Ronnie05's Blog

Network Scalability: The challenges from an Indian perspective

Posted in Business Cases, Industry updates by Manas Ganguly on January 31, 2014

This was presented by me to Accenture on 31st January 2014 and defines the challenges in terms of technologies, standards, networks and the investments and costings underneath.

Network scalability – The Indian perspective from Manas Ganguly

The pace of innovation is outstripping the RoI recovery cycles for Telcos worldwide and then again, there is no single standard and one unified eco-system. Betting and hedging on future is a difficult task for even the most seasoned Telcos.

Infosys 3.0/Murthy 2.0: 10 Reasons why and what wouldn’t work!

Posted in Business Cases, Industry updates by Manas Ganguly on June 1, 2013

The poster boy of Indian IT, which had been richly exhorted and hailed by none other than Thomas Friedman in his book “Hot, Flat and Crowded” is out of steam. Infy’s loss of momentum is a well documented piece. It was India’s technology bellweather at one time. Its an insipid story now.

A lot about Infosys’s chequered fortunes has been attributed to N.R. Narayana Murthy – its founding member and while there have been other illustrious names such as Nandan Nilekani – it is Murthy who in some sense is treated as the “god” in Infosys. After a 21 yr CEO stint, followed by 9yr Chairman stint and a 2 yr Chairman Emeritus stint, as of 1st June 2013, Murthy is back as the executive chairman of Infosys. This is perhaps of the lacklustre performance of Infosys – loss of technology leadership, an otherwise series of uninspiring moves and an inability to move up the value chain inspite of money, resources and efforts that have gone into it.

Growth share In Infosys has tanked and Cognizant marched right ahead of Infosys - Vision Infosys 2.0 hasn't really worked

Growth share In Infosys has tanked and Cognizant marched right ahead of Infosys – Vision Infosys 2.0 hasn’t really worked

With a penchant for fanciful terminologies, Infosys after Kris Gopalakrishnan and under K D Shibulal orchesstrated the Infosys 3.0 vision – broadly related to moving up the value chain, greater scope and scale in partnerships and enhanced profitability. That didnot work – and now Murthy is back for his 2nd innings at Infosys to make Infosys 3.0 vision a success.

Would Infosys 3.0/ Murthy 2.0 work out? I dont see that happening – and the reasons-

1. Culturally Infosys is stuck in a time wrap – its hugely successful 1.0 times (1995- 2010) – the global delivery backyard powered by its huge and glorious delivery centre infrastructures.
2. I dont see Infosys having really innovating on products – it had the Financle platform on Banking. In terms of product and platforms, Finacle has beeen Infosys’s only pony. Nothing really has worked out.
3. With other specialized service providers such as IBM, Accenture, Capgemini taking the value pool game ahead, Infosys has been consigned to the low margin stuff at just making the customized delivery.
4. For all the talk, Infosys hasnt been able to break new business in new domains with new customers. Consider the Flypp Application store for instance.
5. Organizationally, Infosys has not been able to manage its diversity and size – with very many Delivery centres redoing the wheel when some one has already done something around this. The Silo mentality is a big organizational roadblock
6. Cutting edge – Intelligent software has suddenly shifted to the developers – to the mercenaries of the open source – the staid professional in business suit (Thats my personization of Infosys) is elbowed out at the cutting edge by the developer mavericks.
7. Interestingly enough – in 2010 when business in Africa was booming – Infosys thoought things were a little premature for entry into the dark continent. I would have assumed making software and technology for the 4+bn Asian and African subcontinents would be the big future – but not at Infosys.
8. In 2010-11, 97% of the revenues made by Infosys were from its existing accounts – cash cows being miled. A miniscule 3% revenues were attributed to new customers. A lot of the work with the old customers were being done in the old areas. Even with the existing accounts (for instance North America), Infosys is loosing share to the other Tech firms from India.

Not only has Infy been a laggard in emerging markets, its staple business in North America has not registered growth

Not only has Infy been a laggard in emerging markets, its staple business in North America has not registered growth


9. Lastly, from what i understood of the Infy R&D – it was a maintenance R&D, rather than an innovation one. Global technology is going places – 3D Printing, Bio Metrics, Foveated reading, Augmented reality and many other- Not sure where Infy would place itself on these technologies.
10. Lack of single unit one piece coherent strategy in Infosys is something Murthy needs to fix – as of yesterday.

