Hank [BS/MSEE,
MSM $$$, Ph.D. Mgmt] teaches 
In a discussion with investors Thursday 10/25/07, Eric Schmidt, Google’s CEO (also a Ph.D. in electrical engineering and a billionaire), made a couple of comments that nascent entrepreneurs should take to heart. In Yoga’s unique way of expressing himself, “it ain’t over..” My paraphrasing follows:
- The technology industry is on the verge of another major shift, similar to the early days of the Internet.
- We are at the beginning of a massive transition to cloud computing. In a world of cloud computing, data and computing services will be as natural a part of the human environment as white pillows of water vapor are in the sky.
- Part of Google’s strategy to participate in the change is to provide productivity applications, like spreadsheets, e-mail and word processing, over the Internet.
- The search problem is powerful, fundamental and not completely solved yet.
- There remains lots of room for improvement in targeting advertising to Internet users as well as expanding overseas.
Let’s dissect his comments into actionable sound bites for application of The Disruptive Innovation Model:
- There is plenty of room for new ideas, new approaches, new startups for technology-based companies
- Cloud computing is a band wagon waiting to happen. It is an entry point for startups NOW.
- While Google is concentrating on productivity applications for cloud computing, there are plenty of other “holes” to be filled.
- While Google is “Mr. Search,” or so they would like to think, they don’t have a monopoly in this area implying an entry vector for startups.
- While Google has Adsense and is starting to realize financial gain from their YouTube acquisition, the surface hasn’t been scratched relative to targeting Internet users.
- US-based firms have not to date taken advantage of markets other than the US; keep in mind the US is a very small part of the global market.
Indeed, we haven’t even taken the first swing yet. Get up to bat, you might just hit a home run. Hank
When my group (group 2) met to come up with ideas that we could invent for the ccs, we had a difficult time coming up with ideas that weren’t already for sale on the market. Most of our ideas focused around solving problems for people our age or making some technological device better. But we forget that there are other target markets out there besides our own. As we have discussed earlier, the “baby boomers” are a huge target marekt. Not to generalize but many baby boomers are not big fans of the internet. Yesturday my mom was incredibly frustrated because she couldn’t easily order somthing online. I know my dad is the same way. I don’t think its that the baby boomers are afraid of the internet, but i get the feeling that many are not as big of fans as we (the younger crowd) are. This problem lends itself to targeting the baby boomers and getting them excited about the internet. So…. what could we do to make them want to get online and then hit them with advetisements so we can make money? Maybe we could find a way to simplify the internet with less technology and more functionality. First lets focus on what they want, get them used to the internet, and then nail them with advertising. There’s the pitch and the swing……
Mr. Schmidt’s words actually made me think of what start-ups can do with this new era of the internet rather than what Google can do with it. This new era will not be completely for huge corporations, rather what Hank said, a bandwagon for smaller start-ups. I see it being like the dot com era. Many companies will hop on the wagon and innovate the internet industry to the next step, then a few companies will succeed and have dominance over the market. It sounds routine, and I actually hope I’m wrong so we can see something new happen in the internet world.
For the techie looking for ideas:
http://research.google.com/pubs/papers.html
Plenty of cool ideas for a startup.
The shift described by Mr. Schmidt will definitely open the doors to plenty of entreprenuers. There are numerous ideas and opportunities for small businesses, so this will be a huge new environment for businesses.
This is totally true but it’s not like US firms aren’t trying to take advantage of the international markets, it’s just that international markets lack technological infrastructures to support technology that we’re all used to in the US. Before US firms can move in, places like China are waiting on other US firms like Cisco to build their networking and power infrastructures. Essentially we’re in a deadlock. Eventually it will free up but, believe me, US companies are poised at the starting block to be the first in.
Google has done all the right things so far, and I’m sure they’re going to grow worldwide. It just seems way to hard for any other company to compete with them now, considering they have so much money and they hire the best people…. curious to see whats the deal with the Google Phone.
”This is totally true but it’s not like US firms aren’t trying to take advantage of the international markets, it’s just that international markets lack technological infrastructures to support technology that we’re all used to in the US. Before US firms can move in, places like China are waiting on other US firms like Cisco to build their networking and power infrastructures. Essentially we’re in a deadlock. Eventually it will free up but, believe me, US companies are poised at the starting block to be the first in.”
