Sunday, August 08, 2004

[commentary] Seeing Beyond "Traditional" Market Research + A Golden Opportunity for China's ISVs

Sunday, August 8, 2004
Dateline: China
More general commentary than news commentary per se; let's dig in ...
Seeing Beyond "Traditional" Market Research
We're all familiar ad nauseum with market forecasts by firms such as Gartner, Forrester, IDC and even i-bankers (albeit i-bankers tend to have a shorter time horizon).  I've always been a bit suspect of IT market forecasts and was delighted that the META Group (where I was VP, Electronic Business Strategies) focused on qualitative and consultative approaches to serving our end-user and vendor clients.  We were more like a SWAT team version of McKinsey:  Get in, get it done, get out, move on.  The Kensington Group, an IT advisory services industry watchdog firm, has found that most forecasts are simply dead wrong.  Frankly, it's hard to blame the IT advisory services:  Forecasting is tough stuff!!  Some of the firms claim that they are not producing forecasts, but are producing projections.  Call it what you will:  It's a forecast -- and it's usually wrong.  (In defense of the IT advisory services, often the commentary which accompanies a forecast is quite useful.  The forecast may be wrong, but often other issues are adequately -- and usefully -- addressed.)
I've been a long-time proponent of more "advanced" forecasting techniques ranging from Delphi (pioneered by the RAND Corporation) to cellular automata to Lotka-Volterra (which in a plain vanilla and watered-down form was the basis of a lead article in an issue of Harvard Business Review) to the good 'ol Fisher-Pry technique -- and just about every flavor of forecasting in between.  Not only do I read Technological Forecasting & Social Change, but I annually read numerous papers published in a few hundred engineering journals and in all ACM, IEEE and SPIE conference proceedings which cite a paper published in TF&SC.  (Think CiteSeer.)  And something relatively new has captured my attention; I want to share this with the readers of this blog/e-newsletter.
MIT's Technology Review has embarked on a interesting project called "Innovation Futures".  (They may not view this as a "project," but it feels like a "project" to me.)  There is a fair amount of history behind the project -- and some may recall the related DARPA fiasco last year -- but I'd like to stick specifically to the MIT project.  To quote Technology Review, "Innovation Futures is a predictive market system that enables users to predict the outcome of events related to emerging technologies."  Think of it as a futures and options market for emerging technologies -- NOT about companies, but about the underlying technologies.  For example, rather than betting for or against Nanosys as a pure-play nano firm, a "player" (think "trader") can bet for or against a definable nano event (e.g., commercial devices produced using molecular self-assembly techniques with combined annual sales of at least $100 million by 2006).  Something "easier" to phantom might be a bet that VoIP will be implemented in some form by at least 75% of G2000 companies by 2007.  Think about this:  Which would give a better indicator of buying intentions, the MIT predictive market system or an IT advisory service forecast?  I'll put my money on Innovation Futures or a clone.  (Frankly, I'd put my money on other technological forecasting techniques.  But if the choice is between the MIT system or Gartner, I'll go with MIT.  And the MIT market is a lot easier to follow than building a nonlinear model.  Leave the tough stuff to Pugh-Roberts; leave the everyday stuff to Innovation Futures.)
At this point, the MIT site doesn't have very much and most of what they have is focused on short(er)-term bets.  But this will be very interesting to watch, especially as broader -- and long(er)-term -- issues are market tested.  What happens when the marketing folks at IBM, Microsoft, Oracle, HP, Accenture, CSC, TCS, Infosys and SAP play?  And when the members of the Global Business Network and their brethren play?  And when IT advisory services analysts play?  And, perhaps most importantly, when CIOs representing companies of all different sizes and from all parts of globe start to play?  Food for thought.  I'll keep this readership posted:  I plan to have several long discussions with the folks running Innovation Futures.  I have many specific ideas to share with them.  For more information, see .
A Golden Opportunity for China's ISVs
In the past I've talked about the opportunities for SIs (systems integrators) in China to work with utility computing vendors in the States.  Well, I've given this a lot of thought and have another idea:  What about ISVs (independent software vendors) in China floating utility computing offerings in the States?  As one example, let's take Free CRM (see ).  The totally free version seems a bit worthless, but gives a smaller firm a chance to play with the idea with very little risk.  However, the "Professional" version is only $10 per month per user, far less than's average of $70 per month per user.  Okay, the "Professional" version of Free CRM (maybe they should call it "Cheap CRM" -- or some B-school grad might name it "Value-Driven CRM") certainly doesn't have the industrial strength features of  However, think a modified Pareto strategy:  A good chuck of the functionality, but at a fraction of the cost.  Add a few zingers like syncing for a PDA/smartphone and/or pages automatically "modified" to fit any form factor (see the current issue of CACM for a great article on this; hot research area and tomorrow's urls listing will include a link to a downloadable paper on this subject) and the offering from the ISV in China becomes incredibly -- perhaps irresistibly -- enticing.  And guess what:  At least in theory the platform could be leveraged for both the market in the States and in China.  (I have some reservations about this, but it's theoretically doable.)  BTW, the Free CRM solutions are NOT hosted, but for in-house initiatives.  However, the same marketing principles apply in this analysis.
Bottom line:  This is truly a golden opportunity for ISVs in ChinaDon't target the F1000; go after SMEs, perhaps the same firms that are normally targeted by the largest ISVs using telemarketing.  (I'm not suggesting a telemarketing strategy; I'm simply segmenting the market in Oracle fashion.)  Think of a U.S. company with less than 500 employees.  The world (well, at least the U.S. part of it) will be your oyster ...
China: A Hotbed for Management Consulting?
An interesting article published on the China Economic Net site (in Chinglish, no less) kind of uses the phrase "management consulting" in a rather broad way.  But when it gets to specifics, it's illuminating.  First, there is the claim that "China has become the management consulting market with the most rapid growth rate."  Not sure if this is really true, but it's certainly one of the more interesting markets. 
For specifics, BearingPoint is cited.  Basically, they're bursting at the seams and projecting growth from about 1,000 today to 6,000 in 2008.  CapGemini went the acquisition route.  The average annual salary of a "good management consultant" is about US$40,000 -- a far cry from what a "good management consultant" makes in the States.  And what do the consultants bring to the table?  Well, this is where the article went from being written in English to Chinglish.  But if I can make out what they mean, it's the ability for management consultants to help with implementation and operational issues.  See .
Bottom line:  SIs in China should look to adding so-called "management consulting" services to their offerings.  I am NOT suggesting a massive move in this direction, but a selected approach.  Also, China's SIs should look to partner with Western management consulting firms already in or planning to enter China.  On the one hand, the BearingPoints of the world make good partners, especially for sub-contracting work.  On the other hand, the BCGs of the world are more complimentary and not directly competitive.  Have a strategy and plan for dealing with both types of management consulting firms, i.e., the strategy firms with a stake in IT (e.g., @McKinsey) and the IT consultancies/SIs with a strategy play (e.g., IGS, Accenture, ...).
What I'm Reading (and Why I Didn't Post as Often as Usual Last Week)
The new proceedings for SIGIR04 are out and I've been sifting through dozens of papers.  Google seems like child's play compared to what is brewing.  However, I have it on good authority that Google is brewing many of the same things.  But so is Microsoft.  In the future, we all benefit.
David Scott Lewis
President & Principal Analyst
IT E-Strategies, Inc.
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