…with Borat. Since I first heard about Borat, two weeks ago, I can’t spend one day without watching it. Will try to make it to the cinema this week-end.

[youtube=http://www.youtube.com/watch?v=En1C31NsdSs]

Addendum 3rd December 2006: not anymore. Just saw the movie. Okay but not great, definitely not great. Better pieces on YouTube and all.

On your left: the research building of Ecole Centrale Paris, a prominent French engineering school, covering all disciplines of pure and applied science. Disclaimer: the picture was taken today. You see? Winter is not bad at all in Paris.

On your right: one of Stanford University’s 101 research centers (this one’s especially dedicated to research on cancer).

Guess who wins?  It’s time for continental European corporations & governments to build strong ties with educational research centers. Europe ‘produces’ great engineers, but its research is too ineffective. As a proof, take a look at the home university of 90% of the articles published in the very best scientific reviews.

” Message from Jeremy : For those new to Tech IT Easy, who could obviously not remember the initial announcement, I have invited my friend and fellow Alexandre Lucas to help me try to provide you, dear readership, with everyday better analyses on software, telecom & Internet trends. Alex’s mission statement is basically to go further into the details, from both a financial and a strategic angle. Alex, the floor is yours…”

Today, French minister Renaud Dutreil, who is in charge of the development of small and mid-sized companies, will soon implement a series of additional measures (mainly tax breaks) aiming at optimising returns of investors in start-ups in France.  Several tax reductions are already in place : investors can deduct up to 25% of a cash investment from their revenues (thus reducing their income tax) and long-term investments are tax-exempt.

French governement is aiming at boosting the number of business angels from 4-5.000 to 20.000 over a period of 5-6 years. There are 40.000 business angels in the UK and 400.000 in the US.

 A study by AFIC (the French Venture Capital Association) has recently published a study on venture capital financing in France. Main takeaways:

 - companies financed by business angels represent account for 9% of total private employment in France (1.5m people, c.4.800 firms), i.e. the same figure as the sum of employees of the companies included in the CAC 40

- the number of people employed by these firms has risen by 4% (60.000) over 2005 with total sales of EUR200 bn

- these firms outperform the french economy and the CAC 40 in terms of growth with 7% p.a.

This ranking has been out of the wood for a while, but I was once again examining it when I felt I had to blog about it (and I’ve been waiting hard for the European ranking, soon to be released):

• Mind the Gap! Take a deep breath and then look at the gap between the two French leading software publishers Dassault Systèmes and Business Objects (making more than 90% of their revenues outside France by the way) and their challengers.

• Moreover, companies like Sopra Group & GFI Informatique aren’t pure players (at all, they are IT service companies), and still belong to the Top 10.

• Put together, IBM Software Group and Microsoft account for one fourth of France’s total software investments.

• Financial software is getting hotter and hotter (and we frogs are very good at it): GL Trade, Cartesis, Soltim-Proval (insurance) and Linedata Services are all Top 20 pure players.

• I’m glad to see search engine Exalead & object-oriented development tools company Wyde in the ranking, since I got to meet recently both Guillaume Mainbourg, a general manager at Exalead France, who runs a seminar at Ecole Centrale Paris where I’m studying, and Jean-René Lyon, the founder of Wyde, who came to give us a lecture about entrepreneurship recently.

• There are plenty of opportunities for bright entrepreneurial teams devising a great software to hit the top 20 in more or less 5 years. The 5 keys to success in software are:

1. Maintain your hiring standards high for as long as you can and make sure everybody in the company has stock-options
2. Find a relevant, fast-growing niche positionning and try to reach a leadership position fast in your national market
3. Plan international expansion early (I said ‘plan’, not necessarily go abroad early – except if you’re in the Internet business or a B-to-C publisher – in this case, allow downloads from your website)
4. Keep your cash-burn rate super low: stop eating, sell your car, don’t go on week-ends and holidays, break up with your girlfriend, save you a rent by sleeping at the office; do whatever you can do to save yourself (and your company) cash!
5. It may seem obvious, but make sure your software rocks! Not from a geek’s viewpoint but from the client’s point of view. Using your software has to be an experience in itself (think ROI and usability).