Keep in mind, Luke, that most of the technology we’re all used to in the US is made OUTSIDE of the US. Honestly, I don’t think it’s going to be the US companies who are going to be first, but rather Indian companies. They have a huge technology hub right in Bangalore,India and a lot of companies have outsourced their technological needs to that place. And even though I’m ashamed of this, but Bill Gates did say Indians played a huge role in developing Vista.
@Janam: I knew someone would try for this approach but that’s why I stressed infrastructure. Just because the factory somewhere makes wire, it doesn’t mean the country containing that factory has the infrastructure to support an iPhone (for a tangible example).
In the completely separate argument that you brought into this conversation: outsourcing, I think you are failing to realize what kind of work is being outsourced. The work that is outsourced is sustaining work that companies consider a waste to have their high payed and educated engineers do. All of the thinking and designing is still done in the US. Most of the clients for the Indian outsourcing companies are US companies. This means that the money is coming from the US. India’s economy isn’t self sufficient. If/when Indian sustaining programmers cost the same as US workers doing the same job, where then will the money be coming from? There’s going to be a whole lot of programmers with no one to design anything.
If anything, I think China has the best chance to step in. China has a ground up economy with good factories. Haven’t you ever wondered why only programming gets outsourced to India? Because it takes almost nothing to have some guy work on his computer in a little room, not because the best programmers are there. This can be done anywhere. India will just do it for the cheapest. China can also have some guy sit in a room and program, but on top of that it has its factories to support it’s programming which can be done anywhere.
I think it’s interesting to hear the CEO of Google mention the wide-range of opportunities that are out there waiting to be taken on by internet entrepreneurs, but also the areas in which Google is going to address in the next few years. Its as if Schmidt is giving everyone advice on what niches to attack in the new market that he seems to be forecasting in the next few years. Cloud computing is surely the next major advancement when it comes to technology and computing, but more than just technology seems to be at the forefront too. Online advertising, and especially targeted ads, has seemingly been a daunting since the inception of the world wide web, but with years of experience and successful business models beginning to appear as far as advertisements, this area could be very profitable and see tons of growth in the near future. Another interesting point was made concerning the expansion overseas. With the numbers of college graduates from the U.S. leaving the country and working in foreign countries growing drastically every single year, it’s not long before more and more countries close the major technology gap and begin functioning on a scale comparable to us. Google foresees this happening, and they are already planning on how to take advantage of the new market opportunities; just another way they are staying a few steps in front of their competition.
I agree with Luke that U.S. companies are ready to invade other nation’s vertual economy. American companies are amazing at taking over local market in other nations. Look at Mcdonalds. You can go to France, China, or Russia and find Mcdonalds anywhere. American Multi-national companies are the world heavy weight champions at invading other nation’s economy, why should the internet be any different.
As for the Indians taking over, I don’t fear it at all. For my experience at Oracle (I had to work with some Indians), they are not ahead of Americans. While they may have degrees and PHDs in computer software, they are impossible to work with. Oracle (a software company that is about the size of Microsoft) has given up trying to work with India. The trouble that goes along with working with the Indian’s cost more then outsourcing saves. Recently, Oracle has moved some huge software developement facitites to Romania. Thats were is at. Plus, the only reason that India got those jobs to begin which is cheap labor and not much else.
Hmm, that’s weird, I replied to Luke’s latest post yesterday but apparently it never showed up.
To Luke: ” Just because the factory somewhere makes wire, it doesn’t mean the country containing that factory has the infrastructure to support an iPhone (for a tangible example).”
Just what do you exactly mean by support an iPhone, do you mean R&D?
”In the completely separate argument that you brought into this conversation: outsourcing, I think you are failing to realize what kind of work is being outsourced. The work that is outsourced is sustaining work that companies consider a waste to have their high payed and educated engineers do.All of the thinking and designing is still done in the US. Most of the clients for the Indian outsourcing companies are US companies. This means that the money is coming from the US.”
Ok, here’s where you’re wrong
articles:
AMD sets up chip DESIGN center in India
http://www.eweek.com/article2/0,1759,1572426,00.asp
all-Indian designed and made INTEL CHIP
http://www.theregister.co.uk/2004/05/01/intel_whitefield_uncovered/
”India’s economy isn’t self sufficient. If/when Indian sustaining programmers cost the same as US workers doing the same job, where then will the money be coming from? There’s going to be a whole lot of programmers with no one to design anything.”
Yeah, because Indian programmers are stupid and they don’t know how to design their own technology.
