Wednesday, December 13

Crowdsourcing at work: Ears Wide Open

Slim Devices is a Silicon Valley startup with hot products for audiophiles. It's also a next-generation open organization where customers imagine and design the products. Is this the company of the future?

December 2006 | Page 102 | By: Alan Deutschman

“You have to love this sweet, satisfying machine," wrote David Pogue in his New York Times review of the Squeezebox. The sweet machine in question is a $300 device that lets audiophiles take digital music from their computer hard drives or from Internet-radio streams, and play it with impressive clarity on high-end speakers in their living rooms. "Its creators have sweated so many details, you want to hand them a towel."

Sean Adams

One of Them: Slim Devices founder and CEO Sean Adams tinkers with his audio devices--just like his company's legion of customer-creators--in his "mad lab."

Ah, but who actually did that sweating? Not just the handful of engineers on the payroll at Slim Devices, the startup that makes the Squeezebox. The player, which has sold an impressive 50,000 units, is largely the brainchild of its customers around the world, who have done much of the vital engineering and design work--for free. They've been motivated by their passions--for great audio, for cool products, for the art of engineering--and also by the satisfaction of being admired and relied on by a global community of their peers.

We know about open-source software and Web services such as Linux, the Mozilla Web browser, and Wikipedia, of course. But Sean Adams, the 27-year-old college dropout who started Slim in his Silicon Valley garage, bet that the same ethos of knowledge sharing and community could extend to a manufactured physical object, one being sold--gasp!--for profit. True, it's a conclusion he came to by accident. Adams had a more conventional company in mind when he was making the rounds for venture capital. He just happened to be looking for funding during the Valley's particularly inauspicious time of late 2001. "Sean wanted Slim Devices to be open source because he didn't have the money to build a company in the usual way," says Patrick Cosson, Slim's vice president of sales and marketing. "It wasn't a political position. It was out of necessity."

And you know what they say about necessity. Slim Devices will bring in around $10 million in revenue this year. Its fans include music stars Herbie Hancock and Alanis Morissette. And its latest product, released last September, the higher-end $2,000 Transporter, has reaped three times the expected orders.

Slim Devices is still small, of course, and young. But it offers a glimpse of how many companies may come to function in the future: as ecosystems that depend on the active participation of broad networks of contributors. "Everywhere you find innovation today, a community is involved," says Patricia Seybold, author of Outside Innovation: How Your Customers Will Co-Design Your Company's Future (Collins, October 2006).

In this world, running a company is not about brilliance or command, but about attracting and orchestrating the work of talented and passionate outsiders--people who know more than you do, have better ideas, and maybe even care more about your product than you do. As Slim's five-year history shows, there's still an important role for the company and its leaders, but it sure isn't what people have been learning in business school for decades.

People around the world have been contributing to Slim Devices free of charge for all sorts of reasons. Some do it to showcase their skills in the hope of attracting a job offer. Some do it for the challenge. But much of it comes down to this: We want things our way. "Initially, I really got involved because the product didn't do quite what I wanted," says Adrian Smith, who's employed as a network architect for a large telco in Britain. "Instead of just complaining, [Slim] allowed me to roll up my sleeves and try to improve it."

Hard-core audio enthusiasts like Smith, the sort Adams calls "people who will do anything in the pursuit of sound," are the backbone of the Slim Devices community. But what keeps these avid listeners engaged, in fact, is the chance to be heard. Felix Mueller was a software engineer in San Jose, California, a few miles from Slim's headquarters in Mountain View, when he started writing new features for its players. The startup's bosses treated him with deference when he dropped by its vintage 1950s Silicon Valley building (which originally belonged to Fairchild Semiconductor, the legendary company that invented the computer chip). "When I first met Sean," Mueller recalls, "he greeted me with, 'You must be the famous Felix.'" Mueller remained a key member of Slim's community even after he moved to Switzerland. Smith says Slim's executives have earned his trust by relying on his software and "treating me as the expert on how it works."

Slim Devices has depended on its community of enthusiasts to both suggest and create the numerous add-on features that give its products their full richness. But if that's all there was to it, Slim would be merely a customer-centric organization using open-source software development in much the same way giants like IBM do. Adams's true leap of faith is to let his company rely on nonemployees for much of its most crucial engineering. A particularly vexing challenge for any high-end audio product, for example, is minimizing the amount of power it uses, because electricity creates noise that detracts from the purity of the signal. And Andrew L. Weekes, the engineer who masterminded Slim Devices' approach to minimizing power, isn't an employee: He works for a company that supplies the British military with target drones, unmanned aircraft that they can use for practice. Still, he's one of a handful of the community's members who have full access to the product's inner sanctum "firmware," the detailed hardware specs and software that determine how it works. "Vendors told us, 'You guys are insane,'" Adams recalls. "They said, 'What are you doing? You need to protect intellectual property. You need patents.'" Instead, Slim's executives decided to put their trust in the contributors who have proven their talent and commitment to the endeavor for several years.

