I.R. Gilyeat & Company

A advisory firm that creates blueprints for company growth

Published Commentary When you hire an adviser it's important to know what they think about business and how they think about problem solving.

The best place to see what we're working on and thinking about is to visit our blog at:

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You can also read about physics and marketing and see a few of our published commentaries that are distributed to the investment community listed below.

Betting against the house...at Google no less.
Published: 4/21/2008 3:44 PM

http://online.wsj.com/article/SB120846206032023831.html?mod=hpp_us_whats_news

Implications:
This is a good reminder that buying advertising from Google is like betting against the house and that barriers to entry for competitors like Microsoft(NMS:MSFT) and Yahoo(NMS:YHOO)! continue to rise. Google has great supply - but how much demand is in the market is the question.

Analysis:
A couple of quotes from this article are useful to remind us of what the dynamics are when buying from the Google ad machine:"The price of search advertisments is determined by an auction-based system where advertisers bid against each other to have their ads displayed more prominently." This raises the real queston, when a company buys ads from Google are they really bidding against other advertisers? Or are they bidding against Google? Remember, Google's job is to increase the pay per click that they receive. Who says they can't raise the price even if another advertiser isn't in the bidding.

"There are some 'verticals' where we might be hitting limits, and there are plenty of verticals where we're not - but in aggregate there's still plenty of room." said Eric Schmidt. "He also specified that there were hundreds of thousands of vertical advertising categories in Google's systems factoring in such things as types of advertisers and regions."

Trying to recreate hundreds of thousands of vertical advertising campaigns with appropriate and accurate measurement tools that meet the satisfaction of marketers is a task that will continually evolve, incrementally improve and constantly raise the barriers to entry. All companies that want to compete with Google in delivering up ads, whether in search, display, radio, newspaper or on-demand video must have a comprable solution or they cannot compete with the Google ad machine.

In essence, the real question behind Google's continued growth isn't a question of supply - they have ample supply and know where to get plenty more. It is clearly a question of demand. How much demand is in the market and at what point does Google reach saturation or obtain so much market share that their growth becomes limited and is constrained?

On the search side, the 3rd link is a key indicator and should be watched closely. Knowing that the 3rd link is empty will give everyone a consistent measure as to how much demand is in the market.
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Don't be misled by the flap on Facebook Beacon - it can yet deliver many benefits
http://online.wsj.com/article/SB119621309736406034.html

Commentary & Analysis
Published: 12/17/2007 4:45 PM by Gerson Lehrman Group

Implications
Consumers, marketers and social networks will continue to rethink and evolve the notion of electronic connections. Advertising and marketing dollars will continue to move online to take advantage of electronically enabled relationships.
Analysis:
Facebook has lifted more of the curtain on the potential of social networks and how consumers and marketers will redefine economic relationships. Although Beacon can be viewed as extremely intrusive it can also become a highly desirable tool for business relationships.
We need to remember that Facebook offers companies and individuals the ability to create groups and networks that are open to the public, secured and administered by a company representative or completely private. The simple ability to create a private network for employees means that Beacon could be a wonderful means to generate enthusiasm and loyalty within the employee network by using the Beacon technology to add value to the sales team or even to a select group of customers.
As in many new technology innovations, we frequently miss the value or its best purpose and need the market to show us how it can be used in a beneficial manner. Facebook Beacon as a method to track consumers and broadcast our every move to our friends and acquaintances may be very intrusive in a public forum, but as a technology platform for building customer loyalty or employee loyalty, I say it is an impressive development that will be very welcome in relationships that mutually benefit from the exchange.
In my opinion, the future of marketing is personalized, measurable, transactional and integrated. Facebook Beacon meets all four of these criteria and should provide great benefit as we become more familiar with its varied uses. Every digital platform and interactive marketer should make note of this new capability and think of how to leverage the notion of what Beacon offers. It is only a matter of time before its real value is understood and used for the benefit of many. Companies to watch that can build on this ability include MySpace, Google(NMS:GOOG), Yahoo(NMS:YHOO)!, Amazon(NMS:AMZN), Microsoft(NMS:MSFT), Digital River(NMS:DRIV) and email service providers such as SilverPOP, Responsys, ExactTarget and others like them.

