How Indian IT Firms can ‘Crack’ the China Market

China has become the world’s largest economy. Consequently, it is also one of the world’s largest markets for IT and IT-enabled services. While Indian IT service providers have a large presence in western markets (for example, the Americas provide 60% of Infosys revenues), their presence in China is negligible. Why? This question has troubled the top managements of these firms for many years. Based on the views presented in the recent article, it seems that managers are still far away from finding all the answers to this riddle.

The Indian IT industry, which has of late been eyeing the Chinese market, will have to sweat to gain entry here, a top Infosys official has said.

via China IT market a hard nut to crack for Indian companies: Infosys China CEO Rangarajan Vellamore – Economic Times.

 

It is often said that the first step to solving a problem is acknowledging it. IT service providers from India seem to be stuck in a time-warp – a bubble of their own making. The challenges they face in the China market are not replicas of the hurdles Indian firms overcame when they entered the US or European markets. These are unique challenges, which call for a unique approach. Entering China requires a China-specific strategy and anything less does not do justice to the potential revenue growth possible from the world’s largest economy. Below are a few challenges that have not been identified in the above article, and some ideas by which these can be turned into opportunities.

English: China, Shanghai

English: China, Shanghai (Photo credit: Wikipedia)

Language Barriers: Historically, the Indian IT services industry was able to grow in the US and other western markets due to the language advantage – client facing personnel were able to communicate effectively in English. In contrast, China’s market has significant language barriers and a working to excellent knowledge of Mandarin is essential. To overcome these barriers, Indian firms should have ‘localized’ client facing personnel who will be able to understand client problems and deliver feasible solutions.

Price-Arbitrage Disadvantage: Another key advantage that Indian service firms have historically had is the low cost of labor in India. However, compared to China, there is no real price advantage of India based software engineers. Once coordination and communication costs are taken into account, it might actually be cheaper to hire talent locally. Many Indian firms have been attempting to do so (for example, Infosys runs a development center in Shanghai), but complain that they are unable to get high quality talent. The reason is not the unavailability of talent – rather, Indian firms are not employers of choice and hence fail to attract the best people.

Reputation Barriers: The challenge is not that Indian IT firms do not enjoy any brand recall in China. Indian firms have to actually overcome a negative reputation. Low costs are associated with a perception for bad quality work. To overcome the reputation barrier (in context of both potential clients and potential employees), firms should use a counter-intuitive approach. Use their success stories with F500 companies as a basis for a premium positioning.

No Guanxi: Doing business in Greater China is heavily dependent upon the ability to leverage personalized networks of influence, or Guanxi. Indian firms need to hire business development managers and top management who bring not only business acumen, but contextual information and guanxi on board.

Services versus Solutions: It is believed the size of the US IT market as a percentage of its economy is larger than the ‘perceived’ size of the China market. This has been explained by the following logic:

“In terms of purchasing power parity, the US will have a revenue productivity of two-and-a-half times compared to China. …It translates the market size by less than two-and-a-half times,”

In line with this argument, it can also be said that the potential productivity gains from IT in China are much more than the potential gains in the US market. Therefore contrary to the ‘common perception’, the IT market in China is not oversaturated a-la the US. However, unlike their US counterparts, firms in China may not be actively soliciting IT services as many are unaware or more likely, unconvinced of the potential benefits. The size of the potential market is huge; the size of the market (of addressable) that is actively looking for an IT service provider is small.

Indian IT firms can penetrate the market by offering solutions, not services. This is not a market where sales personnel cannot passively wait for a RFP (request for proposal) to be floated by a possible client. An active sales approach is required. By the same logic given above, the gains per dollar of IT investment in China would be more than the gains per dollar of IT investment and thus easier for IT service firms to create business cases and deliver value.

In a nutshell, to crack the China market, Indian IT service providers should re-position themselves as premium players who offer a value-for-money proposition to F500 firms. They hire local talent for business development and client facing roles that are well versed in the nuance of business (and guanxi) in China. Finally, instead of waiting to answer requests for proposals, firms should actively solicit business and focus on growing the market by offering solutions.

Reading Boosts Brain Function

Reading a good novel can boost brain function. A recent research study from Emory University, co-authored by my dissertation co-adviser, Michael Prietula, has found “changes in resting-state connectivity of the brain that persist“. The study used a functional magnetic resonance imaging (fMRI) to identify brain networks associated with reading stories.

