JAMNALAL BAJAJ Institute of Management Studies
Issue – January 2011
........... 7 HOW THE GROWTH OF EMERGING MARKETS WILL STRAIN GLOBAL FINANCE.........14 CONSULTING FUN .................................................. 3 CONSULTANT TALKS ......... 7
PUTTING STRATEGIES TO THE TEST: MCKINSEY GLOBAL SURVEY RESULTS ............................................................................................ 12
CROSS WORD ........................................... 9 INCREASED LABOUR MOBILITY TO MEET DEMANDS FOR ECONOMIC GROWTH ...........CONVOYAGE
AN ARTICLE: POWER OF THE CLOUD IN THE WORLD OF BUSINESS ..............................15
you need to have so many resources in your hand: Business applications like SAP or other ERP software. Cloud computing is a mere extension of Software as a Service (SaaS). 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. applications and computing power are all lodged at a remote location from the user.
1st Year MMS. or technology becoming outdated. he simply logs in by providing a user name and a password. To be in business. What does it have in store for the various firms across the globe??
needlessly frustrate you. or technical issues which
available with you. By this.edu
. you need technology and to make the best use of the resources
Think about the way you do business. data. talented resources and might be highly successful. But are you doing enough? Are you doing it the right way? When you need to start a business. 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. operational and set up costs which can be enormous. power costs. monitor and debug these applications.CONVOYAGE
An Article: Power of the Cloud in the world of Business
this case the internet). JBIMS
and only pays for those applications which he wants. Welcome to the world of cloud computing. Plus there are always problems with version upgrades. You might have the best technology available. servers and technical people to run. you have to leverage your IT costs where Cloud Computing helps you out. Cloud
Computing is a concept where the entire applications runs from a virtual cloud (In
it is better to move the application since it will have better utilization. Web 2. But for start-up.
application.edu 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. it then makes no sense to move it to the cloud.0 and other emerging technologies. since no time is wasted for resource allocation or for set up. The concept of cloud computing incorporates web infrastructure. which
. 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. small and medium enterprise firms. It works on the concept of multi – tenancy where in a single software runs on a server. software as a service (SaaS). But in cases of applications with high variations in the traffic. If the application has a fairly consistent load throughout the day. scalable
consultingclub@jbims. 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. but the same is used by multiple clients (called tenants in this case). the only way to survive and make progress is by
expenditure and operating costs. Also. A classic example in this case is of Pixar Animation Studios. 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.CONVOYAGE
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. reduction in capital
KPIT Cummins is an emerging leader in providing consulting. they can get the job done as fast as they need. The result is huge spikes in Pixar‘s usage of Azure as they render on-demand. Traditional way of communication was via email to which sales employees had limited access. software licenses. it was possible for them to communicate with the company since
services in the fields of finance. accounts and manufacturing. Some industry examples where companies have actually cut down on their IT costs drastically and become more optimally competitive: KPIT Cummins: Headquartered in Pune. In order to fill up this
messaging need and maintain contact with the employees. Negatives on Cloud Computing: While the entire concept of cloud computing has gathered steam in the past few months. Larry Ellision. said it was unclear on what could be hosted from the server.edu
. particularly with its sales employees to deliver information to them in real time. In order to grow against heavy competition and a complex environment. they migrated to Microsoft online services where the software and data were hosted online with real time support. power usage and consumption.CONVOYAGE
means it would take them about 272 years to render an entire movie. producer and distributor of Coca-Cola products. India. Coca Cola Enterprises:
consultingclub@jbims. But now. With Azure. and increasing the server utilization. To handle issues like the increasing cost of hardware. there have been increasing criticisms on cloud computing. CEO and co-founder of Oracle while quoting some companies which boasted of providing ERP systems on the cloud. the company migrated to a virtual environment and optimized the server space utilization. effectively there was a need with to its
employees. solutions and
Coca-Cola Enterprises is the world’s largest marketer. the company managed to get newer applications deployed and
there was ample support for the software through multiple devices like mobile phones and computers. He said
provision servers from several months to a few hours. By reducing the number of servers from 120 to 20.
But for traditional large scale organizations.com
Another disadvantage is that they would provide you the same set of service to
consultingclub@jbims. References: www. Also.CONVOYAGE
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. 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 usage. 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.
everyone who uses it. So even though you could customize it.microsoft.edu
. 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. 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.
enterprises. Software as a Service has co. it is always economical to have your own server (private cloud) and host applications rather than migrating your application to some third party vendor. only time will tell since there are too many constraints.
