Business

Open-Sourcing the Telecom Rack

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I started my career many years ago in the data center configuring Cisco routers and switches and thinking….damn these “boxes” are expensive as shit. I wasn’t thinking much about the future of the data center as I was more concerned about getting XOT working…yes kids, that’s X.25 over TCP/IP.

I was on the Iridium project for Accenture and we worked besides equipment like the Siemens D900 GSM Switch in a telecom data center.

Software-defined networking (SDN) and the Open Compute Project were established to break the proprietary nature of the hardware used in data centers. Instead of buying a Cisco switch with its software you would buy generic hardware from Taiwan or China and use the open source OpenFlow protocol.

Software-Defined Networking (SDN)

This commodization explains the growth of cloud providers like Amazon Web Services (AWS), Microsoft Azure and Google Cloud Platform (GCP). Companies want to ditch their existing data centers and move to cloud providers that have a perceived lower cost since they are using open source hardware and software to bring down the build-out costs.

While all this was happening in the corporate data centers, I figured the telecom data centers were business as usual with expensive proprietary hardware. Well, I was wrong.

I was recently chatting with a friend who is in the telecom field and he told me the same commoditization is happening in the telecom data center. The initiative is called Network Functions Virtualization (NFV). Reading the NFV white paper is a great way to get over your insomnia and also packs a lot of information in it.

The idea was that the core components of the data center – routers and switches were getting commoditized but the applications and servers were still proprietary in nature. NFV is changing that and it has enabled them to bring down the cost for telco providers but more importantly allow them to use the latest cloud technologies such as containers…that’s for another blog post.

Not surprising is that the NFV initiative was driven by the telcos like AT&T, British Telecom, China Mobile, Telecom Italia, Verizon and several more providers. I guess when you have these heavyweights behind a project it gains traction. With the upcoming 5G deployments around the world the telco providers figured they needed to cut costs somewhere and NFV was a good start. The one place I don’t think we will see open source equipment is the radios in the cell towers…that’s where all the money is going to be made by the 5G vendors like Samsung, Huawei, Ericsson and Nokia.

WeWork Collateral Damage in India

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The last couple of weeks have been a real shit show for WeWork. It all began when WeWork started it’s roadshow for its upcoming IPO which was being led by JP Morgan and Goldman Sachs. The IPO was targeting a USD $3.5 billion offering. WeWorks’ last valuation was at USD $47 billion based on their Series H raise from SoftBank back in January 2019.

The roadshow highlighted many of the issues that people have been complaining about, mainly their business model. They take on 10-15 year leases on buildings and then turn around and sell seats on a monthly basis. What really kicked up the negativity was a blog post by NYC Professor Scott Galloway titled WeWTF (click for blog post), and WTF was not We Truly Fine! The blog post highlighted many of the red-flags about the upcoming WeWork IPO. It’s fair to say the professor is probably not welcome at any WeWork facility around the world.

So how does the WeWork IPO train wreck lead to collateral damage in India? Well, there are 2 entities that will get affected – Embassy Group and OYO.

Let’s talk about Embassy Group first, they are a property developer based in Bangalore (Bengaluru) and the local JV partner in India for WeWork.

The JV entity is called WeWork India Management Pvt. Ltd., 30% is held by WeWork and the balance 70% is owned by the Embassy Group. In June 2019, they were hammering out valuations and it was reported the JV was worth USD $2.75 billion. Which meant if WeWork wanted to buy out the Embassy Group it had to fork over USD $1.9 billion. At the time of the negotiations WeWork was valued at $47 billion, but after all the drama some are now estimating the company to be worth under USD $10 billion. Which means there is NO WAY the India JV is worth USD $2.75 billion. If WeWork really has taken an 80% haircut then the JV is probably worth in the neighborhood of USD $600 million as the new enterprise valuation.

