In India, with Force(.com) !

The Tour de Force events across the globe continue to draw great attendance and interest from developers looking to build new SaaS applications. The event is yet to make its way to India but I have been traveling across India (Pune & Bangalore) meeting with partners, educating them about Force.com and Platform as a Service generally – and the response has been tremendously positive. At one of our partners in Pune, I delivered an hour long session on PaaS and Force.com – and the result was a lot of very interesting questions and interest in this paradigm shift. A similar event in Bangalore with over 100 attendees drew a similar response.

India is Ready

There was genuine appreciation about how difficult and wasteful it is to currently build, deploy and manage software applications. This is especially true for IT outsourcing firms that month after month see ISVs and IT departments of large enterprise burn time and money on infrastructure and platform, delaying and risking delivering business value to the end users.

Across Generations

India is a country of young people – over 50% of India’s population is under 25. And presenting to various audiences – I couldn’t help but wonder how many in the audience can even remember what computing without connectivity was like. The shift from client-server to SaaS comes naturally to this generation.

More interestingly, the senior executives and technology gurus – some that wrote compilers in 1980s by hand – were even more excited about this shift. The questions and discussions revolved around how to navigate this shift and understanding the new evolving SaaS ecosystems and not whether the shift is underway.

Here is a sampling of questions:

Is There a Whitepaper on SaaS?

Yes, we do have whitepapers on SaaS and PaaS. However, whitepapers are so 90s – I encouraged our audience to learn through building and engagement with the community – blogs, online forums, how-to wiki’s, informational videos.

What Kind of Applications Can I Build on PaaS?

Even as salesforce.com started out as a CRM company, the Force.com platform is being used by our customers and partners to build out applications that cover wide variety of solutions be it Finance and Accounting (Coda), Risk Management (Riskonnect), Life Sciences (Verticals OnDemand) and many others. Business Applications that are data and process driven is where Force.com provides the most value today

What about Security?

No one asked this question – so I thought I will mention it. This question that resulted from both genuine apprehensions and FUD created by certain vendors that did not have SaaS capabilities is increasingly becoming a non-issue. I think there are two reasons for this: First, as customers use more and more SaaS applications their experience invalidates the concerns. Second, initiatives such as trust.salesforce.com that educate and inform have re-assured the community of users, developers and investors.

Really?

Yes, this question was asked a few times. For example, when I explained that Force.com is multi-tenant not just for our direct customers but also for all applications written by end users and partners – and that everyone is on the latest version of the software. The response is: Really?

Salesforce.com’s success with the platform in releasing as many as 25 major releases in last 8 years – and comparing that to once in 3 to 7 years cycle for legacy software vendors also draws a: Really?

So yes, really!

The proof is in the pudding – you are welcome to get a free developer login and build an app.

India, Real Estate and Some Numbers

I just returned after spending a few weeks in New Delhi, India. The incredible pace of growth in India inspired me to see if I can participate in the growth by investing. India does not allow direct investment in equity markets for non-resident Indian citizens (and definitely not not foreigners). I do invest in US-listed ADR (like Infosys) and exchange traded funds (or ETFs like IFN) but I wanted to invest directly. One option available is real-estate.

The numbers when it comes to real-estate just don't add up though. Real-estate in India is incredibly expensive and not just by Indian standards (with per capita GDP of US$ 700 per annum). Here are some numbers:

• Condos in New Delhi, India: 2-bedroom, 1000 sq ft apartment for $200,000. [$200 per sq ft] (Source: 99acres.com)
  
• Condos in Chicago, USA: 2-bedroom, 1000 sq ft apartment for $400,000 [$400 per sq ft] (Source: Google Housing)
  

Now, remember that the median income in Chicago is 50 times more than that of New Delhi. Why Chicago? Because New Delhi can grow in all 4 directions much like Vegas can (and Chicago can in 2 directions) as compared to Manhattan and San Francisco that are geographically restricted.

Next, look at agricultural land prices.

• Agricultural land in Faridabad, Haryana (adjacent to New Delhi much like New Jersey is to New York): $250,000 per acre (source: 99acres.com)
  
• Agricultural land in New Jersey: $12,000 per acre (source: USDA, and for comparison its $6,000 per acre in California and $8,000 per acre in Florida)

One may argue that Haryana is too close to Delhi. Land in Dehradun is available at only $100,000 per acre while its much cheaper at only $20,000 per acre in villages in Himachal Pradesh. All at prices way higher than Florida or California. Commercial land is even more expensive.

The issue of population density pops up every time I discuss this. Let me be clear, the population density of India is much higher than USA. But, when you compare New Jersey and India - New Jersey is actually slightly more densely populated. And New Jersey is much more densely populated than Haryana, India.

The next issue that comes up is one of regulation and availability. Yes, real-estate is regulated in India with laws that prevent easy buying and selling and land records that are poorly maintained. This simply means that the prices can be artificially inflated in the near term (that could last several years) but in the long-term must return to rational values.

