March 24, 2003

PR lessons from my barber

I've lost count of the number of times I've seen hi-tech CEOs attempting to get the press excited about their "exclusive" tie-up to distribute some foreign company's software product in India, or their "significant achievement" in landing a SEI-Level 3 certification, etc. etc..

In most cases, after a lot of time, effort and money is spent, the end result is a one-para mention in "the briefs" section of most papers--if at all!

Don't get me wrong. It is natural--and laudable--for entrepreneurs and CEOs to be proud of each and every baby step that their start-ups make. And feel eager to tell the world about it.

However, whenever we are trying to market something (in this case, a message) it makes sense to look at things from the side of the consumers (in this case, journalists).

This is something that the co-owner of the latest "men's hair style" shop in my neighbourhood knows pretty well.

"You know what, sir? Journalists as a breed don't want to hear anything that's normal or stuff that has been done before," he says, handing me the business card of the local NDTV correspondent with contact details of journalists at The Hindu and Indian Express written on the reverse. "If I'm just another passerby on the road, they won't care for me. On the other hand, if I throw a stone at a passing bus, then I become interesting to them!" he says.

So, what is he doing with this insight?

"I'm toying with the idea of announcing that I will give free haircuts to underprivileged--'corporation school'--kids," he says. "These are boys who cannot even imagine stepping into a shop like this. Don't you think that would get some journalist to take notice, sir?"

"Or, should I do something to go with the world cup? Maybe, make some boys stand outside my shop dressed in the Indian cricket uniform and with haircuts that make them look like those of Indian cricketers?" (I had my haircut before Ponting gave Srinath, Zaheer & Co. theirs).

"I'm still groping for the best idea to go with, sir. However, I'm sure of one thing: whatever I do, must stand out. Once my unusual offer or service catches the attention of the first journalist and he publishes something, then I'm sure all the others--including the TV guys--will start approaching me on their own."

Wow! Let alone hi-tech CEOs and entrepreneurs. This guy could teach the so-called PR gurus some valuable lessons.

As for me, this is one haircut I surely won't forget! (Unlike the case of the 18th Indian software company to acheieve SEI CMM Level 3 status.)

Agree? Disagree? Do send me your thoughts.

Chit funds chip in where banks fail

The latest issue of Outlook Money has an article that explains how chit funds work including how, entrepreneurs and small businesses--who are often unable to get banks to lend to them--can use this financing tool.

Click Here to read the full article.

March 23, 2003

Interesting interview with Phaneesh Murthy

In a wide ranging interview to Business Line, Phaneesh Murthy speaks about some of the sales and marketing techniques he used as marketing head of Infosys Technologies, how he sees the BPO opportunity evolving and other related topics.

Here are extracts from the interview that I found particularly interesting:

On his pitch to global clients:
Today most large companies have their cost structures in developed countries but have the bulk of their growth markets in developing countries. I am saying I am going to try and change the cost structure to a developing country so that you can compete more effectively in the growth markets that you have. If you build that story, if you can educate the board on that story, they are unlikely to go to somebody else just because they are offering at $2 less.

On why software companies can't be into both products and services:
Except for IBM, there is no other company, which has got successfully both product and general services. Reason? In a services company, sales and marketing costs as percentage of revenues are about 6-7 per cent while in a product company it is about 25 per cent.

In a services company, engineering costs are about 50-60 per cent of revenues while in a product company it is about 20 per cent .The models are very different and it is very difficult to figure out how to make them co-exist under the same management.

At some point of time, a services company fresh into a product starts wondering if it would be a great opportunity to do a 25 people or 50 people project. "There are guys here whom I can use for the project where as they are building some products whose revenues will come in a year or two later." That's a destructive but inevitable thought.

Click Here to read the full interview at the Business Line web site.

March 13, 2003

Rediff's Ajit Balakrishnan dismisses the competition

Ajit Balakrishnan, Founder & CEO of Indian Internet portal,, has made some pretty blunt remarks about the company's competition in his latest interview to Business Standard.

Here's what he has to say about: & 123india

" overspent without having the capital. 123india which did not have enough internal management strengths. Everything for them was bought out. They didn’t have enough internal resources to craft products. Plus they didn’t have any legitimate funding--they were funded by Bombay stock brokers who are not known for far-sighted investments."

