Tuesday, December 26, 2006

Is Wikiasari Google killer?

Wikiasari is a new community based search engine being launched by Jimmy Wales. For those of you who don’t know he is the founder of Wikipedia which really showed for the first time the power of community and in my opinion it is also the first killer product based on user generated data. I am not going to talk about wikipedia because everyone knows how useful and great it is .The basic reason for this posting is Wikiasari I think this might be the real product to compete against Google .

First of all there is little information available about wilkiasari except that, it will use user/community input to generate search results which is different from what Google for example does –Google basically uses algorithm to create search results without human interaction. There have been several attempts before also to generate search results based on user ratings or user bookmark data etc but none has been successful to beat algorithm based Google results. It is widely accepted fact that user/community input based search engines would be better than algorithm based search provided someone gets the right way to use user/community input. It is like an open secret that everyone knows but no one knows how to get it right, there are lot of examples like everyone knew digital music players (mp3 players) is big thing many attempted to enter that space like creative, Sony etc but it was apple with ipod and itunes that got it right and was successful.

I think wikisari might be the search engine that will finally get the right way to use the user input ,the reason for my thinking is simple that its founder knows really well how to use community .If there is anyone who can get it right it would be him his records speak for itself when he started wikipedia people questioned that how can user generated knowledge be equal to Britannica were the content is generated by professionals but he showed the way and now wikipedia is accepted as trusted place to find information .

So in short Wikisari with right approach and right people driving it now has the real chance to be a Google killer.

Thursday, December 21, 2006

IPhone, Google Phone what next?

Today I was reading articles about Google phone and I have been reading similar articles about Apples IPhone over last few months .One question that has always poped in my mind is why is such speculations about these 2 companies in general and also pertaining to their speculated phone plans in particular. In this posting I try to put my thoughts and answer to those questions.

Both Apple and Google have been phenomenally successful companies in post dot com bust days, Creating a legions of fans both in consumer and stock market world .Both these companies offered easy to use products and were able to monetize their success with consumers into real profits gaining them star status in stock markets. Both these stocks have high valuation compared to their counterparts in their industry with PE of 58 for Google and 38 for Apple. Which basically means markets expects their financial performance in future also to be spectacular. So what it means in reality to these 2 companies is that they should churn out again world beating products like Google search or Apple Ipod to generate high growth and justify their present high valuation .Considering the fact that both these companies are leaders in their respective markets with high market share they both are forced to view market opportunities in other industries .But in reality there are very few industry or segments were there is huge revenue potential to justify these companies attention .As I have already posted in my earlier postings I believe one such field is converged device markets space with smart phones as first products with huge potentials in near term future .So it is quite logical for analyst and industry observers to speculate that these 2 companies will launch phones .

Having put my thought on why there are speculations about these companies launching phones in earlier paragraph, I will now try to put my thoughts on what are the chances that these speculated phones if launched will be successful. First I would say it will be really challenging task for both these companies to develop and launch even a moderately good phones .But the markets expectation is that they would be able to launch phones that not only leave up to their brand name but also challenge the industry leaders which according to me too much to expect .Some of the reasons for such pessimistic view are

  • Mobile phone is still complex industry both because of technology involved and also due to non existent standard hardware architecture .What it means is it is not easy for new players to come and produce good phone without prior experience and IPR in this industry. So they can’t rely on ODMs alone like in other electronic and PC industry. One example to prove my point is Microsoft is working with HTC for at least 3-4 years now they are able to produce decent phone after several mediocre attempts. So both apple and Google have any prior experience or IPR in wireless handset industry are in serious disadvantage.
  • Customers: Even today mobile phones major sales channel is mobile operators which mean phone manufacturers need to work with them to produce operator specific variants which are not easy especially for company like Apple which is known to be company that loves to control total user experience. And wouldn’t like to make compromise with operators on this issues.Ofcourse they can try to sell directly to consumers but without operator subsidies for device the price wont be attractive for mass consumption meaning it will remain niche market.

So not limited to above 2 points but also due to many other reasons like competition from existing well established brands like Nokia, Motorola I think the chances of apple and Google pulling of successful products in this space is very low –But at the same time if they eventually launch phones as speculated and are truly successful it would be really a remarkable achievements and proves that both these companies are really not ordinary companies.

Tuesday, November 21, 2006

X-Series Do or Die for 3!

For those of you who have never heard 3, it’s a pan European 3G only Mobile operator owned by Hong Kong based Hutchison Whampoa Limited .3 announced last week that they are launching X-series Mobile broadband offering which allows consumers to unlimited data access at fixed price similar to what fixed broadband users are used to .I try to explain why this is such big thing and according to me has a potential to disrupt the existing business of mobile operators.
To begin with 3 was one of those who bid and bought 3G spectrum in Europe at bloated prices in late 1990s on top of it 3 was new entrant with plans to build pan European 3G only network .Basic Idea being that they thought that 3G and its services is going to be real killer and its worth investing huge capital to roll out the network and service. Of course it is true that all other mobile operators like Vodofone, Orange, and T-Mobile also banked on 3G while bidding for spectrum along with 3 but one major and crucial difference between 3 and others is that 3 is pure 3G operator while others are dominant 2G players with already successful 2G business. So what happened between late 1990,s and till now 2006 as it is evident now is that other than 3 other operators after the tech bust downgraded their 3G expectation and tried to concentrate on 2G at the same time rolling out 3G in much more conservative way. But 3 which had relied on 3G had to rollout network and services in more aggressive way like bundling huge voice minutes in their basic 3G plans and also trying to lure customers with its own data services .As it turned out that all these actions didn’t help their bottom line and their own 3G services uptake being low and forced to improve their financials fast they were forced to think differently to lure customers and one important initiative in that direction is X-series launch.
Today most of the mobile operators who have launched data services have launched data plans which is based on the concept of charging users based on how much traffic they generate.(i.e. users have to pay a fixed price per MB of data they send or receive )similar to early days of fixed broadband plans. Basic Idea or strategy is that operators would like to offer their own services at fixed price per service which would include data costs example: In US Cingular, Nextel and other have launched mobile phone based navigation service which cost user 6-9 $ per month which includes data costs, By using this strategy they would like to control the services that are delivered to consumers and also have good margins. In short in future as and when most of the mobile services including voice are going to be delivered on packet network they wouldn’t like to be like end up like Internet service providers (ISP) just providing data pipes at fixed cost. So this is a kind of common strategy the entire mobile industry agrees and adopts including 3 till recently.
Due to the reasons mentioned earlier as 3 was forced to change their strategy they launched X-series .which basically provides unlimited data access to consumers at fixed price, ofcourse 3 is also bundling some of common internet services by partnering with Google, Yahoo, Skype and other big internet brand name so that these partnered services work seamlessly out of box. But the crucial thing from consumer perspective is it is unlimited data meaning that consumers can pick and choose their own service and even replace some of the rebounded service at no extra cost .So basically allowing access to internet same way as we do with fixed broadband believe me its big change compared to the present state .
Finally if this service is successful it will bring down 3 margins further but at the same time it increases its revenue and customer base to which if it is innovative can provide its own services and make margins.
Most importantly if it successes then it force other operators at least in Europe to offer similar services meaning forcing them to abandon walled garden approach to data and embrace open internet approach to data. It is also beneficial for handset vendors like Nokia who have invested in open mobile SW platform like S60 and smart phone development as it is most likely that smart phones would be the phone of choice for consumers using unlimited data plans. Most importantly it gives consumers freedom and choice to services.

Sunday, November 19, 2006

Motorola and Qualcomm VS Nokia

Motorola last week announced that it will use QUALCOMM chipsets for its 3G phones, Its already using Qualcomm chipset for its CDMA portfolio both 2G and 3G but this announcement extends it to using QUALCOMM chipsets for WCDMA (European or GSM evolution to 3G) phones .This is significant development for overall 3G handset market and in particular to Nokia . This posting tries to explore the reasons and its implication of this deal.

Before going into details of this deal let me try to paint the current 3G market place broadly. Today we have basically 3 competing technologies for 3G namely CDMA 2000, UMTS and TD-SCDMA .CDMA 2000 and UMTS provide evolutionary path to their respective 2G technologies namely CDMA and GSM.,While TD-SCDMA is home grown Chinese version of 3G technology. GSM is dominant 2G technology having 80% of total 2G market place with rest of the market covered by CDMA.CDMA has dominant presence in US with 2 namely Verizon and Sprint-Nextel of top 3 biggest mobile operator using this technology and has also presence in Brazil, China and India but recently there has been news that both in Brazil and India the CDMA operators are planning to migrate to GSM .So when it comes to 3G it is oblivious that GSM operators will evolve to UMTS and CDMA operators will evolve to CDMA 2000.As discussed above UMTS is going to be dominant 3G technology and of course CDMA 2000 networks will also exists but predominantly only in US ,Which means Motorola number 2 handset vendor in the world needs to have good market share of UMTS(3G) handset even to maintain its current position .

