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STARTING AN IT COMPANY

STARTING AN IT COMPANY. Group 8 Mutia Putri Sona Hovasapyan William Prada. STARTING AN IT COMPANY. OVERVIEW CISCO TECHNOSOFT DELL SUMMARY. Emerging of Digital Economy 2002. Digital Economy 2002

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STARTING AN IT COMPANY

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  1. STARTING AN IT COMPANY Group 8 Mutia Putri Sona Hovasapyan William Prada

  2. STARTING AN IT COMPANY OVERVIEW CISCO TECHNOSOFT DELL SUMMARY

  3. Emerging of Digital Economy 2002 Digital Economy 2002 “Despite and economic slowdown and recession, U.S Industries have continued to build the IT capital stock, to marshal the human skill and IT services that make the installed base of IT capital more productive, and to create as a result the enduring foundation of a stronger economy” Source: Digital Economy 2002, Economic and Statistics Administration US Department of Commerce, February 2002

  4. Highlights in Economy 2002 - “During 2000, business investment in IT-producing industries accounted for 37% of the U.S. GDP.” • “By contrast, in 2001 reductions in business investment in IT-producing industries had a negative effect on economic growth.” Source: Digital Economy 2002, Economic and Statistics Administration US Department of Commerce, February 2002

  5. 700 700 2000 600 600 2001 Percent change 4Q95 – 4Q00: 20% annual rate 500 500 1999 400 400 Percent change 4Q00 – 3Q01: -14% annual rate 300 300 200 200 1995 1996 1997 1998 1999 2000 2001 Investment in Information Processing Equipment and Software Billion of 1996 dollars, annual rate Source: Digital Economy 2002, Economic and Statistics Administration US Department of Commerce, February 2002

  6. Highlights in Economy 2002 “Despite the 1.4 % decline in the total private sector employment during 2001, employment grew by 0.5% in telecommunication services and 1.4% in computer software and service-industries.” Source: Digital Economy 2002, Economic and Statistics Administration US Department of Commerce, February 2002

  7. 130 130 Recession 125 125 Computer services 120 120 115 115 Telecom services 110 110 105 105 Private nonfarm 100 100 95 95 2001 1995 2000 Continued Strength in IT Service Job Index, January 1999 = 100 Number of employees (in thousand) Source: Digital Economy 2002, Economic and Statistics Administration US Department of Commerce, February 2002

  8. -Some estimates indicate that surge in dot.com failures that began in mid-2000 peaked in first half of 2001 and has begun to subside.- 10% of the 7, 000-10, 000 “substantial” internet companies that received some venture funding closed between Jan 2000-December 2001.- Through middle of 2001, these failures, staff cuts at surviving dot.com companies had resulted in an estimated 135, 000 layoffs . Source: Digital Economy 2002, Economic and Statistics Administration US Department of Commerce, February 2002

  9. STARTING YOUR OWN IT COMPANY

  10. Company Life Cycle Promising Transitional Corporate Start-Ups Initiatives Initiatives The Origin and Evolution of New Businesses, Amar V. Bhide

  11. What differentiates companies? Nature of the opportunities Different initial conditions: different level of project uncertainty, amount of investment, and likely profit The Origin and Evolution of New Businesses, Amar V. Bhide

  12. What differentiates companies? Tasks and Strategy - degree to which they rely on prior analysis and planning rather than adaptation to unforeseen circumstances The Origin and Evolution of New Businesses, Amar V. Bhide

  13. What differentiates companies? Personality and Traits Characteristics of founders that differentiate the successful initiatives from the unsuccessful one Social and economic contributions: different sizes and maturity affect the development of new technologies and market, and the interaction with existing economic structures The Origin and Evolution of New Businesses, Amar V. Bhide

  14. Common Perceptions for IT Start-Ups Brilliant idea Breakthrough creativity High capacity to innovate Leadership & Management Skill Technical education High tolerance for risk/loss SUCCESSFUL?? The Origin and Evolution of New Businesses, Amar V. Bhide

  15. Initial Conditions:IT Start-ups • most successful business started with the notion of no proprietary idea and no verifiable human capital ( such as: no knowledge, and no reputation ) The Origin and Evolution of New Businesses, Amar V. Bhide

  16. “Most promising business started by someone who is working for another business, who sees a small niche opportunity. And the person jumps in with very little preparation and analysis - - and pretty much does what somebody else is already doing, but does it better and faster.” – Amar Bhide Interview of Inc.com editor-in-chief George Gendron with Amar Bhide, author of The Origin and Evolution of New Business, February 1 2002

  17. Initial Conditions:IT Start-ups most successful business started with no exceptional trainings and no managerial experiences (i.e.: Bill Gates, Michael Dell, Steve Wozniak ….) The Origin and Evolution of New Businesses, Amar V. Bhide

