MacWorld 2006, the future of software applications

Jobs’ keynote address at MacWorld 2006. One word, Innovation.

iPhoto: The Mac now has photocasting. Similar to podcasting, it allows your family, friends, and fans to get updates on photo albums seamlessly.

Apple is showing the world how to enslave technology (as compared to being enslaved by it).

Instead of focusing on just web-based applications (e.g. using Ajax, or maybe flickr), or just focusing on desktop applications (e.g. WMP), they have decided that both need to work with each other without the accidental artifiacts in the way (e.g. the Internet Browser).

The use cases are very simple. You can send a (possibly RSS) URL to your grandma, have her click on the link and import your iPhoto album over the web. In the backdrop, iPhoto (or any other RSS photo application) is subsrcibing to a RSS feed from your album on .Mac. Now as you update your album locally, the updates are seamlessly exported through .Mac to all your subscribers.

Flickr I hope you guys are listening. This would make my life a lot simpler (to quote a MacWorld participant).

I think in the future, desktop applications that depend on the platform will not go away. There is way too much hardware that will integrate with the platform in the first place. This hardware will provide content. It is one thing to get Maps from Google on your phone or PC. Creating your own content and exporting is a different beast altogether.

iWeb: Talk about “Content Management Systems“[Sukshma], iWeb will now build a website for you, around your photos, blogs, videos and other content. Jobs started his presentation with his goals, easy to use, must create beautiful websites. (hey Shalin, if your reading this, any thoughts?).

He then went ahead and demonstrated iWeb for the audience. It was very inspiring. As a bonus, all Mac applications can contribute and share content through iWeb in a matter of 2 clicks.

Services lobotomizes would-be Entrepreneurs and Research Scientists

Original Article: “What’s driving India’s rise as a R&D hub” – Knowledge @ Wharton.

Vivek Paul, ex-CEO of Wipro believes that the Services industry has a negative impact on the entrepreneural eco-system of India. At first glance, this would appear to be an extreme opinion. But if you read the paragraphs below carefully, you will see that Vivek makes a strong case. Specifically, his argument implies that there is a tradeoff between risk taking abilities and attention to process detail. With reference to the workforce trend, the low entry barrier to services is causing the Indian workforce to tilt towards the latter. Overall, his point that the path down a Services model will not lead to innovation and products, is well taken.

Knowledge@Wharton: Where do you see opportunities in India, on the IT side and the life sciences side? And where do you think India’s competitive advantage might lie compared with other countries?

Paul: It goes back to the abundant supply of trained labor. That doesn’t necessarily mean just cost. It means cost, process and availability. So I don’t think that at this moment in time [the question is] “how do you build the manufacturing of a pharmaceutical” or “how do you do the clinical process.” Are there ways for you to do more of the generics side? Are there derivative drugs that you can develop? People are finding that you can create drug cocktails, and come up with a different kind of an outcome versus an individual drug you can make somewhere else. Those are very interesting areas.

Aron: Wipro, which you did so much to grow over the past five years, has been doing a lot of captive R&D for other companies. Do you see that as something that can be replicated by other companies? Is there a profitable and robust revenue stream in India for such services?
Paul: If you look at the service business, absolutely. But if you look at that service business as leading to innovation and product outcomes, the answer is absolutely not. Frankly, I feel that when people work in a service business like ours, it’s almost like we give them a lobotomy. I don’t think — and I hope I’m wrong — you will see a single successful product startup coming out of people who were working at Wipro or any other similar companies. You’ll find that innovation comes from people who worked for Intel India; they’ll go off and come up with a new chip. Or someone at Cisco India will come up with a new router. Why that is, God knows. But I truly believe that there is some sort of inadvertent lobotomy that we give people.

Aron: So you believe that some sort of self-selection is taking place? That those bright people who are risk-averse, who want to be very good at process detail, those are the folks who will come and join service businesses? And those who have an appetite for risk, who are willing to look at messy, ambiguous situations, will go off and try to do R&D?

Paul: I don’t know. I just have that observation. I have not spent any time thinking about what the root cause might be. But there it is.

Aron: Where do you see high-end R&D opportunities in general? For instance, there’s a lot of R&D being done in China, in Ireland and in Finland by American companies. Do you see those kinds of captive R&D centers coming up, or better still, ones that give R&D projects to a third party and say “I want you to come up with a new circuit board for my cell phone?” Do you think that kind of thing could happen?

