Mittal Steel, Arcelor and emerging market trends

Sunday, June 25, 2006 could possibly become a defining moment for modern markets. On this day, Arcelor board members approved the takeover deal by Mittal Steel, marking a historic step-down of a European giant’s efforts to maintain supremacy in a core segment. The deal, which escalated 40% in value over Mittal’s initial ₤18.6 billion offer in January to Sunday’s ₤26.8 billion, will create a behemoth three times as large as its next competitor, Nippon Steel. While this is incredible, what strikes me is something that is not immediately apparent – the possible ripple effect that this can cause in global markets. 

Mittal Steel, founded by Indian-born Lakshmi Mittal, has grown to phenomenal strengths over the past decade by acquiring and turning around distressed units all over the world – from Trinidad to Kazakhstan. But this deal gives insight into Mittal’s tenacity to achieve total supremacy. Even in January, Mittal’s initial offer to Arcelor was 27% higher than the Arcelor’s trading price. Throughout the six month period, which I have been observing closely, Mittal has relentlessly countered Arcelor’s flippant refusals (which I reckon were more to maintain a protectionist barrier around its pan-European status) with tremendous surges in offerings. He even renounced his family’s voting rights and provided detailed business plans to Arcelor in an effort to win stakeholders. And by Sunday, he was offering cash and shares valued at €40.37 for each share of Arcelor, nearly double what the company was trading at when he first made an offer in January.

This to me seems to be the most significant sign of what has been brewing under – the rise of China and India and their increasing presence in global markets. These emerging markets seem to be accumulating immense capital, which they are bound to be spending abroad. And once this deal is completed, analysts worldwide are expecting a surge of acquisition attempts by multinationals rooted in the developing world. While the term ‘acquisition’ might seem to carry negative undertones, I believe it spells good to global economies, consumers and conglomerates alike. 

In the words of Mittal Steel board member Wilbur Ross – “…no matter what the games, shenanigans and interventions, at the end of the day if you’re determined enough the best price will prevail”.

Frameworks – generic solutions or generic problems?

Having to double up in the role of project management and providing technical stewardship has allowed me to look at the topic of this post in very interesting light. The basic line of thought I’m trying to follow is with the myriad frameworks that have been spawned over the last few years, how much is the actual benefit that is drawn? How well do they solve or serve the business purpose for which they are employed? Are they all (or at least a good percentage of them) being leveraged to their maximum potential?

A Little history

Avoiding the technology platform pitfall, I’m talking about frameworks in general – be it the J2EE suite, .NET or any other technology group. The industry seems to be abuzz with a million different frameworks, each with their own claims of strengths and success and clusters of avid followers.  To start off, a framework, in my opinion, is a generalized solution to recurring problems. Back in the days when web-based applications had just begun to unlock the door for businesses to evolve onto a whole new plane (the e in eCommerce), groups of the early explorers into this world began to face similar, but isolated problems. How do you ensure secure logins, ensure web-based application security, decouple the presentation layer from the business logic, avoid expensive database calls etc. And the solutions that ensued formed the foundation for frameworks – provide generic solutions that can be leveraged to solve recurring problems. And along with time, they started getting smarter – doing more than just solving generic problems, they started providing features that would drastically alter your applications (mostly for the better). Performance boosts, reduced life cycle times, decoupled layers, flexibility, reduction in resources required (including human resource) and more became the main reasons for the choice of frameworks. And today we have more than a few to choose from – Struts (and the hundreds that it has parented), Spring, Java Server Faces, Stripes and a whole multitude of .NET frameworks. 

And the problem is…

So what could go wrong with a solution that is intended to make things easier? According to a report published by the Gartner group about 5 years ago, the unjustified use of EJB technology was costing US firms alone an estimated $2 billion a year over what they would have spent had they used more appropriate technology. And it would be rational to assume this figure has gone up over the last 5 years. So something seems amiss. From my observations, here are some contributing factors – 

• Complexity is equated with quality – There seems to be a general assumption that the more complicated of 2 options is the way to go.  This is especially true in my area of work – Financial Services, where performing organizations are more conservative than other sectors, and less likely to take risks with a lightweight, not-so-popular framework over a bulky but widely-used option. 

• The inherent nature of frameworks – as I said earlier, frameworks are intended to act as generic solutions, but in doing so they become the victims of their own success by trying to solve more problems than possible to remain generic enough. Most frameworks these days come with components that have absolutely no value, or in fact are in the way, of firms using them. And internal rigidity within them limits picking and choosing what to use and what not to. If frameworks are akin to the chassis of a car, it’s similar to attempting to build both a convertible and a family mini-van using the same frame. Sure, there are choices in the amount of features you want to have, but take the more popular frameworks, and you’ll notice they have to remain generic enough to keep a broader target base, hence compromising on flexibility.