IndiaWorld & Sify

"Indiaworld was the original portal but Rajesh Jain sold out. Sify has a killer, but they’ve been schizophrenic about whether they want to be-- in the services business or the consumer business. So they lurched from one end to the other. At this moment they seem to be going after corporate business."

The best however is reserved for IndiaTimes

"Indiatimes is one tenth our size. We are roughly at 22 million and they are at 2 million, though their nuisance value is a lot because they advertise in the newspapers. Our reach--if 100 people are on the internet, what percentage comes to you--is close to 65 per cent, they are at 20 per cent. They’re at the same level as (sic). Hangama (sic) is as big as them."...

"They’ve thrown resources enough to deplete even their full coffers. That’s an indicator of how they were late. They’ve thrown everything possible into it--money, advertising, people, deals. We are at 65 per cent and it’s impossible for them to bridge it. Their advertising in The Times of India brought them to 20 per cent."

Of course, Balakrishnan does also speak about other interesting issues--apart from his competition--in this remarkably candid interview.

Here is why he is still bullish about the portal business:

"The difference between now and last year is that the number of participants in this game has been reduced. There were 50 people competing then; now it’s down to two or three in most markets.

Secondly, online user bases in some countries have come to a critical mass. China is a case in point. All three Chinese portals have become profitable, and that’s a function of bigger user bases. The Chinese have got to 60 million. We are still around 15 million. What is stopping us from profitability is the growth of the user base."....

"The user base is normally increased by telecom investment. In the last 12 months a tremendous amount has gone into telecom in India. The second difference is the mobile connection convergence with the internet. Eighty per cent of the revenue of Chinese portals is from mobile phone users."

On the hassles of being a publicly-listed company

"One of the things about becoming a public company is that the CEO and one or two others at the top spend more than 60 per cent of their time on things that they ought not to be doing. When you’re doing it for the first time like I was, you waste too much time on investor relations. Ultimately that whole system where you have analysts--it’s all a waste of time.

Essentially there is the consumer and you. You do a good job with the consumer, he rewards you with profits and Wall Street loves you. I have told everyone (in the company) to stop looking at things from the stock price point of view. Let us go back to where we were before all this hype started."

Click Here to read the full interview to Business Standard.

March 12, 2003

Are small and medium sized software cos. doomed?

The Indian software industry is set to take shape of "hour glass".

At the top of the hourglass will be heavyweights (like TCS, Infosys, Wipro, etc.), at the bottom there would be focussed specialists (like Sasken, iflex, Polaris and RelQ).

In the middle there will be none.

This is the conclusion of an interesting article in BusinessWorld on the future of small and medium sized (SME) software companies which contributed a third of India's software export revenues (of Rs.24,000 crores) last year. ("Grow up - or get out"; BW issue dated March 3, 2003)

Here, in short, is what the article had to say:

Last year, the top 20 software companies accounted for 63% of the total export pie. Also, the biggies (like TCS, Wipro and Infosys) grew at double the rate as the rest of the industry.

Even though, US companies are taking to offshore software development in a big way, there is also a "flight to scale". Most of the outsourcing business is going to the large vendors who, in the current environment, are willing to bid for even relatively small projects.

Case in point: Bank of America, which has decided it would not do business with any firm with less than $100 million in revenues.

Industry watchers quoted by BW feel the salvation for SMEs lies in becoming focussed players. "Smaller companies with a clear focus such as RelQ and ThinkSoft have grown by over 30%," says Kaushal Agarwal of Avendus Advisors. (RelQ and ThinkSoft offer outsourced software testing services.) The article also names companies like Polaris and iflex (which are focussed on the banking, financial services and insurance space) and Sasken (which is focussed on telecom) among the likely survivors.

Sanjeev Mohapatra of Texas Instruments (India) corroborates this analysis and says that the large players do much of his company's outsourced development, because of the lack of focussed SME service providers. "Even now their selling pitch is: 'We have 50 engineers with C++ skills'. If I am looking at just staff augmentation, then isn't it obvious that I will go to big companies which can scale up quickly," he asks.

The article does point out that there is price to be paid for being focussed. "After all, some specialist companies, especially in the Internet middleware, have been badly affected by the downturn. Aztec (Software) saw its revenues drop by 70% last year, while (telecom-focussed) Future Software's revenues fell by 15% to Rs.65 crores," it says.

