Gaurav’s book on the offshore services business

Often caricatured and mislabeled in popular media, India’s Offshore services industry has emerged, within a single human generation, into the industry that defined India’s image to the world—a young, vibrant, upcoming nation. But how does the industry really work?

Industry veterans Gaurav Rastogi and Basab Pradhan explain what is really going on, using simple language and without resorting to jargon or code.  Offshore: How India got back on the global business map, raises and answers some powerful questions. Why did this industry come about in the era when socialist and bankrupt India was almost written off; its population bomb ticking ominously? Why should India be proud, and what has the industry done for the country? What gods have conspired to make this industry so profitable? Are the industry leaders really well managed or merely the beneficiaries of a flattening world? Will the industry find itself high and dry when the rising tide of globalization recedes, marooning the millions who work in and around this industry?

Whether you’re already in the industry, invested in the industry, or know someone who will soon be, this book is a necessary companion to make sense of the relentless news cycle.

Sholay and the principle of non-linearity

Kitne aadmi the?!

Has there ever been a more powerful dialogue?

Gabbar Singh, master of all he surveys (actually – some pretty pathetic rocks in the outskirts of Blr – but thats a different story), finds his authority challenged by the village of Ramgarh.  His first question is – Kitne aadmi the? (how many men were they?) .

For India’s services sector, this obsession with head-count continues.  A person’s importance is measured by the number of people he manages (Kitne aadmi hain?). Kaalia and his friends were more perceptive –  they refer to the mass of villagers as a gang of incompetents – knowing they faced no threat from them.  Little did they know of the real danger.  As Gabbar painfully realizes later on, a smarter, small team can be a lot more effective than a gang of followers .

Today, firms that are truly able to leverage the capabilities of a its people are found to demonstrate non-linear growth.  Analysts worship these companies.  But really, they should be thanking bollywood!

Acquisition joy and heartbreak

Used to be a time when selling the company was akin to selling the family silver.  Not anymore.  Many companies today are “built-to-flip” – i.e. created in the expectation that they will be bought out by a larger player at some point.

It’s a tricky game.  Sell too early, and you’ve lost a lot of the value.  Sell too late, and you may actually find very few buyers out there (many tech companies in India are discovering that today).

And, how does one position oneself for a sale?  What is the right way to maximise value for oneself?  What are the things that  may go wrong?  Really little literature on the subject – one is forced to go by the advise of people around you.  Hopefully they’re right!

And for those who come close to a sale and fail, it can be heartwrenching.  Years of work, the smell of success, and the numbness of the rug whooshing from under one’s feet.

Which is why this is a really interesting story of joy and heartbreak.  Backblaze – the online storage company went through the roller coaster, and has now told the tale.  Some excerpts:

We Signed The Offer!
Woohoo! Pop the champagne! Well, actually, it was around 2am at this point, so it was more like “woohoo, go to bed”. But, with some trepidation about the decision, we were all excited to have signed and to move on to the next step.

Fast forward a few months:

Saturday. Exclusivity expired.

Warning bells went off. It was possible that Cogswell forgot the exact date of exclusivity expiring and thought they were still under exclusivity. Maybe Cogswell wasn’t worried about it because we were so close?. While both were possible, the paranoid senses were saying something was wrong.

Monday morning I got a call from Cogswell’s CEO. “I’m sooo sorry.”

….

We were roughly back to where we were six months earlier.

Online Schools

This post on the LA Times (replicated almost in its entirety):

The Los Angeles Unified School District is opening its first ever virtual high school this fall.

Los Angeles Virtual High School Academy is a full-time, online school enrolling 650 9th and 10th graders during the 2010-11 school year.

The district hopes to have a K-12 online school in the near future, according to Themy Sparangis, LAUSD’s chief technology director.

District officials say a full-time online campus gives students another alternative to learning, and opens a door for nontraditional students, like those who have been home schooled.

In 2007, some 300 students were enrolled in at least one online course. By 2009, that number had soared to 2,500.

Nearly 1,000 LAUSD students enrolled in online courses this summer, part of a growing number making the shift from traditional to virtual classrooms

Is this an idea who’s time has come?  Given the constraints on physical infrastructure and teachers (both availability and quality – more on that soon), combined with the easy and low cost availability of computers and broadband connections – should we be looking at more online education?

Talking to education-entrepreneurs in India, I get the sense that there is still some skepticism about the growth of online education.  There are some success stories – but all of them are still small.  It may be that the sector needs some serious government support and a willingness to break away from the existing thought process.  If we are to achieve quality education for all, we need to be more serious about the use of technology.

Our demographic responsibility

Posting [Live] from Peepli

Amma (Grand Mother India?) is one of the special characters from Peepli [Live] – and unfortunately represents one of many elder Indians who will be forced into dependence on their increasingly nuclear families.  The average life expectancy of Indians has increased from 42 in 1960 to about 65 in 2008.  Unfortunately, we’re nowhere close to geared for this.

