The Pyramid Structure

All of us have been reading newspapers for many many years. Just in case you have not noticed the following about news stories;

This structure is most commonly used in the newspaper industry. Here, at the beginning of an article, the whole story is told in one bold paragraph, in a few short statements at the beginning (the apex of the pyramid). The next paragraph tells the same story with more detail, and the third paragraph the same story with even more and longer detail. This technique allows the editor to cut the article to fit the space available from the bottom of the pyramid of copy.

This can be useful for presentations because it allows you to take a similar editing approach from the bottom up.

Thought for the Day

- Plan your work AND work your plan.

- The Failure to Plan IS a Plan for Failure.

Software firms - big get bigger

by Sudin Apte. NOT all is well on the Indian offshore front. While a handful of offshore players, and in particular the top three, are performing exceedingly well, more than 500 small and medium-size firms are struggling and performing below the industry average. Almost all Indian providers have announced their quarterly results for the period ending December 31, 2006. The top three — Infosys, Tata Consultancy Services, and Wipro Technologies — reported superlative performance, with high revenue growth and sky-rocketing profitability. However, a close look at the performance of the top 20 Indian services firms tells a different story. The concentration of revenues in the top three players is increasing every year, demonstrating the rapid polarisation of the market. While there are more than 700 IT companies in India, the top three account for more than 40% of total IT services export revenues in the current fiscal; just two years ago, the same figure was 26%. The top three have consistently performed above the industry average. They grew by almost 40% during the 2006 Indian financial year. They continued to increase their profitability amid mounting multinational competition, increasing staffing costs and attrition, and growing deal complexity. Incapable of differentiating and beaten by the scale and volume pricing of the top Indian firms, small and medium-size firms face growing challenges. The majority of firms in this space recorded an average 20% revenue increase and 10% profitability, underperforming the top three on both sales and margins. For example, NIIT Technologies and iGate saw profitability at less than 8%; Polaris, whose performance has been choppy over the past two to three years, earned profits of around 12%; while Intelligroup continued to see net losses. Cognizant, HCL Technologies, and Satyam — which crossed the coveted billion-dollar mark in 2006 — sit on the size and scale that puts them in middle of the top three and rest of the industry. They have also gone through some management or strategic direction change in the recent past. They may swing in either direction — toward the success of the top three or get lost in the crowd of 700 other firms, based on how their new strategy works in coming 18 months. We believe that the best strategy for them will be to pick specialisations and remain focused in order to retain differentiation. Most sub-$1 billion-revenue companies are marginalised and facing either survival challenges or acquisition threats. The Indian offshore industry has become synonymous with a handful of companies that hog most of the limelight — but other firms, such as yesteryear's stock exchange favourites Mastek and Polaris, are losing prominence with every passing quarter. When staffing costs are mounting by 12% to 15% annually, firms like Covansys that produce single-digit growth in profits and revenues must change to remain competitive. Some of the most severe challenges that these firms face include: • Diminishing brands that fail to attract the best talent. Multinationals and the top Indian IT firms dominate the premium recruitment options for hiring new engineers — such as the first days of campus recruitment. Our interviews with recruitment professionals at these firms demonstrated that they have several open positions at the middle-management level, but that hiring laterally from the leading firms is difficult. Unable to compete with top-tier firms for talent, small and medium-size firms face serious shortages. • A dispersed client base that inhibits smaller firms from building up domain skills. In the late 1990s, many Indian firms picked up any business that came their way. As a result, most providers have clients across many more verticals and service lines than they can manage or nurture. Our research shows that these companies have no more than five clients in each vertical and service line that they claim to offer. As a result, they are spread too thin and are unable to invest enough in domain-specific centres of excellence and solutions. • A hand-to-mouth business situation that blocks future strategy development. Slow growth, reduced operating margins, and an inability to add new accounts characterise this troubled segment. These firms are unable to invest in developing management skills required for larger deals, building industry solution accelerators, and hiring onshore consulting skills. Business leaders at the mid-tier companies that we spoke with also said that their already-stretched management bandwidth prevents them from tackling issues in basic business operations, such as sales and client management. Most firms in this space — such as Hexaware, iGate, Mastek, NIIT, Polaris, and Patni — are either publicly traded or have VC firm/ private equity funding. Because of the aggressive demands that these stakeholders exert, the smaller Indian firms are further stressed when they fail to meet metrics like "headcount added in a quarter" or "new accounts won" in line with the top three. Given that these companies are in a vicious circle they need to either super-specialise or merge with other firms. Since low-cost and quality have become hygiene factors, firms need to build vertically aligned solutions that solve specific business pains, such as dealer management in auto or deploying RFID- and GPS-based logistics. Focusing on a clearly defined niche — such as HR processes and apps or engineering services for automotive — will allow firms to win over business from volume players like TCS or Infosys. Firms following this route — for example Tech Mahindra, Hexaware, and iFlex — continue to be successful in their niches, in spite of fierce competition. We estimate that more than 200 companies use services from one or more small or medium-size Indian providers. Several of these clients are new to offshore delivery and have worked on a project-by-project approach over the past two or three years. While our research shows that the work currently done offshore is not mission-critical, clients that are using these firms in more significant areas — such as ERP upgrades, remote infrastructure support, and legacy integration — should start tracking their providers more closely and have an exit strategy in case their chosen provider starts to falter. (The author is Sr. Analyst & Country Head (India), Forrester Research)

Don’t crib. Find a way!