It goes without saying, but start building your ecosystem from day 1. This is key in software. By ecosystem, I mean make sure you brightly pile up partners such as consultants, integrators, other software publishers (much bigger as well as much smaller), research centers, universities, software unions, functional unions, etc. Remember that it takes time and commitment to build an ecosystem. But in the end, your ecosystem will save you time, and many good deals.

• This is very probably French, but software publishers tend to do B-to-B and Internet companies B-to-C or C-to-C. Consequently, there aren’t enough French B-to-C software companies (like Avanquest Software, ex-BVRP – thank you Julien for reminding it to me) and French B-t-B Internet companies (like Hubwoo or BlueKiwi).

Thanks to Steven for telling me about it. Now I can claim to be running a gazelle

Computer salespeople

[youtube=http://www.youtube.com/watch?v=fDiCTnQrw78]

Two young American students took a very interesting initiative: they went to several hardware manufacturers and/or distributors and asked relatively simple technical questions. I liked Apple most, where nobody bothered to answer, and the Geek Squad who didn’t know the answer (“what’s the role of a hard drive cache?” I think) but still tried to bullshit…

This video raises once again the issue of training. While pure engineers ought to get training in finance, marketing, logistics and strategy, marketing and sales people need to understand what they’re talking about. We live in a complex world, and IT products are complex products. Still, the best way to make sure people know what they’re talking about is bringing people from the R&D department talk with the customer. But R&D people are in short supply, and sometimes do not want to see customers.

Complicated equation, isn’t it?

Still, the video’s pretty cool.

I had discovered FreeDOS about 2 months ago. Today, I LiveCD-tried ReactOS, an open-source initiative aiming at reproducing the Windows NT environment.

Although I’m not an expert, I found the software to be pretty stable. However, the system crashed when I installed good old “Alone in the Dark” (those who were playing PC games back in the middle of the 1990s certainly know what I’m talking about).  The ReactOS team had warned me though: the current version (0.3.0) is an alpha stage release and is not recommended for everyday use.

Looking at the history page of the ReactOS community website, it appears that the project “grew out of a dissatisfaction with Microsoft’s monopoly over the operating system market” (stated in context).

Jason Filby, and all guys belonging to the team: you’re doing an amazing job. But how the heck can you claim to escape from a so-called monopoly by reproducing its flagship product?

You’re definitely all excellent at hacking quality code, and you wanted something new, a different OS. By the same token, it was obvious you’d never reach Windows NT’s quality and functional scope. So why didn’t you guys teamed up to start a start-up company? Why didn’t you help yourselves fullfill your dream and come up with a brand new, disruptive operating system?

I’m guessing you’re sitting on the fence with Microsoft. It’s a soft of love-hate relationship. If I were a painter and hated Picasso for any reason (which is far from being the case), I would want to copy anybody but him.

Before I finished writing this post, I discovered on Alex Ionescu’s blog, one of the main recent contributors of the ReactOS community, that Alex actually is a Microsoft Student Ambassador.

Eventually, it looks like my intuitions weren’t far from the reality…a love-hate relationship.

Sorry, no real connection with information technology, but since the focus of this blog is pretty international, I’d like to take advantage of the situation to let you know what happens here in France this week. I know it harms the reputation of the city I was born and live in, but I believe public criticism is well-deserved. Tourists coming to beautiful Paris ought to know what to expect if going to the stadium. Actually, let’s say the connection with IT is that blogging allows one to display a viewpoint instantly becoming available to all. In other words, the epitome of democracy…

I recently told you how bullish I was when taking a look at the entrepreneurial landscape in France: great people, great technologies, cash available for new venture initiatives, international ambitions, and so on and so forth.

Now, here’s the dark side of the force. The day before yesterday, I went with many friends, including girls, kids, parents, etc. to watch a football game in the Paris stadium Parc des Princes. I wasn’t, unlike some of my mates, so happy about the outcome (Paris lost), and I would bet laughed at by my Tel Aviv friends for a while (I spent 5 months in Tel Aviv launching a start-up last year). Worse: going out of the stadium, we found ourselves in the middle of a hooligan gang looking for Jews to kick some ass. We could hear them shouting: “Where are you Jews? Where are you Schlomos?” (“Ils sont où les Feujs? Ils sont où les Schlomos?”). Allright, I was used to it and all sorts of racism (actually occurring more often against Muslims & black people – but wait, story not over) since, although I hadn’t been at the stadium in a while, maybe 2 years, I had had a full ‘Auteuil’ supporter membership from 1997 to 2002 – going during this time period at almost every game of Paris Saint-Germain, the Paris-based soccer club.