Today 3G phone markets is dominated by Nokia because of its technology leadership in WCDMA and also its scale which translates into its ability to produce cheapest 3G phone which in turn translates into great market share and margins.Nokia uses its own radio modem chipset and Texas instruments (TI) Application processor in its 3G phones and also collaborated with TI to design one of the world’s first single chip WCDMA chipset i.e. both radio modem and application processor sits in a single silicon .Which translates to smaller and cheaper phones giving Nokia further edge against Motorola in WCDMA handset space. On the other hand Motorola nearly 2 years back spun of its Chipset business into separate company called Free Scale. This was recently bought over by private equity investors moving Freescale further way from Motorola. Motorola was cornered and had to look out for external silicon partner to have any chance to fight Nokia in 3G phone market.

Qualcomm a wireless technology provide rose to fame and made most of its money from selling its CDMA chipsets and licensing its CDMA Intellectual property Rights (IPR) .When its come to CDMA it has most dominant position both in terms of IPR and CDMA chipset market share As discussed earlier as CDMA technology market share dwindles and CDMA camps 3G technology only dominant in US, it needs to expand into GSM and UMTS space .WCDMA the radio technology used in UMTS is built on basics of CDMA technology which means some of the basic IPR of CDMA is also relevant for WCDMA and which gives a logical edge for QUALCOMM because of its strength in CDMA.Which it would like to use to generate its second wave of revenue stream .Precisely this issue has landed them in confrontation with Nokia. Nokia claims to have maximum number of essential IPR in WCDMA space and would like to get license revenue for it from Qualcomm same way as it pays to license CDMA IPR from QUALCOMM for its CDMA phones. But QUALCOMM as it tries to enter into WCDMA space with its chipsets claims that its IPR portfolio is superior to Nokia and it doesn’t have to pay anything. This conformation between Nokia and QUALCOMM has not yet concluded the result of which has profound impact on Qualcomm ability to make cost effective WCDMA chipset which has impact on its ability to take market share in UMTS handset market .

As I tried to explain earlier this agreement between Motorola and Qualcomm looks like a logical alliance to fight against a common enemy Nokia .From Nokia perspective this is the strongest challenge that they may face in its race for 3G handset market leadership positions.

Sunday, November 12, 2006

Blyk is it killer service?

Blyk is Pan -European free mobile operator .yes you have read it right they are planning to offer mobile service free of cost based on advertisement model. You have heard a lot about free WLAN access but free regular mobile service which most of you would be paying nearly minimum of 30- 50 Euros per month is going to be offered free is hard to believe but if all goes well according to this company they will be launching this service in UK in mid of 2007 and soon expanding to rest of Europe.

Lets start analyzing this company and its model from checking who are its founders .It is started by none other then former Nokia president Pekka Ala-Pietilä ,which is one of the main reasons which makes me feel that this is serious company and not a dot com kind of company trying to ride the advertisement based success of Google. The company as not disclosed many details except that its services are free and revenue model is based on advertisement so it leaves people like me to speculate on what kind of model and services it can be. To begin with my primary assumption is that this doable the reasons for this are

  • Due to convergence and emergence of VOIP technology the cost of per minute voice has come down considerably making it this kind of free service possible .For example skype founder recently said cost of voip call is so negligible that when delivered in volumes it is almost free which made them to provide skype PC to PC calls free.Ofcourse VOIP PC to PC is different from mobile calls but there are indications that cost of mobile calls are heading in same direction which is making some operators in UK to bundle unlimited UK to UK mobile calls as part of decent monthly subscription plans. So if Blyk comes up with smart way of delivering most of calls on voip making cost per minute almost negligible they have big piece of puzzle solved.
  • Blyk is MVNO meaning that they don’t have to build capital intensive network and bid of scare and costly spectrum they lease network from exiting operators at whole sale price .so which means they don’t have much of fixed cost and can easily expand as customer base grows .Of course European regulations regarding MVNO also help them
  • Most important thing is if advertisements are delivered in a non intrusive way this medium (i.e. mobile advertisement) has potential to be most important and effective medium for advertisers even better then internet PPC (pay per Click model) .Because this not only delivers all goodies of internet based advertisement but has potential to take it better level in terms of targeted and timely advertisement using both mobility and location metrics and tools .So in short it has potential that advertisers may shell out more money then in pure internet model. This means that theoretically Blyk potential revenue opportunity is enormous.

So after going through things in favour of Blyk let’s see some potential huge problems

  • Most importantly these kinds of free services have been tried out unsuccessfully in 1998-99 in South Korea .Recently Xero an new American MVNO with 300 million $ funding plans to start partial advertisement based services where consumers by seeing or listening to advertisement can accumulate free voice minutes. This service seems not to have picked up so in past none of these kind of services have picked up. So based on history Blyk chances look bleak but again it might be Blyk chance to create history.
  • Another big hurdle is typically for this kind of service to work there needs to be decent number of customers ideally in millions and definitely not in thousands because as discussed earlier more the customers lesser would be cost per minute and also most importantly from revenue generation side advertisers are not attracted by small numbers as their cost of producing mobile specific advertisement content may not work out .So in short from both cost of operation and revenue generation side it is absolutely must that this kind service gather quickly good number of customers to keep it rolling .which is typically very hard thing to do .But again you may never know the real power of free service .

So in all I would say this company is certainly a company to watch in 2007 .It has great potential to disrupt entire mobile operators space and become next Google or at the same time high chance of failure and become yet another failed company .But I hope it succeeds.

Sony Ericsson buys UIQ

Sony Ericsson (SE) announced that it is buying UIQ.For those of you who are not aware of UIQ its subsidiary of Symbian providing UI layer on top of symbian OS.UIQ is the UI layer that runs in SonyEricsson popular P900 series smartphone.offcourse no financial details were disclosed about the transaction by both parties .I will try to put my thoughts why did SE buy UIQ and what is the future looks like

To answer the question why did they buy lets try to discuss about symbian ecosystem.Symbian is the dominant Smartphone OS with more than 70% market share.Symbian similar to Linux world doesn’t provide its own UI layer but there are many options available for mobile manufactures like S60 Nokia’s own layer on top of symbian, UIQ from UIQ technology which is subsidiary of Symbian ltd and MOAP which is UI layer by NTTDocomo.But if you look closely which of these UI layer ,its Nokia S60 devices that accounts nearly 60% of generic Smartphone market share and close to 80% of symbian devices market share .Rest 20% of symbian devices are dominated by MOAP in Japanese mkt and also UIQ devices whose biggest customer is SE.Now Symbian itself is privately owned company with Nokia being the biggest owner with 47.9% followed by Ericson and SE combined together hold 28% and rest is owned by Panasonic(10%) ,Siemens (9%) and Samsung(4.5%).As you can see Nokia is not only the biggest share holder but also the biggest customer of symbian .It also as S60 layer on top of symbian which it licenses to other symbian phone manufacturers like Samsung,LG etc and UIQ is direct competitor to it .UIQ as mentioned earlier is a subsidiary of Symbian and had SE has its major customer .In this environment it is oblivious that Symbian shareholders would not be interested in pouring symbian money into UIQ development in long run so my guess is that since SE was dependent on UIQ was forced to buy UIQ and continues it development same way as Nokia does S60 and in process making symbian as pure OS vendor .

Now lets try to predict the future of this acquisition.SE for now as said that it would like to keep UIQ has separate company and not only develop it further but try to license it to other symbian phone manufactures meaning that they would like to place it as alternative to S60.Ok that’s what SE aims to do but would it be able to do lets put this way that I am little bit pessimistic. Reasons are straight fwd

  • Today’s symbian volumes are coming from Nokia and its S60 devices they are not going to license UIQ
  • To develop and maintain SW platforms is very expensive with low volumes it becomes much more difficult .so with SE present volumes it may become difficult to develop and sustain UIQ.
  • UIQ will try to get other license but most other major symbian license like Samsung are already S60 licensee

So in short my thinking is that in market for symbian phones there is space for only on UI platform and that at this moment seems to be clearly S60 so future of UIQ looks bleak but again who knows SE may become biggest Smartphone vendor which gives the volumes to sustain platform development cost .:)

End of Mobile email Consolidation?

