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And now, get some glue

Posted on Tuesday, Sep 13th 2005

After nine acquisitions in nine months, Oracle’s ravenous appetite for acquisitions may have finally been sated with the purchase of long-suffering rival Siebel (see “Larry, there’s been a mistake; somebody put my nameplate on this broom closet”). Certainly, CRM gourmand Larry Ellison seems to feel Oracle’s had it’s fill — at least for the time being. “I don’t think you’ll see us do another major acquisition for some time,” he told analysts yesterday. A wise course, because the integration issues Oracle is facing are daunting enough already. Last week, Oracle had three CRM product lines — its own, PeopleSoft’s and J.D. Edwards’, which was bought by PeopleSoft. Now it has four. Integrating them will be a herculean task. (SiliconValley.com)

Indeed. Here’s a company to look at for that glue: Siperian. The value of Siperian’s Customer Data Integration suite (CDI) is that it provides a “360-degree view” of the customer by bringing together data from disparate sources throughout the enterprise. A central component of CDI is an integrated master customer reference database (a.k.a. “the customer data hub”) with built-in data quality, correction and correlation capabilities. Competitor DWL has recently been purchased by IBM.

Larry’s dessert ought to be a small gift to his professional services organization who must be reeling at the moment!

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Larry can buy his protege next

Posted on Monday, Sep 12th 2005

The deals have been happening…

Oracle finally bought Siebel: GOOD.
eBay bought Skype: BAD.
Palmsource got bought by a Japanese firm: GOOD.

A future deal to look out for: Larry Ellison could convince Marc Benioff next, for after all, he is Marc’s Guru. If Oracle could indeed pick up Salesforce.com, that would give Microsoft & SAP a run for their money in CRM / Enterprise Apps.

And while he is at it, Webex wouldn’t be a bad SaaS + SME acquisition to throw into the mix either!

Double Bottom Line Entrepreneurship

Posted on Thursday, Sep 8th 2005

Today, I spoke with Dr. Ken Gibson, Founder of LearningRx, and listened to quite a fascinating story of an entrepreneur. Ken was an Optometrist, with a strong interest in business, and at some point, provided business consulting to over 300 Optometrists, before developing the methodology for training people to learn that is now at the heart of LearningRx.

LearningRx provides cognitive skills training that improve the brain’s ability to process information. The LearningRx training programs go beyond the symptoms of academic struggles to attack the root problem – the limitations to the student’s ability to learn. The training enhances underlying cognitive skills required to learn effectively – auditory processing, attention skills, comprehension, visual processing, memory, and problem solving. Once strengthened, these skills enhance the student’s capacity to learn.

Ken stresses, “It’s training, not teaching or tutoring. It’s like giving a lecture on Piano versus training someone to play the Piano …”

The best competing reading & learning program called Lindamood provides 2.3 years worth of improvement in 142 sessions. Ken’s program provides 4.8 years worth of improvement in 72 sessions.

In 1989, Ken started licensing this methodology to doctor’s offices and such, but soon realized that he needed a franchise infrastructure to reach more people. In 2002, he opened a Colorado Springs center, which within 4 months of existence threw up $225,000, with about 70 students participating over 3-6 month average duration.

Ken believes, engineers, not necessarily teachers, make his best trainers. Many engineers work at his centers, wanting to make a difference. Ken doesn’t allow any trainer to work for more than 15-18 hours a week, or 3 hours at a stretch. The process is intense, hence the precaution.

The first franchisee opened in 2004. Today, LearningRx has 32 centers around the country, with about 50 average active students bringing in anywhere between $250k-$500k / year. The number will surely go up, as the franchises mature! All franchisees have been recruited by Word-of-Mouth. Customer recruitment has been through a mix of newspaper and radio ads, although now moving largely toward direct marketing.

Our VCs invest money in so many incremental businesses … Ken Gibson’s bootstrapped jewel is one that makes a difference in many lives, and in my opinion, is worth scaling!