The other startup that is going to face valuation drama is Oyo. Oyo is backed by SoftBank which also happens to have funded WeWork and Uber. SoftBank seems to have a track record of going big on these bets and pushing for public market valuations even though these startups don’t make a dime in profit. Uber had the same drama with the founder before it’s IPO and was ultimately fired. Uber is currently trading at it’s all-time lows and has yet to figure out it’s path to profitability.

I’m pretty sure in the coming months we are going to hear about OYO along the same lines of these other SoftBank portfolio companies. In fact the NY Times recently had an article about SoftBank founder Masayoshi Son and how these bets may not turn out as expected. But don’t feel bad for Masa, some of his other bets have done fantastic. In 2000, SoftBank made its most successful investment ever – USD $20 million to a then fledgling Chinese Internet venture Alibaba. This investment turned into $60 billion when Alibaba went public in September 2014.

The Rally that Left Manpasand Behind

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Friday, Sept 20th, 2019 will hopefully go down in Indian financial markets as the day the economic boom for the country got re-started. The markets zoomed over 1,900 points or 5.3% for their biggest gain in a decade. The fuse was lit by the Finance Minister Nirmala Sitharaman when she announced several economic measures that should help companies. The theory is that by helping companies they will invest and create more jobs which the economy sorely needs.

One company that completely missed this rally was Manpasand. In fact, it fell below Rs. 10 for the first time ever which is also it’s par value or face value.

I’ve been tracking this stock for a couple of years now. And I got to watch it go up and down and so glad I never invested a single Rupee in it.

The company has been around for 30 years and is a Gujarat-based juice manufacturing company. In 2011, it got private equity money from SAIF Partners a well-respected PE fund. (SAIF is a acronym for Softbank Asia Infrastructure Fund). Then in early 2015 it started a roadshow to build up enthusiasm for its upcoming Initial Public Offering (IPO). You can read the Red Herring prospectus here (PDF) to see how they pitched their offering. What is a Red Herring prospectus? click here.

In mid 2015, Manpasand finally got listed on the National Stock Exchange (NSE) at Rs. 150 a share. All was good and it looked like another example where PE money helped a company grow and everyone benefitted.

Then in May 2018, the wheels fell off when the auditor on record – Deloitte Haskin & Sells resigned. It’s pretty clear from the above chart where the stock ended after this revelation. The brokerage firm Motilal Oswal quickly issued a statement (PDF) saying it’s recommendation for the stock was “under review”. Let me be clear, when the auditor bails on a company that’s a very clear indicator you need to bail on the stock.

Had you sold when the auditor resigned, then at the worst you would have broken even from it’s IPO price. But, if you held on thinking the auditor resigned because they didn’t like the Gujurati food while auditing the client, then that’s on you.

Jio is Unstoppable

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Reliance Industries (RIL) this past week held its 42nd Annual General Meeting (AGM) in Nariman Point. Mukesh Ambani broke the meeting into 3 parts:
1. Oil & Chemicals
2. Jio
3. Reliance Retail

The Oil & Chemicals division is the money maker that allows Reliance to expand into new unrelated markets like Jio.

Jio was the star of this AGM and rightfully so, they have 350 million paid connections and on a growth path to 500 million connections. Their GigaFiber service is what everyone is waiting for. I’m on their free GigaFiber trial service and it’s been an absolute delight – 100Mbps download AND uploads. Because of GigaFiber we have cancelled our traditional coaxial cable connection and now watch everything via OTT apps like Amazon Prime, Netflix and YouTube.

When I used to work at Cisco Systems 20 years ago we talked about the Triple Play – Voice, Video and Data over the same connection. Here we are in 2019 and Jio is finally delivering the holy grail of connections. The connection speed will be upto 1Gbps to allow for the large amount of data that is required for broadcast quality high definition TV. The amount of traffic that is taken up by a single voice call is next to nothing and hence Jio is willing to say voice calls are free for life.