Motorola on Friday announced that it is acquiring Good Technologies for undisclosed amount. Good Technology a Santa Clara based company which provides primarily email solution for enterprise customers. Though the amount is not disclosed I can make an educated guess that it should be around same amount as that paid by Nokia to acquire Intel sync (450 million dollars).In Mobile email segment RIM (makers of Blackberry Devices) has around 59 % market share followed by Intellisync with 9% and then Good technologies with 8% . This post tries to analyze wider implication of this deal on mobile email segment.

Mobile email or Push email (i.e. technology that enables access of email in your wireless devices like mobile phone PDA etc) is pioneered by blackberry devices (RIM).As the technology matured the other mainstream Mobile device vendors like Nokia, Motorola etc started offering similar services in there portfolio and even started producing devices similar in form factor to blackberry (Nokia E61 and E62, Motorola’s Q).around same time there started popping up device independent pure wireless email SW solution vendors like Intellisync,Good Technology,Visto,Seven to name a few noted vendors .Device vendors like Nokia ,Motorola typically provide support to many email solutions in their devices .But at the same time both Nokia and Motorola started to diversify into Enterprise Solution business in which email solution is first and import segment which enterprises are embracing now So they had to develop or buy companies with this technology .So Nokia acquired intellisynch and Motorola on Friday bought Good technology. Now life for independent Mobile email solution vendors like Visto and seven is tougher of course right now they are concentrating on Mobile operators to reach customers but as this technology matures and it becomes as integral part of devices the chances for independent companies to survive narrows down. My guess is that companies like Visto would be acquired by big companies like IBM, HP etc who are big Enterprise SW vendors who might be interested so that they can expand their offering to enterprise Mobility Space.

Thursday, October 26, 2006

Who needs UMA ?

Unlicensed Mobile Access (UMA) allows mobile operators to offer their mobile services over Wireless LAN and other such technology. So basically what it means in short is operators can now offer cheap VOIP calls.Inspite of operators worldwide embracing this technology as one of tools to fight both pure VOIP providers (Vonage, Skype etc) and other Convergences challenges I would argue in this posting that this may not be the answer nor stop operators from being just a bit pipe providers like today’s ISPs.
T-Mobile in US and Orange in Europe are first few big operators to launch UMA services but many other operators are planning to do same in the future .So from end user perspective what it means is for example if you subscribe to this new T-Mobile Service by paying 19.99$ per month + your regular mobile plan cost+50$ for new handset that supports this technology+WLAN Router from T-Mobile +of course you need to have some sought of broadband connection at home after having these thing, what you get is that you can make unlimited phone calls within US when you are in home or near any T-Mobile wi-fi Hot spots .So you may be wondering what is new you get from this technology compared to using regular VOIP service like vonage or from cable operator what you get unique is that you can seamlessly move between home and outside and your mobile phone uses appropriate technology seamlessly .
Mobile operators after rapid growth in 90s are facing this problem that their basic voice business revenue is slowly down as voice traffic is moving to VOIP and at same time they are not able to generate any new killer data service which could yield better margins faced with this solution they teamed up with network infrastructure vendor to come up with this UMA technology which basically allows operators to utilize wide availability of broadband at home and provide VOIP services themselves at the same time keeping close control over who enters their network .For more details you can visit www.uma.org .
Though it looks like perfect solution for operators problem I would argue that this doesn’t serve end-user (i.e. consumer well) and hence their success will be limited at best .Basic reasons are
Cost: Cost of UMA service is still huge compared to other solutions like Cable VOIP providers or pure VOIP players like vonage .The reason is pretty obvious Mobile operators had to invest on new UMA equipments and subsidies UMA phone cost.
Smartphone’s: In future when there is wide spread availability of smart phones end-user can install skype or Google talk kind of VOIP clients as they do on PC and they have VOIP solution at no extract cost and more over this solution would work every where unlike UMA which works only in home and other restricted environment .Check www.fring.com if you have Nokia S60 Smartphone you can download free Google talk and skype client.
Unlimited data Plans: Soon operators will start launching widely fixed prices mobile data plans like what is available in broadband connection when this happens coupled with Smartphone availability makes UMA irrelevant. Already some operators like T-Mobile in US and Vodafone and orange in Europe have started offering this kind of plans but as it becomes popular it becomes even more cheaper for example in Finland you can get 1Mbps unlimited mobile data plan from Elisa for 30 euros.
So in short my argument is Mobile operators can invest and build these networks like UMA or IMS to offer services in controlled way but because the services they are offering can be delivered independently also without these kind of specialized network infrastructure at much cheaper price their services will not take off and finally they will be forced to just provide data connections (Data pipes) and let the consumers choose which service they would like to use in similar way to internet .I hope they release sooner than later and save money buy not building these kind of specialized networks .

Monday, October 09, 2006

Impact of technology on Financial services industry if any !

Internet and other technologies have significant impact on almost on every industry some of these industries business model have been significantly modified.Oh you may be wondering this are known issues and that why am I writing these in my posting, The reason is recently I stumbled upon one website which is offering a kind unique financial service though at first I was impressed by its services but soon it struck me that how much unique that service is in financial industry. My point is that financial industry which basically the kind of industry most suited to embrace internet and change their business model has not changed a bit especially in terms of business model .
Financial services industry which encompasses everything from personal banking to investment banking which forms the heart of capitalism is most suited to be most impacted from internet .Reason for this is at the heart or basic function of this industry is to act as middle player between the movement of capital (money) from where it is available to where it is needed. so in old days these middle player where much needed because of lack of communication and information about both players involved in the transaction, so theoretical internet which enables both communication and information flow across the globe should have drastically changed this industries landscape and reduced the other industries dependence on it .But what happened in reality is industry embraced internet and other technologies to improve internal productivity but protected their basic business model completely .
But slowly we are seeing some attempts to change that, of course they are very very minor attempts .I am trying to list some of them
Google attempts to use internet and auction based system to allocate its shares in IPO is one attempt to remove investment bankers service for that activity.
Prosper.com: Interesting service on net the one I mentioned in my first paragraph. its kind market place where individuals group together to finance another person .So essentially acting like some sort of bank but the whole process is transparent and more benefiting to individuals .Of course the risk mgmt and other things are still there but as this site attempt to mitigate that by using credit rating among peers I hope some of these methods will be successful. Think of similar kind of solution for raising capital through debt and other instruments be opened up and transparent to be participated by individual rather then the present structure of multiple layers then it may impact hugely the business case of many banks .
Zecco: A start-up that will allow consumers to trade stocks for zero commissions, versus $10 to $20 that many online brokers charge today.Intrestingly it has quite powerful backers like backers of Skye ,former Dutch Coco Cola CEO.It is intresting test case .This if successful to attract not only individual consumers but also fund mgr and other big traders then Brokerage firms revenue stream may be impacted -
Another very small example is that nowadays small web 2.0 companies are sold in auction in EBay .Think of situation were there is open trading place for companies themselves .The significant part of IB business would be effected .

Of course those entire example I put fwd are very minor but those ideas really catch up then we can see lot of changes. The most important thing why it has not happened is due to the fact that when it comes to money individual wouldn’t like to experiment and take risk but rely on time tested and trusted banks even though it may cost in terms of money .But my thinking is that over period of time as some people dare to try like in prosper.com other people will join later as they see it working and also much more beneficial to them.

Tuesday, October 03, 2006

Opensource router takes on Cisco

As I had written in my earlier posting about voip and open source and its impact on telecommunication network equipment business I would like to present another example that proves my earlier posting .I was reading this article in redherring I would recommend its worth to read it.
In short a start up called Vyatta is providing open source based router sw bundled on standard server HW from dell. For those of you who have been working or associated with telecommunication business know how radical this change is compared to the present models and practices.Ofcourse this wont make Cisco out of business or infact effect thier bottomline immediately ,but it is one clear trend if continues and gains momentum like it happened in pure SW area, then we may expect drastic change in business environment .Initially atleast this startup is targeting at small enterprise were this product suits well.

Saturday, September 16, 2006

Open source and VOIP is nightmare for Network Equipment vendors

Inspiration for this post is an article I read in Linux world about how an university made huge savings by shifting to open source PBX from Cisco one, for those of you who is interested in reading this article here is the link .Though I have been following open source projects in the field of telecommunication in general for more than 4 years I have never been more convinced then now that these projects are going to impact networks vendors bottom-line and hence a serious opportunity for other players to entire the space .

It is pretty clear and accepted fact that Linux in Operating system space, MySQL in Database space, JBoss in App server space to name a few not only posed serious threats to traditional Software vendors but forced the industries business model for ever .IBM is a solid and biggest example the company that not only embraced open Source SW but also used it effectively to turn around its business and revenue from pure product based to today’s predominantly services based business. It is worth to note that before the rise of Linux which basically formed the nucleus/heart of open source movement the commercial proprietary SW ruled the market and had good pricing power making SW industry as one of the elitist and high margin industry .But the whole landscape has changed in span of little more than half decade .My point of writing this issue is to form a basis for comparison with what is happening today in telecommunication equipment business.

