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IBM India Battles Fraud Amid Scramble To Save Its $2.5B Airtel Contract

Over the past few weeks, IBM India has fired at least half a dozen top- to mid-level executives, as well as several others accused of fraud. The fraud led to a portion of the over $2 billion outsourcing contract, with Bharti Airtel being subcontracted to a company founded by former IBM-ers.

The original contract signed was in 2004 and was for managing telecom networks, desktops and other software applications at Bharti Airtel. It was worth around $300 million annually and over $2 billion overall for IBM India. It was also one of the most showcased engagements globally for Big Blue.

Now, as Airtel prepares to announce renewal of this 10-year-old contract, IBM’s share of the business is set to be reduced to around $100 million annually, at least three people familiar with the discussion said.

“IBM and Airtel are now negotiating terms of a contract that could be reduced to around 3-4 years with total value of less than $400 million,” one of the people I spoke with said. He also cautioned that this figure could change, especially given the ongoing negotiations.

The reasons are multifold — first, Airtel wants to reduce its over-dependency on IBM and shift away from the total outsourcing mode, and secondly, the mismanagement and involvement of executives from both sides in the subcontracting fraud has created “an environment of distrust,” one of the people directly familiar with discussions added.

“The Bharti contract renewal has already undergone over a dozen iterations; it was supposed to get signed and announced weeks ago. Ongoing investigations into ‘unprofessional conduct’ of some IBM-ers and customer staff has made it a contract everybody wants to sign, but with conditions that reflect lack of trust,” a person familiar with the talks said.

In one of the major changes, IBM will not have the freedom to take independent calls on subcontracting work, or buy hardware and software solutions as part of the contract. Instead, a committee of executives from both IBM and Bharti will make joint decisions about what products to procure and how.

At least half a dozen sources, which included some company executives, confirmed that around nine IBM India officials being investigated for “process violations” have been fired.

“The specific charge being leveled internally is called the business conduct guideline violation,” one of the sources told me.

IBM’s Business Conduct Guidelines has strict rules for working with a third-party vendor, and any kind of special treatment to a supplier is considered sinful. In this case, IBM has started investigations to understand why a particular subcontracting firm, Mara-ISON (whose management mostly comprises former IBM India executives) was given a chunk of the business.

Several IBM insiders and some officials at Airtel confirmed off the record that there are “conflicts of interest” about the decision to subcontract work to Mara-ISON.

“At least a quarter of all the work being outsourced to IBM was being subcontracted to Mara-ISON, and the motives look questionable,” another person familiar with the investigations added.

“Supplier selection cannot be dictated by a customer, which happened in this case. And when giving business to an outfit run by former employees who have quit IBM within a year, you need to take three levels of approvals,” another person familiar with the developments said.

An email query sent to Mara-ISON in January this year was unanswered at the time of writing.

IBM is not offering any specific comments on this story. An IBM India spokeswoman said the company does not discuss details of confidential client contracts.

The latest process violations and a potential fraud being investigated by IBM India also involved the CIO of Bharti Airtel who was sacked for violating code of conduct in December last year.

IBM CEO DELIVERS KEYNOTE ADDRESS AT MOBILE WORLD CONGRESSFor IBM, a lot is riding on this contract beyond just the commercial value. IBM’s current CEO Ginni Rometty made a quiet visit to India last year to meet Airtel’s Mittal, underscoring how crucial it is for IBM to ensure that the contract renewal happens without too much reputational damage.

I have been tracking the internal fraud at IBM India and even the negotiations that could see its biggest outsourcing contract in the country reduced by over half. Now, sources at IBM and those in the industry are telling us there’s much more to the recent firing of dozens of senior and mid-level staff than just a cost-cutting move being executed globally.

And it’s not just internal process violations forcing IBM to let its staff in India go. IBM’s revenues have been declining for the past seven quarters, causing a rethink of its top-heavy management structure.

When the going was good, IBM could accommodate even some its average performers in the top ranks. But with 2013 global revenues ($99.7 billion) almost close to what it reported in 2008 ($103.6 billion), IBM Rometty is cracking down on units and executive positions that were once considered untouchables a few years ago.