  18. Initial Conditions:IT Start-ups most start-ups do not have significant up-front investment uncertain market niches The Origin and Evolution of New Businesses, Amar V. Bhide

  19. Nature of Opportunities:IT Start-ups • Entrepreneurs pursue highly uncertain projects • Face significant constraints • Unlikely to generate large profits The Origin and Evolution of New Businesses, Amar V. Bhide

  20. Tasks and Strategy: IT Start-Ups Strategy to face the problems: Opportunistic adaptation- High uncertainty requires entrepreneurs to extensively adapt to unexpected circumstancesand opportunities- High uncertainty limits the value of prior planning and research The Origin and Evolution of New Businesses, Amar V. Bhide

  21. Personality and Traits: IT Start-Ups Important attributes: • High tolerance for Ambiguity • Open-mindedness • Ambition “IT takes a really extraordinary individual to build on a start up business – extraordinary in terms of someone who has an almost maniacal level of ambition,…”– Amar Bhide The Origin and Evolution of New Businesses, Amar V. Bhide

  22. …… Continued • Resilience • Perceptiveness about the wants and needs of customers • Sales skills • Self-control The Origin and Evolution of New Businesses, Amar V. Bhide

  23. Proportions about Promising Start-Ups Entrepreneurs with meager endowments … thrive in … INITIAL CONDITIONS NATURE OF BUSINESSES Low investment High uncertainty Low likely profit No proprietary idea or technology + Limited verifiable human capital … face the tasks of … OPPORTUNISTIC ADAPTATION to unforeseen circumstances … requiring TRAITS AND SKILLS Tolerance for ambiguity Open-mindedness Resilience Sales Skill Self Control … Unavailability of outside funding

  24. Cisco Systems one of the World’s most admired companies • the world leading supplier of enterprise internetworking solutions • expanded from a small startup to an industrial leader with around 19 billion net income • captured 85.5% of the market for routers* • one of the most successful companies to emerge from Silicon Valley http://www.nwfusion.com/news/0516cisshare.html

  25. Cisco Systems Nature of Business Core activities (at the time of start-up): • the first product – the router; manufacturing networking and communications products; Currently • provides a broad line of products for transporting data, voice, video over LANs, WANs and all over the Internet • provides strategies and solutions that can help solve critical business problems • services associated with the equipment and its use

  26. Cisco Systems Nature of Business Target Market (at the time of start-up): • higher education and research institutions • large size corporations Currently targets also small size businesses

  27. Cisco Systems Customers: “Nasdaq, the world’s largest electronic stock market, is only as good as our network, and we have built this network with Cisco technology”.- Steve Randich, Executive Vice President, Operations and Technology, and CIO, The Nasdaq Stock Market   “At Sprint, the bottom line satisfying customers. We were able to increase Sprint IP network capacity by a factor of nine, positioning the company to quickly meet new customer requirements in Europe and the US” -Bob Azzi, VP, Network Engineering, Sprint

  28. Cisco Systems Customers: “With more than 3.5 billion viewers watching the 2002 Olimpics, the network had to be 100 percent reliable. There was no margin for error and we met our goal”. -Bob Donohoo, Chief Network Engineer for Olympic Operations and Olimpics Network Manager, Salt Lake 2002 Olympic Winter Games, IKANO Communications, Inc.

  29. Cisco Systems • Since the beginning of 2001, 53 public telecom companies have filed for bankruptcy. • In 2002, publicity held telecom companies announced 165,840 job cuts. In the last 18 months, some 500,000 telecom jobs have been axed. “We have been stunned as just about everybody else has, by the severity of the downturn in telecommunications business” * Anthony Muller, Chief Financial for JDS Uniphase headquarters in San Jose Chris O’Brien, Mercury News, Telecom Failure Hitting Home in Silicon Valley", Sun, Jul.7, 2002

  30. Cisco Systems Net Income(Loss) (Dollars in billions)* Cisco Systems, 2002 Annual Report

  31. Cisco Systems • Cisco’s fiscal 2002 revenue of 18.9 billion resulted in major market share gains compared to their competitors. • Fiscal 2002 net income according to GAAP was 1.9 billion and earnings per share were $0.25, as compared to FY 2001 loss of $1.0 billion and loss per share of $0.14. • Average cash flow from operations(FY 2002) $1.5 billion per quarter Cisco Systems, 2002 Annual Report

  32. Cisco Systems Net Sales (Dollars in Billions)* Cisco Systems, 2002 Annual Report

  33. Cisco Systems Key players: • John T. Chambers, President and CEO Widely recognized as one of the great motivators and customer driven chief executives in the technology business. • John P. Morgridge, Chairman of the Board • Donald T. Valentine, Vice Chairman of the Board

