Sunday, April 09, 2017

The Riveting Rhythm of an Algorithm

Sudhir Raikar, IIFL | Mumbai |

Algo Trading represents a captivating convergence between Finance, Math and Technology. Before we explore its inherent potential, we need to explode a few myths. Here’s a primer for beginners.

The role of algorithms in addressing the needs and requirements of scores of disciplines across all walks of life – from commuting to computing – cannot be overemphasised. The answer to any challenge, common sense has it, is essentially a list of logically sequenced rules which is what an algorithm is all about. Named after Persian Mathematician Al-Khwarizmi’s set of arithmetic rules for Arabic numerals, algorithms evolved as potent tools for automated analysis, thanks initially to Charles Babbage’s pioneering Differential Engine and later Alan Turing’s dynamic Universal machine.

Today, the internet has truly unleashed the algorithmic potential in ways that were hard to imagine only a few years ago. Search engines, social networking platforms, e-commerce portals, hardware, software and middleware vendors - just about every entity relies heavily on the power of algorithms to identify preferences, define trends, influence target communities and build competitive edge in an ever-evolving marketplace. Data mining and analytics have taken a big leap forward with the recent marriage between algorithms and artificial intelligence.

Talking of the bourses, algorithmic trading is a sterling example highlighting technology’s enabling role of enhancing financial decision making in a highly unpredictable environment. Algo trading is an emotion-free, bias-free, scrupulous and validated mathematical analysis of humungous volumes of market data. Apart from expediting the analysis and execution processes, it helps market players make better decisions across diverse spheres including market making, inter-market spreads, arbitrage, hedging or speculation – whether bullish, bearish or range-bound.

Algorithms analyze market data based on pre-defined parameters and mathematical models which could be diverse in nature – from purely fundamental to the pattern-based. The models are the same, but the algorithmic value-add comes from the precision, flexibility and speed of analysis. Contrary to popular perception, algorithmic logic is fairly simple to understand even if they are intricate to develop and design. Simply put, algorithms study the stock market by weeding out emotional, subjective and irrelevant factors from the analysis. For Algo trading, it’s elementary to define the set of rules for trade entries and exits as also to gainfully employ historical data to build trading strategies.

Now that we have some idea of the essence of Algo trading, let’s explode the popular myths surrounding the term. Based on the clarity of thought, it would become much easier to explore the Algo market space for identifying and engaging with credible vendors and value providers.

Myth 1: Algo trading is fool-proof

Risk is integral to Algo trading like it is to any form of market activity. When it comes to unpredictability, they become as infallible as the weather prediction at times if not more often. The market can beat the models in several unfathomable ways and it’s necessary to take a holistic view of the overall portfolio. You may win some claims, you may lose some stakes but if you end up being a net winner, you have reaped the rewards of Algo trading, much like the common investor who spreads his or her portfolio across sectors and businesses to profit from diversification. And like how one needs to evaluate one’s portfolio potency from time to time, even the mathematical models governing Algo trading need to be regularly assessed for their dynamism and suitability in line with the targets and sectoral specifics of every investment. Another issue of concern and consideration is the caustic Algo warfare wherein certain crafty algorithms regularly look to outsmart the others to make a killing based on the illusions they create. There have been instances of algorithmic manipulations in the market that essentially profit from misleading other algorithm-driven traders as well as common investors. For instance, some Algos create artificial buying pressure on certain counters to influence other players to make aggressive purchases in anticipation of attractive price highs. Once the intended triggers have borne fruit, the mayhem architect quietly exits the scene having reaped a fortune.

Myth 2: Algo trading is only for the big fish

This is more the result of a fear psychosis emanating from ignorance. Essentially an enabler, this tool is pretty democratic in its utility value and proves gainful provided one is prudent about risk management and constant evaluation. Expert help is available to the retail investor to reap the rewards of Algo trading like it is accessible to treasury houses, family empires and HNIs. Like it’s very common today for common investors to engage in technical analysis based on candlestick patterns and moving averages, they can do well to gain some familiarity about Algo trading as well. As it is, this space is gradually opening up its vistas to the retail investor. There are many companies, predominantly in the West, that now offer an unambiguous design environments and programming templates to common traders for developing customised Algo trading strategies. Many vendors are trying to optimize the coding and back testing time to make Algo trading more attractive for everyday investors who wish to get a flavour of the game without any help from computer whiz kids or mathematical geniuses. In the time to come, we may have more and more user-friendly platforms allowing common investors to input asset types, indicators and algorithms in order to track meaningful patterns and predict movements for specified time frames.

Algo trading is naturally suited to asset classes with limited number of participants with the time, inclination and wherewithal to develop quant-based strategies for high-volume trades in an extremely volatile scenario. There’s no surprise that retail investors are invariably not part of this segment dominated by hedge funds and arbitrage houses. However, this fact does not imply the absence of a level playing field as many like to believe. Even without quant-based trading, small traders could never match the might of the top-notch brokers and institutional investors. More importantly, a small investor looking to make steady long-term gains has no reason to compete with the big guns. He/she can still make gainful long term gains from fundamental analysis as also take benefit of the Algo space to sharpen his/her analytical abilities. No wonder, Algo strategies hitherto applicable to high-frequency trades of a few seconds are increasingly being extended to conventional trading of a larger time span – whether days, weeks or months.

Myth 3: Algo trading technology is copybook

Technology for Algo trading, hard as one may like to believe, is far from standard. Right from the choice of language to system architecture, much depends on the trading specifics including trading frequency and volumes.

Readers will find the following thought piece highly informative in understanding the technology considerations of setting up a Algo trading environment including performance, ease of development, resiliency and testing, separation of concerns, familiarity, maintenance, source code availability, licensing costs and maturity of libraries:

Myth 4: Algo trading is disruptive

This is more an expectation than a myth but still far from reality. Algo trading for all its promise is a great complement to conventional trading. In every trade, the human gut feel is of the greatest essence while the quantitative analysis is a great validation tool to remove ambiguity and bias. With the passage of time, Algo trading will only gain from strength to strength for its value proposition is indisputable in making trading decisions fast, reliable and cost-effective. As our trading and investing psyches evolve, we will be keener to take advantage of analytics to sharpen our financial decision-making. But that certainly won’t make Algo trading disruptive as the place and premium of human intuition and insight is irreplaceable especially in situations which are beyond machine comprehension including political instability and natural calamities. As for the future, it clearly belongs to those who show the maturity and alacrity to become masters of both worlds. This tribe will always be in minority but will rule over the majority.

Wednesday, March 15, 2017

मी जगून पाहिलंय

15th March is my dad's birthday. I am reproducing one literary gem from the timeless archives of his philosophical writings (thanks to Meena Aatya, I could access some of his old priceless letters)

असं कार्य मी करून पाहिलंय
ज्याची कदर कधी होत नाही
असा स्वार्थ मी सोडून पाहिलाय
ज्याला त्याग कुणी म्हणत नाही

असं खरं मी बोलून पाहिलंय
जे कधी कुणाला पटत नाही
असा धर्म मी झुगारून पाहिलाय
जो मनाला मोठं करीत नाही

असा विश्वास मी टाकून पाहिलाय
ज्याला किंतु कसा शिवत नाही
अशा बेअब्रूत मी बुडून पाहिलंय
ज्यातून वर कुणी निघत नाही

अशा आगीत मी जळून पाहिलंय
जिची हाळ कुणाला लागत नाही
असं मरण मी मरून पाहिलंय
ज्या मर्तिकाला कुणी जमत नाही

असा प्रवास मी करून पाहिलाय
ज्यात खंड कधी पडत नाही
असं वाळवंट मी पार केलयं
ज्यात ओऍसिस कुठं दिसत नाही

अशा मार्गानं मी चालून आलोय
ज्यात मदत कुणाची मिळत नाही
असं अंतर मी कापून काढलय
जे लक्षात कुणाच्या येत नाही

असं काहीतरी मी मिळवून पाहिलंय
जे सहसा कुणाला लाभत नाही
असं जीवन मी जगून पाहिलंय
जे वाया कधीच जात नाही

- यशवंत रायकर (बडोदा)

Wednesday, February 22, 2017

The Best Option: Trust the Greeks

Courtesy: An IIFL appetizer on Option Greeks and their pivotal significance in Options trading.
Sudhir Raikar, Content architect, IIFL

Ancient Greek philosophy, much like the Indian Vedic thought, is unanimously hailed as the mother of deep introspection and radical reasoning. In fact, the European renaissance owes a lot to the Hellenic republic for the knowledge repository in diverse areas including polity, philosophy, ethics, metaphysics, ontology, logic, biology, rhetoric, and aesthetics. No wonder, the Americans still turn to Aristotle’s Poetics to fathom the root cause of any tragedy. The tragic flaw, Aristotle reminds us, is hubris, an excessive pride that causes the hero to ignore a divine warning or to break a moral law.

