Bertrand Barthélemy's Blog

The promises of the Internet bubble made true

The promises of the « Internet bubble » are becoming real today

 

9 years later the Internet bubble ‘s promises become true. I see more and more actual projects with outstanding results leveraging the  “Internet principles”.

 

I know a project where we cut costs by 10 and saved 2 years in achieveing the project. The idea was simple: keep the current machnies and put the “smart soft” outside while plugging it to the machines trough webservices; and it works.

 

I know another project where no CRM software was needed but a CRM solution was implemented in 3 monthes only leveraging a smart definition of the data. For 30 millions users…

 

And another one where we cut costs by

5 in communication tools within a company. On top of that saving, instant collaboration was made available with their suppliers and clients….

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The differences between the Chinese and the Indian education system for Engineers could explain the past…and give a hint for the future

Indians are taught software and program management, they learn how to work in groups.
Chinese are taught hardware and in professional skills (aerospace, accounting, …), they work more on their own.

This difference could explain why India has specialized in IT and saw huge Indian companies emerge on the world scene: their skills fit the program design needs, program management and software development.
The Chinese are better in everything to do with the machines. They excel in computer manufacturing, Telco equipment. They don’t have national champions in IT services where teamwork and knowledge of software are more necessary.

For BPO, China could have an edge: the most important skills for BPO are “sectorial” skills (a good knowledge of the processes in a given sector). International BPO companies could find easier to train a Chinese process expert to work in BPO, than to teach a sectorial process to an Indian professional with soft skills.

By the way, on that matter, Russia is very close to China… watch out for China and Russia in some high-end BPO markets!

China is a modern country

In May, I went to Beijing and Shanghai.
It was modern. Large avenues, superb subways, a forest of skyscrapers in Pudong.
The fastest train in the world: it attained 437km/hour when I reached the airport on board of the magnet train.
But I thought it was only the big cities.

In August I went deep in the country: 250 kilometers inside.
I was driven on  4-lane highways. I saw factories and modern housing along the 250 kms.
I visited Nanjing which is still a Tier 2 city, and Kunshan, a small town.
It was not as modern as in Shanghai or Beijing, but it is much more modern than Bangalore. And in some offices, it is state of the art in terms of technology. For example, I saw the equivalent of the Cisco “Telepresence” equipment in Kunshan….

Even Chinese local authorities are investing for tomorrow

...And that’s not the end of the story.
At county level, some mayors decided to prepare for the future.
I spent one day in Kunshan, 30 minutes from Shanghai domestic airport.
This small (1,3 million inhabitants) town is the heart of the laptops manufacturing: 40% of the world laptops production  is made in Kunshan).
But they forecast that the vicinity of Shanghai in the long run is going to hurt their cost competitiveness in manufacturing. They made the decision to move all the laptop factories further West, and they set up “Services parks” close to Shanghai. Land is owned by the city in China. Most of the income of cities comes from the sale of land. But in Kunshan, they resisted the temptation to maximize the short term income. They keep the land and rent it at a discount price to attract companies and workers.
They chose to specialize their town in services activities where they could get a comparative advantage on other cities, ie where the proximity of Shanghai would be an asset: one park for high end logistics, one for Headquarters and one for BPO. The goal is to attract white collars from Shanghai, in businesses for which the cost of remaining downtown Shanghai is becoming too high.
The facilities are top technology.

And they built housing for the workers and condos for the managers. I visited one apartment: it has the standards of a western apartment, with one bedroom per person, enough space, Wifi, broadband Internet and IP TV in each room…

China is preparing the move to a « Services » economy

I had several business meetings in Southern China: Hong Kong, Shenzen, Nanjing and Shanghai.

I was struck by the quality of the strategy of the country and the smart way the Chinese implement it.
China decided to prepare for the next step: after Manufacturing, they want to step into the Services economy. They are the “factory of the world”, but they know their cost advantage could fade. Hence China doesn’t want to let India be the “Office of the world” alone.

At central level, they decided to boost the IT and BPO business in the country.

The plan is called: 10-100-1000.
10 stands for 10 cities to compete with Bangalore
100 stands for attracting 100 multinational companies (MNC) to transfer their IT/BPO in China
1000 stands for developing 1000 domestic IT/BPO providers.

The list of the 10 big cities was decided by the central government.
Now the 10 cities are competing to attract the 100 MNCs.

And that’s the smart way of implementing a central strategy: each city is free to choose its own specialization, its own incentives, its own negotiations with MNCs.
That freedom enable China to test numbers of  ideas, numbers of solutions. When one proves to be efficient it is multiplied; when one fails, it’s just dropped.