Despite this 'danger', Avinash Vashista of NeoIT (an outsourcing intermediary) says there is simply no choice. "The writing on the wall is clear. If you are small and have no clear focus, you are not going to survive."

Let me know if you have any thoughts on this topic.

March 10, 2003

How to sell tech to the US govt.

We keep reading about how, in the current economic climate in the US, the federal government is a better customer for tech companies than the private industry. According to recent reports, the US federal government spent more than $24.3 billion on IT outsourcing last year.

But how does a tech company (American or otherwise) sell to the feds?

A recent article in Business 2.0 provides an excellent starting point. This "cheat sheet" article includes stats, tips and profiles of the CIOs of key federal departments.

Click Here to read the full Business 2.0 article

March 09, 2003

Common problems of Indian SOHO entrepreneurs

Outlook Money (formerly Intelligent Investor) frequently comes up with articles about entrepreneurs and small as part of its "enterprise" section. The best part about these articles is that they aren't just gyan and opinion from the magazine's journalists or interviews with some "experts". The articles are based on interviews with real entrepreneurs who are "out in the field".

In its latest issue, Outlook Money profiles some of the typical problems faced by SOHO entrepreneurs in India. Click Here to read the article.

March 08, 2003

A couple of articles I read recently that would be useful/interesting to entrepreneurs anywhere:

Grist: Don't Read the Business Pages

Newspaper business pages are a waste of time for entrepreneurs, says Adam Hanft, president of an advertising and marketing firm in a Inc magazine article. Hanft feels most of the news in the busines pages is either stock-market focused or "a daily knee-jerk reaction to the story of the moment". And as for "news" pertaining to your industry, most of the time, you know all about it long before it hits the papers!

So, is Hanft recommending that entrepreneurs stop reading newspapers altogether? No. In fact, he recommends that they diligently scan all pages other than the business pages! "The rest of the paper is a rich resource, a trend trove that can tell you more about the economy and your business than you might imagine," he says.

Click Here to read the full article and find out why.

An Indecently Hasty Proposal

In this BusinessWeek SmallBiz column, Christopher Kenton, president of a US-based marketing agency, recalls the "classic" mistakes he made in preparing and pitching his first proposal.

"I won my first project based on a fixed-price bid. Not terribly unusual, except that the scope had only been defined in broad strokes. Once the proposal was signed, I was essentially agreeing to take on any hidden features that might accrue as we filled in the blanks on the scope of the project. Good for the client, bad for my business," he says

Click Here to read the full column.

March 07, 2003

More on Red Herring's death (and possible re-birth)

Lawrence Aragon, a former Red Herring staffer reports in his Private Equity Week column that Chris Alden, co-founder and onetime CEO of Red Herring and former Editor-in-Chief Tony Perkins are among the bidders for Red Herring's assets.

Also, according to Aragon this is what actually killed Red Herring:

Red Herring has been struggling for several years, after living large during the dot-com boom. At its peak in 2000, it employed more than 300 people and ran three businesses: the print magazine, a Web site with a staff in excess of 30 people, and an events department. To accommodate such a large staff, it leased two offices in San Francisco and one in New York. The pricey leases proved to be its undoing: When the bubble burst, the magazine cut its staff several times, but it still had to make large lease payments. Finally, last October, the company went through a reorganization known as an ABC (assignment for the benefit of creditors), and Broadview bought all of the assets, renaming the company RHC Media. That allowed RHC to get out of its onerous leases. It appeared to be hanging on, but once word leaked that Broadview had hired DeSilva & Phillips to sell the assets, advertisers grew skittish and Broadview pulled the plug.

Click Here to read the full Private Equity Week article

Today, I deleted from the "favorites" list on my web browser and simultaneously inaugurated this web log (?!)

In case you haven't heard :
Red Herring magazine closes down
The technology business magazine, which placed special focus on start-ups and venture capital, closed it doors after a 10-year run reports Reuters.

"We were looking for a strategic partner to join our existing investors, Broadview Capital, to keep funding the company through the advertising downturn. Unfortunately, in spite of the interest of several parties, no one would commit in the timeframe Broadview required, and our only option was to cease publication to buy time to sort out our options," said Tony Perkins, former Editor-in-Chief of the magazine in his Always On-Network column.