Some – pretty scary, I saw them – hooligans, part of a group of ’supporters’ called Boulogne Boys, finally found a lone (they wouldn’t attack a group you understand) Jewish boy (23), and started to run after him. An undercover cop ran too, to protect him. But it happened that this policeman was black, so, can you imagine how excited the neo-nazis became, chasing a Jew and a Black? The press mentions that 150 skin-heads started kicking them two, and I heard one could survive not more than 2 minutes when on the ground and kicked in the head. So, the policeman took out his gun and shot twice, killing a young hooligan, wounding another one. It was him or the other guy. He did his best and was brave enough to avoid showing the gun earlier, but eventually had to do so.

Now what? Paris Saint-Germain’s Chairman, Mr. Alain Cayzac, a guy I used to respect most, wrote an apologizing letter (in French) to all supporters including the hooligans, not mentioning racism, not mentioning anti-semitism, not striking the slightest, smallest stance against racial issues in stadiums. Same business and shame when it comes to the coach. I thought the Boulogne Boys were an epiphenomenon that couldn’t be controlled, I discovered the Boulogne Boys were not actually out of control, but rather that nobody ever tried to take control, to eradicate stadiums of such evil people. I don’t give a damn of this skin-head’s life, it has no value. There were many, many kids (see picture below) in the stadium, many families. It could’ve been a lot worse.

I had a nice time at Parc des Princes, chit-chatting football with friends of all ages, watching the game, drinking a beer, etc. A long-time football-lover and supporter of Paris Saint-Germain, even when it played against an Israeli team, I was pretty sad of the result at first. Thinking twice, I don’t know why I would support a team managed by people implicitly supporting racism through avoiding the fight.

Yesterday, Total, an oil company, invited 65 of my university classmates, including me, in Pau, in the Pyrenées, Southern-West France.

Total is by far the biggest French company, represents in market cap about 14% of the CAC40, a stockmarket index made of the 40 biggest companies by market capitalization.

We didn’t visit it, but were told that just in Pau, Total was hosting an 8,000 square feet computer calculation center representing some 20 teraflops of calculation power (a flop being a floating point operation).

Oil companies heavily investing in IT infrastructure is a no-brainer: the ability to map the ground faster for explorational purposes definitely helps foster a competitive advantage.

Sorry guys, no nice picture of the research center from the inside: pictures were not allowed and will never be so.

I’ve always wondered why software VCs often also have a biotechnology start-ups investment arm (let’s not give out the VC names));. Frankly, I find it hardly understandable, for a number of sound reasons:

• No external synergies: software start-ups are founded by software developers; biotech companies are ran by medical doctors, healthcare engineers or biochemistry PhDs. By external synergies, I mean moving a good manager from a bad investee to a good investee with a bad manager.
• Distribution strategies are clearly different. Biotechnologies focus on R&D and go through big pharma corps for manufacturing and marketing. Software start-ups tend to try to master the whole value-chain, prepare to go international fast, and may sell directly to the end-customer via the Internet.
• Geographical clusters aren’t necessarily common. The following picture is very broad: in Europe, biotech players regroup in Cambridge (UK), Denmark & Switzerland. In the US, in Boston, Austin & Cincinnati. Software players in Europe are located in Paris, Munich & London, and in the US, in Palo Alto, San José, Seattle, Boston & New York. But since technology makes remote work very easy, it’s everyday harder to locate software clusters.
• Both markets have nothing in common, that’s a no brainer. So one VC has to chose in which industry (s)he’s going to specialize in.

