Is being in the Philippines bane or boon for founding a tech startup?

Last January 10th, I posted a topic which I hoped would get insights from the community to help not only budding technopreneurs better understand the challenges they face in not only starting their own technology venture, but also help them create truly sustainable, wealth-creating companies which can emulate the success of organiations such as F-secure (Finland), Trend Micro (Japan/Taiwan), Kaspersky (Russia), ICQ (Israel), Skype (Estonia/Sweden), SAP (Germany), Zoho (India), and many others.

I was surprised and happy to find that it generated a  lot of insightful comments from very knowledgeable people in the industry (many of whom have actually lived through, going through, or are helping others through the experience).

The gist of the discussion: Filipino technopreneurs face several challenges in getting their company to a point where it can become a truly world class company (initially the discussion was confined to software, but is applicable as well to any technology venture). Here are some of them:

1) Access to capital:

  • according to Carlos Perez: “Easy and cheap capital helps you avoid distraction of having to hunt for money”
  • But Jay Fajardo had a counter point saying: “Tech startups nowadays require less capital to launch because of very cheap access to web and cloud infrastructure. The focus [has] shifted from raising money to getting a product out fast.”
  • Francis Egenias shared that organic growth is possible

2) Timing
(need to catch an inflection point in the industry, take advantage of discontinuous shifts in technology and business models)

  • Jay Fajardo mentioned leveraging new developments such as cloud computing; but applicable here as well are new trends such as open source, social/Web 2.0 technologies, mobile applications (ie iPhone apps), virtualization, etc.

3) Focus
(dominate a niche, target specific verticals, get into markets where size and capital is not an issue, target the needs of a larger, international market, go into markets similar to your local market, leverage local unique culture/economic/social conditions–>ie as in the case of wireless/SMS technologies; or English speaking talent in the case of customer service and distance learning solution providers)

  • Here strategy was mentioned

4) Talent
(access to world class engineering talent, product management and product marketing talent, executive talent, ability to recruit and retain talent–> not losing them to greener pastures abroad or to multinationals with local operations)

  • Paco Sandejas and Joey Gurango talked not only about engineering talent but product management talent.
  • Giancarlo Angulo mentioned a lack of critical mass of talent

5) Leadership
(of course!)

  • Joey Gurango, Paco sandejas and Michael Hamlin talked about competence and experience of the leader (they themselves are leaders of their own enterprise)

6) Attitude/orientation/commitment
(to have confidence to stay the course when faced with challenge)

  • Miguel Ladios shared his experience working in a multinational environment and the importance of attitude
  • Floyd Piedad shared that we should have an attitude that focuses on solutions instead of over-analyzing problems

7) Enabling infrastructure
(ie government, education, IP protection, etc)

  • Michael Vincent Yap and Albert de Cera talked about IP protection
  • Ody dela Merced and Ruben Canlas talked about the role of government and education in creating the right environment for entrepreneurship to succeed

I’m intrigued however by Michael Hamlin’s last post about:

8) how effective communications plays a key part in gaining success on the world stage.

I agree that communicating effectively is crucial (but unfortunately is often missed as I have). Communication plays a key role in the lifecycle of any enterprise/product from startup to maturity–ie getting attention, creating awareness/interest, driving adoption, creating loyalty, building on success.

But just out of curiosity (and in the context of Filipino technopreneurship and what it takes to communicate effectively to the global market), is being in the Philippines (and being associated with the “Philippine brand” if there is such a thing) bane or boon to founding a tech startup and its marketing communication efforts? Does it matter at all?

A review of the communication strategies service companies employ in the IT and IT-enabled services sector seem to prominently tout the advantages of being in the Philippines (or for that matter India, China, Mexico, Poland, etc). But what if you are a product company?

Social responsibility and nationalism aside, does it make business sense to prominently display that your company is “proudly Filipino?” Or that your product was developed by Filipino talent?

Can it be a liability? (ie shows narrow focus? insular thinking?). Should the fact that your enterprise is a Filipino company employing Filipino talent be buried in the marketing copy? Should it be mentioned at all? Some companies I know (both here and abroad) make it a point to highlight the fact that they have international offices (even if its just a one bedroom apartment or PO Box somewhere) to show their global ambitions. At a time where distance is made almost meaningless by technology, does it still matter? Does it really help?

If I were an entrepreneur wanting to set up the next revolutionary open source/cloud computing/social networking/mobile gaming startup right now—what advice would you give?

What it Takes for Filipino Software Companies to Go Global

Melvin Calimag, a Filipino journalist and blogger for ZDNet Asia posts in his blog PinoyPost a question on why is it that, unlike in India, there are very few IT/Tech companies in the Philippines who have gone global. He writes:

Need for Filipino IT firms to go global : Pinoy Post : Blogs : ZDNet Asia

Unlike India which has launched quite a number of successful global IT firms, mostly in the BPO (business process outsourcing) sector, the Philippines seems to be content in merely hosting multinational companies in the country. 