There are two types of people in any organisation. Those who identify problems, and those who find solutions. So, which category do you fall into?

by JYOTIRMOY BOSE

ONE day, a junior colleague told me, "Something's bothered me for a while now, so I want to check it out with you. My job involves operational duties as part of my daily routine, interacting with others to coordinate or follow up, besides attending to e-mails, calls and visitors. Most days are hec tic without much time to spare, yet as I leave office every evening, I feel I haven't really accomplished anything. On a dayto-day basis, I get some feedback on tasks and activities from my boss, but rarely about my contribution and career path. How do I know if I'm adding value to the organisation or even to myself?"

I was instantly reminded of a Peanuts comic strip, where Charlie Brown reflects: "Another complete year gone by and what have I accomplished this year that I haven't accomplished every other year?" Charlie answers "Nothing!", going on to add, "How consistent can you get, Charlie Brown?!"

Many employees complain that they work very hard and are as competent (if not more) as the next person, yet get ignored during reward and promotion decisions. As a boss of mine told me early on in my career, "There's nothing wrong with your matter, but the same cannot be said of your manner."

It is your "matter", or domain expertise, which usually gets you a job, but it is your "manner" which determines where you land. We come across gyani accountants or lawyers and bureaucrats who will be able to quote the chapter, section and verse of every rule or statute that stands in the way of our proposal, application or case. We meet cynics or pessimists who do a brilliant job of compiling a laundry list of problems, or loopholes, which would make the marketing or sales plan fail. We have people, with Biblical faith in the BOM (Branch Operations Manual), who go, 'That's how it's been always done here'. Such people will often hoard information, or knowledge acquired over the years, refusing to share it with others. These are gyan paapis!

Sure, procedures and processes are important, nay key, for sustainable organisational growth and past practices have their value, but there is simultaneously a critical need to be responsive and flexible; to adapt to dynamic market conditions. Identifying issues and problems, or 'poking holes' in a plan or an organisational initiative is required, in fact expected. That's why we get paid.

What gets rewarded or recognised is your contribution in finding a way out of these problems. It's a mindset. Valued contributors steadfastly stay the course from 'problem identification' (what you get paid to do) to 'solution ori entation' (what gets you rewarded and recognised). I draw a distinction between 'problem identification' and, what management gurus term as, 'problem definition'. Those with a problem identification mindset see a problems as the justification for why something can't be done, almost as an end in itself. In sharp contrast, 'problem definition' is a starting point for those with solution-oriented mindset, to gain better understanding of the context and constraints, resulting in a crisp and sharp definition of the problem to be addressed. People who solve problems, or demonstrate persistence or tenacity in finding a way forward, will be valued as contributors by most boss es in an organisation. Employees may feel that their value to an organisation lies in consistently raising objections or pointing out flaws in business plans. They may believe that information they have hoarded over the years and their subject matter expertise makes them indispensable. In a progressively flat world, barriers to knowledge acquisition are falling and information is widely available, at little or no cost. In such a scenario, a gyan paapi runs a clear risk that the boss will call him in one Friday evening to say, "We don't know how we will manage without you, but from Monday, we are going to try!"

Jyotirmoy Bose runs a business consulting practice for The Times Group)

Learn the easy way, apply rules of thumb

Source: Economic Times

Financial planning and products are all about number work and most of it is fairly complex. It helps if there are certain simplifications to make life easy. One way is to have rules of thumb, which can be quickly applied to understand the situation at hand

HERE are a few commonly used rules of thumb categorised into mathematical, financial advice and mythical.

Mathematical Rules

THERE are some rules that are true due to mathematical properties:

Rule of 72:
This rule (written as 72/r) helps one determine the number of years it will take to double money, where r is the annual compounded rate of interest. If a bank offers you 8% p.a. compounded annual rate, then you can expect your money to double in approximately nine years. Similarly, in the earlier days of money doubling in five years, the implied annual compounding rate was around 14.2%.

Real rate is twice 'flat rate':
Many agents sell loans at a rate which appear mouth watering. But look closely and the fine print will say that the calculations are based on "flat rate". Flat rate means that the interest is linearly (or simply) calculated, rather than on a reducing balance method.

