Looking through the global economy crystal ball

Forecasting the global economy is very very tricky. About a month back we heard that things would start looking better by end of 2009. But recently there were reports that things may not be so good after all. Every year in January India's National Council of Applied Economic Research ( NCAER) and the National Bureau of Economic Research ( NBER) of US arrange a conference on Indian and world economy in tourist resort called Neemrana. NCAER is staffed by some of the finest economists of India and some of the best brains from India and US attend this conference. However predicting the economy is difficult and fraught with risks even for them. The economists had no idea of the impending economic and financial crisis in the January 2007 conference - although there was some mention of concern in the US housing sector. Even in the January 2008 conference - Economists did not believe that US would get into recession and the contagion would spread to rest of world including India - although by that time the sub prime crisis was full blown.

Apparently , one of the reasons why things will not improve despite economic stimulus packages is because corporations are not spending. Here in India I see "cost cutting" all around me in all sectors.

I am just hoping gurus are wrong this time as well.

Just a Bunch of People

As the Satyam saga unfolds, the Satyam stock price is tumbling by the day and is trading at less than 90% of what it was before the fateful decision on the Maytas acquisition was announced. Broking firms are advising investors to exit at any price. Many fund houses are offloading Satyam stocks at price much lower than the current market price. That brings us to the question - what is really the net worth of the company? This question is difficult to answer - it will take experts several weeks to come out with the real state of affairs and finances. But is it really possible that even we take out all liabilities - the net worth is still close to zero?

In all probability, Satyam - even at its peak - was Just of Bunch of People ( JBOP). The concept JBOP needs to be explained. JBOP is a IT service organization with a bunch of people with certain technical skills - skills like programming, knowledge of various packaged applications, tools, platforms, operating systems, hardware etc. JBOPs aslo have a sales and business development staff - who nurture relationships with customers and sell technical services - mostly by leveraging the labor cost arbitrage provided by India and other low cost geographies. JBOPs typically focus more on horizontal skill sets and less on vertical domain knowledge. Knowledge management is typically weak and execution capability is dependant on the availability and skill levels of the current set of people present in the JBOP. A JBOP is always at risk of losing out key people to competitors - but on the other hand it is equally capable of poaching others. A customer can replace a JBOP with a competitor - since the capabilities and offerings of the JBOP are undifferentiated and commoditized. Most importantly a JBOP has no focus on products, asset based offerings, technology platforms, proprietary tools etc. - capabilities that can possibly lock in a customer. The JBOP hardly has any Intellectual Property assets worth mentioning. The revived/ resurrected Satyam needs to do some serious introspection and ask itself it was a JBOP and what its vision for the future is.

An indicator of IP assets of a company is the number of patents granted. A Google Patent search of issued US Patents assigned to Satyam Computer today threw up only 3 results. The same search for global IT service companies like Accenture and Computer Science Corporation gave 201 and 193 respectively. This only shows the pathetic level of IP assets and gives credence to wisdom of the stock market. Other Indian IT service companies don't fare well either - most have less than 10 as per this search criteria. Key customers and partners of Satyam like Microsoft, SAP and Oracle have an impressive patent portfolio though. The search throws 571, 369 and 600 respectively for these companies.

Outburst on Outsourced

I had never thought that I would be writing a movie review in this blog, but then 2 hours of Outsourced at a local multiplex did it. One can debate if - as Ad Guru and columnist Santosh Desai once put it - the movie was "fake genuine" or a "genuine fake". This movie , made in 2007 and for some unknown reason released in India in late 2008, is in my opinion the former. I am still OK with the NY Times giving this flawed and poorly researched story on India, outsourcing, BPO industry a rather favourable review, but what I find galling is that Indian movie reviewers like Nikhat Kazmi have given it a 3 star rating. The movie has managed to pile on us every possible cliche - the Indian viewer has to suffer along with the protagonist - crowded streets, manic auto-rickshaw drivers, cows and buffaloes blocking the roads, beggars, sadhus, dilapidated Ambassador cars, diarrhoea and thickly accented colleagues. Haven't we been through all these decades ago - a la Heat and Dust, Mind Your Language and god knows countless others. Well I must concede that the BPO part is new.

Well, one can even suffer the cliches if there was some more substance to it. Our protagonist is able to set up a complete fulfillment process call center in heart of rural India in flat 3 weeks time. This should bring cheer to folks who are shelling out big bucks for BPO seats in Gurgaon, Whitefield and Hiranandani. And hey - improving productivity is easy - you need to allow employees to stick photos on their desks and get their Ganesha and Krishna idols to work. Indian girls are even more easy to get - you only need to praise their work and then you could check into the Kamasutra suite with them in a hotel in the Elephanta island. And if you allow slum dwellers to eat the left overs from your plate , they will one day invite you for lunch in their hovel.

This is one of those times when one wishes he had a better command over the English language. I am sure people like K whose blog I am now following could have expressed things much better than me. He could also probably explain while some of the lousiest movies get fairly decent reviews in the press.

Half full glass

As we start the new year, I am quite hopeful that things would turn around this year. Most newspapers editorials today share this view. It wasn't that 2008 was devoid of any good news. We have seen a "regime change" in the US - one that augurs well for all denizens of the world. More recently a friendly government has been voted to power in neighbouring Bangladesh and that is a huge relief. People power has made our government sit up and take a serious note of our internal security issues , non performing heads have rolled and we all hope to have a safer 2009. Democracy and the parliamentary process seems to be functioning reasonably well. I firmly believe that it is because of India's strong influence in the region, entire South Asia is embracing democratic institutions. Elections in Nepal, Pakistan and Bangladesh are a testimony to this fact.

Terabytes have been posted on most of the above. What I would like to bring to notice is an interesting fact - The ISRO Chandrayan mission team has been voted to the 5th position for Indian of the Year in a eight city poll conducted by the Times of India. In my opinion this is indeed significant because of the following -
Indians are acknowledging the stellar success of the lunar mission which sucessfully landed a lunar probe on Nov 14th. ISRO has been one of the most successful institutions built in modern India and has had a string of successes right from its inception. One of the reasons for its success has been the top quality of the ISRO leadership. ISRO has been led by scientists like Vikram Sarabhai , Satish Dhawan, A. P. J. Abdul Kalam, K. Kasturirangan - leaders who have been able to establish and sustain a culture of excellence in ISRO. Interestingly, multiple speakers in the PAN IIT Meet 2008 referred to the excellent quality of research and program management at ISRO.
I also do hope that this success of ISRO Chandrayan mission motivates some our best young brains to take up science as a career. Science is these days figuring at the bottom of the list of most college entrants. This is especially true in metros like Mumbai and Delhi. Cut off marks for science courses are way below commerce, management , arts and computer science in many of the top notch undergraduate institutes. Many countries such as the US are already facing a strong decline in quality and quantity of students in science. We in India cannot afford this if we have any aspirations of making it to one of the top four economies of the world within the next fifteen years.

I end this note with a three cheers for the ISRO team. In an otherwise gloomy year, they have done their bit to make the glass look half full.