BTW look at the amount of Indian students in the US studying computer science. Whatever Americans are learning, so are Indians. So if Americans know how to design, so do we.
Oh and ”Indian economy isn’t self-sufficient.”? Are you serious, the Indian economy is made of more than just oursourcing.
”If anything, I think China has the best chance to step in. China has a ground up economy with good factories. Haven’t you ever wondered why only programming gets outsourced to India? ”
First of all China is getting more expense, so more and more companies are looking to manufacture in India (also China has really bad PR).
Secondly I don’t think you actually know what get’s outsourced to India, it’s not only programming.For example go to clothes stores and see how many ‘Made in India’ labels you can find.
”Because it takes almost nothing to have some guy work on his computer in a little room, not because the best programmers are there. This can be done anywhere. India will just do it for the cheapest. China can also have some guy sit in a room and program, but on top of that it has its factories to support it’s programming which can be done anywhere.”
Infosys, which is a multi-billion dollar Indian outsourcing company can easily make factories in India, making factories to support programming is perhaps the easiest thing about technology.
To Trevor:
”I agree with Luke that U.S. companies are ready to invade other nation’s vertual economy. American companies are amazing at taking over local market in other nations. Look at Mcdonalds. You can go to France, China, or Russia and find Mcdonalds anywhere. American Multi-national companies are the world heavy weight champions at invading other nation’s economy, why should the internet be any different. ”
There’s a difference between McDonalds and the internet. First of all McDonalds came first and they supple cheap junk food. The fact that it’s an American company definitely helped. I remember that America signed some pacts with countries allowing America to give help funds in exchange for access to market in those countries Why is the internet different? Because America doesn’t own the internet and can’t command it around as it does with the world and really right now it’s the smartest,fastest,most innovative person in the world will win, not the smartest,fastest,most innovative person in the US. There are no boundaries on the internet, no borders, no economical or political pressure. Just the best person in the world wins, especially in this age of globalization.
”As for the Indians taking over, I don’t fear it at all. For my experience at Oracle (I had to work with some Indians), they are not ahead of Americans. While they may have degrees and PHDs in computer software, they are impossible to work with. Oracle (a software company that is about the size of Microsoft) has given up trying to work with India. The trouble that goes along with working with the Indian’s cost more then outsourcing saves. Recently, Oracle has moved some huge software developement facitites to Romania. Thats were is at. Plus, the only reason that India got those jobs to begin which is cheap labor and not much else.”
I don’t care about Oracle. The fact that Microsoft is using Indian DEVELOPERS, that Intel and AMD are doing the same says more than me than Oracle. Be honest with yourself. What seems to have more value: Microsoft,Intel AND AMD using Indian developers or Oracle saying they have had nothing but problems with Indians? …But maybe it was that the Indians were having problems with Oracle and not the other way around.
And seriously, guys, thinking that America is still the best and the rest of the world (especially India, don’t underestimate us) is worthless is a very bad mentality considering globalization. US do NOT have an advantage over the rest of world, we are catching up.
Chip Design is NOT Human Designed
I’m only going to comment on the few of your points, where you at least tried to back up your claims. Your example about chip design being outsource to India, though you may have just picked a horrible example, is a perfect proof of my point. Chip design is now done by programs and it’s considered a waste of time (and too error prone) for engineers to design them by hand. The US writes up the specs for the chips, sends it off to be designed by the computer, and then the output is checked by outsourced testers (because that’s a by-the-book task). There may indeed be some design going on in India but you just picked a horrible example. I’ve worked at Dell, worked with AMD and Intel, and know this information first hand.
India’s Lack of Supporting Economy
You talked about Infosys being multi-billion dollar Indian outsourcing company but again, I feel like you picked a bad example. I’m not sure if you’ve ever been to Infosys but it’s a complete oasis to it’s surroundings. Infosys looks like a nice American company (because the money and influence is coming from the US). As soon as you step outside it’s grounds, it’s practically a third world country. There is no Indian economy to support Infosys when the US moves to cheaper solutions. Infosys may continue to outsource to other international companies but, it’s only going to grow the gap between upper and lower classes which is horrible for economies. China’s middle class is, on the other hand, booming. You are talking like the US and India are competing for these emerging markets. India isn’t competing for emerging markets, it is an emerging market! India is competing with China not the US.
