JimPinto.com - Connections for Growth & Success™
No. 201 : 26 January 2006

Keeping an eye on technology futures.
Business commentary - no hidden agendas.
New attitudes, no platitudes.

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My visit to Bangalore, India

You may have noticed that you haven't received an issue of JimPinto.com eNews since Dec. 28 2005. That's because I just got back from a 2 weeks visit to Bangalore, India. I was born in Bangalore and lived there till I was about 20.

It was a wonderful visit, a reunion with 10 Pintos - 5 brothers and 5 sisters - and their families. I was overwhelmed with the love, warmth and hospitality, and it will take a long time for me to get back to my groove. But let me give you my impressions of Bangalore, and India.

India, the world's largest democracy, has over a billion people. There are now 300 TV channels, 1.6 million telephone connections (land-lines) and 116 million cell phones, with 94,000 being added every day. At 2c. a minute and free incoming calls, everyone (and I mean everyone including street vendors) has a cell phone. There's a tremendous increase of Indian content on the Internet, with an estimated 50 million Internet users. Small Internet cafes are on almost every street-corner, where Internet access costs less than 25c. per hour.

I landed in Bangalore, non-stop from London. India's high-tech HQ is a vibrant, pulsating, megalopolis - population 12 million, larger than ANY American city - New York, the largest is 8-9 million, Los Angeles and Chicago are next at about 3 million.

The traffic is everywhere - cars, buses, taxis, motorcycles, the omni-present auto-rickshaws and the occasional ox-cart, plus pedestrians all over the place. There aren't any real traffic rules that I could make out, except: don't hit anything and don't get hit. Any small opening is quickly closed by the boldest driver, who often slipping through with a few inches to spare. And yet, amazingly, I didn't see any accidents (I'm sure there are some). You know, I've driven in Los Angeles, New York, London, Paris, Frankfurt, Tokyo, Melbourne - but I wouldn't dare to drive in Bangalore.

The software companies Wipro and Infosys have their headquarters in Bangalore. I visited Wipro, which was an amazing experience. After traveling about 15 miles (which took more than an hour) I arrived at Gate-6 of the Wipro complex, which is right next to the Infosys complex; direct "freeway" access to the new suburb called "Electronics City" is now being built to ease the 24-hour traffic.

We walked past a large outdoor auditorium (occupied by an animated group chanting a vibrant sales-pith) through a series of buildings as modern as anything I've ever seen anywhere in the world. My host asked me to look around from a viewpoint, "Wipro as far as the eye can see" he boasted. I asked my hosts a million questions - about security, hierarchy, personnel policies, training, working hours, promotions, loyalty - all of which were answered with excellent knowledge and pride. Frankly, I was impressed.

A recent global scenario report by Royal Dutch Shell says that by 2025 India will emerge as one of the world's best nations, politically and economically. The report says that India's young population, vibrant entrepreneurial spirit, and strong state-owned industries and educational institutions would drive its growth. Growing at 6-8% a year over the past decade, India is one of the most important economic stories of the next decade.

It'll take me months to digest what I saw in Bangalore. As I make sense of it, I'll write more.....

Click Why What's Good for India Is Good for Us

Click The Promise of India: The Challenges Ahead

Click Peter Drucker: India's progress more impressive than China's

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Schneider trumps venture-capital to buy Citect

The October 2005 JimPinto.com eNews announced that Schneider would be acquiring Citect, the Australia based MES and SCADA software company. It turns out that my announcement was premature. The Citect directors had previously recommended that stakeholders vote in favor of the Schneider buyout. They switched for a price hike of 10% - in my opinion it was a mistake.

Few could have predicted that a private-equity firm would up the ante to buy Citect. With about $1.75 billion of capital, US based Thoma Cressey Equity Partners has invested in about 200 companies in software, business services and healthcare. The Citect directors "unanimously resolved" to recommend the Thoma Cressey deal, worth about 10% more than the offer made by Schneider in Oct. 2005.

This was supposedly good news for Citect customers. The buyout by Schneider would have resulted in another small, innovative and dynamic company disappearing by integration into the French giant. So now, the public company would "go private" with Thoma Cressey, and make plans for independent growth and success.

