Weak demand, a concern for IT sector – Can impact the Indian GDP

IT sector contributes to 12% of GDP and it has good growth in India

However, the second half of this fiscal year has a weak demand. This may put some pressure on IT sector in the near, considering their higher current valuations (The process of determining the current worth of a company.)

TCS, Infosys, Wipro, HCL Technologies and Tech Mahindra — along with some of their mid-tier counterparts such as Hexaware Technologies, Infotech Enterprises, KPIT Technologies, Mindtree and Persistent Systems has earned healthy returns in 2013.

Economy

Source: Economic Times

A gradual renewal in the outsourcing demand in the US and the European market helped Indian IT players to resume on the growth path.

A sharp fall in the rupee against the major currencies during the first half of the fiscal further boosted the top line growth and operating margins.

However, the December and the March quarters are traditionally weak for IT companies due to the festival season and the financial year for many of the client firms to ascertain IT budgets for the next year. IT players naturally report a sequential volume growth of 1.5-3% during this period, compared with more than 3% increase in the first two quarters.

As seen in the December quarter, the rupee has more or less stabilized on an average. Some of the currency market observers have predicted this trend to continue in the remainder of the fiscal.  If that happens, India IT players will not be able to enjoy higher top lines (sales), unless a major depreciation in the rupee takes place. Both these factors are likely to curb the pace of growth in the later of year 2014, which may impact valuations in the near term considering the facts that valuations have risen at a faster pace in recent months.

For more info please check out Economic Times Dec 31st 2013

8 things the next government should do

These are few thoughts of our business heads on what next government should do:

Articulate the Promise 2019: Any government should measure their performance with respect to the promise they made. Ex: MW of generation capacity added. KM of national highways constructed. Mainly publish regular and transparent annual updates.

Measure social sector “outcome”: out policies are input focused, emphasising how much is spent in healthcare, education etc. Instead, measure outcome – how much is the outcome.

–       Anand Mahindra, CMD – Mahindra Group

Indian Government

Reimagine healthcare delivery: India’s healthcare systems is in major crisis. India has 63 million diabetics and 2.5 million cancer sufferers, the majority does not get quality treatment. Urgent need to scale up the practices of those Indian hospitals

– Vijay Govindarajan, Professor Dartmouth College.

Boost tech Infra: New government should focus on the rural broadband strategy, enhancing our mobile internet infrastructure, increasing the reliability, security and sped of web

– Sachin Bansal, CEO – Flipkart

Control fiscal deficit, Introduce GST, improve relations with other SAARC countries.

–       ADI Godrej, Chairman Godrej Group

Create jobs: Only way India can reduce poverty is by creation of jobs with decent disposable incomes.

                                 –       N R Narayana Murthy, Chairman Infosys.

Minimise Energy security: Two thirds of India’s power is generated from coal. India holds fourth position in coal reserves, yet faces shortages. Long term, government should focus is to minimise energy imports.

Target  FDI

–     Deepak Parekh, Chairman HDFC

Is China a threat to Indian IT companies?

Studies show that Chinese software outsourcing firms are unlikely to catch up with Indian and other global software services firms anytime in the near future, despite a major policy push towards outsourcing from China’s central government in recent years. Language barrier has also played a huge role in China’s inability to attract large outsourcing contracts at a time of increasing commoditization of IT services. According to a survey 79% of IT services firms in China have been in business for less than 10 years. On the other hand, top US and Indian IT firms have been around for the better part of the last three decades, in some cases, even longer.

software-company-logos-india

China has also faced the problem of attracting the best talent, with the country’s engineering graduates not looking at IT services as a primary option for employment, instead focusing more on manufacturing firms. China currently trains 1.1 million engineers annually, according to a recent report by Kotak Institutional Equities. Since 2006, the Chinese government has tried to build expertise in software outsourcing. It identified 20 cities where such firms could be developed.

 The average profitability of Chinese IT services firms went down from 10-15% to less than 5% over the past two years, while that at most large Indian firms was in the 15-25% range

Experts say China’s focus on the domestic market and Japan may have hindered its ability to gain market  share in other growing economies.

To be sure, China’s IT industry was never considered to be a serious threat to traditional multi-national and Indian outsourcing giants, such as IBM, Accenture, TCS, Infosys, Wipro Etc.

What is a Bitcoin and how it works?

Bitcoin is virtual currency. Once you have installed a Bitcoin wallet on your computer or mobile phone, it will generate your first Bitcoin address and you can create more whenever you need one. You can disclose your addresses to your friends so that they can pay you or vice versa. In fact, this is pretty similar to how email works, except that Bitcoin addresses should only be used once. It is a peer-to-peer currency with no central bank, based on digital tokens with no core value.

Bitcoin1

Balances – block chain

The block chain is a shared public records on which the entire Bitcoin network relies. All confirmed transactions are included in the block chain. This way, Bitcoin wallets can calculate their spendable balance and new transactions can be verified to be spending bitcoins that are actually owned by the spender.

