IndiQuest Analyst Weblogs

Neuro Linguistic Programming: A New Mantra for Professional Success

2011-02-11T15:04:00.001+05:30

I attended a seminar by Dr. Keshab Nandy on Neuro-Linguistic Programming (NLP) which was quite interesting. Thought sharing some thoughts on this concept, quite new to India, would be interesting. To make things simpler, let us understand what Neuro-Linguistic Programming is. The basic hypothesis of NLP is that the words we use during our communication reflect an inner, subconscious perception of our problems. If these words and perceptions are wrong, as long as we continue to use them and to think of them, the underlying problem will persist. In other words, our attitudes are, in a sense, a self-fulfilling prophecy.

The literal meaning of the three words are:

Neuro - refers to the brain and neural network that feeds into the brain. Neurons or nerve cells are the working units used by the nervous system to send, receive, and store signals that add up to information.

Linguistics - refers to the content, both verbal and non-verbal, that moves across and through these pathways.

Programming - is the way the content or signal is manipulated to convert it into useful information. The brain may direct the signal, sequence it, change it based on our prior experience, or connect it to some other experience we have stored in our brain to convert it into thinking patterns and behaviors that are the essence of our experience of life.

Our experiences and feelings affect the way we react to external stimuli. Our brains interpret the implications of people, animate & in-animate objects entirely differently. In processing the information, our brains use our experiences (good and bad), our biases, our opinions, our value systems, etc. to convert it into useful information that we can use. This is the reason why we see varying results/outcomes from people with similar education, training, background, and years of experience which otherwise should have been similar. NLP is a science that has helped inceptors like Richard Bandler and linguist John Grinder to learn the secrets of effective people as well as understand what makes them perform & accomplish their goals. They realized that communication (verbal language, body language, eye movements, and others) played a key role in ensuring effective excellence personally & professionally. These two individuals were able to make out patterns of thinking that assisted in the subject's success. The two theorized that the brain can learn the healthy patterns and behaviors and that this would bring about positive physical and emotional effects. What emerged from their work came to be known as Neuro-Linguistic Programming.

How does NLP help:

NLP uses self image and attitude towards illness to effect change and to promote healing.
What you're doing isn't working, you should try something else that will work for you, a NLP therapist will help you identify that ‘something else’.
The person who is most likely to do well responds to changing (or unchanging) circumstances appropriately. NLP will help you gain that attitude.
Finally the NLP theories have been hugely successful in the west since the concept is is much more interested in getting results.

Cloud Computing: Untapped Potential of the Indian IT Industry

2011-02-01T11:47:00.003+05:30

‘Cloud Computing’ has been touted as the next wave of transformation in the Indian IT industry. According to IT research firm IDC, the Indian public cloud computing market was estimated to be USD 66.7 million in 2009. IDC has predicted the market to grow at a CAGR of 40 percent by 2014. Unlike the Americas and EMEA (Europe, the Middle East and Africa), India and the APAC have ample untapped potential for cloud computing at every level; be it enterprise, public sector or ITES. Although Indian businesses are gradually adopting cloud computing, it's still is in a nascent stage and hasn’t received much awareness.

However, in the wake of the global economic slowdown; cloud computing has gained wide interest. The most attractive feature of this new technology is the prospect of converting large, upfront capital investments in IT infrastructure into smaller, manageable ‘pay-per-use´ annual payments. According to India-based research firm, Zinnov; the Indian cloud computing market is going to experience a tenfold growth by 2015. According to the firm, the current cloud computing market is USD 110 million today with; approximately USD 66 million in the SaaS market dominated by applications such as collaboration apps, CRM and ERP. The remaining USD 44 million is shared by the PaaS (Platform-as-a-Service) and IaaS (Infrastructure-as-a-Service). By 2015, the cloud computing market in India is expected to reach USD 1 billion with SaaS capturing USD 650 million while PaaS and IaaS cumulatively get around USD 440 million.

The study claims that this growth will be driven by the rapid increase in data such as text and media moving online. Some numbers shared in the study are quite interesting, it is expected that information stored online will reach a staggering 2.3 million petabytes. The main sectors which would utilise cloud computing extensively include: the banking and financial sector; the telecommunications sector and the manufacturing sector.

The country’s top IT firms such as; Infosys, TCS, Wipro and Tech Mahindra have announced cloud projects to their names. The competition is fierce as the market is nascent and big international names like Microsoft, IBM have dedicated resources as well. Support from the government to get basic infrastructure (cheaper and faster Internet) in place will go a long way in ensuring India’s IT prominence.

Correspondent Banking – A new banking mantra for emerging countries

2011-01-01T12:48:00.006+05:30

In a shocking but true revelation, recently a newspaper report claimed that nearly 45 percent people in Gujarat do not have access to bank accounts. This surely is a bit surprising especially since Gujarat is one of the more prosperous states in the country. The scene is not too good nationally as well. A RBI report states that nearly 40 percent of the Indian population lack access to formal financial services. As much as the news seems de-motivating, the brighter side is that huge untapped market in the banking sector that exists in India - a scenario true for most of the emerging countries across the world. As huge opportunities are yet to be tapped, pioneers need to think out of the box and initiate new models in order to target to the rural section of the society.

‘Correspondent Banking is an interesting banking practice that could be extremely effective in emerging markets. Novel to India but successfully implemented in countries like Brazil, Mexico and Kenya, Correspondent Banking is a model in which the financial institutions work with a network of non-banking retail outlets. These outlets could be anything from post office to convenience stores. In Brazil, the correspondent banking alone serves nearly 1600 municipalities. In Mexico, more than 5,000 correspondent outlets supported by 11 banks have come-up since the government authorized correspondent banking in late 2009. Moreover, the government of Mexico has also reported to be offering half of the 23,000 state-owned Diconsa stores for correspondent banking. On the filp side, in some countries have shown poor progress due to regulatory issues & other restraints.

Corresponding Banking offers a range of benefits for all the stakeholders. It provides the poor a convenient access to financial services in their own backyard while financial institutions get access to a large new underserved customer base. According to a World Bank’s Consultative Group to Assist the Poor (CGAP) the average overall monthly cost per customer using correspondent and mobile phone banking is 19 percent lower than the traditional model. According to Mckinsey’s research all-in cost of offering savings accounts in Mexico through correspondent outlets is 25 percent lower than the traditional route.

In India, ‘Corresponding Banking’ has been in operation since 2006. However, the progress is very slow compared to other countries. Some of the main drawbacks which have led to the slow progress of corresponding banking in India are the legal framework for banking in India and ultra-conservative approach from the banks. Special measures must be taken by RBI to implement certain proactive measures like removing cap on cap on interest rates charged on small loans which in-turn would make it more lucrative for banks to offer banking services to the rural poor.

The first and the primary challenge for successful Correspondent banking is to identify a suitable partner who could act as an agent/intermediary in delivering the service to the customers. This is especially true in India’s context as mostly we find many small retailers serving local communities with little or no access to neighbouring community. Moreover, dealing with the local retail partner may get cumbersome for financial institutions which do not have any experience in non-financial retail segment and the same goes for the agent/retail partner who lacks experience in providing financial services to end customers.

Overall, correspondent banking if implemented well could prove very beneficial for emerging markets as it has the ability to bring banking to a huge percentage of unbanked population in India. In India alone more than 40 percent of the population (which comes to 480 million people) is unbanked; this represents a huge untapped market. Add to this the unbanked population in other emerging countries, surely correspondent banking seems to have bright prospects moving forward.

Personal Branding

2010-12-27T19:15:00.000+05:30

Known to some, unknown to some – Personal Branding isall about learning to position yourself forsuccess, so that you become known for your passion and expertise. In thedigital age, more and more individuals are focusing on personal branding to geta competitive edge in the marketplace. In reality though, emerging asa brand comes effortlessly for a few, but with a little smart-work,determination and self-marketing anyone can brand themselves to enhance theirbusiness and gain more publicity.

Technically anyone with basic knowledge and skills iscapable of personally branding. The big question is ‘how’. In recent times, ithas been observed that more and more educatorsare interested in this space and are dwelling on researching on the basics. Theconcept primarily depends on how well we are networked, how good is our first impression,our personal visibility and self-promotion. Personal Branding isconsidered to be that key to help us achieve success. It is imperative for one to also understandwhy one must indulge in ‘Personal Branding’ to realize its importance. We mustremember that be it personally or professionally, ‘all are being judged.’ Secondly,most of the time, we have to constantly sell our ideas to teachers,managers, venture capitalists, friends and family, to make things happen. Forthis purpose, we need to convince them to take action. We will achieve successin this only if we market ourselves well. In a nutshell, personal branding hasfive benefits, you become the best choice for a promotion, it brings you happinesssince you can turn ’work‘ into a’hobby’, helps you command premium prices thereby giving you better compensations, helps you get more business and more perks.

Iwould like to share the DCCM personal branding process, which is quite aninteresting concept by personal branding expert Dan Schawbel. This four stepprocess is discussed below and is worth being practiced.

· Discover -In this process, you need to ‘discover yourself’. You need to understand whoyou are, what you want in life, what is your passion, what are your goals. Onceyou list them down, you need to create a development plan that aligns yourshort-term and long-term goals. Thendesign your own personal marketing plan (Iplan to discuss in my next blog coming soon).

· Create- In the early days, traditional ways ofpersonal branding, some of which are used even today, like business card, professional portfolio, resume, cover letter and reference documents.With the digital era setting in, non-traditional ways like a video resume, LinkedIn profile, blog, Twitter and your existence on thevarious other social networks are considered to be a preferred mode of personalbranding. It is important to note that while you create your brand, ensure thatthe content, including pictures and text, are concise, compelling andconsistent with how you want to represent yourself.

· Communicate–After creating, it is important to ensure that the content on your ‘personalbrand is appealing’. Reason – you would like to garner interest of the mostlikely people who you would like go through the ‘personal brand’ you havecreated. For this purpose, you must ensure that you properly communicate yourbrand through self promotion. Ideal way to do this is to first promoteothers before you promote yourself. Communication comprises guest postingon blogs, writing articles for magazines, becoming your own personal PR person(pitch to the media), attending networking events and speaking.

· Maintain–Last but not the least, the brand people see has to show significant, gradual andconsistent growth. For every new job, award, press article, and client victory(to name a few), everything you have created has to reflect that. Experts believethat the main reason to do this is since ‘You want to use what you did in the past to get what you want in thefuture’. There are some free tools by experts (again which I plan to discuss in my next blog) to check thepopularity, reputation, usage and reference of your brand in the web-space.

The Rise of the Private Sales Websites

2010-11-22T14:43:00.000+05:30

Towards the end of the last quarter of 2009, India witnessed a sudden surge of shopping websites like Fashion and You, 99labels and ThePrivateSales which sell high-street fashionable apparel and accessories at major discounts. These types of websites are not mere novices in the webosphere. In fact, the concept has been around for almost two decades. One major reason for this suddenly crowded space was the recession which left luxury brands saddled with unsold merchandise. This, in turn, led to the entry of the private sale sites offering goods at cut-rate prices.

Private sales sites have become popular for many reasons. First and foremost, these sites, which are targeted at the upper middle class, give the customers an opportunity to buy designer items at quite reasonable prices. Another reason is that these sites work under the guise of ‘exclusive’ and ‘members-only’ which appeals to the customers. The sites also have great control over the product selection and often tailor it specifically to meet their target audience through the information collected when members sign up, resulting in more precise sales and happy customers. Lastly, these sites work on the customer’s psychology by capitalizing on a sense of urgency and relying on the impulse of shoppers. Since the products are often available in limited number and sizes, customers rush to buy the product to get an item in their size or colour before anyone else, while not missing out on a great deal. These sites often use the effective technique of the ticking pressure of the clock to encourage impulse shopping among their customers. Further, there is no exit strategy for buyer’s remorse as some items are often non-refundable and shipping for returns is often paid for by the customer.

These sites are a relatively new way to successfully sell and promote items. In some cases, the items sold on these sites are samples created before the item went into mass production. In the fashion industry, samples are often referred to as apparel that have been created by luxury brands and high-end designers to test design variations or to get a feel of how the market responds to their creations. These creations are often seen in magazines and runways. There are also many situations when these designs often do not make it to production due to the lack of interest from merchandising buyers. In other situations, designers may have manufactured too many pieces of a particular item, which often occurs during mass production. However, with the emergence of private sales websites, designers now have another option to load off the excess productions instead of sending them for dirt-cheap warehouse sales. In the end, the customers are the ones who reap benefits as they can buy high street fashion at inexpensive prices.

While this business model continues to grow in popularity, more opportunities are likely to emerge for smaller businesses to offer their products as well. In fact, sites like Fashion and You and 99labels often offer household decoration items and gifting items on their websites other than designer clothes. Thus, what started with designer clothes has quickly branched out to travel, restaurants, home decor and even kitchenware, indicating that there is plenty of room for all sorts of products and services to be sold this way.

These websites primarily follow two different types of business models:

Block, Sell and Ship: Many sites operate on the ‘Block, Sell and Ship’ model. In this model, brands send samples of their clothes to the company, where merchandise buyers handpick the items they want to sell on the site. The buyers then place their orders for the amount of merchandise they’d like the brands to set aside for the sale, based on available stock.

After members pay for their goods and the sale ends, the website then places the confirmed purchase order with the brand for what it has sold online. Merchandise is then shipped to the website’s office, where everything is packaged in the company’s branded boxes and shipped out to customers.

This is a fairly safe model with few risks to the company. The most the company really has to worry about is the time taken for the brand to send its purchase order, which is then send out to customers. Another risk in this model has to do with inventory. If the count is inaccurate, the website would be compelled to issue refunds and render apologies that orders could not be completed. The discouraged customers would be forced to look at other sites to fulfil his needs.

Buy and Directly Distribute: Another common way by which other sites operate is purchasing and fulfilling orders directly. This model brings with it relative risk but has the potential to offer customers the best discounts. With this business model, the company contacts brands to check how much inventory is available and the brands will send their inventory reports and samples. Here is where things differ – the more inventory the site buys, the better the wholesale price, and the better price it can offer to members. The risk here is that if a site orders 100 percent of a brand’s inventory and it goes unsold, then that is money lost.

The 2G Scam - Where are we headed?

2010-11-15T11:00:00.008+05:30

A loss of INR 1.76 lakh crore to the state exchequer - that is what the CAG (Comptroller and Auditor General of India) has reportedly said in its report on the 2G (Second Generation) spectrum allocation scam. In one of the biggest telecom scams to be borne out of India, the 2008 2G spectrum allocation is a matter of great interest not only for the political class but also for the entire nation. The man in the middle of the controversy, A. Raja, is still putting up a brave front or rather trying hard to do so in the face of some serious criticism from the opposition. Before delving into who is right and who is wrong, let’s just try to understand the 'scam' first.

What Happened?

It all started with the TRAI (the telecom regulatory authority of India) allocating pan-India licences for the 2G spectrum to telecom companies in the year 2008 at a price fixed in 2001, i.e. at throwaway prices of INR 1,651 crore. Just to put things into perspective, the 3G spectrum which came up in 2010 earned exceedingly higher bids. Moreover, the 3G allocation was auction-based as is the standard procedure; whereas the 2G allocation was made on first-come first-serve basis which is contrary to the usual auction of the spectrum. Whatever the motive or the logic was behind the allocation, the companies involved were not complaining. As expected, many of the operators roped in foreign investors post acquiring the licences and made a neat profit on their investment.

The Allegations

The primary allegation is that the government gave away scarce spectrum to companies at throwaway prices and in a completely flawed process. It was only the intervention and scrutiny by various bodies, including the Central Vigilance Commission (CVC) and the Central Bureau of Investigation (CBI) that brought to light the 2G spectrum allocation issue. A Public Interest Litigation was filed alleging criminal conspiracy between certain public servants and private persons. In November 2010, The CAG submitted its report to the centre. The report reportedly claimed that the Ministry of Telecom took arbitrary decisions while allotting 2G spectrum ignoring the advice of the Union Finance and Law Ministries. Besides, it accuses the ministry of selling 122 new 2G licences in 2008 at 2001 prices.

It happens only in India

Supreme Court, in its latest hearing, ridiculed the government by asking how can the minister accused of fraud still hold on to the ministry. Congress, on its part, has been backing the tainted minister all the way even going to the extent of stating allegations against A.Raja as false in the Supreme Court. If you are wondering why A.Raja is the blue-eyed boy of the government you don’t have to think too hard. This is the irony of a coalition government. DMK, of which A.Raja is the member,may just withdraw its support from the government in case Raja is ousted. So far it is absolutely disheartening to see how the government has handled the whole situation. The government has left no stone unturned in trying to put a lid on the controversy, the scam is of such huge proportions that even whole-hearted efforts by those involved are not paying off.

India has been a developing country from a long time. Have we ever wondered even with growth rates of eight percent and above, when it comes to actual development why are we still in the doldrums? It pains us to think about the nearly 27-percent of Indian population who live below the poverty line, the country’s pathetic healthcare system (with only 1.1 beds available per 1,000 citizens), deplorable infrastructure and many other things that are not even worth discussing. Add to the already hopeless situation, a loss of INR 1.70 lakh crore to the state exchequer because of a few irresponsible and corrupt individuals. Can we really afford this? The answer from a common man/ a true Indian is 'No'. Our politicians, on the other hand, may think otherwise.

BCCI - Business of Controlling Cricket in India

2010-11-11T17:22:00.000+05:30

It is said that two C’s drive India crazy – Cricket and Cinema. Success with cinema is not guaranteed but with Cricket it is. It is absolutely amazing that every One Day International, Test match and T20 game in India is watched by packed stadiums and millions of television viewers. It is not surprising that sponsors are queuing up to associate their brands with cricket in India. This in turn means that BCCI, the governing body of cricket in India, is always in sound financial condition. It is surprising that till 2007-08 BCCI enjoyed tax exemptions under the pretext of being a ’charitable organisation’, however even today BCCI does not fall under the ambit of audit by Comptroller and Auditor General. The financial clout of BCCI has grown from strength to strength in the past decade and half.

This may be one of the reasons why the BCCI banning two IPL teams made little difference to its coffers. The situation has again brought to the fore BCCI’s monopolistic practices in Indian Cricket. Just a few years back, BCCI cut Subhash Chandra’s ICL down to size causing those involved with the league much distress. BCCI was rudely roused out of its slumber with someone else coming to India with the innovative concept of T20. ICL was named a rebel league and banned. By the end of it, Subhash Chandra was in absolute despair, not only losing millions of dollars but also running from pillar to post attending court hearings in his battle against the BCCI. History seems to be repeating itself, with Subhash Chandra’s role, this time, swapped by the owners of Rajasthan Royals and Kings XI Punjab. Will the court of law recognise the fact some of BCCI’s actions as unfair and at times bordering on unprofessionalism is matter to be seen. The Court further needs to take into consideration that not many Indian companies function in monopolistic industries and sectors. It is the underlying principle of free economy that competition always leads to better business environment. Then why is the BCCI the lone proprietor of Indian Cricket? Why is it that BCCI does not fall under the purview of the Sports Ministry of India? Not for a second is IQ suggesting that the Sports Ministry is an excellent administrative authority, but being under its control would at least mean that all of BCCI’s actions will be made more accountable.

Today cricket is a power game and we in India have now accepted that wherever there is huge money involved, corruption and politics is inevitable. This acceptance is attributed to the famous tolerant Indian psyche. However, the question is how long can we be patient? Ironically, despite being embroiled in controversies, Indian Cricket continues to attract more money than it can handle while other sports remain adversely affected by underfunding. As a sports fan, it really is disappointing that in every Olympics Game all that India can manage is a couple of medals. It is embarrassing for a 1.2-billion population country to be eternally damned to the bottom of the sports points table. Instead of keeping millions of rupees in BCCI’s coffers lying unused this could be utilised to promote other sports in the country; this point must be further explored. This at least gives us a better chance to produce better sportspersons in the country – and must we add, we are in need of a few!

Importance of Online Marketing

2010-11-08T14:47:00.000+05:30

Running a business today is quite different from what it was, say, a decade ago. After all, we live in the age of computers, broadband, iPods, iPads, Facebooks and Orkuts. Hence the requirements of businesses have also changed over a period of time. Today, irrespective of the type of business it is imperative to have an online marketing plan in place. Over a period of time, even social media-shy companies which initially thought that an online presence is just an “option” are now vouching for its viability. The question then arises as to why is online marketing so important for companies?

For starters, it has the ability to be an additional source of revenue for the company. Moreover, it can be an important platform for promoting your products/services besides serving as a public relation tool. An all-inclusive website complete with social features would enable customers to get requisite information about the products sold by your company; this in turn can result in actual sales for the company. Another advantage of internet marketing is that it is always on and never stops, i.e. your online marketing is active 24/7. Then there are geographical advantages too. Suppose you are the owner of an engineering company, say L&T, and one of your prospective clients based abroad, is interested in knowing your capabilities in Construction & Infrastructure. In this case, L&T can pitch to the client via its informative website by furnishing complete details about the projects completed by the firm as well as its efficiency in turning around projects. This could result in a definite lucrative deal. Online marketing is important for small and medium enterprises as well. For it gives them an opportunity to cater to a larger target audience compared to other conventional modes of marketing.

However, a successful online presence is not something that companies stumble upon by chance. The online marketing plan needs to be formulated well in line with the core values and objectives of the company. Merely having a website is like having a business card which, unless you give it to others, is of no use. A key aspect to planning this is allocation of adequate budget to aid search engine optimization. Further, the plan would involve defining your target audience and creating content on your website in accord with your target audience. Moreover online marketing is a continuous process and it needs to assessed frequently in order to achieve optimum results.

Undeniably, companies are leaving no stone unturned in trying to attract consumers towards their brands. This endeavour has resulted in social media marketing gaining worldwide recognition. With the soaring popularity of social networking sites like Facebook, Myspace, Orkut, Cyworld etc., companies are looking to either advertise on these sites or kick off a viral marketing campaign. According to a recent study by Harvard Business School, viral marketing is the way ahead in terms of social media marketing.

Online marketing, if well planned and used prudently, can maximise profits for companies of all sizes and operating in different sectors.

Educational Development in UK & India

2010-11-03T16:21:00.000+05:30

UK Education Scenario

Education in United Kingdom is highly advanced and is one of the prominent education systems in the world. Universal state education in England and Wales was introduced for primary level in 1870 and secondary level in 1900. Since then, UK education has been climbing the ladder of success and setting many great examples across the globe. Infact, in 2008, ranked in the global top 10 universities for ICT implementation and infrastructure by QS World University Rankings were University of Cambridge, University of Oxford, Imperial College London and University College. One of the major reasons for UK’s success in Education has been the early implementation of ICT.

Following the introduction of ICT, the UK government was prompt enough to establish agencies dedicated to managing ICT funding allocated to universities, colleges and schools. One of the government's lead agencies set up for this purpose and to ensure rapid development of the sector was British Educational Communications and Technology Agency (BECTA), a non-departmental public body of the Department for Children, Schools and Families in the UK. Established in 1998, BECTA administers the procurement of ICT equipment for schools using framework agreements valid for four years. Under this framework, educational institutes in the UK intending to purchase ICT-related goods and services – including system design, hardware and software provision, training, implementation and ongoing technical support – in the budget range of GBP 100,000 pounds can save themselves from much wasted effort and trouble by procuring from a BECTA-listed company. Also, the process of purchasing ICT-related services is simplified, thus bridging the gap between the Government and the schools and colleges willing to adopt technology.

In 2005/06, much focus was given to ICT developments following the launch of the first wave of the Building Schools for the Future (BSF) programme by the then government. The ambitious project by the Labour Government had made provisions for redevelopment of every school in England. Of the revamp cost, nearly GBP 11 billion was allocated by The Department of Education (DfE) for ICT development. However, in 2010, the newly formed government axed the entire BSF project which saw many schools and colleges lose out on fundings including for ICT development.

By then, the need and importance of ICT was much understood by the educational institutes. The recent survey conducted by British Educational Suppliers Association (BESA), a trade association, reveals that over half of the schools in the UK are determined to continue with the planned IT investment, despite the funding cuts. Of 1,379 surveyed schools, 58 percent of primary schools and 51 percent of secondary schools are willing to go on with their IT investments for 2011-12.

Indian Education Scenario

The successful UK education sector has attracted tie-ups from countries like Australia, China and India. Asian countries like India, Pakistan and Sri Lanka have a long way to go to achieve what UK has till now. Of these three countries, India is most closely following in UK’s footsteps in terms of implementation of ICT infrastructure in Education. However, only recently have the Government of India (GoI) and private firms begun promoting the use of information and communication technologies (ICTs) in Education, especially in Formal Education. Many reforms and policies have been introduced by the government for the use of ICT, some of which are listed below:

GoI’s efforts in providing multi-purpose community information centres in the northeast of the country has parallels to a similar joint effort by the Uttaranchal State Government in cooperation with the Indian Institute of Technology.
Madhya Pradesh is also home to the Headstart Programme, which provides computers along with multimedia learning kits to students and teachers in rural community schools that are set up under the Education Guarantee Scheme. The Government of Goa is involved in a similar initiative to provide Goan school students with computers.
The Government of Andhra Pradesh is actively engaged in a partnership with Tataliteracy.com, a portal designed to provide free literacy in some of the poorest districts of the state. Similar initiatives with MediaLab Asia, on the outskirts of Delhi, and in the interior of Tamil Nadu (Baatchit, Infothela, and Sari projects), seek to provide access and content to rural populations.
Project Vidya, a partnership between the Government of India and Intel, seeks to improve the quality of educational input in selected government schools throughout the country by providing both, ICT access and training to students and teachers.