It's a risk, to be sure. But cultivating customer-creators of all stripes gives Slim access to talent that it otherwise wouldn't have. "There are a lot of bored telecom engineers who would move to California if they didn't have families or passport problems," says Cosson. "Half our contributors are abroad--in Canada, the UK, Switzerland, Germany--and this is their way of connecting to Silicon Valley."

Leading a network of outside contributors--if it can be called "leading"--takes some getting used to, says Dean Blackketter, Slim's chief technology officer. He knows this relationship from both sides: Blackketter was Slim's first customer-creator. A seasoned software engineer who had worked at Apple, Microsoft, and WebTV, he bought Adams's first product, the SliMP3 (serial No. 3), out of curiosity. He saw that the software code that ran the device was posted as open source on the company's Web site. He began making improvements and additions to the code and sending them to Adams, who responded by sending a free SliMP3 to Blackketter in San Francisco (now a common gift to contributors), and then another, and then some stock in the company. In 2002, Blackketter came aboard as the company's second employee.

Now he presides over the community, a task that, among other things, requires a talent for suppressing his own ego. "The hardest part is giving up control," he says. "Do I make decisions myself about changing the product, or do I open it up? Every single time I've opened it up, it's paid off. A couple of times, I've been this close to doing it my way, but they"--the people in the community--"changed my mind. Their hearing is better than mine, their ideas are better than mine. They're doing it because they love it."

At some point, though, the community has to be saved from itself, and that's when Slim's managers step in. One customer wrote a piece of software that enabled Slim's boxes to connect to Rhapsody, Real Networks' online music service. He did so by breaking the code that protected Real's data transmission over the Net. Uh-oh.

The author of the Real plug-in lived just a few blocks from Blackketter in San Francisco. Blackketter went over to his house and said, "That's a really good hack, man," but told him it wasn't legal. Only mildly daunted, the hacker put the plug-in on his own Web site rather than Slim's. Then, sure enough, an email came from Real Networks asking him to take down the posting--and, in classic Silicon Valley fashion, to visit Real the following week for a job interview. Slim managed to hire him first, then eventually worked out a legal relationship with Real and incorporated the plug-in into its players. "You can't be heavy-handed and kill the creativity," Cosson says. "But you have to manage the chaos and resolve disputes."

As the company has grown, Slim's leaders have learned exactly what the founders of Mozilla Web browser discovered: If you're going to have a grown-up company, with a competitive product in the marketplace, you need a staff of paid full-time employees. They make it possible to meet deadlines and run reliably. Some things have to be handled by staff--such as quality control for the physical product. And, of course, you can get paid staffers to do what the volunteers pass up or abandon midway. "We think of our development community as this big game room, this big playpen, and we're watching," says Cosson. "If the community can elevate an idea and get it over the hump, that's great. But sometimes we have to rewrite software to finish it." Slim now employs 26 people.

The company's open-source model will increasingly be tested as it grows and matures. Already, Slim's top contributors detect changes in the tenor of the online forums that have been so effective. "The community has grown wildly in the last couple of years," says Kevin Deane-Freeman, who makes his living as a hardware designer for a printer manufacturer near Vancouver, British Columbia. For several years, he has often spent his lunch break working on software for Slim. "It's no longer possible to keep up with it 100%, nor to make everyone happy. That's a big thing when much of why you do it is to see others happy with what you have provided."

With Slim's full-time staff increasing, there's also a danger that the intellectual center of gravity will shift to the inside. In the past, Blackketter says, "the vast majority of our technical discussions, inside and out," took place on Slim's online forums, "where you wouldn't be able to tell who is an employee and who isn't." Now, Adrian Smith warns, "as the employee team has grown, there are more conversations going on in private."

How Slim manages this phase will determine whether it can be more than just a startup that briefly thrived on the open-source model. "With the open organization, the real question is: Can it scale?" says Ram Charan, the prominent management consultant. Open-source software projects often reach a "forking" point where the community splinters and factions go their different ways. And while the open-source approach offers a nearly limitless resource potential, "that same potential can introduce an unpredictability," says Deane-Freeman, who signs his postings "not a Slim Devices employee" because of confusion that arose from his frequent and authoritative contributions. "In a larger structure, and especially with a publicly traded company, predictability plays a strong role." Indeed, Slim's unconventional, open style may prove challenging for Logitech International, which announced in October that it had acquired the company for $20 million. Logitech promised that Slim would remain autonomous, enthusing over "one of [its] key assets, a committed community of developers." But you still have to wonder whether Logitech merely covets Slim Devices for its cool audio technology--and whether, ultimately, it will kill off the more valuable invention.