Looking for explanations, I found two major ways to look at VCs doing both software and biotech players:

• There is too much money available for investing vs. too few entrepreneurs (at least in Europe). So, VC funds manage to raise a lot of money, too much money. And since there might not be enough deals in one industry (and the bigger, the more money they make), they start a new fund in another industry to diversify their portfolio. The way they may justify such a move is crystal clear: in case the software industry enters economic doldrums, biotechnologies play a defensive role and vice versa.
• This is the very best reason, although I still don’t find it quite satisfying, why VCs could invest both in software and biotechnologies: investment cycles are similar. Time periods may differ (obviously much longer in biotech), but in the end, in both industries, the time-to-market may get pretty long. In other words, between the idea and the product, between the invention and the innovation, you need a relatively long time to launch a market-ready device. And development time costs money: you need to pay software developers or researchers, you need to invest in computers and testing hardware, you need to pay for business development expenses, lawyers, accountants, etc. Bootstrapping in software is feasible (although very ambitious people will tend to raise early-stage money), but impossible in biotechs. In both cases, before you breakeven, you need to have enough cash to breath – and the lower the cash burn rate, the better. That’s what I call investment cycles, and they’re often similar in the businesses of software and biotech.

When all’s said and done, I’ve thought about it – as you can see, but I still don’t understand why VCs in one industry don’t start another VC brand to invest in another industry. And when I’ll become an entrepreneur, I will for sure not select an investor that doesn’t specialize in my industry, and my industry only.

Investment-wise, I don’t know what to think about Google. Yesterday, GOOG closed at an all-time high 509.65USD.

The fact is that Google looks expensive. It’s P/E equals 65, which in other words means that investors anticipate the growth of markets on which Google makes money, and hence Google’s revenue generation, to be extremely high. If I bought GOOG today, I would have to wait for 65 years to get my money back if the company’s economics remained stable, all things being equal. That’s not healthy, but not Google’s fault either; I remember Monster Inc. trading at an equal PER back in 2000 (against 30- today). Although Monster markets are probably not as massive as Google’s, I don’t think I’m taking a big risk saying Google will trade at a 35-strong P / E ratio in 2010. Time will tell if I’m right or wrong.

Looking at the income statement (or make it P&L account, who knows if I get some traffic from the UK or Ireland) and the annual report makes one realize that the Mountain View 9-year old start-up derives almost 100% of its total revenues (6 bn$) from online advertising.

6 billion USD…That’s about 60% of the 10bn$ big online advertising market. The thing is that this juicy market isn’t going to grow at such a fast rate (+30% nowadays) as it is maturing: Jupiter Research predicts online advertising should grow up to 16.1bn$ in 2009, and 18.9bn$ in 2010 (that’s still a nice +15% though).

Furthermore, I’m not certain the competition will let Google foster its quasi-monopoly in paid search and ad words.

So, in order for Google to satisfy its today investors, the company should either look for new revenue paths (eg monetize its online work tools, or..search) or kill its potential competitors in the egg. There is also a third way to sustaining a competitive advantage: search has become boring. Even with Google, which provides relevant results, I find it hard not to spend time sorting the outcome. I’ve been hearing here and there that semantic search tools are ready in many R&D labs, that picture recognition, and even video recognition features are in the pipeline. As the competition is awakening, & since Google revenues derive from advertising, and advertising comes from Google’s leadership in search technology, Google may come out soon with something new and big in search.

I’m having a hard time decrypting the rationale of Google’s economics and I’d be glad if you could contribute to my better understandings leaving a comment. One thing that’s certain though: Google is an elitist company. It has perfectly understood and integrated the challenges the Western world will face in this new millenium, these challenges winding up to one concept: “human capital”. Google recruits sharp-minded, bright people only, asking for grades from high-school to college graduation, for referrals and project samples. Although I really doubt the best people necessarily get the best grades at school, focusing on recruiting the crème-de-la-crème breed is in my opinion an excellent way to prepare for the future.

Addendum 18:48: about an hour after I blogged this post, Michel de Guilhermier, a French entrepreneur mostly blogging about retail, Apple & investments, published a complementary analysis about Google hitting the 500$ psychological threshold. As a stockholder in Apple & MSFT (but not Google) – exactly like me although I sold my Apple shares 3 weeks ago (I haven’t had any GOOG for 15 months), Michel adds a comparative perspective to my analysis (those who read Tech IT Easy often have for sure noticed that I enjoy a lot Michel’s top-notch blog) that I had wrongly omitted. It’s all there.

How many times have you heard that “this new, very innovative hydrogen engine will drive a breakthrough into the automotive industry. Thanks to the great work of our R&D labs, consumers can now face the future oil shortage with no fear thanks to hydrogen-powered car engines”?

Well,  what if hydrogen-powered engines existed for more than 2 centuries? Back in 1805 (patented in 1807, on January 30th), Swiss inventor Isaac de Rivaz had invented the first hydrogen-powered car.