Much emphasis has been given to ICT development in India. Slowly but steadily, India is reaching those standards set by other countries like the UK and the US. With continued and consistent efforts like these, over the next few years India could join the league of the elite nations in terms of education.

Seeking Fortune at the Bottom of the Pyramid

2010-10-29T18:59:00.000+05:30

It’s said that Mahatma Gandhi never lied and he once stated that true India resides in its villages. Regardless of whether you agree, most of the big FMCG cos are toeing the Mahatma’s line perfectly. It is fascinating to know that at a time when India is constantly accused of inequitable distribution of wealth and widening gap between the incomes of rural and urban India, FMCG behemoths like HUL, P&G and Marico think that fortune indeed lies at the bottom of the pyramid. Logically this should not come as a surprise as more than 60 percent of the Indian population still resides in the rural areas. What is interesting though is the innovative business strategies adopted by the FMCG companies to attract consumers in the rural markets. Also, down the line, the Indian rural market is estimated to be worth USD 1,000 billion (approx. INR 444 billion) by 2020 making it as big as the Korean or Canadian economy. With intensifying competition in the urban centres, rural India has turned into a new battle ground for the FMCG companies.

Traditionally Rural India has not been a happy hunting ground for cos in this segment since the usage frequency of FMCG product categories is low in these parts. To overcome this, HUL has innovated strategies aimed at making their brands more ‘experiential' in nature. It has put this into action by carrying out live demonstrations of its brands. Part of the strategy also is an innovative campaign called ‘Khushiyon Ki Doli‘(KKD), launched in March this year in three states: Uttar Pradesh, Andhra Pradesh and Maharashtra. KKD is a multi-brand rural engagement module which introduces personal care and home care products by HUL – Wheel, Surf Excel, Fair & Lovely, Sunsilk, Vim, Lifebuoy and Close Up. KKD is a street play about hygiene benefits and improved quality of life which is intertwined with the TVC of the HUL products. In addition, there are quizzes and games which enhance consumer engagement. Earlier, HUL had built a strong distribution model through its much popular campaign Project Shakti . Godrej Consumer Products also came up with an initiative called ’Project Dharti’ through which it plans to strengthen its position in Rural India.

Recently, Nestle tried to endear itself to the rural masses by venturing into Infant Milk-based Nutrition with its low-priced packs. Also in the offing are its plans to offer noodles, ketchups, chocolates and beverages at affordable prices to the rural population. For low income consumers, Nestle sells its Maggi Noodles at INR 4 and Maggi seasoning at INR 2. Coca Cola powder-based beverage Vintingo is sold at INR 2.5 per sachet across villages in Orissa. Companies like GlaxoSmithKline and Britannia are not far behind with plans to develop innovative products meeting the needs of rural shoppers in India.

Recent facts IQ stumbled upon are astonishing. Who would have known that Godrej No.1 is the highest selling Grade 1 soap and undisputed leader in the north India? More surprisingly, relatively lesser known biscuit brand PriyaGold, which has not managed to catch the attention of the urban masses, has a strong market in northern and central India and earns around USD 85 million (approx.USD 3.77 billion) annually in sales!

However it is quite a task to win over the rural masses. In fact, catering to rural consumers is comparatively more difficult than urban consumers as the former seek quality brands at affordable prices. Also, owing to the impact of television in the rural parts the aspiration levels of the rural consumers have risen. Today, the average Rural Indian wants to use the same products stars are shown using on television, and this has made the task of the FMCG companies tougher. However, one of the keys to success in the rural market is to ‘Customize and Communicate’. The companies that do well in these two aspects will ultimately stand a good chance to unearth the fortune at the bottom of the pyramid.

NOTE:

- Project Shakti is a rural development programme through which HUL established factories-centred activities focussing on farmer training, animal husbandry, generation of alternative income, health hygiene and infrastructure development.

- The soaps ranking are the highest rating of the Bureau of Indian Standards based on the fat content; toilet soaps have a higher fat content than bathing bars.

The IPL Drama Continues...

2010-10-12T19:51:00.000+05:30

Indian Premier League (IPL), the only sporting extravaganza to be born in India is getting messier with each passing day. It was an event that put India on the global map and attracted eyeballs from all parts of the world. In a shocking turn of events, BCCI, a few days back, terminated two franchises from the league citing reasons of non-compliance to rules laid down by the IPL. The two teams, Rajasthan Royals (RR) and Kings XI Punjab (KXIP), have shown utter disbelief and shock towards the decision taken by the BCCI.

Roll back a few years, a certain Mr. Lalit Modi who, prior to being ousted, was the blue-eyed boy of BCCI dreamed about creating a cricket league in India. He was turned down by the many authorities he tried to sell his idea to, many of whom ridiculed his vision. After many such disappointments, a group of elite visionary businessmen dared to believe in a dream called IPL and put in their money to get it up and running. The rest is history. IPL became a household name and the names of Rajasthan Royals, Mumbai Indians Chennai Super Kings and etc became national brands.

For an average cricket fan, the recent decision by the BCCI has many implications. How can an avid cricket fan ever forget the magical moment when Shane Warne led a bunch of unknown players to IPL glory in the inaugural tournament? How can we forget the gleaming dimpled smile of Preity Zinta when KXIP took a wicket or hit a six? It was quite surprising when Preity ZInta revealed that she had put her Bollywood career on hold just to be with her team throughout the IPL. This spirit is shared by the owners of all the franchises, be it Shilpa Shetty, Shah Rukh Khan, Mukesh Ambani or Vijay Mallya. IPL, for these elite few, is more than just a means of minting money – it is a sport that they love and are passionate about; it is a brand that they envisioned; it is a means to reach out to the masses and spread a sense of joy.

Once an English columnist famously wrote that “premiership loyalty and wife are never changed”. Across all sports leagues in the world, fans never contemplate changing their loyalty for the club they support, come what may. However, in India today we encounter a strange case where Rajasthan and Kings XI fans would be forced to support other franchises if the elimination is finalised. It is truly a sorry state of affairs. These decisions actually make us wonder whether BCCI has gone a step too far in its supposed mission to “clean up” the IPL which actually seems more like ‘selective clean-up’. In a country where even Ajmal Kasab, in spite of being caught on camera killing hundreds of people, is given a fair chance to defend himself and put forth his points, it is difficult to justify BCCI not giving RR and KXIP a chance to defend themselves. It seems logically unfair that a bunch of relatively new/unknown investors i.e. the Kochi franchise have been shown some level of trust and given time to prove their innocence, however respectable and well-known investors associated with the IPL property for three whole years have been shunned. Furthermore, BCCI has displayed utter disrespect by not taking into account the feelings of the nearly 60 million people in Rajasthan, 26 million people in Punjab and millions of RR and KXIP fans across the globe in arriving at their decision.

The turn of events in the past few months clearly indicates that there is certainly more than what meets the eye. A change of regime in the BCCI has triggered off all these allegations against the franchisees. This makes us wonder why the BCCI did not find these anomalies earlier since the IPL has been going on for three years now. Also, why are only those teams targeted that have established links with “BCCI’s blue-eyed boy who suddenly turned into a fall guy”? It compels us to speculate that another regime change at the BCCI might mean bidding adieu to a Chennai Super Kings or Mumbai Indians or Delhi Daredevils and we may have new teams every time there is a regime change in the BCCI. It seems scary and hilarious at the same time, but that is where we are headed. Also, Indian’s not-so-happening rank of 133 in terms of World Bank’s ease of doing business report will not improve in a hurry since we are sending out a message that investing in India is never too safe and you may get engulfed in the bureaucratic tangle anytime.

It is too early to judge whether RR and KXIP should be a part of IPL or not, but it is only fair that these teams be provided with an opportunity to defend themselves. After all, we have to give it to them for helping build IPL into a brand that has managed to capture the imagination of millions. As cricket fans, we would all appreciate if BCCI makes prudent decisions and exercises transparency in all matters without any hidden agenda. At the end of the day, a game of cricket is always more enjoyable than a game of politics and bruised egos. And for all the people who have idolised Rajasthan Royals and Kings XI Punjab over the past three years, we can only hope that our beloved teams will continue to be part of the IPL and continue to bring a smile on our faces whenever they take to the field.

What Women Want – The Female Economy

2010-10-08T12:00:00.009+05:30

‘What do women want?’ is a question that has tormented generations of men. Even renowned psychologist Sigmund Freud, who spent thirty years of his life researching and delving into the ‘feminine soul’, was unable to find an answer to this generations old complicated question. This thought was not pursued earlier with companies citing ‘a not-so-strong female economy’ as the reason. Today however, since the world market is already saturated with products backed by tried-and-tested marketing gimmicks exclusively targeted towards men, companies are on the constant look out for new avenues and uncharted territories to boost the sale of their products. One such uncharted territory consists of women or the ‘Female Economy’. Companies today, increasingly are looking at targeting women for their products and therefore are investing huge amounts in trying to find an answer to ‘What women want?’

A recent study conducted by Boston Consulting Group (BCG) states that women control or substantially influence 65 percent of the world's annual consumer spending of about USD 18.4 trillion, – this is around USD 12 trillion (about INR 550 trillion), or about 10 times India's GDP. The study also found that with the pay difference narrowing, women’s USD 13 trillion yearly earnings could reach USD 18 trillion in 2009-10. The incremental USD 5 trillion is almost twice the growth in GDP expected from China (USD 4.4-6.6 trillion) and India (USD 1.2-1.8 trillion) combined. Even former journalist and co-author of ‘Women Want More’, Michael Silverstein, is of the opinion that the ‘Female Economy’ would have a global economic impact greater than Brazil, Russia, India and China and it would be extremely foolish for corporate around the globe to ignore or underestimate the female consumer.

Globally companies are slowly waking up to this fact, and they are manufacturing women-specific products, complementing them with suitable marketing gimmicks. For instance, Haier, the fourth largest white goods manufacturer, has successfully transitioned into the female economy with products redesigned for women taking into consideration the average height difference of 5 inches between men and women. What is more interesting is that companies that were exclusively dealing with men’s products are also looking towards women as the new target audience. For instance, Harley-Davidson, the motor-cycle manufacturer who has long been a symbol of masculinity, has added a ‘Women Riders’ section to its website. This section features riding gear and apparel for women along with advice on riding safely and personal rider stories. This step has been taken by the motor-cycle major in response to the growing popularity of motorcycles amongst women, who now buy 10 percent of all Harleys sold, compared to just two percent in 1985.

However, the question here arises whether these companies are formulating adequate and proper strategies to target the female economy. Unfortunately, companies who approached this opportunity with one business model targeting both men and women failed miserably since they assumed that men and women display the same buying behaviour. The indispensible fact still remains that men and women display different buying behaviours when deciding upon their purchase options. The objective of selling to women might seem simple to the company but it is in-fact far from the basic truth. There are many instances where companies launched products that were tweaked to target the 'pink' segment but were immediately thrashed by women. One classic example is Dell’s short-lived effort to market notebooks specifically to women. The company fell into the classic ‘make it pink’ mindset with the May 2009 launch of its Della website. The site emphasized colours, computer accessories, and tips for counting calories and finding recipes. But, it created uproar among women, who described it as ‘slick but disconcerting’ and ‘condescending’. Within weeks of the launch, Dell was compelled to change its website and focus.

As per Silverstein, women have repeatedly been underserved and ignored by companies in male-dominated sectors, which run the risk of alienating the world’s largest and fastest growing economic force. These sectors include the car industry, consumer electronics and financial services, offering countless examples of poor service to women, primarily due to confusion about their wants and inability to speak the language of the ‘fairer sex’. Thus, while the main opportunity for companies lies in addressing the dissatisfaction of women in these sectors. Companies also face the challenge of understanding the complexities involved in selling to a woman as compared to doing business with a man. Companies have to face the tough road of identifying what a woman wants and creating products that would be an adequate fit for the numerous different profiles held by her, while keeping in mind that time is her biggest constraint.

Ambush Marketing

2010-10-06T18:00:00.000+05:30

Imagine: you throw a lavish party for your friends and it burns a hole in your pocket. Now imagine your room-mate walking in, claiming to be a co-sponsor of the party without chipping in with a penny; this situation is sure to more than just infuriate you. Such things happen, more so in business! Try asking P&G, the FMCG behemoth, about the harms of Ambush Marketing, the group will surely testify about it. Recently, P&G conceived an elaborate plan to relaunch one of its shampoo brands Pantene on 1st August, 2010. To build anticipation, on 23rd July, P&G promptly put up the hoarding across Mumbai which said, ‘A Mystery Shampoo!! 80% women say is better than anything else’. This seemed to be a perfect opportunity for arch rival HUL to go one up against P&G. On 28th July, Mumbai woke up to a HUL hoarding announcing ‘There is no mystery. Dove is the No.1 shampoo’. (Dove is one of the shampoo brands of HUL). HUL simply hijacked P&G’s campaign and made no bones about its source of inspiration. All P&G could manage was to issue a statement saying “One of our international competitors has been consistently trying to denigrate our brands, via either disparaging advertising or unsubstantiated claims across categories.” Well, our heart does go out to P&G, unfortunately that’s how ambush marketing works. Although this type of marketing is probably one of the most devious and unscrupulous ways of marketing, it could be very effective in augmenting sales.

Ambush marketing started off as a strategy for companies to promote their products at events without actually paying the sponsorship fees. However, with time companies are now gradually expanding the scope of ambush marketing. It is very effective in damaging the competitor’s campaign and at the same time attracting consumers towards your brand. Indian advertisers have not taken to ambush marketing as openly as their western counterparts. Exceptions to the norm are companies like Jet and Kingfisher, Coke and Pepsi. In 1996, Coke bagged the official sponsorship of the Cricket World Cup and Pepsi reacted with a catch line of “Nothing Official about it’. The recently concluded FIFA World Cup also saw an instance of ambush marketing when Bavaria, a rival of Budweiser, the official sponsor of the football world cup, kicked off the sale of Bavaria T-shirts prior to the tournament as well as at the event. The FIFA authorities deemed this to be illegal act and accused the so-called "Bavaria Babes" of ambush marketing. This is not the first time something like this has happened during sports events. In 1998, Carlsberg paid USD 21 million to be the official sponsor of the Euro 2008, while its rival Heineken distributed a few Heineken caps among the fans that were clearly visible on the television close-ups.

Indeed, ambush marketing as a concept has more significance in terms of Sports Marketing. In case of gala sports events like Cricket World Cup or Football World Cup or an NFL, the stakes of sponsoring the events are very high. Hence, there is a strong consensus that ambush marketing can pose a huge risk for advertisers seeking sponsorships at sporting events as millions of dollars spent sponsoring an event could count for nothing if a competitor ambushes your campaign. Therefore, it has a strong potential to adversely impact the events itself. This has led sports governing bodies like the FIFA and International Olympic Association (IOA) to take strict action against ambush marketing advocates.

There is no doubt that this type of marketing is very opportunistic in nature and envisages gaining maximum attention for a brand by spend minimum capital. Despite being controversial in nature, Ambush marketing could prove to be an effective marketing technique. This is especially true in case of online marketing. For instance, controversies equal popularity and popular news stories/blogs are easily chanced upon by people/companies who track back to the source and/or leave a comment. When the popularity of news stories increases, even the traffic to your website shoots up. This technique could be very useful in gaining more friends and followers on Facebook and Twitter as well. There are many ways of doing ambush marketing the internet. If done with a bit of prudence, it could prove to be very fruitful.

Instant Noodles Market in India

2010-09-28T12:36:00.006+05:30

Noodles are a commodity which is consumed by everyone, right from kids and teenagers to retirees. Infact, India consumes a little less than 90,000 tonnes of noodles every year. A decade ago the word ‘noodles’ was synonymous with Nestlé’s ‘Maggi’. Two-and-a-half decades since its launch, ‘2 minute Maggi Noodles’ is the numero uno brand in the Indian market. Overall, the instant noodle market in India is worth over INR 1,300-crore (USD 260 million) and is growing at a phenomenal rate of over 17-20% per year, according to Datamonitor estimates. Inspired by the success of Maggi, a number of F&B manufacturers ventured into this market. Among the prominent names are Top Ramen Smoodles and Cup Noodles manufactured by Indo-Nissin Ltd, Ching's Instant Noodles, AA Nutritions's Yummy, and Wai-Wai, owned by the Chaudhary Group from Nepal and India.

In the early 80s, the conservative and typical food consumption era, the concept of ‘ready-to-cook’ food was alien to the Indian market. People were skeptical to experiment with food especially food meant for their children. Despite the unfavorable circumstances, Maggi took the challenge and launched itself in 1983. The brand’s appropriate realization of target segment, effective positioning and effective promotion and sales made Maggi the most-loved noodle brand in India. Maggi enjoys a market share of over 70% today, despite the presence of a number of other brands. In 2005, the Maggi brand was worth USD 3.7 billion in comparison to USD 1.7 billion recorded in 2003. In 2005, Maggi was the highest Indian spender in the Sales Promotion department in the Noodles Category.

For much time since its launch, Nestlé’s Maggi Noodles was the only kingspin in the noodle market. However, in the recent past two well-known FMCG players in the country – Hindustan Unilever (HUL) and GlaxoSmithKline (GSK) introduced their own brands of instant food noodles and have managed to put their foot into this segment. Today, Knorr from HUL and Foodles from GSK have become well identified noodle brands besides Maggi Noodles and Nissin’s Top Ramen. New investments by HUL and GSK are paying off now. Individually, they hold 5% and 2% respectively of the noodles market share. Interestingly, GSK plans to capture 10% of the organised noodles market within a year. The newest entrant in this sector, ITC, seems to be sending strong competitive vibes to HUL and GSK as well as Maggi. ITC plans to launch noodles under the ‘Sunfeast’ brand name. GSK, HUL and ITC’s entry into noodles will heat up the competition for Maggi, which is already facing traction from retailers’ private labels like Tasty Treat from Future Group and Feasters from Aditya Birla Retail. According to data provided by Nielson Co., Maggi’s share of instant noodles, on an all-India basis, across urban markets, has slipped consistently between December ’09 (90.7%) and July ’10 (86.5%).

Some of the Major Companies producing Noodles in India:

Nestle (Maggi)
Nissin (Top Ramen)
Capital Foods Ltd (Ching’s Secret)
Future Group (Tasty Treat)
Aditya Birla Retail (Feasters)
GlaxoSmithKline (Horlicks Foodles)
Hindustan Unilever (Knorr)
ITC (Sunfeast)

Investments

To cope with the increasing competition from the new entrants, Nestle India is investing INR 950 crore (USD 210.9 million) to set up two units to manufacture instant noodles and infant foods in Karnataka and Haryana. The unit in Karnataka will be up and running in the first quarter of next calendar year, while the Haryana unit is expected to commence its commercial production by the end of the next calendar year. With three other units based in Punjab, Uttarakhand and Goa, a fifth facility is expected to be set up in a yet undisclosed location to manufacture instant noodles; this will be put up for approval in the next two months. Nestle also announced plans to set up its first Research and Development Centre in India which will primarily focus on developing products specifically aimed at the domestic market. This R&D centre is valued at INR 230 crore (USD 51 million) and will be based in Manesar, Haryana.

With increasing competition in the Indian noodles market, it is very difficult to say whether Maggi can sustain its popularity over the coming years. The new entrants have launched their own brands of noodles which have already started hampering Maggi’s hold on the Indian market. It will be interesting to see how Maggi combats the competition with the big Indian conglomerates/new entrants earmarking ambitious plans and high commitments.

Evolving Smartphone Market

2010-09-22T15:41:00.001+05:30

Until a few years ago, the smartphone market consisted of just a handful of players such as Microsoft, Nokia and Palm, with Nokia’s Symbian OS accounting for a majority of the market share. However, today the game has changed with Nokia fighting to regain its dominance.

Nokia cellphones rocketed to success in the 1990s and continued to dominate across the globe till the mid-2000s. All that changed when Apple's iPhone was introduced three years ago with an innovative touchscreen and iOS operating system which was miles ahead of Nokia’s Symbian OS. However, the real threat to Nokia isn't iPhone or the business-oriented Blackberry – the two most popular smartphones in the market. The real culprit behind Nokia's shrinking market share is Google’s Android OS launched just a couple of years ago. Android marked the penetration of open source culture in the smartphone market. It offered mobile manufacturers a low-cost operating system that was at par with Apple’s iOS. As a result of this, large companies such as LG and Samsung flocked to Google's system, drilling a hole in Nokia's dominance. Today, not only is Android eating into Nokia’s share market but is also disturbing the position of the likes of Apple iOS and RIM’s Blackberry.

However, all does not seem rosy for Android as Nokia has vowed to fight back with its new Symbian 3 OS and Maemo OS – both of which have been released by the company on a limited set of handsets. It will be interesting to see how both the operating systems are accepted by the market in the upcoming months. Apple, on the other hand, is building upon its proprietary system, which has been refined and tuned to be more user-friendly over the years. Another factor that could work in favour of Apple is the strong repository and tremendous support it receives from third-party application developers across the globe. Meanwhile, Samsung has also jumped on the smartphone bandwagon with its new Bada OS. The system is relatively new and has received positive as well as negative feedback. Another new OS expected is Microsoft’s Windows Phone 7, successor to Microsoft's Windows Mobile platform – currently under development and scheduled to be released later this year.

It is evident that over a period of time, the smartphone market will become increasingly saturated and competitive. We envisage that the Android OS will ascertain its dominance in the future due to its open source nature and affordable price. However, technology in today’s age is changing at a rapid pace and it will be interesting to watch who holds out and rules in the next decade.

Will it be the open source based Google Android who will continue its reign or will new OS’s from Nokia, Samsung or Microsoft snatch the crown from Google? Let us know your views by voting on our blog.

Venture Capital & Private Equity in India - Q2 2010

2010-09-09T09:00:00.004+05:30

The economy in India is booming with a multitude of start ups and growing companies mushrooming across the country. The success of these firms is attributed to strong private equity (PE) and venture capital (VC) backing. Recently, in the second quarter of Calendar Year 2010 (April-June), India saw 57 PE deals worth USD 1.5 billion. Although the total deal value was lower compared to the prior quarter, the vibe seems optimistic. Nevertheless, in terms of number of deals, this is the second-highest quarterly performance in the previous seven quarters. The PE deal size in the second quarter was 70 percent higher compared to the average quarterly aggregate PE deals in 2009. On the whole, 2010 so far (Q1 and Q2) has recorded a cumulative deal value of USD 3.15 billion, having almost caught up with the past year’s deal value of USD 3.54 billion.

A continuous trend of active investments from Global PE firms was observed from Q4’09 into this year with seven of the top ten PE deal in Q2’10 from these entities. Domestic PE houses were also active in raising India-focused funds. Over 15 domestic PE houses either announced funds to be launched or raised capital worth USD 3 billion in the April-June quarter. Another trend seen in this quarter was a rise in exit activity with nearly half a dozen VC and PE firms preparing for at least a dozen portfolio exits as they reach the end of their investment horizons and cash in on an improving economy. One of the main reasons contributing to the mass exit is the handsome returns earned by the companies, which is somewhere between 3X to 7X. According to industry sources, there could be as many as 50 exits over the next six months.

Assisting the already improving economy is the increased interest of VC and PE players in small & medium enterprises. Funding institutions, which stuck to secular sectors like healthcare, pharma and agri industries during the economic downturn, are now seeking opportunities in Technology and Renewable Energy as well. After the grand success of E-commerce companies like Flipkart (Accel Partners-backed online book seller) more and more VC/PE firms are vying for a piece of such companies. Small-sized PE deals (worth about USD 10 million) continued to dominate PE activity in Q2’10, accounting for 45 percent of the total deal volumes.

Niche sectors like Clinical Research & Carbon Consulting have been receiving a steady flow of capital as well. Recently, PE firm Elephant Capital acquired an estimated 28.8-percent stake in ClinTec International, a clinical research organisation for USD 12.42 million.

Other sectors like information technology (IT) and IT-enabled services (ITeS) continued to see the maximum number of deals (11 deals worth USD 99 million, or around INR 460 crore). However, in terms of value, the top destination was Infrastructure. The highest investment amount in this space (INR 1,350 crore) was handed out by Olympus Capital to two of Tata Power’s coal special purpose vehicles, followed by Temasek’s USD 200-million investment in GMR Energy. Other large deals were TPG Capital’s USD 217 million fund injection in Shriram Capital and Temasek’s USD 175 million in the National Stock Exchange.

Despite the global uncertainty, PE activity in India sure seems optimistic!

Indian DTH Sector: Survival of the Fittest!

2010-09-06T11:00:00.004+05:30

In a country with a population in excess of 1.8 billion, more than 50 percent of households own a television set. Television has transformed itself from being a luxury product to a bare essential for every household. Traditionally, the cable operators in India have had a free run enjoying themselves in a market bereft of competition. Suddenly the game seems to have changed for them with the Direct to Home (DTH) players thronging the market one after the other.