Telecommunication industry has not changed much from business model perspective from the days of first PSTN network nearly more then a century before. as a result of which you can see handful of big players who are there from nearly century controlling most of the market (eg Ericsson,Alcatel,Lucent to name a few).But things are changing rapidly after internet boom with IP establishing itself as undisputed layer for carrying traffic which resulted and gave opportunities for companies like Cisco to be created .But though there was some rationalization happening w.r.t to networking technologies but business model ( i.e still customer needs to shell out per licensee fee) didn’t change .But now I think with advent of VOIP to mainstream business coupled with open source movement in this field would definitely change the landscape,VOIP forms the nucleus/heart of open source movement in telecommunication industry same way as Linux formed the heart of open source movement in SW industry. Now the interesting thing to watch is which big telecommunication player would embrace open source to propel it next stage same way as IBM did it in SW industry? I guess there needs to be similar kind of crisis as experienced by IBM in one of the big telecommunication players for it to embrace it .So far telecommunication vendors are trying to merge among themselves to survive but it wont be too long when one of them at least is forced to embrace open source ecosystem and subsequently change its business model. Which may well form the basis for their survival in converged world also?

Tuesday, September 12, 2006

European operators Convergence Strategies

This posting continues on the convergence topic but from different player (i.e. Operator) perspective. Trigger for this posting are two separate announcements from two European telecom giants. Telecom Italia confirmed that it is restructurings its telecom business into two separate units one focusing on fixed business the other on Mobile .Where as at the same time worlds largest mobile operator Vodafone announced that it is teaming with BT (British Telecom) to provide fixed broadband service under its brand to its UK customers .Idea behind this posting is to try to figure out underlying strategies behind these companies.

Telecom Italia presently has 40 billion Euros debt at the same time the group has quite large sized fixed (includes broadband) and mobile business. Many pure large mobile operators like Vodafone would envy and love to have such strong fixed business. Basic reason being that in converged market if they own both business they can bundle services better and in turn increase not only customer base but also churn out better operating margins. But for Telecom Italia story is different after failing to leverage both business together they announced that they would separate it into two separate independent entities eventually as many expect that it may sell its separated mobile unit for an estimated 35 billion euros .which could be used to clear debt and in turn will allow it to concentrate on fixed business .Already it has announced content deals with Fox to stream its movies for its broadband customer base .So in short strategy seems to be that it would concentrate only on fixed business but the same time expanding itself as Multimedia content provider. My view is that they may partner with some mobile operators to bundle services if the market looks attractive for bundled services .instead of owning all network to deliver those services in-house.

Vodafone on the other hand which is presently a pure Mobile player it has been speculated for long time that it would acquire some major fixed player ,took a another interesting but similar approach ,it tied up with BT to offer broadband services under its brand name in UK.Vodafone in 1990s was known for acquisition based mobile growth strategy .the underlying logic at that time being that scale matters and being a dominant global pure mobile player gives the required edge to maintain high growth rate .But in last year or so as in western markets the mobile subscriber growth totally slows down with no significant data revenue streams visible at the same time to offset the slow growth on pure mobile voice revenue ,Vodafone was under severe pressure to have a convergence strategy to sustain growth .The option was to go into acquisition spree as at did in 1990s only this time target being fixed Telco so that they can offer bundled services . Or partner with fixed Telco. It is with BT announcement that it is at least for now clear that it would pursue partnership route to converged services.

So basically one thing that can be concluded is that 2 big operators find that partnering route to converged services is better then owning all networks themselves to deliver those services. From my view point it makes a perfect sense to partner then to own all networks themselves .Reasons are many but most important among them is with present technologies there are no synergies to own all networks i.e. there is no significant advantage to be gained .The situation may change in future when single network can provide all services with good quality which in my opinion is not true at least at the present stage .Though you may argue how about IP as underlying tech to deliver all services but in my opinion we may have to really wait for some more time to really happen because with present available deployed network technologies none has bandwidth that can provide all services .Let me leave to next posting what I mean by it and try to argue with proper examples.

Wednesday, September 06, 2006

Nokia Buys Again

Nokia buys again this time a Location based application provider Gate5.As suggested in my earlier posting that Nokia will buy more application providers in different strategically important domains this buy from Nokia justifies my statement. In this posting I will try to put my thoughts why Nokia bought this company.
To begin with Gate5 is a smaller company then their recent acquisition Loudeye.It has 70 employees and is based out of Berlin Germany. The financial terms were not disclosed but it definitely has no impact on Nokia quarterly results which indicates cost of the aquisation should be very low .Gate5 basically has Navigation applications portfolio targeting both in car navigation systems and Smartphone and PDA market .The part which interests Nokia is navigation application portfolio for S60 Smartphone. So the basic logic and reasoning behind this buy seems pretty clear that Nokia would like to ship this software as default in their high end N Series Devices which are expected to have inbuilt GPS receivers’ question might be is why couldn’t Nokia partner with some other more established and popular navigation SW vendors like Tom-Tom ,Route66 or Navicore who also have similar offerings My guess is that Nokia would try to push in long term to have GPS revivers in mid range phones also and would like to ship navigation SW as part of basic device offering so as to have a competitive offering. So in such a scenario to have cost effectiveness it is better to have application in house rather then through partnering process. Another interesting move might be that they start bundling this navigation SW with their Bluetooth enabled GPS receivers so as to offer complete solution rather then selling just GPS receivers to customers like now .So in all it makes sense to acquire company like Gate5 .
Another interesting thing to note is both gate5 and Loudeye buy are though strategically crucial for Nokia they went and bought small companies with tech assets rather then buying big companies with already established customer base for example instead of buying gate5 Nokia could even have bought much bigger and established company like Tom-Tom .This basically shows that Nokia thinks it has great brand value and the converged space is still infancy stage and hence by acquiring small tech focused companies today it would be in great position in future when this market hots up .And another thing is that Nokia would still like to be primarily device vendor but at the same time wouldn’t like the value to be taken away by SW and application service vendors hence would like to bundle crucial applications and services itself in devices and use it as differentiating factor w.r.t to competitators.I would say all of its competitors including Motorola are lacking or unclear about their strategy in this space i.e. converged device space)It would be definitely would be good to see how these companies react if and when this market of truly converged devices happen and also worth to watch is weather Nokia startergy really pays off .

Tuesday, August 22, 2006

Nokia Buys Loudeye what next?

Nokia buys Loudeye a Seattle based company for 60 million dollars recently. For size of Nokia this deal is nothing financially but a significant strategic move .It also indicates company’s intention to move fwd in new direction. I will try to justify my statements .As noted in my previous posting regarding zune about changing value chain and relevance of horizontal business in new converged space, this move from Nokia fits into that space.

By buying Loudeye Nokia would be launching some kind of music download service the scope and functionality we need to wait, but it looks like it will be competing with itunes and other service available today. Some analysts were questioning the logic of this move because it puts at risk Nokia's relationship with operators who are planning or have launched similar services themselves. In my opinion even though operators are big and important player for Nokia today but at the same time considering long-term future it should position itself in right direction in that context this Nokia move is strategically important it clearly shows Nokia willingness to look beyond present and also take some amount of risk so that they have right things in place for converged space.

So what do I mean by this is simple that in converged space in which digital music is one segment the value in the chain is not determined yet i.e. who make most money is not clear weather it is converged space device vendors( like Nokia,Apple,Samsung) or Horizontal components’ vendors (Like Microsoft with horizontal SW,TI with hardware chipset) or pure network service providers (Vodofone,Orange,Cingular) or application service providers (Google,Yahoo,iTune,Youtube etc).Of course all these segments and players are required but most important thing is which among these segments were most money will be made is big question and would be answered only by time . In this uncertain stage all the above listed players are trying to position themselves either by entering into each other segments so that they would be able to capture most value.

So Nokia a dominant mobile phone vendor is trying to position and transform itself to face new converged market place. First of all it is positing itself as major player in converged device space by launching different products with multiple capabilities most prominent among them is N series devices which have multimedia capabilities like camera, Music and video playing capabilities. They are trying to enter horizontal segment by licensing there dominant SW platform S60,the basic motivation to enter this segment is to make sure that other horizontal segment players like Microsoft doesn’t take away major portion of value in converged space. Now that leaves then service space it is here Nokia has no presence and acquisition of this new company helps it establish one service in music space. But of course for it to be truly big player in this pace it not only has to expand its service portfolio but also link it seamlessly with their device offering in similar way as apple did it for music. So it is clearly trying to be application service provider and may acquire many companies in this segment in future. Service providers like You Tube may be attractive target .I will hold my thoughts about potential targets for Nokia for my next posting.