“It’s a bloodbath for those making anywhere between half a million to $1 million and above annually,” an executive told me two weeks ago. In India, there are at least a dozen such highly paid executives who have been either asked to take a pay cut or move a rank below.

The pressure to cut costs and rationalize is not just for the top positions — many low-level programmers and even mid-level operational staff are facing the whip, too. Earlier this month, IBM started the process of laying off around 2,600 staff in India

After dominating India’s over $70 billion domestic software industry for over a decade, IBM’s revenues and profits from the country have been shrinking recently. According a regulatory filing with India’s ministry of corporate affairs, IBM’s profits for the financial year ended March 2013 fell by 20 percent.

Falling profits, newer instances of corporate governance breaches and shrinking business from top customers such as Bharti Airtel are in stark contrast to the dominance that IBM enjoyed in India until a few years ago.

All this is putting pressure on IBM’s India headcount, which is estimated to be around 150k currently, according to several sources. This is much more than what IBM employs in the U.S. (less than 100k).

While it seeks to trim its payroll overall, IBM is also attempting to call back old talent in order to steer through the ongoing crisis. For instance, the company has extended the tenure of its former India head Shanker Annaswamy by another two years till November 2015. Shanker, an IBM India veteran of over a decade, had retired last year and now serves as a senior advisor.

About seven years ago, IBM’s Palmisano addressed hundreds of company workers at the imperial Bangalore Palace, announcing over $6 billion worth of investments in the country. It was the first time IBM held its global investor meeting anywhere outside the U.S. and Airtel had won what would potentially become an over $2 billion outsourcing contract.

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“IBM means I am Bharti Mittal,” Sunil Mittal, chairman and founder of Bharti Airtel had said in June 2006 while hosting then IBM chairman Sam Palmisano in Bangalore, the tech capital of India.

Everything seemed perfect back then. 

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Microsoft Announces General Availability Of Azure In Japan

Almost a year ago, Microsoft announced its plans to expand Windows Azure to Asia, with data centers in China, Japan and Australia. Today, the company announced that its two regions in Japan (Japan East and Japan West) have now hit general availability, and Azure users in Japan will now be able to store their data locally.

As Satya Nadella noted a year ago (when he was still the president of Microsoft’s server and tools business), the company decided to invest “hundreds of millions of dollars” into this expansion in Asia because it believes there is a huge market opportunity for cloud computing in the region. At the time, then-Microsoft CEO Steve Ballmer also noted that the new data center in Japan would “bring Japanese businesses all the benefits of Windows Azure while protecting data sovereignty and increasing performance.”

Microsoft says that demand for Azure is increasing quickly and that it is doubling capacity every six to nine months. Storage usage on Azure from Microsoft’s Japanese customers grew 10x in the last 15 months (even before the local region was online).

Besides its expansion in Asia, Microsoft is also tackling the Latin American market at the same time. Last December, the company announced plans to open an Azure region in Brazil, which should come online in the next few months.

Continue reading here: Microsoft Announces General Availability Of Azure In Japan

Xiaomi Sets Singapore Launch Date As It Prepares For Global Expansion

Xiaomi just announced that it will launch in Singapore on Feb. 21. This is a significant move because it marks the company’s first expansion beyond China, Hong Kong, and Taiwan six months after naming Google’s former Android vice president Hugo Barra as the head of Xiaomi Global in a surprise announcement.

The company unveiled its Singapore site earlier this week. The only product currently featured is the Redmi, Xiaomi’s cheapest Android phone, which will cost just S$169 (or about $133 USD).

Despite its very low price, the Redmi still has some impressive features, like a quad-core processor, a 4.2-inch HD screen, and 8MP camera, that may help it standout from competitors. Xiaomi’s other handsets have also earned kudos for strong specs, attractive design, and Xiaomi’s Android skin, which it customizes by crowdsourcing user feedback.