However, with the distinct price advantage and local programming cable connections have managed to stay fairly relevant in changing times. However, rise in the disposable income and increasing standard of living has meant that there is a huge market for DTH players as well. Within a short span of time, the DTH segment has endeared itself to consumers. According to a ‘TAM Annual Universe Update –2010’ study, 80 percent of the 135 million TV-owning households are subscribed to Cable & Satellite connections. Of this subscriber base, one in every five households has a digital connection. Going further, India is set to overtake the US as the largest DTH market in the world by 2012 according to a Reuters report. By 2014, the number of DTH subscribers in the country is expected to reach 45 million and by 2020, 58 million. During the same period (2014), the report projects cable operators to have a market share of around 70 percent , which is expected to fall to 64 percent by 2020.

The DTH story is very interesting. At one point of time, in 2005 the sector had just one player with pan-India presence – Dish TV. In 2008, Tata Sky joined the Subhash Chandra venture, with both fighting the unorganised sector comprising of cable operators. However, the scenario changed very quickly when Sun Direct, a regional player till then, decided to expand into the western and northern part of the country. This was soon followed by Reliance BIG TV's entry which coincided with the company’s INR 600-crore annual budget. Three months later, BIG TV claimed to have acquired 15-percent of the DTH market share. This was followed by Airtel’s entry into the segment.

Players like Reliance and Airtel quickly gained significant advantage over other providers, having a telecom subscriber base of more than 50 million. Furthermore, Reliance also had the option to tap into the subscriber base of Reliance Energy, its PCO partner. Airtel also had an edge over other standalone DTH players as it could leverage its one million retail outlets for mobile bill payment and recharge. Still, it was never a case of David v/s Goliath. Other DTH operators also had support to fall back on. For instance, Tata Sky, by virtue of being a joint venture between Tata Group and media baron Rupert Murdoch's News Corp had the reinforcements required to brace themselves against competitors. Chennai-based Sun Direct is also joint venture between Chennai-based broadcaster Sun TV Network Ltd and Malaysia's South Asia Entertainment Holdings Ltd. Dish TV is backed by Zee Networks.

The intense competition has created a win-win situation for the end consumers. DTH operators are fighting a price war while ideating innovative services to capture the imagination of the consumer. In the process, end users are benefitted by offerings of multi-channel functions, interactive and personal services live event recordings etc. Tata Sky kicked of the trend of providing an advanced set-top box with a built-in recording feature, a move which was soon emulated by almost very other player. Today we can expect out DTH provider to offer hi-tech innovations like MPEG technology, digital video recording, and High Definition viewing experience. The intense competition is a foreboder of consolidation in the industry. Analysts are of the strong view that, of the existing players, who are already on their toes vying to remain ahead, companies caught snoozing will end up losing.

With the ongoing battle for supremacy in the DTH space, it would not be wrong to conclude that DTH is recreating the trend in the Indian telecom market, where despite growth, increased competition shrunk margins of existing players. In the face of stiff competition, the service providers were compelled to offer innovative service offerings in a desperate bid to stay relevant.

Boom Time for Online Advertising

2010-09-02T09:00:00.005+05:30

Internet is the buzz word in the corporate sector today. The digital platform has opened up a new avenue of opportunities for marketers who are now targeting customers through sophisticated interactive modes. On the net, firms are interacting with consumers through channels such as social networks and microsites, in the process effectively targetting customers. This method of engaging consumers is, in particular, lucrative for smaller local companies which have limited advertising budgets.

Online advertising, still at a very nascent stage in India, helps publishers increase number of visitors as well as initiate a steady process of brand building. The rise in the awareness about the feasibility of online advertising has led to many advertisers queuing up to take on this type of promotional tactic. Considering India has 46 million internet users, you would expect marketers to be serious about implemeting online advertising strategies. However, according to a Digital Outlook report by Webchutney released in 2009, Indian entrepreneurs are cautiously stepping foot into this arena. The study found that of the top 500 marketers polled, a massive 82 percent spent only 5 percent of their advertising budget online (2008-09).

However, online advertising is well placed to achieve strong growth moving forward. The Digital Outlook report estimates online advertising to grow by 44 percent in fiscal 2009-10. This could be primarily based on the fact that almost all businesses – big and small, irrespective of the sector in which they operate – are focussing their marketing efforts on online advertising. UK-based SMEs have been a classic example for this with many firms doing extremely well by adopting cross-media marketing .The companies indulging in online advertising have managed to attract customers quickly compared to companies which depend on other conventional advertising platforms. Betting on the growth in India are private equity and venture capital firms, who’ve shown clear interest in the online ad space. Investees on the receiving end of this interest are firms like Komli (DFJ and Nexus India), Tyroo (Y! India), Ozone media (IDG Ventures) and Networkplay (Goosefish media ventures and Capital 18).

The platform has simplified and aided many big and small businesses across the world. SMEs who earlier depended mainly on word-of-mouth-marketing are now using the cost-effective Google Adwords where all they have to do is mention their company’s name, specialisation and contact information. It’s as simple as that and your business could benefit immensely. Digital media analysts agree with this belief and suggest that every business can benefit from restructuring business processes to make optimum utilization of the digital media platforms. Some cynics of digital media point towards research that indicates South east Asians to have a tendency to research online but buy offline; however, this evidence further suggests that opportunities abound for businesses to go online and it is not restricted to just short-term sales figures.

In the coming times, the Internet will surely emerge as one of the best marketing platforms to not only create awareness but also assist in the brand building process. The confidence shown by the investors and advertisers clearly indicates that the sector is getting ready for the big boom.

Who will Ratan Tata pass on the mantle too?

2010-08-30T11:23:00.000+05:30

It’s hard to find a replacement for influential individuals like Ratan Tata, the man of few words who made unforgettable quotes like ‘A promise is a promise’ and ‘Question the unquestionable’ and lived up to them. Tata, a person most identified with adjectives like poise, dignity, focus and international appeal in today’s world, will step down as chairman of the Tata Group in December 2012. In his own words, he has defined his successor as the person, who must maintain the company’s core values, because they are, in a manner of speaking, the DNA of the group – the crown jewels. In 19 years of association with the Tata Group, Ratan Tata has to his credit the manufacture of the world’s cheapest car, globalisation of Tata Group and the successful and huge takeovers of companies like Tetley, Corus and Jaguar-Land Rover.

Indians are experiencing the mixed feeling of sorrow, seeing him step down and the joy and anticipation of seeing the next generation Ratan Tata. It is interesting to note that the powerful magnate has clearly stated that the USD 71-billion conglomerate ‘Tata Group’, is an Indian group and should not be branded or seen as a ‘Parsi group’. Hence, he will choose a successor based on aspects other than religion, despite pressure from the community to appoint a chairman of that religion.

Ratan Tata took charge of the Group when it was looking for direction and there were satraps in corner offices. He has nurtured the business, shaken hands with the world, embraced technology, challenged existing notions of manufacturing and built a proud legacy today. He has brought in young managers and moulded them into fine representatives of the company. Building on each of these aspects will be a massive task for his successor. Further, Ratan Tata has been conferred with honorary titles of ‘Padma Bhushan’, ‘Padma Vibhushan’, economic advisor to Hangzhou city in the Zhejiang province of China, 26th Robert S. Hatfield Fellow in Economic Education by Cornell University as well as recipient of innumerable awards like Responsible Capitalism in 2010 (presented by FIRST, a multidisciplinary international affairs organisation) and Global Indian Award in 2008 (at NASSCOM Global Leadership Awards) to name some. The icing on the cake for his successor is that the individual will have the good fortune of working with him for seven to eight months before taking charge.One can imagine the calibre required by his successor, since s/he would not only have to fill the tough and legendary shoes of Ratan Tata, but also have to face the panel of corporate gurus comprising N. A. Soonawala, Shirin Bharucha, R. K. Krishnakumar, Cyrus Mistry and Lord Bhattacharya who are icons themselves. More interesting is the list of contenders for this post. Among the top names are Noel Tata, Ratan Tata's half-brother, current PepsiCo chief Indra Nooyi, former Vodafone head Arun Sarin and Renault Nissan chief Carlos Ghosn. A common attribute prevalent in all the contenders is their global experience. Considering how the group has dramatically expanded its global footprint under the iron-hand rule of Ratan Tata and that around two-thirds of the group revenue is generated from abroad, the selection panel was strictly instructed to look out for and consider contenders who have global experience and could easily manage and lead the ever-growing group. The contender should also be ready to see the end of the current turmoil in the global economy and be prepared to face a world that might see a structural power shift to emerging economies such as China and India. Other parameters include the ability to deal with the debt resulting from the twin acquisitions of Jaguar-Land Rover and Corus Steel.

Among all the listed successors, Noel Tata’s name figures prominently and is in constant circirculation through the ebb and tide of speculation around India Inc’s most closely-followed succession. His family name makes him a strong contender for the position. Within days of being named as a probable successor, Noel was given an enhanced role in the group. He was elevated to vice-chairman of Trent – the group’s retail company which he had been steering for over 12 years as managing director. In addition, he was promoted as the managing director of engineering-to-leather goods maker Tata International. Noel Tata’s candidature seems to be fortified by the fact that he is the son-in-law of Pallonji Mistry, the single largest shareholder (18 percent) in Tata Sons, the holding company of the group.

However, if the panel decides to select a non-Parsi to lead the group, it would be a first in the 140-year-old history of the salt-to-steel-to-software conglomerate. The only non-Parsi chairman to head the group has been Nowroji Saklatvala in 1932.

March 2011 will see the dawn of a new era for the Tata Group. The selection panel would have arrived at a decision regarding the new chairman and successor of Ratan Tata. Until then, the successor remains wrapped in a shroud of mystery. When JRD Tata had named Ratan as his successor, everyone, according to Ratan, was taken by surprise. As per reports, Nani Palkhivala had been the frontrunner for the chairmanship, but the renowned jurist lost out as he was a strong critic of the government, which JRD Tata felt could go against the interests of the Tata Group. In the same way, Ratan Tata, who added that there are contenders outside the group to succeed him hopes to choose the right person who would surprise everybody.

Social Media Security – Do’s and Don’ts

2010-08-25T16:04:00.009+05:30

Cyber security is one of the most imperative concerns raised in today’s modern technological era. Traditionally, managing personal information was comparatively easier and limited to the boundary’s physical security. However, the advent of the internet coupled with the enormous uptake of e-commerce and social media has blown the issue out of proportion. Cyber security is now the most imperative concern in today’s digital world.

E-commerce websites are less prone to security attacks since they follow strict security standards and strong 128-bit encryption technologies. On the other hand, social media websites are embraced by unsecured Web 2.0 technologies that promote collaboration and sharing – a hacker’s delight. These sites are relatively easy to hack and present hackers with much more return-on-investment. They could sell the data for prices ranging from USD 25-50 per 1000 accounts, depending on the number of contacts the user has on their account. This data could then be harvested by scammers and phishers to start money scams and spam campaigns, distribute malware and for many other nefarious purposes.

The state of affairs turn uglier when social media is accessed through corporate networks. It not only puts personal user information at risk, but also classified corporate data is in harm’s way. With more and more organisations embracing social media, it won’t be long before it turns into a happy hunting ground for hackers.

Since most people access social network sites from the comfort and privacy of their homes or offices, they can be lulled into a false sense of anonymity. Moreover, people naturally trust these sites because they are based on a network of friends and acquaintances, so people are more likely to click on a link sent by social media than through e-mail. Social network sites are potentially useful business tools and mediums of interaction, but only if you approach them with an adequate amount of caution and common sense.

Here are a few basic tips that could go a long way in protecting your online information:

All major social networking websites have privacy settings; use them to safeguard sensitive personal information. Besides your email address, this includes your home address and phone number. Bits and pieces of such vital information can be used to obtain other identity information – even your bank details.
Treat everything you see with a high degree of scepticism. Never click on links just because you know the sender – my own email account had been compromised and my entire contacts list was spammed with marketing mails . Also, beware of using third-party applications on social networking websites such as Facebook since these applications access all your personal information stored on the site.
Never accept friend requests from unknown people on social network sites – because 99 percent of the time the requests are from dummy profiles created by hackers to gain complete and easy access to all your personal details.
And lastly some common rules to be followed while roaming in the digital world; regularly change your passwords and use an alpha-numeric code for higher security. Moreover, keep your firewalls and security software up-to-date.
In case of private organisations and companies – they must create strict policies on the usage of social media tools and networking sites, or better still restrict access only to certain terminals.

Why Orkut is losing out to Facebook

2010-08-18T17:33:00.006+05:30

Technology has touched our lives in many ways and one of the most wonderful technological innovations has been social networking sites. These days if you are not on Facebook, Orkut or MySpace or any of these sites you run the risk of being called 'anti-social'! Surprising as it may seem, for a country like India where internet penetration is not as high as some of the western countries, people warmed up to social networking sites like Facebook, Orkut, hi5, LinkedIn, Twitter and Buzz pretty well.

Globally, Facebook has been ruling the roost in the social networking space. However, as in most cases the scenario in the Asia-Pacific market has been relatively different compared to the western countries. In fact, social networking dynamics in the Asia-Pac region exhibit significantly more individual market differentiation than in other global regions. This fact has been corroborated by comScore, who in an Asia-Pac focussed April 2010 report revealed that of the 50.8 percent (or around 240.3 million visitors) social media site users in February 2010, a majority of visitors from individual markets preferred Facebook; while competitive brands like Orkut, Mixi.jp, CyWorld and Wretch.cc commanded top position is markets like India, Japan, South Korea and Taiwan respectively.

In India, Orkut has been holding the pole position for a while now. In February, it was reported by comScore that Orkut holds approximately 46.8 percent market in India. However, Facebook has been slowly eating away at Orkut’s market share. Interestingly, the marketing research company found that Facebook dominates the social networking landscape globally however in India and Brazil, it is Orkut which has more popularity. The times are changing now, and Orkut is suddenly facing the heat even in India. Orkut, owned by internet search behemoth Google, is losing considerable market share in India with every passing day. According to Google Trends (a site that compares daily web traffic), Facebook has been growing its number of visitors, while Orkut is heading in the opposite direction. Social media site visitors across states like Karnataka, Tamil Nadu, Uttar Pradesh, Andhra Pradesh, West Bengal, Punjab and Gujarat are using Facebook more than Orkut. Madhya Pradesh is the only state among the top ten states ranked by Google Trends where the battle is more on even terms. However, It’s not just Facebook that is causing concern for Orkut, it is also facing serious threats from micro-blogging sites like Twitter (irrespective of the irreparable damage it has caused to the reputation of some influential people, its popularity in India is growing).

The question then arises, “why is Orkut suddenly under pressure? The answer is simple – “innovation”. With Orkut, Google missed a trick, especially in India, and ended up forfeiting its huge market share. At a time when Orkut should have been proactive and ideated innovative technology to engage users, it adopted a more reactive approach. The result is there for everyone to see. Facebook, on the other hand, started off slowly. Initially, its interface portrayed the perception of being less user-friendly; however once users started adapting to the new technology, there was no looking back for the network. At a time when Facebook engaged users with innovative games like Mafia Wars, Farmville, FishVille etc, Orkut was vying for eyeballs with its archaic online games. Facebook’s basic service of photo-sharing also was much attractive compared to Orkut. Though Orkut has been making an attempt to lure users back to its network, by making certain changes on its platform, it seems like a classic case of too-little-too-late. Since Facebook has already used these innovations, Orkut is reduced to a mere ‘me too’ brand. All this underlines the fact that innovation in business is key to survival and Orkut has found this out the hard way.

Orkut joins Wave and Buzz in the list of Google’s failed social networking ventures. Media reports suggest that Google is now planning to launch another social media venture called ‘Google Me’ which is expected to bring back the glory days for Google in the social networking space. Some have even gone ahead and termed this service as a ‘Facebook killer’. Only time will tell how things will pan out but Orkut has reminded us of an important business necessity – Innovation.

Cyber Security – A Global Challenge

2010-08-16T11:00:00.003+05:30

Since independence India has always been kept on its toes in terms of security thanks to a hostile neighbour who often exported terror into the country. Things seem to have changed a bit recently. No the neighbour has not turned saint, however the security threat these days is emanating from a different source altogether – international cyber criminals. Just to put things into perspective, a recent newspaper article quoted the CEO of the country’s largest IT firm expressing serious concerns about the numerous attempts of cyber attacks faced by the country in recent times from anti-nationals.

In all fairness, we should be least surprised with the importance of cyber security. India has undergone a technology revolution and the major factors driving the revolution are the adoption of Information and Communication Technology (ICT) and its benefits. Hence the threat from the cyber criminals was inevitable. An amazing fact is that all it takes to challenge the might of a country is a team of capable tech savvy people and some amount of resources.

A ‘State of the Net’ survey conducted by Consumer Reports in June 2009 revealed that one in five online consumers were victims of a cybercrime in the past two years. The combined loss suffered by these victims is pegged at USD 8 billion while 1.2 million computers are said to have been replaced owing to software viruses during that time. It is widely regarded that cyber crime has not declined in the past five years and also there is a sneaking feeling that consumers, corporations, and the government have not done much to change this.

It is simply astonishing that a country like the US with much technology at its disposal has been unable to curb the cyber threat. A recent report says that computer-based network attacks are bleeding the US businesses of revenues as well as market advantage. In one of the most candid revelations, Michael McConnell, executive vice president of Booz Allen Hamilton's national security business and a former director of national security and national intelligence stated that if US went on an all-out cyberwar the country would lose hands down. If a developed country is so vulnerable to cyber threat, we can imagine the plight of other countries.

There is a need for governments across the globe to actively involve themselves in protecting the nation's networks. Some of the recent steps taken by these governments indicate a step in the right direction. For instance, in July, we had India asking mobile operators in the country not to import any equipment manufactured by Chinese vendors, including majors like Huawei and ZTE. The reason given was simple: these imported handsets could have spyware or malware that gives intelligence agencies across the border access to telecom networks in India. More recently, Saudi Telecommunications Company announced that it had received orders from the country's regulatory authority to suspend key BlackBerry services, following a similar move by the United Arab Emirates.

However, these measures are not solutions to the problem. All the countries across the world are approaching this problem in a very narrow minded way, seriously hampering any chances of collaboration between countries and arriving at a global cyber regulation. However, since governments around the world are more consumed by the need to heighten national cyber defences, cyber criminals are roaming around free. It probably will take a national catastrophe akin to the 9/11 incident in cyber space to shake officials out of their complacency.

‘Customerization’ – An Innovation in Mobile Marketing

2010-08-12T17:59:00.010+05:30

Innovation creates marketing opportunities and challenges. The mobile platform market has witnessed this scenario in the recent past. This sector has seen a plethora of smart phones like iPhones and Androids being launched across the globe. There has also been a steady rise in the popularity of mobile websites and applications. Globally, each has an adoption rate of 83 percent and 71 percent, respectively. The recent past has seen robust growth in social media applications which have been recognised and integrated in many smart phone appliances. Eighty-five percent of teens in the age group of 15-18 are expected to yield mobile phones and therefore the most effective way to communicate with this group is through mobile marketing. The broader set of the audience could also be tapped through this new mode of marketing since almost everyone has a cellphone.

Globally, businesses have spent approximately USD 2.3 million on making their businesses more compatible on the mobile platform. In 2011, this expenditure is expected to catapult to USD 5.5 billion. Interestingly, by this period, the Mobile Marketing Association expects digital marketing expenditure on the whole to go up by two percent to 32 percent. Of this spend, approximately four percent is expected to be allocated to mobile advertising.

An interesting study conducted by a management institute in India revealed that Mobile Marketing is at a relatively nascent stage in India. Here, the biggest challenge is the acceptance of consumer marketing/advertising. Researchers have analysed the perception of the consumers in India and have categorised these perceptions as follows:

Lack of contextualization and personalization of mobile ads
Disruptive nature of mobile ads, and
Perceived usefulness of mobile ads

Further, in India, the existing format of mobile marketing does not have any significant impact on the likelihood of purchase. Customers are averse to the generalised nature of the mobile adverts and expect customization of mobile marketing messages as per their individual requirements, tastes and preferences. This trait has clearly indicated the need for Customerization in mobile marketing/advertising in India. Customerization combines operationally driven mass customization with customized marketing in a way that the company is able to respond to individual customers by customizing its products, services, and messages on a one-to-one basis. In a nutshell, the marketing firms need to combine Mass Customization and Customized Marketing. This is what Customerization means. Another desired attribute as per consumer perception is the preference for session-based messages, which would self delete after a certain period of time – hence saving the mobile users the hassle of clearing the clutter of marketing messages in their inboxes, which would otherwise occupy unnecessary memory space. Ideally the best way to achieve this would be to deploy Intelligent Mobile Software Agents, which enable firms to completely customize mobile marketing messages to individual customer preferences. This could be coupled with artificial intelligence which enables software agents to learn, optimize and individualize information dissemination to mobile users. As much as the theory sounds interesting, it would be fascinating to know how companies would execute this supposedly success formula.

Topic Microsites - The New Way to Promote a Brand

2010-08-10T16:20:00.000+05:30

Microsites are focused, high impact sites useful for advertising an event, launching a campaign or promoting a brand. These are employed as tools by companies to acquire customers for their business, since they allow incorporation of many components (that cannot be included in other media) to create engagement and participation, and to generate return traffic. A multitude of companies like FedEx, Accenture and McKinsey have already incorporated these microsites into their websites.

Microsites are usually a cluster of pages meant to function as an auxiliary supplement to a primary website. These sites usually run from 1 to 10 web pages that feature the company’s product, expertise on a particular topic or service, along with description, offers and a call to action. In many ways, it is an electronic version of direct mail which includes newsletters, promotional emails from the companies, polls and surveys sent directly by the companies. These sites help companies focus on a specific purpose or cause, help to promote new merchandise, provide customized pricing as well as help the company segregate between B2B and B2C clients. These microsites can be blogs and social media platforms like Twitter and Facebook, animated and interactive graphics, several articles that have been grouped under one common theme, videos and podcasts, reader point-of-view development, reader polls and surveys, self diagnostic tools and comments from readers. However, for a company to achieve optimum traffic and user engagement, its microsite must focus on the following four elements:

In-Depth point of view
Topical narrative
News
Audience participation

The main aim of microsites is to provide specialized information which may be either commercial or editorial in nature. These sites should not just be a simple collection of news articles but should feature a company’s point of view on how to address a complex issue and therefore must feature in-depth articles on that topic. These articles should contain news and latest development of the company and should be updated regularly to keep the reader interested in the site. In order to engage readers on to the site, a comment and feedback section should also be included, where the reader can post their comments on the topic on the website.

It is due to this narrower focus that microsites can be effectively used as hub pages featuring specific products or services and their detailed attributes. Since, these sites contain premium quality topics; they can be easily optimized for the search engines as well as several Pay Per Click (PPC) campaigns. Search engines like Google, Bing and Yahoo Search often prefer quality content on microsites and hence rank them higher as they satisfy the users' thirst, which in turn increases the rank of the overall website. These mini-sites, as they are also known, are also one of the best and easiest places to run PPC campaigns, since a specific topic is the focus. The user will not be distracted by other topics concerning the business. Rather, he will see only what he has come for, which in turn, would increase the chances of converting his leads into business opportunities and would also lead to higher conversion rates over the period.

Advantages of Microsites:

Actionable results – Microsites drive action. Lead generation, information requests or orders can be generated through a microsite.
Continuous promotion – the content promotes the company as well as products/services of the company.
Customizable – the design of microsites can be personalized.
Microsites are ideally optimized to convert readers into business opportunities.
Microsites are primarily customer-focused.

Keys to Success

In order to be successful, an average microsite must follow these criteria:

The landing pages should convey the company’s stories quickly and succinctly. Readers arrive at a website with definite queries in mind, if the content is irrelevant and does not meet their requirement, they prefer moving on to another site.
Continuous improvements and updating of content are imperative to keep the site in trend.
Effective and cost-effective promotions serve the very purpose of a microsite.

Mobile Websites - The way ahead

2010-08-05T13:00:00.000+05:30

It is really astonishing how fast technology keeps changing. A few years back having access to internet was a big thing. Today, however technology has eased our access to internet even when we are on the move. Interestingly, ComScore quoted that 75 million Americans access the Web from mobile phones and this trend is being observed in emerging countries like India as well. In the recent past, it is seen telecom service providers are increasingly launching innovative data plans at throw away prices resulting in a sudden spurt in the number of people accessing internet on their mobile handset. According to Google, number of people who have used internet through their mobile phones in India has doubled to about 8-10 million since 2009. The figures are expected to grow further given that many handset companies are thronging the market with new, innovative and user friendly GPRS models at affordable prices.

This trend has alerted many big as well as small business houses in India to plan their growth strategies in accordance to this evolving market. It is quite elementary that internet as a platform is something that every marketeer would think is worth trying to leverage. Moreover, it is still obvious that going forward social media platforms are aggressively going to drive the mobile internet or mobile commerce businesses. However it is often seen that websites are built to support internet accessibility through desktops and laptops and hence there are not many smart phones that will enable user to view the websites in the same way as they do on the laptop/desktop. Many companies in the western countries have re-acted to this trend and have already looking at possible options to make their website more user friendly for customers using mobile phones.. These companies are building what is termed as “Mobile Website” which in fact is separate from the company’s primary online presence. Moreover, in-order to ensure that the platforms are device friendly, we have observed more collaboration of software & device manufactures in the recent past.