In the context of financial tragedies, hubris could well be the collective complacency and conceit that breed inertia and indecision. Going deeper into the womb of the financial context, a conveniently complacent perception that guides most players in Options trading is that the macro variable of market direction rules the game, with little or no thought to the velocity and volatility of change as also the associated time bleed.

Trust the Greeks for providing a reliable compass to find our way through the often-turbulent, living waters of premium movements – in the form of a lighthouse popularly known as ‘The Option Greeks’. A better appreciation of the Option Greeks will help novice traders lock horns with the intricacies of Options pricing, which go far beyond mere price movements of the underlying stocks or indices and merit a deeper probe into the distinction between option price and option value.

The Option Greeks find their roots in mathematical models like Black-Scholes and Cox-Ross-Rubinstein. They quarantine a given variable to study the effect of its change on the options price. Consequently, we get a concrete rationale, albeit theoretical, to base our trading decisions which otherwise could prove to be a nightmarish experience if driven by blind faith, half-baked advice or reckless choices. If you develop some resonance for the Option Greeks, you would never say, “It’s all Greek to me”. To help you do just that, here’re five Greeks introducing themselves for the very first time in the history of Options Trading:

Delta: Prices change, so do premia

Hi folks, I am well known to students of physics and mathematics. In the context of options trading, I am a dynamic number revealing the change in premium following the change in the price of the underlying security. For call options, I move between 0 and 1. So if I am 0.3, the premium will vary by 0.3 points for every 1 point of change in the underlying price. For Put options, I range between -1 and 0 (diametrically opposite you see). So, for every gain of underlying price, put premium goes down to my extent (exact opposite for any fall in underlying price). By using an options calculator, you can match my values with the given moneyness applied to calls and puts as per the respective logic in contrary directions (ITM: positive intrinsic value and time value, ATM: strike price equal to current price or OTM: no intrinsic value)

Gamma: Who moved my delta

Hello, I am expressed as a positive number for both calls and puts, calculated in terms of my 2nd order derivative Vomma. I let you know the rate at change in the option’s delta in line with the change in the underlying. So, delta moves to the extent of my value for every point move of the underlying. A revised delta is thus original delta + (point change in underlying multiplied by me) I may appear hopelessly vague to you but do pay close attention nevertheless. It’s only when you consult me for risk analysis, you find that equal deltas may not bear identical outcomes. A delta with a higher value of mine will spell higher risk or reward, given the fact that any antagonistic change in the underlying stock or index will have a large adverse effect on the delta (ditto for favourable outcomes).

Vega: Left, right, centre of Ups and Downs

I measure the rate of change of option’s premium for every percent change in volatility which is in turn represented by fear and uncertainty over likely and unlikely market developments. All options, whether calls or puts, rise in value with the rise in volatility thereby increasing the likelihood of the option expiring ITM. No marks for guessing that I am a positive number, for both calls and puts. All other things being constant, I will always be higher for ATM options compared to the other two variants given that ATM options are most sensitive to volatility in terms of aggregate points. Need I add that OTM options are the most sensitive to volatility in percent terms.

Theta: All about time and its decay

I measure the rate at which an option loses value with the passage of time. As options get closer to expiration, the rate of money loss increases, so does the premium. The eroding premium represents the time decay. Simply put, I represent loss of points in the given time frame. I have different mood swings for different strike prices. For deep OTM and ITM options, I deplete at a furious pace in the initial stages and get reduced to almost nil during the concluding phase. But for ATM options, I do the contrary, constant during the initial periods and super-fast in decay during the last phase, with the pace of deterioration maximum in the last leg. I am the hot favourite of option sellers for obvious reasons. By the way, time expiry is more crucial than what you think. So even if my friend Vega shows high volatility, he may have a limited impact on the option value if the time to expiry is less. So, read mine and Vega’s values in concurrence given that time and volatility are interrelated variables.

Rho: Strictly a matter of interest

I begin (and end) with a humble submission! Yes, I don’t matter much to you given the relatively steady state of bank interest rates. Yet, no harm in knowing me better. I stand for the change in option value for every percent-point change in interest rates. My formula is rather complex, but it should suffice to say that I am calculated as the first derivative of the option's value with respect to the risk-free rate. Interest rates are used in pricing models to consider the options price based on its hedged value. I am positive for calls bought, as higher interest rates push call premiums up. Conversely, I am negative for puts bought as higher interest rates erode put premiums.

Sunday, January 29, 2017

Workshop interventions...Celebrating five fruitful years

On Feb 5, 2017, I will be completing five years of workshop intervention programs aimed at facilitating different target groups - individuals, institutions and organizations - to move up the value chain in respective spheres. These workshops continue to be free of cost and will remain so, despite the repeated plea from some stakeholders to make them fee-based. I appreciate their view point, that anything free, more so in the fertile space of education, is undervalued by default, which also implies that anything offered for a fee is upheld by design.

Having said that, the whole charm of my workshops is their 'free for all' tag which helps me escape the burden of obligation - and yet ensures measurable value for the target audience provided they come with an open mind, free of the baggage of pre-conceived notions and prescriptive expectations.

Over the span of five years, I have conducted these freewheeling sessions across different geographies - whether pan India, US, UK, Central Asia or Africa - from the scenic town called Horley near London to a sleepy village called Nakuru in Nairobi, from the Mount prospect locality near downtown Chicago to the central business district of Almaty, Kazakhstan, from the pious landmark of Rishikesh to the tribal pockets of Meghalaya, and from the Haddo market area of Port Blair to the awesome terrain of Alangar in Karnataka - for diverse target groups - whether MNCs or SMEs, PSUs or NGOs, kids or housewives, salaried or self employed, contractors or workers, children of plush societies or urchins from slum pockets...

Some of the popular workshops and modules:

Poetry of Mathematics and the science of languages

From Classroom to Workplace: managing the academia-industry transition

Learning beyond the confines of Arts, Science and Commerce

Learning through Music, Literature, Films & Theatre

Probing the Child's mind: No child's play

Decoding gender sensitivity, financial literacy, career planning and life & language skills

Moving from intent to content: Actionable tips on ‘Fit for purpose’ writing

Why get better at communication?

o A brief on communication challenges of the ‘playground’ called Workplace

o What is Fit for Purpose writing and how it helps?

Cutting across cultures: Camaraderie beyond comfort zones

• The Pivotal Role of Language, History and philosophy in cross-culture communication
• Edward Hall’s concept of low-context and high-context communication
• Persuasion and assertion in a multi-cultural scenario – I, we and us.
• Managing a global team: Consensus stems from cultural relativity
• How to become a culture catalyst – going beyond acceptance and tolerance
• Interactive discussion on interesting specifics of cultural contexts – American, European, Asian

Friday, January 20, 2017

Shemaroo Entertainment: The Content Connoisseurs

Very few corporates have their legacy rooted in innovation the way Shemaroo has. Incepted way back in 1962, the year of the Indo-China war, the Shemaroo trump card of ‘engaging content’ has come a long way, locking horns with the evolving paradigms of the entertainment market across eras: from the relatively restrained avenues of the erstwhile ‘webless’ and ‘immobile’ world to the boundless opportunities of an ever-expanding digital universe.

Sudhir Raikar, Content Architect, IIFL | Mumbai | January 20, 2017 10:50 IST

Book library, video rentals, home video, broadcast syndication, film distribution, production and restoration, phenomenal progression is a way of life for the 55-year old warhorse, Shemaroo Entertainment. Given its seamless transition into greener pastures and smart assortment of diverse businesses across media - whether Satellite channels, Physical formats, Mobile, Internet, Broadband, IPTV or DTH – Shemaroo has raised the bar for the burgeoning content creation, aggregation and distribution market in India.

Shemaroo Think Tank: Thought leadership across generations

From the flagship book library to the current day YouTube repository, the Shemaroo management has carved a niche in territory after territory on the wings of its unflinching conviction and rock-solid resolve. That’s precisely why the Shemaroo narrative of exemplary evolution is incomplete without a tribute to founder Buddhichand Maroo’s flagship book library - its ethos and essence - that continues to guide the flagbearers of Shemaroo’s current day businesses.

The Shemaroo saga: Offbeat Off-screen blockbuster

The roots of the Shemaroo’s 200-crore enterprise employing over 500 people can be traced to Buddhichand Maroo’s eternal love for books. The invigorating company of thriller bestsellers during a part-time stint at an old paper mart enthused him to incept a circulating library of his own. The dream came true in 1962, albeit on borrowed money, in Warden Road of South Mumbai (then Bombay) The name Shemaroo was an acronym of the surnames of friends-turned-partners - Gangajibhai Shethia and Buddhichand Maroo. (Subsequently, Shetias exited the business but the Maroos retained the name, presumably for the emotional connect.)