Singapore makes sense as Xiaomi’s first stop in its international expansion because the country has one of the highest mobile penetration rates in the world. According to Nielsen, 87% of people in Singapore have a smartphone, the same number as in Hong Kong. To put that figure into context, it beats the 71% mobile penetration rate in China, 72% in the UK, and 60% in the U.S.

Xiaomi has grown extremely quickly since launching just three years ago. In 2013, for example, it more than doubled its sales to 18.7 million phones.

Though Xiaomi continues to face strong competition from domestic Android handset makers like Lenovo, ZTE, and Huawei, it has held its own thanks to the high profile of its founder, Chinese tech pioneer Lei Jun, as well as unique marketing strategies, like selling phones directly from Sina Weibo, China’s top microblogging platform.

Xiaomi’s growth plan has worked very well so far: in August 2013, Xiaomi’s market share in China surpassed the iPhone by a small margin, according to Canalys.

Link: Xiaomi Sets Singapore Launch Date As It Prepares For Global Expansion

Glam Media Plans To Expand Its Audience Beyond Women, So It’s Looking For A New Name

As company names go, Glam Media is pretty memorable, but the name is about to change, according to co-founder and CEO Samir Arora.

Back when the founders of the digital publishing and advertising company were first meeting in December 2003, Glam was actually called Project X. It was only when the company started to focus on reaching women that it took on the name Glam Media in 2005.

So why change it now? Arora told me via email that the Glam brand has become tied to women and fashion, but with the success of Foodie (which launched two years ago, and saw 17.1 million visitors December), the company is starting to serve a broader audience.

For example, he noted that the Foodie Recipe app hit number one the Apple App Store’s Food & Beverage category during the Super Bowl, with a “Game Day” edition. So it’s time for Glam to go broader, and to find a name to match.

Just to be clear, though, it isn’t giving up on the Glam name entirely. It will continue to operate the Glam website and its other properties like Tend, Bliss, Brash, and Foodie — it’s just the company name that’s changing.

As for what that new name is, well, Arora’s team is working with agencies and going through the standard branding process to figure it out. In the meantime, it’s calling itself “NewCo” as a placeholder.

“Glam Media started in Silicon Valley 10 years ago as a platform called Project X, focusing on men and women across all categories,” Arora said. “It is now going back to its roots as a consumer discovery platform, and will change to a new name later in 2014, continuing Glam as a vertical focused on women, but building Foodie and other new categories for men and women.”

As an example of how the company might expand, Arora pointed to the Editions platform for curating content based on trending topics, which was used to create the aforementioned Super Bowl Game Day edition. (Not every curated collection is released as an app, but the best are, he said.) For example, here’s a collection of cheap restaurants in my not-so-cheap neighborhood of Williamsburg.

One thing Arora declined to comment on were the reports last year that Glam has filed for an IPO. although it’s been nearly a year since the initial report.

Excerpt from: Glam Media Plans To Expand Its Audience Beyond Women, So It’s Looking For A New Name

Zynga Buys NaturalMotion For $527M, Signaling A New Tack For The Gaming Giant

Zynga has long been famous (or infamous?) for its data-driven approach to game design. The company never focused on building strong character IP, or intellectual property, in favor of releasing games that had been thoroughly funnel-tested.

But now that founding CEO Mark Pincus has stepped aside and let Xbox executive Don Mattrick take the reins, perhaps the company is going in a totally new direction.

Mattrick is sending a big signal on that front today with a $527 million deal to acquire NaturalMotion, the Oxford, U.K.-based gaming company behind franchises like CSR Racing and Clumsy Ninja. The deal involves $391 million in cash and about 39.8 million shares of Zynga stock at yesterday’s price, leaving Zynga with about $1.2 billion in cash and marketable securities on hand. (There is also sad news today, with layoffs for 15 percent of the company’s workforce.)

Torsten Reil, who runs NaturalMotion, doesn’t come from a cookie cutter gaming background.

He had actually been working on his Ph.D. in Complex Systems in Oxford’s zoology department when he decided to go in a totally different direction. He used his biology background to design software that could realistically animate 3D movement. Those products went on to become a middleware business that helped animate games in the Grand Theft Auto franchise and films in the Lord of the Rings trilogy.