Dwelling more on the ‘Mobile website’ thought, it is observed in some of the western countries that developing a mobile website is not a herculean task and neither does it cost a fortune. There are a plethora of online services that can easily create a mobile-friendly version of a company’s existing website (it only helps that most of them are for free!). Google Mobile Optimizer is probably one of the best alternatives in this respect. It is also the most basic version and least customizable. There are some other premium products like Mippin, MoFuse, Mobify, and WireNode which offers greater customization. For people who want greater customization, hiring web designers who could provide a platform with exactly sufficing the need of the company. Hiring a web designer is advantageous as it saves time as well as the money.

One of the most challenging tasks for companies though is how to translate the content designed for desktop experience into much smaller mobile screens and slower pace of mobile devices. According to industry experts it is always the context and not the content that needs to be tailored to suit the needs of a mobile user. It is most often the device that ultimately dictates the consumer experience of viewing a mobile website. Even though there is always a temptation to replicate everything in the original website into the mobile website one must start with the most important things relevant in the mobile context. This could vary from business to business for example if it is Courier Company then the most important thing for the company would be to allow customers to track their consignments easily via their mobile phones. The most important aspect in doing this is always to put yourself in the shoes of the user and try to know what their needs are.

Mobile platform provides a new challenge to business and indeed the companies that can seize the initiative and cater to customer needs would always stay ahead. Hence it is very important for all companies to act smart and act fast. Mobile is the way ahead!

Thought Leadership and Social Media

2010-08-03T18:39:00.004+05:30

As a follow-up to our blog published on 29 July, we thought it would be useful to share the findings of a report on ‘How Consulting Firms are Using Social Media to Market Their Ideas’ created by the Bloom Group, BlissPR and the Association of Management Consulting Firms (AMCF).

Though social media is considered to be ‘untamed’, the increasing number of entities using this medium to augment their brand building strategies, necessitates the spread of proper knowledge on this subject. I thought it would be interesting to share some key findings of this report with our readers.

Consulting firms are quickly expanding their budgets to accommodate social media. While social media represented only an estimated 5 percent of the thought leadership marketing budget five years ago, spending has climbed rapidly in the last five years to an estimated 18 percent today. Five years from now, social media is projected to be about one-third of the marketing budget – about the same amount as consultancies will spend on offline and ’traditional’ online thought leadership marketing programmes.
Social media will increasingly complement traditional thought leadership marketing channels. The two most effective thought leadership marketing activities are still ’offline’: seminars run by consultancies and speeches they give at conferences organized by third parties. However, company micro-sites or online communities, a relatively new social media channel, are close behind, ranked third in effectiveness (tied with search engine optimization.)
Other social media tools are gaining on traditional techniques. For instance, company pages on social networking sites and participation in third-party social networks already surpass white paper syndication sites – an old staple of content marketing – in effectiveness.
Falling short of content and determining how to use it as a marketing tool are the two biggest concerns about social media
The consulting firms with the most effective thought leadership marketing programmes are much more likely to use research-based content, and they reportedly invest much more in social media than consulting firms with the least effective programmes. The ‘leaders’ of thought leadership marketing (firms generating more than 30 leads per month) are more than twice as likely as the ’laggards’ (firms generating 10 or less leads per month) to develop research-based content. In addition, the leaders dedicate three times the proportion of their budgets to social media than do the laggards. However, the leaders still apportion more than three-quarters (77 percent) of their budgets to offline and traditional online marketing.

Although the 2010 figures are not very promising for social media, the next five years are expected to steer its growth. Some interesting signs suggesting that consulting firms are in the early stages of using social media to market their ideas are:

Only 31 percent have company-sponsored blogs.
Less than half (48 percent) post comments on the blogs of influential parties outside the firm (e.g., professional bloggers).
A little more than half (55 percent) use social networking message services such as Twitter to communicate their expertise and direct their followers to websites where they have published their ideas.

Ever Evolving Digital Marketing – Increasing Opportunities

2010-07-17T18:38:00.003+05:30

Thanks to the ever-evolving social media platforms, digital marketing is definitely going to overtake the traditional platforms of direct marketing. Analysts indicate that digital marketing expenditures are expected to see huge exponential growth over the next four years. Leadership marketing, which primarily involves person-to-person activities, such as in-person seminars and public speaking presentations, is slowly being replaced by social media platforms. Social media is quickly becoming a central component to thought leadership marketing. Analysts predict that offline thought leadership marketing will drop to 46 percent, while social media marketing will rise to 18 percent in 2010.

Social media is expected to be the top emerging platform for marketing many B2B businesses. Already 88 percent of B2B firms have their presence on social media platforms as per reports by eminent marketing authorities. Among the many social media portals, are professional networking sites like Linked-in as well as micro-blogging sites like twitter. Apart from having their own presence on such sites to communicate with customers and share their expertise, it is observed that firms are capitalising on sites like these by sponsoring blogs and posting comments on other influential blogs.

The standard marketing gig of mass marketing is being gradually replaced by personal marketing by engaging the respondents at an individual level. The primary motive of the marketers is to use social media to increase their brand awareness, augment brand building activities and generate high online sales. Interestingly, businesses like search marketing, B2B search engine optimization etc. are also picking up thanks to this ever-evolving trend.

If we look at digital marketing alone, in 2009, the global online ad spend reached USD 55.2 billion, up two percent from the previous year. eMarketer predicted that the channel will continue this growth at accelerated rates through 2014, increasing by 10 percent or more each year. In fact, by 2014, the firm expects internet marketing to account for USD 96.8 billion worldwide. Geographically, Asia-Pacific, Eastern European and Latin America regions are considered to be the major drivers for this growth. Established geographies like North America and Western Europe are also expected to contribute significantly. eMarketer further revealed that despite the uneven global recovery, digital marketing is growing at a CAGR of 11.8 percent.

What better way to end than on a promising note for all the entrepreneurs. A report predicts offline, traditional online and social media to account for roughly equal shares of thought leadership marketing, with traditional online and social media campaigns accounting for 33 percent each and offline strategies representing 35 percent by 2015.

Pre Schools – The Next Target for Private Equity Investors

2010-06-06T18:34:00.004+05:30

The hectic lifestyles in the metros have converted basic requirements like pre-school or play school, the first step towards the beginning of education for a child, into a successful emerging business proposition.

Gone are the days when pre-schools would largely mean an unorganised segment with small one-room classrooms with small budgets mushrooming in every neighbourhood. Over the past five to six years, this fragmented segment has witnessed drastic changes. Companies like KidZee (now Zee Learn), Little Tree House, Eurokids, Apple, Bachpan and many others have changed the landscape converting this business to lucrative & organised market. Interestingly, this sector has managed to attract many private equity investments in the recent past.

According to the Kaizen Education Report, in India, the pre-school segment is pegged at USD 500 million and is growing at a CAGR of 30 percent per annum. By 2012, the report forecasts the sector to grow to a USD 1-billion market.

The hectic lifestyles among the working class as well as the need of many parents to entrust the early days of their child in safe hands are some of the main triggers for the success of this business. Moreover, in a process to give their child the best, parents are willing to spend exorbitant amounts. This business which has targeted only 12 percent of the urban market is spreading its roots as well as slowly gaining impetus in the Tier I & Tier II cities.

Another reason for the spurt is the high corporate activity within this segment. While PE investors find this a lucrative segment to invest in, play schools with their ambitious expansion plans are also vying for such investments. For instance, PE firm, Matrix Partners India (with INR 1,500 crore [USD 325.30 million] of assets under management) invested around INR 59 crore (USD 12.79 million) in Tree House Education, a pre-school and K-12 education entity. The investment was done in two tranches – INR 50 crore in 2008 (USD 10.84 million) and INR 9 crore (USD 1.95 million) recently. The pre-school also received funding worth INR 31 crore (USD 6.50 million) from another key investor, a US-based Foundation Capital, with over INR 11,000 crore (USD 2.38 billion) of assets under management. Tree House currently operates 135 pre-school and 12 schools under the K-12 brand spread across India. Sources state that other players – Kangaroo Kids Education (KKEL), Hyderabad-based DRS Kids and Zee Learn – in the industry are also in talks with PE for funding.

IQ Analysts believe that the increase of PE investments in the pre-school segment is primarily due to the recession-proof quality of education and other reasons including low regulations, low-entry barriers and huge demand-supply gap. Other than this, the attraction of PE investors towards play schools is backed by the fact that the pre-school market is unregulated and there is a low upfront investment requirement to expand and establish a new branch, such as rentals that can be offset against monthly receipts and upfront admission fees.

Private Equity in India – Quarterly Update and Future Prospects

2010-05-05T18:30:00.000+05:30

The surge of Private equity investment in India in the first quarter of 2010 has been relentless. In the three months of 2010 the PE investments in India amounted to USD 1,943 million increasing by 185 percent from USD 675 million in the first quarter of 2009. The average of the private equity deals in Q1 2010 also increased to USD 26 million from USD 19 million in 2009.

The growth in investment demonstrated the strong fundamentals of Indian economy. Even after the robust growth in investment, India has been not able to reach the level of investment that it attracted in 2007 before the financial meltdown. The IT and financial sector saw maximum number of deals in the first quarter of the year. Furthermore the number of exits during the period also registered considerable increase. During the three months there were 32 exits made which were worth USD 824.44 million.

Future Prospects

According to a study conducted by IDG Ventures, India could expect to reach USD 75 million in 2010-2015 at existing growth rates. However with some favourable regulations by the government of India the industry could reach USD 100 billion by 2015. According to estimates 660 companies are likely to attract USD 22 billion worth follow on funding in 2010-2015.

Sectors to watch out for

The recent months education sector has attracted the attention of a number of PE investors. According to a survey conducted by Venture Intelligence 80% of investors replied in affirmative when they were asked if they are interested in making investment in education sector. The Indian Education sector offers USD 40 billion investment potential. The sector promises a CAGR growth of 16% CAGR for five years however stringent regulatory restrictions in formal education (K-12) and higher education have somewhat stalled the progress of investment. The sector has only seen 9 deals in 2008 and 10 deals in 2009. In 2010 already four deals are completed.

The Indian Mobile Handset Market – A Future Outlook

2010-04-12T23:49:00.006+05:30

Multi-national mobile handset manufacturers such as Nokia, Sony Ericsson, Samsung, Motorola and LG, have dominated the Indian mobile handset market for several years. In the next decade though, these handset moguls might soon face a new challenge. The challenge this time will not be from the cheap unbranded handsets imported from East-Asia; but from the unprecedented increase in small and medium Indian handset manufacturers.

In the past year alone, more than 26 new mobile handset vendors have entered the Indian mobile handset market. This includes entry of well known electronics vendors such as Intex and Videocon as well as a number of new entrants such as Spice Mobiles, Micromax, Karbonn Mobiles, Lava Mobiles etc. This surge can primarily be attributed to the Indian Government, which recently released a directive on banning all mobile handsets with false or no IMEI (International Mobile Equipment Identity) number. This directive effectively eradicated the cheap unbranded Chinese handsets from the Indian market and produced a new breed of competition.

What makes this scuffle all the more interesting is the confidence that these domestic companies are radiating while taking on the big global multi-nationals. Their strategy to beat the stiff competition is astoundingly notable. These companies offer feature-rich mobile handsets at very lucrative prices to the Indian customers. These domestic companies are split into groups – the first who purchase handsets in bulk from countries such as China, Taiwan and Hong Kong, and then market the phones under their brand offering warranty and after-sales service. The second group includes companies that import cellular chipsets from China and design the phone themselves.

One such company that offers chipsets is Mediatek - an Asian chip company which was established about a decade ago to supply chips for TVs and other appliances. The company shifted its attention towards the mobile chipset market five years ago. Since then, the company has been on an upward growth spree offering stiff competition to chip giants such as Infineon and Qualcomm. In 2009 alone, the company sold more than 300 million core cellular chipsets globally - approximately 22 percent of the global market.

Today, approximately 20 mobile brands in India include Mediatek-branded chipsets command a market share of almost 20 percent. Market leader, Nokia has seen its market share decline from around 65-70 percent to 50-55 percent over the last two years. The three global brands – Nokia, Motorola and Sony Ericsson, together have lost close to 30 percent market share over the last two years, some of which has been grabbed by Samsung and LG. This dynamic shift in the market share is mainly attributed to the change in purchasing patterns of the Indian consumers who are more ‘feature conscious’ than ‘brand conscious’. Another reason cited by experts for the change in market share, is the fact that retailers get a higher commission (10 percent) on these domestic brands as compared to the established brands (2-3 percent).

Looking at these developments, things in the Indian mobile handset market is definitely going to heat-up in the near future. Success of early entrants such as Spice Mobiles should be enough to cause jitters among the international brands and force them to pull up their socks. They need to come up with a strategy to countervail this local competition. Otherwise these timid looking domestic companies will eat-into the market share of the major companies – like termites eating-into wood. No longer will any company hold a monopoly over the market and the handset market might follow the similar suite as the current mobile operator market, which has become one of the fiercest markets in modern times.

IPL - Sponsorship & Advertising Galore

2010-04-09T16:19:00.002+05:30

Indian Premier League (IPL), the cash-rich cricket league has been a pioneer in cricket in many ways. Today we hear commentators shouting out 'Karbonn Kamaal Catch', 'DLF Maximum' and 'Citi Moment of Success'. Many first time viewers are left wondering as to what these terms mean. But this is just another idea to associate brands with cricket and increase awareness about the brands. IPL, indeed has taken the sponsorship and advertising to a different level all together.

In 2008, before the first season of IPL was started 8 official sponsors were roped in for the event. According to the agreement signed at the time all the revenue accruing from the sponsors falls under the central pool. Out of this 40 percent of the revenue would go to IPL, 54 percent to franchisees and 6% to prize money. The money will be distributed in these proportions till 2017, subsequently the share of IPL would be increased to 50%, while the franchisee share and prize money share would come down to 45% and 5% respectively.

The Third season of IPL has seen a mad rush of sponsors lining up to sponsors the mega event which is grabbing eyeballs in India as well as globally. According to reports from TAM Media Research Pvt. Ltd, in the first week TRP of Season 3 is said to 5.72% compared to last year’s overall TRP of 5.16%. Some of the official partners of IPL are as follows.

IPL Teams are also not to be left behind in the race to acquire new sponsors. Chennai Super Kings leads the pack with a staggering 18 sponsors while other teams are not far behind and on an average have around 15 sponsors each.

On the Advertising front also everything has been hunky dory for the IPL. This year’s IPL has seen a few more innovative marketing strategies. The two strategic time-out breaks of 2.5 minutes in each innings is timed perfectly to hold the interest of viewers. There are a few more innovations that IPL has brought in this year like ten second main screen ads that are shown in the middle of the overs while the viewers are glued to their TV sets. Companies would see this as a great way to break clutter and get their own space to advertise. This is a genial idea as viewers would not think about changing the channels as it is only a 10 second ad in the middle of an over. Currently Karbon, Micromax and Munch are using the service. IPL’s partnership with Youtube has also given the brands a new platform increasing the customer base with its entry into online forum. According to industry reports IPL stands to earn INR 40-45 crore (approx USD 8.9 million – USD 10.12 million) from selling a part or all of the 150 seconds of advertising inventory allotted to it per match by broadcast partner Multiscreen Media Pvt Ltd.

But again even when we acknowledge that IPL has been a brilliant sporting event and Lalit Modi has created a business model worth praising; IPL should not go the Superbowl way. Superbowl which is the championship game of the National Football League has gone on to become an advertising event more than a sporting event. The mega event guarantees viewership of 106.5 million but charges advertising cost of USD 2.5 million to USD 2.8 million for a 30 second ad. This has led to some of the leading advertisers like Pepsi and FedEx to stay away from the event this year. All cricket fans want IPL to be more about cricket than an advertising event because it is the passion for the game of cricket that has made IPL so popular.

IPL – Valuation Of Existing Teams May Sky Rocket

2010-03-25T04:49:00.002+05:30

March 2010 saw IPL attracting two big names on their board. The Sahara Group and Rendezvous Sports bought the Pune and Kochi IPL teams respectively. The fact that surprised everybody was the amount splurged skyrocketing the IPL team valuation. Sahara Group won their franchise for USD 370 million while Rendezvous Sports won their franchise for USD 333.33 million. The huge variation in the base price of USD 225 million and the actual bid amount truly indicates the emergence of IPL as a lucrative business proposition. Now the next big question is what is it that’s luring all these renowned, knowledgeable and elite business honchos to take so much interest in a Cricket League?

Just to put things into perspective, Indian Premier League (IPL) started in the 2008. Within a span of three years IPL transformed itself into a success story only a few had imagined. Today IPL’s brand value has more than doubled to a staggering USD 4.13 billion from USD 2.01 billion in 2009 representing Y-O-Y growth of 104 percent in valuation. The table below illustrates the current valuation of the IPL teams.

What impact would such mammoth valuation of smaller cities like Pune & Kochi could mean in comparison to the larger existing franchises would be interesting to know. The high price bids for smaller teams have meant that tier one teams which have larger cities as their base might look at a completely different valuation all together. According to industry sources the enterprise valuation of the tier-I teams are expected to be somewhere around USD 500 million. Moreover, the existing teams would also in all likelihood ask for a premium over Sahara Group's $370-million bid for Pune franchise when striking a deal. Owners of teams like Mumbai, Delhi and Kolkata might ask for higher valuations based on better revenue potential and prominent location. These valuation could be well above USD 500 million as these franchises have better ecosystem bigger fan following and cricket infrastructure in place. If some other factors like popular international player with big valuations are added, the enterprise valuation might just suddenly sky rocket. However, industry insiders believe that in next 2-3 years a more scientific valuation might come through focusing more on revenue potential and operating efficiency of the franchises. There would be proper grading methodology in place for valuing even intangible assets of these franchises. Over a period of time other than fan base, revenue potential and location of the franchises, global fan base and prospective buyers (especially the high networth individuals who are associated to the city) would also assume significant importance.

With many investors queuing up to bite the IPL pie the existing teams would always be keeping their eyes and ears open to simply identify the right time to off-load any stakes. Business conglomerates like Videocon Group and some prominent people from the film fraternity have already made it very clear that they would be interested in buying minority stake in some of the existing teams which again is a good indicator of the vast availability of funds implying growth boosters for the team valuations. Additionally, with every passing day and increasing popularity, more teams are seriously contemplating going public, which in turn would get the fans directly involved with these teams and add a new feather in the cap to the fairly tale saga of IPL.

Highlights of the FICCI-KPMG Report 2010

2010-03-18T00:46:00.001+05:30

The Indian Media & Entertainment (M&E) Industry, estimated to be worth approximately INR. 587 billion (USD 12.32 billion) in 2009, is growing at a compound annual growth rate (CAGR) of 13 percent to reach the size of INR.1091 billion (USD 22.91 billion) by 2014.

The growth is attributed to favorable demographics, expected recovery in the GDP growth rate, strong long-term fundamentals of the Indian economy, expected rise in advertising-to-GDP ratio (compared to developed economies) and increasing media penetration.

Sectors impacted during the previous fiscal were: OOH, Films and Radio. These are, however, expected to recover in 2010. Contrarily, sectors such as Music, Internet, Gaming and Animation showed double-digit growths.

Advertising growth was flat in 2009 despite a robust 10 percent y-o-y growth three years prior to this period. Moving forward, this sector is expected to exhibit a CAGR of 14 percent by 2014.

IPL, with advertising revenue estimated at INR 4.5 billion (USD .09 billion) and 80 percent growth rate in 2009, was the highest ad revenue reaper.

Media companies are increasingly concentrating on cost optimization, strengthening of existing operations and processes, talent and human capital management, innovation and assessment of options for growth through consolidation. Factors like digitisation, regionalisation, convergence of new media, etc. are some of the trends in the industry which are expected to drive growth going forward.

The television industry is projected to grow at a rate of 15 percent over 2010-14 to reach a size of INR 521 billion (USD 10.42 billion) in 2014. This growth will be driven by a rise in subscription and advertisement revenues for the industry.

Filmed Entertainment is projected to grow at a CAGR of 9 percent and reach the size of INR 137 billion (USD 2.74 billion) by 2014. Growth drivers for the sector would include expansion of multiplex screens resulting in better realizations, increase in number of digital screens facilitating wider releases, higher revenues, improving collections from the overseas markets and ancillary revenue streams like DTH, digital downloads, etc. which are expected to emerge in the future.

Print Media is projected to grow at a CAGR of 9 percent over the next five years to reach around INR 269 billion (USD 5.38 billion) in size by 2014. Growth in this industry is achievable through sustained growth in advertisement revenues due to increased advertising spends from emerging sectors such as Education, Organized Retail and Telecom, improving literacy levels in the country, optimization of cover prices leading to improved penetration and growth in sales volume, increasing importance of regional print etc.

The Radio Industry is expected to grow at a CAGR of 16 percent over 2010-14 to reach a size of INR 16.4 billion (USD .32 billion) by 2014. Growth indicators for this sector are increase in the number of radio stations in Phase 3, expected regulatory reforms that are likely to improve profitability and stimulate foreign investments, enhancement of current measurement systems and growth in locally targeted advertising.

The Music Industry is expected to grow at a CAGR of 16 percent over 2010-14 to reach INR 17.2 billion (USD 0.344 billion).

The Out of Home (OOH) Industry is projected to grow at a compounded rate of 12 percent over the next five years to reach a size of around INR 24.1 billion (USD .02 billion) by 2014.

The animation industry is expected to grow at a CAGR of 18.7 percent in the coming years to reach INR 46.6 billion (USD 0.93 billion) by 2014. This growth will be triggered by the increased consumption of animated content, focus on IP creation and growth of 3D formats.

The Gaming sector is expected to grow at a CAGR of 32 percent over the next five years to reach INR 32 billion (USD 0.64 billion) by 2014. Console gaming currently constitutes the largest share of the gaming pie; however, going forward mobile gaming platform is expected to eventually surpass levels of console games. The growth in this sector will be backed by increase in the number of casual and active games, arrival of 3G, availability of localized content, growth in ad-funded gaming platforms and greater awareness of products and services.

IPL Auctions – Negligence towards Pakistani Players; A Boon for Pakistan Cricket in Disguise

2010-01-28T16:29:00.001+05:30

The Indian Premier League (IPL) auction is the biggest of its kind in the cricketing fraternity. Unheard of three years ago, the IPL auctions are keenly followed by cricketers and fans alike. The third edition of the IPL had 66 players being auctioned amongst eight franchises, with a maximum of two slots per franchisee.

The auction process is also quite interesting. The auctions are preceded by the IPL Trading Window wherein teams trade players amongst each other. The trading prods team owners to gauge the skills missing from within the team which they try to acquire through the auctions.

In other words, the purchase decision is based on a franchisee’s need for certain skills – be it a strike bowler, a hard-hitting batsman, a wicketkeeper, batsman or an all-rounder. With thousands of dollars involved, team owners chart out strategies and decide beforehand the type of player they require to bring balance to their cricketing outfit.

IPL Auction Three included players from all major cricketing nations as well as not so major cricketing nations such as Canada and Ireland. Prior to the auctions, the Pakistani and Australian players were apparently in great demand. However, this year, the franchises chose not to utilise the services of the Pakistani players for various reasons. While the franchises cited ‘non-availability’ of the players, the Pakistani government termed it as a ‘conspiracy’ against its players. A number of Pakistani sports and government officials hit back at the IPL and the franchises for not having purchased a single Pakistani player. It was evident from the auctions that the decision to neglect the Pakistani players had been taken in collusion and was not a standalone one, as none of the IPL teams bid for these players.

While Pakistani authorities and the media have been weaving conspiracy theories around the event, there is a rationale behind the exclusion. The previous two editions saw many players leave the IPL after playing a few matches due to international commitments. Teams were left stranded and with no option but to either make last minute changes or to buy the services of a lesser skilled player for the remaining duration of the tournament.

For instance, most Australian players left the first edition of the IPL early due to national commitments, while in the second edition, the Australians joined after having finished their national duties. The same would have applied to Pakistani players as Australia was playing against Pakistan during the second IPL.

Also, English players like Kevin Pietersen and Andrew Flintoff were the highest paid cricketers last year, but were unable to play for the entire duration of the tournament for their respective teams.

The franchises seemed to have picked up cues from the past tournaments. Nearly all players acquired this year are available to the franchises for the entire duration of the IPL. For instance, the acquisition of Damien Martyn and Adam Voges by Rajasthan Royals seemed to be based on this sound logic. Both players have no international commitments and have been cleared by Cricket Australia to play in the IPL.

It is apparent that the decision by the IPL teams was based largely on corporate strategies, rather than only on the political situation prevalent between the two countries.

The losers here are not the Pakistani players but the IPL teams. Just like last year, the entire Pakistan team will have the time to prepare for the upcoming Twenty20 World Cup. Last year the Pakistani players were not involved in the IPL which gave them the opportunity to bond with each other and play as a team. The other squads were visibly lacking in team spirit and the brotherly bonding that cricket teams are so famous for was missing from most outfits.

Pakistan won the Twenty20 World Cup last year and seems to be a favorite this year as well. As far as the IPL franchises are concerned, they seem content with their purchases and will be looking forward to seeing their new acquisitions in action in IPL Three.

