January ‘11

JAMNALAL BAJAJ Institute of Management Studies

Issue – January 2011

Page 1

.. 7 HOW THE GROWTH OF EMERGING MARKETS WILL STRAIN GLOBAL FINANCE.................... 12 CROSS WORD ......................... 3 CONSULTANT TALKS ....... 7 PUTTING STRATEGIES TO THE TEST: MCKINSEY GLOBAL SURVEY RESULTS .....................................................15 Page 2 ..........CONVOYAGE January ‘11 CONTENTS: AN ARTICLE: POWER OF THE CLOUD IN THE WORLD OF BUSINESS .............................................. 9 INCREASED LABOUR MOBILITY TO MEET DEMANDS FOR ECONOMIC GROWTH ...............14 CONSULTING FUN ..................................

CONVOYAGE January ‘11 An Article: Power of the Cloud in the world of Business By this case the internet). or technology becoming outdated. he simply logs in by providing a user name and a password. To be in business. or technical issues which available with you. servers and technical people to run. But are you doing enough? Are you doing it the right way? When you need to start a business. You might have the best technology Page 3 . By this. It can also be called as a Utility computing similar to utility services like Electricity and Water where you pay only for what you use. So how does the User leverage this to his advantage? Well. monitor and debug these applications. Welcome to the world of cloud computing. you need to have so many resources in your hand: Business applications like SAP or other ERP software. What does it have in store for the various firms across the globe?? needlessly frustrate you. Plus there are always problems with version upgrades. Cloud Computing is a concept where the entire applications runs from a virtual cloud (In consultingclub@jbims. operational and set up costs which can be enormous. Cloud computing is a mere extension of Software as a Service (SaaS). talented resources and might be highly successful. data. It is similar to a building where every office in a building uses the same infrastructure and basic facilities available but still has the capability to customize its own office space. JBIMS and only pays for those applications which he wants. Vineet Inamdar 1st Year MMS. you have to leverage your IT costs where Cloud Computing helps you out. applications and computing power are all lodged at a remote location from the user. power costs. you need technology and to make the best use of the resources Think about the way you do business.

which runs its computer-animation rendering process on Windows Azure (A cloud computing or cloud services operating system for the development service hosting and service The advantages of Cloud Computing is that it gives the organization a very rapid start up. application. since no time is wasted for resource allocation or for set up. A classic example in this case is of Pixar Animation Studios. small and medium enterprise firms. reduction in capital architecture. What would decide whether you should move your application(s) over the cloud or not?? It depends on how fair is your usage of the data and the application. but the same is used by multiple clients (called tenants in this case). It works on the concept of multi – tenancy where in a single software runs on a server. But in cases of applications with high variations in the traffic. scalable consultingclub@jbims. The concept of cloud computing incorporates web infrastructure.CONVOYAGE January ‘11 Traditionally bigger firms have deep pockets to buy the latest technology and use the traditional client server since the number of users can grow but everyone shares only one single instance of the software. If the application has a fairly consistent load throughout the day. which . the only way to survive and make progress is by expenditure and operating costs. Page 4 management environment) because every frame of their movies takes eight hours to render today on a single processor. How does cloud computing work? Cloud computing is Internet based system development in which large scalable computing resources are provided “as a service” over the Internet to users. Web 2. it is better to move the application since it will have better utilization.0 and other emerging technologies. it then makes no sense to move it to the cloud. But for start-up. you pay the same amount of money when you move to the cloud and in fact enjoy the advantage of a higher processing power in the form of several shared multiple servers working on your embracing cheap but effective technology. software as a service (SaaS).