 

The results showed heightened connectivity in the left temporal cortex, an area of the brain associated with receptivity for language, on the mornings following the reading assignments.

Heightened connectivity was also seen in the central sulcus of the brain, the primary sensory motor region of the brain. Neurons of this region have been associated with making representations of sensation for the body, a phenomenon known as grounded cognition. Just thinking about running, for instance, can activate the neurons associated with the physical act of running.

From Emory University

or in other words, the study shows that reading makes you smarter, reading stories makes you even more smarter. This explains why some of us (me included) have to read a story or a research study to ‘kick start’ our brain into ‘writing mode’.

The original study can be accessed here. This news was also covered at Futurity.org and The Independent.

Google Acquires Nest

Google has announced its acquisition of Nest for $3.2 billion. This is Google’s biggest and most newsworthy acquisition in the Internet of Things / SmartHome space. Perhaps it forebears its intent to integrate data captured from smart sensors into its search results? More likely is the creation of multiple Google Smart Devices that are deeply integrated together through the Android operating system. An exciting possibility indeed!

 

Google Inc. (NASDAQ: GOOG) announced today that it has entered into an agreement to buy Nest Labs, Inc. for $3.2 billion in cash.

Nest’s mission is to reinvent unloved but important devices in the home such as thermostats and smoke alarms. Since its launch in 2011, the Nest Learning Thermostat has been a consistent best seller–and the recently launched Protect (Smoke + CO Alarm) has had rave reviews.

See the original press release here.

How The Hobbit is like doing a Ph.D.

I came across this interesting post about a paper on how The Hobbit is an allegory of doing a Ph.D. It makes several fascinating connections between the two.

This paper was presented by Ken Halland in 2006 at the 36th Annual Conference of the Southern African Computer Lecturers Association, Cape Town, South Africa.

Gollum from The Lord of the Rings and The Hobb...

Abstract 

In this paper, I show how The Hobbit by JRR Tolkien can be viewed as an extended allegory
for any challenging and arduous human endeavour, and in particular for tackling and
completing a PhD.

 

Read more in the full paper: Ken Halland, PhD in Middle Earth

The original post is here while the original paper can be found here.

Google’s Acquisition of Waze: A Triad of Benefits

Most analysts have hailed Google’s recent acquisition of Waze for $ 1.3 billion a masterstroke (a minority thinks that this is going to be a botched overstretch, a la Motorola). [See some nice reports here, here and here and the Waze blog announcement here.] However, there seems to be no agreement on whether this is a strategic M&A, a pure technology acquisition or an acqui-hire. Different folks have differing opinions; IMHO, this acquisition offers Google a few advantages of each of these.

Waze navigatiescherm

Waze navigatiescherm (Photo credit: Henk-Jan van der Klis)

A Pre-emptive strategic move: It was reported that there were several suitors for Waze, including Facebook and Apple. By spending a small part of its $50 billion plus cash pile, Google has managed to keep a key technological advancement out of the hands of the competition and this been able to maintain its pre-eminent position in the Maps market.

A technology acquisition: By definition, a technology acquisition provides the acquiring firm with a technology or technological knowhow. Waze will enable Google to add a critical element to its Maps technology – real-time, crowdsourced updates. A weakness of all the major players in the Maps market has been the need to spend millions of dollars to periodically update the maps for accuracy in a rapidly changing world (cue the Apple Maps disaster). Waze will augment Google’s efforts by providing a cheaper option for map updates as well potential future monetization through location based advertising.

An acqui-hire: While the technology artefact represented by Waze is impressive indeed, Google will also benefit from the knowledge residing within the employees of Waze. Google has committed to maintaining the Waze R&D team in an ‘as is’, independent state, thus ensuring continuity of tacit forms of individual and group level knowledge. This will maximize the potential innovation outcomes from the Waze R&D team, and Google will be able to benefit from potential knowledge spillovers to its own R&D centres (some of which are located relatively nearby). [It is reported that Waze employees have been offered nice retention bonuses to stay for 4-5 year post-acquisition, thus maximizing the time for spillovers, knowledge transfer, and innovation.]

Overall, the Waze acquisition provides Google with several benefits which will enable it to possibly dominate the ‘Lo’ portion of the next big battlefield – The SoMoLo Convergence.

Good or Bad? 1 Billion+ LinkedIn Endorsements

Why LinkedIn Endorsements are a good idea, gone bad. 
  