Paul: It’s already happening. The stuff that’s been done in India is staggering in terms of range and depth. I don’t think that anyone can say that the work we’re doing is trivial. But the work we’re doing is under somebody else’s direction. Let me put it this way: For an engineer, there’s a big difference between discovering something, versus discovering something that you know somebody else says can be done. That difference is the difference between the service business and the products business. In the service business, what you’re doing is great stuff, but it is in some sense something that someone else told you to do.
Aron: Let’s talk about doing something under someone else’s direction, after someone says, “This can be done, do something better for me.” That mindset works in the services business, but to succeed in products you have to go off and discover the possibilities. Is that correct?

Paul: Yes, and there’s a second quality I didn’t mention: Knowing what you want, or what the market wants, versus being told what to do.

Update (2nd Feb. 2006): “Bootstrapping a Business” – Rajesh Jain, Emergic.org.

Related posts on Sukshma.net:

Made in India for India” – Why development for Indian markets matters more than services for developed nations.

Posts under start-up on Sukshma.net for those interested in understanding how to start a start-up.

Promod Haque wants to invest in Indian startups

..in which case we should give him every reason to do so. Promod is a managing partner at Norwest Ventures. They shot into the news lately when they bought a sizeable share of Persistent System’s Pvt. Ltd, Pune.

Rediff recently had published an interview with Promod Haque discussing new ventures in India and greater exploration of the technology product space. I agree with him, employers must cultivate a sense of ownership in their final products through equity and options. Creation of wealth is not nearly as important as the creation of new ideas, markets and products for our well-being and progress.

Update (6th Feb. 2006): Ram Sriram of Sherpalo wants to invest in Indian Internet Consumer Companies. [Economic Times]

Must see movies

I was glad to begin 2006 with an extended visit to India. Unfortunately, I missed out on a few movies (made in India), despite having had the necessary free time. Thanks to a last minute ditch by Sid, I also ended up missing out on the 2006 Pune International film festival.

Paul Graham on How to start a start-up

To follow-up on my earlier post on “Young Entrepreneurs“, Paul Graham has an excellent article that talks about the initial years of any start-up. “How to start a start-up“, PaulGraham.com. Paul accurately describes what exactly can stop a nascent company dead in its tracks. He also covers some of the oft-used terminology. To add to his article, I have learnt a few things over the past few weeks (from other experienced entrepreneurs).

Entrepreneurs might decide to maintain full control of the company and the idea initially and provide the seed capital from their own pockets. On executing the model successfully and having it pay for itself, the company could then decide to involve VC’s. Apart from retaining control on the idea and the model, the entrepreneur also enjoys the advantage of not having to showing potential investors that the idea does work. Naturally, this might not work in all situations. For example, the start-up may require a lot more ready cash than the founder can provide himself. There is an alternative, start-up’s could seek strategic investors for exclusive contracts and equity in the company. Unlike a VC or an angel investor, a strategic investor is also a direct beneficiary of the proposed model who is attracted to invest based on the potential of the idea. The company can then continue to retain IPR over the idea. Inviting angel investors might potentially seed friction in the future. When inviting subsequent rounds of VC funding, VC’s might propose to wipe out existing angel investors for a larger share in the company for themselves. Since angle investors are usually family or friends, accepting such an offer would invite disaster. (Thanks to Shridhar)

I really like Paul’s advice on how to determine sweat equity awards to each of the founders, it makes sense because the founders do need to stay hungry to see the company through.

The problem is, for the company to exist, you have to decide who the founders are, and how much stock they each have. If there are two founders with the same qualifications who are both equally committed to the business, that’s easy. But if you have a number of people who are expected to contribute in varying degrees, arranging the proportions of stock can be hard. And once you’ve done it, it tends to be set in stone.

I have no tricks for dealing with this problem. All I can say is, try hard to do it right. I do have a rule of thumb for recognizing when you have, though. When everyone feels they’re getting a slightly bad deal, that they’re doing more than they should for the amount of stock they have, the stock is optimally apportioned.

India’s Hybrid Automobile: Mahindra Scorpio

Thanks to Vinod I was able to pull up a story on India’s bid to build a Hybrid Automobile. I kid you not, we are looking at an almost production quality Mahindra Scorpio.

Main story: “Mahindra & Mahindra showcases hybrid Scoripio and HY-Alpha Champion“.

Vinod’s complaint is, such news does not even make headlines anymore, it is so common place. Now I just wish Infrastructure would catch up just as rapidly.

