Capitalism Vs Socialism - Part2

This is in continuation of my earlier write up on the same topic on 23rd April,


Subprime crisis had been one of the factor economic recession. Banks, financial product companies were directly involved in subprime and hence there capital got eroded. Free slow of money stopped there by triggering a recession. Since people lost jobs, spending decrease and the revenue got hit, which led companies to move into a protective mode.

Since unemployment peaked up, there are talk at Govenment level as well, to look at ways to stop outsourcing to low cost destination, so that adequate employment are available locally. Offcourse this is a right thinking, there is no point in providing opportunities to outsider and displacing the local.


Now, on a different spectrum, none can deny that US has been one of the main innovators in Technology or Product. IT has been one of the major one, Right from CPU, Laptop, servers, Operating systems, open source software, package entreprise software, databases, the US corporates has been leaders in this sector. Its not only IT, US had dominated in many sectors as well.

Over the decades, all the US corporates have grown exponentially and for US corporates, US alone is not the market, world is the market. Truly so, the expectation of capitalist approach is to have a free market so that fittest one survive.

Having considered the above point, if one think of a sitution of restricting outsourcing, what could happen is corporate could think of having a plant or task allocated in US location for US and western market and plant in China or India for Asian Market. The implication could be since of cost of living is different, it might end up product manufactured out of US location is higher priced compared to a product manufactured in China or India location. Such approach will fail and can lead to other problems like the black marketing or illegal trade or even business getting closed or acquired.

So, I believe only approach for the world countries is a collobrative approach and
continue to have free market regime and thereby have competition, which allows consumer to get the best. Ultimately one has to look at root cause to get solved, there could many option, some of them might look like,

* Revaluation or devalution US currency against world currencies.

* Options of having salary cut instead of providing pink slips OR making salary parity based on skill level, attitude and experience instead of location based.

* Further,I really fail to understand, as what the benefit US economy get by trading or bench marking Oil in USD. I believe it creates artificial demand for US currency which in turn make USD to appreciate. But in long term, I do not see a no real benefit to US economy.

I still believe capitalist and free market are the best for world economy & for further growth as well, so that consumer have the best product at a best price at the right point of time.

I welcome readers comments ......

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Should You Move to India for a Job?

Recently, I read an interesting article in the "Business week".



But, I don't think the author has explored the facts. No doubt, there might more jobs available in India.

Click to read Business week article

I don't think the author has gone to the root cause of the problem, which I believe is the root cause of the problem.

No doubt, there is corruption, bad infrastructure etc. But, still most of the world famous MNC has set up the shops in India and the have recruited only Indian for the job, the reason being we Indians salary is low(when you apply exchange rate). The author is giving example of LIC and some banks, the salary of these employees will not be more than 700 USD per month. Will any western citizen willing to work for that Salary? , even though cost of living is much less in India.

Higher exchange rate of US currency is the main culprit. When US economy in downturn, there is no point in boasting higher exchange rate for USD. If US exchange rate is at 25Rs ( which was the exchange rate in early 90's) per dollar, then there is bound to be growth in US economy otherwise I believe US business will always opt for low cost centre from where they can get higher value for money.

Had earlier written about the same in my blog as well in the month of march. If interested to read more then,

click on the link

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Cloud computing - Will it really blossom?

There is so much talk these days in the IT field about cloud computing, SaaS (Software-as-Service), will it really blossom and change the way of IT operation in the future?

Today, I read an article in THE HINDU, I liked the way of presentation as it was quite simple in explaining the concept behind cloud computing.



Click here to read THE HINDU article on cloud computing

However, cloud computing will not be without challenges and I also not too sure how cost effective it would be for the following reasons.

i) Most of the business, whether SME or big has quite a large customization of application to suit their business needs. Hence, if a company needs these customization to be in tact when moving to cloud computing, they would have to pay a price for it.

ii) The Hardware cost of servers required for hosting various applications, database may not be that much highly priced when compared to the application maintenance cost in the long run. Hence, customer has to perform cost vs benifit analysis of opting for cloud computing or to have server located within its boundary.

iii) Some of the countries legal frame work does not allow a companies legal transaction data to reside some where outside a country.

iv) Trust on the service provider to have your application up and running at all critical point of time. You definetely need to have an SLA with the service provider.

Further, On-Demand services is nothing new, as some of the leading IT companies are already providing it. As for as Saas(Software as a service) goes, I feel it might be cost effective when business start using the standard product with minimum customization or SaaS service provider has to have its product built with easier option to customize the same with minimum effort. In any case, I still believe it to be early days and it might take few year to really mature out.

I welcome reader's thoughts and feedback.

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Thinking of 'Start Up' !!!###????

In the last few months, I find quite of few people trying to take up entreprenuership, This might be due to various factors, recession? might be one, if you read this article in Business Today
or it might be purely out of passion to be on one's own.

If you are trying to find out as how to legalize a start up and then read on.

In Indian scenario, Indian business entity can primarily take four different forms

1. Sole Proprietor.
2. Partnership firm.
3. Private Limited.
4. Public Limited.

If you are are a new startup, I feel its better to concentrate on the product and getting it into the market so that your capital can be churned out into revenue . Hence sole proprietor or Partnership firm would better suit for a small start up who is particularly focusing on running the business legal entity on a small budget.

On Partnership & Proprietory I found an interesting article in this link which provides an
overview.

VC & Debt Financing : If lucky enough and if you are able to entirely finance your start up from concept to till the stage of self sustenance, then I think you have achieved the objective of being totally on your own. If you are looking for financing you dream, then you need to look at the options through debt financing or venture capital funding.

Debt financing is the 'loan' from financial institution or any third party. Financial institution like bank do offer loan but getting a loan for a business might not be as easy as a home loan for a salaried person. In case of home loan, it much more easier for the bank to arrive at the loan amount, which is naturally based on your salary and on top of it property is also morgaged to them. However, in case of business loan, banks need to be sure of your repayment capacity and hence would ask for 'project proposal' in case of a start up and on top of it, in most of the case, they would naturally insist on a 'collalateral security' in the form of morgage.

Venture capital is much more attractive. But unfortunately, venture capital funding org should trust your concept/project and have confidence that your start would provide adequate returns in the near future. Venture capital is an 'equity' participation in your legal entity, which mean there is no interest or principal repayment involved and only agreed upon profit sharing at later stage. The venture capitalist would be a shareholder in your business entity and hence most likely they would look for a Pvt Limited or a Public limited company.

Which is best venture capital or Debt financing?, each one has its own advantage, venture capital is much more advantageous, since unlike 'loan' there is no interest outflow during early days of your venture where business returns are very less.

Well, world over, I believe its passion which drove the inviduduals to take up entreprenuership and I am sure you can find so many real life examples who had started in a small room and went on to realize their big dreams!!!

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