deal architect

The Real Deal: Arkadiy Dobkin on E. European Technology Services

This continues a series of guest columns from practitioners and bloggers I respect. The category - The Real Deal describes them well.

In recent months, I have written about buyers starting to look beyond India for global delivery resources. I have invited executives from firms in E, Europe, S. America, China to write about their value proposition over the next few months.

Arkadiy Dobkin is CEO of Epam, which focuses on software engineering and support and delivers them from Hungary, Russia, Ukraine and Belarus . Arkadiy was recently named one of the "25 most influential consultants" by Consulting Magazine. Scott Schwartzman, SVP of N. America (and formerly with SAP) contributed to this POV on why E. Europe looks more and more attractive.

"With the extraordinary growth and overall acceptance of offshore outsourcing, companies have flocked to India for many years now…. and there seems to be no end in sight. The downside of this trend has been the unavoidable dilution of talent, competition for resources amongst the outsourcing firms and project team instability due to high turnover. Naturally, companies are now looking outside of India and many are choosing Eastern Europe.

What makes Eastern Europe an attractive alternative to India and other prominent outsourcing regions?

Thanks to the “soviet heritage” and the strong emphasis on advanced education in math and the sciences, this region produces thousands of the world’s best software engineers each year. In fact, many multi-national and leading edge technology companies have already discovered and leveraged this highly skilled pool of talent. Eastern European countries, including the former Soviet Union, have seen the IT industry export reach $1 billion in 2005, with 30 percent growth expected in 2006.

The availability of aforementioned talented resources has been a major factor in fueling the growth of this region – but there are many other factors. The region is still in the “early” stages of the growth …and can offer stable teams of people; turnover is relatively low – usually single digit percentage versus double digits in most other regions.

Proximity to the clients is another key factor driving the growth. Eastern European countries are easily accessible to their Western European neighbors…..and several countries, including
Hungary, are now members of the European Union. This offers Western European companies a “near-shore” alternative - addressing issues around time zones and flexibility to travel on a moments notice. Even for North America clients, there is “only” a 6-7 hour time zone difference with east coast states, providing for some overlap in the working day.

Lastly, the region has clearly benefited from the outsourcing pioneers from other regions. India and other regions have blazed the trail for outsourcing. And they discovered many pot holes along the way. Leveraging these lessons learned, the Eastern European region has fast tracked into a premier destination for software application outsourcing."

You can email him at [email protected]

The Audacity of (Oracle's) Hope

In time for the elections, comes this stream of Oraclespeak - promises and spin.

Executive Vice President Juergen Rottler tells financial analysts that Oracle put through an inflationary increase recently on its maintenance pricing.

How likely is that to stick as customers become aware of third party maintenance choices - or at least use those benchmarks to negotiate Oracle down?

In the mean time, Larry Ellison offers discounted support to Red Hat customers. "And our support costs way less than half of what Red Hat charges,"

Larry is hoping Red Hat customers do not realize what Oracle charges customers when they do become its customers.

Here's Garfield's reaction.

They say Washington, DC is 60 square miles of real estate surrounded by reality. Redwood Shores is slightly smaller.

Daylight Savings - I think your bank pays better

Whoever simplified things into "Spring Forward, Fall Back" was a genius - and clearly not a politician.

As Charlie Wood points next year will be chaotic as we go to a different DST start/end date in the US. Probably offset the energy savings Congress predicated with the planned extension.

Of course, the ripple effect around the world will be even messier given all the permutations.

May be I should quit bitching about the measly interest rate (currently 0.25% a year) for my kids accounts at BofA. At least with that Savings, the quantifiable benefits generally exceed the costs. If you watch BofA's fees like a hawk...

Greg Aharorian on IBM/amazon patents

Greg Aharorian, publisher of the Internet Patent News Service, a vocal and witty critic of the way software patents get handed out, has this to say about IBM's lawsuit this week against amazon for patent violations - and about  other  software IP  matters. Thanks to my lawyer friend Hank "Memphis" Jones for bringing it to my notice during my travels this week.