Whether cloud computing showers itself upon the world or not. the biggest disadvantage is that of data security.
Also.existed with traditional software vendors for several years. primarily of security to be handled.
the rest say their strategies are better
strategy. the results underscore that companies can do much more to pressure-test their strategies. advantage is an elusive goal. just playing along. and what the implementation plan involves. some seem content just to play along.CONVOYAGE
Putting strategies to the test: McKinsey Global Survey results
Creating a winning strategy is a struggle for most companies. Yet for many companies. make for a good strategy. The remaining nine tests disaggregate the picture of a market-
Competitive advantage is the essential ingredient of any strategy. 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 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. They may not be asking themselves the right questions.edu
strategy positions the company in the market. In this survey.
described as matching industry best practices and delivering operational
imperatives—in other words. The first— whether the strategy will beat the market by creating competitive advantage—is comprehensive. And only 2 percent of respondents say their companies pass nine or all ten tests. 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. meaning that our description of the test closely describes a particular element of their strategies. While it’s certainly possible for a strategy to succeed at a company that fails all or even most of the tests. Nearly two-thirds of
respondents indicate that their companies pass three or fewer of the ten tests. what level of insight the strategy rests on. based on years of work with clients and academic research.
Conversely. meanwhile. for example. And indeed. Executives in the health care and hightech sectors. with 46 percent saying so. Executives in the energy industry. novel insight is the test rated least important to financial performance and passed least frequently. when asked which three tests have the most positive effect on financial performance. When executives assess the tests’ impact on financial performance. are likelier than all others to say a focus on trends has a good effect on their financial performance. of course. to be partly related to whether they think it matters. And as Exhibit 2 shows. arise some among
industry sectors (Exhibit 4). the results underscore that companies can do much more to pressure-test their strategies. stress the
importance of management having a strong belief in the strategy’s underlying assumptions.edu
. this is the test the most companies pass. 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.CONVOYAGE
While it’s certainly possible for a strategy to succeed at a company that fails all or even most of the tests. there is a rough correlation between passing a test and executives saying a test is instrumental to financial performance. nearly half of them cite that test. For example.
consultingclub@jbims. Taking the tests to the bottom line Whether executives say their companies pass a given test is likely.
more executives select flexibility to make choices in the future than any other test.
The gap between the world’s supply of. China’s efforts to rebalance its economy toward increased consumption will reduce global saving as well. its willingness to save—will fall short of its demand for
requiring new channels of financial intermediation and policy intervention. and other kinds of public infrastructure—and the many companies building new plants and buying
potentially act as a drag on growth.
investors. and an aging population seems unlikely to reverse that trend. with real long-term interest rates languishing near 1.8 trillion in cash holdings at the end of 2009. government policy makers. These findings for have business important executives. The McKinsey Global Institute’s (MGI) recent analysis finds that by 2030. the world’s supply of capital—that is. and
How the growth of emerging markets will strain global finance
Surging demand for capital. as patterns of global saving and investment shift. crowd out some investment.
machinery—may put unexpected strains on the global financial system.
consultingclub@jbims. water and power systems. Yet all those new roads. and they have access to cheap capital. 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. Moreover. capital to invest could put upward pressure on real interest rates. ports.
Short-term doldrums aside. and financial institutions alike. led by developing economies. and demand for. They enjoy healthy cash
capital. the world’s corporations would seem to be in a strong position to grow as the global economy recovers. capital flows between countries will likely change course. or the desired level of investment needed to finance all those projects.edu
. with $3.5 percent. as developing
economies continue to pick up the pace of urbanization. Indeed. the prognosis for companies that can tap into that growth over the next decade looks promising. Indeed.
this time fueled by rapid growth in emerging markets. offices. 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. water systems.CONVOYAGE
Surging demand for capital Several economic periods in history have required massive investment in physical assets such as infrastructure. Considering the very low levels of physical-capital stock these economies have accumulated. our analysis suggests that high investment rates could continue for decades.8 percent of GDP in 2002 to 23. Asia. hospitals.7 percent in 2008 but then dipped again during the global recession of 2009. and shopping centres has already caused investment to jump. schools. and Latin America. transport systems. and housing. Across Africa. factories.
consultingclub@jbims. the demand for new homes. The global investment rate increased from a recent low of 20. We are now at the beginning of another investment boom.edu
. These eras include the industrial revolution and the post–World War II reconstruction of Europe and Japan. factories.
