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 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 ?.

Wednesday, April 05, 2006

Mobile Web 2.0 - 2

Before continuing further let me try to highlight what’s the scope of “Mobile Web 2.0” postings, basically the target is to explain what are the preconditions required for mobile web 2.0 to really happen. In my first posting I gave a brief introduction about what is web 2.0? What were the underlying factors that contributed to its present success? At the same time I also covered one important precondition for mobile web 2.0 i.e. Mobile network infrastructure.

.In this posting I would continue discussing another important requirement i.e. Availability of Smartphones in huge volumes at affordable price. Now you may wonder what is a Smartphone, In general mobile phones fall into 3 categories

  • Basic Phone-It’s a typical phone with only basic voice focused features .its typical common type of Mobile phone available at low end of price range.(<125>
  • Feature Phone –It’s Basic Phone plus additional features like integrated camera, better Color screen display .Typically these phones also allow java or Brew applications to be downloaded on to the phone .But typically these phones are built using proprietary and closed OS .Hence applications that are available are limited in functions. Generally these phones have mid price range (150-250 $)Ex: Nokia 6265,6230,Motorola Razr V3
  • Smart Phone - it’s a terminology used to describe a phone which has at least the following extra capabilities and typically they run on open OS Platform like S60, Windows Mobile.
    • Internet access Capability(Normal HTML Browsing capabilities),
    • PDA (i.e. Calendar ,Email applications and capabilities to synchronies them with desktop corresponding applications )
    • SW applications can be installed by user to increase the functionality –these applications typically have much richer functionalities compared to Feature phone applications.

Typically these phones are priced more that 300 $. Example: Nokia 6600, 6630, N70, N90.Motorola HC700.

Now coming back to our topic for Mobile web 2.0 to happen we need to have good percentage of mobile phones to be in smartphone category today (according to 2005 statistics) only around 5.5 % of total mobile phones that are sold are smartphones (45 million out of 823 million) .But important thing is this segment is growing nearly at 100% year on year. So my personal view based on PC web 2.0 history analysis is that we need to have at least around 15-20 % of mobile phone shipment to be smart phone to have any meaning full business case for mobile web 2.0 services or mobile data services in general.

Now good question to ask might be is this 100 % growth rate in smart phone is going to continue with the present smartphone price range? Simple answer is NO, only way further volume growth in this segment can happen is when price of smart phones fall to the level of present day feature phones i.e. 150-250 $.I strongly believe that is the direction industry is moving recently Steve Ballmer was saying that smartphone at price range of 150 by 2009 is his company target I would say these are some of the indicators that this may happen in reality .Now I will try to list some of the practical drivers that will make this happen

· There is strong move in industry towards platform horizontalisation both Hardware and SW side .Similar way as in PC industry .Though it might turn out to be little bit tricky compared to PC.

o There are 3 competing SW platform in market available for any device manufacturer they are S60 (based on Symbian) by Nokia, Windows Mobile by Microsoft, Linux. And you can find already many vendors have chosen these platforms.

o Now there is same kind of move happening in semiconductor side also there were many announcements made in 3GSM conference.Among them some of the key players are

§ FreeScale single chip solution for S60 (Single chip means that single silicon chip has both wireless processor and Application processor) this greatly reduces the cost and also size of devices.

§ ST micro electronics,TI ,Intel have announced similar plans

o Surprisingly another big player i.e. operators are also nowadays seeing the benefit of horizontalisation on device side and trying to select their SW platforms of choice

· Again recently Vodofone biggest mobile operator in the world Chose S60 as one of their Sw platform of choice.

Considering the above factors make me believe that the smartphone prices are going to fall and finally will be available at affordable prices. But the critical question is when .So let me know try to make a bold prediction to answer that question I think the time might be end of this decade (more concretely I expect by 2009 time frame).

Saturday, April 01, 2006

Mobile Web 2.0 - 1

During past one month I have been analysing the impact of latest buzzword in internet world called "Web 2.0" on mobile domain.Partly as part of my work and partly due to my own personal interest .This is basically first in series of posts I hope to write on this topic .In this I try to capture the basics like what is web 2.0? and how if it all is linked or effects mobile domain.
If " web 2.0" is a new term for you search google you can get tons of web pages explaining it .I try to define what it means from my perspective ,It is basically a terminology used to describe new generation of web sites that are proping up at rapid rate.The Icons of web 2.0 are highly successful sites like Flickr (a cool photo sharing site),,craiglist etc. I would recommend to visit web2.0 sites to check an impresive list of web 2.0 sites .