So basically at this stage of converged space it seems that services are going to be critical component of the value chain and also important is to tie and bundle devices with services.

Saturday, July 22, 2006

Microsoft announces Zune is this the way forward?

Microsoft confirmed their plans to launch digital media player and associated ecosystem which looks similar to ipod ecosystem.Ok this news is reported extensively in media my aim is not describe zune or predict weather it can make a dent on Apples ipod market share .But the idea here is to explore what does this move mean for future of digital players (which can include mp3 players, Internet tablets, Smartphone’s or so called converged devices) ecosystem.

If you go back in history to the time just before PC revolution the whole concept of horizontal hardware and software platform concept (i.e. like Windows + Intel platform (Wintel)) was not in existence .Apple, IBM and many other companies at that time introduced PCs with both HW and SW built in house, Infact this kind of system is known as closed systems and even Microsoft came into existence as a subcontractors to develop DoS OS for IBM PC. It was later that Microsoft and to a Large extent Intel which joined forces to create this new ecosystem of hardware and Software platforms, i.e. Microsoft and Intel by themselves will not produce PC but will supply horizontal platforms so that any other player can combine both these platforms and produce PCs.As result of this new ecosystem new players like DELL could enter and change the entire competitive landscape of the PC segment .I would attribute the high rate of growth of PC to this ecosystem because this lead to competition in market place which in turn lead to reduction in prices. But at the same time if you look at Apples Mac story during the same period even in spite of being technically superior product lost market share and was relegated to a minor niche player in PC segment .Some of the business pundits call Apples reluctance to give its superior OS as software horizontal platform to others including competitors as on of the biggest business blunder as they predict that if apple had horizontalised the sw platform Microsoft had no chance of survival .But that is any way history .one thing that is clear is Microsoft strategy of horizontalisation was more superior and successful strategy to Apples closed ecosystem strategy .

So my big question is Microsoft strategy of horizontalistion (Microsoft’s Music SW which is licensed to many HW mp3 vendors like iRiver) or Apples closed ecosystem (ipod is another great example of closed ecosystem) is most suitable for new digital world?

Ok now you may say that Microsoft had already embraced closed ecosystem in gaming console market by successful introduction of XBOX to compete against Sony’s Play station .But my point is Microsoft entered gaming console market dominated by Sony and Nintendo for the first time with Xbox they never tried to change ecosystem unlike in music player segment were first it took PC like approach relaying on many other players to make digital media players by just providing Software .But by the announcement of zune it has accepted that the old model was not working and it is forced to take Apples approach of closed system to compete with iPod .So big question is Microsoft going to revisit its strategy in many other segments were it has tried to play pure software vendor role and has not faced any considerable success .one such very lucrative segment on top of my mind is Smartphone segment so far it has licensed it its windows Mobile platform to many vendors like Motorola and Samsung without much of success to gain considerable market share from Nokia in that segment .Whatever little success that it has got in Smartphone segment has been in Enterprise segment and that to especially in North America. While Nokia which seems to be main rival to Microsoft in that space has not only has 60+% market share by its own phones but also played Microsoft horizontalisation game by licensing Nokia Smartphone SW platform (S60) to many of its competitors like Samsung,LG, Lenova etc.

Though I have raised more questions then answers but one thing is for sure all companies are fundamentally reevaluating their ecosystems and business models so that they are not left irrelevant in new digital converged world. Consolidation that is happening in industry (see earlier postings on this topic) is one such measure after reevaluations. Who knows it may be the time for Apples closed ecosystem to succeed.

Saturday, July 15, 2006

Internet + US Communication Bill = Walled garden

For those of you who are not aware of New Communication Bill (also known in press as Net Neutrality). In US senate please search Google you find tons of articles explaining/debating about this topic. As title of my posting suggests at the heart of the bill is this issue of how basic Internet works should work?

Though internet is supposed to be international network of service but in practice it is US and its policies that have single most influence on its working. The new bill if passed would break so called internet neutrality (i.e. all data traffic are treated same on the network irrespective of its type(voice data, file data etc),source of origin or destination).The new bill would allow the telecommunication companies which own the physical networks through which internet traffic flows, to control and differentiate the traffic in their network .So in simple terms it would allow Telco’s to create paid network ways for data like the present paid motorways where entering traffic at toll gate has to pay a fees to enter the roadway .Unlike today were there are no such paid data traffic ways and hence today Telco’s pay fixed interconnect charges based on bandwidth capacity between themselves to carry traffics of each other but are not allowed to give differential treatments based on particular traffic .

If new bill is passed in present form it has potential to curb internet as we know today .One small example to illustrate what it can mean in practice is some of websites will appear faster to end user compared to the others even though all sites are hosted on same power servers and connected with same bandwidth data pipe to the network .The reason being that faster websites would have paid Telco toll fees for the traffic that originates to and from its server so that it would be given preferential treatment in their network. Today it is not like that if you access multi billion dollar company google.com or a few thousand dollar a new startup from network perspective the data traffic are treated similarly .

Initially Telco’s are lobbying so that they can introduce so called convergence solutions (i.e. delivering TV, internet, Voice calls on a single telephone line i.e. exists in home) in a similar way how cable companies can and are delivering through cable .Telco’s claim that without the ability to differentiate traffic they cant deliver good quality IP TV services which in fact would be competing with TV services delivered through traditional cable. another point is as cable companies are providing Voice services using VOIP and competing Telco’s in their traditional space they should also be allowed to provide TV services and allowed to compete with cable companies in their traditional space .Though I tend to agree with their claim to deliver TV kind of services they need to differentiate the data but my worry as that of many others is that once you have infrastructure in place to do differentiate one type of services it is very easy and also not far fetched to imagine that they would like to differentiate other data traffic also. This would drastically change how internet works today .Infact it would make it a closed network delivering selected few services which are dictated and controlled by Telco’s. There is one example already existing i.e. mobile networks that are in available today more or less works as controlled networks delivering only few services like voice call, though technically they can deliver all most all type of services that are delivered on internet .Infect that in my opinion single most reason why data services have never picked up in mobile space as already suggested in my earlier posting on Mobile Web 2.0 .So in a way you can say if new bill passes then we may take present truly open internet to kind of closed network which some call “walled garden”.

Saturday, July 01, 2006

Do You have a question ?just dial +12123400849 !

This might be one of the shortest posting on my blog .I generally try to keep it more of analysis posting rather then posting some intresting news links and just one line comment about it .This time i couldnt resist from doing such a thing check this article out in CNET news New York Public Library
Isnt it worth considering that such kind of services ,is still best done by humans rather then google.com ?

Saturday, June 24, 2006

What is the future of NOKIA –SEMIENS Networks?

On Monday 19th of June Nokia and Siemens announced that they are creating a 50:50 joint venture called Nokia-Siemens networks by merging Nokia Network division and major part of Siemens Communication division .On paper this creates 3rd largest Telecom company in world with revenue of nearly 16 billion euros putting it at striking distance of both no 2 player Ericson ( around 16.5 billion) and No 1 Alcatel -Lucent (around 17.5 billion dollars ).so most of analyst and other players welcomed the move and agreed that this joint venture creates an opportunity to be no1 player in converged infrastructure space .My purpose of this posting is try to analyze the joint venture from product and technology perspective and not from financial number perspective as I am pretty sure those would have been done by Investment bankers who had advised both sides on this deal for which they would have received huge fees. As I had mentioned in my earlier posting on mobile industry consolidation these kinds of consolidations are Inevitable but is that alone enough to survive?

Now let’s look at the portfolio of each companies and their strength and customer base separately and then what would be their combined strength and in which segments they would be strong.

Nokia Networks: Before the merger it was No2 player in Mobile infrastructure space of Telecom infrastructure industry with Ericsson at Top position but the gap was quite bag between No 2 and 1 player.Nokia networks has quite strong product portfolio and IPR position in GSM and its evolutionary technologies like EDGE ,WCDMA ,HSDPA and HSUPA and also strong R&D investments in its long-term evolutionary path within the 3GPP standardization body .Nokia Networks is not a player in CDMA and its evolutionary path like CDMA 2000,EV DO and EVDV networks .On the Core Side of the network it has decent product portfolio to complement its radio network side of 3GPP network like in IMS product portfolio ,It has no presence in Fixed telecom infrastructure business though an attempt was made to break into broadband business but the product portfolio is very week compared to Alcatel who is the market leader. Then finally services side it is again no 2 behind Ericsson .Regarding its 150+ operator customer base most of them are mobile operators.