M-Commerce – A Huge Business Potential

2010-01-20T23:00:00.001+05:30

The RBI (Reserve Bank of India) in October 2008 announced the guidelines for mobile banking in India which has resulted in the potential growth of M-Commerce - a segment of the mobile value added services (MVAS) in India. The M-Commerce segment – broadly divided into M-Banking and M-Payment services, has since then resulted in a number of service deals and tie-ups, reflected in the two tie-ups announced last year; Tata Teleservices tie-up with ICICI Bank and Dish TV’s tie-up with Atom technologies.

Brief details of these deals are as follows; Tata Teleservices, one of India’s leading telecom operator company owned by the Tata Group partnered with ICICI Bank, to offer mobile banking services to Tata Indicom subscribers. The partnership offers a range of services and includes transferring funds to any bank account, bill payment, prepaid mobile recharge, view account balances and credit card payment due date amongst other services. In the other deal, Dish TV, an Indian DTH provider, entered into an agreement with Atom Technologies, a provider of mobile payment solutions, to offer mobile payment services to Dish TV’s subscribers e.g. recharging payments, additional service payments.

Since its introduction in India over a decade ago, the cellular industry in the country has been on a constant growth trajectory. This potential has attracted a number of cellular operators (international and national) to the Indian market. The new entrants have increased competition and also affected the industry player’s average revenue per user (ARPU) and profitability. Thus, as an additional profitable revenue stream mobile operators in India have realised the importance of MVAS (mobile value-added services) over the past five years. According to IMAI (Internet & Mobile Association of India), MVAS which was approximately nine percent of mobile operator’s revenue in 2008 is estimated to increase to 12 percent by June 2010. In value terms, the MVAS industry in India is expected to garner revenue worth INR 16,520 crore by June 2010 from INR 5, 780 crore in 2008. Amongst the triggers forecasted to boost the MVAS segment’s growth is M-Commerce services. (e.g. purchasing a movie ticket using a mobile phone or transferring funds between banks.)

Currently, M-Commerce in India is at a nascent stage and a minor percentage of the mobile users are aware of the availability of these services in the country. Despite the low awareness, M-Commerce is highest amongst all MVAS with regards to practical utility due to the advent of mobile technology. The increasing mobile penetration and technology developments have lead to a number of Indian companies and banks offering a plethora of services fostering the growth in M-Commerce. Segment-wise the saturated Indian urban segment is expected to adapt to M-Commerce sooner due to the higher penetration of bank accounts, credit cards as compared to the rural segment. This is reiterated by a recent survey, commissioned by Paymate and conducted by The Nielsen Company, which that 64 percent of respondents utilising M-payment had registered for an M-commerce service within the previous six months, an indication of rising consumer confidence since the RBI issued the guidelines. Besides, low confidence and low awareness a major barrier in adoption of M -Commerce is the aspect of security, user friendliness and pricing of the services. Indian consumers being price-sensitive pricing will be another key for proliferation of mobile banking in the country. Despite the challenges M-Commerce services provide an opportunity to consumer’s convenience and cellular operators a revenue option which will lead to the segment becoming a large growth driver in the next 2-3 years time.

BCCI: The Money Spinners

2009-11-12T18:31:00.002+05:30

The richest cricket board in the world – Board of Control for Cricket in India (BCCI) showed the world that innovations in sport can help keep one right up the ladder. In 2006/07, the BCCI had reported an annual income of INR 651.83 crore (USD 139.25 million), the highest for any cricketing board globally. However that did not prevent the authorities from going a step further to ensure the board maintains its top position in the cricketing world.

The board launched the Indian Premier League (IPL) in 2008 – a marquee Twenty20 cricket tournament that captured the imagination of millions worldwide. Within the first year itself, the IPL became a major money spinner for the BCCI. The board earned USD 1.5 billion in TV rights for a 10-year period – a single deal that catapulted cricket amongst the most valuable sports in the world. In the second season, the IPL itself earned over INR 500 crore (USD 106.81 million) in ad revenues, and for the third has already garnered future ad earnings of INR 650 crore (USD 138.85 million). Such is the pull of the tournament, that global advertisers such as LG Electronics and Pepsi has chosen its brand with the tournament nearly four months in advance.

Buoyed by the interest in the domestic Twenty20 tournament, the BCCI has upped the ante. This time it is a shirt sponsorship deal that the board is keen on signing. While the deal itself is not newsworthy, the valuations are eye popping. If the INR 800-crore four-year shirt sponsorship deal for the Indian national team comes through, it will eclipse the INR 621-crore (USD 132.66 million) shirt sponsorship deal between Manchester United and Aon Corp for a similar duration. This could possibly make the BCCI deal one of the biggest ever shirt sponsorship deals in the world of sport. While reports suggest that the existing sponsor, Sahara Group may not bid at such high prices, others including Bharti Airtel have shown interest in the same. The Sahara Group paid USD 90.54 million (INR 425 crore) for the sponsorship of the Indian team in 2005.

Why the deal can be a successful one?

The deal is essentially for the Indian national men’s team. Over the course of time, the Indian cricket team has proved itself as an important tool for brand managers. An ad consisting of Indian cricketing heroes can sell a product by the millions. A recent advertisement by Pepsi which utilises a majority of the Indian team playing against local youth in the backwaters of Kerala drives home the point well.

Secondly, with cricket going global due to the IPL and with India at the centre of the global attraction, it only makes sense for BCCI to utilise the global visibility of Indian cricket and capitalise on the same.

Thirdly, global companies have repeatedly shown interest in Indian cricket. Brands such as LG, Pepsi, Vodafone and others have associated themselves with many tournaments involving India or Indian cricket in the past. The deep pockets of these companies may have been another trigger for the BCCI to increase the sponsorship deal size.

Wireless Mesh Networks

2009-09-19T00:07:00.001+05:30

Wireless mesh network (WMN) is technology that could be implemented to introduce true wireless connectivity to entire cities using inexpensive, existing technology.

In a wireless mesh network, a single network connection is spread out among hundreds of wireless mesh nodes that communicate with each other to share the network connection across a large area. Mesh nodes are small radio transmitters that use the common WiFi standards known as 802.11a, b and g to communicate wirelessly with each other. These nodes are programmed with software that tells them how to interact within the larger network. Information travels across the network from point A to point B by hopping wirelessly from one mesh node to the next. The nodes automatically choose the quickest and safest path through a process known as dynamic routing.

Wireless mesh networks can be created with either WiFi or WiMax technologies. Both of these wireless broadband technologies differ in the technical execution and ultimately have different applications. While WiFi is currently the preferred choice due to its wide spread adoption, there will soon be shift to WiMax in the near future. This is mainly since WiMax provides wireless reception over significantly greater distances and at much higher broadband speeds. Implementing a WiMax mesh network would also significantly lower both – deployment and maintenance costs of mesh nodes.

Some of the prominent advantages of wireless mesh networks include:

- Low Setup Cost: Wireless mesh networks incur low set-up cost since there are no wire installations.

- Easy Upgradeability: Wireless mesh nodes are easy to install and uninstall, making the network extremely adaptable and expandable as more or less coverage is needed. Mesh networks are ‘self configuring’; the network automatically incorporates a new node into the existing structure without needing any adjustments.

- Existing Technology: WMN relies on the same WiFi standards (802.11a, b and g) already in place for most wireless networks.

- Low Maintenance: Mesh networks are ‘self healing’ since the network automatically finds the fastest and most reliable paths to send data, even if nodes are blocked or lose their signal.

- Better Connectivity: Mesh networks are useful for Non-Line-of-Sight (NLoS) network configurations where wireless signals are intermittently blocked. For example: in an amusement park, a ferris wheel occasionally blocks the signal from a wireless access point. But if there are dozens or hundreds of other nodes around, the mesh network will automatically re-route to find a clear signal.

Evolution of Mobile TV in India

2009-08-12T22:55:00.001+05:30

Mobile TV is a value added service that enables cell phone owners to watch television on their phones from a service provider. The television service is either provided via mobile telecommunications networks or by using broadcasting technologies such as DVB-H (Digital Video Broadcasting - Handheld) and DMB (Digital Multimedia Broadcasting).

India’s stride towards the introduction of mobile television in India commenced in early 2007, when Nokia formed a private-public partnership (PPP) with national television broadcaster Doordarshan, to initiate the country’s first mobile TV pilot project. Under the partnership, Doordarshan broadcasted its channels using Nokia's DVB-H based mobile broadcast solution. The pilot project beamed eight free-to-air channels within 10-12 km of Akashwani Bhawan in Delhi. The eight channels that were broadcasted included; DD National, DD News, DD Sports, DD Bharati, DD Urdu, DD Punjabi, DD Bangla and DD Podhigai. The pilot enabled Doordarshan ascertain the reception quality, explore advertising and interactive services as well as gauge future consumer expectations.

Although, the pilot was successful the concept failed to commercialise, due to basic non-availability of user end infrastructure. The mobile handset market at that time, offered only two handsets (Nokia N92 and N77) which featured the DVB-H technology. To dampen things further, in early 2009 Nokia sold its Mobile Broadcast Solutions unit to Wipro, raising doubts over the future development of the technology.

In the latest developments, Doordarshan is planning to roll out and expand its Mobile TV service in 17 cities across India. The broadcaster floated an expression of interest last month, to hire a consultant for developing a public-private-partnership (PPP) model for digital broadcasting services. According to the proposed plan, the roll out will take place in five phases, starting with the metros. It is proposed that out of the 16 programme channels, the private partner will be given capacity for offering 12 channels on a revenue sharing basis. While Doordarshan will provide the infrastructure in terms of TV tower, power supply and spectrum, the private partner will be responsible for content aggregation, marketing, operation and maintenance. Additionally, the private player will have to invest in setting up transmitters, antennae and other infrastructure required for mobile TV technology.

The other form of providing Mobile TV is via existing mobile telecommunications networks such as WCDMA, EDGE or 3G. In this type of service, the operator works with content providers to host video clips which downloaded on demand by users. The delivery of this video content is done through the data channels of the existing cellular networks.

Mobile TV services on this platform have witnessed much more acceptance since the technologies and user end infrastructure is already in place. Existing players in this arena include; Reliance Communications, Airtel, Idea Cellular and Mahanagar Telephone Nigam Limited (MTNL), all of which who provide Mobile TV services over their existing data networks.

Bharat Sanchar Nigam Limited (BSNL) and Tata Teleservices are the two new entrants that have entered in this space in the past quarter. BSNL has tied up with the ROK Entertainment Group, a UK-based mobile applications developer, to introduce ‘Tiny TV’ offering an initial portfolio of 6 channels for a monthly fee of INR 150. ROK TV technologies will enable BSNL to stream video over the existing 2.5G and 3G infrastructure. On the other end, Tata Teleservices launched their Mobile TV services in Mumbai earlier in this March. Using technology services from Hyderabad-based Apalya Technologies, the company offers Mobile TV services over its existing 2G infrastructure.

Looking forward, Mobile TV is set to become one of the most competitive and fierce arena’s in the near future. With the allocation of 3G spectrum right around the corner, and DVB-H technology still under exclusive control of the Government-run broadcaster, it is very clear which technology has the upper hand. Mobile TV will seeming continue thrive on the existing and upcoming mobile telecommunications networks like 2.5G and 3G. The low availability of DVB-H based handsets and high penetration of 3G enabled handsets makes this case even stronger.

Useful and Practical – Retail Inc. 2009

2009-07-06T18:04:00.001+05:30

The Indian Retail sector, ranked as the most lucrative sector prior to the recession, has seen many ups and downs in the recent past. Earlier, global management consulting firm, A.T. Kearney, in its annual Global Retail Development Index, had ranked India as the most attractive retail destination during the period 2006 to 2008.

Unfortunately, the downturn has hit this sector at an estimated INR 2,402,211 crore (USD 511 billion), according to figures released by consulting firm KPMG. Furthermore, the consulting firm expects this slowdown to persist for another 12-18 months. Unlike in the US, where spending on goods has decreased in the current scenario, the Indian consumer is still making purchases, albeit wisely. In order to fruitfully traverse this slowdown, the consultancy expects retailers to concentrate on food retailing and consumer goods and move away from lifestyle goods. Angel Broking reported that "Value-retailing players such as Pantaloon and Reliance are more likely to benefit in the current scenario than lifestyle players like Shoppers Stop”. Due to the value proposition offered by kirana stores and local vegetable vendors, the duo survived the economic downturn. Compared to modern retailers, vegetable vendors, more often than not, offer fresher vegetables; while kiranas offer the luxury of home delivery and interest-free credit. It was only a matter of time for customers to move towards different shopping avenues for their varied needs. One of these avenues was the Internet.

Online Shopping

Online research and advisory firm JuxtConsult reported a massive increase of online shoppers between 2006 and 2008 from 12 to 19 million. According to a recent survey by MasterCard Worldwide, the average frequency of online purchases in India grew from 2.6 percent in the fourth quarter of 2007 to 2.9 percent in the corresponding period of 2008. This growth is mostly driven by the 18-29 age group, who have the highest average global spend on online shopping. One of the areas, where the youth is inclined to drop their cash is in the personalised gifting and merchandise space. This trend has proved favourable for e-commerce portal, Myntra.com, where “business has increased up to five times this year despite the economic recession” according to its CEO, Mukesh Bansal. Another company, futurebazaar.com – an e-commerce portal venture of Kishore Biyani-owned Future Group – has also raked in profits thanks to the uptrend in the online merchandising space. Only a year old, the portal is already worth an estimated INR 62 crores (approx USD 13 million).

In the merchandise segment, popular online purchases include home appliances and electronic gadgets like mobile phones, cameras and laptops, among other contraptions. The survey by MasterCard Worldwide revealed that the online spend on electronic products has gone up by 51 percent in 2008. In a bid to maintain this flow of online shoppers to their e-commerce portals, firms have turned towards social networking features which are incorporated into their websites; these are utilised by users to take counsel with friends and relatives before making a particular purchase.

Online shoppers, overall, conduct research on their planned purchases before taking the plunge. Being able to compare prices and features of a price is another benefit of picking up items on the net. Jyoti Ramnath, CEO, Craftmygift – a personalised gifting firm, opines that "through online shopping, customers can attain the objective of value for money during these tough times."

On the Flipside

Although the downturn has been kind to value-for-money providers, the same cannot be said for value-retailers, such as Vishal Retail (VRL), who cater to the lower middle-income group consumer. The company has been suffering due to its disability to generate positive cash flows from operations in the first two months of this quarter, according to Chief Executive, VRL, Manmohan Agarwal. Analysts are of the view that the next two quarters will be critical for the company, since sales are expected to fall further. In such trying times, the company is seeking solace in the wired medium by testing waters with the sale of electronics on its launched portal, VishalMegamart.com. Further, successful companies like Tata and Videocon (with its portal, eDigiworld) have joined the fray by initialising online stores for their products as well.

Riding out the wave

Until the second quarter of 2010, when things are expected to get better, the key to riding the recessionary wave is by concentrating on the online medium and by coming up with value-for-money strategies, since at the end of it all, consumer really is king and it is he who dictates a company’s profitability.

3G – An Impetus To Mobile TV

2009-07-03T16:10:00.002+05:30

3G, the third generation of mobile phone standards and technology, was formally launched in India by the country’s largest government-owned telecom service provider – BSNL (Bharat Sanchar Nigam Limited), in February 2009. This latest mobile technology promises to enhance a user’s experience in mobile handsets through video screening of calls, video on demand, mobile surveillance, Live TV and movie downloads, among other services.

The launch of 3G is likely to usher in additional areas of entertainment avenues such as 3G mobile television and streaming video besides the usual mobile music downloads and mobile game downloads among others. Currently, mobile television is unavailable in India due to delays in spectrum allocation for the same. 3G could potentially be utilised by television networks in partnership with telecom operators to air ‘tv channels’ on the mobile phone.

Besides mobile television, video on demand is another potential revenue stream for television networks and mobile value added services providers. According to a recent article published in Business Standard, according to an online survey conducted by Nielsen, nearly 63 percent of the 43 million internet subscribers in India stream or download content on the computer or a portable device. The growth in internet penetration has resulted in an increase in consumption of online audio and video content. Neilson also reports tremendous increase in the consumption of music videos, movie trailers, TV shows, full length movies and video games – all of which can be availed on 3G-enabled handsets.

With 3G providing speeds greater than that of an average internet connection (2 Mbits vs. 0.64 Mbits) in India and nearly five mobile users for every internet user, content producers are bound to shift base to 3G, at least partially if not completely.

Further, Business Standard reported that an increasing number of users viewed the 2009 election news on Web TV; giving rise to the opinion that by 2015, users are likely to view poll-related news on their mobile handsets on a 3G network.

Deregulation Of Oil Prices – Yet Another Endeavor!

2009-06-30T17:23:00.001+05:30

The rising global prices of petrol and diesel have always been a concern for Indian consumers and oil marketing companies as well as the Ministry of Petroleum & Natural Gas (MOP&NG). To politicians, these prices may only be a matter of gaining or losing reputation, however for the consumer a price hike means having to revamp his entire household budget. The state-owned oil marketing companies (OMCs) are the worst hit; their bottomlines have been severely dented as a repercussion of selling the commodity at government regulated prices. To combat this issue, the centre is evaluating options involving partial deregulation of the oil prices.

Although a similar proposal was being discussed upon, wherein, an attempt was made to dismantle the administered pricing mechanism in the oil sector in 2002, the reform collapsed in 2004. This was a result of the consistent diversion of the OMCs surging crude prices to the consumers despite the government’s persistent intervention. Hence, a final decision was taken to withdraw the deregulation.

This time however, MOP&NG has prepared a draft Cabinet note, linking the price of petrol & diesel to the price of crude oil in the international market, on deregulating the price of petrol and diesel According to the proposal, oil marketing public sector undertakings (PSU OMCs) like Indian Oil Corporation, Bharat Petroleum Corporation Limited and Hindustan Petroleum Corporation Limited will be given the leeway to fix the rates of petrol and diesel till the price of crude stays below USD 75 per barrel. Once the price goes overboard, the government would intervene to protect the consumer’s interest. The Ministry has already secured support from the Deputy Chairman, Planning Commission, Montek Singh Ahluwalia, who is optimistic about this proposal.

This reform becomes very imperative for the PSU OMCs, which are bearing losses to the tune of USD 28 million per day on sale of petrol, diesel, LPG (liquefied petroleum gas) and kerosene. Currently, the government is offsetting the losses being incurred by these Oil PSUs through a three-pronged complex compensation mechanism. More than one-third of the loss is being compensated through the sale of oil bonds to oil marketing public sector undertakings, while another one-third is met through the sale of crude oil by state-owned oil and gas explorers like the ONGC Ltd. and GAIL India Ltd. at a discounted rate to state-owned oil retailers. The remaining loss is covered by the periodic rise in retail prices of petroleum products as allowed by the government.

Whilst the Public sector is aided by the Center, it is imperative to safeguard the Private sector end companies as well. For long, private companies like Reliance Industries and Essar Oil have been urging the government to provide them with a level-playing field as far as the prices are concerned. Since there is a lack of subsidy provided to them, the two companies have closed down a lot of their retail outlets.

Analysing the current scenario where the crude price is hovering around USD 50-60 per barrel, it is the right time to bring in partial deregulation. If the reform gets implemented, the price of the petrol will surge by USD 0.04 per litre and the price of the diesel will slump by USD 0.006 per litre. With the same government being re-elected, the oil sector can hope for some sort of deregulations which increases neither the financial burden of oil marketing companies nor the pressure on the poorer sections of the society.

The UPA Government’s Agenda

2009-05-28T20:41:00.002+05:30

The 2009 general elections in India turned out to be a surprise – a pleasant one for the UPA (United Progressive Alliance) government supporters. The results established the fact that the mindset of the present Indian voter had changed and he considered factors such as stability, continuity and good governance while voting for candidates. For individuals less interested in politics, it is important to know who is running the country and by what margins the victors won the latest elections. The UPA - a coalition of Indian political parties, including the Congress Party, garnered a historic win in two decades with the Congress alone winning 206 of the 543 seats in the Lok Sabha. The victory included the party’s remarkable revival in Uttar Pradesh with 22 seats and the invasion of the communist territory - West Bengal - along with its ally, Trinamool Congress. A gist of the new government’s agenda for its second innings in power is discussed by IQ Analysts who have been following the political movements in the country.

The UPA government’s re-election was attributed to its substantial ability to live up to its promises during its previous regime. The coalition was lucky since the agricultural sector received a boost due to normal monsoon patterns last year and the robust increase in global investments led to the buoyant overall economic growth in India resulting in a nine percent growth in GDP.

The smooth ride continued unabated till the sub-prime crisis, which cooled down the Indian stock market and sectors which were bullish on foreign investments e.g. reality. This situation was managed by the government and regulators with its fiscal and monetary policies satisfactorily.

‘Bharat (rural India)’ has been the focus of the UPA government, which in its first run implemented incentives such as minimum support price of crops, loan waivers, guaranteed employment and housing as well as infrastructure development such as power for the upliftment of these regions. These initiatives have helped the government regain its position and as expected, the first item on its agenda in the new regime is rural upliftment. Although the government’s focus will be on rural growth, the policies for implementing them carry a caveat of fiscal burden – the current fiscal deficit of the central and state government combined is expected to exceed ten percent in FY09.

Fiscal Deficit

The increase in fiscal deficit is attributed to the revenue slowdown from the industrial and services sectors due to the global turmoil (revenue was INR 40,000 crore below budget estimates), forcing the government to borrow for meeting its expenses. In addition, another trigger to the increased government spending was the INR 1,75,000-crore stimulus packages given out to suffering companies due to the global slowdown prior to elections.

Thus, the government faces the challenge of balancing between rural growth and deficit. The same can be effectively met, provided government funds are effectively allocated without leakages which exist in the Indian administration structure. By being rural-centric, the UPA government will have to drastically modify the filled-with-leakages implementation process, reducing the cost burden on the government. The government’s second innings provides an opportunity to introduce a remedy for these leakages.

Infrastructure

Moving on to the next pressing need of the country: infrastructure development. With a stable government ruling now, the world is focussing on India as an investment avenue. In comparison to other developing countries, India lags behind in infrastructure. Connectivity between the urban and rural regions has always been a challenge. Almost all governments in the past have formulated policies to boost highway construction leading to higher accessibility to interior India.

However, clearance procedures and government bureaucracy have been major bottlenecks for the execution of many projects leading to drastic cost and time overrun of these projects. To overcome this, the government will have to expedite the entire process and this, besides one of the most pressing demands, is also one which will test the government’s mettle to manage the country. Another infrastructure segment tarnished with government policies is the power sector. The government will have to introduce reforms in the power sector such as distribution to realise the country’s potential of becoming a “superpower”.

India’s aspirations of becoming a superpower have been fuelled by the growth in the manufacturing and services sector in the past. The current situation is however in contrast due to the country’s dependency on the world economic situation. Known as an agrarian economy, the Indian government, will need to focus on its agriculture sector, which is largely unaffected by external environments, however impacted by internal policies. The sector which has taken a back-seat in the current growth period has resulted in a number of farmer-suicides. Here again, the UPA government will have to formulate policies which boost agriculture financing, improve rural infrastructure and overall betterment of the region and most important ensure that these facilities reach them.

In the end…

Besides the above mentioned urgent issues; some issues that the government is expected to take concrete steps on include:

• Relaxation of Foreign Direct Investment (FDI) in the insurance, telecommunication and aviation sectors

• Taxation changes, fiscal responsibility

• Judicial and police reforms

• Reforms in the education sector

• Divestments of public sector undertakings (PSUs)

The new government has just completed the formation of the new cabinet, and the onus of continuous and sustainable development of the country lies in their hands. India, along with the rest of the world is now awaiting the implementation of the government’s promised agenda.

Comics – Someone’s Reading!

2009-05-26T02:38:00.001+05:30

What sentiments cross our minds when we hear names like – Chandamama, Tinkle, Akbar & Birbal and Amar Chitra Katha? These are titles of emotion-invoking Indian comics, which would lead some to being nostalgic, others to excitement, and still others to sighing with boredom. Comics and reading per se as a habit is supposed to be an integral part of every child’s growing years. However, with the advent of technology ‘traditional’ methods of reading are being replaced by the Internet, cellular phones and the convergence of these technologies as well. People across age groups opt for the digital mode of reading since these advanced technologies offer simple and less expensive access to a wide digital library. The ever-evolving technology has adversely affected the print & publishing sector over a period of time, however, despite the dwindling growth in the sector, IQ Analysts have observed that a miniscule segment - comics - has managed to retain its attraction. Although in terms of value the segment is very small, it still holds the attention of a section which we doubt will ever perish.