These web 2.0 sites tend to have following distinct characteristics.
  • User interface(UI) -These web 2.0 sites have much more richer and interactive UI .Ex: flickr,Google Maps,Gmail,Windows Live,Yahoo maps,writely.They are more nearer in terms of richness and ease of use to desktop applications .The underlying technology used mostly is Ajax and some times mixed with Flash technology.Ajax is acronym for Asychronus Java Scripts and XML.Again you can find tons of material about Ajax in web I will try to cover it in details in future posts.
  • Data - Basically data means the content that is represented or shown in websites . Most of web 2.0 sites that data is usually user generated data unlike pre web 2.0 sites were the content is generally hosted and created by the website owner .web 2.0 sites data backbone is websites community member generated data .So community is biggest asset of web 2.0 sites Good examples are
    • Flickr -Were the user posts their photos and also are rate photos posted by others.
    • user store and rate bookmarks to different websites.
    • Blogs ,wikis,Podcasts-Again user generated content is heart of these kinds of websites.
    • MySpace
  • MashUps - This is again is related to how content is created .Mashups basically means the seamlessly process of combining content from more than one source to provide an integrated experience for the user e.Usually mashup web 2.0 sites combine content from different webistes through thier open API,RSS Feeds etc and add thier own content on top if it to create a new value for end user .Examples are
    • MySpacemap -mashup of Myspce and google map which represents myspace members on google map .
    • Lots of RSS aggregators site ,Podcast aggregator sites.
    • Google adsense
So far I have tried to explain as broadly as possible what is web 2.0 .But good question to ask is how much of the above mentioned technologies are new things that have been developed. The simple answer is none of the basic technologies underlying web 2.0 are new they have been there from very long time (They were there and known during dotcom days also) .Then subsequent question would be then why is it now it is becoming popular .In my understanding the basic reason of success of web 2.0 now is due to timing .By timing I mean availability of critical user base for these kind of services to take off has been created now .The following 2 things are basis for creation of that user base
  • Avilability of broadband connections at affordable rates as lead to increase in its penetartion.(High Bandwidth networks has become widespread min of 512 kbps is common connection speed)
  • Processing power of PC has also increased over period of time (Today Large % of household pcs have minimum of P4 level processors )
I will post exact numbers on the above 2 points which validates my claim in future postings when I try go in details .

Now let me try to explain other term Mobile Services and link it to Web 2.0 .
.Again There are tons of definations and explaination about what is Mobile services .For me Mobile services means simply services that are delivered on Mobile phones using mobile networks .So mobile services can be simple and basic like voice call ,text messaging,WAP services to latest IMS (IP multimdeia services),Mobile TV,Full HTML browsing .
Basically what type of mobile services can be delivered depends on richness of underlying networks and the capabilities of the Mobile terminal .As was the case in Internet world, required technologies to deliver web 2.0 kind of services on mobile devices are present already now (mostly same internetworld technologies can be used in mobile world also) but the big question is the time right for mobile web 2.0 ? To answer this I would like to validate one question is thier a critical user base for these kind of services on mobile world ? .
  • Availability of mobile broadband -From technology perspective it seems that networks that can deliver high bandwidth data service are there .(3G Networks and its evolution like HSDPA,HSUPA,3,9G and limited Mobility Highspeed networks like WiMax).The Deployment of these networks and 3G in particular has been happening at quite good rate .But unlike in fixed broadband world were deployment and userbase increase went in hand in hand in mobile world there seems to be a discontinuity between deployment and increase in userbase for these high data services.The reasons for these things are
  • Operator relactunce to open up thier network for open services- Presently most of the operators follow walled garden approach basically meaning ,that operators would like to deliver all services themselves and open services hosted by 3rd party service providers are closed from networks .
  • Operator still charge users based on data volumes and dont have yet launched monthly subscription model .Charges are also quite high which effectively curtails user from using any mobile data services .
  • Operators are still getting most of thier revenue from traditional voice calls .which means they are optimising this revenue stream using latest technology and new spectrum allocations.(ex: 3G UMTS networks are now days used to deliver optimised voice calls thus trying to capture more margins on voice calls then to launch new 3G data services )
So in short the trends in providing high badwidth wireless connections at afforadable price is not so good.However during end of last year and begining of this year there is small trend among small operators trying to break above mentioned barriers .So picture is not all negative .I expect as MVNO and other competions for operator hots up the above mentioned barriers would be broken at very fast speed.
Avilability of Rich enough Mobile Terminal which is another important factor for mobile web 2.0 to happen would be covered in my next postionings along with more in depth anlaysis of Mobile web 2.0 technologies .