In 1969, when the Indian government was pre-occupied with its self serving activity of nationalising banks, NASA’s obsession was more stratospheric. They wanted to put a man on the moon and they did. Unknown to him, Neil Armstrong’s moon landing had repercussions far beyond the United States. Impressed by NASA’s feat, a 16-year old decided that he wanted to go to America and figure out, “who are these people who are able to take a man, put him in a box and propel him 250,000 miles to a rock and get it right on the first try.” As Vivek Ranadive narrates this during our meeting at the Tibco headquarters in Palo Alto, California, a slight shakiness in his voice gives away the fact that he still gets overwhelmed when he relives the moment. That 16-year old from Bombay is now a billionaire and in a nation obsessed with basketball, part owner of NBA team Golden State Warriors. On being asked as to what it was that he found so fascinating about Armstrong’s moon landing, he feeds us a basketball analogy. He says, “It is like throwing a basketball in California and have it land in New York perfectly through the hoop.” Since that pivotal moment in his life, Ranadive has taken many giant steps and now straddles Silicon Valley with equal ease as he does Wall Street.
Let’s open with a quote of yours: “If you get the right information to the right place at the right time and put it in the right context you can make the world a better place.” How far have we come? What more still needs to be done?
We are still in the infancy stage. We live in a time where there is amazing amounts of data available. If you look at the amount of data that was created from the beginning of mankind till a couple of years ago and you call it X, then in the past two years there has been 10 times that amount of data created, i.e.,10X. If you look at how much video content will go up on YouTube today, it is more than all the content that was created by Hollywood in its entire history. So, we have massive amounts of data. We know what Shaquille O’Neal ate for lunch or maybe, in the case of India, Sachin Tendulkar. Yet we haven’t solved the simplest problems. We still have airplane crashes, security breaches, lost baggage on airplanes. We still get sick and diseases still spread. I think we are entering a new exciting era where math is going to trump science. You don’t need to know the why of something. You just need to know the what. You just need to know that if A and B happen, then C will happen. The data is there. We just have to connect the dots and make it available at the right place at the right time.
Are you awaiting a particular inflection point or any development to hasten it?
I believe the inflection point happened over the past couple of years. It has been a perfect storm of technologies coming together. The cost of solid state chip memory has fallen so dramatically that the amount of memory you have in your cellphone is more than what entire countries used to have not too long ago. The next 10 or 20 years are going to see an exponential increase in applications of these computing technologies to all kinds of problems. It could be a simple problem like you have run out of change on your parking meter. Why should you have to look for change? Why not just hook it up on your iPhone? I think mobility is probably the single biggest catalyst for everything that is happening. We are doing work in countries where people don’t have a bank account but have a phone. So the phone becomes the bank account and changes lives in a dramatic fashion. If you look at the cost and price performance of communications capability, it has been actually growing even faster than computing power. It took us about a 100 years to get to a billion landlines, about 10 years to get to a billion cellphones and only one year to get to a billion smartphones.
When you combine all these developments with real-time technology, it opens a whole lot of possibilities. It means instead of your data just lying there, it can actively help you make decisions. A little bit of the right information just a little bit beforehand is more valuable than all the information six months after. For example, if I am a retailer and you are on my website, I want to make you an offer before you leave the website or you leave the aisle of the store.
What is the point of knowing that your customer has gone after he goes or what is the point of knowing that fraud is going to be committed after the theft? So, all these problems can be prevented in a real-time event driven model.
If you look back at the last two years, which have been very transformational, can you come up with business examples of where and how real-time contributed?
There was this large cellphone company in India that used to add 5 million customers a month and lose 2-3 million a month. They wanted to improve on their churn. After trying out everything, they came to us and, again, math trumped science. What we found is that if you drop six calls in a 24-hour period the customer is likely to switch. So, for us, every dropped call is an event. After five dropped calls, we make you an offer for free SMS messages if you top up your pre-paid card right there — problem of churn gone.
You get on an airplane in New York, land six hours later in San Francisco, you go to the baggage carousel and then you look for your bag. No bag. Then you wait in line and tell them, “I don’t have a bag.” Why are you telling them? They have your bag and they have information on your bag because it is sitting in the database somewhere. So now when you get on the plane and your bag does not, when you get off the plane, there is a message waiting for you that your bag didn’t make it; give us your address and we will send it where you want to. I can go on and on. I can make you an offer before you leave the aisle of a store, not six months later. A large American retailer applied that and on the first day they went live, they had 1.5 million new transactions for making the exact right offer to the right customer at the right time.
Tell us more about this retail application.
It was for one of the largest retailers in the country. They wanted to upsell and cross-sell customers while they were still in the store. They know who you are and what you are about to buy and they can make you another offer on something. If you walk into a store and you say, “I want to buy a blue shirt, medium size” and they don’t have the shirt, the next question is whether any other store has it or what is the next best shirt? By giving you the exact right offer instantly, they are able to get you to make a purchase and make you happy. They are also able to say, “By the way, your wife was on our website and she clicked and looked at this dress. While you are here, if you buy it, we will give you 20% off.” The revenues went through the roof.
