The Media Godfather

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Idle thoughts on Delhi-Gurgaon Expressway

The traffic snarls at the Toll Plaza is daily affair for most of my colleagues. Their minds go numb at the gross national wastage of productive working hours and precious fuel of the idling engines. The talks on Green Energy and awareness around greenhouse gases seem to be meaningless. Many of the folks waiting in long queues are engineers and can algorithmically prove that wastage caused by Toll Plaza is more than the productive collection by DGSCL. One enthusiastic company MTS proclaimed that they will bear the burden of Toll during the peak traffic hours. Good suggestion but the reporter says that officials at DGSCL are not pleased with it. I am sure MTS meant Free Talk Time at Toll Plaza during peak busy hours and the reporter at the TOI would have gotten carried away.

Searching on net found some links which report that the Toll Plaza was designed for 75K vehicles/day and is currently experiencing 200K vehicles/day. Not sure why DGSCL increased the Toll by almost 50% in last 18 months? Isn’t higher number of vehicles giving DGSCL better return on investment on their original business case? There better be a good justification for this highway robbery, anyone for RTI followed by PIL? You know how an idle mind works when stuck in long queues.

Not sure what the official reports says but it is my guess that more than 70% vehicles do not use the ETC (Electronic Toll Collections) Tags. Given the situation what can be done? I have asked several taxi drivers while waiting in the queue on my way to Airport, on what they think can be done to make things better. Most of them have given exemplary suggestions –

• The toll must be in round figure. Rs 10, Rs 20, Rs 30 so on and so forth.
• The vehicles which get into Tag Lanes and insist to pay cash must pay Rs 10 more.
• The display on each Toll Gate statistics like Average Queue Waiting Time, Time to serve One Vehicle, Number of Vehicles in the Queue. Of course DGSCL can consider broadcasting this to Radio Stations and use it for internal training and rewarding their staff.
• There should be a ramp of 10-15 degree for around 500 meters. This will allow vehicles to switch off engines and use the slope to roll the vehicle. This will help in reducing fuel wastage.
• Collect return Toll from daily commuters.
• Register vehicle Mobile for mBanking payment of ETC charge. A simple Bluetooth device or SMS based service can help facilitate authentication of online payment.

What are your suggestions? Please do share.

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The Last Samurai

What is common between Microsoft & Oracle? The fact they make tens of billions of dollars in software revenue, sure! And that their predominant source of revenue is from software products. They were founded in late 70’s. I am sure you know all this. What is new is that in the times to follow great software product companies like Microsoft, Oracle and SAP will either disappear or switch to services model. This makes Steve Ballmer and Larry Ellison, The Two Last Samurai of the software products.

It is extremely important for upcoming software ventures to understand this trend for the successful implementation of their selling Strategy. Basis of my analysis is the revenue data from Top 100 Software companies. 70% of the top Software Companies attribute their revenue from the Products. However what is more interesting note is the fact that product revenue is only 24% ($200 Billion) and the rest from services. Based on these findings and other supporting data we can conclude that selling of software products or RTU is on its way out. It is also clear that large numbers of products only companies are dependent on large system integrator partners to be successful. Many of the software companies are now dependent on Internet for selling Software as a Service (SAAS). The latest trend of “Cloud Computing” and selling software as a utility or infrastructure or transactions or bundled with content; are all indicative that software as RTU is disappearing.

These changes will bring fundamental changes in the way Software Development Centers are organized. I have listed some of these changes -

1. Product Management and Program Management roles will get merged under one person. No more hot potato meetings.

2. Product Management will move up the value chain. The new age product manager will be responsible for Sales and Business Development. No more hypothetical discussion in the beginning of the year what we must build to sell.

3. Feature priority are now decided by the end-user metrics. Let user enjoy the value but not the burden of platform.

4. No more professional services or SI certification issues.

This model will unleash highest level of optimization in knowledge workforce. The trouble is that most of the organizations are not able to come to terms with their own established processes and structures.

