Consulting Research Entrepreneurship Strategy
Issue 4
July ’09
Crest
The E-Magazine of CRESCENT, XLRI
This issue Google’s Chrome OS Strategy P.2 Making Sense, the ZignDog way P.4 From Risk to Reward P.6 C-Cubed: Consulting Simplified P.8 News Watch P.9
Crescent The Committee for Research, Strategy, Consulting
and
Entrepreneurship
(CRESCENT) is the result of the en-
Editorial Dear Readers,
deavor of the student community of XLRI to promote an environment of creative
July. The month of monsoon rains. For those of you who are forced to stay in-
solution building amongst the students of
doors because of the rains, there’s some reason to rejoice. This month’s issue of Crest is
the institute, while reaffirming high ethi-
here. So, grab a mug of steaming hot coffee and start flipping through (oops..scrolling
cal standards and values, and fostering
through) the pages. But, before you go ahead, here’s what we have in store for you in this
personal development in the pursuit of
issue.
excellence. It works with the two fold
You can start exploring this month’s Crest with an article which takes a peek into
agenda of creating a brand presence of
Google’s strategies to take a swipe at Microsoft in its core market, with plans to launch the
XLRI among the corporate and to help
Chrome OS. The article will also tell you how the two companies are fighting each other in
nurture ideas of budding entrepreneurs
many other domains.
by providing a platform to them to showcase their Ideas
In the entrepreneurship section, you can enjoy reading about the experiences of a group of young entrepreneurs from IIT Roorkee who went on and started ZignDog, a firm which specializes in giving design solutions to its clients. The article will tell you how this strange name was coined, and about the seemingly stranger designations that are given to ZignDog team members. The article in the Consulting section will tell you how the ballgame has changed for many consulting firms in the light of the ongoing economic recession, and how some of the top names in Consulting are coping with the new scenario and how they go about balanc-
Editorial Team Mandar Kulkarni Manoj G. Kamath
ing their risk vs reward. Starting this month, a new section titled Crescent Reporter will keep you updated on the activities of Crescent on campus for the month. Finally, there are our usual sections News Watch and Fun Corner to complete this month’s Crest. Hope you will enjoy going through this issue. Happy Reading !! - Editorial Team
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The Editorial Team of CREST invites articles from readers for publication in forthcoming issues. If you have articles/ experiences/ studies to share in the areas of consulting, entrepreneurship, research or strategy, please do send them in to crest.xlri@gmail.com mentioning your name and institute name.
S T RA T E G Y
Has Google got its Chrome OS Strategy right? After a lot of rumours, finally, Google has announced that it is developing an Operating System of its own– The Google Chrome. A peek into the strategy of Google behind coming up with this OS, and what its main rival Microsoft is expected to do to counter this move of Google..
Google is developing an operating system of its own, based on the company's Chrome browser and intended primarily for use in low-cost Netbooks. Like any other commercial enterprise, Google is trying to make money. No secret there. But Google doesn't make money the way other computer software companies do. Microsoft, for example, makes money mostly by selling software (and a few hardware products) to computer users. There are two sides to this plan. Microsoft wants to make computers more valuable, so buyers will spend more of their income on computers; and it wants to increase the share it receives of that budget. What makes Google unusual is that it wants a share of a different budget: the time people spend in front of their computers. Google makes money by displaying ads on a small part of the display while people view Internet content on the rest. Not all the time, of course, but the opportunity is there, and Google's multibillion-dollar revenue shows how well this strategy can work. Turning the Chrome browser into the Chrome OS is technically straightforward, though of course it'll take a lot of work. A browser already has most of the key elements of any OS: application programming interfaces (APIs) to allow application software to display content and accept user input, store and retrieve data from mass storage, communicate over the Internet, and so on. Google will have to add a driver model and some other things that don't exist in a browser, but it can learn from how these things are done in existing operating systems, and possibly even borrow much of the code directly from Linux; there's no need to reinvent the wheel. Existing operating systems such as Windows support a far wider variety of programming languages and provide far more services than Chrome OS will, but Chrome will probably be plenty good enough for Netbooks. So, Google is after your time, not your money. It can try to get more of your time in the same ways Microsoft tries to get more of your money. Will the Chrome OS increase the time people spend in front of the computer? No, quite the opposite. There will inevitably be less to do on a Chrome OS computer than on a Mac or Windows machine. Buying a Chrome-based Netbook means giving up the chance to run most Windows games, Apple's iLife suite, and other popular software. But for Google, the key is this: once you've got a Chrome system, Google's in charge of ALL the time you spend with it. However, it looks like that that is not good enough for