04/20/07

04:15:27 pm, Categories: Entrepreneurship, SalesQB Diary  

The Idea

This is the year I left IBM. Had a gut feel that there were major inefficiencies in how reps tackle solution selling (a.k.a complex sales). It was obvious to me that for reps to effectively sell solutions, they required deep industry & domain knowledge to establish credibility with decision-makers. And having had an enterprise apps background, I started thinking that there had to be a way to package the knowledge required for solution selling, very similar to how “best-practice” business processes are packaged in enterprise apps. With this little nugget of wisdom, I quit IBM and started-off on my own.

The Funding

I didn’t have much of a net worth to begin with. So, I started off doing IT consulting, something I had been doing for the past 8 odd years, to bootstrap SalesQB. The idea was to do consulting and put food on the table, and then bootstrap SalesQB with the positive cash flow. A tried-and-tested funding model, except that it takes a lot of perseverance, mid-night sessions and family commitment.

The Pedal to the Metal

Now came the hard part – figuring out what to sell and whom to sell to. We decided to take a crack at the small business CRM market, which was beginning to get a lot of media attention that year. Over the course of 2004, we developed the first version of our product. A full-fledged CRM application and then some. We had a plug-in called OppCoach™ that provided opportunity specific sales coaching. If you had an opportunity in your CRM system, OppCoach would ask you a few questions to determine the sales context and then recommend a customized sales methodology for that specific opportunity. In this version of our product, we didn’t have industry or domain knowledge embedded as yet. But I am proud of the fact that we had a full fledged product that could have gone toe-to-toe with Siebel, SalesForce.com or any other leading CRM / SFA product out there.

We determined that the best way to take a crack at the small business CRM market was to partner with regional IT resellers. So, we went to a Gartner conference called Small Business Vision, where Gartner was trying to bring ISVs like us together with regional IT resellers. We went to a conference in Orlando to meet with IT resellers in the South-East.

Very quickly we figured out that we were having a hard time rising above the Small Business CRM noise. All the big CRM vendors (Microsoft, Oracle, Siebel and SalesForce.com) were hammering the small business market that year and our family retirement fund didn’t quite have the wherewithal to taken on these 900 pound gorillas. Furthermore, there were 2 dozen more CRM vendors (Pivotal, ePiphany, SalesLogix etc) that were trying to enter this market.

We gave up on the idea of taking our offering to the small business CRM market and started looking at ideas for 2005

The Lessons

Most of our leadership team had a management consulting, enterprise apps and technology-heavy background. We were very entrepreneurial and had launched sizeable practices within management consulting firms. However, when we decided to target the small business market, we should have consulted closely with someone who knew how product management worked in the small business market. It took us close to 4 months of spinning our wheels to figure out that we were headed nowhere with this approach.

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04/11/07

02:49:33 pm, Categories: Entrepreneurship, Business Trends, KPO  

Caution! Dire predictions ahead.

Now that we have figured out the true impact of BPO, we are being thrust into the middle of the KPO trend. For the uninitiated, business-process-outsourcing (moving IT delivery & operations offshore) was a $157B global phenomenon in 2006 and is expected to grow at a CAGR of 10% for the next few years. Knowledge-process-outsourcing (KPO) deals with the outsourcing of knowledge related activities. If you can think of an insular knowledge-intensive business function, it can probably be outsourced. Examples of functions that have already been outsourced include medical transcription, legal research (patent analysis & preparation), pharmaceutical / drug research & trials and financial research (M&A deals, equity analysis). OfficeTiger, one of the leading KPO firms, is targeting a $400B market for general research in the US. Other more conservative projections talk about the KPO market reaching $17B by 2010. For reference, it was about $2.5B in 2006.

With the open, easy flow of information across global borders, nations like India, China & Philippines are beginning to flex their muscle. The big advantage they have is a huge, low-cost, educated labor pool that has a flair for research and analysis. For example, the loaded cost for a research analyst in India is hovering around $15 / hour at present. If an enterprise can get an insular, knowledge-intensive business function done in another country at a third of what it costs here, it would be tough to argue against outsourcing that function. True, we need to factor in the language, time and cultural barriers. But these factors are not insurmountable, as we have seen in the last 3 – 4 years with BPO. And the fact remains - We are in an age of knowledge commoditization. If a knowledge-intensive business function is not a core competency or critical to its competitiveness, an enterprise would be hard-pressed to NOT outsource it.

So what are the implications of this trend? I think that most business functions in most industries will be impacted to some extent by KPO by 2015. The only business functions that will not be adversely affected are those that require on-site presence at customer premises, like sales & customer service. The only industries that will not be adversely affected are the services & retail industries, for similar reasons. There are several projections out there that estimate that China will account for 20% of the World GDP by 2015, based on its manufacturing prowess. I predict that the KPO trend will enable India and some of the key south-east Asian countries to account for over 5% of the World GDP by 2015 as well. A quarter of the World GDP being accounted for by a handful of countries in Asia. Sounds like fiction? Think again. All indications point to this scenario emerging within 8 to 10 years!

