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T E C H N O L O G Y The e of outsourcing They have names like jamcracker.com and mooncloud. com, are promoted by valley veterans like K.B. Chandrashekar (jamcracker), and Marc Andreesen (mooncloud), and will probably change the dynamics of the software industry. Meet ASPs (Application Service Providers), a genus of companies that hope to leverage the fundamental principle of the network economy-you don't have to own it to use it. There's an extreme analogy that highlights the logic these companies are driving at. If you wished to travel from, say, Delhi to Mumbai, would you be willing to pay what it costs your airline to buy the aircraft, and put a crew on it? That, ASPs argue, is what happens with most software. If you choose to use their services, they claim, you will only have to pay for what you use. Avers Atul Saxena, 39, CEO, Result Services International, a US-based ASP: ''The beauty of this model is that the client does not have to spend any money upfront. And the costs incurred by the ASP can be spread across a wider range of customers.'' Here's how the ASP model works: the application is resident on the vendor's server; so is your data; when you choose to use the application, you do so through the Net. In return, you pay the ASP a monthly retainer, or a variable pay-per-use sum. The range of services offered by ASPs vary from pay roll processing, and call centres, to web-hosting and e-commerce. Since ASPs develop software for, not one company, but a slew of clients, the resources they can expend on doing so are obviously higher. As is the amount they can spend on ensuring that your data is safe. Little surprise then, global network majors are keen to see the concept succeed in India. Avers Anil Menon, 32, Country Manager, Citrix Systems: ''We are evangelising the concept in the local market.'' So seductive is the concept of being an ASP that entities that had earlier positioned themselves as software consultants are repositioning themselves as ASPs. Accepts Anil Bakht, 46, Managing Director, Eastern Software Systems (ESS), a Delhi-based firm that has its own brand of ERP, Makess: ''Yes, I am an ASP, not just an ERP company. But with a variety of other front-end applications.'' The urge to become an ASP is understandable. In a hi-tech environment, it offers software companies the option to become technology-independent application providers. When in doubt, outsource. -Ashutosh K. Sinha T
E L E C O M Dear Mr Paswan: Well done! The dust had barely settled down on your offer of free phones to dot (Department of Telecom) and DTS (Department of Telecom Services) employees when the latter decided to go on strike. I hope you tried to make the odd std call during the strike. Ha! I find the entire issue funny. First, the GOI decided to split the dot into two. The sound logic on which this move was based? The policy maker and the monopoly operator cannot be the same. That saw the creation of the DTS (the operating arm). However, as you know, the lines between dot and DTS are fuzzy. I am told the person in charge of marketing DTS' services is part of dot's policy making cell. Judge Jackson, are you there? Then your government went ahead and tried to install an IAS officer as the head of the DTS. Employees protested; and you appointed a new head who retired last month. Again, you tried to appoint an IAS officer (surprise: it was the same man) , and again, employees protested. Their rationale? In the new technological milieu a technically qualified individual (read: member of the Indian Telecom Service, its) had to head DTS. I must commend you on the solution. Another vertical split, this time of the DTS. So now we have the DTO (Department of Telecom Operations), which will be headed by an its officer. The DTS, will, you say, look after 'policy'. Where does that leave dot and the Telecom Commission? This, when the Union Finance Minister is speaking about reducing the size of the government. I'd like to end by quoting John Donne to you Mr Paswan: Ask not for whom the bell tolls, for it tolls for thee. Mine? It doesn't. It's been dead the past
two months. S T O C