The library stocked magazines and books across genres – from detective novels, literary gems and glossy paperbacks to inspirational and self-help literature, children’s books and women-centric publications. But Buddhichand was not content with the mere sourcing and stocking (from different old paper and book marts). He travelled the extra mile, in the true spirt of a knowledge catalyst, to establish a personal bond with members – whether commoners or celebrities - based on which he would tailor the library collection to suit the needs of an ever-growing clientele from all walks of life. No wonder, the readership was also a rich assortment of the most happening people of Mumbai including industrialists, writers, journalists and film and theatre personalities. The library opened three branches in quick time.

Innovation being an integral part of the Shemaroo DNA, the family was always looking for greener pastures even though their existing business was yet in its prime years. When Video Cassette Recorders (VCR) arrived on Indian shores, people raved about these incredible ‘fairy-tale machines’ that magically sucked in a cassette to play a film or recorded programme just like a tape recorder played audio. But the Maroos saw an irresistible business opportunity in the technology, beyond the wonderment. The Shemaroo Home Library, brainchild of younger brother Raman, who had seen an exhibition demo en route a business trip to Cologne, began life in 1976 with an inventory of 20 cassettes. With VCR technology in its formative stage in India and the then prevalent Licence Raj regime which made imports impossible, cassette production was itself a limiting factor. But the brothers worked around this supply-side constraint with yet another Shemaroo brainwave. They initially borrowed cassettes from different affluent business families, who had their own personal collections, and circulated the stock-in-trade, routing it from one family to another for a fee. This way, each family enjoyed a steady fare of new arrivals without having to own them. Subsequently, the Maroo family also acquired a few cassettes on their trips abroad. In due course, the library had over 3000 members relishing thousands of titles. The VCR market was by now at a tipping point, and with scores of nondescript libraries cropping up in every nook and corner of the country’s cities and towns, Shemaroo set its eyes on a new goal: creating an in-house video label.

A heart-to-heart conversation at a film gathering, with the nephew of noted filmmaker Raj Khosla, proved the turning point. Convinced of the value prop of Raman Maroo’s proposition, the Khoslas sold the rights of many a blockbuster film from their stable. Memorable hits like Mera Gaon Mera Desh and Do Raaste entered the video market under the Shemaroo banner. The film library swelled with time and effort and today Shemaroo’s content library has over 3400 titles across different genres.

In the nineties, spurred by Dr. Manmohan Singh’s liberalization drive, the private TV channel industry took off and the Shemaroo family was keen to mark its presence in this space too. While exploring a deal to buy films of Sony’s Columbia Tristar, the Maroo brothers ended up taking an equity stake in Sony’s Indian TV channel. Raman’s experience as the channel’s director came handy for a ringside view of India’s entertainment dynamic and later paved the way for Shemaroo’s debut into filmmaking.

Even a cursory glance at the Shemaroo graph makes it evident that innovation is at the core of their business. Working around problems, going beyond constraints and looking at the larger picture is ingrained into the management vision, mission and values. Today, the firm’s digital initiatives are being spearheaded by Buddhichand’s son Jai Maroo and maternal nephew Hiren Gada. Although they are locking horns with a new set of challenges and opportunities, the rock-solid Shemaroo business sense is intact. So is the zest and zeal to conquer new frontiers.

The Road Ahead
Shemaroo’s new media initiatives, at this juncture, constitute less than 20 per cent of total revenues. Bulk of the contribution comes from content aggregation and distribution while the home entertainment segment fetches a small slice. But given the company’s track record of making smart inroads into sunrise segments as also its rich insights into the digital space, Shemaroo’s new media business is set to scale new highs in the immediate future. The momentum should come about from one, the growing viewership on digital platforms led by high-speed internet, increased smart phone penetration and better infrastructure and two, more realizations from better view monetization and RPM rates, notwithstanding the glaring gap between India and the West in RPM rates.

On the conventional business front, India’s prominent film-centric entertainment preferences continue to spell great news for Shemaroo. Here, any meteoric rise in business opportunities seems unlikely going forward but Shemaroo should be able to maintain its competitive edge based on its impressive catalog and first-mover advantage. The future revenue mix, that would tilt in favour of new media in due course, should also improve margins and enhance asset utilization due to the inherent rewards of the digital turf.

Going forward in the digital-led era, Shemaroo would have to constantly strike a judicious balance between the tranquillity of balance sheet stability and the traction of library ramp up. Given the dynamic nature of opportunities on both sides – on one end, the graph of new media topline revenues and on the other, acquisition of compelling content to enhance the content bank - deciding the cut off for tapering the ongoing investment spree would obviously be a tight rope walk. But given the management’s overall prudence as also the practice of cautiously weighing each proposition for the cost and benefit, we strongly believe they will achieve the golden mean with resounding conviction, if not immediately strike gold. After all, it’s the management’s far-sightedness that has placed it in a comfortable position on the debt front with enough leeway for making more investments, if an opportunity should arise, and more importantly devoid of any undue FCF worries unlike what many analysts would like to believe.

Already the Shemaroo digital strides are quite impressive, especially the traction on their YouTube channels (although the revenue contribution is currently way less than what the Telco traction contributes). The Shemaroo creative value-add in this space is superlative. A case in point is their channel Retro Diaries which recalls Hindi film classics like Taxi Driver, Pakeezah and Do Bigha Zameen for a contemporary audience - a voiceover-led neat summary, rich in style and substance, highlights the timelessness of handpicked films of the bygone era for the benefit of today’s youth. This initiative makes Shemaroo a high-minded cultural ambassador on behalf of the entire film fraternity, an edge that goes beyond the triumph of mere numbers linked with views and clicks. Going forward, this value-add should motivate yester year film producers to grant perpetual rights to Shemaroo for their creations, especially when they face the looming threat of shelf-life expiry and given Shemaroo’s command over second and subsequent revenue cycles of content distribution.

Having said that, one feels the Shemaroo team needs to articulate its value prop more effectively, especially for the benefit of a global audience. The YouTube channels demand a better preface introducing the Shemaroo universe at a glance, where the conviction behind each channel needs to be elaborated, more than a mere mention of number of hits. Ditto for the Shemaroo website which hardly conveys the distinctive features of the Shemaroo DNA. This is one area where the staple Shemaroo obsession with caution could prove counterproductive.

Many PEs/VCs still regard Shemaroo as only a catalog library even though it has travelled many a mile to become a wholesome content creator and provider across media with credible presence even in tech-centric areas like animation and restoration. In the quality time and attention to the repackaging of Bollywood content, the Shemaroo team seems to have inadvertently kept the packaging of their core value content on the backburner. After all, founder Buddhichand’s Midas touch is their most crucial intangible asset of undeniably tangible gains. The founding story deserves better packaging, rather than leaving it solely to the media to rehash the Shemaroo lineage saga from time to time.

The Shemaroo conviction, as expressed in impromptu management conversations, is way more powerful and reassuring than what the web content conveys. And articulation doesn’t mean telling the whole story unlike what most managements believe. A smart gist of the past, present and future should suffice. Shemaroo, given its wealth of content, has the potential to become the most definitive encyclopaedia on India-stamped entertainment – film as well as non-film. For overseas communication & entertainment players keen to make quick inroads into India, Shemaroo can offer an India-advisory service ahead of collaborating with them.

Management Interaction

Shemaroo’s most distinctive value prop is undoubtedly the management’s vision and values, which in IT terminology is much like the Microservices Approach to Solution Architecture, of not replacing the monolith by a new structure overnight, rather testing out new waters in smaller, parallel silos and launching new initiatives in incremental fashion, and once convinced of the overall cost-benefit at a portfolio level, focusing on the new pursuit, mitigating risks to the extent possible and working around challenges and constraints aided by lateral thinking. Hiren Gada, whole-time director and CFO, Shemaroo Entertainment in conversation with IIFL’s Sudhir Raikar.

How has the entertainment industry evolved over the years?
The vehicles of delivery have changed, not the need for quality content. Content is timeless across eras, more so in the entertainment space. In the bygone era, film watching was a rare privilege for most households. Our home video service served the demand of the time admirably well, enabling one to watch one’s favourite movies from the comforts of the living room. In stark contrast, today one has the luxury of the proverbial remote to sift through scores of serials, films and entertainment programs being aired on different channels at any point of time.

The entertainment market in India is very different from that of the developed countries. Notwithstanding the fact that India has a thriving film and music industry, RPUs in India are very low as compared to US. So, despite the plethora of conventional and new media platforms on the supply side, India is still largely an underserved market. At the same time, demographics and a predominantly young population are India’s biggest strengths. So the scope for market expansion is huge.