So what does this mean for Corporate America? There is a lot of literature out there that talks about Innovation being the only sustainable, competitive advantage for American enterprises. I would like to take that thought a bit further. Innovation in its current sense deals with continually revamping your product & service portfolio and target markets. I don’t believe that such a complacent approach to Innovation will help. We might even see the outsourcing of the Innovation business function, if we keep it this simple! To stay truly competitive, I believe that American enterprises will need to constantly keep re-inventing themselves by redefining their value chains and appropriately positioning themselves in the new value chains. And American enterprises would do well to borrow a couple of pages from the playbooks of successful entrepreneurs to develop this kind of agility in short-order.

Thoughts?

Sampath

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03/20/07

As an entrepreneur starting a Web 2.0 company, I have often made the mistake of adopting the “build-it-and-they-will-come” attitude toward our offerings. As I mentioned in a previous article, it is seductive to draw comparisons with significant trends (social networking, Web 2.0, SaaS, Enterprise 2.0, Services 2.0 etc) and large success stories (Google, Yahoo, eBay, MFG.com, SalesForce.com) and think “If only we could capture 3% of that market …” There are a slew of Web 2.0 entrepreneurs out there today who are thoroughly convinced that their offerings will change the world, but are not seeing any market traction.

I was reading a book called Freakonomics on a flight home and had a moment of clarity. In this book, the authors talk about all human behavior being influenced by three types of incentives; financial, social and moral. They go on to explain several confounding phenomenon just based on this premise.

I started thinking about using just this approach to predict whether Web 2.0 offerings would gain traction. Very simply, think of your offerings as an incentive program. What is in it for the user to get excited about using your offerings? What is his financial incentive to do so? What is his social incentive to do so? And in the case of not-for-profit organizations, what is his moral incentive to do so? If you have compelling answers to do the above questions, you offerings will probably gain traction. If not, starting working on your next idea.

Now I realize that taking a hard look at the value of a company’s offerings is not really a novel idea. But I do think that thinking about Web 2.0 offerings (the audience for which is typically an individual) as an incentive program makes a lot of sense.

Thoughts?

Sampath

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03/12/07

04:12:20 pm, Categories: Entrepreneurship, SalesQB Diary  

This is an attempt at maintaining a journal on how SalesQB evolves over its lifecycle. If things go well, hopefully this journal will serve as somewhat of a blueprint for successfully launching start-ups. If not, well, you will get some concrete ideas on what NOT to do!

For obvious reasons, this journal is a bit dated. That is, I will describe what SalesQB’s inner workings and machinations were for the previous year. We continue to deceive ourselves into thinking that we are smarter than the rest and that we are working on ideas that no one else knows about …

Happy reading.

Sampath

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02/26/07

02:35:26 pm, Categories: Entrepreneurship, Business Trends, KPO  

Entrepreneurship in the high-tech sector will undergo some dramatic changes over the next decade. I have developed a little visual model for the processes used by entrepreneurs to raise money, hire exec talent and develop & support products. Big caveat here. My experience is primarily in the high-tech sector and the only offshore experience I have today is in India. So, please extrapolate to other sectors and the BRIC (Brazil, Russia, India, China) block as appropriate.

A couple of notes on how I came up with the above model.

  • The model in the 1980s is pretty obvious. This how the Ciscos & Oracles started
  • The model in the 1990s started leveraging the BPO trend to move the product development & support functions to India
  • The 2000s, particularly 2005 - 2006, have seen the emergence of a new breed of start-ups in India. By some accounts, over 200 KPO startups have been launched in India in 2006. Also, we saw most Tier 1 & 2 VC firms from the Bay Area set aside funds to seed India based companies. On average, these funds have corpuses to the tune of multiple hundred million dollars! Sequoia Cap, for example, has an India focused fund of $400M. Today, the situation in India is that there is too much money chasing too few deals. My unvarnished assessment is that this smells like the Bay Area of the mid 1990s where there were many good technologists but few seasoned entrepreneurs. But as with most dire situations, this too shall improve. Which leads us to the 2010s
  • The 2010s, I believe, will see a good set of start-ups in India, particularly focused on KPO (Knowledge Process Outsourcing) offerings. The availability of money, a sustained advantage in the KPO market, improving infrastructure & a maturing labor force will be the cornerstones for a large number of these start-ups. By some measures, the Indian KPO market will be the same size as its BPO market ($17B) by 2010. I have already run across several KPO firms that have good ideas & less than stellar management, but have secured seed funding. Deja vu, anyone? Hopefully we will have the business discipline to not get too excited and remember the key lessons from the mid-1990s.

So what does this mean for the entrepreneur? I think the entrepreneur of the 2010s has to:

  • Develop global expertise in short-order. GPs at tier 1 VC firms are on record saying that outsourcing of some sort is now a requisite in business plans, because otherwise, the start-up is wasting the VC's money
  • Hire cross border exec teams. Critically, the entrepreneur will need to ensure that his professional network is well balanced and reflects the reality on the ground
  • Gain first hand experience of the emerging markets. It is a question of when, not if, the BRIC block will transform itself from a cost center to a key market that entrepreneurs will need to be acutely aware of. My bet is that will happen in the early part of next decade (2011 - 2015)

Would be glad to hear what you have to say ...

Sampath

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