A stunning balance between central strategic decision and local freedom of competition.

China's labour arbitrage is changing dramatically

China is modernizing its Labour market

At the beginning of 2008, China passed a new law protecting the workers.
Companies have to pay benefits for individual subcontractors who are working for the same contractor year after year and pay severance if they want to get rid of them.
Hence the cost advantage of subcontracting to an army of low paid workers is over. Over is the flexibility.

This law is pushing big chinese companies to optimize their practices. It will trigger a wave of outsourcing of tasks to professional outsourcers.
It is a plus for low paid chinese workers…and it is triggering a profound modernization of the chinese economy with the emergence of a modern offer of professional services.

Retail 2.0

I visited the Technology show room of Galeries Lafayette, the high end French retailer and consumer loans bank.

They are displaying prototypes of new technologies, applied to a department store.

I got a glimpse at what could be a retail store in 3 or 4 years from now;

Innovation can be split into 3 categories:

- ways of getting a much better recognition of the brand, of the ads

- ways of improving the buying experience by displaying instant information about the product the customer is looking at or by providing the customers in real time with profiled information or rebate

- ways of simplifying the action of paying your purchases.

1. Better recognition of a brand

The key idea is to use videos or moving pictures. The best example can be seen in the video of the pool and the red fishes.

It has been used in stores to advertise soft drinks:the customers was walking on ice and made the name of the drink appear below their feet. The recognition results were ten times higher than a traditional ad.

On the Internet we find the same level of efficiency: the transformation into an actual purchase of a product after an Internet ad is 8 times higher when you use rich media (video, animation) than with a traditional static web site.

2. Improving the buyer experience

You can display on a flat screen information about the product the consumer is handling or simply looking at. It’s a simple use of RFID tags or video recognition. You can even recognise which type is the customer(eg: male, between 25 and 45, or female above 50) and display information profiled for this type of category.

A supermarket manager can monitor the sales by product and send SMS to the clients present in the store in order to offer focused rebates on the products which are selling slow. The biggest hurdle for this type of service is not the technology, but the internal rules of retail companies!

3. Speed up the payment of your purchases

In Japan 98% of the mobile handsets enable the customer to read electronic tags put on goods or ads, or to pay their subway card, to buy drinks from machines, to pay their purchases at their local department stores, and a multitude of new applications….

The USA are catching up very rapidly with pilots at Safeway for example where you pay with your mobile: you pay in 3 seconds instead of 19 seconds!

Visa and Mastercard are now allowing to use your mobile phone instead of your credit card.You just enter your pin code and send it by SMS.

Google is about to launch new services and Apple is partnering with Starbucks…

Europe is coming too with experiences in Austria, in Amsterdam.

In japan, the two biggest Telecom operators have just bought two banks..

Who is going to drive the Mobile marketing?

The banks, the retailers or the telecom companies?or Google?

The winner will make big money.

15 big trends in the Bay Area according to Orange Labs

1. Video & bandwidth explosion
2. Social networking (with a direct link with real networks)
3. Data portability (I can control and transfer my personal data from a social network to another one)
4. From portals to platforms (ie:ability for anyone to develop applications on a given platform (eg:for Facebook, I-google, Yahoo!,…) it allows these platforms to offer for free a lot of applications.
5. Datacenters: cloud computing & virtualization (the data are not hidden inside the enterprise anymore; GenY doesn’t care for confidentiality as returns are high from openess.Geny is ok to give free access to their personal data: 26% of facebook users give the real phone number, on Mint.com people give the real bank account number!).
6. Mobile Plus (Android by Goole, I Phone, …):access to the web everywhere, with rich media applications available on your smart phone;
7. “Consumerisation” of the enterprise. The best tools are not the ones provided by your company but the ones you use in your personal life (her’s a real example: a clerk used his own PC with Googlesearch next to his company CRM system. It allows him to give quicker information to his clients)
8. On line advertising is still THE business model for start ups on the Internet
9. Search function is commoditized. Google has won the battle. The next battle will be about “discovery and “recommendation?” (advices, reputation)
10. Location based services & the Geoweb
11. Reality mining. Indexing reality and intention management (reality is what I do everyday with my phone, my PC. It allows forecasting my intentions in order to provide me with higher confort. Yahoo! made a demo around these possibilities.
12. Neuro-marketing and mind-augmentation: be more than human. Internet can correlate more data than I can
13. Knowlegede amplifier: understanding what we know; there’s a lot of data but a lack of “meaning”
14. Green tech, clean tech
15. GenY is joining the workforce. It has an impact but nothing is ready for them within the traditional companies. This young generation need IT but no confidentiality. Managers must listen to them, go and understand their needs

From Gen Y to Gen IE

The 30-45 years old are called GenX, they are the generation of the end of the economic bonanza in the western countries, the generation of the oil shock and all the struggling years that followed.