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The Curious Case of Data Dumping

I have all the material ready for my next provocative blog. Yes the one that will make me controversial and unpopular!

A Sensational Title: Anti-data-dumping law to bridge the digital divide

Some background patronizing information: Most countries introduce anti-dumping duties to protect the local industry. Without getting into the history, open market arguments etc., the fact-of-the-matter is that anti-dumping duty is a reality. Commodity and manufacturing sector comes to ones mind when international trade pundits discuss anti-dumping. Developing countries bear the brunt of taxation trying to sell their low-cost produce in developed nation. Interestingly in the knowledge industry the dumping of knowledge products and services are in reverse direction.

The Case Opening Statement: Internet, the new media is controlled by developed economies and a handful of global players have cornered most of the new medium across the globe. This kills the chances of developing local industry and hence the underdeveloped markets will lose out most of the advertisement revenue and marketshare to the developed markets. I would like to argue that to protect small and local internet web services there is a need to introduce anti-dumping duty on global players.

Circumstantial Evidence: I collected some evidence to build my argument.

The above tables show that there is direct correlation between the internet advertisement revenue and explosion of content on the web pages. The global internet traffic and proliferation has grown as well adding to the demand side.

Hard Evidence: The next piece of evidence needed was to nail down the perpetrators. This came from an unusual sourceTeleGeography’s Global Internet Map.

Agreed, this is not an easy to read map, hence for analysis purpose I have used some spreadsheet tricks.

In mature market like Europe 75% of the bandwidth is consumed within the region. However the less matured markets like Asia and South America are largely dependent on the fat pipes from North America and Europe. Interestingly but not surprising USA exports 85% of internet traffic outside of North America.

The Usual Suspects: In any anti dumping situation there are beneficiary interest groups. I had the list of usual suspects in mind, however to establish the facts rested my case based on the latest Analytics Reports -

Cold Feet: I must admit that in spite of such strong case and so close to being self-appointed for the next round of Doha negotiations, I have developed a cold feet to continue pressing charges!! Why? Well, first of all USA is a net importing nation and secondly USA is net importer of "Advanced Technology Products" including Information Technology and Communications. This will perhaps come as a shock to most of the technology producers who look upon US funded venture capitalsocialists and track closely NASDAQ technology companies.

Let Go: I will conclude with a note of sympathy to world's largest producer of technology to reconsider its views on Software. It is up to US Knowledge Workers to decide if an eyeball attention is worth more than technology and knowledge!

The Great American Internet Brain Drain (loss of knowledge in return of eye-ball)!!

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Enanomics

Choice of Free Products (or Services) is of utmost consumer interest regardless of our ideological beliefs. There are several blokes on the Internet who strive to give quality product or service completely free. The analysis of “Free” is essential to our understanding of Enanomics (web economics). When it comes to web technologies the cost of each transaction cannot be measured accurately, there is some kind of uncertainity principle. Nano-economics or Enanomics has not been understood properly and is not even defined in Wikipedia, let me make a humble beginning.

The Institutional Free:

As a class VI student I recollect an essay on Mother Teresa. She would accept broken biscuits from local bakery to feed the growing needs of her institution Missionaries of Charity. Charity missions have two important elements (a) champion visionary and (b) public private partnership to channelize spare/unused resources for the goodness of society.

In any given technology the hard part is to develop the tools and knowledge. It requires champion visionaries to build and enrich tools or knowledge. One can look up to institutions like universities to sustain this effort (BCD UNIX Project). GNU and Wikipedia are two examples which have been built on charity model. The principles used by GNU and Wikipedia developers are to keep software tools and knowledge above business greed. This philanthropy drive helped in getting the best people to contribute for noble cause. The time-management inefficiency in knowledge industry is being channelized for contribution towards building GNU and Wikipedia.