Customer Performance analysis is the unifying factor in transforming payments processing for big banks
http://www.intelligententerprise.com/showArticle.jhtml;jsessionid=RMV20NZP1AMXSQSNDLPCKH0CJUNN2JVN?articleID=204203321

Commentary & Analysis
Published: 12/12/2007 2:57 AM by Gerson Lehrman Group

Implications:
Real-time data, when used in concert with customer performance analysis, can help banks accelerate migrating customers that use paper checks to electronic payment methods. Real-time data will strengthen banks ability to provide international payment offerings as part of a complete payments solution for corporate customers.
Analysis:
Large banks such as JP Morgan Chase, Bank of America and Citibank(NYS:C) are fully engaged in creating complete payment solutions for commercial customers. These payment solutions include domestic and international payments. They enable improved ease of use, self-service payment portals, integration with payment applications from vendors such as Oracle, SAP and Microsoft(NMS:MSFT); and support of a full range of payment types such as ACH, debit, credit, international ACH, wire transfers and alternative payment type such as PayPal. Broad payment platforms utilize multiple communication networks such as Mastercard(:MA)/Visa, AMEX, SWIFT, CHIPS and FEDI. They serve all customer types from large multinational companies, mid-sized companies and small companies, including those engaged in international trade.

Customer performance analysis is required in order for banks to correctly understand the firmagraphic attributes and behavioral characteristics of customers. Holistically understanding the entire banking relationship with these customers will enable banks to offer broad payment solutions that will entice and compel corporate customers to abandon paper checks and take advantage of electronic payment methods - domestically and internationally.

Today, the majority of B2B payments are sent via paper check (25 billion according to BIS Research), representing 60-95% of total B2B payments made by check (% varies according to company size: source Aite Group). The integration of real-into Check 21, currency trading and back time data office conversion (BOC) initiatives can help banks communicate and persuade customers in a relevant and timely manner when based on usage of customer transactions.

The benefit of real-time data is in creating timely and relevant conversations with banking customers that move them away from paper checks. It allows banks to deliver high value services to customers that must manage the risk of currency fluctuations while they do business in a global economy. Real-time data enables banks to put control of the clearance or settlement date in the hands of the corporate customer and improve their cash management operations.

Equifax will lose focus if they continue to chase the Business Process Management(BPM) market
http://www.equifax.com/cs7/Satellite?c=EFX_News_C&childpagename=US%2FEFX_News_C%2FPressReleasePage&cid=1182376541587&p=1182374863790&packedargs=locale%3Den_us&pagename=EFX%2FWrapper

Commentary & Analysis
Published: 11/29/2007 3:26 PM by Gerson Lehrman Group
Implications:
This announcement suggests Equifax(NYS:EFX) is moving away from providing information solutions and data and into a position of providing Business Process Management (BPM). A move into the BPM sector will cause them to lose focus and become distracted away from their core value of delivering data, advanced analysis and usage of data.
Analysis:
This is a press release and demonstrates a drifting focus for Equifax. The ability to sign a signature on a digital pad at the bank is not the same thing as closing loans electronically. The selling process hasn’t changed and still requires the customer to come into the bank and sign documents.

Granting someone permission to view documents does not inherently create the ability to organize, review and enforce audit compliance of the loan package. There must be much more to the process management tools of APPRO® than is highlighted in the release and is captured at the end of the release: APPRO automates every phase of the loan processing workflow - from data acquisition and decisioning through a range of post-approval functions.

