, equipment etc. They report IFR data shared with the FAA. It is a bit spooky to see trans-Atlantic flights all terminate in the ocean short of Greenland but as the FlightAware site explains "For flights departing the US for an international destination, FlightAware will be able to track the flight until it leaves the US and then it will be lost with no arrival ever recorded." But overall, a nice service - FlightAware tracks over 30,000 arrivals every day. I was once waiting for a delayed flight and could tell the ground agent was just saying nice things to keep the crowd pacified. I could monitor the progress of the in-bound flight on my WIFI enabled laptop and tell the poor guy was lying through his teeth!

In a future post I hope to write about what the FAA, NTSB and other agencies are using technology to manage the complex air traffic grid. And keep up with UFOs which do not use IFR!

Most passengers love to watch movies or read books or nap on flights. I know Leonardo Da Vinci would be sitting agape watching the flight track in total awe of the magic of modern aviation - and do not feel too bad for doing so myself, especially when my laptop batteries have run out.

See this neat post from Rick Segal on how access to a flight tracking site enabled him to get a better meal before a delayed flight and an upgrade!

Hollywood Wizardry

So, a tradition was broken this weekend. The kids did not get to this Harry Potter movie on the first Friday it came out. We are out of town at a chess tournament and every evening show was sold out. They saw it on Saturday.  And when the DVD comes out we will faithfully buy it. Probably on the day it comes out. Young, eager consumers of Hollywood's IP.

So when I hear about Sony in a soup over installing copy protection code on CDs which potentially a) exposes users to hacking and b) may be in violation of open source licensing, I have  to wonder about the music and film industries obsession with "rights management". Or its profession that it is doing so "to protect the rights of the artists".

There are passionate consumers who pay full price for its products - others more casual probably need lowered, time elapsed pricing. They likely just wait for the product to show on network TV or rent at Blockbuster when it is on a special or borrow it from their public library. So even if some of them are file-sharing or burning copies illegally, I am not convinced Hollywood is losing as much revenue as it thinks from piracy. The revenue shortfall may be far less than the industry believes.  But then again - may be not since the industry seems to risk all the PR issues it has had around copy protection the last few years. Take a pretty strong potion from Hogwarts to fix this problem.

Eau de HP

BusinessWeek shows that brand name printer ink costs more per ounce than Chanel no. 5 or 1990 Dom Perignon.

Large incumbent tech vendors just cannot adjust to life with more realistic margins. No wonder third party options are gathering market share - like third party software maintenance, Open Source, offshore systems integration, VoIP.  Explains why market leadership in every tech category changes every few years.

800 Pound Gorillas make tough pets

More proof as an industry we do not know how to run mega IT projects. This story here in Computerworld and this one in AccountancyAge talks about a big, troubled Deloitte SAP project in Ireland. Will have to ask my sister-in-law working in the Irish healthcare system if it affected her...