K O P T I O N S The better a manager performs, the more his company's stock price will rise and the more his stock options will be worth.'' They tell you that all the time in B-schools. But the fickle world of stockmarkets has a way of standing logic on its head. The result: hard-working techies are losing sleep over the manner in which investors have decimated stock prices. Take a look at NIIT. In January, 2000, the company announced an exercise price of Rs 2,647 per share for its employee stock options. By April, 2000, it had to reduce the price to Rs 1,460 after stock prices collapsed. Says Dinesh Mirchandani, 41, President, Boyden, a search firm: ''There is an increasing disenchantment with stock options." The stockmarket's roller-coaster ride is proving how crude a measure of managerial performance stock price can be. For one, short-term share prices are determined by factors other than on-the-job performance. A recent McKinsey study reveals that of the total returns to shareholders during any one-to-three year period, 40 per cent is explained by market movements. And by no way was the trend new. The firm had analysed returns for almost 400 organisations since 1962. As the McKinsey report notes: ''If managers are being rewarded on the basis of share price movements alone, they are in large part being rewarded (or penalised) for events outside their control.'' A reason why stock options could still have their charm in India is the discount companies are offering. In the US, discounts are usually limited to 5-10 per cent from the offer price. But in India, it can be as high as 90 per cent. Translated, it means that those who have ESOPs will still end up making money on them. But what the volatility in the market will probably do is force companies to rethink the stock percentage in compensation. -Seema Shukla C
O M M U N I T Y If you thought it was smart of landlords in Silicon Valley to ask their techie tenants for a share in their ESOPs instead of rent, then think again. In a unique experiment, 120 farmer families in Pune have pooled in their land to build a 400-acre Magarpatta City that will have an information technology park, offering 4.5 million sq. ft of space. The City will also have 12,000 residential units. Since groundbreaking on May 6, 2000, the Infotech Park-called Cybercity-has received enquiries for 4.5 lakh sq. ft of space for sale. Not surprising, considering that the City's real estate rates at Rs 1,350 per sq. ft are lower than those of other infotech parks in the country. The Millennium Business Park at Navi Mumbai costs at Rs.1,500 per sq. ft; Hi-Tech City in Hyderabad Rs.3,000 per sq. ft; and Whitefield in Bangalore, Rs.3,800 per sq.ft. Says Satish Magar, a 42-year-old scion of the Magar clan that is spearheading the project: ''Our residents won't have to commute to work, and they will have international communication infrastructure in the City.'' The Magars have tied up with the vsnl for 155 mbps of bandwidth. The first phase of the Cybercity-the first private initiative of its kind-will be completed in the next two years, and will consist of one million sq. ft of built-up space. The entire Magarpatta City will be completed by 2008 at a cost of Rs 2,000 crore. And you thought farmers didn't know any better? -Roop Karnani A
D V E R T I S I N G
They are at it again. Within a month of declaring truce, car companies are running over each other again. The sniper who shattered the tenuous calm this time round was Daewoo Motors, whose Nexia advertisement slams its competitors saying, ''The worst thing that could happen to the Ikon, Accent, Corsa and Siena: The all new, all powerful Nexia.'' Competitors allege that the ad compares Nexia to their stripped-down economy models and not their feature-rich models. Daewoo, however, is sticking to its guns. Says S.G. Awasthi, 56, Chairman, Daewoo Motors India: ''This is not a disparaging advertisement. We have supplied factual and correct information in one place for consumer information.'' With crores of rupees invested in spanking new facilities, car companies are willing to get bitchy if it helps sell. Hyundai's ad for its tall boy takes a pot-shot at Ford India's car, saying, Santro Ends Ikon's Josh. Another one from its dealers says Kar Aap Ke Ghar, Kampani Sarak Par (transliterated, it means ''You've bought their car, but do you know if the company will survive''), a reference to Daewoo Motor India's huge accumulated losses. The most preferred vehicle of bitching, of course, is comparative advertising. Daewoo had dragged Hyundai to the Monopolies and Restrictive Trade Practices Commission (MRTPC), alleging misrepresentation of facts in the ad. In another case, where Hyundai had compared its gls2 Santro model with the 1.3-litre Ikon, the Korean car maker was exonerated by the Advertising Council of India, which acts as an arbitratory body when conflicts arise. Says B.V.R. Subbu, 45, Director (Marketing), Hyundai Motor (India): ''Comparative ads are acceptable as long as they present facts correctly.'' The battleground for ad car wars is not just national dailies. Car dealers are using local newspapers such as Dainik Jagran and Amar Ujala in Uttar Pradesh and Maharashtra, respectively, to take potshots at competitors. Daewoo's agency, however, doesn't think the war is sneaky. Says Sanjay Garg, 35, Director (Client Servicing), Enterprise Nexus: ''We have compared like models. It's unethical only when data is misrepresented.'' Despite the homilies, the war goes on. -Vinod Mahanta
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