The new generation is 15-30 years old .It’s called the Gen Y.
they are born in the post cold war era, in a decent economy, with technology everywhere, with an instant access to their friends, to video games; They are tech savvy; they are living in the instant

Y is following X. but the Y has an extra meaning: they ask “why”.

“why” should they have to go to work for big companies which didn’t offer their parents a proper career.
”why” should they vote for governments which don’t tell the truth?
“Why” should they wait for enjoying anything they like to?

Now this generation is joining our companies.
What can we offer to them.
I suggest we give a sense to Gen Y.

They have technology at home, at their universities: mobile phones, direct and mobile access to the Internet (they are always “on”), they use the tools of the Web2.0: wikis, social networks, blogs, vlogs.

We can provide them with these tools.
It’s the easy part, even if it’s not yet the case in most of the companies.

But it won’t be enough.

They want an open world, where the permitted is the rule and the forbidden the exception, they want to organise their work the way they organize it in their personal life.
They want a better balance between personal life and worklife.
They don’t respect authority, they respect competency;
Hence we have to change our way of management: empower them more than stick to our old military model of Command &Conquer.

And they want to give a sense to their life.
Our company purpose should bear a sense.
If we want to attract and retain the best of the GenY we have to offer them a sense.

The good news is that Tech Companies have an historic opportunity to answer to their Y question

The Internet is changing radically our economic landscape.
Internet brings global connectivity at a much lower IT cost, and can bring real time and relevant data to the agents in the field.
These agents will have the opportunity to transform these real time data into real time decisions.

That’s what I call the Intelligent Economy

This Economy is an economy of much higher efficiency and much more services, tailored to each of us needs.
It is an Economy where one can get the real service he longs to; and an economy where the smart companies can grow dramatically.
An economy where the decisions are made by the people in the field.
An economy where one uses technology as he does at home or at school;
An economy which makes sense

The genY could become the Gen IE, Generation Intelligent Economy.

Insights on China and India

Thoughts on comparing China and India in the Technology world.

China and india seem to live in the same ecosystem.

350 000 new engineers arrive on the labour market each year in India.
600 000 in China.

their workforce is used to apply processes and enjoys a very high motivation in both cases.
Both countries has a diaspora in the US. This diaspora is very useful to ease the connexion with clients.

Companies of both countries get the same support from the government with Special economic zones (low tax, good networks, special labour laws).

China seems to have an edge when technology is concerned.

There are 4 times more mobile handsets in China than India; three more times PCs , three times more Web users.

And as everybody knows, much better infrastructures in China.

Chinese seem to enjoy Technology in their day to day life;but does in translate into powerful Chinese companies,

Yet, the Information Technology Offshoring (ITO) world is dominated by India.not by Chinese companies

In India, 70 of the IT market is served by the 15 biggest IT companies (TCS, Wipro, Infosys, HCL,..) with employees by the tens of thousands. 15 is served by the local branches of Western IT companies (Accenture, IBM, Capgemini, CSC,..)
In China, there are 10 000 IT companies, only 5 of them bigger than 2000 employees. IBM has 2000 employees in IT, Accenture 1200, Capgemini 400

Why is the market so concentrated in India and so fragmented in China?

BPO (Business process Outsourcing) came by chance with captive subsidiaries of US companies (GE was the front runner) which were transferring work from the US to India.

But ITO (Information Technology Offshoring) came from Indian managers themselves. Apparently from an handful of managers able to create these 15 giants. They got the support from the Indian government, they took advantage of being linked to big US companies (some of them started as jv).

Does the proficiency in English explain the difference? Is it something else?

My intuition is that the education system and culture play a big role in the emergence of India in the IT world. Offshoring products and services need the capability to run processes. Both China and India have it.

But IT services require an additional capacity: being able to question specifications, in a complex environment. This capacity seems to be well spread in India, where maths are highly regarded. In the traditional Chinese culture, question orders seem not to be so common.

Finding an answer to this question is key for western companies which want to expand in China.

Is the “Indian way” the right solution?