Archive for the ‘Business’ Category

India’s Talent Pool Drying Up

January 6, 2006

WSJ writes:

India, despite its reputation as a bottomless well of back-office talent ready to scoop up American jobs, is having an increasingly difficult time finding qualified workers to fuel its booming services sector.

The cross-sector crunch is especially worrisome in the technology industry, where wages are rising 15% a year as call centers and software firms throw money at the increasingly shallow pool of youngsters who can hit the ground running. Consulting firm McKinsey & Co. says India’s information-technology industry could face a deficit of 500,000 workers as soon as 2010, undermining its attractiveness as an investment destination.

Even if companies continue to find the talent they need in the near term, the rising wage bill is a troublesome long-term trend for India’s competitive prospects — and for foreign companies pumping money into the global outsourcing market. The emerging talent deficit is giving rivals such as Russia space to compete with India for high-end outsourced work such as software design and solutions, and allows aspirants such as the Philippines — where English is widely spoken — to better compete for call-center business.

Business Week writes:

If India doesn’t take urgent action to reform education and build modern infrastructure, the nation could fall far short of its potential as an outsourcing haven. That’s the conclusion of a new study to be released Dec. 16 by McKinsey & Co. and Nasscom, India’s influential information technology trade association.

The first inklings of a tightening talent supply are already visible in rising staff turnover and skyrocketing wages. If offshore outsourcing work grows as rapidly as expected, the study predicts, in five years India will have a shortfall of 150,000 IT engineers and 350,000 business-process staff. “The problem we are facing is huge,” says Noshir Kaka, a McKinsey consultant who led the study. “The acute demand is leading to supply-side shortages.”


Economic Moats

January 6, 2006

Morningstar writes:

We begin with the premise that all highly profitable firms attract competitors, and only firms that are able to keep competition at bay will earn above-normal profits for a long time. An economic moat–or competitive advantage–allows a company to fend off competitors and earn sustainable excess economic profits. We look at return on invested capital (ROIC) relative to the company’s cost of capital to determine profitability, because ROIC shows us the cash return on the capital invested in the business. We think that ROIC is the best measure of a firm’s true economic profitability.
Of course, we have to examine ROIC relative to a firm’s cost of capital because money isn’t free–those who have capital charge companies for the right to use it, and they charge some companies more than others. A firm that operates pipelines or sells beer has a low cost of capital because it has a stable business, so investors don’t ask for much in the way of returns. A small semiconductor or biotech firm would have a very high cost of capital because it’s entirely possible that investors might not get their money back, so they ask for a high return to compensate for the higher risk. For example, an ROIC of 14% would be spectacular for a pipeline company relative to its 8% cost of capital, but would barely clear the bar for a small tech or biotech firm.

Best Web Companies and Innovators of 2005

December 27, 2005

Read/WriteWeb by Richard MacManus writes about Best Web Companies and Innovators of 2005.

Web Access on Gadgets

December 21, 2005

WSJ writes about the mobile Internet:

The overall move to Web pages designed for small screens is still in the early stages. In many cases, when you access any Web site from a mobile device, you may see the text and graphics of the normal page awkwardly condensed. But such distorted layouts are becoming less common, as companies take advantage of faster wireless networks and more powerful mobile devices.

Sites tailored for mobile — the availability of which varies depending on the device and carrier — typically have only a few links listed on the home page and few or no graphics clogging the screen. The URLs of these sites may be identical to their parent sites or may require adding “mobile” or “wireless” somewhere in the address.

Internet giants Yahoo, Google, MSN and AOL are leading the mobile Web push, but other sites are gaining popularity as well. Among them are mobile versions of ESPN, Mapquest, sites that list movie show times, such as, and a range of travel sites.

Cisco Bets on Web Video

December 21, 2005

WSJ writes:

Mr. Chambers predicts the demands of video will transform the Internet over the next decade. Network traffic should increase fourfold to sixfold annually, instead of the 100%-a-year gains now seen in the U.S. and Europe, he says. Beyond the heavy traffic is the technical challenge of moving video, Mr. Chambers says. “Making work is really, really, really difficult.”
Scientific-Atlanta’s products help Cisco expand its offerings by bringing it closer to the consumer market for movies and other videos. The set-top box becomes a valuable piece of real estate as video becomes more widespread, Mr. Chambers says.

Cisco’s recent $61 million purchase of Kiss Technology AS, a Danish consumer-electronics company, was in anticipation of a push into video like the one with Scientific-Atlanta. Kiss “may have been one of the most aggressive moves we made,” says Mr. Chambers.

Google Base and Vertical Databases

December 21, 2005

Bill Burnham writes that the combination means the death of walled gardens:

Much like the delusional King in the Holy Grail, many of the Internet’s biggest and most profitable “Walled Gardens”, sites such as,,, and even EBay, appear to be in denial about the ultimate destiny of their sites, which is, that they are bound to be subsumed by the larger Internet.

With Google Base fully in place (and ultimately similar services from Yahoo, Microsoft, and Amazon), why in world would anyone pay to have their listings displayed or pay to have to access to a database of listings? After all, if you publish the listing on your own site Google will automatically index it and then list it within Google Base within the next few days and if you want to make sure they get it immediately, you can just submit if directly to Google Base or register your RSS feed with them (a feature I’ll bet they are likely to add). Instead of charging you (or its end users) for the privilege, Google will make money off of the advertising it sells around the listings. Perhaps you may even be able to pay a fee to have your particular listing “advertised” in a preferential position.

This reminded me what Paul Graham said about emerging Web 2.0 marketplaces:

Odd as it might sound, we tell startups that they should try to make as little money as possible. If you can figure out a way to turn a billion dollar industry into a fifty million dollar industry, so much the better, if all fifty million go to you. Though indeed, making things cheaper often turns out to generate more money in the end, just as automating things often turns out to generate more jobs.

Online Ad Marketplace

December 8, 2005

Fred Wilson writes:

Online advertising is a marketplace and its working great. That $12.3bn number was around $9bn last year. Any market that is that big and growing at 30% per year is super healthy.

But there are some things that aren’t yet right about this market.

For one, there really isn’t true price transparency. And there isn’t true performance transparency. It’s not like anyone in the world can look at the xbox 360 ad campaign that Microsoft is running, chart it, see how it is performing, understand how it is being priced in the marketplace, and step up and say “I’ll take some of that”. I can do that with MSFT, the stock. But I can’t do that with Microsoft the advertiser.

I believe that right now, we have a marketplace, but it’s a nascent marketplace.

The thing that gets me so excited, though, is that is so clear where all of this is headed.

Toward massive liquidity

Toward total price and performance transparency

And toward a completely open marketplace where anyone can run anyone’s ad campaign.