Google. The company intends to implement the whole Chrome OS environment within the Chrome browser so Linux, Mac and Windows users can also run Chrome applications. This plan is necessary, since Google can't very well hope to muscle aside the incumbents, but it means that Netbook buyers will have no reason to prefer a Chrome-based machine. Or will they? Linux may be free, but Google can undercut that price if it's willing to cut OEMs in on its ad revenue. In this way, Google could bring to market a subsidized pricing model we usually associate only with 3G-equipped notebooks. Google won't have nearly as much money to throw around as the cell phone operators do--maybe just a few unpredictable dollars per month averaged across all Chrome OS users vs. the reliable $60/month subscription fees associated with 3G cards--but that could still add up. Even a $20 subsidy could amount to 10 percent of the sale price of a cheap Netbook, which could tip the balance in favor of Chrome. (contd. On Page 3)
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S T RA T E G Y (contd. from page 2) However, it seems that Netbooks aren't the ideal platform for this strategy. The Google model can't work as well on a small screen, since users will be reluctant to share what little space they have with Google's ads. But they'll work well enough, and Google has no realistic chance to place Chrome on mainstream notebook and desktop systems except in the same narrow markets where Linux sells today. (And not all of those; for example, Chrome has no shot at the engineering workstation market, where Linux is popular.) We'll soon see some number of Chrome OS-based machines in the market in 2010, and then we'll see what happens. Chrome may do about as well as Linux has done in the Netbook business: not well. A lot of people will try it, possibly enticed by those lightly subsidized prices and the usual interest in novel computing platforms. And then most of those people will return those machines, or give them to their ungrateful children, or just toss them onto a shelf to gather dust, and they won't buy more of the same--at least not until Google spends a few more years building Chrome OS into a fully competitive product, which I'm sure it will do. Google's big enough, and it knows there's a business here. It just won't be ready to take full advantage of the opportunity just yet. Disruptive Potential in Google’s Approach There is in fact real disruptive potential in Google's approach, with two substantial hurdles standing in the way of success. Before we discuss the hurdles, however, let's look at the disruptive potential. Google's introduction of the Chrome Internet browser last year heralded a more direct assault by Google on Microsoft's core applications and operation systems businesses. While that browser hasn't had huge market impact, it allowed Google to learn more about application development. Chrome OS could continue Google's disruptive march. Google is betting that it can optimize its operating system for the unique demands of netbook users. Also, while Microsoft has made public proclamations about the strategic importance of the netbook market, it's always harder for companies to prioritize smaller, less profitable markets. Google's approach of starting simply and moving up-market is right out of the disruptive playbook. What's in it for Google? As always, the easier Google makes it for people to browse the Internet, the more it can grow its core advertising business. Plus it makes strategic sense for Google to distract Microsoft from its widely publicized — and increasingly successful — efforts to crack into the search market. Now, about those hurdles. First, Google has to demonstrate that it can go from merely flinging "good enough" products into emerging categories to actually building viable businesses. Henry Blodget from Silicon Alley Insider appropriately termed some of Google's past efforts "science projects." Remember, more than 95 percent of Google's revenues come from its core advertising offering. Second, Microsoft isn't going to sit idly by and let Google disrupt its core business. The company has proven to be a fierce competitor in established markets. And it does have its own promising new operating system (Series 7) coming out later this year. How real are those hurdles? To its credit, Google has acknowledged that it needs to bring greater discipline to its innovation process. The Chrome OS initiative will be a great test of whether the company is able to focus its resources to realize its still-untapped innovation potential. And early signs suggest that Microsoft needs to adjust its netbook strategy, moving from the defensive strategy it appears to be taking today (designed to insulate its core business) to a more offensive approach. Chrome OS is going to be less of a torpedo and more of a nagging irritant, as there's a reasonable chance that Microsoft will do a good enough job in the netbook market to stave off disruption and that Google will revert to its old ways. Adapted from: Analysing Google’s Chrome OS Strategy by Peter Glaskowsky, CNET News and Google’s Chrome OS: A ‘Nuclear Bomb’ or Just Noise? by Scott Anthony, HarvardBusiness.org
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ENTREPRENEURSHIP
Making Sense, the ZignDog way... While the world around us seems to rebound from the recession, there are still those who want to carve a path for themselves. One such gang, or rather pack, of IITians have come together to make the world a more beautiful place. Crest catches up with the Founder and Chief Thinker of ZignDog Media – Puneet Singh Jaggi - in a candid interview about this IIT Roorkee based startup.