This announcement suggests that Equifax is losing focus on their core business of providing data intensive, information solutions into a business process management sector where they will compete with the likes of IBM(NMS:IBM), EMC(NYS:EMC) and Global 360. Forrester Research(NMS:FORR) in a recent report (Business Process Management for Document Processes, Q3 2007) identifies IBM and EMC as the market leaders. Equifax does not appear anywhere in the report. IBM has been publishing reports on their success in business process managment for mortgage loan providers for over three years and probably longer (CIO Insight, March 2004, Business Process Modeling, A Model Student

Link: http://www.cioinsight.com/article2/0,1397,1552198,00.asp.

Equifax is allowing their strategy of developing enabling technologies to drift from advanced analytics and decision support and their core value proposition that rests on data to process and workflow engineering. There is a distinct difference between enabling the mortgage process with brilliant analysis in order to minimize credit risk and portfolio loss and that of reengineering the workflow process to eliminate the use of paper.

Equifax needs to keep their focus in enabling technologies on improving the quality of the data and enabling smarter analysis and decision making with data usage and leave the process reengineering to IBM, EMC and others.
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Blackboard and Sony partner to offer contactless card technology in the U.S. Education market
http://money.aol.com/news/articles/_a/blackboard-and-sony-partner-to-offer/n20071107083809990001

Commentary & Analysis:
Published: 11/9/2007 4:45 PM by Gerson Lehrman Group

Contactless card readers can improve student and teacher security on school campusesImplications:

Implications:
Although contactless technology is interesting for commerce applications the real home run is in addressing security problems on the school campus. Education security firms will use contactless card reader technologies to secure the school campus in a seamless and virtually invisible manner. The notion of perimeter detection and network security layers will migrate from the protection of payment transactions and email inboxes to the protection of individuals, the classroom and the campus workplace. The notion of "big brother" will become more accepted and adopted as a benefit as it is redefined from being intrusive to inclusive in the fabric of safe relationships and human interactions.

Analysis:
The security of children and youth is of primary concern for society at large. This concern also extends into the workplace for adults in the classroom. The use of contactless technology for positive identification and access control will set a new standard for addressing security concerns.

Contactless card technology can identify and authenticate a transaction or an individual in .1 second. This creates an ability to seamlessly and almost invisibly positively identify many individuals as they enter controlled access areas like school campuses, classrooms and school workplaces.

The notion of setting up perimeter detection for email is highly useful when coupled with contactless card technology that is embedded in student ID cards, teacher ID cards or cell phones for secure identification of students, teachers and visitors as they enter or leave the school campus. Security can be layered across the campus in similar fashion as security within a computer network is layered.

Contactless technology can become a significant catalyst to a society that "opts-in" to electronic capabilities that proactively use dynamic mutual authentication to secure children, students and teachers. Intrusion detection, access control and user management from software companies like MicroTrend, Symantec(NMS:SYMC), CA, Novell(NMS:NOVL) and others have much broader implications than simply securing payment transactions when combined with contactless technolgy from Sony(TSE:6758)(:SNE), Blackboard(NMS:BBBB) and others.

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Rising rupee claims first BPO victim in Spectrum
http://www.bpowatchindia.com/2007/10/rising-re-claims-first-bpo-victim-in-spectrum/

11a39a08-8810-11dc-9464-0000779fd2ac.html?nclick_check=1). Company executives cannot ignore this fact and will recognize that long-term operating objectives will make it more difficult to take advantage of a labor cost gap that narrows by 15% each year.

As the cost for talent increases the ability to retain employees becomes increasingly difficult. The cost of attrition makes every outsourcing operation difficult because the ability to keep expertise in the operation is such a key factor in keeping clients satisfied. A lower cost of operation is simply one factor in the decision to outsource - expertise in the process or industry is a second critical decision point.

It should also be recognized that Accenture(NYS:ACN) recently lured a high profile executive from the U.S. to return home to India and lead their operations. This is another indication to me that opportunities for highly compensated executives, middle manages and knowledge workers are in demand in the Indian marketplace.

It appears that the simple labour arbitrage play has run its course in India and that new economic factors are arising that demonstrate that India is not necessarily a simple low cost solution, where excess labor and talent are readily available.