Indians In Computer Science
I hate that you’ve made this a racial debate and I’m going to try and bring some fact to this conversation. I’m heavily involved in the CS department here at Purdue. I TA the intro CS programming class and have taken many CS classes myself. There are two Indians in my senior year of computer science. Both are great guys and damn smart. Also, both have taken jobs with US companies and are staying in the US. Though they are of Indian decent, they are now Americans. In the class I TA, there is one Indian in my lab section. I don’t know the exact stats but there is a very small percentage of Indians in CS here at Purdue. The graduate school is a bit more diverse but there are many more Chinese. Maybe you could find some stats to back up your claims, Janam, and then I can more precisely comment?
Janam “I don’t care about Oracle. The fact that Microsoft is using Indian DEVELOPERS, that Intel and AMD are doing the same says more than me than Oracle.”
Janam, you obviously do not know what you are talking about. Oracle in many ways is bigger then Microsoft. Oracle has a virtual monopoly on corporate software. Ask, Hank, Oracle has aquired at least five major software companies this year. Seibel Systems (which was one of Oracle’s competitor’s), was bought recently for billions of dollars. Larry Elison, owner of Oracle, is one of the riches men in the world (close to Bill Gates). In short sighted way, you are right. In the grand scheme of things, Oracle does not matter much. However, it’s departure is a indicator that there are problems within india.
Janam “Infosys, which is a multi-billion dollar Indian outsourcing company can easily make factories in India, making factories to support programming is perhaps the easiest thing about technology”.
The only reason that Infosys is around because of cheap, expendable labor. Does infosys invent anything themselves, no. They are an OUTSOURCING COMPANY that means that they do the crappy jobs that Americans don’t want to waste their time. you proved my point of me. Once you have to pay your workers a decent wage, no one will outsource there. If India doesn’t change it’s practices, it will be poor forever.
Janam “Because America doesn’t own the internet and can’t command it around as it does with the world and really right now it’s the smartest,fastest,most innovative person in the world will win, not the smartest,fastest,most innovative person in the US”.
In a way you are right. American cannot use its strengh over the internet, but we can use or creativity. Lets name the biggest internet comapnies. AOL, Google, Youtube, Yahoo. Did i miss an Indian one. The Indians have cheaper labor, but why don’t they start there own business.
Janam “look at the amount of Indian students in the US studying computer science.”
Don’t you know that that fact helps America. All of your good programers come here and stay here. Why would they want to go back to india where they get paid nothing.
next time janam, back up you facts with statistics.
India has a long way to go before it becomes a developed superpower. Some vision is as the year 2020.
I say all this is BS. The day India stops fueling politician’s pockets and has a proper youth revolution that takes over conservative beliefs and replaces it with a good forward thinking society, the world started to get owned.
Corporate America remains corporate America(as in dominating), since brilliant killer ideas flow. When Indians have amazing brainpower available for direct use, rather going through some politician’s hands, society will change dramatically. India had an extremely alarming economic situation and things were going terribly bad. Then came in a new foreign poilcy, new economic structure and many radical changes. Guess what? Indian is now competing with China. Almost every Indian will come back if a political change occurs coz we know we are brain drain and we are looking for this change to occur. THIS is the main reason I am pursuing work outside India. Opening a business by an Indian in India is expensive because money goes to corrupt politicians. They are parasites, though few exceptions are true gems.
India itself acknowledges that it is impossible to target developed nations. Its unofficial target is China.
No one will support an American phone because it does not run on GSM frequency for some stupid reason(pls. enlighten me). Perhaps they think it is fun to be a pain in the @ss to the world by adopting a totally different system!! Same goes to adopting an archaic system of units!
Luke: Other countries do not have infrastructure to support US tech?!! I think US is on an average a bit technologically backward compared to Western Europe and Japan! I say US companies are LAZY!!! Get off your bu77s! Keep in mind that the UAE, Bahrain, Qatar and Kuwait are some of the fully developed economies in the Middle East with one Kuwaiti Dinar equalling 3.61 USD! You guys are lazy. That’s all I have to say about not going international!
PS: Trevor, you sound like you want America to conquer the world! Psst, secret….Colonial Era is over! Its time to help one another than to conquer everyone else below you. I make this comment seeing that you sounded like a US fanboy one your comment here. Patriotism is encouraged, blind patriotism is not. Cheers!
PPS Hank, we need your advice before this turns to a proper flame-fest!! It will be the first one I have participated in, though! Very excited!