How come ‘ZignDog’? I won’t pretend to have put in a lot of logic behind naming the firm. ‘Zign’ is from Design and ‘Dog’ simply because I am fond of canines. Besides, the name has a good recall value and an element of fun and creativity – 2 qualities that are a must for a creative design firm.
What does ZignDog do? We started off as a niche presentation design firm in January, 2009. I dare say that globally, we are one of the best in the field. But, business plans have a way of changing themselves when they reach market. Most prospective clients we talked to were looking for one stop destination for all their design requirements. Today, 6 months down the line, ZignDog provides graphic, presentation, web and user interface design solutions. We envisage expanding to the fields of audio and video solutions soon, making ZignDog a 360 degree design solution provider.
Why Design - it is not exactly a blue ocean field? How is ZignDog different? There is always a space for a Macbook in the overcrowded PC market. Till lately designers in India were vastly underrated and underpaid in comparison to their counterparts abroad. But, in the fast moving internet age, Indians too are realizing the importance of good looks. Though, there have been many firms dedicated to the cause, but very few of them are in touch with advanced technologies in the field. At ZignDog, we invest a lot of our time in learning the latest and best practices to shorten our delivery cycle and increase our output quality.
How and when did ZignDog come into existence? I have always loved good looking designs. It was disturbing to see some of the best and biggest corporates giving shoddy presentations, having websites that belong to the 80’s and distributing brochures not worth a second look. Having said that, it was clear that any corporate – whether a blue chip or an SME – have these 3 fundamental design requirements. We had a market and we had a team, I just set the ball rolling and ZignDog came into existence. Besides, we are out there to prove a point, to show that good design – like any other high end service - is a merger of good technology and creative thinking and deserves better revenues and recognition.
How has your experience been so far? What is the kind of difficulties that you have faced or are facing? The experience has been nothing short of a rollercoaster ride. We have designed for Hindustan Times, IIM Kozikhode, IIT Roorkee, Gensol Consultants and many start-ups. The biggest difficulty that we have faced so far is from the marketing perspective. (contd. On Page 5)
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ENTREPRENEURSHIP (contd. from page 4)
Being students pursuing full time excruciating degree courses at an IIT does not leave us with a lot of options to call or have meetings with prospective clients. Recently, we have included a full time marketing professional in our team who can take care of lead generation and client servicing while the core team concentrates on operations.
What is the road ahead? Design and print though widely prevalent, is an unorganized sector. We plan to build synergy by building a print and distribution network. Also, an e commerce platform is already in the making to cater to all the requirements of designers from stock photography to design tutorials. We are also exploring the area of software products, but that is still at a very nascent stage.
We notice that your firm gives a lot of fancy designations. Could you elaborate on this? The conventional designation system was too serious and boring. We resorted to something more creative. Instead of the ‘Art Director’ and ‘Creative Designer’, today designations like ‘Graphics Wizard’ and ‘Web Warrior’ decorate our visiting cards. It creates a more vibrant atmosphere and is an ice breaker when it comes to client communication. .
