Bala Iyer

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High velocity multi-sided markets

Posted by Bala Iyer on Sun, Sep 18, 2005 @ 07:25 PM

This weekend I was thinking about multi-sided markets and how Microsoft has used it to their advantage. Upon further thinking, I feel that it is the same concept that is hurting them today. It was once their core-competency now it is a competency trap.

In the earlier era, MSFT served it two main constituents -- developers and end-user -- very well. Today, they have to worry about the talent market as well. However, this is not their main cause for worry -- although they are losing their allure here. In these multi-sided markets, companies have to first recognize these markets, provide deep value to each market and understand the interactions between them. I think MSFT has done a good job recognizing these markets. I also believe that they understand the interactions between the markets. However, I think they have failed in providing the deep value component. Let me explain. When MSFT dominated in the PC era, interactions with customers and developers were basically around product releases and major upgrades to the product. While they maintained contact in between releases, a major part of the education and learning were centered around the product life-cycle and release dates or on a yearly basis. As a result, they have big events each year that recognize users and developers. They designed their organization structures and process around this. Recent postings about the high level of bureaucracy and low level of innovation and response to market conditions, support this view. Compare this to what Google does. Google interacts with its users on a daily basis with beta product releases and search results. They are learning about customer preferences daily. In addition, they allow users to innovate on their platform. Also, their unique team structures and 70/20/10 principle supports a faster pace of innovation.

Let us turn our attention to the other side and focus on developers. Here again Google is on a different rhythm. It allows developers to interact with their application programs via APIs and track interactions on a call-by-call basis. This interaction allows them to respond to developer needs and modify the platform constantly. Furthermore, with mash-ups being created on a daily basis, this network is growing fast.

While MSFT is using its network effects to sense and respond to market needs, Google is able to anticipate and lead using its high frequency, granular data collection..

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Consolidation within the software sector

Posted by Bala Iyer on Mon, Sep 12, 2005 @ 04:54 PM

Two contrasting acquisitions took place in the industry. The eBay/Skype acquisition was between complementary players. The other one, between Oracle and Siebel, was more about scale.

eBay acquired Skype for $2.6 billion dollars. For that they get around $60 million dollars in revenues, a VoIP product, 1000 developers that write to the Skype platform, 200 employees and 53 million users. eBay believes that this product will help improve communication between sellers and buyers and reduce friction costs in transactions involving high value or complex products. Buyers and sellers can do that with regular telephones, but with this acquisition they can get the functionality bundled with the eBay platform.


In the other acquisition, for 5.85 billion dollars, Oracle gets a CRM product, 3.4 million users, $1.3 billion in revenue, 1000 developers and 5000 employees. With this acquisition, Oracle will be able to consolidate the application layer of the stack and compete with the likes of SAP, IBM and Microsoft.


In the Skype/eBay story, the focus is on all the new functionalities that will be made available to customers. In the Oracle/Siebel case, it is all about integration and interoperation of existing products. Currently, companies have to spend money on integrating the various products from database management systems to CRM packages. With this acquisition, Oracle can potentially bundle the two products and make it work out-of-the-box.

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Is Microsoft becoming intellectually bankrupt?

Posted by Bala Iyer on Fri, Sep 09, 2005 @ 12:34 PM

Recent developments such as the one time dividend disbursement in 2004 and the recent law suits against Kai-Fu Lee suggest that it is plausible.

In the case of Mr. Lee, Microsoft feels that he was privy to their China strategy and may use that to compete with Microsoft. Is their China strategy so fungible that it can be implemented by any other company? Also, doesn't their vision/strategy take into consideration their own internal capabilities and partners? Another reason that is being floated is that Microsoft wants to use this case to prevent further defections. It may be too late for that. If Google has cornered all the action and attention on the innovation agenda, they will continue to attract the best talent -- law suit or not. Google, meanwhile, seems to be focused on building their consumer, developer and complementor networks.

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