The gap exists in all categories of
infrastructure but is particularly large in transportation (for instance. When mature economies invest. and people make home
improvements. we project that global investment demand could exceed 25 percent of GDP by 2030.
scenarios. they are largely upgrading their capital stock: factories replace old machinery with more efficient equipment. in 2008).CONVOYAGE
In several scenarios of economic growth.7 percent of GDP versus 2. respectively. we find that investment will still increase from current levels. We project global investment
firstname.lastname@example.org percent. followed by power and water systems. But the coming investment boom will involve relatively more
investment in infrastructure and residential real estate. The mix of global investment will shift as emerging-market economies grow. To support growth in line with the forecasters’ consensus. roads. global investment will amount to $24 trillion in 2030. compared with about $11 trillion in 2008. When we examine alternative growth
infrastructure and $5 trillion in residential real estate in 2030.edu
. airports. if the global economy grows in line with the consensus of forecasters. and railways). though less so in the event of slower global GDP growth. Consider the fact that emerging economies already invest in infrastructure at a rate more than two times higher than that of mature economies (5.
foreign-born workers with university degrees or equivalent qualifications make up just 2 percent of the European labor market. Germany. exceeding 4 percent across all countries sampled. talent scarcity will become a threat to sustained growth.” said Hans-Paul Bürkner. and managers. where retirement of the baby boomers will result in an unprecedented talent deficit. expected immigration and birth rates will not offset the workforce losses caused by aging populations. (Labor-demand
growth rates are compounded annually. The roots of the global talent risk include the widely uneven quality of educational systems.5 percent in the United States and nearly 10 percent in Canada. • In the next two decades. transportation. demand for professionals in manufacturing will peak at more than 10 percent in developing countries.
Kingdom. technicians. and demographic changes in the Northern Hemisphere. and the United States. • Employees without critical knowledge and technical skills will be left behind. particularly in knowledge-based
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.) • Health care research and development alone will generate enormous demand for skilled labor worldwide. Professionals will be in BCG’s president and chief executive officer. and communications
industries in developing nations. “Human capital has replaced financial capital as the engine of economic prosperity.edu
. the United
particularly high demand in the trade. erratic employability of the workers in the Southern Hemisphere. In Canada. compared with 4. • Demand will be biggest for highly educated professionals. Today. Improved
practitioners. Doha. result-driven action focused on effective sharing of good practices. Members of the Global Agenda Council on Skills and Talent Mobility. New Delhi.
recommendations in the report and to the talent mobility dialogue hosted by the World Economic Forum online and at meetings in Brussels. head of partnership. Davos-Klosters. starting with—and going well beyond—removing barriers to the mobility of talent.CONVOYAGE
education and training must go hand in “The global problem is no longer a mere talent mismatch. Cumberlege.edu
. and New York in 2009 and 2010. older professionals. immigrants. • Extend the pool by tapping women. The report proposes seven core responses to global talent risk: • Introduce strategic workforce planning to address imbalances between labor supply and demand. Montreal. World Economic Forum.
consultingclub@jbims. The World Economic Forum Annual
Meeting 2011 in Davos-Klosters will seek to catalyze a pragmatic.” said Piers A. • Ease migration to attract the right talent globally. • Develop a talent “trellis” by focusing on horizontal and vertical career and education paths. • Increase employability by advancing
hand with increased labor migration. senior director. • Foster “brain circulation” to mitigate brain drain.
technological literacy and cross-cultural learning skills. The scale of the predicted talent gap requires concerted action. as well as more than 100 high-level contributed experts to and the the disadvantaged. • Encourage temporary and virtual
mobility to access required skills easily. Dubai.
proof of payment 3. put money into a company or business 5. legal agreement 16. neither cheque nor credit card 15. amalgamation of two companies 14. rate and efficiency of work 4. ask the bank to advance money 6. wealth of person or business 12. Names of the early three winners will be published in the next month edition of ConVoyage)
consultingclub@jbims. total sales of a company 17. amount of money spent 14.CONVOYAGE
Business and Finance
. money returned (Note: Solve the crossword and mail the solution to consultingclub@jbims. where shares are bought and sold 9. money paid for a loan 10. money paid to owner of copyright or patent 7. promise to repair or replace 13. share of profits paid to shareholders
Down 2. part of the capital of a company 8. money lent 11.edu.
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