With 35 – 40 contact hours of classes, loads of assignments and semester exams, how would you be able to weather the storm?
The ZignDog team
It’s not going to be a smooth sailing picture perfect story, but then, we are IITians. We will have to figure out a way to live up to the name! One way we are ensuring that is by building businesses that can be run on an auto mode like ecommerce platforms. We are also resorting to social networking tools to make ZignDog more interactive, reduce publicity expenses and time spent on in-the-field marketing. .
How tough was it to get the business started in the first place? Heading the Entrepreneurship Development Cell at IIT Roorkee and being a younger brother to a successful first generation entrepreneur, I was well versed with the challenges of a start-up. I had complete support of my family right from the beginning. The team has been cherry-picked and comprises of the best and most creative brains in IIT, but it was not hard to build the team either. Most of them have been my friends for a long time and put their trust in me.
What is your vision for the future? It is too premature to peddle with numbers as far as top-line and bottom-line are concerned. But, it is often repeated at ZignDog that we intend to build the next Google – only with a better name.
Any message for the readers? I won’t say that taking up a job is a bad idea. At the end of the day, even start-up envisages to become big shot one day and employ many. But, the growth trajectory and learning experience that start-up offers can never be compensated enough by any corporate biggie. So, whether you want to break away from the rat race or make a difference to the world – starting something of your own or joining one who is out there doing that is definitely a good idea. Here, I would like to quote Robert Frost – ‘Two roads diverged in the wood; I took the one less travelled, and that has made all the difference.’
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CONSULTING
From Risk to Reward Relationships between consulting firms and their clients have become more complex, as the projects have increased in scope and importance. In recent months, the global economic downturn has highlighted the need for a more rigorous approach to risk management and has in some sectors led to increased regulation. As a result, all parties in the consulting supply chain are more risk averse, with clients looking for a quick and tangible return on their investment and consulting firms concerned about credit risk and liability requirements. Globalisation and technology have undoubtedly created new opportunities for consulting and outsourcing firms, their clients and their suppliers. However, they have also given rise to a whole new set of risks, which go beyond straightforward performance management. Loss of confidential data, expensive battles over patents and copyrights and service breakdown due to force majeure, are all examples of a failure to manage risk effectively, which can be at best expensive and at worst disastrous for the organizations concerned. These risks need to be firstly understood in a global context and then managed appropriately for each organisation through due diligence, contractual frameworks and insurance. Besides the “upstream” relationship with the client, consulting firms often find themselves managing other suppliers on a project, thus creating a “downstream” contractual and management relationship. Implementation projects may involve clients, consultants and suppliers in multiple countries over many years. In response to the new risks, the procurement process has become even more rigorous, lengthening the sales cycle for suppliers and reducing the personal element of business negotiations. Many organisations are centralising both their procurement and risk management functions to deal with these challenges in a more integrated way. Consulting firms need to understand these changes in procurement and supplier selection in order to differentiate themselves, speed up the business pipeline and secure longer and more profitable contracts. There is general agreement among consulting firms that the nature of the risks has changed in recent months, largely as a result of the economic downturn. “There are three dimensions of risk – the risk to us as a company, the risk to our client and the contract risk – the extent to which the contract reflects both our risks,” says Mark Goodridge, ER Consultants. In a survey conducted by MCA consulting among eminent consulting firms,lack of client engagement was considered by far the most significant risk for most consulting firms with 60 respondents of the 270 people surveyed selecting this as their top concern. Lack of clarity around responsibilities and objectives was ranked the second biggest risk, with availability of consultants in third place. It is perhaps not surprising that low client engagement and lack of clarity around responsibilities are perceived as the greatest threats to consulting projects. Much of the work involves fundamental change within client organisations and without sufficient sponsorship at the right levels this is unlikely to succeed. Responsibilities and objectives should be clearly set out in the contract, but these can change over time and ongoing project stewardship is needed to ensure that everybody understands what is expected of them. Reputation is always important for consulting firms, but particularly so in the current buyers’ market. The biggest risk for many consulting firms is reputational. Consultancy projects are now more visible in the outside world than they used to be. Many consulting reports find their way into the media and public domain. This also requires a greater speed of response on confidentiality and security issues than previously. Another major challenge in the current economic scenario for consultants and clients alike is liquidity. There is a greater risk around liquidity and financial position of the client these days. As a result, consultants are forced to monitor debtor days and payment of invoices by clients more closely. How are these risks managed?