Siemens Communication: Infrastructure or network comprises bulk of Siemens Communication business .It has annual revenue around 9 billion euros with 70 % of it coming from mobile wireless side and rest 30 % from fixed Telco infrastructure business. Regarding product portfolio it was no 3 behind Nokia networks in GSM and its evolution path .Siemens had an alliance with NEC of Japan for 3G (WCDMA) systems and was very close to Nokia in 3G from market share perspective. another biggest asset of Siemens its strong position in Chinas version of 3G(SCDMA) which it had co developed with china government .If Chinese govt insists on deploying its version of 3G in china then Siemens will be in great position. Regarding fixed business it was quite decently positioned. It had quite broad range of product in different services like IPTV,Mobile TV etc.Regarding its customer base it has also around 150+ operator customers some of them are fixed Telco. In particular it has quite strong relationship with Deutuche Telecom and quite strong relationship with operators in Spain, Latin and South America...

Now coming back to how the combined company looks like ,It would not only create fortune 300 company but also a strong No2 in mobile infrastructure player in general with even stronger position in high margin 3G network business. Regarding converged market segment it would be in better shape compared to as individual companies. But it wouldn’t be in very strong position as touted in media its would have quite good portfolio in fixed –mobile convergence space but not in overall converged space .I will try to explain how I see converged space in my next posting .It would be quite strong w.r.t to operator relationship as there customer base complement each other nicely. Overall they are quite good positioned w.r.t to scale to play high volume and low margin emerging markets 2G business and in quite good starting point to develop Fixed –Mobile convergence portfolio and has already one of the best 3G position in world, But in long run i.e. 7-8+ years time frame when I suspect true convergence of access network and services with pure IP core/Backbone networks may play out I think this combined entity in present form may not be a winner.

Sunday, June 11, 2006

US Spectrum Auction

US Spectrum Auction a great news for US mobile consumers

In august this year 90 MHz of valuable spectrum in 1710-1755 MHz band will be auctioned by FCC in US .This would enable at least 2 to 3 new nation wide service providers to enter highly lucrative and growing mobile market. If you look at the present mobile service and player’s landscape it becomes quite apparent why upcoming auction is such a big thing, with potential to really change the mobile service space in favor of consumers.

Today US market is dominated by just 3 nation wide players Cingular, Verizon and Sprint. And couple of regional players. For me for the size and population of US this is totally pathetic condition which is pretty much evident if you look at the pricing structure and powers these players enjoy compared to rest of the world. One example to illustrate my point is the fact that most operators still have concept of airtime charging basically meaning that both the caller and called parties are charged when a call is made. This kind of practice existed is in most part of the world when mobile services were initially launched but consequently abounded except in US where still in continues just because of lack of real competitions.

FCC after freeing the spectrum from other government departments like department of defense etc at an expense of nearly 900 million dollars, plans to auction the much needed spectrum for advanced wireless services like 3G data services etc already some estimates suggest that 90 MHz may fetch government up to 35 billion dollars coming close to year 2000 Europe’s 3G auctions in value terms .My thinking is that this spectrum allows for 2 to 3 new nationwide carriers to enter the markets. Already some rumors are there that some of non traditional mobile players like cable service providers (ex: Comcast) may bid for that spectrum .some of these may bid so that they can build assets so that they can start offering converged bundled services. What ever may be the reason one things is for sure is that there is going to be quite good bandwidth available in the market which will start driving competitions and hence prices down.

Another thing that I think will happen is that more and more MVNO will be launched which will drive the cost down that has been the case in most part of Europe .Today without the new spectrum there are were little bandwidth available for launching mvnos but with new players entering the market with auctions they would be willing to sell part of their network bandwidth to MVNO so that they can recover some initial high capital costs, as they would not be able to immediately acquire huge customer base .There are already some MVNO planned in US who are planning to offer advertisement supported services to customers which by definition either allow to provide free or very low cost services .I hope this is just beginning of these kind of services.

So in short by 2007 I hope to see totally different and consumer friendly mobile service landscape in US.

Sunday, May 07, 2006

WINQUAL = WINTEL for Smartphone?

Microsoft announcement of its partnership with Qualcomm to push its presence in smartphone segment signals start of smartphone war between Nokia (S60 Platform) and Microsoft (Midowsmobile) to dominate the future huge smartphone market. This is good to consumers as competation drives down the cost and thus making it affordable to majority of population. As I had mentioned in my earlier blog mobile web 2.0 -2, that one of the key drivers is horizontalisation of both hardware and software platform for smartphones.This Microsoft announcement fits very well to this driver.

Nokia totally dominates today’s small but growing smartphone market with 70 % market share (smartphone segments includes handhelds also i.e. iPalq, palm pilots, Blackberry).With rest 30 % split between many players like RIM, Palm and other Microsoft platform based devices (both smart phone and pocket pc devices).It has always been predicated that it would be tough for Nokia to maintain that high percentages in future as smartphone markets expands. But according to me there were no serious threats apart of some minor challenges that have been suggested like Linux, Microsoft etc. The real problem has been that none have total E2E capabilities like Nokia (i.e. both Sw platform and HW knowledge and integration expertise).

For Linux real problem as is the case in PC industry is its too open and requires serious commitments to back it up from some big players to make it really happen .Big players are required because it requires long term investments and ability to make industry wide partnerships both hardware and SW so that some kind of minimum agreed standard otherwise the market would be fragmented and would not been seen as one platform .As of toady I don’t see any signs happening in this direction .Of course you might have heard some announcements here and there like Montavisata initiative etc but none of them have capabilities that I mentioned before to make Linux a real threat in smartphone segment .Having said that Linux may be real option in feature phone segment(i.e. below hundred dollar phone ).Were device manufactures may tie up with Linux vendors like trolltech or develop a their own flavor of Linux version to replace their existing in house OS which are becoming more difficult to maintain and add features as costs in this segments are falling down .Motorola for example is shipping low end phones with Linux .I expect this to continue in other device manufacturers also .So in short Linux in smartphone segment may not be real player at least in short term .

Now coming back to Microsoft the topic of this blog, I think with qualcomm partnership announcement they have moved one very big step in right direction to give real challenge to Nokia .The real problem in making smartphone has been SW platform integration with HW platform and this not only consume most of the time and costs, but adds little direct value to end user unlike new features additions. The only solution to this issue is by driving HW and SW platform horizontalisation and also to make base porting layer(layer that talks to hw platform and needs to be changes with changes in HW) with SW platform deliverables to device vendors this is exactly what Microsoft announcement does .So any device manufacturer may buy qualcomm chipset and take Microsoft platform which will include base port layer and make a smartphone in small amt of time and without much in house expertise in hw and SW integration work. This is especially required for Microsoft since its pure SW company and don’t ship them selves any devices and rely upon other device manufactures and bringing down cost for these partners is major criteria and this announcements helps in that .And also with its partnership with qualcomm Microsoft is trying to create some thing similar to WINTEL for smartphone only difference this time is instead of WINTEL it is “WINQUAL”. But is this going to have same kind success I think it has quite good potential but at the same time it is starting the race from behind Nokia (S60 with TI, ST Microelectronics, FreeScale, and Intel) who has great lead already in the race .So let’s see what happens but at this moment of time my money is with Nokia.

Wednesday, May 03, 2006

Microsoft to buy a stake in Yahoo ?

There is a story in wall street journal that microsoft is in talks with Yahoo to buy a stake in Yahoo. If this turns out to be fact then i think this would have not only big impact on how future xSP maket place develop but also marks a significant change in microsoft stratergy.
I presume fighting Google was the main reason behind this move from both yahoo and microsoft.If you look at the first quarter result of microsoft there is no growth in its MSN business compared to nearly 80% growth in revenue for google .Forcing microsft to make some real quick changes .Many analyst were expecting that microsoft will spend most of 2 billion dollar extra R&D spending in 2007 it announced would be on online service business.But I guess this yahoo talks comes as total surprise move from microsoft.But if you look back at its failed attempt to take stake in AOL, taking stake in yahoo might appear logical.
For me the most important thing would be to check out what would happen to Windows Live .

Tuesday, May 02, 2006

Why is Google Crying foul?

Microsoft Plans to include MSN search as part of IE 7 this was big news but bigger news was Google complaining that it is anti competitive practice and some even claiming that it shows Microsoft is returning to old practices of 90s for which it got wrath from regulators both in US and Europe. Now a day’s Google being darling of press and investors seems to stand for good and everything right and Microsoft stands for evil and everything wrong.