Then a few years ago, Reil and NaturalMotion pivoted to building their own games, using their proprietary animation software to make freemium titles like My Horse and most recently, Clumsy Ninja.

Reil is a perfectionist, and he’ll delay games for months until the details are just right. That attention and care has attracted support from key partners like Apple, which let the company demo Clumsy Ninja and CSR Racing on-stage at the WWDC and iPhone 5 keynotes. (Let me just stress that being invited by Apple to go on-stage at their marquee events is like winning the “Best Picture” Oscar for an app developer.)

When he launched Clumsy Ninja last fall (a whole year after the company teased it on-stage at the iPhone 5 launch), Reil told me,

“We want to get the game right. We want to make people laugh and smile. We don’t want to design it to be a hard-core monetizing game. It has to be a delightful, wholesome experience.”

It doesn’t sound like stereotypical Zynga, does it?

Well, times have changed on the iOS platform. It used to be comparatively cheap to launch lots of casual, social games on the platform. But if you look at the top-grossing charts today, they’re almost the same as a year ago with companies like King, Supercell and MachineZone at the top.

That’s because it’s so expensive now to market and acquire users on mobile platforms. So if you’re going to launch a game, it takes much more time and investment than it did a year ago. So that’s why a new and even more deliberate approach is necessary. It’s not enough to fast-follow on proven gaming categories, which was Zynga’s strategy on the Facebook platform.

With this deal, Zynga gets a good portfolio of current and upcoming games, a character with real franchise potential in Clumsy Ninja, a middleware business and a 260-person gaming company that is culturally focused on quality.

As for NaturalMotion and its investors, the company was backed with $11 million from Benchmark Capital and had former EA executive Mitch Lasky on the board. Balderton Capital, which used to be Benchmark Europe, was NaturalMotion’s first venture investor.

Lasky, who overlapped with Mattrick while both were at EA, shared some of his thoughts here.

“NaturalMotion will provide Don with a fantastic slate of mobile products (both new, innovative ones, as well as sequels of their current hits),” he wrote in a blog post. “Combined with Zynga’s reach, social networking expertise, and advanced audience measurement tools, NaturalMotion and Zynga should be a very potent combination.”

More here: Zynga Buys NaturalMotion For $527M, Signaling A New Tack For The Gaming Giant

Kim Dotcom gives a sneak preview of Baboom, his new music streaming service

Kim Dotcom‘s new music streaming service — Baboom — is still to go live, but the Mega CEO has given us a look at what is in store after releasing a limited preview that features none other than him, and his first-ever album ‘Good Times’.

Dotcom has described the service as a combination of Spotify and iTunes, and the design is pretty slick. In addition to music streaming — as you’d well expect — artist pages include a bio, photo and video galleries, and the option to download content that an artist has designated as available for free.

Screen Shot 2014 01 20 at 13.11.47 730x406 Kim Dotcom gives a sneak preview of Baboom, his new music streaming service

Most of the site is still off-limits as the service has not fully launched yet, but there are hints that users will be able to curate a library of selected tracks, and hit a jukebox mode for random tunes.

The presence of an ‘activity’ tab suggests there is a social element to Baboom, but that wouldn’t be a big surprise since it is a staple part of established streaming services like Spotify, Rdio, Deezer and others.

Dotcom’s own artist profile is the only one that is available right now, but artists and early adopters keen to get on board can provide their email address for updates.

Interestingly, Baboom is offering viewers a chance to earn money by getting their creative juices flowing.

The best remixes of five of his songs will earn their creators $5,000, while $10,000 is on offer for the best music videos for each song. We presume this is an offer to promote ‘Good Times’ and Baboom together, but it remains possible that this is the kind of engagement that Dotcom is looking to foster between artists and fans that use the service.

baboom1 730x410 Kim Dotcom gives a sneak preview of Baboom, his new music streaming service

Despite launching Baboom, his second new venture following Mega.co.nz — which launched a year ago today – Germany-born Dotcom remains on bail charged with a series of offenses relating to his previous business — Megaupload — that was shut down by the US government two years ago.