the company migrated to a virtual environment and optimized the server space utilization. In order to grow against heavy competition and a complex environment. solutions and Coca-Cola Enterprises is the world’s largest marketer. software licenses. producer and distributor of Coca-Cola products.CONVOYAGE January ‘11 means it would take them about 272 years to render an entire movie. In order to fill up this messaging need and maintain contact with the employees. Traditional way of communication was via email to which sales employees had limited access. Some industry examples where companies have actually cut down on their IT costs drastically and become more optimally competitive: KPIT Cummins: Headquartered in Pune. accounts and manufacturing. it was possible for them to communicate with the company since services in the fields of finance. effectively there was a need with to its communicate employees. said it was unclear on what could be hosted from the server. By reducing the number of servers from 120 to 20. the company managed to get newer applications deployed and there was ample support for the software through multiple devices like mobile phones and computers. The result is huge spikes in Pixar‘s usage of Azure as they render on-demand. particularly with its sales employees to deliver information to them in real time. they can get the job done as fast as they Page 5 . But now. He said provision servers from several months to a few hours. power usage and consumption. Coca Cola Enterprises: consultingclub@jbims. Negatives on Cloud Computing: While the entire concept of cloud computing has gathered steam in the past few months. India. Larry Ellision. they migrated to Microsoft online services where the software and data were hosted online with real time support. CEO and co-founder of Oracle while quoting some companies which boasted of providing ERP systems on the cloud. With Azure. To handle issues like the increasing cost of hardware. KPIT Cummins is an emerging leader in providing consulting. and increasing the server utilization. there have been increasing criticisms on cloud computing.

everyone who uses it. it is always economical to have your own server (private cloud) and host applications rather than migrating your application to some third party vendor. cloud for computing small might be successful and medium enterprises. So even though you could customize it.CONVOYAGE January ‘11 that the entire issue of ‘cloud’ which is a new name for coined for the ‘hosting from the internet or over the network’ is in fact over blown and has always existed in the past. Software as a Service has co.existed with traditional software vendors for several years. the logic still remains the same: Same set of services to offer from a host of services from which you need to select which service you require. It is true today that all organizations providing cloud computing services have to comply with several security standards but instances of data breach are not uncommon. the biggest disadvantage is that of data primarily of security to be Another disadvantage is that they would provide you the same set of service to consultingclub@jbims. Also. Whether cloud computing showers itself upon the world or not. Also. References: www. But for traditional large scale organizations. But it is definitely a new concept in the use of IT which gives a method to companies to be more cost effective in terms of the technology Page 6 . It would not be possible for an organization to deploy its highly sensitive data over a remote server which houses data and provides services to different users. only time will tell since there are too many constraints.

the rest say their strategies are better beating strategy. described as matching industry best practices and delivering operational imperatives—in other words. executives around the world answered a series of questions that allowed us to test how fully their companies’ business unit strategies pass ten tests that we believe. make for a good strategy. Competitive advantage is the essential ingredient of any strategy. the results underscore that companies can do much more to pressure-test their strategies. what level of insight the strategy rests Page 7 . In this survey. Nearly two-thirds of respondents indicate that their companies pass three or fewer of the ten tests. advantage is an elusive goal. assessing how the strategy positions the company in the market. The first— whether the strategy will beat the market by creating competitive advantage—is comprehensive.CONVOYAGE January ‘11 CONSULTANT TALKS Putting strategies to the test: McKinsey Global Survey results Creating a winning strategy is a struggle for most companies. and what the implementation plan involves. The results of a recent McKinsey survey suggest one reason: just 53 percent of executives characterize their companies’ strategies as emphasizing the creation of relative advantage over competitors. based on years of work with clients and academic research. Yet for many companies. just playing along. The remaining nine tests disaggregate the picture of a market- consultingclub@jbims. They may not be asking themselves the right questions. The results also suggest some ways that companies can prioritize improvements in their approach to strategy based on the tests respondents say contribute most to financial performance and are most frequently used in their sectors. And only 2 percent of respondents say their companies pass nine or all ten tests. While it’s certainly possible for a strategy to succeed at a company that fails all or even most of the tests. meaning that our description of the test closely describes a particular element of their strategies. some seem content just to play along.