Thanks to our creative team’s acumen and alacrity, we have repackaged our vintage content to suit the demands of the digital generation. A case in point is our 15-minute movie segment, an astutely condensed version of a regular three-hour movie, in line with the tastes and preferences of the YouTube fraternity. It offers them a delightful peak into the film’s plot which more than keeping them glued, motivates them to watch the whole film. So, in more ways than one, we are reviving the charm of a vintage movie for the youth of today.

Has the new media changed the demand-supply equation of entertainment?
The enabling role of technology is undeniable. With technology, access to various forms of entertainment is now easier, faster and better, be it broadcast via satellite, cable or terrestrial mode. In the personal consumption space, video cassettes made way for physical media which in turn is migrating to the digital regime. The prevalent trend is in favour of internet-based and mobile-based platforms. But content is still the king. After all, our YouTube are not because of the ease of access, it’s primarily due to the quality of our content, the value-adds we etch it with. Technology enriches the recall value by facilitating any time access and repeat viewing at will. For us, content and tech always go hand in hand. ​

Having said that, certain realities of today can’t be overlooked. Today’s households, middle class in particular, have a default ‘second-best’ alternative screen in their form of their cell phones. Invariably, the living room TV screen is switched on and off depending on the preferences of a select, mostly elderly, group – either by housewives for their regular Saas-Bahu fare or by the male members for their daily dose of news, sports and action spectacles. So, the younger folks of the family invariably look up to the ever-obliging cell phone as their most reliable source of entertainment – which is more user-friendly, delightfully mobile and ripe with downloadable variety entertainment. This household factor has changed the very dynamic of the entertainment industry and almost all the providers and via media players are vying for a share of this pie.

So, digital is the way to go for you?
Absolutely. Our acknowledgement in favour of this vibrant platform came way back in 2007. Given the nature of business, of owning and aggregating content, digital was a natural evolution for us. So, we tied up with a few regional players of the music and audio space for supply of ringtones, mobile radio and song downloads in as many as 20 languages. We also digitised our film library and made it compatible and accessible across different formats.

Our digital strategy is broad-based. We are not just thinking of films here but even special interest productions. The whole idea is to build sustainable revenue streams. That explains our premium DTH offerings – based on themes like fitness, health and self-help - running on channels like Tata Sky, Airtel and Dish TV. Besides, we have the refurbished library content of films and TV serials that become our additional monetization mechanisms.

Having said that, our digital focus in no way implies the end of the home video segment. The demand for home video is still alive, what’s changed is only the format of delivery. Given the higher price tag and susceptibility to piracy, the physical format is no longer feasible. Digital makes the whole process efficient and secure. Hence the thrust on moving to digital as fast as possible.

What’s your take on the competitive landscape of today?
We have minimised the risk window through our focus on re-issue segment, steering clear of new film arena. Besides, we put in a lot of thought in the choice of films. The enduring nature of the product – say a film like Amar Akbar Anthony – itself creates sustainable demand. Talking of competition, we see one strong contender in the producer fraternity but having said that, it’s difficult to make quick inroads into this sector especially when you have no experience of the space. The production houses are focused on theatrical distribution where we have no presence. Content distribution is our forte.

What about your home productions?
We are distributors first and then producers. Of course, we’ll selectively look at opportunities for film production but we are focused on the special interest non-film segments given the healthy demand for such products.

​Has the ongoing data volume slowdown in the telecom space affected your new media prospects?
Notwithstanding a minor slowdown in data volume in the telecom space in the recent few months, the video content consumption has been steadily increasing. In the developed countries, video based consumption is substantially higher as compared to India. The important aspect in India is that the overall trend of data consumption is still on an upward path and most drivers for this continued momentum are strongly intact. The current trends like wider acceptance of 3G & 4G, introduction of competitive data plans by telecom operators in the wake of Jio launch, improving broadband connectivity, surge in affordable smartphones sales, etc. are bound to increase the demand for video consumption.

In the new media, bandwidth issues are the biggest challenge. With time the cost of bandwidth is reducing and so even a normal consumer enjoys higher bandwidth. This is also one of the reasons why consumption of entertainment on the online platform is gaining popularity. Also, with better streaming solutions and increasing Internet penetration in India, bandwidth is no longer a constraint.

Managing a good creative product at a reasonable cost is a challenge these days. As we see it, video consumption gets a boost with bandwidth growth. Hence a delay in the rollout of 4G in India could be a challenge.

Which platform(s) among mobile, DTH and TV have proved more productive, both in terms of revenue and brand visibility?
Shemaroo is technology and platform agnostic. Our business model is based on content monetization across multiple platforms. In this context, our business growth would be linked to the scale of the respective platforms. We have presence/relationships across the ecosystem. We are partners to most of the services/platforms due to our content strength and industry experience. At this point, television is one platform with maximum scale and reach in the M&E space; Consequently, even for us, TV remains one of the biggest contributors of revenue.

Could you brief us on the status of your initiative to create a self-regulatory code of conduct which is critical to your industry.
This initiative is currently work-in-progress and with respect to time span, it is medium to long term in nature. I acknowledge piracy is an issue for entire Bollywood.

What’s the thought behind your Bollywood-theme merchandise initiative Yedaz?
Globally, Licensing & Merchandising (L & M) is a huge space and a major source of revenue for content owners. However, in India, the L&M business is currently at a very nascent stage and only serves as an auxiliary source of revenue. Bollywood has a strong consumer and emotional connect in India. Shemaroo has a large library of content (including movie dialogues, songs and characters) which appeals to various age categories. So, we are trying to leverage on an existing content asset under the umbrella of ‘Yedaz’. This is our experiment in the L&M space with minimal capital investments.

Wednesday, January 18, 2017

Kedar Vanjape: Maverick in Motion

Kedar Vanjape, 38, represents the changing face of Real Estate, away from the surreal towards the real. His corporate den, situated in a quiet corner off a busy road in the heart of Pune, hardly looks like a real estate developer's office. Basking in the glory of bright sunlight, adorned with minimalistic decor, blessed with an inviting sit out balcony and to top it all, manned by a friendly and courteous staff, the cosy place looks more like a sport and recreation club. But if you suspect business would be amiss in this laid-back space, you are sadly mistaken. The whole office is buzzing with positive action, staffers greeting prospective clients and helping flat owners with different modalities.

The man at the helm, Kedar Vanjape, is in the thick of things himself: taking phone calls, attending to visitors and also addressing the flurry of questions I throw at him. One look at him and you can make out his humility is not for the sake of advertisement. He's unassuming to the core, and delightfully blunt in his observations, calling spade a spade on just about every issue under the sun - real estate included. His phenomenal life story is an inspiration for all those who wish to tread on the offbeat path to success and achievement,who wish to scale new heights and yet stay grounded at all times.

Hailing from the small town of Kopargaon in Ahmednagar district, Kedar aspired to earn his laurels in the medical field, following in the footsteps of his Surgeon father and Gynecologist mother. When he could not secure the requisite marks for enrollment into the medical stream, he opted for engineering and cleared his Industrial Engineering from VIT, Pune. His first tryst with employment happened with the United Nations Industrial Development Organization in the capacity of a Junior National Consultant. Life was going the UN way when he got what he thought was an irresistible offer. His cousin Sanjay Deshpande, who worked with the renowned DSK Developers, asked him to join him. "Honestly, glamour was the biggest pull for me at that age, having seen Sanjay's life style from close quarters. I was convinced, at first sight, that real estate was the ultimate gateway to a life adorned with swanky cars and palatial homes."

So, Kedar took the plunge in the brick and mortar world, armed with his starry-eyed ambition and steely resolve. But to his utter dismay, Sanjay quit DSK and started out on his own in quick succession. Having burnt all bridges, Kedar had no option but to stay put, and somehow try and come to terms with the new reality. He decided to take the challenge head on and the ensuing effort earned him rich dividends. In a short span, he got quality exposure in different facets of realty - desk work, drawing blueprints, managing contractors, supervising sites, customer facing, ensuring legal formalities, marketing, liasioning with government offices - you name it, he did it. The depth and gravity of the grassroots experience helps him to this day as he's on first name terms with most stakeholders in the business who have moved up the value chain in terms of designations but still value their relationships with him above mere transactions.

His dogged determination and back-breaking effort saw him rise to the position of Executive Director at DSK Developers. But after this elevation, his career suffered the consequences of the glass ceiling effect. "I have learnt a lot from the founder D S Kulkarni, especially about maintaining a judicious balance between lifestyle preferences and professional decorum. Having said that,I found him highly insecure in matters of succession planning and delegation of authority. My ambition, soaring on the wings of my capability, was bursting at the seams then and I just couldn't continue in an environment which, knowingly or unknowingly, sought to clip my wings."