For me it not only looks strange but also I think it is more to do with crowd mentality that has set in,then with reality or facts .Lets take latest search feature issue

Google is the company which started bundling Google search as default home page of Firebox Browser (number 2 browser and is stealing market share from IE) and also has search plug-in for firefox.Ofcourse any user can change default home page and search engine plugin .But the issue is how many common users bother to do so unless search functionality is so bad that users are forced to change it.

But same company (Google) which started this practice is now complaining if Microsoft copies the same feature in its IE browser.Ofcourse you can say the difference is IE has 83% market share compared to 11% of firefox .But then you need to see also that Google has same kind of dominance in search space so if you want cry foul just because IE has huge market share then Google also has the same in search segment. And another piece of information how Google is promoting firefox is Google has referral program by which Google pays 1$ for every successful download of firefox browser through the link advertised by the webpage owner . Thus trying to promote firefox using financial incentive .

For me its simple issue that Google like Microsoft would like to capitalize its search dominance to enter new markets same way as Microsoft used its desktop dominance to gain browser and other sw market share. Which by the way is perfectly ok as companies are their to maximize profits for share holders and not serve humanity .I think it is hard core fact even most though companies claim to the contrary including Google. So lets market forces determine successes in market place in the process if any company uses its strength why cry foul?

Saturday, April 29, 2006

Jajah I just love it mobile operators nightmare

These days VOIP companies are started every other day trying to imitate skype .Especially after ebay bought skype for 2.6 billion US $.This particular voip company Jajah started in isreal now moved to silicon valley is not only different but in reality may change the landscape of telephony market especially in mobile side .

Using this service is very simple unlike skype and other voip service providers you don’t need to download any software or require any headset and speakers what you require is simple browser .Basically how it works is that you enter the number you need to call on webpage and then just press dial .then you will receive a call to your telephone (that u have given when you had registered) when you receive the call it will ask you to wait so that they can connect it to the number you wanted to call .So basically you would be using your regular phone but call is VOIP .

Reason why I would say this can be a killer in mobile world is since most of the phone have browser you just need to go to a website and make a call rest all is similar to a regular call .so it would be very hard for operators to block this kind of service as it doesn’t involve any special client or require any gateway like skype.

I would say these are kind of innovation on service delivery side using VOIP as underlying technologies that would bring dramatic changes in telephony landscape.

Friday, April 28, 2006

Mobile Industry Consolidation -2 (Network Infrastructure Players)

This posting is a continuation of my earlier posting with the same title But the idea for this posting is to go in detail and analyze consolidation story in one segment i.e. network Infrastructure vendors of mobile industry .

Let’s go through the present state and dynamics of infrastructure market so that it gives a basis to continue to predict why and how consolidation might play out in future. To understand the industry dynamics we need to understand what the prominent technologies in the mobile communication are. Basically mobile communication industry has evolved from basic old telecommunication (meaning basic telephony i.e. landline) industry and hence it carries some of the traits of that industry and not that of PC or Internet industry. Although PC and Mobile communication exponential growth happened around same period. The fundamental difference between PC, Internet industry and Mobile communication industry is the way Technologies are developed and introduced into the market

  • Standardization-In PC,internet world technologies are first developed and immediately introduced by individual companies and then market forces determine which will survive .The most popular and widespread technology in that segment becomes defacto standard. But in telecommunication side the story is other way round technology are standardized first in standardization forums like 3GPP, 3GPP2 by industry players (i.e in reality by major dominant existing players).Then based on those standards companies introduce products .Typically this process takes years for example it took nearly 6-7 years to just introduce the new 3G (UMTS) systems into market.
  • Systems are sold not Products – This is another fundamental difference i.e. in mobile network industry generally systems are sold and not individual products .For example in 3G or GSM networks vendors generally sell complete radio access network(RAN) , Core network or both together .Each of those things consists of many products and infrastructure to link them(ex: RAN consists of BTS,BSC and required transport elements to connect them ).So this kind of model has lead to domination of market by few big companies who can afford to not only invest in large scale R&D but also has influence in standardization bodies .Compare this with internet vendors were there are many small companies providing niche individual products of the network .Though still you can absorb big companies existing like Cisco how can provide system solutions.

Now coming back to topic of consolidation .the fundamental drivers that I think will drive consolidation story are

  • Customer consolidation –Mob infra vendors customers namely operators are consolidating as their basic revenue stream mobile voice starts to become a commodity and they still are unable to find profitable revenue streams in data applications-as customers consolidate the vendors needs to consolidate as well.
  • Technology Changes –There are 2 fundamental changes in technology side
    • Fixed –Mobile convergence :As Voice becomes a commodity fixed –mobile convergence technology gives ability to cut costs for operators and they look more and more for solution in this space from their vendors .So vendors tend to fill their portfolio gap by either consolidating with other vendors who are complimentary to them .Lucent alcatel merger according to me partly is in this category
    • Service business: As operators try to concentrate more on their customers they will try to outsource basic network operation to outside companies .This is similar thing that happened in IT industry .So in this kind of business scale matters more and hence vendors need to consolidate to compete with number 1 player like Ericsson.
    • Disruptive wireless technologies: Technologies like Wifi, WImax which are not typical evolution of existing standards are becoming popular .These a technology are not standardized by 3GPP like standardization bodies but more or less resembles internet tech standardization process. These tech are gaining momentum as they are much more cost effective technologies and also can rolled out by new incumbent operators ,So this puts question mark on 3GPP based evolutions on which most of the existing big vendors rely on for their further growth ..So it is imperative either mobile vendors start to change their culture drastically towards internet based culture so that they develop similar technologies in small amount of time or spend money constantly acquiring companies to fuel further growth ,

I would argue that based upon above mentioned points that consolidation will continue further especially till 2008 .as vendors position themselves for changed business landscape.

Sunday, April 23, 2006

Do we still need IMF?

Today After reading this news article in washingtonpost about changes that are proposed in IMF. The first question that popped up in my mind was is IMF still relevant in today’s world and not how it should be reformed. Though I am not an expert on IMF and its policy or for that matter neither have any concrete formal background in economics my view is purely based on views that I have read on the subject over a period of time due to my personal interest .

There are various books and articles written against IMF and which sights lots of data to prove their point .I am not going to sight them to prove my point as most of these are written by people who are anti Globalization proponents for whom IMF is symbol and heart of it. and also they are generally strong believers of socialism .so in away you can say they might be biased in their opinions though they have some data which are facts to prove their point .So this posting instead of relying on their opinion tries to give links and pointers that are written by eminent economists who are pro globalization but think IMF in present form is totally ineffective in today’s world.

If you want to get some good overall background information about IMF check out this link in wikipedia IMF .IMF first came into practical existence in 1947 and the chief architect was an economist by name john Maynard Keynes with the basic idea that IMF would give financial assistance to countries that experience serious financial difficulties. At the core of IMF and its policy is Keynes economics (i.e. john Maynard Keynes economic theory) which is considered to be the foundation for modern Macroeconomics .He belived strongly and advocated that governments should use fiscal and monetary measures to mitigate the adverse effects of economic recessions, depressions and booms. So this became part of IMF policy as well i.e. IMF lends loan to troubled countries with condition attached that those governments agree to implement policy dictated by IMF. It sounds reasonable from outside but the problem is in details how it is implemented. IMF generally tends to dictate policies that are global(same kind of policy for all countries ) in nature and theoretical based policy which has proven not only ineffective but counterproductive in many countries example: in some of east Asian countries in 1990s .These issues are discussed in depth by Joesh stiglitz Noble prize winner in economics and former chief economist at World bank in his book Globalization and Discontent .I would say this book not only present about deficiencies in IMF Policy directives but also argues quite logically about IMF existence .Now coming back to Keynes economics though it is accepted economic models it has fair number of critics you can find about them by searching in Google but one article I would say worth reading is Wanted: A New Macroeconomics because it argues not on principles but on its relevance for todays world .

Now before closing I would recommend one final article to read which really captures the different options in front of IMF .IMF: Reform, Downsize or abolish
and of course my opinion is in the title of this posting.

Thursday, April 20, 2006

Is long term planning still relevant for companies?

This posting is little bit offbeat and has nothing to do with mobile technology but still has huge impact or influence how it evolves or for that matter how any industry in general evolves in future. I would continue my mobile industry consolidation postings after this one. The trigger for this posting was again some news article that I read yesterday about how and why Hedge funds and private equity are booming business and the trend is going to continue in future. You might be wondering what is this linked with topic of the posting .In my defense I would say that the article is not the only reason for the posting but it triggered in my mind a series of question which finally lead to this topic. .Before going further lets define what is long term? .For me If you are planning for period that is more than 5 years on an average I would say it is long term .Another term i.e. good to clarify is planning, for me it includes everything like Strategy creation, R&D investments planning, Share and stake holder value creation basically every thing that is required to make company successful in duration for which planning is done for.