At Deloitte every opportunity is submitted to a Take On Process, an automated web-based tool, which is completed by the partner responsible for the project. The results determine the degree of risk and the level of authorisation required. At least two management partners sign off each project, with others involved should there be a greater than normal risk. There is also a Deal Review Board for high risk projects, which are also subject to Quality Assurance Reviews conducted by specially trained partners. (contd. On Page 7)
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CONSULTING (contd. from page 6)
PricewaterhouseCoopers (PwC) completes a risk assessment for every new client before starting work on a project. This Client Acceptance Procedure considers risk under a number of headings: sponsorship by the client, nature of the work, external factors, resourcing, subcontractors, and stakeholders. Turner and Townsend has a structured risk evaluation process, which looks firstly at the contractual obligations, such as the scope, terms and conditions. There is then a commercial risk assessment, which evaluates the client’s liquidity and payment track record. Lastly, there is a review of the personalities involved and how the relationship is going to work. Any risk is highlighted and reviewed monthly by an independent senior MD. There is also a quarterly review with the client, which is scored. The Change Management Group uses a RAID (Risk, Assumptions, Issues and Dependencies) matrix, which is shared with the client. In many organizations, risk management is no longer a discrete business function; indeed it works best when it is applied throughout a project by a cross-functional team.
Balancing Risk and Reward Even before the current economic downturn the consulting sector was witnessing a gradual move away from fees for time and materials to fixed price projects and even incentivized fees or payment by results. With an increased focus on the bottom line, clients are much keener to link payment to specific outcomes and, where possible, to a tangible return on investment, but many are nervous about paying a premium for this. More clients are willing to consider risk/reward based contracts, and as per many consultants, this shows real maturity in a client – to understand the value they will get from a project and be willing to pay a premium for a better return. Most consulting firms are willing to work in this way, provided the project outcomes can be clearly measured. The new mantra among consultants is to take a risk upfront with lower fees and then build in the reward on delivery. As per them, it helps clients to see how confident the consultant is about delivering. But, some of the consultants find this model highly challenging. As per them, their work is very integrated with the client and it is very difficult to separate the cause and effect.
Source: From Risk to Reward: Managing Risk in Consulting Relationships, MCA report, June 2009
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CRESCENT REPORTER
C-Cubed: Consulting Simplified Crescent launched the Crescent Consulting Club (C-Cubed) on 4th July, 2009. The inaugural session was an introduction to the consulting industry, which covered the basic aspects of consulting, the various types of consulting firms, a brief history of the consulting industry showing how it evolved over the years, and a peek into a consultant’s life. The session witnessed enthusiastic participation from both the batches and was witness to a lot of lively discussions between the participants and the facilitator as well as among the participants. Agenda of C-Cubed C-Cubed has been launched by Crescent with the objective of promoting consulting on campus and helping the students build the required skill sets for consultancy. It aims to make learning about consulting a routine affair at XL, making it a platform to share knowledge and experiences so that students have better insights into the world of consulting. On the agenda of C-Cubed are periodic club meetings with the initial few sessions focusing on various aspects of consulting, techniques used by consultants, etc, Speaker series which will see guest lectures by renowned experts in the field, Company Breakouts which will have workshops conducted by consulting
A snap from the inaugural session of C-Cubed
firms , Case workshops which will have practice sessions for tackling consulting case interviews,, developing a knowledge repository which will be a one stop access for all consulting resources, Industry breakouts which will be gyan sessions on latest developments in various industries, and Informals including quizzes, 2x2 matrix contests, etc. Videoconferencing session C-Cubed also organized a video conferencing session with Mr. Joe Simon, CIO– Viacom International, and Ex-Principal, Booz Allen Hamilton. During the course of the video-con, Mr. Joe Simon, an XLer of ‘83 batch, on line from New York shared his experiences of working as a consultant including instances of projects involving the New York stock exchange, Boeing, etc.