Will someone please explain this to me? How can farmers that make less than $1000 per annum continue to own land that is valued (notionally) at several $100K? Are the low rental yields (2-5%) indicative of the bubble?

Update: Today, Wall Street Journal writes about a trader that made billions betting against the real-estate bubble.

"Most people told us house prices never go down on a national level, and that there had never been a default of an investment-grade-rated mortgage bond," Mr. Paulson says. "Mortgage experts were too caught up" in the housing boom.

In several interviews, Mr. Paulson made his first comments on how he made his historic coup. Merely holding a different opinion from the blundering herd wasn't enough to produce huge profits. He also had to think up a technical way to bet against the housing and mortgage markets, given that, as he notes, "you can't short houses."

I heard the same arguments repeatedly in India - house prices never go down etc. We shall see!

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Italy Refuses Visa; Sings Aria of Disappointment

Let this be a lesson to all nations including America - if you close your doors to foreigners: immigrants and visitors - prosperity is unlikely to come by. In India there is a saying that roughly translated means "Unexpected guests bring prosperity", and it seems that whether you believe in the elephant god Lord Ganesha or not, the saying is true.

I went to the Italian consulate last year to obtain a visa and was summarily refused even the opportunity to submit my papers because there were only 8 days left for my trip and they require good 30 days notice. Now, I am not aware of too many businesses that can predict all their sales opportunities more than a month in advance - I would assume that there is in fact a Chi-square like distribution (yes, like the one in all the Long Tail diagrams) with most visitors being last minute travelers. At the same time, Brazil, Mexico and Taiwan all provided a visa in less than a day. Not only was my visa refused, the visa staff was rude and unprofessional. I was really keen to visit Italy and build business relationships and spend time (and money) as a tourist.

So today's New York Times article on Italy In a Funk, Italy Sings an Aria of Disappointment did not come as a surprise.

But these days, for all the outside adoration and all of its innate strengths, Italy seems not to love itself. The word here is “malessere,” or “malaise”; it implies a collective funk — economic, political and social — summed up in a recent poll: Italians, despite their claim to have mastered the art of living, say they are the least happy people in Western Europe.

And co-incidentally on my flight to India, I sat next to a 25-year old beautiful Italian woman, Aastha - a second generation immigrant born in Italy to Indian parents. She is now studying design in London and has no intention of returning to Italy but probably work either in London or other growing markets. She told me that she was not sure Italy had room for growth. This is not good for a nation that has the second highest ageing population in Europe when you are immigrants start leaving. The New York Times article suggests that the same is true for native Italians.

Back home, we may be able to learn from this. The United States, as it struggles with the immigration issue in this election cycle, could be at a make or break point for its future. Are we going to stay open to the Aastha's of the world or are we going to sing a country song of disappointment in 20 years?

Goldman: Chinese or Indian Banks May Buy American Banks

I never thought I would see this in my lifetime but emerging market financial institutions from India or China may be able to buy out American banks due to the fallout from mortgage crisis, according to the latest Goldman Sachs report. The report by Goldman Sachs Group Inc says:

Further, we would not be surprised to see the first acquisition of a major US broker or commercial bank by an emerging market institution. While most US brokers and some US banks have broadened their geographic presence over the past decade, none has developed a truly robust Chinese or Indian offering. With these economies growing at multiples of the US, we would not be surprised to see a larger international bank attempt to gain access to the US financial services community through acquisition.

Add to the mortgage crisis, the rapid decline in value of US dollar against these currencies and the growth rates of these economies - the scenario begins to look much more plausible. Its a matter of when and not if.

So What?
The ownership of a company by a foreign institution, although sure to cause a ruckus with the likes of Lou Dobbs, is not a big deal. After all, even today banks like Citi have substantial foreign ownership from the likes of Saudi Kings and Princes. And emerging market banks like India's ICICI Bank have substantial foreign ownership - which means Americans own part of these institutions through a complex chain. But there is a big deal.

The Big Deal: Lower Cost Structure
The cost structures of these banks are much lower than that of their American counterparts. A few years ago, I met an executive from one of these banks at a banking conference event. The Indian bank was having trouble obtaining a license to operate in the US and he said to me that it was because American banks did not want competition in their home court.

A country such as India where cell phone calls cost a penny per minute, cell phones cost $25, cars are being designed for $2000 and employees still cost 1/3 to 1/10th of US counterparts - can deliver banking services at much lower costs.

First it was IT, now it may be the turn of banking. Telco and retail could very well be next. Clearwire-Reliance anyone?

Notes for the reader:

• Clearwire is a WiMax company in US that is struggling due to the break up of the Sprint deal.
• Reliance is India's largest conglomerate with a successful Telco business and market cap approaching $100 billion (yes with a B).
  
• ICICI Bank is India's largest bank.
• Goldman Sachs is one of the few large banks/brokers that has come out ahead through the mortgage fiasco.