Murthy would look to addressing some of the organizational issues immediately – but a larger gap is technology innovation. Ass i understand Infosys is a step out of synch with many of the big fellas – and unless there is something really significant (which as an organization – Infy is not geared for, as of now), i can see it a step behind in most of the things.

A lot of the observations and views in this post are based on my experiences of working in Infosys.

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SMS- The Operator cash cow is dying. Time for telcos to wake up & smell the data coffee.

Posted in Business Cases, Industry updates, Revenues and Monetization by Manas Ganguly on May 2, 2013

As SMS celebrates its 20th anniversary , Chat apps are overtaking SMS communication globally. The Operator cash cow is dying. Time for telcos to wake up & smell the data coffee.

A new study by Informa loads the dice up for Chat apps. For the first time, more messages are being sent via applications such as iMessage, WhatsApp and Viber than traditional texting. Messages sent using such apps outnumbered those sent through carrier-based SMS in 2012 and the lead is expected to widen this year as chat apps send twice as many messages as texting. Although traditional SMS has a larger user base, iMessage, WhatsApp or other chatting apps are sending more texts per user, giving them the momentum. Informa estimates that on an average, a chat app user sends 32.6 messages per day, versus just five for SMS. This despite there being 3.5 billion SMS users compared to 586 million among the top six messaging apps surveyed by the researchers.

Mirroring this sentiment, Ovum estimates that Indian telecom operators may lose $3.1 billion in SMS revenues by 2016. In 2012, the Indian telecom industry lost close to $781 million in SMS revenues, as mobile telephony subscribers increasingly used social messaging apps for quick communication. According to data from the Telecom Regulatory Authority of India (TRAI), the number of monthly SMS sent per GSM subscriber fell by 5.62 per cent to 36 for the three months ended September 2012 from 38 in the year ago timeframe. For CDMA users, this number was marginally up to 25 during the same period. Industry watchers believe that there is a secular fall in SMS revenues for both CDMA and GSM operators.

There are a couple of reasons that are driving the consumer growth in the chat apps segment
1. As smartphones outnumber dumb feature phones, app-based messaging is set to eclipse texting. The next evolutionary step is likely to be calling from Facebook, now in limited roll-out, and other social networks.
2. In addition to being cheaper, these apps are more interactive as compared to the traditional SMS. (We could see the popularity of messaging apps wane if they decide to charge for the service. WhatsApp, for instance, is reportedly considering a paid 99 cents a year subscription.)

The demise of SMS is perhaps most symptomatic of the evolution of communications underway. First was the voice call, which largely vanished as texting became common. As SMS slowly declines as a significant revenue opportunity, mobile Internet (broadband or narrowband) is steadily growing as a key revenue generator.

Carriers, globally are playing to the changing notes, and are giving away unlimited texting on data plans. The intent is to convert dwindling SMS revenues into a broadband revenue opportunity. Indian telecom operators seem to be cognizant of this shift. They are increasingly co-bundling free messengers and content services to push data usage as an alternative to cascading SMS revenues. Last year, Reliance Communications tied up with WhatsApp and Facebook, enabling its GSM customers to use the two services for Rs 16/month. Aircel, too, has taken the leap by tying up with Nimbuzz. Others have started this integration – Nokia recently launched a new phone, Asha210, which has a dedicated WhatsApp button

The Chat platform providers are riding the wave and are collaborating with telecom companies for monetising the chat platforms through operator billing

Educomp and Education’s sub prime crisis (Part II)

Posted in Business Cases by Manas Ganguly on April 23, 2013

This is Part II of a series of posts that discusses the Rise and Fall of Educomp track the growth of the prodigal education services company and track the factors that led to its fall. Read Part I here

From an asset light services to a capex laden balance sheet player – Educomp was getting its business mode wrong – Why did Shantanu Prakash (CEO, Founder) and Educomp move to this business model which would take in more capital and where the money would not come in quickly? The Answer – The lure of high valuation. In January 2008, it’s price-earnings multiple was 27.8 (today it is just a fraction of that at 6.77).

smartclass-logo

Buoyed by Educomp’s rosy growth numbers, between 2008 and 2009 investment banks and broking firms started putting out fat reports on the massive pot of gold at the end of the education rainbow. And Educomp was buoyed by its greed to ride the wave. The potential market was estimated at $30-35 billion across various education segments like multimedia-in-classrooms, privately run K-12 schools, vocational training, preschools, coaching classes and higher education.

