deal architect

Technology Innovation and the Salvage Business

Salvage to me always brings images from the Jim Croce hit "Leroy Brown ...meaner than a junkyard dog". So, when I sat next to Jim Reilly on a flight recently and he said he was in the salvage business the conversation almost ended. Then he told me he ran a B2B site. And I figured it was near death like most marketplaces. But when he told me they held the record for the largest single biggest auctioned on-line item (over $ 25 m for 4 turbines) - bigger then anything ebay has ever sold, I started to show some more interest.

Jim is COO of a Houston based company called SalvageSale. They work with insurance companies, risk and asset managers. He has been spending considerable time in Florida recently with hurricane affected asset business owners.

2 stories he told were fascinating. One was about frozen shrimp which was rejected by a large retail chain because the batch had gone over its stringent temperature specifications. But only marginally so. In the past, the supplier would have sold it to a local salvage shop for may be 5% of sale price. But with the reach of an electronic marketplace - both in thousands of potential buyers around the world and "re-furbish" service providers - the merchandise was checked and certified free of e coli and other flaws, re-packaged and sold for almost 40c on the dollar.

The other was around an expensive server damaged in transit. Instead of going through the reverse logistics of sending it back to manufacturer, local "re-furbishers" re-certified the box and re-packaged it. While the original warranty was void, the asset sold for a lot more than it would have  - not to mention the reverse shipping and insurance costs were avoided. Again recovery was many times what it would have been a few years ago.

His site is filled with other case studies similar to this. What he was describing was the emergence of a "good enough" marketplace - where bargain hunters, but not real bottom fishers, can now get access to less than perfect assets. His site has stringent rules on deposits in to escrow accounts and dispute resolution - controls to satisfy wiring $ 25 million to someone you only know from the Internet.

The quality of the assets and the trust factor are bringing more professional buyers and sellers in to the salvage market. Leroy Brown would not begin to understand the word "dis-intermediation" - but he has to behave and pay a fairer price to win in this marketplace.

Process Angioplasty: Bureaucracy in Africa

Courtesy of Paul Kedrosky I saw this in the Financial Times:

"How many official signatures does a farmer in the Central African Republic need to obtain before he’s able to get his bananas on a ship bound for America or Europe - 38.

How many official procedures must a businessman in Lagos go through in order to legally buy a warehouse - 21."

OK, so we can be smug in the West. But I have been talking to some US parents who have adopted foreign born children. Try and imagine how many steps that process takes - I am working on a post on the topic. As some of the parents would say - what process?

Google and China

Google is getting savaged in the media and in numerous blogs. It is siding with the "cruel government which tortures its own people". My reaction - the same as when my friends around the world ask me if I live in fear of being tortured and being spied upon by our US leaders. Huh? Both China and the US have poor "brands" around the world. They have each earned it over the years during the Cultural Revolution, in Iraq and so on.  But day to day life is so different from what the brand would suggest.

I had dinner with a few Chinese businessmen last year and I asked them if they live in fear of the military government. They burst out laughing. They said they were too busy making money to worry too much about the government. They do not go out of their way to annoy the government but the impression I got was things were far more laissez faire than we see or hear about China in the US.

I hate to see China play games with web access. But as a consumer, I am just as pissy about US restrictions on foreign airlines wanting to do business here. I am tired of the tired old Americans Deltas and Uniteds. Yet, we do not allow foreign airlines to easily do business here - even when for over a decade we have known the industry could use new capital and talent. I could point to a bunch of other areas where the US meddles with foreign businesses operating here like China does with Google, Microsoft and others.

But politicians will be politicians the world around. As business people and individuals we have always learned to give them a wide berth. Let them worry about their power games. Let us focus on family and money and values. You know what - history shows the politicians eventually come around to the consumer and individual point of view - and even claim credit for it.

Author's Note: For less charitable views of Google in China (and my comments) see Nick Carr's and Jeff Nolan's posts.

"The three chickens"

Courtesy of Sadagopan I saw this article by Subir Roy about the brand image of the three big Indian offshore firms - TCS, Wipro and Infosys - and their marketing efforts and challenges.

His assessment is in line with what I have written about TCS needing a "makeover" here, about the values of Wipro CEO Premji here and here, and about Infosys' showiness here, here and here.

But having said that, each of them does have delighted clients. They did not get there - or stumble - just because of their brands or values. They have built the business one client at a time. - and have built their own styles and personalities along the way.

Which brings me to a recommendation I make to most of my buyer clients- "Buy the appropriate team for your project/outsourcing needs, not just the provider brand or its culture".  The services business can be very inconsistent in people quality - selecting the right team armed with the right tools is critical. Also, "Take advantage of the bounty" - which means also evaluate specialists and less recognized brands as I have written in my SWITCH post.

"The New Boom"

Chris Anderson writes in Wired Magazine a more eloquent version of my Florence during the Renaissance and Economics in New Florence

The one thing I disagree on - he ends with "most New York cab drivers are happily ignorant of what's hot in the Valley, just as they should be". That immigrant group is probably more aware than the average American of what is going on in Bangalore, Dalian and elsewhere in the world. The neat thing about the new boom is it's happening in so many places around the world - as I wrote in Florence above.