• The Developers – Around the same time as frameworks started to take off, so did the industry in general. And that brought in hoards of career-switchers, who probably hadn’t had a lot of academic / professional background to have participated in the evolutionary journey from procedural spaghetti-style days, to the modern, distributed environment.  Without having been through the pangs of dealing with some of the root causes that led to frameworks, I would imagine it would be difficult to look a little beyond what is offered by framework X into the rationale, or the lack of it. I’ve entered innumerable discussions with colleagues regarding a framework component or the other, and have invariably found it easier to get across to someone who has worked with a lot of, or even better without any, frameworks. It’s not what people know, but what they don’t that is the cause of concern.  

If the axe is not sharp, it doesn’t matter how hard the wood is.

- Ancient Chinese proverb.

And that’s why I strongly believe in Aspect Oriented solutions – the right tool for the right job. Don’t get me wrong – I’ve employed various frameworks to great success and believe very strongly in their value. But evaluate carefully if you really need a framework for every solution. As Einstein said – “Everything should be as simple as possible. But no simpler.”

New York, New York

"Immerse yourself in New York for 5 minutes, and you'll see why it's like no other place on earth" they say. I've immersed myself in this global capital for a lot more than that, and seem to have left a part of me behind. Yes, there are the Empire State and the Chrysler buildings, Times Square, the Statue of Liberty and a plethora of attractions in this conglomeration of 5 boroughs. But live in The Big Apple for a while, and you'll be able to transcend what is immediately (breath-takingly)visible to see the spirit that drives this great city. The diversity, the culture and the style are intensified in much more an intriguing way than can be expressed.

When I was moving from NY, someone told me "When you leave New York, you ain't going nowhere". It didn't make a lot of sense to me then; it's starting to sound prophetic now.

Click images to enlarge or hover for description                                                             

Nokia’s blow to Qualcomm

Nokia seems to have landed a sharp upper-right to Qualcomm as the latest development in their prolonged battle over patent issues. Nokia’s announcement today that it would stop making phones based on Qualcomm’s CDMA technology caused a direct drop in the latter’s shares, and possibly has longer ramifications. Nokia had earlier planned to manufacture phones along with Sanyo Electronics to leverage CDMA benefits. 

While I believe the merits of CDMA technology itself weigh in slightly higher over GSM, business models that link this technology to cell phone manufacturers and service providers push the end user in a tight corner. Since a CDMA-based cell phone has to be pre-programmed to work with a service provider, manufacturers complain about arm-twisting tactics by providers to sell their phones at cheap prices. The end result, as is evident in the US market (where CDMA technology is more popular than South-East Asia and Europe), is tending-towards-obsolete phones being pushed at customers by service providers in the guise of cheap prices (or even for free). Nokia has been known to bring in some of the most widely used and popular models (taking a worldwide average, not restricted by regional imbalances), and the now defunct deal with Qualcomm would have, I perceive, seen a reduction in innovation. And this seems to have been the trend with most other manufacturers (like Sony Ericsson, Siemens and Motorola) that pursue the CDMA route. The difference between phones offered by CDMA-based service providers vs. GSM-based ones is gaping, even between ones manufactured by the same company. Take a trip to your neighborhood mall, and you’ll notice the trendier, more technologically advanced ones invariably seem to be in the GSM basket. 

Elsewhere, things don’t seem to be going very well for Qualcomm either – CEO Paul Jacob rushed to India this week, just as Reliance hinted at entering the GSM market. Reliance had been using CDMA technology alone until now, and had gained a formidable market share in India. Jacob apparently had some ‘royalty obligation’ concerns, and is coincidentally also meeting with India’s telecommunications minister.

While service providers, phone manufacturers and technology owners battle it out, it’s a shame to watch a technology that holds great potential not being able to be leveraged by the end user.

The affordable and highly efficient alternative to PM Tools – Wiki

As in the case of most Project Managers, I’ve had the opportunity to work with several popular PM Tools – MS Project, Niku, Primavera and Welcom. While each brings its specific strength as an aid to effective Project Management, I’ve personally felt an inherent lack of lucidity and accessibility to non-Project Managers and teams. Licensing restrictions, lack of user awareness, bulky architecture, security restrictions, to name a few, contribute to limiting these tools’ effectiveness as ‘groupware’. And here’s where a simple concept serves well – a Wiki. Simply put, a wiki (derived from a Hawaiian shuttle bus Wiki-Wiki meaning very quick) is a bunch of web pages that can be edited by a group. It’s a blog, several web pages, online repository and index all rolled into one easily-editable and manageable solution. In short, an efficient and quick collaborative tool. Wikipedia, among the most popular wikis on the internet, currently offers over 1,203,000 articles in English alone, not to mention hundreds of thousands more in other languages.  Searching for ‘Project Management’ on Wikipedia returns a page that provides a concise, just-enough-to-hold-the-attention-span content, plus hundreds of cross-references to related material. It serves equally effectively to both the tertiary reader, and somebody whose intent is to draw in-depth information. The cross-referencing aspect is what sets a wiki apart from websites and encyclopedias, enabling the authors to branch off wherever the content becomes too big or too diverted to incorporate into the main section. And because it is based on the concept of collaborative writing, the extent to which content is cross-referenced is only limited by the number and efforts of people involved in the process. 