India still needs WaaS, PaaS and not (only) SaaS

by indoloony

India is making a lot of progress with more new billionaires being minted every month. The focus on software industry sometimes takes away from what are more pertinent problems- Water (as a Service) and Power (as a Service). Most Delhiites get around 2 to 4 hours of water supply and must have intricate arrangement of electric pumps and tanks to store water for the other 20 hours. Similarly, the business of electricity invertors (think of them as an electricity cache) is booming. The invertor stores power in a battery and when power goes off (every day), the invertor can provide a fraction of your power needs to run your computers and fans but not air conditioners.

It is no wonder that VC Vinod Khosla, with his ties to Delhi, identified water and energy as the mega opportunties for the next few decades.

Broadband for $1 a month, SaaS and Flat World

I just returned from a two week India trip, and was once again amazed by the rate of change- or to be more precise the rate of change in the rate of change (acceleration). I attended an event hosted by TiE New Delhi where a speaker mentioned that the cost of broadband in India is Rs.200 (US$4.50) per month and that he was told by CEO of an Indian Telco that he can deliver broadband profitably for Rs. 50 (US$1) per month.

India: Loosely Coupled!

So, if you are living in Silicon Valley paying over $45 per month for broadband - get ready to compete with the Indian paying $1. This is a flat world except that it slopes East!

To a SaaS evangelist like myself, this also opens up the possiblity of selling a 'bundled software & connectivity' solution to businesses (SMB) that are not yet connected. You can go in and sell an accounting package or SFA (as a Service) including connectivity for $5 per month.

Banking in Brazil - BRIC2.0 or Web2.0

I have been receiving these podcast alerts from Gartner and one of them caught my eye-"What Banks should know about Web2.0". The podcast available here talks about how Web2.0 will inevitably impact the banking industry. The analyst talks about how money will change hands in MySpace, how banks are using podcasts and that RSS feeds can be used to disseminate information. I am sceptical about the MySpace, don't much care for podcasting or its supposed impact on banking but agree that podcasting and RSS are useful technologies. Although it is hard to understand how this is specific to banking vs. retail or healthcare. The analyst then refers to CircleLending, a peer-to-peer lending enablement startup. A very interesting startup amongst the ranks of Zopa and Prosper.

By nicholasb (Creative Commons License)

Meanwhile in Brazil, HSBC seems to be everywhere. On my latest business trip to Mexico and Brazil, I saw HSBC truly dominate the marketing landscape in the two countries. And they seem to be doing well in India too with over 50% growth in profits. Citibank is probably the only other bank that has had so much success in its global strategy and its claim to be "the world's local bank" rings true. So how does this relate to Web2.0- it does not and that is the point. In my view, the future of banking is not Web2.0 but Brazil, Russia, India and China. I would like to coin the term BRIC2.0 and propose that more opportunity and growth is to be found by following the advice of CK Prahlad than by doing a mashup of Bank of America site with LendingTree!

For example, customers of banks in India can check their balances and pay bills by using text messaging on their cell phones. And text messages in India cost lower than 1c per message. In fact, over the next few years as banks from India and other low-cost high-capability countries set up shop in the USA, they may end up giving the US banks a run for their money. If Infosys can run IT operations of large European or US banks at a lower cost, then their friends at HDFC Bank or ICICI Bank may one day be able to provide banking services that can compete with the large US banks. And that may be the logical conclusion of outsourcing. You only have to look at how the PC industry started with outsourcing manufacturing of minor parts, then chips and now Lenovo owns IBM to wonder if one day the same could happen in other industries from banking to healthcare.

BRIC2.0 is the next generation of developing economies that are the engines of growth for banks, automotive, steel, etc. Indeed, IBM is moving its global procurement offices to China from New York. A sign of times to come... forget Web2.0, focus on BRIC2.0!

Ever heard of UFIDA, KingDee, Tally?

Well, you may never have heard of these enterprise software vendors but they are the giants from China and India. KingDee and UFIDA are #1 and #3 vendors in China and Tally is the top local vendor in India. Gartner recently predicted that a large vendor will emerge from China and India over the next 5 years. These 3 could well be the favorites for that spot. Tally is the QuickBooks of India with ambitions in mid-market ERP.

These homegrown wonders have the advantage of deep knowledge of the local markets, ability to develop software that fits the unique infrastructure of these countries. For example, connectivity to the Internet is far from ubiquitous in India. These limitations box these vendors allowing them to innovate in a space that is unique and disconnected from the global enterprise software world. And believe it or not, this is actually an advantage (see The Innovation Sandbox by C.K. Prahlad) as it prevents easy co-option by global vendors. We have already seen this play out in the consumer internet world with the success of Baidu.

Race to the top?
(by Bruno Girin)

So while we all look to climb the ladder of features and architecture and race to take advantage of Web2.0 and SOA in the enterprise software universe, we are also increasingly distancing ourselves from a market that cares about simple software that meets the most basic needs, can run in a sometimes connected world and on previous generation computers. And this market at the bottom of the pyramid is probably many times larger than the top we are all running towards. What do you think?

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