And the winner is...

this is the longest blog I have ever seen (or read). And it is a pretty insightful and funny analysis of Oracle's recent Fusion Update from Niel Robertson of Newmerix. Saw it courtesy of Jason Wood.

Imagine how much longer it could have been if he had also analyzed Steve Miranda's slides which dealt more with accounting and HR features like sub-ledger accounting. If you are curious read my post here.

Of firemen and enterprise bloggers

In my 2006 predictions I wrote:

"Much as I love Google, it cannot process BOMs for the average manufacturing company. Much as my daughter loves her iPod, it will not process insurance claims. Whoever does whatever with AOL will not improve supply chain logistics at UPS.

As we did in the last Internet Bubble, we risk making the Web and consumer technologies the center of the technology world. It’s the Gates/Plattner scenario again I wrote about earlier."

I communicated this premise today in an email exchange with Gabe Rivera of memeorandum as I saw a few other bloggers complain that certain topics like web 2.0 and certain vendors like Google dominate the listings there. I asked him how he could expand coverage since "enterprise spend is 10x the consumer tech spend and the CIO is interested in telemetry, biometrics, predictive analytics as much as web 2.0"

Gabe responded:

"Thanks, and I like where you're going, but show me the links!  I'll explain...Can you pick three headlines from today about the topics you mentioned that have been linked by 5 or more people? (Use technorati or whatever as need.) Or how about linked by just 3 bloggers?"

I have emailed a bunch of bloggers who write about enterprise stuff - to write more about enterprise stuff and  to link to each other so Gabe can get the results he needs to meet his filters. This post is meant to encourage others I did not email to blog about enterprise topics and vendors - could be SaaS, BPO, SOA, VoIP - whatever the CIO would be interested in.

About the title of this post: One of the people I emailed was Dennis Howlett. He does his best work at 5 am in France. He promptly wrote this post The self-selecting sausage game.

Funny, I thought only firemen practiced that. It was part of their back up plan in case the water ran dry.   

Open Sesame

Open is the word du jour

Jeff Nolan points to McDonald's concept of  "Open for Discussion" on one of its blogs

Linux pioneer Linus Torvalds opens (deepens) a chasm in the Open Source world over GPL3

The really open debate (over 100 passionate comments in a few hours) on Torvalds at ZDNet

Reading these posts I also got the sense it is open season for attorneys....

Small is beautiful

Nick Carr points to some more large IT project failures.

Good news -Most CIOs I know are extremely wary of launching mega-projects. They learned from their late 90s, early 2000s experiences.

Bad news - Most vendors I know, though, still want to shoot elephants as I wrote here and here

Oracle Fusion: Customer and Competitor Impact

On its website, Oracle has posted the presentation (zipped, total of 71 sides) it made to the press at the Fusion update meeting last Wednesday. I took a look and here are some observations:

- As expected, lots of attention to Fusion architecture and middleware - application features finally start to show up in slide 52. Every contemporary buzzword is in the pitch from composite applications to process orchestration to activity monitoring
- Fusion Middleware brings together a number of Oracle products and concepts from grid computing to application server technology.  A key point in a slide:  Generally available - Now.
- Pretty good road map on what comes out by year, and fairly WIIFM for each of major customer bases (Oracle, JDE etc)
- Applications - based on best of what Oracle, PeopleSoft and JDE (and presumably Siebel). Presented some examples of features existing Oracle customers would see in new applications - rules based engine for AP matching, HR localizations for Brazil and Malaysia. Existing PeopleSoft customers would see sub-ledger accounting and HR localizations for Middle East and Korea.
- No examples of CRM, SCM or other non finance/hr features. Other than quick overview on Retail, little on any other vertical functionality. The consolidation and re-architecting of apps will mean they will primarily reflect portfolio of features circa 2005 (or earlier).
- Recommending slow, gradual migration. Step 1 - Protect investment by adopting latest non-Fusion releases. Step 2 - extend through better master data management, BI implementation and web services light applications, then Step 3 - Evolve to Fusion. Ironically, Oracle referred to Gartner chart which laments 80% of IT budgets go towards maintenance. If this gradualism (and related upgrade costs) is not "maintenance" not sure what is.
- No real discussion of migration tools or automation - though a few mentions of "Oracle and partner services" (related note: there were rumors in the Indian press that Oracle was close to acquiring an Indian services vendor)
- An ominous statement at the beginning "the following is intended for information purposes only, and may not be incorporated into any contract"

Long and short:

a) If you are competing against Oracle and think you can out SOA it, think again. Go around the edges in weak application areas - vertical functionality, emerging SCM, CRM, HRM areas. Or compete on a business model like SaaS and/or lower maintenance and implementation cost (tough to compete on license as Oracle will just about give that away).
b) If you are an existing Oracle customer seriously review the costs to get to Fusion apps - maintenance for every year till you feel apps are robust enough (post 2009) plus sizable migration costs given the demands on the services ecosystem.  What you will end up with is a more current architecture, but likely little in business practice improvement (unless you consider sub-ledger accounting an improvement.)
c) if you are a new prospect evaluating Oracle v/s alternatives : Core ERP functionality (financial, hr, materials management) is solid. The architectural transition every vendor is planning will be safer with Oracle. On the negative side, Oracle will hand its hands full with migrating incumbent customers.  Finally,  if you are going with Oracle negotiate hard on the statement above "...may not be incorporated into any contract"