Going back in time, the Indian comics segment experienced a drop during the previous two decades i.e. late 1980’s to early 2000s due to the introduction and quick adaptation of technology. This drew people from all age groups towards it, thus showing a paradigm shift from the most traditional way of relaxation i.e. reading to indulging more in versions of technology i.e. Internet, mobile etc. However, since the past few years, the Indian comics segment has shown gradual signs of recovery and revival from its lean phase. Various factors have attributed to this retracted trend. Due to hectic lifestyles, parents are unable to bond with their children. To resolve this issue, many therapists recommend reading stories/books to children as one way of strengthening parent-child relationships. Further, they are of the opinion that Indian mythology and affinity towards one’s mother tongue can be well introduced to children through story reading, with pictures for reference. Thus, recent times have seen parents promote the habit of reading comics by involving themselves in the comic-reading activity along with their children. Also, with technology becoming a part of life, the curiosity and excitement surrounding it has become stagnant. Moreover, foreign characters have also attributed to the success of many superheroes and comic characters like Spiderman, Harry Potter and Shinshan in developing countries – thus increasing the zeal and excitement among children to read comics based on them. This sentiment is supported by the estimates provided by the Indian comic’s industry players. According to the industry players, in 2007 the approximate INR 90-100 crore sector is expected to grow in the range of 10-20 percent in the foreseeable future.

Another indicator of the potential in the comics sector is reflected in a recent partnership between two Indian entities – television channel, Star One and book publisher and distributor, Prakash Books India Pvt. Ltd., which launched comics based on the most popular serials aired on the channel; for e.g, Sarabhai vs Sarabhai (a popular comedy sitcom). Here, the convergence of two channels of media i.e. television and print is utilised to increase visibility and brand value recall as well. The added boost to this industry has been observed with the arrival of international publishers, in April 2009, The Walt Disney Company’s Indian subsidiary, through its division – Disney Publishing Worldwide (India), announced a licensing agreement with local publisher, Junior Diamond to publish Disney comic books in English and Hindi. According to the company representative, every month the company will be printing 50,000 copies for two characters Mickey Mouse and Donald Duck and launch two titles under Mickey and Donald, respectively per month.

Although the mention of the comics evokes thoughts of a dying industry, on the backdrop of the recent momentum, the Indian comic industry players can take solace from the fact that someone’s still reading!

Advantage Genpact - Captive to Independent Unit

2009-05-18T15:30:00.001+05:30

Jack Welch‘s visit to India almost two decades ago c. 1989, resulted in the formation of GE Capital International Services (GECIS) – a business process services operation of the global conglomerate General Electric (GE). With this, the then CEO of GE, Welch, capitalised on the huge potential of the Indian intellectual pool and the cost advantage the country had to offer. The captive outsourcing hub, over time, provided services to a number of GE’s global financial-services and manufacturing businesses. However, nearly eight years after its inception, in 2004, GE in a strategic move divested 60 percent of its share in GECIS to private equity investors General Atlantic and Oak Hill Capital. Moving out of the parent company’s shadow, in 2005, GECIS was renamed to Genpact Limited and later got listed on the NYSE in 2007. Since the change in ownership, the independent company under the leadership of Pramod Bhasin mapped out a strategy of winning external clients to foster its growth in the dynamic Indian ITES-BPO sector.

Genpact’s revenue has grown at a CAGR of nearly 21 percent; from USD 491 million in 2005 to a whopping USD 1.04 billion in 2008. The company’s growth juggernaut has continued in the current financial year as well (Jan – Dec 2009). On 5th May, 2009, Genpact declared its first quarter results (Jan – Mar 2009); the revenue for the quarter increased by 13 percent year-on-year to USD 265.8 million from USD 234.6 million and net income grew by 52 percent to USD 30 million from USD 19.7 million in the corresponding previous year quarter. For the quarter, the company earned 83 percent of its revenue from BPO services and the remaining – 17 percent from Information Technology Services (ITS). Genpact has given a guidance of an annual revenue growth of almost 10-15 percent in the current financial year; this is in contrast to the subdued guidance provided by domestic IT companies such as Infosys Technologies, TCS etc.

IQ Analysts have attempted to unearth the reason for the company’s optimism and success. Based on the data available on Genpact’s website, IQ Analysts have concluded that one of the reasons for the firm’s growth train taking a fast-track has been the divestment of its parent company GE which allowed it to capture external clients in the burgeoning Indian ITES-BPO sector. Besides this, a mention of Pramod Bhasin, President & CEO Genpact is necessary. Bhasin has played a pivotal role in the company’s independent journey. Some of his strategies, such as global expansion and implementation of innovative hiring policies (eg: hiring above 50s for BPOs) have fostered the company’s growth.

Since its “independence”, the company’s success has been reflected in an annual comparison of the previous three years (Refer Table 1). The number of clients has jumped from seven in FY06 to 29 in FY08. The inclusion of new clients has boosted the net revenue from Global Clients - from 26 percent in FY06 to 53 percent in FY08; the book order of the Global Clients has increased from USD 158,282 million in FY06 to USD 550,639 million in FY08.

Comparison of the results on a quarter-on-quarter basis (Q1- Table 2) also revealed that the revenue share from global clients has increased from 31 percent in FY07 to 58 percent in FY09. The book order of global clients has increased from USD 54,310 million in FY07 to USD 153,810 million in FY09. In contrast, GE’s revenue as a percentage of total revenue has reduced from 69 percent (FY07) to less than half of 42 percent (FY09).

Based on the above data, we conclude that GE’s strategy of off-loading its investment was to Genpact’s advantage. The introduction of business from clients other than GE has facilitated its growth from being GE’s captive unit to India’s largest BPO firm.

Telecom continues to embrace sport sponsorships in economic downturn

2009-05-15T15:30:00.002+05:30

At a time when most of the sectors are reeling under the recessionary pressure around the globe, very few industries seem to be sustaining growth in comparison to others. One amongst very few sectors is the telecom industry which has stood apart from the other industries amidst the global economic meltdown. The sector has witnessed robust growth due to the nature of the products made available by the companies which have been witnessing increasing demand y-o-y.

The Indian telecom sector too, has been growing at a brisk rate during a period when most of the companies in the world are filing for bankruptcy under Chapter 11. India added 113.26 million new cellular customers in 2008 – the highest figure globally. The revenue from India's telecom industry is projected to reach USD 43 billion in 2009-10 and USD 54 billion in 2012 from USD 31 billion in 2008.

Owing to the sustained upbeat progress, the companies in this arena have been open to sponsoring sports in particular, cricket, rugby and football for many teams in India, South Africa, England and Australia. The corporates undertake this as a part of exercising brand visibility, building on the customer loyalty and an avenue to earn revenues. This trend has been followed by many telecom companies round the globe and it has assumed tremendous velocity in recent times.

Since companies in other sectors are cash strapped, even sporting associations and teams have been focusing on tapping the telecom companies for sponsorships. Alternatively the recent global sporting events held recently have attracted huge investments from companies and have also paid handsome returns probing a win-win situation.

Since the past two years, Indian sport, especially cricket, has been attracting sponsorship from many telecom companies. Cricket is considered as a religion in India and the hype that it has created in recent years, coupled with the acceptance of the game among the masses, has attracted many companies to invest in this big extravaganza. Cricket is a valued proposition of business for many and this business potential is being tapped by the telecom companies at a much quicker rate. The trend is witnessing an upswing since the return on investment for these companies is highly optimistic.

The outlook of this sector seems to be bullish in India and is forecasted to remain buoyant during the bleak period as well as in the years to follow. It is a ray of hope of lucrative business opportunities for the telecom companies in this precarious scenario and the trend will remain persistent or may even assume another level in the years to come.

Escalating Growth Curve of Nokia India

2009-05-13T15:30:00.002+05:30

Nokia has been one of the most reputed and trusted brands in the cellular communications industry in India, since the mid-1990s. Established in 1994, Nokia Corp. entered the Indian market to leverage the opportunities provided by new emerging markets with the establishment of it wholly owned subsidiary Nokia India. Even though Nokia globally operates in two businesses - mobile phones and telecommunications networks, for the Indian venture, Nokia focused only on the mobile phone market a trait which attributed to its success in the emerging markets.

The company initially decided to set up a handset manufacturing plant in the country. However, the plan was put on the back burner since the volume of sales at that time was too low to justify the establishment of a new unit in India. Instead the company, decided to import handsets from its international manufacturing plants. Nokia formally began its operations in India by supplying GSM equipment/handsets to two cellular players, SkyCell Communications in Chennai and Usher Martin Telecom operating in Kolkata. Towards the end of the decade, the company setup several joint ventures with cellular service providers in different states for the supply of handsets and mobile communications infrastructure. Within the first five years, the Indian operations yielded revenues of in excess of USD 100 million, making India a crucial market for its handset business. India was also considered as a central hub for creating benchmark products for the emerging markets due to its increasing revenue contribution to the Group.

To strengthen its position in the Indian mobile handset market, Nokia followed its global strategy of developing products at a local level, customised according to the consumers needs and at the same time maintaining international standards. With this strategy in mind, the company worked towards developing innovative and user-friendly products at affordable prices for the Indian masses by establishing software development centres in India across various locations. In 2001, the company invested in setting up its own software development facilities in Hyderabad and Bengaluru. The Indian R&D hubs and research centres play a crucial role in the development of new applications, software platforms and hardware for high-end Nokia mobile devices. These centres introduced localized innovations in handsets such as one-touch flashlights and localised languages modes, which appealed more to the rural population in India which were a hit in other emerging economies.

To accelerate its software development Nokia has also entered into research relationships with IT institutes including the Indian Institute of Science (IISC) in Bangalore and Indian Institute of Technology (IIT), Delhi. In 2005, Nokia set up its tenth handset production facility outside Finland at Sriperumbudur in Chennai. Originally designed to cater to the Indian market, the plant has now begun to export a significant part of its production to neighbouring countries.

Today, the India division has become the second largest market for the company globally and commands a 70 percent market share in cellular phones. According to the company’s 2007-08 annual report, India holds the third position, one level behind China (12 percent) with net sales of USD 4,872 million (7 percent of the Group’s revenue from major markets). During its 16 years of operations in India, Nokia has firmly established itself as the most trusted brand in the mobile handsets market.

Bharti Group – A Success Story

2009-05-11T16:30:00.003+05:30

The Bharti Group, a USD 6 billion multi-national conglomerate, has evolved from being a manufacturer in the late 1970s to a diversified business house with interests in telecom, insurance, retail and agriculture. The group headed by Sunil Mittal established itself as a crankshaft manufacturer in Ludhiana to service the bicycle industry operating in that region. The scale of the business was small but provided Mittal with experience of running an entrepreneurial set up. He firmly believed that innovation is the key to increasing market share and generating revenues. This constant craving for launching innovative products in the Indian market marked Sunil’s first tryst with the telecom industry. His timely foray into the ever evolving telecom segment and conducive market conditions helped him establish his telecom empire in India.

Although the Bharti Group was not amongst the first few companies venturing into the telecom sector, they out-powered established business houses such as Reliance and Tata by launching India’s first cellar service under the brand name ‘Airtel’. The company was one of the first to launch a plethora of services in the cellular telecom space as well. Bharti grew its business through partnerships (nationally & internationally) with various companies providing the group the much needed technical expertise and also enabled the firm to operate efficiently. The success of the Bharti Group was not limited to the telecom segment. Sunil diversified into other businesses like insurance, retail and agro-retail by identifying suitable partners in foreign entities taking advantage of the liberal FDI policies governing these sectors. This trait was considered to be a significant contributor to the Group’s success. The strategy highlights indicate that for diversification, Bharti adopted best industry practises like venturing into high growth government backed verticals, partnering with domain experts and hiring experienced employees working in the industries where the group intended to establish its businesses.

The Bharti Group is now one of India’s most respectable and professionally managed business houses. Under the able guidance of Sunil Mittal, Bharti Group has achieved the status of a global conglomerate through differentiation of services and innovation.

Thapar Group – The Inorganic Expansion Route

2009-05-08T16:21:00.002+05:30

India’s brand equity in the international market has been substantiated with overseas business expansions of Indian conglomerates like the RPG Group, Thapar Group and Bharti Group. Historically, these conglomerates have emphasised on overseas JVs, mergers and acquisitions for diversification purposes. Their success stories have been talked in volumes at seminars and also served as perfect case studies of successful business ventures of Indian companies abroad.

One such interesting story is the success of the Thapar Group with special focus on the Gautam Thapar promoted Avantha Group. The two arms of the Avantha Group – Crompton Greaves and Global Green are the only companies of the Group that have ventured overseas. The foresight and vision of Gautam Thapar converged with the business acumen of S.M. Trehan – Member of the Avantha Leadership Team and Vineet Chhabra - Group CEO acted as a catalyst for augmenting revenues and brand penetration for the Group companies overseas as well as domestically. It is understood that this group’s success overseas was attributed due to timely decision making, planning and proficient execution.

However, the noteworthy fact is that Crompton Greaves, the major revenue reaper for the Group, was actually a loss making company in mid 2000s. Crompton Greaves and Global Green ventured into the European and the US markets in 2005 at a time when the macro economic conditions were favourable for the transformer business and horticulture consumer products. The two companies made a series of acquisitions of companies like Pauwels, Ganz, Microsol, Societe Nouvelle de Maintenance de Transformateurs and Intergarden which were loss making but had a strong brand presence in different European and US markets. These timely strategic acquisitions by the stalwarts helped the companies expand their global footprint and increase brand presence. It also helped them leverage the acquired company’s customer network, technological expertise, manufacturing facilities in different geographical locations and gave access to their product lines.

These strategic decisions have increased the group’s revenues manifold in addition to the brand presence that it enjoys today. The group’s overall revenues in FY08 exceeded USD 8.2 billion, with the majority derived from the Avantha group, which contributed USD 6,773.7 million in FY08. The modus operandi for overseas expansion through acquisitions has turned the tables around for the Avantha Group. This is another group which is flourishing in the overseas markets and which is known for the managerial decisions taken by its leader. The Group has certainly witnessed a successful turnaround which is amongst a very few in India.

Calling Virgin Mobile – Number busy?

2009-05-07T16:43:00.002+05:30

March 2008

The UK-based Virgin Group, owned by British billionaire Richard Branson, launched its telecom brand - Virgin Mobile - in India under a franchisee agreement with CDMA major Tata Teleservices (TTSL). Under the agreement, TTSL would sell the Virgin Mobile brand and its services in the country and will pay a royalty for every customer it gets. The CDMA major will launch the services initially across 50 cities (in 17 circles) and will cover over 1,000 cities by the end of the year.

The Strategy – Branson’s words

“Virgin Mobile is targeting the youth, aged between 15 and 30 years, estimated to be around 400 million, which is almost six times the size of that in the US. The usage of this sector is also high with urban youths’ mobile usage standing at around 360 million minutes compared with the industry average of 160 million minutes, while their SMS usage is four times more than the industry average,” Richard Branson (2008).

The Pitch

The company is planning to rope in over 5 million customers in three years and is hopeful of a breakeven during the period. For achieving the target, the company has launched outgoing calls to any network at 0.50 paise a minute and users would get a credit of 10 paise for every incoming call that’s more than a minute long.

… a year later April 2009

Virgin Mobile, in contrast to its launching flurry has tepid numbers as its subscriber base in a market which is growing leaps and bounds since the beginning of the year. According to TRAI, the number of phone connections in the country-mobile and landline-crossed 429 million as of March 2009, of this mobile phone users account for close to 92 percent of the country’s telephone base. Almost 125 million people have bought a mobile connection in the 12 month period and Virgin has only a fraction of the market share so far. What are the reasons for Virgin’s inability to capture the booming market? IQ attempts answering the question:

• Virgin mobile’s strategy of targeting urban youth in the age group of 15-25 is a challenging one, as a majority of this segment already are cellular service users. The company will have to work harder to prompt a change in service providers.

• Virgin’s target segment is urban-based which is experiencing a slowdown in growth momentum and current players, in contrast, have increased their profitably and subscriber base due to the rural foray (eg: Bharti Airtel).

• GSM operators control virtually three-fourths of the market, however, Virgin entered with a CDMA partner which is a disadvantage due to the comparative small market size and presence of market leaders such as Reliance.

• Virgin although has not incurred capex due to its joint-venture, faces stiff competition on the pricing turf. The target segments deemed to be big spenders, have stringent budgets forcing Virgin Mobile to tweak its packages to attract users. The pricing strategy also impacts the overall profitability of the company; numbers for the same are unavailable. In addition, the strategy of being paid for incoming calls has not proved to be useful bait.

• A novice in comparison to biggies who have been around since the past 15 years, Virgin mobile’s advertising spend is almost a tenth of INR 300-400 crore spent by the biggies. This is probably the reason that the company has not painted the town red (its signature colour) and not created the furore on its entry. Although according to reports the company has attacked college campuses to build momentum as of now, the results of the strategy are yet to be seen.

On the backdrop of the above points, the mobile company will have to re-look its strategy to turn the tables in its favour. Each market has its distinct characteristic, which marketers attempt to tap. Thus, despite its success in the UK as an MVNO (Mobile Virtual Number Operator), Virgin Mobile’s number in India would remain busy till it manages to capture the booming wireless Indian market.

The Conglomerate of Two Obsessions in India

2009-02-23T17:03:00.002+05:30

Cricket, a gentlemen's game till the inauguration of the Indian Premier League, has changed its ways and means post the success of the latter. The ardent lovers and the stalwarts of the game would have never envisaged that cricket would form a part of the ongoing extravaganza. The amalgamation of Cricket with Bollywood saw fruition and the duo have further strengthened relationships by intertwining to the business of sports. The amount of Bollywood influence on the game has substantially increased, thus, changing the very temperament of the game.

Since the inception of the IPL, there has been an influx of Bollywood celebrities in the game - either for business or marketing purposes. Bollywood biggies Akshay Kumar, Hrithik Roshan and Katrina Kaif were roped in as the official faces for Delhi Daredevils, Mumbai Indians and Royal Bangalore Challengers, respectively. Realising the business potential in the game, others from the Bollywood fraternity, like Shah Rukh Khan, Juhi Chawla and Preity Zinta acquired franchises of the teams in the IPL. Recently, Shilpa Shetty also acquired a stake in Rajasthan Royals. Hindi film industry personalities have further enhanced ties with the game of cricket by coming together with players in ad campaigns to endorse brands such as Pepsi, Royal Stag, Videocon, Reebok, Dabur, etc. Brands endorsed by cricketers and Bollywood stars gain an extra edge over other products due to the face value and snob appeal among the masses.

The conglomerate has reaped benefits on the monetary front in an immense way. The hype created by the combination of Cricket and Bollywood for IPL has spread across the world and has attracted huge bucks. Players, for Season 1 and 2 of the IPL have been bought for staggering amounts; marketing has been done in a lavish manner and the cheerleading girls make up for the glamour quotient. The flavour of Bollywood has now been merged with that of Cricket, thus diluting the persona of the game.

However, one would feel that amidst the enormous business that this conglomerate has tapped and the revenues it has garnered, the game has lost its charm - a charm so ever-present a few years ago. Though the game has been revolutionalised from the business aspect, the lovers and the observers of the game would feel that the game is not a game anymore. It has turned out to be a valued proposition for business for many.

Pirates on Land

2009-02-05T17:28:00.002+05:30

In the modern day world, piracy has emerged as one of the key concerns for global organisations. From music labels to software giants, this menace has been haunting all major companies in the fields of media, entertainment and software.

In India, the piracy rate has been gradually decreasing in the past few years. However, this fall has been very stagnant in nature, falling at an average rate of only one percent. In contrast, China reduced its piracy rate from 90 percent in 2004 to 82 percent in 2006. Though software piracy in India fell to 69 percent in 2007 from 71 percent in the previous year, the industry's losses in revenue rose to USD 2 billion in 2007 from USD 1.28 billion in 2006. Globally, this loss has increased by a whopping 500 percent from USD 8 billion to USD 48 billion.

Software piracy affects much more than just the industry revenues; it even hits the job market and eventually the country's economic growth. According to the Business Software Alliance India, 38 percent of the software in the world is bootlegged, which accounts for a loss of USD 46 billion. In India alone, this number stands at 69 percent. An economic impact study conducted by IDC revealed that with the reduction of PC software piracy in India by 10 percent over a period of four years could result in an additional 44,000 new jobs, USD 3.1 billion in economic growth, and USD 200 million in tax revenues.

Moving over to the Indian media & entertainment sector, piracy in this sector is much more dominant due to the total lack of security and encryption techniques. According to a recent Ernst & Young and US-India Business Council study, the estimated cost of piracy to the Indian film and entertainment business is a whopping USD 4 billion. The total cost to the film industry alone is roughly USD 1 billion. As many as 800,000 direct jobs are also lost as a result of theft and piracy, afflicting India's entertainment industry.

Meanwhile, the Indian government has taken stringent steps in the recent years to curb this menace. The government has introduced stricter legislations and tougher policies as well as increased the number of raids on these illegal activities. Entertainment companies like Moser Baer have introduced legit movie DVDs at very low rates to hamper the sales of the pirated movies. However, all these steps seem to be small for a country as big as India. Thousands still sell pirated goods openly, hurting the domestic and international entertainment and software businesses. India needs to take efficient steps to eradicate piracy from the streets totally.

The Indian Logistics Sector – A Bright Future Prospect

2009-02-04T22:23:00.001+05:30

The Logistics sector has been touted as a lucrative sector; however, the sector is still in its nascent stage in India. Despite having robust potential, logistics has not blossomed to its capability due to the fragmented set-up, lack of awareness amongst investors and inadequate measures by the government. Logistics primarily involves transportation, warehousing, order processing, inventory control, and material handling activities of goods and services. India currently spends around 13 percent of its GDP on logistics; this is higher than the US (10 percent), Europe (11 percent) and Japan (10 percent).

Though the industry has not witnessed the pinnacle, the recent figures seem strong and promising. In addition, the Indian logistics industry, expected to grow annually year-on-year at the rate of 15 to 20 percent, is projected to garner revenues of approximately USD 385 billion by 2015. Market share of organised logistics players is also expected to double to approximately 12 percent during the same period. The Indian logistics market is expected to reach a value of USD 125 billion by 2010, increasing from approximately USD 100 billion in 2007.

IT and Logistics

IT is considered as the backbone of the logistics industry. The integration between technology and logistics becomes a key for successful planning and transportation of goods from suppliers to consumers. The IT elements employed in the Indian logistics industry are Track and Trace, Warehouse Management System (WMS), Transportation Management System (TMS), ERP and Scanner implementation, Automatic Conveyor Belt system, and Scan-based Auto Sorting tables and process. Global players such as SAP, Oracle, SSA Global, Manhattan, and i2 technologies presently supply IT infrastructure to logistics companies. The IT expenditure in the logistics industry is currently pegged at USD 83.17 million and is destined to reach approximately USD 207.94 million within the next five years with a CAGR of 20-22 percent.

Investments and Logistics

India's logistics sector had, so far, remained unorganised and devoid of investor interest. This continuous trend has started making a shift towards attracting investor interest. The sector attracted investments worth around USD 4.82 billion in the first half of 2008 which outclassed investments in other sectors including aviation, metals and mining and consumer durables. The contrasting change in the volume of investments is due to major development in an important factor, viz; organised logistics, which comprises of about six percent of the total logistics market, and is rising at 15 to 20 percent per year. Despite the economic slowdown, the organised market is expected to rise to 12 percent in a very short period.

The FDI cap has been lowered to 49 percent in the industry; however, the sector is still seeing a flurry of deals involving foreign players; for example, the DRS Group, a cargo transportation firm, received an investment of almost USD 22.5 million for approximately 25 percent stake from the PE arm of Kotak Mahindra Bank in 2007 to build and operate around six warehouses in the southern region of India. In a similar deal in 2007, First Flight Couriers Ltd. received funding of around USD 27 million from Temasek Holdings for a 27.7 percent stake, which the courier company utilised for expansion of its aviation and warehousing businesses.

Outsourcing & Logistics

Approximately 50 percent of Indian companies are now outsourcing logistics services such as supply chain management and contract warehousing up from a mere 10-15 percent reported at the start of the decade. At present, outsourced logistics accounts for only one-third of the total logistics market in India. The potential for growth is therefore considerable, opening a horizon of opportunities for the major logistics players to either enter the Indian market or step up their operations in the country. In addition, strong FDI inflows in the automotive, capital goods, electronics, retail and telecom market will lead to increased market opportunities for providers of third-party logistics in India which are growing at over 25 percent.

Major Logistics Players in India

Is your organisation ‘leak’ proof?

2008-10-21T00:18:00.001+05:30

Businesses across the globe have embraced the growing integration of network communications and business operations. Employees are encouraged to take full advantage of technology such as wireless devices and public hotspots for improving their efficiency. Though productivity is booming, network-based collaboration introduces corporate data into a broader environment that is more vulnerable and difficult to protect.

With virus attacks becoming a common occurrence in all consumer segments, data theft has emerged as a growing concern for enterprises across the globe. Moreover, enterprises in emerging countries such as China, India and Brazil - where IT adoption is at a nascent stage - are more prone to loss of company data and other sensitive information due to flouting of company rules by employees.

Data stored on the corporate network is at risk since it is more accessible than ever due to easy access to company databases for information sharing; storage and compression technology have allowed for powerful (and risk-laden) end-points. The increasing usage of portable data storage devices such as mobiles and pen drives make it easier for employees, partners, or data thieves to access, move, or lose intellectual property or customer data.

In the past two years, more than 250 million confidential records were reported lost or stolen across the globe. These losses arise largely due to internal activities. Whether intentionally or otherwise, innocently or maliciously, employees reportedly engage in behaviour that heightens the risk of data loss. To reduce data leakage and protect corporate information, organisations need to understand how employee behaviour increases risk and take steps to foster a security-conscious corporate culture in which employees adhere to policies and procedures.