"Before I review the relative crappiness of the five patents below (two stink, two are smelly, and one will cause Amazon headaches), let me indulge in a bit of bashing everyone involved with this, and even some not involved - a case I can enjoy having sympathy for no one.  May the lawyers involved make tons of money!!!"

"Amazon - I have never forgiven Amazon for its fake interest in patent quality, which it pretended to care about as long as its 1-click patent was in the news.  Once everyone forgot about the 1-click patent, Amazon quickly forgot about patent quality. Amazon's support for the idiotic BountyQuack just compounded their fake interest in patent quality.  So I hope Amazon loses.

IBM - Concurrently with this lawsuit, IBM is foisting another idiotic software prior art "solution" on the PTO, once again finding chucklehead academics to use as frontpieces for their latest scam.  There is only one solution for prior art handling for patent examination - supply the examiners with the time, resources and management to do it internally. IBM knows this, which is why it keeps on suggesting any other (failed) solution - anything to distract PTO management from seriously addressing this problem.  So I hope IBM loses (but what ever happens, buy IBM stock - they are no fools with what matters).

PTO - How can you trust IBM for prior art help when they are a) asserting patents with dubious amounts of prior art cited, and they are still jamming your pipelines with patent applications that cite dubious amounts of prior art?  Didn't you learn anything after they scammed you with the Software Patent Institute in the 1990s. Forget about letting the fox guard the chickens - you guys are killing the chickens first.

Open Source: Never forget, if any of you actually make money, IBM is going to come after you with its patents.  IBM doesn't care about the philosophy of open source, the quality of IP laws, etc., - they only care about their bottom line (increased by winning all of the support and maintenance work created by open source software) and stock price (once again, buy IBM stock on these announcements - they are no fools with what matters).

Stallman/Moglen/GPL - You say, "We are fixing GPL3 to make these patent lawsuits impossible".  HaHaHaHa - GPL3 is too authoritarian (Stallman) and/or anarchist (Moglen) to ever catch on, let alone scare the legal ogres (ogres are massive trolls) at IBM.  IBM has long known that as long as GPL is based on copyright, it will never hold up in court - they can crush it when it suits IBM needs.  Moglen is an incompetent copyright lawyer (not that an anarchist cares about getting the law right), and any random left toe of any IBM litigator is all that it will take to crush Moglen's legal rantings in court.

In short, may you all lose...."

Of Astronomy, Astronauts and Software Salespeople

Art Mesher and I started at Gartner around the same time, and spent several evenings in drab Stamford hotels. I think I am reasonably smart but I must admit I only understood a fraction of what he talked about when it came to industrial logistics and supply chain network design.

The last few years he has been turning around Descartes Systems in Canada. Read this really insightful interview on the boom, the bust the company went through and the unique value proposition and price paradigm he offers customers. And see his views on software sales. I would like to say I influenced his thinking about customer value and SG&A. But he is way smarter than me, and we have not really talked too much the last few years.

I need to go spend a weekend with him. And get lessons from him on things he was talking about way back in 1995. And all he has picked up in the school of hard knocks in the last decade.

Cap Gemini acquires Kanbay

Cap Gemini pays $ 1.25 billion to acquire Kanbay and in the process picks up 5.000 employees in India and $ 300 m a year in revenues in financial services clients. It follows on the heels of EDS acquiring a majority stake in MphasiS. Cap and EDS are trying to keep up with IBM's and Accenture's global talent pools, but they are also protecting their own customer bases from the larger Indian firms like TCS and Infosys. It will increase pressure on the Indian vendors to acquire mid-sized western firms and expand customer bases of their own. To date, they have shied away from using their large market caps for acquisitions, preferring instead to grow organically.

I support you, you support me, we are one big family..

Oracle announces support for Red Hat customers. NetCustomer ran a WSJ ad this week timed alongside Oracle OpenWorld announcing "75% off your Oracle support costs". If I had gone to the events, folks from TomorrowNow and Rinimi, which also offer third party support for Oracle customers, wanted to brief me.

It's all good. I have long maintained - just because you buy a Porsche does not mean you go to the dealer for every oil change. Now if ISVs would adopt the BMW model and include service in the cost of the car...and price it like a Hyundai, we would all be chanting with Barney...