However, people today still dare to talk about innovative moves when presenting their so-called inventions!

What if I went to Jean-Louis Gassée in the Valley to purchase the sourcecode of BeOS, now dead but a long-time best OS, and launched it saying it’s  highly innovative, grabbing the best of Linux’s memory management, Mac OS’s usability, and MS Vista’s vista? I bet I could create quite a buzz around the lanch, and catch a ridiculous, but thinking twice no-so-ridiculous, market share in a wink at a rather low standard-updating OS re-programming price. (Okay, I acknowledge this last statement is a complete utopia)

Anyways, incremental innovation (95% of innovations in volume vs. 5% disruptive innovations) is all about listening to what the market wants, keeping the best and removing the crap from your product, copying some good features from the competition, and again, listen to your clients and build a bridge between you and them – to ensure future communications effectively happen. Believe it or not, I’ve just defined marketing.

Today’s hydrogen engines should be a million times better than those of Isaac de Rivas; today’s OSs are definitely better than what they used to be: Ubuntu is simpler than any former Linux release; Mac OS X has nice functionalities such as exposé and rapid shutdown; Vista users probably don’t realize it yet, but more than 3,000 new features were been implemented since the birth of XP. I have an old Windows 95-powered PC at home, and I can tell the difference. What the open-source community, Apple and Microsoft have done wrong in the time between was to look-down at petty or old competitors such as BeOS (and/or OS/2, an IBM-MSFT jointly ventured product at the time). Although we learn not to cheat on one’s neighbour at school, I believe not taking into account what your competitors do in the world of work is a big, big mistake.

Too bad we lost 10 years, but it could be worse. Have all car manufacturers engineers taken a look at Isaac de Rivaz’s invention pattern?

Basically, MSFT in Redmond, Washington, selected German and Japanese amongst many languages for their very special common characteristic: both are very tough and hard to both read and write.

In other words, translating a software in German is a good way to test whether the HMI supports long words and explanations; whilst Japanese is Microsoft’s pick in an attempt to test whether Eastern (Chinese, Arabic, Korean, Hebrew, Hindi, etc.) languages were well taken into account during development.

Thanks to Jeremy (another one) by the way, for helping me realize why Germans and Japanese enjoy the privilege of getting to use Microsoft software in their own language first…

I remember signing on and using FriendSet in the Summer 2004, when I first experienced life far from my friends and family, working in Geneva.

Back then, Friendset was the first really popular social networking tool. You were planning a birthday party? Announcing you were available again after breaking up? Feeling like showing off with your 784 connections? Friendset was the place to be and to be seen.

For our American readers & friends, French Friendset was a sort of Friendster. Friendster? Remember, a once US Internet flagship, which still doesn’t do well in terms of both traffic and economics against, say, Facebook, despite having (again) raised 10 million USD in August 2006 (see this article on CNN Money).

Friendset was founded and part of Meetic, the major European online dating group. Meetic recently decided they would switch Friendset databases to Superlol, a new, very successful, non-dating service targeting teenagers, high school and young college students. For my own pleasure, I had tried Superlol and technology is superbly integrated (unlike Meetic) on the platform: mobile content and access, Flash chatrooms, etc. It’s all there!

So bye bye Friendset, you made me discover social networking. I won’t drop a tear since I guess I haven’t connected myself in at least 2 years – and I now use what I find being the ultimate professional networking platform: LinkedIn.

Do you think I’ll post a “Bye Bye LinkedIn” sort of post one day? I bet I won’t have to, never.

I have to say Rupert did a good job guessing Ricardo Semler was the entrepreneur behind the 6th episode of the everyday more famous “Guess Who?” week-end game.

Ricardo Semler is a special figure in the world of management science. I really admire his achievements, based on values such as trust, strong work ethics and a sense of responsibility. Ricardo Semler knows what it takes to empower one’s employees, for the sake of the company and, bottom line, the Society. I wish Ricardo Semler’s concepts applied to other fields (politics, etc.). Information Technology has a role to play in the bottom-up approach (e-voting, 360 feedbacks, etc.). Well, to get back to the initial topic of this post, here’s a little bio of Ricardo. Enjoy!