We did something similar for Citibank in Asia, which used to spend millions on outbound promotions. They were trying to go from a 0.4% return on those promotions to 0.7%. They would send mailers to everyone. For us that was a waste. So we moved them to this real-time platform. So now when you walk into a store on Orchard Road in Singapore and you swipe your credit card to buy something, the system logs in the event and realises that your wife’s birthday is coming up. She likes Gucci. We are doing a special on Gucci and there is a Gucci store right next door. So, before you put your wallet back in, there is an offer on your phone. The revenues ran up 20% in the first month from that.
Is there anything slowing down the process of adoption of real-time technology?
No. It has kind of hit a tipping point and there isn’t an industry that doesn’t need it in order to compete and survive. There are three areas in which it applies. It applies for customer upsell and cross-sell, which grow your revenues. I don’t care if you are a bank, a retailer, an insurance company or an airline. Everybody needs to do that and then they have their own loyalty programmes.
I own a basketball team. We redefined my team as a social network and launched an application around it. When you enter the fan zone I know who you are, what you bought and all your habits. At the back end I know what I have and I know what I need to sell. For instance, I need to sell my hotdogs right away, otherwise they will go bad after the game. Then, I don’t restrict it to just the 20,000 people in the arena. I reach out to the 200,000 people sitting at home watching TV, walking through an airport. So, increasingly, businesses are thinking of themselves as social networks.
And the other two areas where it applies?
The second area is operational efficiency — cutting costs or doing more with the same. Say, there is bad weather and your flight is delayed, then it impacts the whole value chain. By moving to this event-driven model you are able to instantly adjust the whole value chain and squeeze a lot of savings out of it. So you don’t have to have the next plane showing up, the pilots showing up and the food coming. The third area is to manage risks like fraud or cyber security. There was this retailer in Europe who was trying to solve the problem of credit card fraud. What we found is that if you buy champagne, razor blades and diapers, it’s probably a stolen credit card. There is no way I could have known that but, by looking at the data, I was able to find that pattern. It makes sense because champagne and razor blades are big-ticket items that are easy to sell off. Why diapers? Because diapers are easy to sell and the guy is trying to look like he is a dad that he is a good guy, and he doesn’t want to get caught.
You said that for your basketball team you could tap every fan inside out. Could that ultimately create privacy issues, given that you are handling a lot of personal information?
You don’t have to necessarily opt in; it is a choice that you have. People opt in to disclose information when they come into the fan zone as what they are getting in return is much greater. They get special offers, get to talk to the players and get invited to the cool things.
But really, the bigger issue is that of cyber security. About 15 years ago, I was having lunch with somebody who raised almost the same question. At that time they were saying people will never buy anything on the web because it is unsafe. After we are done with lunch, the guy handed over his credit card to the hotel staff presenting the bill. I said, “You think it is safer to give your credit card to some guy you have never seen before than to use the internet?” Now, of course, you buy everything on Amazon.
There will always be breaches but the risks can be managed. It is up to you how much information you want to disclose.
Given your expertise in trading software, what do you think will be the next big thing to come up in Wall Street technology?
We came up with a product called “Faster than light” where we reduced the latency of information getting from here to there to nanoseconds. They were not satisfied with microseconds so we have done that now. The Chicago Mercantile Exchange was the first to use it and now they do $1 quadrillion in trades every year using that technology. While speed is going up for professionals, the average person is getting more and more sophisticated as well. You have got things like ETFs that people are trading in. There is also competition from different areas. Some of the threats could well come from well outside of Wall Street. There is a company called SecondMarket where Facebook first got traded. I think there is a huge amount of innovation happening and a lot of it is happening outside of Wall Street. It is entirely possible that in a few years there will be no credit cards. If everybody has a phone number and a smartphone and people know who you are, they know how good your credit is, and that’s all you need. You don’t even need a home address. If you think about it that way, then mobility could redefine all kinds of markets.
What is the new reality? How will things evolve from here? Will Tibco continue doing more of the incremental improvements that you talked about?
One of my favourite writers is Charles Dickens and in A Tale of Two Cities, he starts, “It was the best of time, it was the worst of times.” This could well describe the times we live in today. It is the best of times for some and the worst of times for others. It is the best of times for Apple, but the worst of times for RIM; the best of times for Amazon and the worst of times for Circuit City; the best for Hyundai and the worst for other car companies.
In a highly efficient world one of the fallacies people have is that when you have access to lots of people and you have all these platforms and information is easily accessible everywhere, it is easy to be successful at something. The truth, is only if it is good, because if it is bad then people will find out about it very quickly as well. The same goes for Tibco. We believe that we are the first enterprise software company of the 21st century. What Apple is to consumer technology we want to be to the enterprise.
Every company needs to move to this event-driven real-time model. They need to move away from 20th century models represented by companies like Oracle, SAP and Microsoft. I believe that Tibco will be one of the largest enterprise software companies on the planet in the next 10 years. The thing I worry about most is about making sure that I am hiring really bright people and making sure that I am able to continue innovation. Five years from now my revenue will come from things that we haven’t yet invented. More than half my revenue today comes from things that I didn’t have five years ago.