Secondly Shantanu Prakash and Educomp diffused the effort over too many businesses in education using every conceivable strategic tool. For instance, Educomp’s joint ventures list reads-
IndiaCan with Pearson Plc (Vocational training)
Raffles Millenium colleges with Raffles Education
Topper TV with Network 18 in the TV space.

There were investments and acquisitions
PurpleLeap in vocational training
Vidya Mandir and Gateforum in test preparation
Eurokids in preschools.
And of course there were numerous new subsidiaries of which its own brand of K-12 schools was the most significant one.

Educomp’s annual report for 2009-10 listed 15 directly held subsidiaries, 28 indirectly held ones, five joint ventures and 14 associate companies spread across India, Singapore, Canada, USA and the British Virgin Islands.

Diffused sense of direction alongwith an awry business model is one of the worst cocktails and Educomp was brewing this.

Continued in Part III

Reproduced from Article on Forbes: The Rise and the Fall of Educomp (April 8, 2013)

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Educomp and Education’s sub prime crisis (Part I)

Posted in Business Cases by Manas Ganguly on April 22, 2013

This is part 1 of a series of posts that will discuss the Rise and Fall of Educomp track the growth of the prodigal education services company and track the factors that led to its fall.

For a company that almost single-handedly created the hype around money-making opportunities in school education, Educomp’s stock is down 72% YoY; 84%over two years; 91% over three years. Its market capitalisation has fallen from Rs 7,000 crore in November 2009 to just Rs 786 crore as of May 1st 2013. Of the $150 million in new funding it raised in July 2012 from three foreign investors, two-thirds would go to pay back a five-year-old foreign currency loan it couldn’t repay on its own, given the debt and liabilities on its stressed balance sheet.

Educomp

Educomp’s rise to glory is a story not too far away in history – From 2006 to 2012, revenues jumped 30X (from Rs 51 crore to Rs 1,500 crore); profits jumped 30X (from Rs 6 crore to Rs 180 crore); school customers increased 200X ( from 75 to 15,000) plus 250 preschools, 47 schools with 22,000 students and 350 vocational training centres. However, the devil they say is in numbers – and Educomp’s net profit margin has fallen 61 percent during the last four years; the net cash generated by its operations has been falling significantly for the last three years; the time taken to collect its money from customers almost doubled in the last four years; and most importantly, its overall liabilities in 2012 were over twice its revenues.

Educomp’s biggest star is the Smart Class – an interactive multimedia heavy digitally powered teaching experience which supplement the normal textbook and blackboard approach. To make things easier, Educomp does not charge for the infrastructure and works on a per student monthly fee for a contract period. The school in turn would pass the cost as a monthly fee increase of Rs.150-Rs.200 per student. Driven by the paucity of good teaching mediums, the technology enabled Smart-Class grew from 100 schools in 2006 to over 6550 schools in 2011.

While all that business and growth is hunky dory – the reality bites in when one accounts for delayed payments from schools and sometimes no payments from schools. The risk is that this technology sales model becomes akin to the sub-prime mortgage scenario that caused the credit crisis in the US. Like in the US where loans were given to people who did not have the repayment capacity, there is some danger that ambitious schools looking for a magic bullet are buying hardware and software they ultimately can’t afford.

It is the job of a financing institution, not an educational services vendor, to finance a school. Otherwise you end up bearing business risk, execution risk and financing risk. Unfortunately the business model of Educomp was treading the risk bit a little too high. Educomp initial assent on the bourses was because it was supposed to be ‘asset-light’ education software company that would scale with lightning speed. Unfortunately the business model chosen was driving Educomp from an ‘asset-light’ education services player into being a balance-sheet player.

Continued in Part II

Reproduced from Article on Forbes: The Rise and the Fall of Educomp (April 8, 2013)

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