A cursory glance at the composition of the largest tech firms in the country would reveal that the majority, if not all, of them are foreign-owned. Even in the field of outsourcing where the Philippines has made some inroads, the biggest names are still those from the United States, United Kingdom, and yes, India.

Sure, there are some Filipino-owned BPO firms which have expanded into foreign shores, but none of them have approximated the level of prominence or success the likes of India’s Infosys, and even Satyam, have achieved–just the mention of these company names would earn recognition of their country of origin.

Sadly, that’s not the case with the Philippines. While the country has somehow been able to market itself as a viable offshore destination, there are no homegrown icons to speak of that can serve as IT ambassadors for the country.

While I certainly share the sentiment, let me share my thoughts on why that is–specially for software product companies (which have a different set of challenges than IT service or IT-enabled service companies). I think the challenge for many software companies in the Philippines (and in Asia for that matter) is that it takes a considerable amount of capital to build a sustainable and profitable business abroad.

Although I have heard of stories and case studies of small, local shops making a nice profit developing casual games, online services or iPhone apps; I have yet to see one scale to a size beyond being a lifestyle business for the owner, or to develop a sizable customer base or presence to be called a truly “global” company. By global, to have the size, reach, stature and success of companies like F-secure (Finland), Trend Micro (Japan/Taiwan), Kaspersky (Russia), ICQ (Israel), Skype (Estonia/Sweden), SAP (Germany), Zoho (India), and many others.

Creating a scalable business with considerable international presence and a sustainable business model in my opinion requires considerable capital. Companies can start out with low cost Internet direct marketing, but to truly grow and to make a name for themselves, they will eventually have to join trade shows, go on trade missions, meet face to face with international analysts/press/decision makers and influencers , or in the case of complex or business applications provide consulting and support, develop partner/reseller channels, and many others.

In order to do this, you need capital. For a company just starting out, often times the only way to do this is to get funding from a) a wealthy angel investor (as in the case of GSCand G2iX as mentioned in Melvin’s blog post); or you would need b) venture funds/institutional investment/debt/capital raised through IPO; or a third route is to c) raise capital purely through organic growth.

Now the first (getting angel investment) is difficult as it requires the right sort of connections or “social capital.” Preferrably you would want to get investment from people who know the industry–who have realistic expectations of the time horizons and amount required to get a software company of the ground and can mentor the software entrepreneur how to best use the funds provided. This is something not all Filipino entrepreneurs have access to, but is something that considerably more Indian entrepreneurs have with the success of many country men who made it big in the US in the 80s and 90s like Vinod Khosla of Sun Microsystems and Sabeer Bhatia of Hotmail (and literally hundreds, possibly thousands of others who found success as software engineers/analyts/testers, etc in the US).

The second (venture capital/institutional investments/IPO) is hard, because the Philippines and many countries in Asia simply don’t have access to the type of capital markets and business ecosystem that entrepreneurs in the US (specially in Silicon Valley) enjoy. In this regard, GSC and G2iX (companies mentioned in Melvin’s article) struggle as well as evidenced by their aborted IPOs.

The third route is hardest as it requires that software companies have a large enough market in its home country for it to be able to grow enough to support and fund that kind of internal growth. This is hardest as it is outside of the entrepreneur’s control. For Filipinos it is difficult because of lackluster economic performance of the country. This is compounded by the fact that the market is just too small (specially for companies developing enterprise/engineering/scientific) applications to fuel the kind of focused expansion/growth required for quick product development, innovation and market penetration (notice how many Singaporian and Australian software companies themselves struggle to create truly global software product companies, simply because their home market is just too small to raise enough capital to build global companies).

Perhaps technical brilliance, innovative products, smart people are not enough? The environment, connections, access to capital, and maybe luck (ie where you were born) plays a part as well. Do you agree? Let me know your thoughts as well.

This just in: Oracle to Buy Sun

After several weeks of flirting with IBM, now comes news that troubled technology company Sun Microsystems will be acquired (for sure?!) by big bad tech behemoth Oracle. Just a few years after ingesting Siebel, Peoplesoft, JD Edwards, BEA, and many others, now Oracle will take on ingesting the considerable assets, talent and notable history of Sun. Among the new properties that will be folded intor Oracle? OpenOffice, ZFS, Glassfish, and what many consider to be Sun’s Crown Jewels: Solaris, Java and recently open source database MySQL (!)

Everybody is holding their breath to find out what will happen next. The press relase is below:

Sun and Oracle

SANTA CLARA, Calif., April 20, 2009 — Sun Microsystems (NASDAQ: JAVA) and Oracle Corporation (NASDAQ: ORCL) announced today they have entered into a definitive agreement under which Oracle will acquire Sun common stock for $9.50 per share in cash. The transaction is valued at approximately $7.4 billion, or $5.6 billion net of Sun’s cash and debt.