But, slow down a minute - Thoma Cressey doesn't really have any track record of growing software or manufacturing companies over the long haul. It is a venture-capital firm, interested primarily in short-term returns - typically 3-5 years. This suggests (my opinion) that they would hold Citect for a couple of years, and then look for a big return through a buyout: acquisition by Schneider, or another of the automation majors. Just a shrewd money-making ploy.

Citect has grown well to the magic mid-size ($30-50m) where more companies get acquired (Wonderware, Intellution, etc.). I can't think of any similar software companies that have grown independently beyond that level. It takes capital and global marketing clout. By remaining independent, Citect will not benefit from Schneider's global sales and support capabilities, and it will take much longer to build revenue in today's competitive global environment.

This was the second offer for Citect in the last three months. It seemed clear to me that Schneider (after evidently doing a lot of groundwork to make their original offer) would simply sweeten the deal. Especially since Citect continues to have good results. And clearly Citect Directors were simply looking for the highest bidder.

So, lo and behold, before I could send my eNews analysis into cyber-space (January 25 2006) the news arrived that Schneider did indeed sweeten their offer (original offer $1.50 per share; Thoma Cressey offered $1.65; Schneider counter offer $ 1.85) by another 10-12%.

Now the Citect "long-term strategic considerations" are hogwash - the Directors had already proved that they'd switch for more money. So there was a new announcement: the Director "unanimously resolved" to accept Schneider's new offer.

It's doubtful that Thoma Cressey will come back with another bid. One wonders if they made anything at all through buying Citect's public stock during the interim. If they didn't, it will have been a total waste of time for them. Oh well....

So, Schneider will buy Citect after all.

Click Citect Goes Private to Grow as an MES and SCADA Provider

Click Thoma Cressey Makes Offer for Citect

Click Schneider Electric's Higher Offer for Citect

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2006 trends & emerging technologies

The world of 5-10 years from now will be a very different from the world of today. Predicting short-term (1-2 years) changes is almost impossible. But forecasting long-term directional change becomes possible by identifying trends through an analysis of deep history rather than of the shallow, recent past.

At the turn of the year, several people publish "trends to watch". Here are some of the things I'd bet on:

  1. Centers of economic activity will shift globally
  2. New global industry structures will emerge
  3. The battle for talent will intensify
  4. Productivity gains will shift "work" to new arenas
  5. Connectivity will transform the way people live and interact
  6. Big business will come under increasingly sharp scrutiny
  7. Emergence of BIG new "startup" companies - new CISCOs and Googles
These technologies will move from hype to wide deployment:
  1. RFID tags
  2. Machine-to-machine (M2M)
  3. Cellevision - the small screen
  4. HDTV - the big screen
  5. Increased storage and bandwidth
  6. Wireless connectivity on the plant floor and process plant
  7. WiFi & WiMax Internet everywhere (airports and cities)

Click The McKinsey Quarterly: Ten trends to watch in 2006

Click Forbes editors & writers annual look ahead at the coming year

Click MIT Tech Review - Most Important Infotech Stories of '05

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Achieving growth & success through balanced outsourcing

The cover story of Business Week (January 30, 06) is "The future of Outsourcing". As companies shift work overseas, outsourcing is portrayed as a killer of good-paying American jobs.

But businesses are now discovering that outsourcing can not only cut costs, but also boost quality and even create new types of jobs and significant new growth for everyone involved.

Up to now, the primary motivation of corporate bean-counters has been to take advantage of the huge wage gap between industrialized and developing nations. Big layoffs at home were usually the result.

But now, a more strategic view of global sourcing is starting to emerge. The new buzzword is "transformational outsourcing". Many companies are discovering that off shoring is really about growth - making better use of skilled US staff, and even creating new types of jobs in the US. The labor savings from global sourcing can still be substantial. But it's small compared to the enormous gains in efficiency, productivity, quality, and revenues that can be achieved by fully leveraging offshore talent.

NOW it's making sense. The shift from short-sighted, narrow-minded local-job protection, to true business use of global resources, stimulating innovative talents, partnering of complementary knowledge resources. Ubiquitous broadband communications makes this possible.