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YahooBay, not SkypeBay

Posted on Thursday, Sep 8th 2005

WSJ: EBay is in talks to buy Skype Technologies, a Luxembourg firm that offers free global phone service on the Internet to about 52 million subscribers. The New York Post, which first reported the talks, said the price tag could be $5 billion. The Wall Street Journal said it could be $2 billion or $3 billion. EBay has needed a pick-me-up lately, amid worries about its future profit growth and grumbling from users about higher merchant fees and con artists allegedly lurking in its auctions. Its shares fell about 4% today, as investors fretted about Skype’s big price tag and what on earth an online auction site planned to do with an Internet phone company. EBay has been branching out into such businesses as classified ads and property listings, but getting into the phone business would be a big leap. On the other hand, it would simply be following the lead of Google and Yahoo, which already offer such service. And a new service could wring more cash out of at least some of eBay’s 157 million users.

Om says it’s only another rumor! The rumor is, however, driving eBay’s stock price down.

Earlier this year, John Donahoe was named President of eBay. John is a former Bain Consulting Managing Director, in charge of strategic and financial planning, marketing, operations, product development and business development for the eBay North America and eBay International businesses. eBay has never had much of a strategic planning process, but with the advent of Donahoe, all this was supposed to change.

Well, if this Skype overture is any indication, I dread to know what else is in the works!

True, that 157 Million Users need to be further monetized with additional services. But Skype is not the answer.

In fact, if I were to put two large scale net properties together, those would be YAHOO & eBAY, making YAHOOBAY a fitting answer to Google’s rising power. Search, Commerce, Community and Content together could become the absolute winning combination for the future of the Net.

24% of IT Spending in 2006 goes to …

Posted on Wednesday, Sep 7th 2005

I was leafing through a copy of Entrepreneur magazine yesterday at a client’s lobby, when the above statistic caught my eye: 24% of all IT spending in 2006 is going to be made by SME businesses.

That’s a pretty significant number, and it made me wonder what sorts of IT might be the beneficiary of that budget?

I have to admit, while we’ve been on the topic of Antispam, SaaS, Security SaaS, … I would not be at all surprised if that is precisely where a large chunk of this money goes. Here are some other contenders that I have recently written about, largely focused on the Very Small of the SME:

PayCycle: ADP for the Very Small
Way Systems: Mobile Payment Terminals

Besides these, there will be some vertical-specific software, so companies with products and channels into SME will win, example: Autodesk, Adobe, Solidworks, some businesses of Cadence and Mentor Graphics (PCB, for example).

Of the horizontals, the two obvious ones would be Salesforce.com and Webex, which brings to attention Microsoft’s failure to really make good on the SME opportunity. They have products in multiple areas catering to the SME, acquired via Placeware in Web Conferencing and Collaboration, Great Plains in CRM, and now Sybari in Antispam services. Could it be that in 2006, Microsoft stock will finally show some movement due to unexpected performance in these nonperforming areas?

And Cisco is the other languishing stock that many of us have held onto, which could also benefit from this SME budget deployment.

What else do you see?

Postini gets high marks

Posted on Wednesday, Sep 7th 2005

All on a sudden, a company has shown up in about 15 conversations within the last 2 weeks: Postini. All the spam that Symantec has been failing to catch, Postini manages to tackle and fend off. What’s more, it is a service (SaaS) company, with significant revenue in the order of $50 Million, which in itself is an anomaly in this market!

For prior art, please refer to my two prior articles on SaaS and Antispam, in which I have extolled the virtues of SaaS, and bashed Symantec’s sloppiness in their Antispam product.

Today, Kumar Vora over at Adobe asked a good question: Symantec has figured out how to solve the virus rules update problem, why do they fail on the spam rules update?

Adobe is a happy user of Postini, as is Philippe Courtot over at Qualys. Philippe’s comment is that it is easier to update the rules when everything is on a server, and hence the ASP model wins. But, Kumar’s question, in my opinion, is a valid one. Updating rules on clients may be a bit more complex, but not dramatically so.

Ofcourse, given prior trends, the most obvious way in which Symantec will solve the problem, is by acquiring Postini or one of its competitors. Microsoft acquired one earlier this year.

Postini intercepts all the spam before they hit the enterprise server, by pre-filtering ALL emails. They have recently made a deal with McAfee. I would really like to see them strike large deals with the various ISPs, and intercept spam at the ISP pops. Right now, my smart PalmOS smartphone doesn’t have any way of leaving out the spam, as it downloads email from my pacbell pop server. Not good!