“We expect this acquisition to be accretive to Oracle’s earnings by at least 15 cents on a non-GAAP basis in the first full year after closing. We estimate that the acquired business will contribute over $1.5 billion to Oracle’s non-GAAP operating profit in the first year, increasing to over $2 billion in the second year. This would make the Sun acquisition more profitable in per share contribution in the first year than we had planned for the acquisitions of BEA, PeopleSoft and Siebel combined,” said Oracle President Safra Catz.

“The acquisition of Sun transforms the IT industry, combining best-in-class enterprise software and mission-critical computing systems,” said Oracle CEO Larry Ellison. “Oracle will be the only company that can engineer an integrated system – applications to disk – where all the pieces fit and work together so customers do not have to do it themselves. Our customers benefit as their systems integration costs go down while system performance, reliability and security go up.”

There are substantial long-term strategic customer advantages to Oracle owning two key Sun software assets: Java and Solaris. Java is one of the computer industry’s best-known brands and most widely deployed technologies, and it is the most important software Oracle has ever acquired. Oracle Fusion Middleware, Oracle’s fastest growing business, is built on top of Sun’s Java language and software. Oracle can now ensure continued innovation and investment in Java technology for the benefit of customers and the Java community.

The Sun Solaris operating system is the leading platform for the Oracle database, Oracle’s largest business, and has been for a long time. With the acquisition of Sun, Oracle can optimize the Oracle database for some of the unique, high-end features of Solaris. Oracle is as committed as ever to Linux and other open platforms and will continue to support and enhance our strong industry partnerships.

“Oracle and Sun have been industry pioneers and close partners for more than 20 years,” said Sun Chairman Scott McNealy. “This combination is a natural evolution of our relationship and will be an industry-defining event.”

“This is a fantastic day for Sun’s customers, developers, partners and employees across the globe, joining forces with the global leader in enterprise software to drive innovation and value across every aspect of the technology marketplace,” said Jonathan Schwartz, Sun’s CEO, “From the Java platform touching nearly every business system on earth, powering billions of consumers on mobile handsets and consumer electronics, to the convergence of storage, networking and computing driven by the Solaris operating system and Sun’s SPARC and x64 systems. Together with Oracle, we’ll drive the innovation pipeline to create compelling value to our customer base and the marketplace.”

“Sun is a pioneer in enterprise computing, and this combination recognizes the innovation and customer success the company has achieved. Our largest customers have been asking us to step up to a broader role to reduce complexity, risk and cost by delivering a highly optimized stack based on standards,” said Oracle President Charles Phillips. “This transaction will preserve and enhance investments made by our customers, while we continue to work with our partners to provide customers with choice.”

The Board of Directors of Sun Microsystems has unanimously approved the transaction. It is anticipated to close this summer, subject to Sun stockholder approval, certain regulatory approvals and customary closing conditions.

The Yankee Group Business Collaboration Tournament

revers1.
Image via Wikipedia

Here is another showdown–this time between collaboration software vendors. Interesting in that it has a tournament style presentation format (ala Streetfighter or K1) and pits large on-premise software vendors such as IBM and Microsoft, with small, up and coming vendors such as pure-SaaS provider Zoho.

This was developed by Yankee Group. Read more below:

The Yankee Group Business Collaboration Tournament

Although the buzzer-beaters and Cinderella surprises of the NCAA college basketball tournament have been put to rest for 2008, Yankee Group revisited March Madness in the business collaboration vendor landscape.This season marks the inaugural Yankee Group Business Collaboration Tournament. Based on the framework we’ve developed, the tournament will crown the technology vendor with the most comprehensive business collaboration solution the champion of 2008.

In addition, in this Report we also announce the Yankee Group All-Tournament Team and Collaboration Coach of the Year. These awards are given to the vendors that are most successful within the categories we evaluated:

* Community-centric collaboration solutions
* Real-time and messaging collaboration solutions
* Mobile collaboration solutions

We also evaluate the 16 selected vendors (see Exhibit 1) on IT friendliness (e.g., their ability to integrate with existing solutions); the level of service and support they provide; and, at a strategic level, their product road map, their commitment to business collaboration relative to their entire portfolio and their long-term viability.

However, the purpose of the tournament is not to predict the ultimate market champion, but to evaluate vendors on functionality and alignment with Yankee Group’s vision of the Anywhere EnterpriseTM, which essentially is a business that—technologically speaking—allows corporate users to work anywhere using any device. The goal of the Report is to help businesses make the right purchasing and licensing decisions for their collaboration infrastructure and strategy.

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Why Indians [and Filipinos?] can not make good IT products, but make good solutions

Sachin Dabir, Sr. Manager at Red Hat Asia Pacific, poses an interesting question in his blog and he asks: “Why Indians can not make good IT products, but make good solutions.”