Click Business Week - Outsourcing

Click Cheaper, Faster, Better - The Productivity Race

Click Solutions for the China Challenge

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Song: I am the very model of a Singularitarian

I know that some people think that Ray Kurzweil's "Singularity" (that a significant event that will occur within 30-40 years) seems far-fetched. But, as I traveled half-way across the globe at 40,000 feet, I keep seeing the world continuing to accelerate through technology. I get a funny feeling that indeed some significant transition is inevitable. It won't be a smooth shift - more like an inflection point, a sudden switch.

Some think that the Singularity will be signaled by the emergence of super-human intelligence. The planet-sized "Web" computer is already more complex than a human brain and has surpassed the 20-petahertz threshold for potential intelligence as calculated by Ray Kurzweil. In 10 years, it will be a thousand times more powerful. So will super intelligence emerge on the Web? And, if it does, will it be "manageable"? Some people are already predicting "transhuman" and posthuman" intelligence. Can anyone say with certainty that this cannot or will not happen?

At this stage, perhaps we can only just muse about the idea. Before you completely dismiss it, please read Ray Kurweil's book - or at least read the first couple of chapters on Amazon.com.

In any case, you might enjoy this song. Charlie Kam has written and recorded a humorous "Singularitarian" version of Gilbert & Sullivan's "I Am The Very Model of a Modern Major General" from the Gilbert & Sullivan opera, "The Pirates of Penzance."

Here's a sample:

    I am the very model of a Singularitarian
    I'm combination Transhuman, Immortalist, Extropian,
    Aggressively I'm changing all my body's biochemistry
    Because my body's heritage is obsolete genetically,
    Replacing all the cells each month it's here just temporarily
    The pattern of my brain and body's where there's continuity,
    I'll try to improve these patterns with optimal biology,
    I'll expand my mental faculties by merging with technology

Click Read the complete "Singularitarion" lyrics, and hear the song (MP3):

Click Wired - We Are the Web

Click Ray Kurzweil's book - "The Singularity is Near"

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Ron Liebis [r.liebis@verizon.net] sent these thoughts on control of executive pay:
    "I think the issue of executive pay is a "red herring". A more important issue would be providing shareholders with an effective way to propose, nominate and vote for the board of directors. This might provide the balance between directors who are beholden to the company's executives for their position and those who are capable of representing the shareholders.

    "It would be nice if in the proxy statement there were metrics to show how much of the earnings growth (or cash flow) per share were the result of corporate activity and how much the result of share repurchases. Also, the percentage of ownership that has, through options, been transferred to the management.

    "I suggest that you read the book "End of the line" by Barry C. Lynn. It is possibly the most incisive book on present day corporate and economic policy that I have read. The author's analysis of Cisco's management decisions and its corporate structure is worth the whole book. It supplements and extends Friedman's thoughts in "The Earth is Flat" and similar topics dealt with on your website."

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Jim Hetzer [Rezteh@aol.com] discusses the longer term impact of genetically engineered agricultural products:
    "With regard to technology agriculture, if the current trends continue, we will all be vegetarians within 25 years. With mad cow disease, avian and swine flu, and vastly depleted quantity of edible animals in the world's oceans, we are going to find animal protein sources to be a major health risk.

    "The reliance on technology in agriculture is a two-edged sword. The technology requires major energy consumption for production and transportation, and the impact on the fields has not been favorable over long periods.

    "With that in mind, someone should get a grip on the people that are attempting to put animal genes into plant matter to "improve" upon their resistance to diseases, inability to be shipped, etc. It is a sad fact that increasing the food supply leads to an increase in population. We may live to see the opposite effect if our vegetable protein sources do not remain viable."

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Paul Fileman [Paul.Fileman@uk.tac.com] corrected my statement that, with the acquisition of Tridium, Honeywell was the first of the major automation companies to make a move on M2M:
    "TAC, as part of Schnieder have been actively promoting open integrated systems for several years now. We have reference sites around the world with integrated systems providing real benefits to operators and owners.

    "It seems to us that Honeywell finally joined in and started to climb the hill we took some time ago. You can check out news stories on projects such as Manchester Royal Infirmary and references on Integration at http://www.tac.com/uk "

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