  34. Cisco Systems • 2001 – “Best Investor Relations Officer” and “Best Investor Relations by a CEO” - Baron’s and Investor Relations magazines • 2002 World Communications Award For Fixed Networks • “Best Trained Sales Force” - Sales and Marketing Magazine • Customer satisfaction rating 4.63 in a five-point scale Cisco Systems, 2002 Annual Report and http://newsroom.cisco.com/dlls/ts_102402.html

  35. Cisco Systems The Legend Sandra Lerner of Stanford University Business School and Leonard Bosack of the Computer Science Department wanted to send love letters to each other via university e-mail, but… the local computers at different departments would not talk to each other. So they invented the router – the black magic box David Bunnell, Making the Cisco Connection, UpSide Media 2000

  36. Cisco Systems Leonard Bosack Education: • major in electrical-engineering from University of Pennsylvania • Stanford master's degree in Computer Science Personal Characteristics: • Open-minded • Philosophical • Non-confrontational • Hard working • Sense of humor David Bunnell, Making the Cisco Connection, UpSide Media 2000

  37. Cisco Systems Sandra Lerner Education: • an Economics major from Stanford University • Stanford master's degree in Statistics and Computer Science Personal Characteristics: • Aggressive • Intelligent • Notoriously extravagant • Hard working David Bunnell, Making the Cisco Connection, UpSide Media 2000

  38. Cisco Systems: Behind the Legend Sandy – the director of the computer facilities at Stanford University Business School Len - the director of Stanford's Computer Science Department David Bunnell, Making the Cisco Connection, UpSide Media 2000

  39. Cisco Systems Needed to find a way to get the local computers networked!Data could be transmitted more quickly, reliably and safely

  40. Cisco Systems The Breakthrough Idea: The Router – allows the two LANs to remain distinct, while being able to communicate. • The Stanford experimenter Bill Yeager developed a crude router based on a DEC minicomputer. • Bill, Len, Sandy, Kirk Lougheed and others created the interface to connect DEC minicomputers to the Ethernet network. David Bunnell, Making the Cisco Connection, UpSide Media 2000

  41. Cisco Systems Initial Conditions Started the company in late1984 Start-up Budget: financed their own start up costs with their credit cards. Brand Name: cisco Systems (with a lowercase c, as in the tail of San Fran) 1986 - cisco shipped the black magic box named a router David Bunnell, Making the Cisco Connection, UpSide Media 2000

  42. Cisco Systems “My take on the Cisco vision: it was a very clever way to sell software by the simple expedient of concealing the software inside hardware. They (Bosack and Lerner) were in the right place at the right time. They also are very smart, very hard working and incidentally, very lucky. They also had the benefit of being in an environment that was on the cutting edge of applying networking on a large scale”. –Ralph Gorin, Stanford University, former Director of Computer Facilities

  43. Cisco Systems Getting Customers: • no professional sales staff or official marketing campaign • founders fired out commercial e-mails to friends and colleagues, asking them to spread the message to others over the Web's early links • have not purchased their first advertisement until 1992

  44. Cisco Systems 1987 - Donald Valentine, founder of Sequoia Systems agreed to front $2.5 million dollars, recruit management and salespeople for a 32 percent share in the company "Apple in 1977 solved no problem. It had to create the application. Yahoo! in 1997 had to create a business model. But Cisco in 1987 filled a desperate need. I never met a company that entered the market in such a timely way with no competition”. –Donald Valentine David Bunnell, Making the Cisco Connection, UpSide Media 2000

  45. Cisco Systems - 1987, Congress made a commercial Internet possible - The demand for routers increased dramatically by the late 1980s - Cisco's financial success was the need for corporations to find solutions for connecting computer networks. Without the router, they would not be able to connect to other parts of their businesses.

  46. Cisco Systems “As more and more people were replaced with employees that Valentine brought in, animosity grew between himself and the founders, particularly outspoken Sandy”-David Bunnell 1988, John P Morgridge, president and chief executive officer (CEO) David Bunnell, Making the Cisco Connection, UpSide Media 2000

  47. Cisco Systems • February 16, 1990 - Cisco went public Cisco stock opened at $18 a share and closed at around $22.50 • In August 1990, Sandy left Cisco Systems • In December, 1990, two founders of cisco decided to sell their two-thirds stake in cisco for about $170 million

  48. Cisco Systems • Len - started a new venture, XKL, producing server-class computing and networking equipment • Sandy - founded a cosmetics company Urban Decay in 1995.

  49. TECHNOSOFT Ashok Subramanian – entrepreneur

  50. Ashok Subramanian EDUCATION Ph.D.University of Houston, Business Administration, 1992Major: Management Information SystemsMinor: Marketing. M.B.A.University of Houston, Business Administration, 1987Major: Marketing. B.Sc.University of Bombay (India), 1980Major: ChemistryMinor: Physics. http://www.umsl.edu/~subraman/ashokvit.html

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