For example, if you take a five year (60 months) auto loan of Rs. 3,00,000 and the EMI is, say, Rs 6,335, the total payment will be Rs 6,335*60 months = Rs 3,80,100, implying that the interest paid is Rs 80,100 over the next 60 months.

The wrong (or the flat) method of calculating interest is to say that the annual interest paid is Rs 80,100/5 years = Rs 16,020, and hence the interest rate is 5.34% (Rs 16,020/Rs 3,00,000*100).

If you calculate the interest based on the reducing balance method, which is what banks actually do, then the real rate of interest works out to 10.18%, which is roughly twice ( 10.18%/5.34%=1.91) the interest rate that the agent will tell you. It is mathematically true that the real rate is approximately twice the flat rate.

Financial Advisors' Rules

THESE rules help the advisor in devising a strategy for you.

Term + Mutual Funds > ULIPs:
Bundling insurance and investments is typically not a good idea. A ULIP can be deconstructed into a term plan (pure risk cover) and an investment portion. Buying a term plan with the insurance company and investing the balance amount in a choice of mutual funds will typically yield you a better performance.
Debt outflows should be limited to 50% of your income: You would have noticed that banks offer loans of up to 48 times your monthly salary. Have you wondered why? Let us see: If you take a loan at 10.5% interest for 20 years, then the EMI per Rs lakh is Rs 1,000.

Assume that your monthly salary is Rs 10,000. Banks, following this rule of thumb, will expect that you can pay up to Rs 5,000 as EMI. Hence, they can offer you a loan of up to Rs 5,00,000. Incidentally, this amount is approximately 48 times your monthly salary!

If the bank realises that you are paying EMIs on other loans (like car or education loan), they will reduce the quantum that you are eligible for such that not more than Rs 5,000 of your income is used towards debt servicing. Anything more, and when the good times stop, you may be in a financial mess!

Mythical Rules

THESE rules have emerged to make life very simple for the financial decision maker. Since they are over simplified, these rules very quickly lose their relevance on digging further. Be careful when using them!

100 minus your age in equities:

This rule states that the allocation of your portfolio in equities should be a decreasing function of your age. So at the age of 30, you should be 70% invested in equities and at 70, 30% of your portfolio should be in equities.

While a good starting point, the actual portfolio allocation should depend a lot on your needs, upcoming milestones, special situations that you might have and your risk tolerance (ability and willingness). Hence, your advisor may recommend that even at the age of 30, you should be invested only 30% in equities,
depending on your circumstances.

10 times your annual salary as insurance: The issue with life insurance, as opposed to non-life, is that it is very hard to put a financial amount to any one's life. Hence, a rule-ofthumb says that your insurance should provide coverage worth 10 times your annual income: even if the life insurance corpus earns 10%
return after you are no more, your family will get your income.

Again, this is a good starting point, but not complete. For example, it does not take into account inflation, the corpus that you have already built up and the change in circumstances once you are no more. A better way is to calculate the Human Life Value (HLV) or ascertain the liabilities that you have to meet and cover them all. Your financial advisor can help you determine the amount of insurance that you need.

While it is good to have rules-ofthumb, it is important that you understand the underlying financial calculations. A detailed discussion on why your advisor is using a rule-of-thumb, will yield a lot of insights into your financial plans!

Rules of Life

Attributed to Bill Gates.

[Bill Gates talks about how feel-good, politically correct teachings created a generation of kids with no concept of reality and how this concept set them up for failure in the real world.]

11 things kids did not and will not learn in school.

Rule 1: Life is not fair - get used to it!

Rule 2: The world won't care about your self-esteem. The world will expect you to accomplish something BEFORE you feel good about yourself.

Rule 3: You will NOT make $60,000 a year right out of high school and you won't be a vice-president with a car phone â€" not until you earn both.

Rule 4: If you think your teacher is tough, wait till you get a boss.

Rule 5: Flipping burgers is not beneath your dignity. YourGrandparents had a different word for burger flipping: they called it opportunity .

Rule 6: If you mess up, it's not your parents' fault, so don't whine about your mistakes, learn from them.

Rule 7: Before you were born, your parents weren't as boring as they are now. They got that way from paying your bills, cleaning your clothes and listening to you talk about how cool you thought you were. So before you save the rain forest from the parasites of your parent's generation, try delousing the closet in your own room.

Rule 8: Your school may have done away with winners and losers, but life HAS NOT. In some schools, they have abolished failing grades and they'll give you as MANY TIMES as you want to get the right answer.This doesn't bear the slightest resemblance to ANYTHING in real life .

Rule 9: Life is not divided into semesters. You don't get summers off and very few employers are interested in helping you FIND YOURSELF. Do that on your own time.

Rule 10: Television is NOT real life. In real life people actuallyhave to leave the coffee shop and go to jobs .

Rule 11: Be nice to nerds. Chances are you'll end up working for one.

Thank your teacher that you can read this!

LOVE ALL, TRUST A FEW ... DO WRONG TO NONE ..........