SOURCE: FastCompany

Wednesday, May 24

Outsourcing Malaysia: In Search of Excellence

By Dian Schaffhauser

Secret Service had finished its bomb sweep of the Hilton meeting room, which meant we could file back in to await the arrival of the Malaysian dignitaries, including the Prime Minister, the Hon. Dato’ Seri Abdulla Ahmad Badawi.

Across the street (guarded by a phalanx of Austin’s finest and their motorcycles) at the Austin Convention Center, the World Congress on Information Technology 2006 was in full swing. Keynoter Michael Dell had just finished taking questions from the crowd of a thousand on Dell’s stock price. Gray-suited businessmen, grinning like soap-box derby contenders, rolled around on demo Segues in the exhibit hall. And 300 delegates from Malaysia (including 74 government officials, 12 exhibitors and representatives from 70 private companies) were studying the details of the conference with an eye toward the country’s own hosting of the event in 2008 in Kuala Lumpur.

Back at the Hilton, we stood as the Prime Minister, a petite, smiling man, entered the room, surrounded by his security contingent. He shook hands as he was led to his seat at the front of the crowd. When the brief speeches -- including his own -- were over, he was invited to autograph an official proclamation. That’s when the music cranked up and we all watched as -- to the beat of disco -- the Prime Minster signed a plaque declaring the launch of "Outsourcing Malaysia."

Projections Look Positive

Outsourcing Malaysia is a new joint initiative by several groups -- the Association of the Computer and Multimedia Industry of Malaysia (PIKOM), Multimedia Development Corp. (MDeC), and Malaysia Debt Ventures (MDV) -- to position the country as an attractive location for shared services and outsourcing (SSO). (One participant recalled how, at an early meeting of the various organizations, guests from Mumbai looked around the room and were "astounded. They said, 'You know, I sat in the first NASCOMM meeting, and it looked just like this.’")

But Malaysia is hardly new to the business of global services. This small country of 24 million in Southeast Asia is already host to dozens of multinationals that have tapped expertise in the energy, finance and logistics industries, many through captive arrangements.

In both its 2004 and 2005 Global Services Location Indexes, consulting firm A.T. Kearney named Malaysia the top third location for shared services and outsourcing behind only India and China and just ahead of Singapore. The ranking analyzes the top 40 service locations worldwide against 40 measurements in three categories: cost, people skills and availability and business environment.

According to the report, "...Government promotion policies continue to pay off... Malaysia has augmented continued investment in world-class infrastructure along the Multimedia Super-Corridor, with further incentives for corporations choosing to locate in Malaysia and additional policies to open up the labor pool and deepen English language and technical skills throughout the population."

In its Global Institute Labor Supply Database McKinsey points out that although Malaysia has a "relatively small" pool of talent, its graduates have "significant international experience." That is a result of three decades of foreign investment in the country by global companies such as Shell, DHL and Dell.

Likewise, Frost & Sullivan, which shared the stage with the outsourcing consortium in Austin, also has identified the potential for major growth of SSO in Malaysia in survey work that is ongoing.

The advisory firm sizes the SSO market worldwide at $758 billion for 2005. Of that, offshoring accounts for about 6% -- $46.5 billion. While domestic SSO is expected to grow about 12% a year over the next three to four years, offshore is expected to grow between 20% and 30% annually over the same timeframe.

The finance industry is the biggest spender (accounting for 33% of the global SSO spend), while the energy industry is growing the fastest (with a compounded annual growth rate of 21.5%), said Aroop Zutshi, president and senior partner at Frost & Sullivan. The firm has identified logistics as the fastest growing vertical in the Asia Pacific region.

This positions Malaysia well for becoming a dominant player in the SSO arena. In the area of finance, said Zutshi, while India is the "clear favorite due to cost and skill of its human capital," and China is "ambitiously catching up by leveraging on human capital," Malaysia is "preferred due to its 'First World’ infrastructure."

In the energy sector, Frost & Sullivan points to Malaysia’s "prominence in the sector...due to clustering of industry players and a skilled talent pool."

In the area of logistics, said Zutshi, Malaysia has been identified as the "rookie of the year," by virtue of being a newcomer "thriving on a high concentration of supply chain management expertise and...completeness of infrastructure ecosystem."

Who’s Doing Business There

Momentum for doing business in Malaysia, according to Frost & Sullivan’s Zutshi, is coming from companies looking for specific domain expertise. "We hear of countries like India that have excelled in knowledge process outsourcing, China in the manufacturing side. What is interesting is that many, many companies today -- especially the Fortune 500, that spend millions of dollars on outsourcing issues -- are looking for pockets of excellence, countries -- regions within countries -- that can offer core competencies in certain areas to help on the process side..."