Born in Sao Paulo in 1959, from Austrian parents, Ricardo was a D-grades student, only interested in rock & roll; he was however, a natural leader in sports and enjoyed some tremendous business flair (running a snack stand for a fundraising purpose, he managed to make all his classmates fly for free out of yearly revenues). Although he started Law School, he found no interest in law matters and, after being refused at the brazilian army, Ricardo accepted to work with his father at engineering company Semco.

Tensions started right from the beginning: his father was opening the partition door between their offices during his son’s meetings, which was the perfect way to deter their relationship since Ricardo didn’t feel he was trusted. It is obvious he and his father had, let’s say, different managing ‘methods’: Ricardo was very laid back whilst his father was from the ‘old school’ (regimented schedule, military way of giving orders, etc.) and unwilling to cede authority to his son.

Frustrated Ricardo started looking for another job, and during one full year negotiated a company to purchase: from $1m down to $1! As Ricardo was about to leave for his own company, his father transferred his shares to him, ceding control effectively, saying he was going on a trip: « if you want to make changes, make them now » Ricardo’s father said. By 6:00pm on the same day, 60% of the Semco top management was fired.

From then on, Semco became a remarkable socio-corporate experiment. Ricardo tried different organization schemes: matrix (confusion of reporting lines), autonomous BUs (too much dispute amongst fiefdoms), before finally settling on a lattice model in which small teams are responsible for the whole production process, including controlling of their own budget & …targets!

Between 1985 @ 1987, 1/3 of the middle management left; unit cost went down; production soared. During the 1990s economic downturn, some severe cost-cutting measures were taken in agreement with the workforce; all salaries (including management) went down 40%; productivity, and performance bonuses went up. Ricardo still felt that wasn’t enough. He decided to push further participation and ‘worker empowerment’ further…He considers employees as adults, and the company as a place that should be a democracy rather than a monarchy.

So, Ricardo Semler set up what he called autonomous teams (based on product lines), which could recruit & fire their own employees; including their bosses!

Semco’s activities field became unrestricted. All decisions were taken democratically, involving every worker (down to maintenance and cleaning people). Everybody takes part of a monthly meeting that analyses the numbers. Ricardo also came up with an idea that would totally modify the way Semco handled innovation: ‘Satellite organizations’. An employee willing to leave to start his own business could use the company’s resources against a percentage of her/his bottom line. Nowadays, satellite companies today account for 2/3 of revenues accounted by Semco!

Until now, believe it or not, everything you read on this post was the tip of the iceberg. Semco has no secretaries or receptionists; your make your own coffee and handle your administrative chores yourself (actually, I remember seeing the same sort of situation at the World Economic Forum in Geneva). People had no job title at all; all information within the company (including salaries) is freely available; management salaries are capped. All noncore competencies were outsourced, often to satellite companies. Employees define their own salaries, decide whether or not to recruit someone (as a boss or not).

Positions are (re-)bid every 6 months for 6 months: people make a democratic decision based on skills & salary. All managers rated out of 100. Below 75, they lose their position.

Employees also define their own time table (no control at all even in the old-fashioned industrial department). There is no business plan at Semco, no nominative office as well: you get yourself where you can.

For bright people that didn’t exactly know what they wanted in their job, Ricardo invented the ‘Lost in space’ program: freshmen migrate through the company before choosing where they fit best. “It’s better to beg forgiveness than to ask permission”: the learning curve was steep thanks to a learn-by-making-mistakes policy.

Of course, there is no computer restriction policy at Semco. Employees may go for the Rush Hour MBA: an evening courses internal programs from volunteers for volunteers. Not convinced yet about Semco’s uniqueness and Ricardo Semler’s genius? Here are some explicit figures:

- Between 1990 & 1996, sales grew from $35m to $100m;

- Today: sixfold sales growth, sevenfold increased productivity, fivefold profit rise: Semco’s revenu: x 40;

- 2000 job applications per month whilst Semco’s headcount amounts to 3,000.

- In 1998, Ricardo Semler said: « the corporate revolution is only 30% complete »;

- He has given 300 lectures around the world and is a visiting scholar at Harvard;

Last but not least, Semco enjoys a hyper low worker turnover: a dozen employees per year.

Food for thought, uh?…If you want the full story, I strongly recommend you read a book I LOVED: “The Seven-Day Week-End“, by..Ricardo Semler.