[Update: Please click here to view the Part 1 and Part 2 of this speech on YouTube. Thanks.]
Following is the full text of the speech delivered by Ashok Malaviya (Director – Sales at Mithi) during Collaboration Retreat 2011 event held on 23rd and 24th September 2011 at Pune (India).
A very good morning to you all. Firstly, let me thank you for making the time to come to this meet. My special thanks to all the participants who have come back for the second time. It means a world to us. We will definitely try to make it worth your while.
Today I will be sharing with you some of the experiences and learning that we’ve had from our customers. I would also spend a couple of minutes to explain what exactly do we mean by the term “low cost” a term often used by Mithi to position our email and collaboration solution.
Let me start by stating something very fundamental.
The per capita GDP of USA is about 14 times that of India.
Since per capita GDP is the measure of value of goods produced per person, it is also an indicator of what our companies earn per employees.
It is estimated that Revenues per employee of Apple and Google is in the range of 1.2 millon USD whereas at Infosys it stands at 55,000 USD almost 1/20th of its counter part in the US.
It stands therefore to reason that if the Indian companies have to be competitive the spending per employee has to match their earnings hence it should be much less than what it would be in a company based out of US.
On a similar note a study done by Boston Consulting group states that Indian banks have the highest cost per employee at Rs 5.5 lacs per annum. Indian banks deploy 62% of staff in customer facing roles as against the benchmark of 82% globally. Therefore if the Banks have to be more effective, especially the sales and service staff, they need to communicate with its customers and prospects.
CIO OF INDIAN COMPANIES HAVE A CLEAR MANDATE TO REDUCE IT AND IT INFRA COSTS
A CIO of a company needs to cut cost on their email and collaboration infrastructure. Especially given a scenario where other input costs are rising. It is estimated that salaries in India would be rising by 9% on average, in order to remain competitive it is imperative that IT infrastructure costs are effectively managed.
One of the core values and the basic value proposition that Mithi delivers to its customers is lower cost and I’d like to talk a little bit about it today.
It makes for an interesting comparison to draw a parallel with low cost carriers and full service airlines.
The interesting thing is that most people equate the low cost carrier with the absence of free food that is served on board… as if food was making all the difference to the cost.
It is much the same as when we talk of Low cost Enterprise Software, it is generally equated with the cost of licensing.
If that was so, free Open Source software should have been enough.
Free should have been low cost enough.
OPEN SOURCE SOFTWARE MIGHT BE FREE BUT IT CAN COST MUCH
Open Source software might be free but it can cost much to put all the different elements together and keep them working. Sometimes, this can be an impossibly high cost for most enterprise.
Microsoft has been shouting over rooftops. Free is more expensive and they are primarily pointing to the high support costs required to run Open source software.
So then, what does it mean to be low cost?
A COMPARISON WITH LOW-COST CARRIERS (LCCS)
Low-cost Carriers (LCCs) get this tag primarily due to their low operating cost structure and Business model.
So besides cutting down on expensive in-flight service, the business model of an LCC broadly includes the following features:
a single passenger class;
a single type of aircraft for lesser maintenance and servicing costs;
flying to cheaper, less congested secondary airports;
flying early in the morning or late in the evening to avoid air traffic delays and take advantage of lower landing fees;
short flights and fast turnaround times;
emphasis on direct sales of tickets, especially over the Internet, hence avoiding agent commissions;
employees working in multiple roles;
optional paid-for in-flight food and drink; aggressive fuel hedging programs; and segregation of ancillary charges.
So it is with enterprise software like Connect Server. Let me briefly narrate to you our journey in making Connect Server.
CONNECT XE – REDUCE COSTS ASSOCIATED WITH COMPLEXITIES.
We started working on making it easy to set-up an email and collaboration system using OSS. That was Connect XE.
The solution created a viable alternative to expensive proprietary software. It took away the complexities associated with open source based solutions while providing the cost and other benefits of open source.
It made it less costly to have OSS based email and collaboration set-up, adding to the base low cost advantage of OSS.
CONNECT XD – REDUCING COSTS BY LOWERING DOWNTIME AND SERVICE DISRUPTION.
The second generation of the software – Connect XD further strengthened the low cost advantage of the solution by reducing the costs incurred due to downtime and service disruption.
By ensuring near-zero downtime and disruptions, Connect XD made OSS based email & collaboration viable even for large enterprises with heavy email loads.
I remember taking a prospect to very large customer of ours who on being asked about the downtime of the system stated it to be 4-5 of minutes unplanned downtime over a 4 year period. The reply came as a pleasant surprise even to us. For a setup that boasts of 25,000+ mailboxes with 70 odd servers spread over more than 35 locations, it was much more that a pretty decent performance.
Bill Hilf of Microsoft puts it very simply: When people buy commercial software, really what they’re buying is a guarantee. You’re buying a guarantee that what you have will perform, and has been tested and there’s someone you can call up, and if things go really bad someone’s liable if something doesn’t work. You’re buying this ecosystem of accountability. One of the challenges of open source and really the challenge with the open source business model is: it’s hard to replicate that ecosystem of accountability and that guarantee.