Companies are seeking "business processes that go beyond generic ones," said David Wong, co-chairman of Outsourcing Malaysia, "That’s why the industry is moving... not on the cost differential, but on the value you’re getting."

Outsourcing Malaysia’s job is to make sure the capabilities exist as well as the domain knowledge to be able to serve growing demand. He said the goal is to "achieve 60,000 knowledge workers by 2008" -- up from 40,000 currently -- to serve the supply side of talent requirements.

During the announcement, Rob Cayzer, director of Shared Services and Outsourcing for MDeC, which oversees the development of the Multimedia Super Corridor in Malaysia, held up a brand new type of Motorola Nextel phone and said that it was "designed, researched, developed, tested, manufactured and shipped out from Malaysia. This is the kind of high end services you will find in Malaysia."

In the financial services realm, Standard Chartered Bank and HSBC have set up global processing hubs in Cyberjaya, a hub location for ICT companies that is situated midway between Kuala Lumpur’s city center in the north and the Kuala Lumpur International Airport to the south. Citibank runs a regional trade processing center in Penang.

Royal Dutch Shell Group runs a global IT support center in Cyberjaya, offering desktop support as well as engineering and development services to Shell companies around the world.

DHL has located its regional IT hub there, responsible for operations in Asia Pacific. Known as DHL GIS Cyberjaya, it’s one of three global data centers run by DHL around the world.

HP is running a data center in Cyberjaya as well as Petaling Jaya outside of Kuala Lumpur. The company said part of its drive to open the newer center in Cyberjaya was to support local clients, including DHL and Western Digital.

Other companies with a presence in Malaysia include Microsoft, Intel (with 8,000 employees in Malaysia, including 1,500 in R&D), Ericsson, BMW and Nokia. On the service provider side, IBM, Fujitsu, EDS and CSC have all set up operations there. On May 9, 2006, ACS announced the opening of a new technical development center in Cyberjaya, which will employ 700 workers by 2007. From this facility ACS said it will provide clients with network and desktop engineering solutions, system engineering services, mainframe support, application management systems, customer care and human resources services.

Much of what has attracted this blue-chip roster of companies is a stable government, a highly skilled talent pool and competitive costs. The country enjoys low inflation, low staff attrition and high levels of returnees among its foreign graduates. Also, unlike many other nations aspiring to become a favorite pick in global sourcing portfolios, said MDeC’s Cayzer, "Malaysia is an affluent country."

At the same time a number of domestic service providers are also building growing businesses in Malaysia. These include BPO firm Scicom; IT service provider ea cap; Sapura, which has grown from being a telecomm provider to becoming an expert in fields such as ICT, energy, industrial and automotive; Vsource, which runs centers of excellence across Asia for banking and finance, insurance, transportation, manufacturing and technology; and ICT provider Kompakar, which became a national hero when it became CMMi Level 5-certified and earlier this year won a RM1.15 million deal with a hospital in China.

Malaysia Finds Its Groove

So why jump up and down (to a disco beat) and launch Outsourcing Malaysia when it’s been around for years anyway? Why take on hosting WCIT 2008? According to MDeC’s Cayzer, "When AT Kearney ranked Malaysia as number three in the world, it shocked a lot of people." He pointed out that it arrived in a time when confidence in the country was just coming out of a low point -- following on the Asia financial crisis of the turn of the century.

"This ranking is a potential," he said. "When this thing first started, we were considered very expensive compared to India. Now compared to Bangalore, in the high end IT space, we’re considered cheaper... We have 3,000 foreign investment projects in the country... It just keeps growing."

The country is already strong in captives. Outsourcing Malaysia’s goal, Cayzer said, is to start to "brand local companies." The strategy, he said, is "to redevelop the relationships we have with the [multinationals]. We don’t have to recreate them. We do have to enhance or capture more mindshare in the American services sector. That’s something we have to aggressively go for."

Concluded the Prime Minister before he took proclamation pen in hand and somebody found the volume knob on the speakers at the Hilton, "We believe we have many advantages we can share -- people who are truly multilingual and multicultural. I am here to say to you, come to Malaysia and you will see many countries of Asia. It’s a cosmopolitan country."

The recorded disco thumping continued as cameras flashed and he worked the crowd on his way out of the room, still smiling, still shaking hands. Malaysia is on the move.

Useful Links

Outsourcing Malaysia

Frost & Sullivan

MSC Malaysia

WCIT 2008

CIA World Factbook on Malaysia

A Baker & McKenzie archived Webcast on doing business in Malaysia

Service Providers in Malaysia





Vsource Asia

About the Author:

Dian Schaffhauser is the editor and managing director of Contact Dian Schaffhauser at dian (at)

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