If you look at any company the most important player’s that determine future of the company (i.e. planning for future) are

Shareholders of company

Top Management

Business environment (including customers, competators etc)

I find changes happening in all 3 segments that lead to question is long term planning still relevant .Now lets go through each of these in details

Business environment-It includes basically everything outside of company. So I guess it is pretty much evident that due to technology and globalization that environment in which companies are operating is changing rapidly and thus making predication of how the business environment looks in long term extremely harder if not impossible. These changes are nothing new it has been noticed at least already during early part of last decade and number of studies have been made and books have been written about this .I would say one concrete action that most companies have taken is to reduce the planning period .Not long ago in 1980s companies used to have planning horizon of 10 years but now a days it would be safe to say that it has been scaled down to 5 years .There are of course some exceptions like Energy industry (Oil, Power etc),Aircraft manufacturing industries were still 10 years period planning is still relevant because of nature of business they are in were typical project durations itself runs some time unto 10 years .But in most other segments the planning period has been already cut .

Top management – Here I include all those people who are directly accountable to share holders and also who are supposed to be responsible for long term sustainability of the company typically it includes CEO and other top executives of the companies .Again I was reading a article about average duration of a CEO the article says the trend is downwards i.e. average period is coming down year after year and for year 2005 it was just 4.2 years .The reason being in most of the cases they were not able to keep their companies share value appreciating at a pace which satisfy share holders(i.e Stock market ) .There is strong pressure to deliver a very good appreciation of share value in short period of time and if they fail they are replaced quickly by a new person. So my argument is that in these environment top mgmt is inclined towards spending more time towards short term operational efficiency and getting most of existing assets so that quarterly results looks very good .So they spend less time and resources towards long term planning issues since it is evident that if they don’t deliver in short term they may not be there to reap the benefit of their long term planning. You mayargue that this has been the case always i.e balancing short term versus long term issues but my point is that yes the issue is same but the problem is that the tilt is now a days more towards quarterly results then ever before .i.e short term planning overviews long term planning .

Share Holders: It is here that Hedge funds and private equity , the trigger for this posting comes in .Historically most companies had quite balanced spread of share holders. Most of the share holders were investors like Mutual funds, pension funds etc who in general invested with long term view and wanted stable decent continuous return for their investments .Basically their investment philosophy or goals were in line and encouraged long term planning in companies .another important thing to note is that these funds have tight regulations which makes difficult for them to invovle in short term speculative investment and also equally important thing is these funds investors are also intrested in stable returns for long term not risky short period high returns . But of late there has been significant shift in share holding pattern , types of investors and thier share holding period of companies .one simple implication that can been seen is shares of companies are changing hands in short durations, This typically means shareholders are investing to make quick money and exit i.e. there is fundamental shift in investment philosophy. I would argue partly that is due to rise of hedge funds .By nature these funds look out for extremely good returns in short duration of period (some of hedge funds have produced returns of 40% YoY).They influence the direction of companies so that they attain their stated goals .Not long ago the size and number of these funds were quite small but of late they have grown extremely fast and now to some estimates they control funds to the tune of 1 trillion $ .Hence these funds are in look out for companies to invest and hence expanding the boundaries of their investments and influence .Another player i.e. Private Equity funds which used to be small players have also grown big of late. Unlike hedge funds they don’t invest to get small % of stocks in company .they totally buy out the company in most cases appoint their own management team modify the company and balance sheet so that they look good and then exit the company by issuing IPO .When they began size of investments used to be small and targeted at companies at specific segments were it made sense to enter (i.e. were there is failure of mgmt or inefficiency in companies ).But again as their size has grown tremendously now they are looking out for bigger and bigger deals .last year alone there were nearly 1500 such deals .My point is that as these funds look out for more and more companies they will be ending up in companies that might have long term prospect but doesn’t have good balance sheet today. They do their quick turnaround story of making balance sheet look in short term and exit at the same time spoiling long term prospects. And another important thing is that it discourages in other companies also long term planning as these companies race to make sure that their balance sheet looks good even at the cost of long term that way they won’t be target of such funds.

For me the changes in Share holder segment are the one which is most alarming and important also to notice.

Sunday, April 16, 2006

One red paper clip

Just now (1:00 PM Helsinki time) I was reading a quite interesting article about how a person would like to own a house just by trading one red paperclip. I guess you would be thinking what an absurd idea but before forming any strong opinions just go to this blog http://oneredpaperclip.blogspot.com/ through which he is trying to do that trading .It is amazing how far he has gone ,by consecutive trading of one red paperclip , he has now for one year a House in Phoenix (US).

There was another story which also looked absurd to me when I first heard about it 6 to 8 months back .The idea was that person was selling each pixel in home page for 1$ .i.e. If I would like to put my name BANUPRASAD on his home page then I would have to pay number of pixels it takes to write my name * 1$ (if it takes 100 pixels then it would be 100$).In this way he was planning to sell 1 million pixels on his home page and make 1million $.Which he aptly named as million dollar home page. At first when I heard about this my question was why would somebody pay even single penny to put add on a personal homepage which serves no unique content to attract visitors. But as the time showed the entire million pixels is now sold out. And the person is proud owner of million dollars.

These 2 examples are not only unique but demonstrates 2 things

1) How web as platform is empowering any common man with some idea to make money without having to invest anything. (I.e. lead to thousands of ideas being tried out)

2) Second important thing is changing social behavior aspect (i.e. people would like to experiment and be part of something different ) this change can be seen in different accepts like how reality TV is becoming popular compared to professional artist involved and developed content .How user generated content like blogs etc are heart of next generation web (check out my first posting ).How so much software is being developed in open source community without any financial gains (some doing to be part of community, some doing to express their technical skills in peer community).

Saturday, April 15, 2006

Mobile Industry consolidation

Alcatels mergers with Lucent

AT&Ts plan to buy Bell South in US

Telefonicas buys O2 in Europe

These were some of the headlines in businessworld in last one month and also the trigger for this posting .The basic idea is to go through the basic driver underlaying these consolidations and try to answer the question is Mobile communication Industry still growth industry? .

In the past if you look at other industry segments like Auto, Utilities, Pharma etc major consolidation happened when that industry reached a mature stage (i.e there is nor more disruptive products in the pipline which could change the business dynamics totally ).So idea would be study the present state of mobile communication (Mob comm) Industry to check are there any potential big disruptive technologies and services that could continue to make it a growth industry .In my opinion mob comm Industry is still a growth industry but some of the players in this industry may change (i.e some of the companies who are major players today may no more be in future and likely to be replaced by companies from other industries ).

Before going further let me classify the different players in this industry into 3 different segments namely

  • Handset providersMobile Phone Manf) likeNokia,Motorola,LG etc
  • Operators Like Vodofone,Cingular ,Verizon etc
  • Network Infrastructure providers like Ericsson,Nokia,Lucent,Motorola

Now after this basic classification of players before entering into present dynamics in each of these segments lets go back in time quickly and try to trace the emergence of these segments and its players. Mobile industry as we know today is just 15 years old .Early 1990s saw the signs of the emergence of this industry around the same time when PC industry started to grow .During these past 15 years mobile phone has grown from being luxury service affordable by only few ,to essential part of common mans life.Today around 2.2 billion people have mobile phones most of these people had never had access to land line or ever used PC in their life this shows that the depth and width of penetration of this industry .Today in volume terms Mobile phones is the single most manufactured and sold elctronics item in the world (around 900 million units/year). During these years It has also produced extraordinarily huge companies like Nokia, Vodofone and ericsson representing those 3 segments

.If you look carefully the only killer service that this industry has served is Voice i.e the ability to make a simple telephone call even when you are mobile.This service was novel when it started to pick up in early 1990s even in developed nations, which meant industry had the pricing power and great margins which gave it a title from Investors community as “Growth industry “. As mobile services started to widen user base ,it had to make it more affordable hence lesser margins but still generated quite handsome profit as most of this net addition of new users were in developed nations were average revenue per user(ARPU) is still quite good .This phase of expansion lasted till early part of this decade.So far the story for industry was quite ok and still it kept its tittle as growth industry .But once penetration reached nearly 70% and in some countries like finland and sewden even 100% the only way to grow revenue was to increase userbase further in untapped markets like developing world or to introduce new high value premimum services in already established developed nations .So far this industry has continued to increase its revenue by using only the first method i.e increasing user base in developing world which meant driving the prices further down to make it affordable which also meant lesser margins and became more of size and volumes business and thus rising questionis is it any more growth industry?in my second posting I hope to cover each of the above segments in detail and tocheck weather second method of finding revenue stream exists ?.