A chance encounter with the legendary Daji Kaka Gadgil (of P N Gadgil Jewellers fame) proved the decisive turning point. The Gadgils wished to venture into real estate and found in Kedar the perfect partner to take the idea to fruition. The four-year collaboration indeed turned out to be quite fruitful and they completed many a sterling project in the given span. It was in June 2013 that Kedar branched out on his own under the name Kedar Vanjape Developers Limited (KVDL). The failing health of Daji Kaka Gadgil and his demise in Jan 2014 left a permanent void for Kedar, as his chemistry was solely with the doyen of the jewellery industry, not with his successors.

KVDL has undertaken several landmark projects on the outskirts of Pune, with few on the verge of completion. But KVDL narrative is incomplete without the mention of an incredible life lesson that Kedar learnt from his mother.

Having seen a fair amount of success, Kedar was tempted to upgrade his lifestyle at a juncture when the construction industry was on a downturn. "I somehow could foresee that this slowdown was not a market correction, it was a business correction, yet the lure of an affluent lifestyle was overpowering." Kedar reveals.

So he went ahead and bought a plot of land to construct a lavish bungalow for the family. Subsequently, he also decided to buy his dream Merc car and wanted his mom to accompany him to the showroom for paying the booking amount.

She agreed to accompany him but posed three questions upfront

1. Can you afford the car?

2. Would it match your persona? ,and,

3. Is there a compelling need for it?

His mom herself answered the first two questions in the affirmative but passed the third in his court.

"My answer was obviously a big resounding 'No' and the car purchase plan was scrapped on spot." Kedar reminisces.

But the radical thought chain didn't stop at that. Kedar then had a detached re-look at the plan of building his bungalow under the new microscope and the honest answer was a 'No' on that front too. Without second thoughts, he sold off the bungalow plot and what's more, he even sold his residence flat and shifted to a rental accommodation, only to self-fund his construction projects rather than rely on a potential mountain of debt in an era of constrained resources.

The timely advice from his mom turned out to be god sent indeed, as Kedar gradually built his fortune brick by brick without succumbing to the lure of ostentation or lavish display of wealth, the defining traits of the real estate fraternity otherwise.

Kedar's approach to development is a sterling case study for all practitioners of the construction business. Transparency is the hall mark of every KVDL project. Comprehensive monthly reports are sent to every buyer, conveying the progress of under-construction projects, thereby weeding out any fear and uncertainty from the buyer's mind about the fate of his decision post purchase.And every project has stringent self-penalty clauses for non-completion of projects in the committed time frame.

Kedar and his team deserve rich accolades for their pioneering strides in an industry shrouded with secrecy and better known for shady dealings. The executive team, however, needs some value-added training in client-centric communication and proactive conversation. The KVDL intent is not in question but the content is far from compelling, so also the website communication which hardly does justice to the KVDL's sterling ethos and essence. The founder conveys all the right messages in his impromptu conversations, but it's high time the team does the same in respective roles.

KVDL, given its conviction, has the capability to become a global thought leader in its own right. If KVDL doesn't reach where it should in the time to come, it would go down in history as a Greek tragedy of epic proportions.

Sunday, January 08, 2017

In conversation with Shivnath Thukral, MD, Carnegie Endowment for International Peace, India

Sudhir Raikar, Content Architect, IIFL | Mumbai | December 14, 2016 10:44 IST

"The Global Tech Summit 2016 (GTS’16) was our first major event under the Tech Forum Initiative. The tech forum is an effort to bring together serious players from the industry, stakeholders across the policy spectrum and government decision makers to discuss critical issues. As a think tank, our aim is to study and research policy issues that need to evolve or re-written based on objective and scholarly analysis."

Carnegie India, the sixth international center of the Carnegie Endowment for International Peace, recently hosted a Global Tech Summit in Bengaluru which saw eminent entrepreneurs, technologists, and academicians sharing their thoughts on a common podium. What seemed like a logical ‘next step’ resonating founding director C Raja Mohan’s incisive views (Trump, Artificial Intelligence, and India) the summit is an attempt to bring together the seemingly disparate worlds of governance and technology by hosting a purposeful dialogue between the policy heads in Delhi and the wizards of Bengaluru and other tech hubs. The thought churn, the organizers believe, will help develop the competencies and curricula that the discerningly disruptive digital transformation deems mandatory, and will also enable global businesses to reimagine legacy processes and redesign contemporary systems in the race to remain relevant, rather in a bid to carve their niche in a fertile space of immense possibilities. On the other hand, the summit also seeks to stimulate policymaking in India towards designing effective governance and regulatory solutions to facilitate the big change rather than watch the action from the side-lines.

Excerpts of the interaction between Shivnath Thukral, Managing Director, Carnegie Endowment for International Peace India and IIFL’s Sudhir Raikar.

Will the summit kick-off engaging conversations between New Delhi and Bengaluru, i.e. India's Power hub and India's Tech hub? How would you measure the success of this event?

The Global Tech Summit 2016 (GTS’16) was our first major event under the Tech Forum Initiative. The tech forum is an effort to bring together serious players from the industry, stakeholders across the policy spectrum and government decision makers to discuss critical issues. As a think tank, our aim is to study and research policy issues that need to evolve or re-written based on objective and scholarly analysis. To that effect, we felt the Global Tech Summit managed to emerge as a serious platform where some critical issues concerning industry and policy were identified and discussed. From the issue of protection to domestic e-commerce players to how Indian start-ups can help India’s diplomatic cause to futuristic technologies such as Hyperloop to how policy needs to evolve within a framework, GTS’16 managed to achieve some key goals. The fact that stakeholders in both Delhi and Bangalore recognise the need for a greater dialogue and that the summit took the first step towards closing it leaves us satisfied.

Going by the website, Carnegie India aims to stimulate new thinking in India's policy space. Going forward, would you look beyond summits to foster collaboration and co-creation of various stakeholders? esp. for bridging the academia-industry divide...

We plan to have a deep dive on issues planned every quarter starting in March. The year will also see policy briefs, research papers and smaller convening sessions on issues earmarked for discussion next year. This will culminate into the second edition of the Global Tech Summit in December 2017.

The list of summit participants is impressive - just that one would have liked to see some representation by India's offbeat productized software development companies - esp. those with clear Big data and Analytics agendas - which have rich insights for developing a new economic strategy that relies on technological innovation.

This was our first attempt to identify certain specific topics and focus areas. We are sure we will be able to expand the discussion and debate horizon for more issues which merit policy intervention or attention of policy makers. The deep dive sessions during the year will attempt to experiment with more ideas and issues.

Elaborating on the same point, it would have been great to see some non-ecomm, non-retail startup representation who may be ripe with disruptive ideas for a new India.

As I mentioned earlier, GTS’16 in its inaugural chapter identified issues which we felt were important and relevant but these are clearly not exhaustive. The sectors you mention have a huge impact on citizens and need further study and we hope to include them in our upcoming discussions.

The India inception of Carnegie Endowment for International Peace Carnegie, as late as in 2016, one feels, has a lot to do with the value prop of a New India under the stewardship of PM Modi. Was the Fund wary of seeding an India office all these years?

The work to set up Carnegie India started as early as 2013. It was launched once all the relevant permissions and compliance requirements were met to set up an office.

Few resounding sound bytes from the summit:

China has very rapidly assimilated nuclear reactors and high speed trains through policies that are designed to encourage sharing technology. To do that, we must develop the infrastructure and experience to absorb such technologies - S Jaishankar, Foreign Secretary

India needs to do what China did 15 years ago, tell the world we need your capital, but we don’t need your companies - Sachin Bansal, Flipkart

The real fight is on capital, not innovation - Bhavish Aggarwal, Ola Cabs

A tectonic shift in technology will not only impact blue-collar jobs but also has the potential to at least partially wipe out human interference in sectors such as healthcare and brokerage, among others” - Ravi Venkatesan, Bank of Baroda

I’m not worried about the next 10 years because these 10 years will be about how to make the existing jobs more productive through technology - Kiran Mazumdar-Shaw, Biocon

India needs to make five transitions—from farm to non-farm, rural to urban, subsistence wage employment to decent wage employment, informal enterprises to formal enterprises and school to work (human capital) - Manish Sabharwal, TeamLease

There is inertia and lack of clarity on the purpose of regulation. Most regulations have been from experience, and they are often knee-jerk reactions. We need to re-look at things to leverage benefits that technology must offer - Rahul Matthan, Trilegal

India needs to have regulations such that innovators and regulators can work together smoothly, to balance public interest and incentives for innovation - Ananth Padmanabhan, Carnegie India

Tuesday, January 03, 2017

House of knowledge

Bad libraries build collections, good libraries build services, great libraries build communities. – R. David Lankes

Today, we happened to visit the Indian Library of Thane, a one-of-a-kind initiative of Sanjeev Malhotra and his brothers Rajeev and Jitendra, makers of the unique indigenous shirt brand DEVAA. It was their parents' dream of building a House of knowledge for college and university students, especially those coming from the deprived sections of society - that was realized in the form of Indian Library, a spacious structure of six reading rooms and a conference room spanning 6000 square feet, open round the clock 365 days of the year. What's more, the library is equipped with a hygienic canteen offering snacks and beverages at subsidized rates. The Indian Library also furnishes the latest information on various courses conducted in India post SSC and HSC. Every quarter, there's a seminar on Vocational Guidance on different course and career avenues.