The Case for Calcutta

Posted on Tuesday, Sep 6th 2005

Dave Chen forwarded me a link to an article in the McKinsey Quarterly called: Ensuring India’s Offshoring Future. Below are the synopsis points of the article, which I think is worth a read:
* India’s lead in offshoring stems from its pool of well-trained, low-cost engineers for IT services.
* That pool is smaller than it appears, and there’s a risk that it may run dry in the most popular offshoring locations.
* For offshoring companies, India’s weak infrastructure is its least attractive feature.
* India’s policy makers must improve the quantity and quality of its graduates, strengthen its infrastructure, and disperse offshore demand for talent to second-tier cities and services other than IT.

Few months back, I wrote another article called Team-of-Twenty-One, pointing to the opportunity for MNC’s in second-tier cities from a cultural perspective.

In this post, I want to draw your attention to Calcutta, a first-tier city and the capital of British India until 1911 (and my hometown), full of excellent universities and colleges, and a very English-fluent population (the influence of the Raj can still be felt in spades). Calcutta has become a second-tier city by chance. Or rather, as a side-effect of the long-standing communist government which until recently, nurtured unionization, and caused the city to have become a breeding ground for a lazy, non-entrepreneurial work culture.

Always a seat of intellectual and cultural creativity, ranging from literature (Tagore won the Nobel Prize for Literature) to science to social entrepreneurship (Mother Teresa won the Nobel Peace Prize for her work in Calcutta), the city fell behind due to poor political leadership. In the last 5 years, however, the Government has woken up to the possibilities and the Communists have, lo and behold, embraced Capitalism. Especially, IT related Capitalism.

I have been advising the West Bengal Government’s IT Ministry (of which Calcutta is the Capital), and have found Dr. G.D. Gautama, the IT Secretary, a very well-meaning and helpful man, who follows up on all the referrals and leads that I send his way, diligently. In 1994, when I had first set up DAIS in Calcutta, Dr. Gautama was the Managing Director of the Finance Corporation of WB, and one of the few people in the Government, who I thought, could see beyond the narrow, domestic walls of self-interest and corruption. It is refreshing to see that the Government has chosen Gautama as the key spokesperson for its IT related efforts, especially at a time when Calcutta is indeed, the only remaining major metro of India that has not yet been tapped fully for IT offshoring.

And in my personal experience, the work-culture had never been an issue. My guys used to work 16 hour-days regularly, whenever needed, and I remember, I even pulled them off of Durga Puja pandals, (an annual holiday equivalent or bigger than Christmas in that part of the world), but they never complained. The customer had urgent needs. My team was ready to service the needs.

Management talent, however, is an issue, since the resident talent is less readily available. You would be better off bringing in some seasoned Managers from other parts of the country, or even the US. Good news: Bengalis are very interested in living in the heart of their culture, and you are likely to be able to attract very senior management without too much difficulty.

In Calcutta, unlike other parts of India, Culture is the main lure. Understand the Culture, and you will be able to leverage it to your own unique advantage. Money matters, but it is a strange place where people still value quality of life and emotional fulfillment above mercenary incentives. My senior guys at DAIS and Intarka were routinely head-hunted.

I never lost a single one of them.

Semi IP Growth & Commoditization

Posted on Saturday, Sep 3rd 2005

The market for semiconductor intellectual property (IP) is set to grow to more than $2.04 billion in 2009 from $1.2 billion in 2004, according to market research company iSuppli Corp. Royalties are becoming the largest source of revenue in the IP market, and offering a steady CAGR of 10%+.

Where is this growth likely to be coming from, though?

One hypothesis from Gartner attributes the growth to Analog and mixed-signal circuit blocks becoming licensable.

I don’t think this is going to be the main source of growth. The growth, in my opinion, will come from lots of erstwhile commodity, low-tech and non-tech products upgrading into a high-tech status. Example: Toys. These nouveau techs are still fairly unsophisticated and don’t exactly need rocket speed processors or humongous memory cores, neither do they need DSPs. Nonetheless, they drive volumes, and the royalties will continue to add up, quite likely, for the old generation products from MIPS and Virage.

Welcome to the age of electronics commoditization!