Speaking at the time, the Depart of Justice said the Megaupload case was “among the largest criminal copyright cases ever”, and we doubt they take too kindly to another Dotcom business, irrespective of whether it is entirely lawful or not.

Can Baboom succeed?

Dotcom and Baboom are starting a long way behind the Web’s top streaming companies — which are about to be joined by Beats, which will launch its own music service this week. Dotcom has previously enjoyed a good relationship and rapport with many artists in the music industry — including P Diddy, Will.i.am, Alicia Keys, Snoop Dogg and Kanye West – and he will need to summon those relationships, and more, to bring top talent and popular music to the site.

For now though, we don’t yet know how Baboom will work exactly, so it is tough to know exactly how it will differentiate itself from Spotify, Deezer, Rdio, Xbox Music, Beats and co.

➤ Baboom

Headline image via Sandra Mu / AFP / Getty Images

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Apple Widens Smartphone Gap Over Samsung In U.S., Now Has 42% Ownership: NPD

While Samsung and Android continue to increase their market share on a global scale, the U.S. continues to be a story directed by Apple and its iPhone. Q4 2013 figures out today from the Connected Home Report from The NPD Group indicate that the iPhone now has reached ownership of 42% of all smartphone owners in the U.S., while Samsung is now at 26%.

As a point of comparison, in the same quarter a year ago, Apple had a 35% ownership share, and Samsung had 22%: in other words, the gap has slightly widened in a key market for both companies.

The news is not a good sign for Samsung, particularly when early indications from Kantar Worldpanel Comtech are that in China in December, Samsung lost its position as the number-one vendor to local favorite Xiaomi in terms of sales. The analyst firm’s full report on this will be out at the end of this month.

The wider picture in the U.S. is that smartphone penetration in the U.S. continues to rise, NPD further notes. Now some 60% of mobile phone users are using smartphones, compared to 52% a year ago. This indicates that, despite some theories that maturing markets will see a rise in low-cost sales over premium devices with a shift from early to medium/late adopters, this doesn’t appear to have happened as much in the U.S. — or carriers, resellers and Apple have found a market for less-expensive and older iPhone models, along with its newer, more expensive editions.

Among other leading handset makers, the only other OEM to see growth in market share was LG, while Motorola, HTC and BlackBerry all declined. Nokia and its Windows Phone operating system do not have a large enough share on its own to merit a separate rank, so it has been lumped into “others” — a group that also declined in another sign of increasing consolidation around the very biggest platforms and brands.

The growth in smartphone ownership has had a direct impact on data usage rising, too. It’s now at 6.6 GB per month in the U.S. compared to 5.5 GB a year ago. NPD says that one of the “key drivers” of that has been streaming music services. Some 52% of smartphone owners now use apps like leader Pandora and number-two iHeart Radio. Interestingly, although Spotify gets a huge amount of press, it’s third in line behind these in terms of usage. 

App usage figures in the report, NPD says, come from its on-device ”SmartMeter” covering 4,500 smartphone users, while some 5,000 U.S. consumers over the age of 18 were surveyed for the Connected Home study.

Originally posted here: Apple Widens Smartphone Gap Over Samsung In U.S., Now Has 42% Ownership: NPD

Pic A Moment Lets You Discover Public Instagram Photos From Moments – Or Even Months – Ago

If you’ve ever wanted to travel back through time to see what was happening in a given location on a particular date, a new, simply designed mobile application called Pic A Moment can help. The app is an Instagram search engine of sorts, allowing you to enter in a place name – be it a city, a business, or any other venue – along with a date, in order to see all the photos snapped there for the timeframe specified.

This is less about getting a sense of what a spot may be like, the way you might by browsing through a collection of check-in photos on Foursquare, for example, and more about being able to research and draw from a collection of public photos related to some event, like a music concert, sporting event, or some sort of breaking news happening.

