Monday, May 22, 2017

The Dark Cloud of the H1-B Fallout for Indian Companies: Layoffs or Reduced Valuations

India's second-largest IT company, Infosys, put out a press release on the 2nd of May, 2017 (link), that it would be hiring "10,000 American Workers Over the Next Two Years and establish four new Technology and Innovation Hubs across the country focusing on cutting-edge technology areas, including artificial intelligence, machine learning, user experience, emerging digital technologies, cloud, and big data."
The first hub, the Infosys press release stated, was expected to open by August in Indiana, which coincidentally is also the home state of the US Vice President, and which would create 2,000 new jobs in the state.
Infosys wasted no time in advertising for jobs in the United States, prominently linking it to its announcement. Nor was there any dearth of tweets on social media site Twitter to give this news more amplification - see this, this, this, this, or this.

While this is certainly good news for the United States and for its President Donald Trump's goal of making American "Great Again", the impact on outsourcing companies like Infosys is likely to be less positive.

Friday, April 07, 2017

Oracle Looking to Buy Accenture? Stranger Things Have Happened.

Image credit: pixels.com
The Register reported that Oracle may be exploring the "feasibility of buying multi-billion dollar consultancy Accenture."

To summarize the numbers involved here, Oracle had FY16 revenues of $37 billion, net income of $8.9 billion, and a market cap of $180 billion.

On the other hand, Accenture had FY16 revenues of US$34.8 billion, net income of $4.1 billion, and a market cap of $77 billion.

Some questions that come to mind:
  1. Why? Oracle buying NetSuite in 2016 made sense. Oracle buying Salesforce would make even more sense. Oracle buying a management consulting and professional services company, and that too one with more than a quarter million employees, on the face of it, makes little sense. Would it help Oracle leapfrog Amazon's AWS cloud business? Would it help Oracle go after a new market segment? The answers are not clear, at all.
  2. Who would be in charge of this combined entity? Both have similar revenues, though Accenture has a market cap that is less than half Oracle's and a workforce that is roughly three times Oracle's. The cultural meshing itself would prove to be a challenge. Mark Hurd, one of two CEOs of Oracle (the other CEO is Safra Catz, a former investment banker), has the experience running a large, heterogeneous organization. Prior to his stint at Oracle, he was credited with making the HP and Compaq merger work. At Oracle, however, he has not run software product development, which has been run by Thomas Kurian, and who reports to Larry Ellison, and not Hurd. A merger between Oracle and Accenture would place an even greater emphasis on synergies between Oracle's software division and Accenture's consulting business.
  3. Oracle would need to spend close to $100 billion to buy Accenture, if it does. How would it finance it, even assuming it spends all its $68 billion in cash to do so? Keep in mind that its largest acquisition was in the range of $10 billion. The financial engineering would be staggering. It helps that it has a former investment banker as one of two CEOs.
  4. Will Oracle make Accenture focus on the Oracle red stack of software products and applications - both on-premise and in the cloud? If yes, it would need a much smaller-sized workforce than Accenture has. That in turn would diminish the value of Accenture to Oracle, and make the likely sticker price of $100 billion look even costlier.
  5. Is Oracle looking to become the IBM of the twenty-first century? It's certainly been a public ambition of Larry Ellison. In 2009, he said he wanted to pattern Oracle after Thomas Watson Jr's IBM, "combining both hardware and software systems." If Oracle keeps Accenture as a business unit free to pursue non-Oracle deals, does it mean Oracle is keen on morphing into a modern-day avatar of IBM and IBM Global Services, offering hardware, software, and professional services - all under one red, roof?
  6. Is Oracle serious about such a merger? An acquisition of this size seems more conjecture than in the realms of possibility, at least as of now. One is reminded of the time in 2003 when Microsoft explored the possibility of buying SAP. Those discussions went nowhere, and the idea was dropped. Combining two behemoths is no easy task, even for a company like Oracle, that has stitched together almost 50 acquisitions in just the last five years.
  7. If such an acquisition did go through, there would likely be few anti-trust concerns. That's a big "if".
  8. Stranger things have happened in the software industry, like HP buying Autonomy.
  9. I hope the Register piece was not an example of an early April Fool's joke.
(HT Sangram Aglave whose LinkedIn post alerted me to this article)

I first published this in LinkedIn Pulse on April 1, 2017.

© 2017, Abhinav Agarwal.

Saturday, March 04, 2017

Amazon Launches Prime in India. Can Flipkart Stay ‘First’?

O
n the 27th of June, 2016, Amazon launched the first of its first AWS (Amazon Web Services) data centers in India, in Mumbai.

Amazon India announcing the launch of Prime (July 26, 2016) 
Less than a month later, on the 26th of July, 2016, Amazon launched Amazon Prime in India. After a free, trial period of 60 days, customers would be able to sign up for what it calls a “special, introductory price” of ₹499 a year. Prime Video was not included in Prime at the time of launch.




Tuesday, February 21, 2017

Flipkart and the Executive Revolving Door

T
he contrast could not have been more striking, or poignant.
2017 began on a sombre note for Flipkart, when it announced on the 9th of Jan that Kalyan Krishnamurthy had been named CEO, and its current CEO Binny Bansal would become group CEO. It was the Indian e-commerce startup's third CEO in less than one year.
Three days later, on the 12th, Amazon let it be known via a press release that it intended "to grow its full-time U.S.-based workforce from 180,000 in 2016 to over 280,000 by mid-2018." To let that sink in, Amazon, already a company with a 180,000 employees in the US, would add another hundred-thousand full-time employees in eighteen months. Media was all over the news.

The battle for dominance of the Indian e-commerce market continues well into its third year. For all practical purposes this battle began in earnest only after Amazon entered India in 2013, and since then it has transformed into a brutal, no-holds barred, fifteen-round slugfest between Flipkart and Amazon. Yes, there is SnapDeal that is entering its end-game (there are talks of a merger between Paytm's marketplace and SnapDeal and of senior-level exits amidst rumours of a cash-crunch), there is ShopClues that has had to defer its IPO plans, and an e-commerce tragedy by the name of IndiaPlaza that was among the earliest e-commerce entities, which survived the dot-com bust of 2001, and yet folded up in a most ignominious manner. Ever since Amazon entered India in 2013, it notched up one success after another against the Indian behemoth, Flipkart. Flipkart went from strength to strength when it came to valuations even as it reeled from one blow to another in the market. Flipkart's party finally entered its long-expected yet still-painful endgame in 2016. For Amazon the costs have been equally staggering - billions of dollars sunk into its Indian operations, promises of billions more to be spent, break-even years and years away, and almost every last penny of profits from its parent company being shoveled into its Indian outpost.

Friday, January 27, 2017

Flipkart: Million-Dollar Hiring Mistakes

Flipkart: Million-Dollar Hiring Mistakes Translate Into Billion-Dollar Valuation Erosions

As the week drew to a close, a story that broke headlines in the world of Indian e-commerce was the departure of Flipkart’s Chief Product Officer, Punit Soni. Rumours had started swirling about Punit Soni’s impending exit since the beginning of the year (link), almost immediately after Mukesh Bansal had taken over from Binny Bansal as Flipkart’s CEO (link).

Punit Soni’s LinkedIn headline
Punit Soni was among a clutch of high-profile hires made by Flipkart in 2015, rumoured to have been paid a million dollar salary (amounting to 6.2 crores at then prevailing currency exchange rates — see this and this). This was in addition to any stock options he and other similar high-profile hires earned.