For long, we were on the lookout for a good library which accepts books across different knowledge spheres, but we had to suffer scores of dreadful interactions with pompous NGOs and charitable (read chair table) organizations (who seem to stand for everything but their stated objectives proudly proclaimed on their websites)

Smiling reception: Rakhi & Pratibha

Luckily, we stumbled upon the modest web site of Indian Library and a short and sweet telephonic inquiry made way for a pleasant, seamless experience. The lady at the reception was very polite and proactive, and honest about the submission that the library being short staffed, door step pick up of books was out of question. So, we drove down to the place with our rich repository of books and were immediately helped by the office boys in the unloading and transfer at their end.

Office peons Ajit Khan and Ashok More

Across the expanse of the reading rooms, you'll find worthy students of Arts, Commerce, Science, Government Services, Management Courses, Medical, CA, ICWA, CS, Engineering and Law engrossed in deep study. A nominal subscription fee entitles students to refer books across various fields under one roof, nearly arranged by titles and authors. They can also order a reference Book,if not readily available. A highly professional staff caters to their needs, as also attends to visitors who come for donating books, making inquiries or seeking admission. The positive energy of the place is contagiously inspiring. No wonder, it has found a place of pride in the Limca Book of Records.

This is one place you must visit at least once and if possible, do donate your used books. The American Library Association famously said "When you absolutely positively have to know, ask a librarian." We would like to humbly add "Ask the Indian Library of Thane"

Wednesday, November 23, 2016

Persistence of Non-conformism

Courtesy: India Infoline

Sudhir Raikar takes a closer look at the firm’s inimitable ethos, radical evolution and self-effacing evangelism in this tête-à-tête with Dr. Anand Deshpande, Founder & CEO, Persistent Systems.

For long, capital markets have allowed the mid-cap status of Persistent Systems to cloud, if not eclipse, its indisputable edge in offering productised service solutions in a market dominated by humdrum body shops and back offices. The Persistent ethos is best articulated by its evolution.

Picture this back-in-time scenario for a moment: It’s the time of the nervous nineties in India, conspicuously marked by grave political uncertainty and economic downturn. A non-conformist in his mid-twenties, a B. Tech in Computer Science from IIT Kharagpur, with a doctorate in object databases from the Indiana University and a prolific 18-month database engineering stint with HP Labs in Palo Alto, bootstraps a boutique firm in the understated Indian city of Pune, specialising in deeper dives into database internals. Consciously retaining focus on the database space to protect the cocoon of his tech acumen, he makes Independent Software Vendors (ISVs) his target audience unlike the Indian IT vendor crowd which is heavily focused on custom application development for different verticals.

Taking a cue from the fact that data is infinite in nature, the firm makes the symbol of infinity its corporate logo and the concept of data persistence – that once written to disk, data becomes stable and recoverable over time and across systems – inspires the gloriously graphic name of Persistent Systems. The rest becomes history, of iconic proportions, created by Dr. Anand Deshpande, unarguably Indian IT’s most prolific and self-effacing thought leader-practitioner. In a world of unabashed corporate antagonism, replete with umpteen “founding” and first-mover claims to breakthrough ideas, concepts or methodologies, this maverick stands out for his razor-sharp insights and matter-of-fact foresight.

Over the years, the name Persistent has aptly reflected the company’s stellar character but its value proposition transcends the database connotation, for the persistence of the company’s vision, mission and values is extremely nimble, guided by the ability to adapt to the changing dynamics and evolving paradigms of the software industry. The company has redefined Persistence - in the non-data context of industries and markets - as an unflinching commitment guided by purposeful perseverance. No wonder, it has rebuilt and sustained its competitive edge at every turning point of the industry’s evolution since its inception.

Excerpts of the interaction with Dr. Deshpande...

How do you look back on your transformative journey till date?
I see the progression as a series of S-curve voyages wherein the predominant industry waves guide the business models till they are rendered invalid by the successive waves. Let me begin with our earliest and latest phases. Our first S-curve was all about sourcing work in a proven area but executing it from India. In fact, we didn’t need to deploy any of our developers in the US during the first 13 years of our operations. This was quite unusual, for the body shopping mode was the mainstay of most software development vendors at that time. Our founding team did coding and marketing simultaneously and contracts were won on personal circles of influence.

The whole scenario has undergone a sea change since then. In the current phase, the 4th S, we are spread all over the globe and see our customers as partners in progress. We are proactively helping them become software-driven businesses to better respond to challenges and opportunities. We call our umbrella offering Software 4.0, inspired by the vision of Industry 4.0, which is about building software-driven businesses and managing software-driven things at speed. The term includes all tools and techniques to build, test and release software rapidly and reliably.

In the intermediary S-curve phases, several things happened in quick succession. The 200-01 dot com bust stunted market opportunities but our risk was minimal as we were a small set up, about 100 people in 1999 and 250 in 2002. By 2003, we zeroed in on product development as a conscious plan and our headcount grew 10-fold to about 2,500. The whole idea was to work in a niche space where it was easy to establish and communicate our edge compared to the teeming market of custom service providers where there was little scope to distinguish one’s capabilities. In 2007, we identified Cloud, Mobility, Analytics and Collaboration as our focus areas, much before industry research analysts and CIOs earmarked them as priorities. By 2008, we had carved a niche in the OPD space and our agile methodologies enhanced our delivery capabilities and growth prospects in the same breath. Since 2011, we began acquiring “end of life” products from other companies.

It’s pertinent to share my experience during the economic slowdown period in 2009. During this lull phase, I met scores of CEOs for capturing their industry bytes. I concluded that most of them – and this generally holds true for any geography – have a few defining traits in common. One, they have limited bandwidth and hence they like to see only high-priority items on their plates, while depending on others for managing the rest end-to-end. If they are convinced of your fidelity on this count as much as your competence, they are more than happy to engage with you. The whole case for outsourcing stems from this rationale, not from cost consciousness as many incorrectly believe.

Two, these guys are revenue-oriented, not cost-focused. This means they instinctively like any revenue-centric ideation, like for instance how tech enablement could enhance the marketability of their products or help make breakthroughs in new geographies. Several of our engagements at premium price points have been the outcomes of such deep conversations which have made trust the driving force of the ensuing relationships.

Three, they are unflinchingly customer-centric and firm believers in the collaborative power of eco systems. If they can’t address a business need of their customers, they have no qualms about partnering with credible vendors who can bridge the given gap. This has helped shape my own thinking in that I now proactively ask my customers about their market plans and propositions to explore how tech could help achieve them. And if we can’t address the given need, I recommend partners from our value chain who can fulfill the need, either independently or collaboratively.

Coming back to the 4th S-curve, how is Persistent geared for the new opportunities?
Thanks to our IBM Watson alliance and the ways in which we have fine-tuned our enterprise digital transformation offerings, we are confident of capitalising on the dramatic shifts and dynamic opportunities of an impending era where connected devices and the Internet of Things (IoT) will rule the roost. Leveraging the sophisticated Watson analytics, our continuous lifecycle management product suite will help customers with performance optimization of their devices in the context of umpteen other ‘things’ in the field. Imagine things reconfiguring themselves, monitoring and sharing parameters with the global cloud in real time. We are truly excited to be an integral part of this landmark revolution, set to change the way systems are manufactured, operated and distributed. Our digital foray is focused on healthcare, financial services and industrial IoT where we have made good progress already.

So, the 4th S-curve has influenced the way software is made and perceived?
Absolutely. First and foremost, there has been a substantial effort shrinkage over time. On the cloud, you build a lot more with less people - what with abundance of development platforms, ease of code branching and merging, availability of numerous testing and staging servers and agile-friendly environments suited for continuous integration and delivery. Release is also no longer the ceremonial event that it once was, given the frequency of software updates in response to user feedback and market demands. On the cloud, every progression builds on the previous one and demands a shift in current processes. But it also ensures value creation up to an order of magnitude larger than the previous one. Several enterprises across verticals are now regularly testing software that is built and deployed in days and evolved on demand.

So, development builds must happen with optimal periodicity aimed at iterative enhancements to keep pace with the user’s market place advancements and developments. The emphasis is on task-centric applications and experiences made wholesome through data collated and curated from disparate sources. We need to offer smart windows of actionable insights to the customer with lot of on-the-go options that can be triggered from the ubiquitous smart phone.