The Indian telecom industry has been completely decimated because of Jio. Idea had to merge with Vodafone and many of the smaller players had to merge as well. Airtel is still the largest wireless company but I’m sure will soon be eclipsed by Jio. It’s clear Jio has become what it is because of Mukesh Ambani and Reliance, their on-the-ground execution is unmatched. If they want something done, they figure out a way to clear the decks to make the policy match their goals – not a bad way to work!

What’s unclear is how much money they have spent on building out the infrastructure and the overall cost of getting Jio up and running. But that has always been the style of Reliance, don’t ask too many questions and just watch the stock price continue to go north. Jai Jio!

During the AGM they did several demos of new technology and they were quite cool. The only funny part it is when they did a video conference to someone in New Jersey where it was 2am in the morning yet it was a bright as hell – maybe some new virtual reality stuff!!

Incredibly Inept India

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Last month I had the chance to visit the Bandhavgarh National Park in Madhya Pradesh (MP) for a tiger safari and it was quite amazing. Bandhavgarh is a 1,500+ square kilometer park known for its large population of royal Bengal tigers and other animals like monkeys, leopards and deer. Some of the pictures taken were stunning:

I could go on and tell you how fantastic the safari was but this is not a travel blog post.

My wife and I went to Bandhavgarh with several friends and we all came back with the same conclusion that the state could do much more to generate additional tourism revenue. Tourism is a big part of the revenue for the state of MP but like so many other things in India, they get to 80% of something and feel that’s good enough.

A very simple example involves the check-in process for every safari drive. You have to go to the safari park office to get a tour guide and show your ID. This facility as you can imagine is run down and a typical Indian government office which means its crap. While our driver entered the office we sat in the the open air Maruti Gypsy (think Jeep) and on average waited 10-15 minutes. This Park office was usually 20 minutes away from the safari park gates.

Why not turn this safari park office into an amazing tourist visitor center with a coffee shop. Sell trinkets like books, t-shirts and stuffed animals for the kids. The people waiting are a captive audience who have nothing else to-do and will most likely spend money since they are excited to begin their safari journey.

Another similar opportunity to monetize is at the actual safari park gates. Many of the vehicles would line-up 30 minutes before the gates open so they can be one of the first vehicles to enter the national park. Of course, we just sat in the vehicle but again they could have built a tourist center here and bring in more revenue.

Spell check anyone? Check out the spelling for Madhya Pradesh on the back of the bus.

When I saw the above vehicle in the park with the misspelling of the state, I just chalked it up to the mantra of “hey, at least we got 80% right.” Actually, they got 12 out of the 13 letters right, which is 92% but sometimes that’s just not good enough.

  • That sign says “Zero Compromise Towards Safety”

In another attempt at getting 80% right. The sign says “Zero Compromise Towards Safety” and the ceiling above the sign is literally a clusterfuck waiting to happen. This was at the Jabalpur Airport, JLR is the airport code. And yes, another missed opportunity for monetization…JLR…as in Jaguar Land Rover (JLR). JLR is an Indian-owned company and their Land Rovers are known for their amazing off-roading capabilities and ruggedness. Yet, over the 5 days I was in Bandhavgarh I saw only one Land Rover Discovery…I mean, how is that possible???

I get it, governments move slowly but when it comes to creating more jobs and adding additional revenue to the state coffers they should move quicker to capitalize on the opportunity.

The WhatsApp Ecosystem

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Earlier this month Facebook held it’s annual developers conference and announced a couple of interesting developments for WhatsApp. Wait, what? What does Facebook and WhatsApp have to do with each other?

First let’s clear the air, Facebook has been getting raked over the coals this past year for a wide variety of issues. Then a couple of weeks ago, one of Facebooks co-founders, Chris Hughes, had an op-ed piece in the NY Times about breaking up Facebook. How many internet properties does Facebook actually have?