* Retirement ages have barely changed.  People will still be productive at the time that they retire, but with little to do (we blogged about this earlier)

* Accumulated savings are often inadequate.  One black swan event can wipe out 20 years of savings.  There is no social safety network worth talking about

* Families are increasingly nuclear.  Baghbaan (the movie) is not an exaggeration.  The traditional family fall-back is falling apart

Amma’s situation in Peepli is not unreal.  We need mechanisms to address the new demographic.  And this must go beyond the traditional “senior citizen” discounts.  Some thoughts:

* A longer time to retirement (65, at least)

* Tighter laws on employment discrimination (against the elder)

* Creation of jobs for the elderly (BPOs?)

* Re-skilling programmes

* A re-thinking of our social security structure – esp for those over 60

* Old age homes

* Improved design of public facilities and infrastructure

The government doesn’t have to be the one doing all this.  The old-age economy can be quite attractive to a private player too.

While we continue to obsess over the demographic dividend, maybe it’s time we also woke up to our demographic responsibility 🙂

The wrong reasons for Air India

There was a tweet chirping around and being re-tweeted – that Air India/Indian Airlines had reduced its fare for Leh – thereby justifying the need for a national carrier.  Curiosity piqued, I checked on the fares.  AI had indeed dropped their fares – but were still above the fares charged by private airlines! It’s the kind of data check that we ask young analysts to do all the time.  Turns out that KF/Jet are more patriotic – maybe they ought to be nationalised!

More seriously, I believe that even if the data were in support of AI – the logic is flawed.  You can’t justify the need for an airline based on the discounts it gives in the time of crisis.  It would be simpler and cheaper for the government to subsidise fares during a crisis or charter planes instead.  Running an airline is hardly the solution for such black swan events.  It’s not like petroleum where the nation’s energy security may potentially be threatened.

We need a better logic for Air India.

P.S. Richard Branson said that the easiest way to become amillionaire is to start out a billionaire then go into the airline business!

Taleb on the economic crisis

Nassim Taleb has a one pager on the causes of the economic crisis:

http://www.fooledbyrandomness.com/crisis.pdf

Musical notes

Great interview on the state of the music industry with Tom Silverman in Wired Magazine.  Also some really interesting factoids in Fast Company.  A few extracts:

* Sweden is probably one of the few places in the world where music sales were up last year – and this is the land of the Pirate Bay

* Despite the promise of myspace and self-publishing, its actually become quite difficult for an artiste to make it on his/her own.  In 2008, only 10 artistes broke the 10,000 album sales number by themselves.  215 had a label behind them.  And the number of people breaking 10K is falling

* 80% of the records released in the US have sales of under 100 copies.  Almost 20% sold just 1 copy

* Music labels apparently buy their own songs on itunes to drive up the hype (Maybe we’re overly harsh on Indian companies).  Sidenote: You can also buy twitter / facebook followers to boost your popularity (more on that here)

And in case anyone was still wondering about the future of music albums, heres a graph:

Who’s your Shyamalan?

Reposted from Marginal Revolution, a simple graphic on the life and times of M Night Shyamalan

One great movie, a couple of interesting ones… and ten years of mediocrity (or undelivered promise).  I stopped watching after The Village… but clearly the studio bosses believe there is a lot more promise than the public sees.

We see this all the time in cricket –  players persisted with beyond their sell-by date – because they did something spectacular a long time back.  And if they happened to do it on debut, the rope is longer.  Occasionally they deliver – and the thrill is higher –  our patience gets justified in our minds.

We see the equivalent in the workplace too.  People hired with great track records.  The star who cracked tough accounts once upon a time.  The hero who got the plant back on line.  The young grad who destroyed the competition.  Now happily ensconced in the bureaucracy and feeding off the system.

How long do we let people live off their past glory?

Death of the kirana shop

According to an ET report today (based on a Nielsen study), modern retailers have been taking the lead in price cuts and are now able to exploit economies of scale.

Early this year, when escalating prices were crunching household budgets, modern retailers were more responsive in cutting or holding prices of day-to-day products than traditional retailers, thanks to their ability to check operational costs, bargain hard with suppliers and launch private labels.

According to a study by The Nielsen Company, modern retail dropped prices by more, or increased them by less, for more product categories than traditional retailers, or kiranas, between the last quarter of 2009 (Oct-Dec) and the first quarter of 2010 (Jan-Mar).

“The power of modern retail lies in the scale and efficiencies which we have built over the years,” says Kishore Biyani, CEO of Future Group that operates retail formats such as Food Bazaar, Big Bazaar, Pantaloon and KB’s Fairprice stores.

You can read this another way.  Modern retail is killing the kirana shop.  A small shop doesn’t have the scale (and hence bargaining power) to get lower costs from suppliers and will increasingly find itself uncompetitive with modern retailers – who offer superior shopping environments and lower costs.  Yes, this story still has some time to play out and the kirana shop still has some tricks up his sleeve – but we’re at the beginning of the end.  Even if the current generation of neighbourhood shops survive, it’s hard to see the next generation taking up the mantle.  More likely they will become a franchisee of another chain to leverage their assets and relationships.

So, in what way are modern Indian retailers better than foreign retailers?  A week back, a political party in India re-emphasized its opposition to foreign retail with the argument that “multinational corporations with their predatory pricing and large cash reserves can crush India’s existing retailers”

Umm.. isn’t that what modern Indian retailers are doing anyway?