Major factors contributing to data leakage:

* Unprotected devices

* Logged on computers when users are away from seats may result in potential theft of company data

* Approximately 20 percent of employees across the globe store their system log-in and passwords on their computers which could lead to breach of security

* Use of unauthorised programs which results in majority of data loss incidents

* Sharing of work devices with others without supervision

* Access to unauthorised parts of a company's network or facility

* Transfer of files between work and personal computers when working from home

A recent survey conducted by InsightExpress, a US-based market research firm and commissioned by Cisco reveals that the blurring of the line between work life and personal life is one of the prime factors behind the loss of company information, either knowingly or due to ignorance. To reduce data leakage, businesses must keep upgrading security networks and consistently evaluate the risks of every interaction with networks, devices, applications, data, and of course, other users.

Consequences

In addition to having more data at risk, businesses today suffer greater consequences if that data is lost or compromised. The loss of intellectual property, such as proprietary product blueprints, financial data, and merger and acquisition plans, can damage a company's reputation, undermine its brand, or jeopardise its competitive edge. Breaches of regulatory requirements for handling sensitive customer data can reduce customer confidence and lead to fines.

Prevent Data Leakages

Threats to data security are continuing to evolve mainly through the Internet, which is a vital component of today's business infrastructure. In this perilous environment, employees around the world are leaking data despite the best efforts of IT professionals to stem the flow.

There is no full-proof solution to secure corporate data, especially as businesses and their data become increasingly mobile and operate within virtual instead of physical boundaries. Many businesses put too much faith in technology alone. However, the best security technology in the world will not produce a good return on investment without the foundation of security processes, policies, and education. Instead, businesses should start by evaluating employee behaviour and the associated risks based on factors such as the locale and the threat landscape.

* Establish tools and processes that track the data's movement to know where it is stored, how it is accessed, and who is using it,

* Identify the types of data that require a unique protection regime within and beyond the company's walls.

* Protect systems by using only authorised application and access methods, maintaining security software such as antivirus applications, respecting and maintaining security settings.

* Protect portable devices by keeping them locked up at all times, not sharing work devices or using them for personal activities, not forwarding confidential information from work systems to personal devices, and not accessing inappropriate sites or downloading inappropriate information,

* Prevent data theft while travelling by speaking softly, using privacy filters to prevent over-the-shoulder viewing and using a virtual private network (VPN),

* Conduct daily business activities according to the company's code of business conduct - particularly pertaining to information security,

* Learn how to handle the different levels of confidentiality for the company's documentation by understanding the differences between public, confidential, highly confidential, and restricted documentation,

* Foster a culture and environment of openness and trust, employees must feel comfortable with the corporate security landscape in order to implement security directives,

* Educate and train employees about company expectations for protecting data.

Preventing data leakage is a business-wide challenge. The more people at every level in the organisation understand the seriousness of the matter, the more successful a company will be in protecting its critical assets. With sufficient desire and proper investments, businesses can avoid security breaches.

Cleantech beckons PE/VC players in India

2008-10-13T17:48:00.001+05:30

‘Cleantech' or ‘clean technology' is a term associated with sectors focussed on preserving the environment. The umbrella term is differentiated from green technology, wherein cleantech signifies investments in the green technology space, which includes sub-sectors such as solar cells/wind turbine manufacturing, e-waste management, water purification and bio fuels among others.

Globally, the market for cleantech products and services is nearly USD 300 billion which is expected to grow to 1.7 trillion by 2017, according to a report by market research engine, Reportlinker.com. Venture capital (VC) firms are vying for cleantech companies hoping to cash in on the boom in the cleantech industry. During the period July-September 2008, the industry attracted approximately USD 2.6 billion in venture investments across North America, Europe, China and India resulting in a cumulative USD 6.6 billion being invested in the first three quarters of 2008 according to the Cleantech Group, a clean technology dedicated advisory firm. India received USD 6.3 million from two deals alone in the third quarter of 2008 compared to USD 111 million across seven deals as reported in China.

According to IndiQuest Research in August-September 2008, cleantech deals in India accounted for approximately 10 percent of the total number of deals concluded in the country in that period. The two top deals in the cleantech sector were Moser Baer Photo Voltaic Limited (Solar cell manufacturing) and Biotor Industries Ltd (Bio fuels).

IndiQuest's preliminary research shows that India has potential in being a major destination for cleantech investments in the future. The country has managed to attract VC investments across various sub-sectors, indicating that VCs are currently testing waters in the country. Sectors such as bio fuels, and energy infrastructure and generation are expected to receive greater investments from PE/VC firms due to government support in terms of subsidies offered to companies operating in these fields.

De“GLAM”ing the GLAM effect

2008-10-03T11:32:00.001+05:30

"Lehman Brothers, a major American investment banker, has filed paperwork for bankruptcy on 16th September 2008; the largest collapse of an investment firm in 18 years."

The above catastrophe has triggered a plethora of tidings made available on various media channels with almost every other individual discussing about the financial crisis, credit crunch, investment banking, and bankruptcy. This despair is based on the fact that global economies are unable to go unscathed from the repercussions of the financial calamity tipped to become catastrophic in the near future.

The impact on India, of the Wall Street tsunami, can only be marginal thanks to India's regulatory system. However, India as a member of the global economy too is expected to experience the ripples of the crisis, despite reports of it being well insulated. Since the past decade, the potential growth in the Indian economy has been tapped by a number of Foreign Institutional Investors (FIIs), VC/PE investors and by the Foreign Direct Investment (FDI) in the country. Part of the inflow of investments was also made by the "GLAM" (pun intended) investors i.e. Goldman Sachs, Lehman Brothers, AIG and Merrill Lynch, via their private equity and venture capital entities. Though there are a number of funds involved who have invested in the country, the focus is on these firms on the backdrop of the current crisis.

An insight into the investments and the sectors in which money is parked by each of the GLAM investors is what this report aims to throw light on. GLAM companies have invested approximately USD 5 billion from the period April 2007 to July 2008. Goldman Sachs has the maximum investment in India based on IndiQuest Research's database, followed by Lehman Brothers the main "hero" of the current scenario.

The financial sector has attracted the maximum investment from GLAM, followed by the real estate sector. Investments have flowed into core sectors of infrastructure, telecom and power/ energy. The inflow of resources has been one of the reasons for the boom in the Indian economy especially in the previous year i.e. 2007.

A brief outlook of GLAM and its individual investments is as follows:

Goldman Sachs

The latest information on Goldman Sachs is that it has obtained the backing of Warren Buffett, the world's pre-eminent stock picker and the CEO of US-based Berkshire Hathaway. In addition to raising money from Buffett, Goldman has planned to sell at least USD 5 billion of common stock to the public. This will be the first common stock offering since 2000 from the investment bank who has not reported a quarterly loss since it went public in 1999. Goldman Sachs from April 2007 has focused majority of its PE/VC investments in the financial services sector. In the light of the current turmoil, Goldman Sachs is touted to be the soundest amongst the GLAM. In India, Goldman Sachs employs 100 people.

Lehman Brothers

The entire scenario today has been initiated by Lehman Brothers filing for bankruptcy protection after collapsing from its exposure to risky sub-prime mortgage securities. Lehman's PE/VC investments have been channelled mainly in the Indian real estate space, a whopping 61 percent of its investments up to July 2008. (Refer below diagram 4). The Indian real estate sector, we believe, will go through some correction due to high interest rates; overall economic stress and Lehman's bankruptcy will impact the Indian real estate players.

AIG (American International Group)

AIG has been an active investor in India; it has a 26:74 joint venture with the Tatas in the insurance business and also an India-specific fund with exposure in companies such as Reliance, HDFC Bank, Bharati Shipyard, BHEL (Bharat Heavy Electricals Ltd)., Bharti Airtel, and Sun Pharma. The India-focused AIG equity fund has exposures in Infosys, ITC, Bharti, Sun Pharma and ABB. The firm has been salvaged by the US federal government (Fed) with its investment of USD 85 billion in exchange for a 79.9 percent equity interest for a period of two years. AIG, being an insurance company, has invested primarily in the healthcare sector.

The company has equity investments in several Indian companies, including MindTree, AIA Engineering, Bharati Shipyard, Federal Bank and Gayatri Projects. The AIG Group has holdings in Indian small- and mid-cap companies through its holding arms. In terms of shareholding statistics till June 2008, AIG Offshore held a 3.27 percent stake in MindTree, while AIG Trustee held 2.07 percent in Gayatri Projects.

The insurer held a 1.3 percent, 1.14 percent and 2.39 percent stake in AIA Engineering, Bharati Shipyard and Sun Pharma, respectively, through its holding arms - AIG Global Investment Corporation, AIG Trustee and AIG Investment Corporation. The change in AIG's ownership may compel the Indian government to examine holdings by the insurer in Indian companies through its various arms, since the US government would become a shareholder in these companies by getting the rights to stakes held by the insurer (in these firms) prior to the bailout.

Merrill Lynch/Morgan Stanley

Merrill Lynch, Wall Street's third largest investment bank, worth more than USD 100 billion (2007), was acquired by Bank of America for just USD 50 billion. Amongst the GLAM companies, Merrill Lynch has invested across sectors and like Goldman they have maximum PE/VC investments in the financial services sector.

Morgan Stanley raised about USD 8 billion by selling up to 20 percent stake to Mitsubishi UFJ Financial Group, Japan's largest commercial bank. The company has been a heavy investor in the country through its private equity arm. In India, Morgan Stanley, according to industry sources, employs 400 people.

The above research and analysis is based on the database maintained by IndiQuest Research Services. We provide a comprehensive weekly PE/VC tracker to our clients, called 'IQ VC Pulse', covering the details of the investments in the Indian markets, accompanied by analysis. For further information on the tracker, kindly contact us at indiquest.services@indiquest.co.uk

Disclaimer: IndiQuest is a think tank providing customised business research and analysis services. Our service offerings cover industries, sectors, companies, and people across all verticals. Our products range from market study reports, competitor reports and industry reports to company and executive profiles. We also provide bespoke news monitoring services. IndiQuest has a team of skilled and qualified researchers and analysts with experience on diverse projects across several verticals.

Kindly note that all the contents of this website are owned by IndiQuest Research Services and are only for general information or use. While every care has been taken to ensure the accuracy of information furnished on this website, IndiQuest does not accept any responsibility or liability for any damage or loss arising from the direct/indirect use of the information provided on the site. However, we shall be obliged if errors/omissions are brought to our notice for carrying out the corrections. Duplication or re-use of the information provided on the IndiQuest blog is prohibited.

Trends in Outsourcing to India – An Introduction

2008-09-16T21:16:00.001+05:30

Graphic Designing

One of the prominent sectors that have led to the stupendous growth of the Indian economy is the IT Business Process Outsourcing (BPO) sector. According to NASSCOM, BPO exports have been the fastest-growing segment of the Indian IT sector growing at a compound annual growth rate of around 37 percent over the past few years. This segment has grown from approximately USD 3.1 billion in FY 2004 to an estimated USD 11 billion in FY 2008. The BPO sector currently accounts for around 37 percent of the global business process offshoring pie. North America and the United Kingdom together account for about 87 percent of the sector's export revenues. North America, primarily the United States, alone accounts for roughly two-thirds of the market.

The major nations contributing to the IT - BPO sector, the UK and the US, are currently facing threats of recession and have been impacted by the credit crunch as is the case with every other nation. This has led to the companies in the region implementing methods to reduce their costs and jump on to the outsourcing bandwagon. One such sector is the newspaper sector that is looking at outsourcing work to other countries in an effort to execute their cost cutting strategies.

According to a recent study conducted by ValueNotes Database on leading vendors in the newspaper industry, advertisement revenue of newspapers in the US and the UK have had a substantial fall due to the remarkable rise in online ads. This in turn has led to huge job cuts and the industry is trying to rationalise with outsourcing options. Further, the burgeoning newsprint prices are also compelling publishers to outsource various jobs. Due to these pressures, Indian graphic designing firms are likely to benefit from this sector and can gain up to USD 120 million by 2012.

The study further stated that Indian firms operating in the graphic design sector and BPOs in the publication segment stand to gain nearly USD 35 million in 2008 from the USD 3.5 billion newspaper outsourcing market. India's current share in the emerging sector is about one percent which is limited to a handful of service providers. If players in the graphic design sector and publishing BPOs focus on the opportunity and acquire necessary skills, the volume of outsourcing business could increase by almost three times from the current size; this will also increase India's share in the global outsourcing pie.

Engineering Services Outsourcing (ESO)

Another sector showing promise in the Indian BPO industry is the engineering services outsourcing (ESO) sector. India is fast emerging as a hot destination for global automobile and aerospace giants who are increasingly outsourcing engineering services such as designing and drafting processes to Indian BPOs. India is expected to garner one-fourth of the global Engineering Services Outsourcing (ESO) business by 2020, and generate a whopping USD 40 billion by the same period.

A recent report by NASSCOM and Booz Allen Hamilton, a strategy and technology consulting firm, predicted that the engineering services market will be approximately USD 1,100 billion by 2020 - higher than the USD 746 billion reported in 2004. Of this, the outsourced component could be worth around USD 200 billion in the same span of time. Currently, the ESO market is worth around USD 15 billion with India garnering a healthy 12 percent share. The major verticals based on spending on outsourcing are hi-tech/telecom (30 percent), automotive (19 percent) and aerospace (8 percent). According to the report, in 2020, there would not be any major shifts in the vertical spends, except a slight increase in hi-tech/telecom spend, which can help India earn substantial profit.

Of the above mentioned sectors (hi-tech/telecom, automotive and aerospace) in the ESO space, automotive can prove to be a big opportunity for Indian players. The report states, "Automotive engineering service is a true ‘knowledge-based' industry with a viable future, as opposed to ‘call centers,' which are more on arbitrage play that could possibly dissipate with time". Tata Technologies is amongst the few Indian early movers in this space with its acquisition of a UK-based engineering and design services company INCAT International Plc in 2005. On the other hand, auto majors like General Motors, Ford, Toyota, BMW and others are already outsourcing engineering work to India through captive centers or third-party vendors. For example, in 2007, TCS won a contract to provide IT and engineering services to Scuderia Ferrari for the development of its Formula 1 car.

The factors that are encouraging ESO in India are similar to those that made ITO (IT outsourcing) and BPO (business process outsourcing) thrive in this country, namely, costs and talent-pool. While cost arbitrage is not the key factor in the ESO space, it may be a major one. However, the expertise required for the project influences the charges for outsourcing. India can provide premium services since the country has a huge number of educated professionals: currently around 35,000 engineers are working in engineering services. In fact, India has an edge over its competition (read China and Russia) because of this scale-up (in terms of people numbers) factor. However, in the ESO space, quality factors many notches over sheer numbers; the quality of the engineers coming out of around 1400 institutes could be a crucial issue over the coming years. Infrastructure is another key inhibiting factor. Countries like China, Thailand, Malaysia and Singapore have scored over India in developing their infrastructure. Also, the facilities and overheads required for ESO are relatively hi-tech and hi-end in comparison with those required for the BPO and ITO sectors

There is also the caveat in the end - the clock is ticking and the lucky chance would not be available indefinitely. The market will get progressively difficult to break into with each passing day and the loss could also possibly impact current service relationships in the ITO and BPO segments. Quite a few players like Neilsoft are campaigning for engineering services to be segregated and formed as a different BPO-like entity to give weightage to the segment, tipped to match the other outsourcing sectors.

Medical Outsourcing - Adverse Event Reporting Systems (AERS)

Outsourcing in the medical sector commenced with medical transcription when professionals listened to audio files from overseas doctors and converted them to text; this was shortly followed by clinical trials. The latest wave in medical outsourcing is adverse event reporting systems (AERS). Dedicated groups study the effects of new drugs to verify their after-effects and compliance with the US FDA (Food and Drug Administration) regulations and report back to the company and the FDA. AERS is a computerised information based database designed to support the US FDA's post marketing safety surveillance program for all approved drug and therapeutic biologic products. The objective of AERS is to improve public health by providing the best available tools for storing and analysing safety reports.

Major players in the sector are Patni Computer Systems, Accenture and TCS. Arjun Bedi, Global Lead of Accenture's Health & Life Sciences R&D practice, stated that non-core medical outsourcing is the latest trend. The scale of operation is enormous and there is tremendous potential in development activities like clinical trials, evaluation of clinical trials, components of data collection, medical writing etc., which are being outsourced. He added that AERS provides huge opportunity for emerging economies like India and China.

The Indian IT Sector – Signalling Growth

2008-09-10T17:50:00.002+05:30

Since the previous decade, there have been a number of M&A deals in the IT industry which have led to an increase in India's presence in the global IT sector and MNCs setting up their base in India. Overall, the country accounts for only a small fraction of the global services market valued over USD 500 billion; so far, it has not attracted major attention due its size. Currently, Indian companies are increasingly spending on outsourcing IT systems and gaining access to cutting edge technology. Additionally, based on the figures provided by NASSCOM, the "small" home market now offers large multi-million dollars. The overall domestic market, comprising of hardware, software and services (IT-BPO), grew at an impressive 42 percent in FY 2007, and is forecasted to reach USD 23.2 billion in the current fiscal i.e. 2008, according to NASSCOM.

According to The Economic Times, Indian companies in the IT services vertical have revenues amounting to USD 50 billion, of which about USD 10 billion comes from the domestic market. In effect, India might be a small market in the global IT services context, however, it is the third largest revenue generator for IT companies after the US (60 percent of the total), and the UK (18 percent of the total). The potential of the Indian domestic market is further supported by the GDP growth of around eight percent. The favourable economic climate is expected to lead to a boost in various sectors including IT and the battle for capturing space has already commenced between foreign and Indian IT players. Foreign IT players such as HP, IBM, Accenture, Capgemini, and Computer Sciences Corporation are amongst the early players to have identified the Indian domestic opportunity.

In the last quarter of 2007, IBM signed domestic IT deals worth USD 1.4 billion and had almost 1,600 deals in the second half of 2007. In 2004, the company signed a deal with Bharti Airtel - a telecom business operator, worth an estimated USD 750 million spread over 10 years whose value is now pegged to be over USD 1.5 billion, making it the largest domestic IT arrangement by far.

IBM's rival, HP's India subsidiary signed on clients such as United Indian Insurance, Bank of India, Britannia, Andhra Bank and Government of Karnataka.

Another MNC, Oracle is present in 20 cities, either directly or through partners. The tech major employs over 24,000 professionals in India which is a significant portion of its global employee base. The company has invested over USD 3 billion in the country over the past five years. Oracle currently has more than 6,000 technology clients and 1,000 applications clients. Its clientele include Bharti Airtel, Ashok Leyland, Aditya Birla Retail, Kotak Mahindra, Arvind Mills, BSNL, BPL Mobile and Genpact.

Rival German software major, SAP, on the other hand has over 3,200 clients across 25 sectors. SAP claims eight out of 12 navratnas and 21 of the top 25 brands in India as its clients.

Besides large Indian corporations, NASSCOM has forecasted that the IT spend by SMEs (small and medium enterprises) is set to grow over 20 percent in 2008 to around USD 9.6 billion. Although some of its current large clients include ONGC, TCS, Tata AIG, Mahindra & Mahindra, Zensar Technologies, NIIT, HDFC and Satyam, even Microsoft pitches itself in the mid-market segment. Cisco has 1,000 resellers in 100 cities and plans to include an additional 600 to cater to SME clients in Tier-2 and Tier-3 markets.

Foreign players are at an advantage being amongst the first movers in the domestic Indian sector. And Indian IT players are trying hard to fight a pitched battle against the might of the integrated deal making of MNC superpowers.

Wipro Infotech won a multi-year, USD 600-million deal to manage Aircel's IT infrastructure, making it the first Indian IT company to win such a large deal from a telecom company. Similarly, TCS bagged a USD 140 million BSNL networking contract and has also signed deals with the Ministry of Finance and other government departments.

Mid-size IT players like 3i Infotech are also trying hard to take a slice of the domestic business. However, the company acknowledges the fact that it's a challenge for them to tackle the large MNC players who have the might of software, hardware and BPO to serve an integrated deal. 3i Infotech has won a deal to manage the IT infrastructure for a large bank, across 900 locations.

Infosys Technologies, which only recently set up a domestic market unit, echoes a similar sentiment and the company is formulating strategies to meet the first mover advantage gained by MNCs. However, it is not just the capability to deliver services that has enabled MNCs to bag contracts; there has also been a lot of groundwork which has led to the business growth.

As Nipun Mehrotra, VP & GM of IBM's Global Technology Services in India and South Asia says: "We are investing in India for India to create local value and local solutions. For instance, we have developed a SDP (service delivery platform) for a large telecom operator on which it can port its new mobile value-added services applications to offer to subscribers. We have also developed intelligent business design solutions for DLF along with video surveillance. So, it's the depth along with breadth of our services which is unmatchable." In recent months, IBM has also expanded reach, setting up offices in small cities.

Besides the growing size of the sector, companies are interested in the domestic sector due the margins it offers. The margins are not only almost equal export margins, the capex per seat to set up a domestic IT outsourcing business are lower. According to a TCS official,"India was margin dilutive a few years back, now its margin additive, hence attractive."

Potential Sectors

Telecom, banking, infrastructure, e-governance and retail are some of the sectors which are seeing large IT deployments.

Telecom

Telcos like Idea, MTNL, BSNL, Airtel or Vodafone have outsourced their IT, billing, infrastructure management and customer care. With a subscriber base of an estimated 300 million, and growing, managing IT has become a gargantuan task. Bharti Airtel, BSNL, Idea Cellular and Vodafone have all entered into deals with IBM India which include work like consolidation of data centres, billing, CRM, data warehousing, IT helpdesk, disaster recovery, business intelligence, managing the intranet etc.

Banking

In the Banking, Financial Services and Insurance (BFSI) space, IT spends currently account for about five to seven percent of revenue. While TCS and SBI have formed a JV to offer consulting in the financial space, HDFC has doled out a Rs. 360crore (USD 8071 million) contract to Wipro Infotech. Interestingly, MNCs are targeting both, large and small deals in BFSI. For instance, IBM has inked a deal with Mahesh Sarkari Bank, a Pune-based cooperative bank, to manage the bank's IT infrastructure. Similarly, HP has tied up with United Bank of India and Andhra Bank.

Insurance

In the insurance sector, Max New York Life Insurance signed a 10-year, multi-million dollar services agreement in August this year with IBM - the largest such deal in the Indian financial sector - to form an integrated solution for policy issuance and administration by the name of Max Vijay. IBM will enable policy dispensation by wireless handheld devices which allow data transfer via GPRS to the back-end systems to facilitate on-the-spot issuance of insurance policies. Overall, IBM will provide policy setup, customer care and claims processing for Max New York Life customers. Aimed at making insurance available in every nook and corner of the country, the recently introduced insurance policy which focuses on the rural masses, will be sold across channels such as neighbourhood stores, microfinance institutions and NGOs, among others.

Infrastructure

Infrastructure is another area which is seeing large IT deployments. Real estate major DLF last year awarded a multi-million dollar 10-year contract to IBM to transform and manage DLF's information technology infrastructure. Recently, Mumbai-based realty company, Lodha Group awarded a 10-year, Rs. 132 crore (USD 29.55 million) IT transformation contract to Wipro Infotech. More such deals will be in the offing as new airports, malls, ports and SEZs are being developed. Though challenges like availability of quality talent and infrastructure in small towns exist, there is a great advantage in terms of negligible legacy systems.

Future

According to a Market Attractiveness Index used by Springboard Research to rank 15 individual IT Services markets on the basis of growth opportunities, the top five IT services markets in India are infrastructure application integration, enterprise application integration, enterprise IT outsourcing, custom application development and network integration. Though, in terms of size India is far behind the US and the UK, the country has emerged as the largest market just behind Australia (USD 14.5 billion) and China (USD15.6 billion). Indian companies have realised that exports apart, the next big growth area for them is back home. The rupee volatility, impact of the sub-prime crisis and economic slowdown has made them learn this the hard way. With the booming economy and over one billion consumers, businesses are expanding in India. To grab a major portion of those billion dollar contracts, the battle between MNC and Indian IT companies is only expected to intensify in the coming months.

Mobile Value-Added Services – A Boon or a Curse

2008-07-23T10:46:00.001+05:30

Mobile value-added-services (MVAS), which currently constitutes of approximately 10 - 15 percent of cellular operator revenues, is an emerging application in the fast growing wireless business. It has attracted a wide category of entities right from wireless operators to handset manufacturers to content developers like 3D Solid Compression (3DSoC), an academic spin-off from Stanford University and Indian Institute of Science (IISc). According to a report by PricewaterhouseCoopers (PWC), the Indian mobile VAS market is all set to grow to USD 2 billion in 2008. Further, the report estimated the worldwide spending on MVAS, including mobile music, mobile payment and mobile advertising to reach USD 55.6 billion by 2011.

