Uncategorized – Page 21

Bailouts and the Fog of Finance

“Bailout” was a bad word in the US to begin with. The current financial crisis and the US government’s $700 B plan to revive the market for troubled mortgage based assets have made it toxic.

What does “bailout” mean to Joe Citizen? It means that a company made mistakes and as it suffers financially, is perhaps close to bankruptcy, the federal government rides to its rescue using taxpayer’s money (“my tax dollars”) to rescue the company. To any logical person that seems unfair.

But Joe Citizen is not all logical about this. There is a lot of emotion and mental imagery involved with the current set of bailouts.

Zoho and the Bottom of the Software Pyramid

Last week Sridhar Vembu the CEO of Adventnet, makers of the Zoho suite of software, was featured on the Economist’s Face Value. This may seem like a big deal for the CEO of $60 M company (The Indian CEO featured before Sridhar was TCS’s Ramadorai). But you have to hand it to the Economist. For a magazine that covers politics, economics and business, it has the pulse of the software industry. What Zoho is attempting to do can be game-changing for business software.

Getting Roadside Directions in India

In Mumbai again. Yesterday I went to visit a friend of mine in the evening. He had moved to a new place in Khar close to Khar Gymkhana. His directions were somewhat sketchy so we had to stop a few times to get directions. It got me thinking about how different asking for and giving directions was in India.

Online Petition

Infosys’s Mohan Babu’s 4 month old baby tragically died on a flight into India, just minutes before landing. The grieving parents are seeking answers from the airlines (Jet Airways) and the airport authorities. Link to the online petition can be found here.

Stopping Climate Change Needs Short Term Targets

Al Gore’s speech yesterday was noteworthy. America, he said, faces three big problems – the economy, national security and climate change – all three of them have the same solution – replace fossil fuels. He said that the US must set a 10 year target of producing 100% of its electricity requirements from renewable and carbon-free sources.

The Nature of Switching – Implications

In my last post I described a framework to understand how individuals make switching decisions. Using this framework, let’s examine its implications for marketers of technology.

At the most basic level the framework says that to maximize the chances of switching you should maximize Switching Benefits, minimize Switching Costs and make Research and Trial really easy.

Maximize Switching Benefits

If there isn’t a compelling feature or two in your product that will get a large percentage of your target user base to check out your product, it won’t work. When you introduce a product, it is more important to focus on the Switching Benefits than on lowering the Sacrifice. If the Switching Benefits aren’t there, you won’t get enough people into Research & Trial. If the Switching Benefits are there but the Sacrifice is somewhat high, at least you’ll get the trials and perhaps some early adopters to switch. You might also get some parallel runs, where users use both products for a while. But most importantly, you will get feedback.

The Nature of Switching

Last week I switched from Windows to Mac. I have used a Windows computer all my working life and the switch was something I agonized over for more than six months. I wanted the performance, stability and design coolth of the Mac, but I worried that the switch would require me to learn a totally new OS. It would cause me frustration, loss of productivity and just plain wouldn’t work for somethings like demoing our Excel product which is not supported on the Mac. What eventually tipped me over was that a couple of weeks back Microsoft pushed an update down and Windows kept insisting that I restart the machine. I decided to restart 15 minutes before a demo to a prospect to avoid the reminders from interrupting the demo. Twenty minutes and a couple of memory reference errors later, it still hadn’t booted up. I had to reschedule the demo.

But this post isn’t really about Windows vs Mac.

Incentive Compensation as a Risk Factor

footnoted.org has a post highlighting a Risk Factor from the 10Q of Anworth, a company that invests in agency backed mortgage securities. Here’s how it reads

In the risk factors section of its first quarter 10-Q filed Friday, Anworth gives this warning: “In an effort to earn greater amounts of incentive compensation under their Employment Agreement[s], as our executive officers evaluate different mortgage-related assets for our investment, there is a risk that they will cause us to assume more risk than is prudent.” (Anworth has included a version of this disclosure in its filings for the past couple of years, but the latest Q throws in some new language about the structure of a certain bonus pool.)

Now its all great that Anworth is making full disclosure on what it thinks are truly its risk factors. But really, calling compensation policy a risk factor is like saying “Our management practices are deficient. And now you’ve been warned.” This begs the question – why don’t they fix the incentive compensation?

On the other hand, one can rightfully ask, why aren’t other companies giving “uncontrollable executive greed” as a risk factor? Its not like everyone else but Anworth has found the answer. The problem is far too deep set. It is a difficult problem to solve. I have written about this before as well here and here.

One of the topmost problems that the Capital Markets will have to solve as it digs itself out of the hole it is in is executive compensation. Disclosing it as a risk factor isn’t enough.

Outsourcing Captives is Not an Acquisition

About a year ago, I had written about why offshore IT captives don’t work [link]. Now I hear that the companies that had set up captives in India are rushing to get rid of them. Except that there is a curious twist. They want to be paid to rid themselves of their mismanaged captives.

Charts on my mind

We’ve been working on doing some cool things with charting on our research platform. Thought I’d have some fun with it. Charts courtesy Google Charts API. Irrationality courtesy US Presidential elections.