More on Enterprise 1.6

Paul Kedrosky jumps in the "Enterprise 2.0" fray with this presentation.

Jonathan Opp of Red Hat magazine runs a wide ranging interview with me where I define Enterprise 2.0 much broader as I have done before on my blog.  (Thanks, Jonathan!)

Ramana Rao, probably the smartest Enterprise Irregular - (and if you read Jeff Nolan, Charlie Wood, Jason Wood, you know this group could look down on Mensa) - writes a nice piece on the technical barriers to Office 2.0.

The Real Deal: Sridhar Vembu on Barbarians at the IT Gate

This continues a series of guest columns from practitioners and bloggers I respect. The category - The Real Deal describes them well.

Sridhar Vembu is CEO of Zoho.com, which develops a a new breed of web productivity - "office 2.0" tools. A recent InfoWorld analysis of such tools commented "No, they won’t offer everything that (MS) Office does on the Web. But they’ll offer enough to make many smaller businesses turn their heads -- especially at an eventual price point of about $10 per user, per month. Give Zoho a rock-solid Web connection -- or install the local server version it’s coming out with soon -- and a “shipping” version, and you’ve got a viable competitor to Office. Maybe even on an enterprise scale."

Here Sridhar explains the passion that drives his solutions.

"The effect of technological revolution, reflecting the very meaning of "revolution", is to make products and services affordable to a broader set of people than before.  Personal computers made computing ubiquitous in the developed world.  Mobile revolution has swept the globe, with hundreds of millions in developing countries making their first phone call in the last decade. Falling prices beget rising volume - that is the key mantra.

Yet, in the world of corporate IT, the low-cost revolution is very much unfinished business. Software, in particular, remains overly complex and expensive, both in terms of the cost of acquisition and initial implementation, as well as the cost of long term ownership. Yet, most of what enterprises pay for software goes towards funding the marketing budgets of vendors. This seems like an universal law that is applicable regardless of whether the vendors have open source or proprietary models, and even extends to on-demand business models. Just a cursory look at the income statements of the leading vendors in each category should illustrate this. 

A fundamental rethink of the industry's economic models is necessary. While on-demand providers leverage the internet as the software delivery mechanism, they haven't fully exploited the internet as the key marketing and sales medium. The traditional IT sales process arises from a fear of margin erosion and loss of sales account control, if prices and discounts were too openly posted. From the perspective of most software vendors, more than their product, their marketing and sales process is their key "value-add" - from a customer perspective we may as well call it the "value-padd". The supreme irony is that the very vendors who preach the gospel of e-business practice relatively little of it.

So how will this change? Part of it is simply generational change. As the Google and MySpace generation enters the world of IT, their expectations are necessarily different. On-demand software can fulfill those expectations, but only if the vendors would embrace it. Embracing it means disruptive change in their organizational structures. It means putting the engineers writing the code on the front-lines serving the customer, cutting out layers devoted to the value-padd process.  Built-in social sharing features of on-demand means that customers in the same vertical segment could share, at their option, customizations made to fit their industry. Cycle times will come down massively, with implementations in hours or days, and customization in weeks.

The other part of it is the globalization of IT. Off-shoring is just one facet of it - in fact, from my perspective that is not the interesting facet. As vendors are forced to serve new and newly global companies from emerging economies, they will find their "China Price" or "India Price" effectively become the world-price. With on-demand offerings, vendors cannot offer country specific discounts and still retain any measure of credibility.

The revolution has just started."

Sridhar can be reached at [email protected]

Big, Hairy IT Projects

InformationWeek catalogs several large IT projects which ran awry. With 1-2 degrees of separation I have known of several of the projects and could tell you a few more tales about many of them.

But step back and look at the numbers objectively: In total, all these projects do not make up even 5% of global IT spend in one year. Since these projects ran several years,  the statistical odds of such overruns are not really that surprising.

Large, long term projects are inherently risky. It is a painful lesson most in the industry have learned, and more and more CIOs I speak to talk about constraints, rapid payback etc. Heck even Steve Ballmer of Microsoft talks about fast twitch projects. In some ways, Vista dwarfs most of the projects in the InformationWeek article.