Currently, about 44 percent of VAS revenue in India is driven by short messaging service (SMS) applications primarily driven by the youth. This youth segment is expected to continue to drive the market, particularly in the entertainment MVAS. During the voting period from November 2004 to March 2005 for Indian Idol – a singing talent reality show, more than 55 million votes via SMS were received. Considering the cost per SMS is Rs.3, this reality show alone fetched Rs.16.5 crore. The telecom company associated with this show earned Rs.11.5 crore, while Sony, the channel on which the show was aired, garnered in about Rs.5 crore. Further, the increasing number of individuals on the move has catapulted the requirement of information on the move as well. This requirement is gaining popularity since the upgradation of technology coupled with latest color display handsets and add-on mobile services like ringtones, wallpapers, ringback tones, live scores and astrology are expected to lure the Indian consumer.

Although MVAS is becoming an indispensable part of the lives of city dwellers, in the recent past, these services have also proved to be a menace by eating into the Indian consumer’s money, privacy and time. In January 2005, a public interest litigation (PIL) was filed in the Supreme Court against the Union of India by a Delhi-based lawyer, Harsh Pathak regarding unsolicited calls made to him and his family by cellular phone, banking and a host of other companies using telemarketing as a strategy for business promotion. In response to the PIL, the Court is reported to have issued notices to the Government and mobile operators such as MTNL, Hutch, Reliance Infocomm, Idea Cellular, and Bharti Airtel for steps to be taken to prevent the mobile database from being used by marketing agencies for unsolicited marketing messages also called spam.

The high volumes of spam in the VAS market currently is evident by a recent stunning fact that some Airtel service providers also use the service logo space for advertisement of their value-added-services. Another operator, Vodafone (previously Hutch) who carried out similar unsolicited acts (activating caller tunes without the customer’s explicit consent) had been ordered by TRAI (Telecom Regulatory Authority of India) to refund billed charges to customers within 15 days in March 2008. On the other hand, some private telecom companies, in a bid to assuage the high nuisance value problem, have begun offering an unsubscription option to their subscribers; mobile phone users can choose not to receive promotional SMSs and phone calls by signing themselves up on a ‘Do Not Disturb’ registry – ultimately turning this option into a VAS as well.

If service providers have to sustain their current status quo as distributors of mobile value-added-services and untap the market potential of this segment, especially through next generation network (NGN) and 3G, a coordinated effort has to be made to promote transparency amongst customers and harmonise the licensing/regulatory framework.

Private Equity Investments in India – June 2008

2008-07-22T12:03:00.005+05:30

The month of June 2008 witnessed private equity investment of approximately USD 1,117.38 million across 33 deals. In terms of number of deals, June 2008 recorded a 37 percent growth in comparison to May 2008. However, if we consider the deal size of disclosed transactions, June 2008 recorded a 25 percent fall in comparison to May 2008. Sector-wise, IT/ITES led the way in number of deals (seven), followed by financial services (six), manufacturing (four), media and entertainment (four), retail (two), real estate (two) and one each for education, healthcare, logistics, food & beverages, pharmaceuticals, textiles, engineering procurement construction (EPC) and mechanical electrical and plumbing (MPC) services during the month.

In terms of capital invested, retail claimed the top spot with USD 300 million followed by media & entertainment (USD 269.75 million), financial services (USD 228.1 million), real estate (USD 87.5 million), MPC (USD 50 million), logistics (USD 28.11 million), IT/ITES (USD 27.5 million), textiles (USD 25.8 million), manufacturing (USD 22 million), pharmaceuticals (USD 21 million), EPC (USD 20 million), telecom (USD 19 million), food & beverages (USD 15 million), education (USD 2.5 million) and healthcare (USD 1.12 million) during the month. The diagram mentioned below depicts the same.

The average deal size was USD 33.86 million nearly half of the USD 62.24 million average investment in May 2008. Off the 33 deals, only three recorded USD 100 million plus investments while five were between USD 50-100 million. Interestingly, 16 deals (48 percent) were below USD 15 million.

In the India-dedicated fund raising front, private equity firms announced new funds to the tune of USD 4,445 million. The new announcements were led by IDFC Private Equity which announced the launch of a USD 2,000 million infrastructure-focussed fund. India's first regulated entertainment venture capital fund, ‘Cinema Capital Venture Fund', with a corpus of USD 150-175 million was launched to fund companies involved in the entertainment space. Another first was the ‘India Rizing Fund', a USD 100 million fund, dedicated to investing in defense-specific SMEs. IFCI launched the USD 82.5 million ‘Green India Venture Fund (GIVF)' targeting Clean Development Mechanism (CDM) energy efficient projects. With a majority of the new funds in the sub-USD 200 million category, it is expected that average deal sizes will remain in the sub-USD 50 million bracket in the next few months.

Investments

a) IT/ITES

The IT/ITES sector recorded seven deals, including two undisclosed investments, totalling to a cumulative of USD 27.5 million. IT/ITES investments include SatNav, a GPS navigation software maker; Fin-e-ssential Infotech, an online tax filing company; Brandscape Worldwide, a data mining and data analytics firm; CtrlS, a tier-IV data centre firm; Jivox Software, an online video advertising platform and Miles, a financial software developer for wealth managers. Interestingly, the IT space did not receive any investments in May 2008.

b) Financial Services

Financial Services space was the second most preferred investment destination in June 2008 with six deals, including one deal with undisclosed investment, totalling USD 228.1 million. The non-banking finance companies (NBFC) led the way with Newbridge investing USD 150 million for a 49 percent stake in an undisclosed company which will in turn hold 100 percent equity in Shriram City Union Finance, a consumer finance company. The other NBFC deals include Baring Asia’s USD 60 million fund infusion in Sharekhan and Hudson and Sequoia’s USD 11.7 million investment in MAGFIL. An interesting development in June was the investment by Sasken in OmniCapital. Sasken will now be a limited partner (LP) in the venture capital fund.

c) Manufacturing Sector

Manufacturing accounted for four deals totalling an estimated USD 22 million. Mid sized companies such as Polycab and Shakti Pumps which are industry leaders in their respective domains were attractive investments.

d) Media & Entertainment

Private equity firms inducted an estimated USD 269.75 million into the M&E sector. The investee firms include outdoor advertising major, Laqshya and PVR Pictures, a film exhibition company. The biggest deal in this space was by DE Shaw which invested USD 157.5 million in International Amusement that plans to construct an amusement park in Jaipur.

e) Telecom

Investments in the telecom space clearly showcased that mobile value added services (VAS) are the next growth drivers in the vertical. Paymate, a mobile payment service received its second round of funding from Mayfield, Kleiner Perkins and Sherpalo.

f) Retail

The retail boom in India is an attractive proposition for private equity firms evident from the USD 300 million invested across two deals. Reid & Taylor along with Devyani International will utilise the funds for expanding their respective businesses across India.

g) Real Estate

Real Estate, the biggest gainer of private equity investments in 2008, managed just two deals worth a cumulative USD 87.5 million. The highlight was Axis Bank making a private equity investment even though Axis has a separate private equity division. Private equity real estate funds are increasingly focussing on project specific deals wherein investments are made in standalone projects rather than in real estate companies.

h) Other Sectors

Private equity firms also made investments in sectors like education, logistics, food & beverages and textiles among others. The education space has witnessed sparse investments in the first six months of 2008, with three deals in the first first six months, whereas the logistics sector has received investments across nine companies in the same period. Newly raised funds are eyeing investments across various verticals including education and logistics suggesting higher volume of deals in the next few months.

Fund Raising

Private equity investments in June 2008 slowed down considerably compared to the first quarter of 2008 but fund raising has remained robust suggesting a huge pipeline of deals for the next few months. A majority of the new funds announced in June 2008 will invest in growth stage and late stage companies. Going forward, infrastructure and real estate firms are expected to remain favourites of private equity players. Cleantech investments are expected to pick up in the future whilst the IT/ITES sector is expected to receive a continuous stream of investments.

Electronic Security Systems – The Road Ahead

2008-07-18T19:55:00.005+05:30

Over a period of time, security has gained global importance due to numerous threats like global terrorism, arson, burglary etc., faced by countries worldwide. Initially, manned security was considered more reliable. However, with emerging trends, the demand for electronic security systems (ESS) has gained prominence. The global electronic security systems industry is growing at nine percent annually and its current value is estimated at USD 60 billion. The Global ESS industry is expected to witness buoyant growth with huge changes in the industry scenario due to M&A activities and in technology innovations like video analytics, in the year 2008. During the current year and in near future, major trends are expected to take place in the industry, some of which are:

(a) IP video surveillance: IP has been a revolutionary technology innovation which has aided the growth of the internet and its uses across sectors. Electronic surveillance systems are also utilising the IP benefits of cost effectiveness, high quality and encryption. Further, video compression technologies are facilitating less storage requirements and bandwidth. IP video is the innovation that leverages a company's IT infrastructure for video control, transport, storage and retrieval. It can be centrally managed from anywhere in the world - even through a web browser in a Kathmandu Internet cafe. It can serve security and other business purposes such as process or traffic controls. IP video can also provide data for business analytics like emerging retail applications that are starting to help optimise store layouts based on analysis of store traffic around merchandise.

(b) Data Analytics: With powerful software tools, companies can mine both security and business data for hidden patterns that can help uncover both - risks and opportunities. Any variance can indicate security violations or insecure environments vulnerable to violations. Video analytics assists storage, archiving and retrieval of data with the usage of intelligent data mining. Currently, this trend is expected to be one of the major modification drivers in the electronic security industry.

(c) Globalisation: In the past three decades, globalisation has exploded due to the opening up of economies along with improvement of human capital. Countries like China and India, along with other developing nations, have joined international agreements to lower or eliminate barriers to trade. Further, the global approach adopted by multinational corporations to control their risk profile better, improve safety, security and business efficiencies through greater consistency and simplicity has made the scenario more lucrative. This has also led to mergers and acquisitions and companies venturing into new foreign markets.

In India, the electronic security systems industry is on the trajectory path due to the economic development and the escalating need for security by government, commercial, industrial and educational segments. The Indian electronic security system is following the global trend. The following are a couple of news articles giving an indication of the same:

Zicom to Acquire Two Companies for Over USD 50 mn

Axis Unveils Business Strategy to Tap Indian Surveillance Market

Zicom is a Mumbai-based company and has been a leader in introducing electronic security systems to the Indian market in a big way. The company is setting the trend of increasing its market reach through the acquisition mode. Recently the company has planned to acquire a local Chennai-based company and a UK-based company. These acquisitions are expected to almost double the company's turnover in the current year over the previous financial year. The estimated value of the deals is around USD 50 million and the deals are expected to be completed by September, 2008. On the other hand, Axis Communications, a Sweden-based company offering network video solutions for the commercial segment, has acknowledged the potential in the Indian market and has initiated distribution and reseller partnerships to enter into the Indian Tier - I and Tier - II cities.

The consolidation in the Indian as well as global market has been initiated by the above transactions. The road ahead is expected to see more of M&A activities as well partnerships along with technology innovations impacting the electronic security systems positively.

SaaS (Software as a Service)

2008-07-15T18:02:00.001+05:30

What is SaaS?

Software as a Service (SaaS), also known as software on demand, is a new model causing a profound change in application delivery and consumption. SaaS refers to a software or application hosted on a remote server that is accessed via a web browser, typically on a subscription basis. The simplest example of SaaS is the free web-based email system offered by Windows Live Mail, G-mail and Yahoo Mail. All the software and data resides in one central server and is accessed by end users through the worldwide web.

SaaS is seldom divided into two major categories. The first category refers to business solutions sold to companies and enterprises on a subscription basis. Applications in this category generally cover business processes such as supply-chain management (SCM) programs, customer relations applications (CRM) and others. The second category includes customer oriented services offered to individuals, either on a subscription basis or for free (supported by advertising). Web-based email services such as those cited above fall into this category.

Traditional Delivery Model Vs SaaS Delivery Model

The SaaS model is fundamentally different from the traditional model of application delivery, in which the customer purchases a software package and license by paying a one-time fee. The software thereby becomes the property of the user and regular software support and updates are provided by the vendor. In contrast, SaaS does not have licenses or one-time fees; payment for the use of software is done through subscription. Moreover, the software is accessed and used through the internet and is not loaded or stored on the users’ computer.

Benefits

From a customer perspective, SaaS is simply an easier, faster, and more cost-effective way of using software. It eliminates the high costs associated with acquiring hardware and setting up of infrastructure. Another plus point lies in the fact that SaaS providers are being constantly judged on a month-to-month basis and are often pressurised to produce rapid improvements in order to retain their clients. SaaS thereby transitions the responsibility of deployment and management of software from the customer to the software vendor.

Software companies themselves can also benefit significantly from the SaaS model. SaaS expands sales opportunities, enhances competitive differentiation and provides new revenue streams. By offering SaaS, large companies can tap and capture revenue from the small and medium sized businesses (SMEs) that may have been previously unable to afford the investment necessary to acquire perpetual licenses. Conversely, smaller software companies and new entrants that are exclusively delivering SaaS can more effectively compete with the larger vendors. SaaS also eliminates end-of-quarter discounting pressures and enables software companies to enjoy predictable streams of recurring revenue and growth rates. Furthermore, SaaS helps in mitigating piracy and unlicensed use of software thereby reducing losses associated with such activities.

Challenges

In the rush to adopt the software-as-a-service model, many vendors and their customers are overlooking the difficulty in shifting to the platform of the Web. The Web as a platform has its own set of challenges which includes different security, interface issues, and multi-tenancy.

Security: Since a single application instance caters to requests of all clients, it is important that there is a mechanism in place to ensure that data of each client remains secured and users of a particular client can access data meant for them alone.

Interface: Incorporating user interface (UI) configuration capabilities according to individual client requirements forms another challenge to building a SaaS application. Additionally the UI must be simple, speedy and easy to use. Most SaaS players often create a much too complex and busy interface, which translates into training and productivity challenges for end users.

Multi-Tenancy: Multi-tenancy is by far the most difficult challenge when implementing SaaS. Multi-tenancy puts data at the centre of an application, which requires partitioning the physical database to support this structure and allocating space as subscribers come on board. The primary challenge with multi-tenant architecture is that the database is typically the heart of any enterprise application, and changing the database architecture means changing the core application.

Future Outlook

Software as a Service (SaaS) is fundamentally changing the way people and organizations work, enabling greater degrees of collaboration and restructuring everything from business and operational processes to the way software is licensed and priced. The day is not too far when all businesses will be renting out software from a SaaS vendor who can deliver value, reliability, and security all at a fraction of the cost.

SEZ Scenario in India

2008-07-15T16:43:00.001+05:30

Special Economic Zones (SEZs) were established in many countries as testing grounds for implementation of liberal market economy principles. SEZs are viewed as instruments enhancing the acceptability and credibility of transformation policies, attracting domestic and foreign investment and also for boosting the economy.

Countries around the world initiated Free Trade Agreements (FTAs) which eventually led to a spurt of investments in infrastructure developments for Free Trade Zones (FTZs) and SEZs. Countries with economies similar to that of India eg; China, Iran, UAE and Jordan are good examples of success stories in SEZs. The Shenzhen SEZ in China is a perfect example of a SEZ success story.

The concept of SEZs in India was initiated to promote the value addition component in exports, generate employment as well as mobilise foreign exchange. In India, the government has been proactive in the development of SEZs. They have formulated policies, reviewed them occasionally and also ensured that ample facilities are provided to the SEZ developers as well as the companies setting up units in SEZs. These favourable conditions resulted in the biggest ever corporate rush for the development of SEZs in India. Over 234 companies received formal approval, 162 companies received in-principle approval and 100 companies received notification to set up SEZs. The Indian government is expecting an investment to the tune of Rs.53,561 crore (USD 13274 million) and an additional job creation for 15,75,452 individuals in SEZs by December 2009.

Though the projected figures and expected revenues in SEZs estimated by the government and industry experts are buoyant, the ground realities reveal a different story. Despite all the efforts to promote this concept, SEZ development has become the most controversial issue for India today. The recent uprisings, protests and closure of some enormous projects have demonstrated that the concept though very lucrative was not given enough thought before its implementation. It is very important to understand all aspects of SEZs like basic concepts, its various models and the life cycle of its business before initiating any policy or investments for these projects. Though the existing SEZ Act and FDI Policies for SEZs are very tempting and promise high returns; the rationale behind the rapid economic and industrial growth of the Indian SEZ policy is being questioned today. With the unending list of trouble shooting problems in India, it becomes crucial for the Government to understand the business of SEZs in India before embarking on any new approvals.

Cricket – A Booming Business in India

2008-07-15T16:28:00.001+05:30

Various forms of sports in India such as Cricket, Hockey, Golf, Kabaddi, Polo, and Formula 1 among others have been promoted and patronised in the recent past. The investment of large corporates and sports authorities which resulted in the upliftment of Indian sports has tremendously multiplied in the past decade. Though hockey, in which India has an impressive record with eight Olympic gold medals, is officially the national sport, cricket has always been the most preferred sport by Indian masses. It is candidly said that cricket is in the blood of Indians.

Originally introduced by the Englishmen, cricket was focussed largely on the up-market class of the demography. The game contained only two formats viz; One day matches of 50 overs and five day test matches. Cricket - also called a gentleman’s game - was predominant with the male audience in the age group of 18-50 years. In a bid to give direction to this game, the Board of Control for Cricket in India (BCCI) was formed in 1929. India entered the international arena and played its first official Test against England in 1932. In 1935, the Ranji Trophy was established Many other Trophies such as the Irani Trophy, Duleep Trophy and Deodhar Trophy came into existence.

The evolution of television contributed to making cricket the religion of sport in every household. India’s World Cup win in 1983 catapulted this interest further. Around this time, the game and the players gained recognition and attracted many corporates for brand endorsements. New formats like the Challenger Series was established by the BCCI in 1994. This led to the recognition of cricketers as icons which subsequently made the corporates rush towards the game to create awareness and visibility for their brands. New businesses such as brand endorsement, event management, and celebrity management started emerging from this era. Further, the cricket authorities turned for support to commercial sponsors who introduced a growing range of mini-cricket matches and friendly matches with gimmicky rules. These friendly matches played by film celebrities for a cause gained immediate acknowledgment. However, there was a major deterioration in the interest of the game with several scandals related to match fixing and gambling plaguing cricket and its players. Furthermore, the debacle of the World Cup in 2007 led to its decline in popularity to a great extent. Corporates started withdrawing investments in this sport and looked out for other prospective sports.

India’s win in the Twenty-20 Cricket World Cup under the captaincy of M.S.Dhoni came like a boon in disguise. Both - the Twenty-20 format and Indian cricket bounced back with a bang. Players like M.S. Dhoni and Yuvraj Singh became heroes overnight. The Twenty-20 format gained stupendous response in the country, and eventually Zee TV’s Subhash Chandra established ICL (Indian Cricket League) - a private cricket league with matches following the same format. This league was formed with the intention to help India develop cricketing talent, as well as provide lucrative sports programming for Zee Telefilms. It managed to attract many sponsorships by big brands. Various other players in the media, marketing and PR industries tried to leverage on the popularity of the format. In reply to ICL, BCCI came up with a similar league called the IPL (Indian Premier League).

With the incorporation of IPL, which works on franchise system based on the American style of hiring players, the business of cricket has been very well showcased. National and international players were auctioned for a total of about USD 718 million and sold to teams owned by various Bollywood filmstars and business tycoons, who have made huge investments in their respective teams. Further, for the first time in cricket, PE and financial firms also participated. Huge transactions crossed hands; for example Sony and WSG won the broadcasting rights for a reported amount of USD 918 million. Further, IPL attracted an expenditure of approximately Rs. 3,984 crore (USD 963 million) for the overall media rights.

Today, cricket is become a rage amongst all sections of the demography. Merchandise and fan clubs have geared up as T20 attracts children and women to the sport. The sport has managed to garner record breaking revenues for the Indian Media & Entertainment industry. The Indian TV advertising revenues, projected to cross USD 6,000 million in 2008, are estimated to grow at a CAGR of 22 percent thanks to the influence of cricket. India is the third largest pay TV market with about 68 million homes paying a monthly subscription to receive specialty channels; this market is expected to grow with the demand for cricket viewing. The sponsors and investors are expected to get a profit on their investments due to appreciation of the game by the mass audience. Adversely, cricket has affected the businesses of leading production houses, with low TRPs and viewership of their television soaps.

Finally, with the game being patronised even by international companies, cricket does have a bright future. Fast becoming a business avenue for companies from all sectors, it can be easily seen as a cocktail mix of glamour, business and cricket. The future will see much more business capitalising on the business of cricket.

Consumer Debt in the UK

2008-07-15T15:40:00.001+05:30

Introduction

The term ‘Consumer Debt’ refers to a debt incurred for purchasing a good or service. It includes purchases made on credit cards, lines of credit and some loans. Consumer credit is the amount of credit used by consumers to purchase non-investment goods or services that are consumed and the value of these goods and services depreciates rapidly.

Consumer debt is perceived to be beneficial to the economy since consumer debt increases spending which subsequently catapults consumption thus boosting the economy. However, if debt is easily available and consumers spend in excess of their capacity, the perceived benefit diminishes resulting in an increase in bankruptcies, insolvencies and debt problems. Today, UK is in a similar situation, consumer borrowing/debt in the UK has crossed the GBP 1 trillion barrier. About 80 percent of this amount consists of credit card borrowing, loans and mortgages. The country is in crisis and government officials are taking stringent steps to solve this problem.

Background

It is important to understand the past and its influence on the present in order to formulate solutions for the future. Until now, debt worked positively for Britain. For a decade, consumers enjoyed a free-spending ride due to the availability of cheap credit. During that period, the government borrowed heavily to invest in infrastructure, health and education, creating a beneficial cycle: government spending led to job creation, which led to greater consumer confidence and more spending, which, in turn, stimulated economic growth. In the late 1990s foreign lenders entered the British market with an array of lending products.

Consequently, there was fierce competition amongst banks and lenders to capture the huge untapped consumer debt market. Consumers were faced with a plethora of lucrative offers and large scale advertisements promoting low or no interest unsecured loans and credit cards. Statistics revealed that the average British adult owned about 2.8 credit or debit cards, more than any other country in Europe. It was observed that a growing number of UK citizens borrow to pay for vacations, furniture and even plastic surgery. This eventually resulted in racking up the British household debt-to-income ratio of 1.62 compared with 1.42 in the United States and 1.09 in Germany.

In the late 1990s and early 2000 interest rates were low, the lowest base rate being 3.75 percent as recorded in November 2003. Real estate prices were on an uptrend and consumers looking at the rapid increase in valuations resorted to borrowing and ride the wave of wealth creation. The notional gain in asset was exploited by borrowing against property to meet other expenses like purchasing a car. During that period, unsecured loans and credit cards were easily available; lenders were lenient in providing loans without strict credit background checks. Thus borrowers were living under a halo of being wealthy and creditworthy. They faced the reality in the sub prime period when lending losses triggered the financial sector crisis in August 2007. Financial institutions and banks wrote off debts and reported huge losses leading to a global credit crunch. Consumers, too, are facing difficulty in managing their debt.

Some Facts and Figures

* As on February 2008, total consumer credit lending to individuals was recorded at GBP 227bn, an increase of 6.6 percent annually.

* Average consumer borrowing via credit cards, motor and retail finance deals, overdrafts and unsecured personal loans has risen to GBP 4,774 per average UK adult as on February 2008.

* According to MoneyExpert.com approximately 6.5 million people have been forced to consolidate their debts, in the past three years, in a bid to keep borrowing under control. Of the total, 1.29 million of them have moved debts of more than GBP 20,000 accumulated due to loans, credit cards, store cards and overdrafts to one lender. Further, people consolidating debts of GBP 20,000 or more are likely to be using loans secured against their house.

* According to uSwitch, the recent fuel price rises is expected to plunge a further 500,000 people into fuel poverty, bringing the total number of people caught in the trap to 4.5 million.

* According to the BBA the proportion of credit card balances bearing interest rose to 73.9 percent in January 2008.

* Total credit card debt in February 2008 was GBP 54.8 bn. The UK collective credit limit on credit cards is approximately GBP 177 bn.

* The average interest rate on credit card lending is currently 17.77 percent, around 12.7 percent above base rate (5 percent).

* More than five million people have missed monthly payments on credit cards in the past six months (11percent of credit card customers).

* Research from the Post Office reveals that at present, one in four credit card holders be more dependent on credit than in 2007. Approximately 41 percent intending to rely on their credit card for day to day living costs such as grocery shopping.

Summary

The effects of the global credit crunch are felt in the UK and the above facts and figures are an indication of the same. Overall the UK economy is on a slow down, home prices are falling and lending institutions are facing a credit crunch. Low liquidity and high cost of funds have lead to an increase in interest rates. The cost of living has also increased with prices of utilities and fuel on the rise. The strings are being pulled on household budgets and in order to meet requirements consumers are looking for credit. The credit profiles of these consumers cannot easily attract borrowing since they are already in debt, by taking loans for property. Lenders are wary and to mitigate the risk of lending are charging a higher rate of interest.

Consumers are finding it difficult to manage this situation and are opting for debt management plans or IVAs. The National Consumer Council reports that six million families in the UK are already struggling to make repayments towards their debt, and Citizens Advice reports that over the last six years, they have seen a 44 percent increase in the number of people seeking debt advice. In 2007, approximately 400,000 people entered into IVAs and debt management schemes. The need to manage debt will see the number of people taking out individual voluntary arrangements (IVAs) - an alternative to bankruptcy, which allows people to settle debts with less damage to their credit rating and employment prospects - double this year.