Are we talking of microservices and polyglot persistence?
Yes, but we don’t endorse the jargon-heavy nomenclature. The word Microservices is a misnomer, we prefer to call them API-centric architectures. In a consumerised IT universe, APIs connect, convey and create value for applications and thereby enrich the entire value-chain of vendors, clients, alliance partners and end-users. No wonder, modern software applications trust APIs left, right and centre – whether to connect to clients on the front-end, integrate with internal systems at the back-end, talk to other applications on the sides, or even to form themselves by binding constituent component services. The conventions of RESTful design and JSON-based data facilitate API development, and widespread mobile clients demand it. Open APIs have proved game changers for building contextually intelligent and universally compatible applications in this IoT era. As far as the reality of disparate data sources is concerned, we rely on data lakes for creating single stores for analytical use, which go hand in hand with API-centric architectures and DevOps environments.

You have been stressing on the need to think Y-o-Y rather than Q-o-Q on the revenue front?
This is not a Persistent issue alone; the undeniable fact is that the T & M space is under pressure. Given the effort shrinkage, effort-based billings have suffered. We knew this was coming and hence proactively shifted our focus on IP and digital. Having said that, the shift can’t bypass the cyclical impact. So, for a meaningful picture, it’s imperative to look at Y-o-Y figures, more so in the context of our IBM alliance.

Would it be right to say that the success of Persistent’s solution-centric customer engagements post the reorganization drive squarely hinges on the reskilling capability of its teams – both development and support?
Beyond a doubt. We need to achieve a massive and incisive orchestration of organization-wide efficiencies where sales and delivery would go hand in hand to do justice to the end-to-end relationships in all our differentiated projects. The norms that applied to the cost dynamic don’t work for the value dynamic. The pain point here is that people don’t proactively take on newer roles. Comfort zones are hard to explode, and there’s no ready-to-deploy mechanism to teach people the elementary truth that a thinking mind is not an option at work. As I mentioned earlier, computing work is less and less about conventional human intervention. While this reality does impact the headcount in a big way, other opportunities emerge where human insights and dexterity in design and development make a big difference.

We are setting up vibrant teams on both sides - sales and delivery – who breathe the essence of product development and customer centricity to fully justify the premium price tags to the customer, especially given the competition from low-cost providers claiming similar value props. Over time, we are confident of creating and institutionalizing a business operating model where product development happens in real-quick time and in cost-effective fashion.

From time to time, most of your predictions have come true, with several research and advisory firms claiming stakes to the honour? How you do face this reality?
I take it very positively, there is no greater joy than hearing your own prophecies echoed back to you. And the furious circulation of our insights help our cause. The market becomes more aware on the critical paradigms; compelling business needs are better articulated at the customer’s end and we get ample opportunities to prove our design and delivery edge in the new scheme of things.

Anukool Modak, Head of Investor Relations & Treasury Operations
(Q & A with Rajiv Mehta and Sudhir Raikar from IIFL)

What prompted the recent reorganization of the operating structure? How would it serve the dual purpose of augmenting company’s market position and profitability enrichment?
Under the new structure, we have created 4 separate P&Ls. The division is based on nature of business as:
1. Services: Traditional OPD business with T&M billing model.
2. Digital: EDT business where we provide a digital platform to the customer. This includes our own products, third party products and services around it. So, the billing model is a combination of linear and non-linear.
3. Accelerate: Our own products are sold under this brand. The is a 100% non-linear revenue model.
4. IBM alliance: This includes our business with IBM and allied business. It has two parts. First is the traditional OPD business with IBM and second, our products business with IBM where we have revenue share arrangements.
The purpose behind creating these four divisions is better market positioning in each of these businesses. It leads to better accountability, as the president is responsible for entire P&L of his unit. Further, the HR and sales structure in these businesses are very different from each other. We have aligned them to the nature of each.

How did the idea of the IBM Watson deal materialize? While it surely opens a world of opportunities, does it also bind you to partner-specific proprietary constraints?

Having identified IoT as the next big thing in the world of technology, we were on the lookout for a robust global alliance. IBM has the best IoT offering in the industry and we already have a very strong relationship with IBM. IBM was also looking for a partner in IoT space and that explains the long-term revenue share partnership. The deal does bind us to IBM but given the abundance of ripe possibilities under their purview, the scope is more than enough for a company of our size.

Could you throw some light on the deal’s progression? Given the IBM sale seasonality, does one wait for at least a year to expect significant gains to reflect in the numbers?

The product revenue is on the rise. Apart from this, we have a lot of SI opportunities where we can go to IBM’s customers with IBM. Here our contract will be with the direct customers and the rates are expected to be better than those charged in normal business. We have yearly visibility for products but the QoQ product revenue is quite lumpy.

What is the long-term revenue aspirations for the four divisions? How would these units differ in terms of billing model, operating profitability and scalability?
‘Services’ is a stable, cash generating but low growth business. ‘Digital’ is a very high growth potential business so it requires high investment. The profitability in ‘digital’ will remain low until it gains critical mass. ‘IBM Alliance’ is a combination of products and services. We have high hopes from some of the new technology stuff which we are doing with IBM. ‘Accelerite’ has around 80% mature products but it also has 20% new generation products where the growth could happen. As of now, margins are better on the mature products as there we don’t need to make fresh investments.

How have Hoopz, Akumina and Genwi fared post acquisition in terms of new wins? Do these acquisitions – including the Citirx and Intel baskets - pose any legacy challenges especially in terms of integration of development teams? If yes, how do you counter them?
Hoopz, Akumina and Genwi have been merged with our digital business and we use these in our comprehensive digital solutions. They have certainly boosted our capabilities. Citrix Cloudplatform has its own customers and is part of Accelerate. These acquired products do have integration challenges in the initial phase but we have managed to retain the key employees in all our acquisitions till date. We offer these employees very competitive compensations and benefits.

What’s your approach to headcount? In the time to come, do you foresee any drastic reduction in headcount owing to tech projects involving value-added, selective human intervention?
We don’t foresee reduction in headcount due to new technology but the pace of headcount increase has certainly slowed down and it will slow down further. Employees get quality work in our company as compared to traditional IT services companies. This gives them more job satisfaction. In addition, we give them opportunity to work on different technologies and customers to avoid monotony. Toppers from many reputed Indian universities voluntarily join us every year for this reason. We have been successful in keeping attrition under check by having best in class employee engagement and retention policies. We try to offer more intangible benefits like better work-life balance, flexible working hours, work from home, cultural and sports activities etc.

What’s the growth strategy for the services business which includes a part of the erstwhile Enterprise business?
We are concentrating on certain accounts where we see scope to expand. We are pruning some non-strategic accounts to improve profitability in the long run. We have hired a lot of domain experts to cater to the enterprise segment.

Which are the in-focus verticals in the Digital space? What’s the cross-sell opportunity to existing clients? Does Digital act more like a consulting partner to its clients?
We are concentrating on Healthcare and BFSI verticals. Cross selling opportunities do exist but they are not too many. Our strategy is to get new customers for Digital. Generally, these deals start small and then the size increases as we move towards more comprehensive engagement. The deal sizes are increasing to $ 5-6 million. These deals give annuity revenue and are sticky in nature. Due to technological disruptions happening across industries, business leaders are increasingly looking for partners having strong technological capabilities. That’s a good sign for us. Yes, digital does involve consulting. Consulting fees are included in the overall invoicing for the project. We also involve outside consultants for business consulting.

What’s the strategy for augmenting Accelerite product portfolio and its revenue scale-up? Are these products sold separately or used in delivery of your service offerings?
These products are mainly sold separately but they are also used in our Digital service offerings. The strategy is to upgrade mature products to increase their useful life and revenue and to invest in sales and marketing of new Gen products to increase sales. We are coming up with new products in-house as well as acquiring products from big ISV customers.

What’s your stance on inorganic growth? What’s the idea behind investing in early-stage Silicon Valley start-ups?
We look to fill the white spaces in our portfolio. Our focus is to acquire products than companies. The idea is to be part of the start-up ecosystem. At times, they become our customers. If their offering becomes successful, then we can partner with them and adopt a joint ‘Go to Market’ strategy.

How much of an impact would Brexit have on your growth prospects?
Brexit will not have any impact on our business as we hardly have any exposure to Britain. The slowdown which the larger IT companies are talking about is mainly in their traditional businesses like ADM. We work in new technology areas only. So, this slowdown does not impact us. Their problems are different.

How’s the medium-term growth trajectory? In the long run, what’s the Management vision of growth in financial terms and geographical spread?
We have a vision of achieving $ 1 billion revenue by 2020 as we believe there’s a market opportunity to help us achieve this target. In terms of geography, we are exploring new geographies but our principle market remains the US. We see a lot of scope to grow our business there.