LOL, Aditya,
btw sorry guys for not giving you statistics, even though you have’t given any to prove your points on how America is still owning the world, but I have been busy. I think i might have a hour free time friday after 10 pm, but in the meantime check out this Indian company
http://www.wipro.com/
Luke, what did you say about Indians not starting their own companies?
more to follow
this is a fun flame-fest though, let’s keep doing this and bring some life to this blog (no offense Hank)
There is no doubt about it, India is growing at an alarming rate and it could the next superpower. Its already the largest democracy in the world with 1.1 BILLION RESIDENTS, and its economy is growing 8% each year. Ive heard(from my indian roommate) that many of the cities are just as built up and diverse as any US city, its just out side those places that are poor.India is not just call centers, they have huge medical, pharmaceutical, and R&D companies along with a rising manufacturing hub. Lockheed martin, McDonalds, ford, and coca-cola have all moved in, just to name a few. But its not just india that matters, the world is more open and accessable than its ever been. The internet is definitely one of those equalizing factors. The hardest part to come by is relating to your target market, if you want india customers one has to relate to them. that the trick
——-
cloud computing is the future,,, say you have internet everywhere, now what would be the point of a personal desktop or even large amounts of memory; it could all be stores in a server some where.. that would change computing completely.
Nice one Pickens! We were just starting to have a flame-fest when you ended the fun with a well-thought argument. Hope you feel good about yourself! Lol, joking!
Cloud computing is an interesting concept, but as of now, it’s still very expensive to run compared to a standard set of servers in a load balanced environment (think ~3 times the cost).
At a lot of industry conventions, they talk about maximizing your $ per sq ft revenue at the datacenter level and while that’s a great idea, the costs and overhead to run this might outweigh it.
I haven’t been sold yet on cloud computing and am not sure yet if it’s just hype or if something will develop out of it.
I’ve skimmed the discussion on Indians in these comments and all I can say is that a true entrepreneur will not let race, age, or any other non-business factor play a role. If someone truly wants to do something, they will find a way.
One more comment I wanted to make - there’s a lot of mention in this discussion about foreign markets. As an entrepreneur, this is a market in itself, so learn a foreign language! If your company does business with someone in Spain, sure, we expect them to know English, or we could get a translator, but wouldn’t it add a *lot* of confidence if you could speak in their language?
They would feel a bit more relaxed and in their true state of mind, because English probably isn’t their primary language or what they grew up with. It also teaches you about their culture and if your company is ever going to launch any product/service in another country, it would be wise to know about that culture.
My point is that while entrepreneurs are looking to invest in businesses and start up their own businesses, you shouldn’t lose focus of investing in yourself. That’s why we’re at Purdue and so we’re already doing that, but just make sure to not lose sight of it and take advantages of demands that we can see
To Ankit: ”I’ve skimmed the discussion on Indians in these comments and all I can say is that a true entrepreneur will not let race, age, or any other non-business factor play a role. If someone truly wants to do something, they will find a way.” Nicely put
btw the statistics I promised
http://www.rediff.com/money/2004/aug/10ariban.htm
R&D Market Size: “R&D (research and development) outsourcing market for information technology in India is estimated to grow to $9.1 billion by 2010 from $1.3 billion in 2003, according to research agency Frost & Sullivan. The R&D outsourcing market for IT in India is estimated to grow from the present size of 1.3 billion dollars in 2003 to $9.1 billion in 2010 at a compounded annual growth rate of 32.05 per cent, Frost & Sullivan, which undertook the study for the department of IT, said in its report. The R&D outsourcing market for telecom in India is slated to grow from $0.7 billion in 2003 to $4.1 billion in 2010 at a CAGR of 28.73 per cent, it said.”- rediff.com
Earth-changing Innovations: “A research team at the National HIV Reference Centre in the All India Institute of Medical Sciences is developing a vaccine against HIV. The vaccine, called the HIV-1 DNA, has worked on mice and monkeys. The team led by Dr Pradeep Seth is now waiting for clearance to start clinical trials on humans.” — Hindustan Times
http://www.businessinnovationinsider.com/2006/12/the_best_in_indian_innovation.php
”More proof, perhaps, that India is turning into an innovation powerhouse that is creating and nurturing the types of companies that are capable of taking on the likes of Intel and Hewlett-Packard.”
http://www.physorg.com/news10570.html
”In 1994 India filed 70 patents in the United States — by 2004 this number rose to 1,300 filings. ”