Specifically within Project Management, I believe this serves as a valuable tool to increase stakeholder buy-in, communication, as a reporting tool, for historical information gathering,  documentation and most importantly, in its capacity as ‘groupware’.

Super-cooled chips seem near!

The most thrilling news today seems to be the announcement by a combined team of IBM and GIT researchers of the new liquid helium-cooled chip reportedly capable of running at 500 GHz. What thrilled me was not the fact that this was achieved in test conditions at the cryogenic station, and is still a distant future from commercial production, but the fact that hitherto established norms in chip technology were broken and surpassed. Since the innovation of the integrated circuit technology (launching the third generation of computers), few events have significantly lead to exponential transitions in modern commercial computing.

Among the few that I can recall (hardware, software, infrastructure all-inclusive, not in chronological order) are magnetic core memory (prior to ICs), virtual memory paging, microprocessors, Ethernet, IBM PC-XT, Unix, MS-DOS, Windows 1.0, Windows NT, 1 GHz Pentium, C, SQL, the Dell PCs, the WWW and Java. I know this list is vastly incomplete and subject to deliberations (to say the least), but certain milestones remain etched in my memory as being responsible for spawning extremely far-reaching and radical innovations. Just like these events, the successful test of a super-cooled chip, in Prof. John Cressler’s (Georgia Tech's School ofElectrical and Computer Engineering) words, "redefines the upper bounds of what is possible."  And to me, expanding upper limits is the reason for the existence of computers in the first place.

Move over X, here comes Y

Generation Y (the demographic that represents people born in or after 1976 according to Wikipedia) seems to be the new force to reckon with in the workplace (PM Network, April 2006). Most of us might have noticed the unbridled energy and freshness that a young and largely uncorrupted-by-time co-worker brings, but according to the article, there is more that comes with this generation -

More persuasive (Able to argue and convince others of a particular viewpoint)

More outgoing (More talkative and noisy)

More affiliative (Prefer working in groups and teams)

More innovative (Ready with lots of ideas)

More achieving (Set higher goals for themselves)

Less modest (Ready to talk up their own achievements)

Less conventional (Want to do things differently)

Being an offspring of this generation myself, I wouldn’t disagree with any of the above! At the risk of sounding predisposed, I would summarize the changes in attitude as ‘I-get-what-I-want-or-I-change-things-around-to-get-what-I-want’ in Gen Y vs. ‘I-get-what-I-want-or-I-change-a-bit-and-retry-or-I-accept-what-I-get’ in Gen X vs. ‘I-do-what-is-expected-and-accept-what-I-get’ prior. External factors such as more conducive economies and global liberalization seem to have catalyzed this transition, but there definitely seems to be a much less degree of deviation that Gen Y tolerates between expectation and veracity. Good or bad, time will tell, but it leaves me seeing a lot of people asking themselves ‘Is this enough???’ rather than ‘How much is enough?’

Multisourcing > Outsourcing

If you are one of the few who are yet to come to terms with, or realize the impact of outsourcing in general, you are in for further surprise. Outsourcing (generally accepted as moving non-central work of the performing organization to another organization specializing in the same) is now making way for multisourcing – the same concept spread over many suppliers. According to trends currently being mentioned in the PM Network, this has gathered more momentum than one would anticipate. And logically so, since multisourcing inherently mitigates the risks associated with engaging a single supplier. With more than one supplier in the equation, risk is bound to be divided hence paving the way for potentially more efficient results. While this may sound like an oversimplification, an understanding of the fact that no two suppliers – or their services – are alike strengthens this argument.

Some would argue that the recent surge in multisourcing, and its superset – outsourcing, is a temporary phenomenon that will be placated with changing economies, tighter regulations and public outcry. Going by historical trends, however, the opposite is more likely. Outsourcing has been subserviently existent from the time industries acquired a 'global' status, and possibly prior to that. And instead of being a negative addition to the global workplace equation, this may only serve to expand horizons, homogenize cross-cultural differences, positively affect baselines and most importantly take a big step towards creating a truly 'global workplace'.