Various strategic investments made in the recent times have impacted your margins. Is the peak investment phase behind you, and how would these investments lead to margin upliftment over the medium term?
Our effort is towards making the billing model non-linear, competing in the market based on value proposition rather than cost. All our investments are directed towards this goal and hence it should result in better profitability with increase in revenue over next 2-3 years. It’s difficult to say whether the peak of investment phase is behind us as there are scores of technology changes disrupting the market. However, in the visible future, our investment should be lower than what we have committed in last 12 months.

Could you throw some light on the IND AS impact on Persistent?
In our case, the major impact was only on actuarial gains which go to OCI and in case of current investments which are reported at fair value as per IND AS. The impact on depreciation and amortization was only at the time of first time adoption.

Atul Khadilkar, President - Corporate Operations on employee training and engagement
(As told to Sudhir Raikar)

Today, digital consumer experiences have made enterprise digital transformation virtually imperative. This transformation must not only be software-driven, it should deliver at speed when and where it matters. Software 4.0 is our approach to make it happen through the confluence of different cutting-edge techniques.

While our domain trainings enable us to deliver appropriate business solutions to customers, we regularly train our employees on various technologies and tools across the engineering lifecycle to make them full-stack developers. They are consciously exposed to the world of continuous integration, DevOps and Design Thinking to help them proactively address diverse customer challenges. Our employees learn through various channels like Instructor-led training (in-class and remote), Assisted self- learning, Massive Online Courses (MOC), Selfy Shots (Self-learning courses) and internal certifications. We are Scaled Agile Inc. Gold Partners and the agile development methodology is deeply rooted in our engineering function.
Hackathons are a way of life within our engineering community to address complex problems through innovative solutions in real-quick time. We also involve our customers and partners in these solutioning initiatives for addressing specific issues. Our Architect school is designed to introduce a wide range of advanced topics in software architecture and design principles to enable employees to take on challenging assignments in the capacity of Product and Solution Architects. Employees work on quick Proof of concepts on latest technologies like Machine Learning, Blockchain, Internet of Things (IOT), Security etc. through our focused program on Talent Transformation to sharpen the saw. All these initiatives enable us to keep pace with evolving business paradigms and technical challenges.

A Tale of Trailblazing Trials and Triumphs: What makes Persistent different?

Growth Trajectory

Unlike most Indian software development players, heavyweights and minnows alike, Persistent chose to tread the challenging pathway of product development right from its formative years. This meant there was no cushion of well-defined specs to deploy resources and guide deliveries. Instead, the name of the game was smart design trade-offs to deliver the best possible product versions within non-negotiable time frames and budget limits. Thanks to its proven engineering excellence and profound business insights, Persistent carved its niche in outsourced product development advising customers – large enterprises and start-ups alike - on timely and cost-effective product enhancements, and thereby winning their confidence ahead of contracts. Persistent’s ‘innovation lab’ approach struck immediate resonance with the business heads of large enterprises, who invariably have rather incoherent, need-based IT assignments that don’t necessarily bloom into mega projects. So, they are always game for any measurable development of R & D flavour. That explains the majority of large enterprise players in Persistent’s kitty. This was a big feat for a small-sized firm of bootstrapped beginnings.

Along the way, Persistent was arguably the only Indian IT player which proactively pushed its OPD clients to acknowledge the enduring rewards of design and build innovations, beyond the conventional benefits of cost and process efficiencies. The company’s breakthroughs in life sciences and telecom verticals is an outcome of this persistence. Persistent’s productization insights prove especially priceless for niche start-up ventures who develop excellent prototype propositions but are clueless about the procedural (but pivotal) issues of testing, QA and integration. This ignorance immediately poses a big question mark on the commercial viability of the given idea, however, disruptive it may seem. Persistent helps these customers with the end-to-end technical readiness for viable market releases, giving the founders the luxury of solely focusing on core intricacies of their logarithms.

Road Ahead

With the company moving at top speed under the stewardship of a dynamic CEO and his think tank, the organization needs more change architects, not merely technical architects, in the middle and lower layers to take on the multiple roles depending on the need. Same holds true for the marketing tribe. It would be interesting to see how the company raises the bar for its people to lock horns with the multifarious challenges of its dynamic market.

When the company says, it would do away with a few non-profitable businesses going forward, does it impact the number of customers, some 200-odd under the Services fold, we are not sure. On the impacted resource numbers, however, it has categorically stated that all released resources will be redeployed on other, more profitable and strategic projects. Another wait and watch area is how the firm deals with the legacy issues of its numerous acquisitions as also specific challenges like in the case of Akumina, given Microsoft SharePoint’s track record of sub optimal adoptions, mobility and integration issues and the threat of competing products.

Notwithstanding all imminent new-wave challenges before it, there’s not a semblance of doubt regarding Persistent’s ability and agility to address the business needs of the fast-evolving modern enterprise: timely releases to keep pace with market shifts or innovations and better customer engagements in a wearable device era. Given its IP-led revenue growth and focused engagements with cream of the crop customers - like the company’s card and retail breakthroughs in Banking, genomics inroads in life sciences and the Appian leverage in telecom space - Persistent looks well poised to capitalise on its value prop to fetch premium price points from a diverse clientele.

Friday, November 18, 2016

Men like my father cannot die

Men like my father cannot die. They are with us still, real in memory as they were in flesh, loving and beloved forever. - How Green Was My Valley, 1941

On the evening of November 14th, my dad's first death anniversary, I got a formal English language text message from a 'blood relation' acquaintance, dutifully reminding me of the momentous day in a matter of fact tone that seemed like a carefully rehearsed Brechtian estrangement. I was also duly updated in the same message, on the publisher's behalf, about the online release of my dad's 'searing' anti autobiography, released 'exactly a year after' my dad's demise (how thoughtful!) and available in print 'at a price' (how resourceful!)

It's always hilarious to learn of things you know better. A few days before his exit, my dad had proactively briefed us on his thoughts on the revised edition of his anti-autobiography, how he chose to subtly hint at the idiosyncrasies of certain characters rather than explicitly expose them, how he inserted a few episodes that he had omitted in the previous version owing to strong inhibitions, and, above all, how he finally came to terms with the fact that journalists won't ever allow journalism to raise the bar, they will instead raise a toast to relish and cherish the Great Indian Mutual Admiration club that binds editors, reporters and publishers of all makes.

More on my dad's book in the posts to follow ...

Coming back to the staged Facebook book launch of 14th November, it was nauseating to watch the fun even from a (safe) distance. Both the publisher and copyright owner would do well to delve deep into the book's text rather than package their rehashed sermons for the target audience. That my father's words resonate even after his exit is no surprise, why they fail to activate the living-dead towards positive thought and action indeed is.

The publisher, in his highly patronizing note, does strike a chord in a few paras, but he could have gainfully resisted the temptation to certify the work, had he restricted his purview to the book's genre and place of pride in literature. There was absolutely no need for sweeping observations on the author's talent and temperament, for which better resources are thankfully available. My dad in his melancholic outbursts had this habit of sharing too much with the wrong set of people, giving them ample scope to package and market their convenient, half-baked conclusions. Besides, father-son ideological differences always come handy for staking first-mover claims of 'knowing him better than the family'

It would have been great had the publisher been more sensitive to an earlier book's cause during the fag end of its making when my dad chased him day and night for corrections and our friend was very selective in picking up his cell phone in response. Notwithstanding my dad's single-minded obsession with text revisions and a discernibly finicky nature, he deserved quality editorial attention in what was one of his last works, if not life work.

Mr. Publisher, don't get us wrong, we are truly happy that you have earned the tag of an intellectual, radical, non-conformist publisher, thanks to this work that belongs to a unique genre that Terry Eagleton aptly refers to as the attempt to write about your personal history 'in such a way as to outwit the prurience and immodesty of the genre by frustrating your own desire for self-display and the reader's desire to enter your inner life'.

About the copyright owner, less said the better. There's so much that my dad shared in his parting thoughts - both spoken and mute - but we don't see any reason to underline them to settle scores, the way the copyright owner did all along. We would only like to humbly request the first owner to secretly recall the ghastly moments of the nerve-wrecking span - from the night of 11th November to the noon of 14th November - of the year gone by. The painful memories of your sickening escapism, promulgated grief and ill-timed tantrums will always be fresh in our minds. No book release can ever wipe them out, and shouldn't. For your kind information and broadcasting, we don't need the crutches of a book release to revive dad's memories and thoughts. He guides us day in and day out, for men like my father never die. They cannot die.

The Riveting Rhythm of an Algorithm

Sudhir Raikar, IIFL | Mumbai | Algo Trading represents a captivating convergence between Finance, Math and Technology. Before we explore ...