of course. For example. nearly half of them cite that test. for example. Executives in the energy industry. And as Exhibit 2 shows. consultingclub@jbims. more executives select flexibility to make choices in the future than any other test. The results also suggest some ways that companies can prioritize improvements in their approach to strategy based on the tests respondents say contribute most to financial performance and are most frequently used in their sectors. the results underscore that companies can do much more to pressure-test their strategies. are likelier than all others to say a focus on trends has a good effect on their financial performance. stress the importance of management having a strong belief in the strategy’s underlying assumptions. with 46 percent saying so. When executives assess the tests’ impact on financial performance. meanwhile. when asked which three tests have the most positive effect on financial performance. novel insight is the test rated least important to financial performance and passed least frequently. this is the test the most companies pass. Page 8 . arise some among interesting differences industry sectors (Exhibit 4).CONVOYAGE January ‘11 While it’s certainly possible for a strategy to succeed at a company that fails all or even most of the tests. to be partly related to whether they think it matters. Taking the tests to the bottom line Whether executives say their companies pass a given test is likely. And indeed. Executives in the health care and hightech sectors. there is a rough correlation between passing a test and executives saying a test is instrumental to financial performance.

ports. as developing economies continue to pick up the pace of urbanization.5 percent. implications investors. water and power systems. capital flows between countries will likely change course. and they have access to cheap capital. and financial institutions alike. or the desired level of investment needed to finance all those projects. crowd out some investment. government policy makers. with real long-term interest rates languishing near 1. The McKinsey Global Institute’s (MGI) recent analysis finds that by 2030. They enjoy healthy cash capital. machinery—may put unexpected strains on the global financial system. consultingclub@jbims. Moreover. led by developing economies. the world’s supply of capital—that is. Indeed. These findings for have business important executives. and other kinds of public infrastructure—and the many companies building new plants and buying potentially act as a drag on growth. capital to invest could put upward pressure on real interest rates. could put upward pressure on interest rates and crowd out some investment. household saving rates have generally declined in mature economies for nearly three decades. Yet all those new roads. the prognosis for companies that can tap into that growth over the next decade looks promising. The gap between the world’s supply of. with $3.CONVOYAGE January ‘11 How the growth of emerging markets will strain global finance Surging demand for capital. the world’s corporations would seem to be in a strong position to grow as the global economy recovers.8 trillion in cash holdings at the end of 2009. and an aging population seems unlikely to reverse that trend. Indeed. and demand for. its willingness to save—will fall short of its demand for requiring new channels of financial intermediation and policy intervention. and balances. as patterns of global saving and investment shift. China’s efforts to rebalance its economy toward increased consumption will reduce global saving as well. Short-term doldrums Page 9 .

factories.8 percent of GDP in 2002 to 23. and shopping centres has already caused investment to jump. The global investment rate increased from a recent low of 20. We are now at the beginning of another investment boom. water systems. our analysis suggests that high investment rates could continue for decades. consultingclub@jbims. schools. transport systems. hospitals. and Latin America. Asia. Considering the very low levels of physical-capital stock these economies have accumulated. this time fueled by rapid growth in emerging markets. the demand for new homes. These eras include the industrial revolution and the post–World War II reconstruction of Europe and Japan.7 percent in 2008 but then dipped again during the global recession of 2009. and housing. Across Africa. factories. Page 10 .CONVOYAGE January ‘11 Surging demand for capital Several economic periods in history have required massive investment in physical assets such as infrastructure. The increase from 2002 through 2008 resulted primarily from the very high investment rates in China and India but reflected higher rates in other emerging markets as well.

scenarios. we project that global investment demand could exceed 25 percent of GDP by 2030. if the global economy grows in line with the consensus of forecasters.CONVOYAGE January ‘11 In several scenarios of economic growth. airports. and railways). in 2008). followed by power and water systems. and people make home improvements. we find that investment will still increase from current levels. To support growth in line with the forecasters’ consensus. But the coming investment boom will involve relatively more investment in infrastructure and residential real estate. When we examine alternative growth demand of about $4 trillion in infrastructure and $5 trillion in residential real estate in 2030. The mix of global investment will shift as emerging-market economies grow. We project global investment consultingclub@jbims. respectively. The gap exists in all categories of infrastructure but is particularly large in transportation (for instance. they are largely upgrading their capital stock: factories replace old machinery with more efficient equipment. Consider the fact that emerging economies already invest in infrastructure at a rate more than two times higher than that of mature economies (5. global investment will amount to $24 trillion in 2030. When mature economies invest.8 percent. Page 11 . compared with about $11 trillion in 2008. though less so in the event of slower global GDP growth.7 percent of GDP versus 2.