A section of the audience during the video-con with Mr. Joe Simon
with the audience. The session proved to be really informative for the consulting enthusiasts who attended the session.
CREST November 2008 8
CREST July 2009
NEWS WATCH Venture Investment Drops 51% as Startup Funding Hits 1994 Lows Venture capital investment in the United States fell 51 percent in the second quarter as firms coped with the recession and a drought in initial public offerings, bringing funding for startups to the lowest level in 15 years. Venture capital firms invested $3.67 billion in 612 financing deals during the quarter, down from $7.56 billion a year earlier, according to PricewaterhouseCoopers and the National Venture Capital Association (NVCA). Only 141 startups had a first round of venture funding, the smallest number since 1994. The lack of IPOs is preventing venture capitalists from earning returns on their current investments. It also forces firms to divert more money to older companies, said John Taylor, a vice president at the NVCA. That’s keeping new companies from getting started as easily, he said. “Typically, the venture industry takes on 1,000 new companies a year, and in 2005 to 2007, it was 1,300,” Taylor said. “This is far off that pace, and far off what we want to see.” Startups will probably raise about $15 billion in capital this year, the report said. That’s similar to 1996 or 1997 levels. They raised $30.6 billion in 2007, the NVCA said. The industry isn’t confident that the economy and IPO market will rebound soon, said Ray Rothrock, a venture capitalist at Venrock in Palo Alto, California. Until it gets easier to take companies public, capital for startups may stay scarce, he said. Clean-technology financing fell 70 percent to $274.4 million, while Internet deals dropped 68 percent to $523.9 million. The bright spot was biotechnology financing, said Tracy Lefteroff, managing partner of PricewaterhouseCoopers’s venture capital arm. Those deals increased 54 percent from the first quarter, spurred by optimism that big drug companies will buy startups to get access to patents, Lefteroff said. A wave of existing drug patents is due to expire by 2011. “Life sciences is one of the few sectors that still have a fairly steady stream,” Lefteroff said. The slumping IPO market is hurting mergers as well. Knowing that acquisition targets can’t go public, companies are offering fire-sale prices, Rothrock said. “An IPO market keeps the merger market honest,” he said. Only six U.S. startups have gone public this year, and only 10 U.S. companies have preIPO paperwork on file with regulators, NVCA President Mark Heesen said last month. That represents the worst slump in almost 40 years, the NVCA said.
CRESCENT MEMBERS Faculty Advisor Prof. Munish Thakur
Secretary Vishal Agarwal
Senior Executive Members Abhinav Singhal Ankit R. Agarwal Anwar Syed Mandar Kulkarni Manoj G. Kamath Sandip Shinde
Junior Executive Members Aalok Sanghvi Ajanta Anindita Himanshu Saxena Indrajit Yadav Miti Vaidya Mohammed Quraishi Siddhesh Ajgaonkar
Source: Bloomberg CRESCENT e-mail id
FUN CORNER
crescent@xlri.ac.in
Joke of the month A man walks into a pet store looking to buy a monkey. The proprietor takes him to the back of the store and shows him three identical looking, well cared for and content monkeys each housed in spacious, animal friendly environments. "This one costs $600," says the owner. "Why so much?" asks the customer. "Because it can sing and play the Banjo" answers the owner. The customer inquires about the next monkey and is told, "That one costs $1,200, because it can talk, translate 20 languages and mix cocktails." The man is astonished and asks about the third monkey. "That one costs $4,000," answers the proprietor. "4,000 dollars!" exclaims the man. "What can that one do?" To which the owner replies, "To be frank, I've never seen it do anything, but it calls itself a consultant."
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