It is not that GNU and Wikipedia are allergic to Money. Every Wikipedia page carries the slogan “Wikipedia is sustained by people like you. Please donate today”. Likewise one can support Free Software Foundation through donations as well. Wikipedia has Alexa Ranking 7 and can easily switch to self-sustained Advertisement Model, but then I could lose my OpenId for spreading such blasphemy! The time saved by millions of people searching for right tools or information is good enough reason for well meaning people to contribute and make it available for “Free”. Though unlikely but if for some reason Wikipedia was to file for bankruptcy, UN will declare it as “World Heritage Site”! The power of “Free” cannot be undermined in a democratic society.

Disclaimer: there is a conspiracy theory that GNU and Wikipedia were created to check the monopoly of Microsoft, though I do not subscribe to it. These are just good examples of how to institutionalize “free” for a good social cause.

The Free Institutions:

All other free stuff on Internet has sound business plan. The business plan could be around “renting virtual shelf to distributers – Amazon”, “target advertising social networking platform - Facebook”, “viral or pyramid marketing tool - Twitter”, “Online publishing – Wordpress”, “Direct mailers – Hotmail” etc. There are times when web developers go awfully wrong with their business plan and they turn to selling their software for "Free" or as "Donationware". This usually doesn't work, they must join SAAS Therapy group to get out of their self-inflicted misery. We are in the early days of Enanomics, so let me start with supply and demand equations.

Uncontrolled Inelastic Supply: Web services are structured around creating seemingly infinite supply, e.g. “Unlimited Storage with email account”, “Unlimited connections in a social network”, “Unlimited Blogs”, “Long tail @ Online App Store, Music Store, Books Store, etc…” In reality the supply is never unlimited. There are sufficient checks to ensure that unlimited supply has limited shelf-space or shelf-life.

Example 1: Only 2% users of MSN Live visit skydrive (25GB free storage on MSN Live). MSN is fairly safe to take the bet that the doomsday of reaching the storage capacity of thousands of petabytes for its hundred million users, will never happen.

Example 2: Amazon has millions of items to sell. The way Amazon builds its inventory is by creating virtual shelf space on its website. The real world seller’s chances of making millions by selling “12mm washers” using Amazon platform is less than winning Australian Lotto. Amazon can charge a small fee for virtual space; Amazon gets rich by charging few cents for lending virtual shelves. It is the ability to create a platform which seemingly provides unlimited supply that differentiates web from real world. However when the rubber meets the road, FedEx wins! Think about it, typical IT cost for any enterprise is ~4% of its revenue, what is a better option, create your own online store or rent space on Amazon, you decide! Blockbuster realized this and was quick to respond with its own online store to fight back the Netflix onslaught. So it isn’t the perceived long-tail of inventory which gives Netflix the competitive advantage.

Controlled Elastic Demand: Theoretically, free-service generates infinite demand. However web service providers are protected/limited by total users with internet access, bandwidth price, network throttling of traffic and deadweight loss (marginal gain from “reading my free blog” vs. “completing your project on time”.) Dead weight loss is caused by “people who would have more marginal cost than marginal benefit are buying the product”.

A Simple Supply-Demand curve of an Ad-Based Web Service

First Law of Enanomics: If everything in the micro-economic or macro-economic world remained constant, the web service provider revenue is a function of internet traffic.

The question that still remains to be answered is that why at zero prices there is no deadweight loss? Web service providers understand the value of “Time”. Any end-user who is not able to find an item on-line in two clicks (assuming average bounce rate of 45% for any given website) will lose the customer resulting in deadweight loss. The web tools like search engines, recommendation engines, folksonomy etc help in building a commercial model which can be tapped by industry. These web tools drive ecommerce and fall under the “Free Institution”, free to user billed to supplier.

Second Law of Enanomics: When the price of a service falls to zero, the demand is proportional to marginal benefit.

There are more laws to come!!

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