Surprisingly many people don’t realize that Instagram and WhatsApp are both owned by Facebook and the 3 properties together: Facebook, Instagram and WhatsApp are a social media 800 pound gorilla.

Back to WhatsApp and those interesting features they mentioned at the Facebook Developers conference. One of the biggest features is WhatsApp Product Catalogs, where users can see what products are available from a brand. This has an immense impact on SMEs that want to sell directly without going through an e-commerce platform like Amazon or Flipkart.

When I first heard about the upcoming feature I didn’t think much of it till a week ago when my wife purchased some products on Amazon.in from a brand she discovered called Pure Elements. Pure Elements is based in Mahabaleshwar, Maharashtra and uses Amazon’s Fulfillment by Amazon (FBA) service. Which means Pure Elements sends their products to Amazon’s warehouse and Amazon takes care of the warehousing, picking, packing and shipping of the product.

We received the order from Amazon and immediately realized there was an error in the shipment. Surprisingly, there was no easy way to tell Amazon that the wrong size of the product was sent. So instead, I sent an email directly to Pure Elements and they promptly fixed the issue and said that next time I should order directly. In the future with WhatsApp Product Catalogs and in-app payments via WhatsApp Payment, I could see myself contacting them directly and getting the products. And if there are any issues I can chat with them directly on the WhatsApp platform.

Currently, the alternative is that an SME needs their own company website with some dodgy payment gateway which invariably is a pain for an SME. Which is the reason why many SMEs in India prefer to use WhatsApp today for commerce even though it’s not as streamlined as it can be. These new WhatsApp features would work well for an SME such as a home baker who sells cookies and cakes.

This brings me to the ecosystem part, imagine if that SME is only going to sell via WhatsApp, then they would only need a CRM (customer relationship management) and a shipping partner. If they made it simple enough for an SME to connect to these external providers it could change the landscape. Yes, WhatsApp does have something called Business API but that’s for larger companies that have a tech team in-house.

I’m thinking something along the lines of WordPress and their entire plug-in community where users can add features to their WordPress website very fast and more importantly without any deep technical skills. A WhatsApp Plugin ecosystem could grow WhatsApp commerce transactions exponentially and spawn many new startups helping SMEs sell more through the WhatsApp platform.

Making it For India

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A couple of months ago the streaming music service Spotify was launched in India with great fanfare. I had tried Spotify about 7 or 8 years back but then they started to block IP addresses from India so I quit using the app. At first I wasn’t planning to try it again but I did and I’m so glad I did, their recommendations are spot on…no pun intended.

What really caught my attention during the launch was their pricing matrix. Yes, the monthly price is cheaper in India Rs. 119 (USD$1.70) vs the US at Rs. 693 (USD$9.99). But they also offered daily packs at Rs. 13 (USD$0.18) and weekly packs at Rs. 39 (USD$0.56) as well, almost like the FMCGs offer sachet packs of their products. Sachets – a single-use, a simple flat pouch or stick pack for powders and other runny liquids and gels.

Spotify took that concept and turned it into a digital sachet. It’s a great way to get people to try the product. This is a great example of localization of a product.

When building an app or platform and going to other markets, there is always talk about internationalization (i18n) and localization (l10n) within the technology team. 7 or 8 years ago foreign companies would sell their products in India and only focus on internationalization. For example, if an app requires a login via a phone number then they enable +91 for Indian mobile numbers.

But the trend is to go one step further and localize the app or platform for the Indian market. And that is where Spotify just nailed it with it’s very Indian pricing matrix. I’m seeing more and more companies localize for the Indian markets because that’s where the growth is as other markets are mature and growth has slowed or stalled.

UPDATE: I’ve received many emails about the confusion about internationalization and localization. For me and the teams I work with, I break it down as:

internationalization – the backend technology to enable the use of the app or platform in another country. For example: language, phone numbers, etc…

localization – the frontend that the consumer will see and you. For example: pricing, localized content, specific features for a country, etc…