The app itself is easy to use: you drag the slider to the date you’re interested in (today, 1 day ago, 1 week ago, 1 month ago, or you can enter in a custom date via the “in the past” selection). Unfortunately, this function for now is limited to the past several months, not all of time. You then enter your place name, and choose from the list of results. These are ranked by proximity to your current location if you’re searching for something generic like “Starbucks,” for instance, as opposed to a specific venue, business or city name.

picamoment 1On the page with the image results from that location, you’re also able to see what else of historical importance happened on that same date, thanks to a Wolfram Alpha ticker at the top, plus the weather for that day through a widget at the bottom. You can then tap on the photos to see them larger, and tap on user’s name to launch their profile on Instagram.

Explains Pic A Moment co-creator Jose Azanza Arias, he sees the new app as a “useful location-based storytelling tool for journalists and marketers,” as well as a way to discover and follow interesting Instagram users who are near you or were in the same places you’ve been to.

The app itself is a project from a group of creatives and developers at digital agency Wunderman Buenos Aires, who, in 2013, decided to come together to build mobile apps as side projects. The team earlier launched an app called Back2gether, aimed at reuniting lost dogs with their owners.

With Pic A Moment, Arias says that the team was inspired by the fact that, while we’re all looking through pictures from around the world, we “don’t see the bigger picture and the context behind them,” he says. Soon, Arias adds, the team will be introducing other features that will reveal more about the context behind the pictures, too.

picamoment 2There are other location-based Instagram search engines, of course. In the past, I’ve personally used things like Instalook or Gramory, for similar tasks. And there are also other ways to virtually “time travel” via photos, though usually these apps are targeting your those wanting to browse back through personal photo collections, as with Memoir or Timehop.

But Pic A Moment has a modern, iOS 7-friendly look to it, as compared with some of the older Instagram search apps, and it’s faster to use as you don’t have to enter in an exact address or reposition a map to find your results.

Still, it’s definitely more of a single-purpose utility rather than something you’d launch every day.

The app first debuted in late December 2013, and is available in both English and Spanish here on the iTunes App Store.

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Samsung’s Newest Ad Is Pretty Much The Worst

Worried that none of their recent commercials would take home that coveted “Worst Ad Of The Year” trophy, Samsung has swooped in with one hell of a last minute entry.

It’s like Samsung wanted to give us all a Christmas present. But instead of giving us socks, or candy, or a puppy, Samsung gave everyone a big ol’ box of cringe.

Like any masterpiece of cinema, the spot leaves the viewer with questions to consider post-viewing. Watch the commercial above, then join us below for some of our favorite bits:

0:15 – If a stranger asks “Want to see something cool?” on a ski lift, is the answer ever anything but “No”?
0:28 – Did he just kill someone? Pretty sure he just killed someone.
0:32 – Ey pree lady.
0:55 – “Check this out. I know I just met you literally 15 seconds ago, but I took 64 pictures of you.”
1:14 – Oh god why is he watching this video in a club who does that
1:51 – Why is she calling him? She JUST walked away from him. Seriously, she just walked out of frame less than 2 seconds ago. Maybe they’re both crazy.
2:12 – “Where’s this music coming from?” “From my phone, which I placed like 20 feet away for some reason”
2:20 – Jiggle fist pump.

Perhaps Samsung is just a master troll. Maybe. I hope.

insta

The rest is here: Samsung’s Newest Ad Is Pretty Much The Worst

Ask A VC: GGV Capital’s Glenn Solomon On How Companies Should Build And Expand In China

In this week’s episode of Ask A VC, we had GGV Capital’s Glenn Solomon in the studio to talk about the developing technology market in China, and his predictions for 2014.

Solomon, who has taken 32 trips to China in the past eight years, tells me in our interview that developing for the Chinese market is completely different than developing for the Western markets. And any U.S. company that wants to expand to China has to be aware of this, and take into account these differences when introducing a product in China.

Solomon explains, “Several years ago, VCs thought they would create the blank of China, and a company that was successful here would work in China. But China is unique and the way you grow and start companies there has to be local.”

Solomon also made his predictions for the IPO market in 2014, investing changes and more.

Continued here: Ask A VC: GGV Capital’s Glenn Solomon On How Companies Should Build And Expand In China