He writes:

Indians are good at services and solutions but can not make good IT products – this is the old problem that we keep hearing about in the industry.

We are good at creating ’solutions’ – solutions that can be tweaked whenever there is a problem. We love to solve the problems and we are very comfortable in the world of ambiguity. But this mental state is not good for making products. Products need state of fixed input and predictable output. Somehow, I realised that we, Indians are not good at being “exact”, “precise” “to the point”. We like giving “big picture” solutions, giving broad views.

Just think about the conversations that we have most of the time – about politics, economics, life. We love to talk a lot but without being precise. Ok this is a very generalised view and there are many good and precise thinking people in India. But the fact is that our brand, image as Indians is not like that. We as, people, are not known to be precise and exact. Hence the buyers dont find trust in capabilities to build great products.

Without surrendering to stereotypes, its funny how I share the same views but this time as it applies to my own country men–Filipinos. Filipinos share many traits with Indians (such as a language and culture that is stilted towards generalities and imprecision). Case in point: in our native language our subject / nouns are generally genderless–unlike Western/Germanic languages which almost always associate gender with an object (ie a ship is a she, etc). We are also imprecise when it comes to telling time and distance, often in conversation we will set meeting times as “later” or use frustratingly unhelpful words such as “near” or “far” when describing the distance to a lost stranger’s final destination.

I was thinking some of the barriers to success for our countrymen in some fields may be rooted in our cultural background and upbringing. This was pursued in Malcolm Gladwell’s book Outliers–he explains how plane crashes may partly be explained by the cultural heritage of the pilots and their “power distance.” (See the chapter on the Ethnic Theory of Plane Crashes or just read about it here).

But on the upside I notice that unlike Singaporeans, Indians and Filipinos generally excel in services, entertainment, the arts–areas where creativity and right brained thinking are valued and not seen as a hindrance. Daniel Pink has an interesting book called A Whole New Mind which posits that we are moving to the Conceptual Age, and in this coming new era, the “scatter-brained”, imprecise but inventive, empathic right brainers will have an advantage. And I know some Indian companies who have been able to overcome cultural hindrances or barriers to marry left-brained, product-oriented precision, and marry this with their innate creativity to go and develop innovative, and fairly successful product companies. Companies like Adventnet and their ManageEngine and Zoho product lines; with more on the way with interesting Indian startups like Druvaa, Vembu, Cynapse and others. Hopefully we Filipinos can one day do the same.

Yochai Benkler: Open-source economics

Speaking at the TED (Technology, Entertainment, Design) Conference, Law professor Yochai Benkler explains how collaborative projects like Wikipedia and Linux represent the next stage of human organization. By disrupting traditional economic production, copyright law and established competition, they’re paving the way for a new set of economic laws, where empowered individuals are put on a level playing field with industry giants.

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Primer on FOSS–from a Philippine Legal Perspective

I read an interesting blog post today from Michael Dizon, who used to be a Senior Lecturer at the UP College of Law and whose interests, among others, is ICT law, policy and practice, and Free and Open Source Software or FOSS.

He offers a nice primer on FOSS, but more interestingly, provides a perspective on the legality and enforceability of FOSS in Philippine law:

In general, FOSS licenses are valid contracts. They comply with the essential requisites of a contract: consent (implied consent through the use of the program), object (use, access, modification and subsequent distribution of the program) and cause (obligation of the user to grant subsequent users the right to access, modify and distribute the program or any derivative thereof).

However, FOSS licenses may be subject to the provisions of technology transfer arrangements (TTA) under the Intellectual Property Code. A TTA refers to contracts or agreements involving the transfer of systematic knowledge for the manufacture of a product, the application of a process, or rendering of a service including management contracts; and the transfer, assignment or licensing of all forms of intellectual property rights, including licensing of computer software except computer software developed for the mass market. If they are considered TTAs, FOSS licenses must contain the mandatory provisions but none of the prohibited clauses enumerated in the Intellectual Property Code.

You can read the rest over at Michae’ls blog. This is new insight for me and find the information really useful–as its very hard to find thoughts around open source (other than trechnology) locally.

Some of the facts seem dated though. He says that:

Technical support: FOSS has limited technical support.

Warranty: Source code availability and the lack of centralized control over the code limits, limits, if not totally eliminates, any form of warranty over the FOSS products.

A lot of popular open source projects nowadays are released as “commercially supported” code or have dual licensing. This marries the advantages of commercial software in that control and support is centralized and coordinate, with the inherent advantages of open source such as code transparency, low cost, flexibility, etc. Check out projects such as MySQL, Acquia, SugarCRM, Alfresco, and many others. These projects, often are released with a dual license, which if clear legal protection is an issue for an organization–they can opt to get.