Transactions – private keys

A transaction is a transfer of value between Bitcoin wallets that gets included in the block chain. Bitcoin wallets keep a secret piece of data called a private key or seed, which is used to sign transactions, providing a mathematical proof that they have come from the owner of the wallet. The sinature also prevents the transaction from being altered by anybody once it has been issued. All transactions are broadcast between users and usually begin to be confirmed by the network in the following 10 minutes, through a process called mining

bitcoins3

How does Bitcoin work?

Bitcoins are sent (or signed over) from one address to another with each user potentially having many, many addresses. Each payment transaction is broadcasted to the network and included in the block chain so that the included bitcoins cannot be spent twice. After an hour or two, each transaction is locked in time by the massive amount of processing power that continues to extend the block chain. Using these techniques, Bitcoin provides a fast and extremely reliable payment network that anyone can use.

RBI – What is repo rate?

Recently, we see the headlines in Economic times that RBI may increase the repo rate by 25bps. So what is it?

bps stands for ‘base points’. 1 bps= 0.01 %

So an increase in 25bps means at increase of 0.25%

RBI

What is a Repo Rate?

The rate at which the RBI lends money to commercial banks is called repo rate. It is an instrument of monetary policy. Whenever banks have any shortage of funds they can borrow from the RBI.  A reduction in the repo rate helps banks get money at a cheaper rate and vice versa.

In the event of inflation, RBI increases repo rate as this acts as a hindrance for banks to borrow from the RBI. This ultimately reduces the money supply in the economy and thus helps in arresting inflation.

Percent growth

What is Reverse Repo rate?

Reverse Repo rate is the rate at which the RBI borrows money from commercial banks. Banks are always happy to lend money to the RBI since their money are in safe hands with a good interest. An increase in reverse repo rate can prompt banks to secure more funds with the RBI to earn higher returns on idle cash. It is also a tool which can be used by the RBI to drain excess money out of the banking system.

What is Cash reserve Ratio (CRR)?

CRR is the amount of funds that the banks have to keep with the RBI. If RBI decides to increase the CRR, the available amount with the banks comes down. The RBI uses the CRR to drain out excessive money from the system. Scheduled banks are required to maintain with the RBI an average cash balance, the amount of which shall not be less than 4% of the total of the Net Demand and Time Liabilities (NDTL), on a fortnightly basis.

Retail: Packaging is important!!

Packaging plays an important role in marketing mix, in promotion campaigns, as a pricing criteria and finally in defining the character of new products. All good things come in small packages, but at the same time this art is not simple. In fact in many cases, package is the product itself.

panasonic

Walter Landor of Landor Associates was one of the first to study and incorporate consumer response into packaging in a scientific way. Walter’s philosophy of ‘the package itself must do the talking’ is a basic idea behind even the modern day brand and packaging design practice. How a soap dispenser or a ketch-up bottle cap works without soiling the nozzle after repeated use, how an egg tray hold eggs without breakage are the kind of things that new technologies and materials have been trying to address.

bees

And these days what happens to the package once the product is taken out of it, is increasingly becoming an important issue for a packaging designer. It also calls for innovation – In some of the laboratories, researchers have created examples like filling an orange membrane with orange juice, a tomato-flavored skin with soup and mini-membranes the size of grapes that are full of wine.

cola

A package tells a story – a story of where the product has come from, who manufactured it, what it is meant to do and by consuming the product what kind of experience a user is going to fell himself/herself and finally what lifestyle statement is the consumer going make.ywater

There are no more good old ideas of putting happy faces on potato chips packs. It is all about triggering emotional connect with the consumer

WhatsApp saving lives!!

Couple of articles these days have caught my attention – felt good about the use of WhatsApp in hospitals.

Doctors started using the personal technology – the smartphone to speed up diagnosis patients with suspected problems.

They started using WhatsApp to send pictures of patient’s electrocardiograms to each other to cut time spent on reaching the emergency. Lack of proper diagnosis and treating the patient within the first hour – the crucial golden hour results in major cardiac arrests. Some patients come from suburbs. In most cases this golden hour is lost as the patient walks into the hospital. By this system, it can be ensured that there is no further time loss once the patient is inside the hospital.

WhatsApp and Doctors

In Mumbai, nearly 250 patients are benefited through this technology. The moment a patient comes with a chest pain or related problem, a specialist takes the ECG and sends the image to the group of doctors. This process helps the patient to reach out for immediate response.

Also Orthopaedic surgeons both from the government and private hospitals have formed a group, Orthopods, on WhatsApp for sharing live images of surgery, X-rays and scanning results, so that members could exchange their views, help in diagnosis, and suggest the best treatment options.

Agriculture rocks!! – Story of beans

Agriculture in India – Appears to be slow process and traditional, but it in reality, is more active than manufacturing.