• Demand will be biggest for highly educated professionals.5 percent in the United States and nearly 10 percent in Canada.) • Health care research and development alone will generate enormous demand for skilled labor worldwide. foreign-born workers with university degrees or equivalent qualifications make up just 2 percent of the European labor market. In Canada. • In the next two decades. particularly in knowledge-based economies.CONVOYAGE January ‘11 Increased Labour Mobility to Meet Demands for Economic Growth Industries and countries worldwide will require major increases of highly educated people in their workforces to sustain economic growth If left unaddressed. Today. Professionals will be in BCG’s president and chief executive officer. (Labor-demand growth rates are compounded annually. Germany. technicians. and the United States.” said Hans-Paul Bürkner. the United particularly high demand in the trade. expected immigration and birth rates will not offset the workforce losses caused by aging populations. and communications industries in developing nations. erratic employability of the workers in the Southern Hemisphere. and demographic changes in the Northern Hemisphere. demand for professionals in manufacturing will peak at more than 10 percent in developing countries. where retirement of the baby boomers will result in an unprecedented talent deficit. Kingdom. transportation. • Employees without critical knowledge and technical skills will be left behind. Improved Page 12 . talent scarcity will become a threat to sustained growth. compared with 4. exceeding 4 percent across all countries sampled. The roots of the global talent risk include the widely uneven quality of educational systems. and managers. “Human capital has replaced financial capital as the engine of economic prosperity.

Cumberlege. immigrants. Montreal. head of partnership. as well as more than 100 high-level contributed experts to and the the disadvantaged. The report proposes seven core responses to global talent risk: • Introduce strategic workforce planning to address imbalances between labor supply and demand. • Extend the pool by tapping women. Doha.CONVOYAGE January ‘11 education and training must go hand in “The global problem is no longer a mere talent mismatch. and practitioners. recommendations in the report and to the talent mobility dialogue hosted by the World Economic Forum online and at meetings in Brussels. The scale of the predicted talent gap requires concerted action. • Increase employability by advancing hand with increased labor migration. Davos-Klosters. The World Economic Forum Annual Meeting 2011 in Davos-Klosters will seek to catalyze a pragmatic. • Encourage temporary and virtual mobility to access required skills easily. starting with—and going well beyond—removing barriers to the mobility of talent. senior director. • Foster “brain circulation” to mitigate brain drain. New Delhi. Dubai. consultingclub@jbims. and New York in 2009 and 2010. older Page 13 . • Ease migration to attract the right talent globally.” said Piers A. Members of the Global Agenda Council on Skills and Talent Mobility. result-driven action focused on effective sharing of good practices. • Develop a talent “trellis” by focusing on horizontal and vertical career and education paths. World Economic Forum. technological literacy and cross-cultural learning skills.

amount of money spent 14. total sales of a company 17. proof of payment 3. money paid for a loan 10. promise to repair or replace 13. rate and efficiency of work 4.CONVOYAGE January ‘11 CROSS WORD Business and Finance Across 1. money paid to owner of copyright or patent 7. wealth of person or business 12. neither cheque nor credit card 15. legal agreement 16. money lent Page 14 . ask the bank to advance money 6. money returned (Note: Solve the crossword and mail the solution to consultingclub@jbims. share of profits paid to shareholders Down 2. part of the capital of a company 8. put money into a company or business 5. amalgamation of two companies Names of the early three winners will be published in the next month edition of ConVoyage) consultingclub@jbims. where shares are bought and sold 9.


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