With the first two versions of the software this is the precise value that Mithi bought to the table for its customers. Complete accountability to our customer but at much lower cost points as compared to the conventional commercial software.
CONNECT XF – REDEFINING THE COST STRUCTURE THROUGH GREATER FLEXIBILITY
We’ve now entered into the third generation of our work on product development. The basic philosophy remains the same- Delivering a low cost advantage.
The current generation of our software- Connect Xf, adds flexibility to the ease and dependability advantages of the earlier generations of the software.
With Connect Xf we’ve moved further down the track of Ease and Dependability, but also that we’ve added a newer dimension of flexibility making it possible to redefine your cost structures.
This flexibility in Xf manifests itself as
Hybrid collaboration solutions
A larger number of Open Source accessories and Add-ons
Greater Resource Efficiency
A wider choice Platform, Hardware & Devices
All aimed at delivering a deeper impact on your costs through enabling you to redefine your cost structures.
LOWER COST DOES NOT MEAN COMPROMISE ON PERFORMANCE
Let me quickly touch upon a few of these.
Last year we spoke about Co-existence and how we’ve been able to lower the license cost by co-existing with some proprietary products like MS Exchange, Lotus Notes…thus reducing the TCO (Total Cost of Ownership). Last year during our first collaboration retreat we had released two case studies, one by Aditya Birla Group and the second one by Aegon Religare highlighting the cost advantage with this architecture.
A host of our customers like GTL, Spice, Lanco, DRDO have reduced the cost of infrastructure, management and monitoring cost by moving their email infrastructure onto private clouds for their group organizations.
Connect Xf brings the cost of an enterprise email and collaboration infrastructure further down by strong administrative features like policies, class of service, reports, role based administration etc which are vital to the centralized architecture necessary to manage a cloud setup. Also Cloud computing is all about gaining flexibility in resource allocation…what is needed in turn to go on the cloud is a good management interface. Flexibility in resource allocation gives you cost advantage.
I recently read a report wherein a study was carried out by EMC and Zinnov Management consulting. The study stated that private cloud deployment would help companies reduce their operational cost by around 50%.
At GTL e.g. they were able to consolidate their mailing solution which was distributed over 25 servers, to a setup that consist of 3 servers and a Load Balancer. With considerable cost savings. Not just on hardware Bill of Material but also the management and monitoring cost.
Traditionally, as soon as an enterprise software sale is made, it becomes the buyer’s responsibility to support the purchase – often requiring the manpower of a 6 and 7-figure consulting engagement. For instance, Microsoft states that dollars spent on services is 6 times the cost of the original licenses. While that’s great for the partner providing services like FM, it means customers have to bear huge cost to support their applications.
With a much better deployment and management capability, Xf enables much of the work to be done by the customers themselves or remotely by the service provider saving considerable time and cost.
To give you an example I’m informed by our delivery team that the Installation of single mail server would take upto 3 days for installation, that has now been reduced to 1 day and the target is to further reduce installation time to 3 hrs.
Sometime back I happened to speak to one of our customers who’s been exploring the idea of outsourcing their complete IT functions. And although they are still debating the cost implications which seems to be on the higher side, he had no such problem when it came to managing and monitoring Mithi Connect Setup. This primarily due to the fact that the resource required managing Mithi Connect could be organized at very aggressive prices points. The staff managing Mithi Connect consists of fairly young freshers with basic knowledge of Linux who are trained and certified by Mithi. I was told that his average salary for this admin staff was within 12-15 thousand which I think is pretty good when we compare it to the average cost quoted by the big three vendors in this space.
It’s not just the flexibility in the product that we’re talking about but also flexibility in terms of choice. Wider choice of software and hardware platform, integration with different applications.
But most importantly, the increased flexibility of XF will enable greater reuse of existing infrastructure and enabling integration with other business applications and collaboration components. E.g. Integration with ADS/CRM/Outlook/….> and a wider choice of free tools like Thunderbird, Neos, etc.
One of our customers during the deployment stage insisted on using MS Oulook as email client citing familiarity as the main reason when it came to end users. We suggested them to use Thunderbird instead of Outlook since it would result in even greater cost savings but more importantly without any compromise on performance and functionality. We told them that Mithi Connect has been designed to integrate seamlessly with clients like Thunderbird thereby offering various functions.
We could convince their IT team to do a pilot before taking a final call. And lo and behold the result is that today they have policy for using Thunderbird only and the company has substantially reduced their cost structures for their email and collaboration infrastructure. Encouraged by their early success with Thunderbird, the IT team is now further pushing the envelope to have even the desktops on to Linux platforms like Ubuntu, Redhat and introducing Open Office as a standard application within the organization.
LOWER COST NOT EVEN POSSIBLE WITHOUT HIGHER PERFORMANCE
Lastly let me leave you with this thought, There is a general feeling that Low cost is a compromise on performance. But let me state this very categorically, that low cost is not even possible without high performance.
Every time we reduced the cost we had to improve performance one way or the other and in many ways.
We’ve already been on this path for nearly 3 years now. What you are seeing today, is a result of that effort. There is still much distance to travel along this path to bring greater flexibility which would in turn make for even greater possibility along this path.