Encouraging Entrepreneurs in India

I ought to be watching the NASSCOM newsline page more closely. India has it’s own set of incentives for entrepreneurs in IT. While I cannot think of a reason why the incentives would change in the near future, I would still watch it closely.

No prior permission of Government of India is required to set up IT/ Software units in India. Moreover, to encourage units in this sector, Government of India has announced many schemes:

* Domestic Tariff Area: When the primary focus is to sell in the domestic market in India. This unit can be set up anywhere in India. All normal laws apply. No concession is available on import duties. Exports are permitted. A special Export Promotion Capital Goods (EPCG) scheme of Ministry of Commerce can be availed. This scheme allows import of capital goods against export obligations at a concessional duty rate of 5 percent.
* Special Economic Zones (SEZs): SEZs are areas where export production can take place free from plethora of rules and regulations governing imports and exports. Units operating in these zones have full flexibility of operations and can import duty free capital goods and raw material. The movement of goods to and fro between ports and SEZ are unrestricted. The units in SEZ have to export the entire production. The first two SEZs are being set up at Positra in Gujarat and Nangunery in Tamil Nadu. At the same time, Santacruz Electronic Export Promotion Zone, Kandla Export Promotion Zone, Vizag Export Promotion Zone and Cochin Export Promotion Zones have been converted to SEZs.
* 100 Percent Export Oriented Unit (EOU): This is similar to SEZ scheme. But in this scheme, there is no need to be physically located at SEZ. All other incentives are same as provided to SEZ units.
* Software Technology Park (STP): This is a very special scheme under the Ministry of Information Technology. STPs are located at Noida, Navi Mumbai, Pune, Gandhinagar, Hyderabad, Bangalore, Chennai, Bhubaneshwar, Jaipur, Mohali and Thiruvanathapuram. This scheme offers zero import duty on import of all capital goods, special 10 years income tax rebate, availability of infrastructure facilities like high-speed data communication links, etc.

I do wish the government would identify software for Indian markets for special incentives. The outlook for software development for the Indian market is upbeat as this story suggests [“The Indian Software Products Sector: a Slow, Yet Steady Rise To Prominence”].

From the story, according to Professor Madanmohan’s study, there are at least 346 indigenous companies involved with product development. While I am unable to locate the study itself, the article optimistically suggests that the market potential is around US $7bn. Phew! The article goes on to identify key challenges to indigenous product development and what incentives would be nice to have. I am just going to paste that down here.

Facing The Challenges
While the product software segment in India is currently constrained by multiple factors and challenges, it is the young start-ups within the industry that face the toughest hurdles. For these companies, internationalisation and developing new revenue streams are the biggest roadblocks. Funding and access to capital is the other constraint these young organisations face, reflecting the fragile nature of their cash flows and nascent stage of venture capital. Being small in size and not so well known, these companies also had problems in attracting key personnel (especially developers with product orientation).

For software product firms in their expansion phase, the key challenging is managing growth and retaining leadership.

Organisations operating within the product domain are also challenged by the lack of industry-institution linkages, the absence of a consortium approach to R&D and the paucity of global-class talent.

Some of the other challenges facing product companies include the following:

* Access to capital and key technologies
* Lack of a domestic market to experiment and develop product capabilities
* An acute shortage of equity (risk) capital, to support the development of the industry (both large and small) and infrastructure outside of the government
* High entry barriers, including relatively larger investment and resources, a gestation period, technological complexity and endmarket and marketing knowledge
* Lack of resources for brand building

Providing The Growth Drivers
Clearly, the industry and the government have to work closely to provide a fillip to the product software segment.

A host of initiatives can be jointly undertaken to catalyse the growth of this emerging industry. These include the following:

* Improve the level of seed funding and encourage networking between the
* seekers and givers
* Increase the talent pool of target areas and initiate higher degree programmes at the IITs, IISc and institutions of higher learning
* Increase the access to test and development facilities at Defense and other national scientific organisations
* Increase tax and other incentives to develop and market ‘Made in India’ software products and standards
* Introduce policies that foster a balance between innovation and facilitate technology diffusion
* Encourage innovation to ensure global competitiveness
* Make investments in frontier technologies such as nanotechnology, SOA, Seamless mobility, bio-informatics and others.

Clearly, a lot can be done to place the Indian product software companies on the global map. By overcoming challenges related to funding, brand building and talent availability, the government and industry can ensure that the software product business become a viable growth opportunity for Indian companies.