A few months ago, LinkedIn celebrated 1 billion endorsements by releasing an infographic (see below). Considering the passage of time and the increasing velocity of endorsement giving, this number may be over 3 billion by now.

On the face of it, LinkedIn Endorsements seemed to be a good idea. Users can endorse specific skills of others, thereby helping potential employers to more easily shortlist candidates (the ‘placement’ market is after all, the main revenue stream for LinkedIn). Users will also benefit from ‘social recognition‘ of their skills and capabilities.

However, all is not well in wonderland. The manner in which the Endorsement system has been implemented is resulting in several, hopefully unforeseen, problems. Three main issues are:

1. Personal Brand Dilution:

A user does not necessarily have control over what skills are being endorsed by others. Thus a skill which one does not wish to emphasize might get ‘suggested’ by LinkedIn for endorsement by others, while the skills a user has selected as part of his/her ‘online brand’ are not always visible. While a one can opt not to display a particular endorsement, the overall result is either a wasted endorsement or dilution of the personal brand.

2. Endorsement Value Dilution:

As per the current implementation, anyone can endorse any skill for any connections on LinkedIn. As a result, one may get endorsed for a particular skill by someone who is not is a position to make a genuine evaluation of the skill. For example, a Scientist’s mathematical skills can be endorsed by his/her basketball teammate – not exactly someone who maybe in a position to make such a judgement.  Alternatively, one might get endorsed for a skill that one does not possess [In jest, I’ve received an endorsement for Quidditch! Unfortunately, I cannot tell a Quaffle from a Bludger]. When combined with the fact that there is no way to verify endorsements, this results in the value of a LinkedIn endorsement being zilch.

3. Unusable LinkedIn Stream:

There was a time when one could view the LinkedIn activity stream and garner the major happenings in one’s professional network. Who changed jobs, who got promoted, who started something new. Now, the stream is largely unreadable, with the majority of updates simply stating that X got endorsed by Y for a skill Z.  Which has made the LinkedIn Activity Stream unusable.

1 Billion Endorsements Given on LinkedIn

The Dunbar Number Explained

The advent of Facebook and other online social networks has made the Dunbar Number a well known concept. This article provides a nice layman’s explanation of the Dunbar number, in the words of Robin Dunbar himself. The article also points out that recent research shows that while people can have several thousand Facebook or Twitter friends, the number of people with whom they have meaningful interactions remains at around 150.

Dunbar's Number in Twitter Conversations

Dunbar’s Number in Twitter Conversations (Photo credit: Cea.)

It seems as though the concept of a ‘Technology Assisted Dunbar Number’, which I had attempted to conceptualize 5 years ago has not found empirical support – as of yet. Hope remains that technology will one day enhance the limits of human cognition and thus enable us to evolve beyond this natural barrier.

 

Key passages from the article are highlighted below:

 

 

 

Over the past two decades, he and other like-minded researchers have discovered groupings of 150 nearly everywhere they looked. Anthropologists studying the world’s remaining hunter-gatherer societies have found that clans tend to have 150 members. Throughout Western military history, the size of the company—the smallest autonomous military unit—has hovered around 150. The self-governing communes of the Hutterites, an Anabaptist sect similar to the Amish and the Mennonites, always split when they grow larger than 150. So do the offices of W.L. Gore & Associates, the materials firm famous for innovative products such as Gore-Tex and for its radically nonhierarchical management structure. When a branch exceeds 150 employees, the company breaks it in two and builds a new office.

For Dunbar, there’s a simple explanation for this: In the same way that human beings can’t breathe underwater or run the 100-meter dash in 2.5 seconds or see microwaves with the naked eye, most cannot maintain many more than 150 meaningful relationships. Cognitively, we’re just not built for it.

—–x—–

Dunbar actually describes a scale of numbers, delimiting ever-widening circles of connection. The innermost is a group of three to five, our very closest friends. Then there is a circle of 12 to 15, those whose death would be devastating to us. (This is also, Dunbar points out, the size of a jury.) Then comes 50, “the typical overnight camp size among traditional hunter-gatherers like the Australian Aboriginals or the San Bushmen of southern Africa,” Dunbar writes in his book How Many Friends Does One Person Need? Beyond 150 there are further rings: Fifteen hundred, for example, is the average tribe size in hunter-gatherer societies, the number of people who speak the same language or dialect. These numbers, which Dunbar has teased out of surveys and ethnographies, grow by a factor of roughly three. Why, he isn’t sure.

 

Another link to the article is here.