Monthly Archives: May 2008

Eliminate back office

Back Office: the departments in an organization that are not directly involved in generating cash for the company. For example, the IT department in a company, or the accounting department in a broker-dealer organization. These departments are absolutely indispensable, because if they were not, they wouldn’t exist.

But does it really make sense to have such a cost center in the organization? Specially when you have options around it. A couple of ways to eliminate the back office would be by outsourcing your back office to someone else or developing expertise in the work you do in your back office to an extent where you can make it part of your business offering.

Your back office is for some one else the “front office”, or the core business offering. So instead of putting resources in your back office and diverting your attention from your core business, a better option would be to look for the best choice out there and outsource your back office. Benefits of this approach are cost savings in most cases, since you will be choosing from a pool of service providers, and ability to pay more attention and resources to your core business.

Another option is to expertise back office work and spin-off the back office into a money generating business. This has been a very successful operation in the software industry, more since the advent of software as the service. The most visible example that comes to mind is Amazon S3 and related services. Amazon hosts big servers through its IT department to power its online store. Amazon now uses the expertise of its IT department to provide a host of services to enable other businesses use its infrastructure and do computing in the cloud, eliminating its back office by turning it into a profitable offering.

The search engine effect

Question: What has Google and other search engines done to the information available on the Internet? Answer: Widened the gap.

While on one hand the search engines have done a great job in organizing the infinite amount of information on the Internet and given access to it in a simple and straight forward way, they have at the same time created a great divide between what people watch and what they don’t on the Internet. Nine out of ten times, we end up looking at the top five to ten results on the search results page. Most of the times, we don’t even bother to go to the second result page. As a result, the page rank for the popular content keeps getting better and that of not so popular gets stagnated.

This is a fact. Now the real question is how to succeed in this new world of Internet where search engines are primarily the window to the infinite information and resources available out there. The goal is simple, be one of the top ten results for something and the best way to do this for any new player is by targeting the niche. Pick a niche, solve a particular problem in the best possible way, be the first choice for anyone who is facing that problem, build a community of mavens and inturn use this search engine effect in your favor.

Is it just another medium?

Newspaper, radio, television and now Internet. People around the world look for mediums for information and entertainment. Looking at the evolution of each of these mediums, it makes sense to ask if this world wide web is just another medium? Well the answer is yes, and no. Yes, because in the end, it is a medium where the customers can get the information and entertainment they are looking for. But then like any other medium, the web has some uniqueness that stand out to make it more than just another medium.

We should consider a few different perspectives while answering this question. Let’s start with the content creators and providers. Internet has revolutionized this field in great ways. The content development on Internet is not something that is controlled by a few big networks. Anyone and everyone can write a blog or upload a video and become a content provider. And since there is no bar on who can become a content provider, the amount of content is infinite, the competition is fierce and the cost is close to zero.

Now let’s look at the monetizing aspect. Advertisements are the main source of revenue on any medium. On Internet, advertisers get a chance to maximize their return by targeting the customers using behavioral or contextual relevance. The interactive nature of Internet and the individual targeting of customers make advertising on the web standout as compared to any other medium.

One more aspect that we got to consider here is the end customer. Internet is more different for end customers as a medium than anyone else because here the customer is the driver. The customer is not bound to read the news printed on the daily newspaper or watch a sitcom at a given time on the television. On the Internet, the customer can pick and choose what they want in terms of information and entertainment, when they want and how they want it.

In the end, what makes the web stand out as a medium is its unique aspects of interactivity, equality, personizability and breath. Another way Internet is more than just another medium is the way it has affected all other mediums, be it newspapers online, where customer can get the latest news live or the television shows on the web, which the customers can watch on demand. For all other mediums, Internet has acted like a supplement to strengthen the customer base, making it really special.

Starbucks and non-free Wi-Fi

I don’t get it. Entire city of Mountain View has free Wi-Fi. The New York City central park has free Wi-Fi. Almost every local coffee shop has it. So why at Starbucks one needs T-Mobile or AT&T subscription to connect to the Internet? Wi-Fi is something that is cheap and easy to set up, and I would expect the third place after home and office where Howard Schultz wants people to spend most time, to at least have free wireless connectivity.

Here’s some simple math to support my argument. AT&T charges $4.99 per month for basic Wi-Fi access. A cup of coffee at Starbucks is more than $4. Whatever deal Starbucks and AT&T have to let AT&T provide an exclusive service and the nominal Wi-Fi set-up cost which Starbucks will face to provide free Wi-Fi is pretty much mute if Starbucks is able to attract even a small number of additional customers who look for a local coffee shop where they can connect to Internet for free (instead of signing up with a service provider just to get Wi-Fi connectivity at Starbucks).

Yet another argument: Starbucks can ad power the Internet service and cut a deal with one of the search providers to make a particular search engine the default one while using Starbucks Wi-Fi, which can potentially make this “free” Wi-Fi service a money churning business. And now when Starbucks is facing competition from the likes of McDonald’s, providing free Internet access and making Starbucks attractive enough for customers to spend more time there is required more than ever before.

All this aside, I believe just going for free Wi-Fi will give Starbucks enough press blog coverage to provide that much required spark that might pull customers back to the coffee shop (something like the iPod touch announcement…) and make a statement that for Starbucks, customers still come first.