When there is a business opportunity for a product, companies needs couple of years to put up a factory of a significant size for meeting the demand. But farmers need 6 months. Once they learn a crop has profit potential, the area for the crop increases.

guar

In 2011, American drilling company discovered shale gas (natural gas) has good potential. Indian farmers immediately shifted their focus on production of gaur – a type of bean (guar gum is used in processing the shale gas).

The guar gum became most valuable export commodity – more than jewelry’s!! American companies spent $2.5 billion that year on this bean in processing shale gas. By 2012, guar production doubled.  Typically, gaur grows on starving, unfertile farms with no investment from farmers. Today, this crop has moved grains and cotton crops and conquered irrigational lands!!

Farmers from Rajasthan, Gujarat, Andhra Pradesh, Karnataka, Haryana, Punjab and Chhattisgarh did not miss this opportunity. Some 100 companies around Jhodhpur gained more than 40% from $3 billion export market.  There is no SEZ, or any scheme for these.

What makes this story of this guar remarkable is that there is no aid from government policy, subsidy or any support price.

So how it’s done?

Easy access to real-time information – mobiles, internet, future trading: helped farmers. More farms will shift to demand driven agriculture. The so called price signals should be clear, in order to get a clear demand for farmers.

Consumers need variety, convenience, and affordability. Farmers will invest in technology that creates this extra value. As the stakes are higher, farmers can use computers, social networking, and communication skills to find multiple marketing channels for capturing higher margins.  

Analyzed from an article in ET, 11th Dec 2013

Google Glasses and Education ?!!

Most of us might have heard of Google Glasses. Augmented Reality (AR) is finally been in live. AR merges the physical and digital worlds in making the real world more interactive to the user.

Mobile AR

Mobile continues to be the preferred device for AR application and is expected that, by 2017 2.5 billion mobile AR applications will be installed.

AR offers an innovative learning experience by merging digital learning material over the physical space. Each learner can control his/ her own learning, manipulating digital information and objects for better understanding.

For example when you and your niece are walking across a park, your niece can point the AR browser in the smartphone to a seasaw in the park and understand the physics behind how it works.

In subjects like physics, chemistry or biology, where it is difficult and time taking to understand the concepts in class, AR will be of great aid in Education. Even in complex tasks like firefighting, let it be surgeries, AR can be used for training easily.

Risks of failure in AR is minimal as compared to practical real object based training i.e. a heavy fall while demonstrating firefighting (happened in some cases in India), can be avoided using AR based training programs. Researchers have found that with AR based training its takes shorter time to understand and the performance of the trainees are good compared to conventional training.

AR in Indian Education:

Though there is still a challenge of reaching the digital resources to majority of school going kids in India due to financial challenges of their parents, most of them posses mobile (low end smart phone that starts from Rs. 3999) – thanks to domestic manufacturing, high competition that lower prices.

Mobile AR provides students access to key digital information right from their homes without the need for any other device to supplement their textbooks. Parents can use mobile phones to help their kid’s educational needs!!

However, quality of broadband connectivity is still a challenge in India, for Mobile AR to reach common man. Hope the spectrum issues are solved soon for grea

FACEBOOK = MARKETING!!

Facebook is no longer a social media; it’s a mass media. It’s more than likes, fans and followers.

Initially it is about acquiring fans and followers, but later it is about engaging them and turning into customers and finally into loyal customers.

Facebook Marketing

  • L’Oreal India has been using social media effectively!! To create advertisement for its premium hair color Casting Crème Gloss, it has created an app in Facebook where customers have to scan a unique code on the product. Then the customer has to upload an image with two of her best friends to get a shot at starring in an ad with Sonam Kapoor.
  • One of the top FMCG company found that some fake products are sold on its prestigious brand name. The brand joined Facebook community. Guess what, in no time, the fans have reported 250 locations where the fake products are sold.
  • ICICI bank recently launched a Facebook app ‘Pockets’ which enables its customers to carry out some striking banking services on the social media like booking tickets for a group of friends, transferring money to friend, mobile recharge etc.
  • Shoppers stop has about 50 lakh fans. On hitting a million like, it ran a coupon offer. Within 2 days 10,000 fans has shopped on various outlets, and resulted in incremental revenues of 2 crore rupees

Social Media helps companies to understand what customers actually need. One the customer likes a page of a company; it shows he likes the brand or product. It is important to make him/her a loyal customer.

Facebook also in interlinked with Twitter, LinkedIn, YouTube, Pinterest etc. For instance Star TV that has 18 million fans and followers ensures that a dynamic response mechanism through tweets (twitter) is followed if there is a concern from its customers.

Starbucks in some areas is offering a gift card “Tweet a Coffee” to a friend by linking the Twitter profile to its own profile

The final goal of any company is to solve the business and marketing challenges through Social media marketing as above. It is all about service and experience!!

Refer to Brand Equity, 4th Dec 2013 for more details