A Question about the present ‘AAA’ Credit Rating of the USA

Two years back, the word "Credit Default" was never associated with the United States of America. However today it is very difficult to find a financial newspaper or a magazine which does not have an article on a possible US Default if the US government is unable to raise the debt ceiling by an August 2nd deadline.

What is surprising is that all three major rating agencies Fitch, S&P and Moody's maintain the top notch credit rating for the US at this point in time even when a CNN.com article headline reads Countdown to default: U.S. debt talks enter critical week  (CNN might change the headline from time to time as the story develops) . Although imagining such a default by the US is very difficult it is apparent that the probability of defaulting as at this moment is definitely not zero.

Therefore one might question as to why this uncertainty is not reflected in the US credit rating, especially when there is an increased uncertainty about reaching a debt deal.  The author of this article is in the opinion that it is highly counter intuitive to maintain an AAA rating when the "Talk of the town" is about averting a default! A question that one would ask the rating agencies is that even if a deal is reached , and a default is averted does it mean that credit rating should still be AAA ? Or does it even deserve a rating just one notch down from AAA which is AA+ ? The fact that the US is contemplating to avert a default, by all means is an unfavorable situation, where one might not associate a top credit rating.

In stark contrast, the rating agencies were very quick to downgrade Greek debt continuously, even though  the European Union made efforts to agree on a bailout. This made it increasingly difficult for Greece to borrow funds and moved the country even closer towards a possible default. The most recent downgrade of Greek debt by Moody's happened on Monday 25th July 2011.

If the rating agencies continue to maintain the prime (AAA) rating, in case of an unlikely event of a US default, they will have no option but to bring down the rating from AAA to default overnight. An example for such a credit rating downgrade could be found during the recent Sub Prime Mortgage crisis where the AAA ratings of certain CDOs were downgraded to junk status overnight.

Comment on LinkedIn Discussion : No wonder CompSci grads are unemployed

Just commented on a LinkedIn discussion based on an article published by the theregister.co.uk titled "No wonder CompSci grads are unemployed". Find the LinkedIn discussion here ( Login might be required ) and the extract of the comment below.

" In my opinion Computer Science/IT Graduates need to understand the programming concepts thoroughly, and there is no need to know each and every new programming language that pops up. If somebody understands the concepts, the programming language would just be a tool to get the task at hand done. In this respect I fully agree with Mark DeFilippis.

Due to the same reason some companies (like ours – IFS) pay more attention to identify the conceptual knowledge/ability than the knowledge of particular programming languages when recruiting graduates. If you are thorough with a programming language that would be a definite plus but knowing "programming concepts" is more important. Someone who knows programming concepts would be at ease when learning appropriate programming language/tool depending on the requirement. However it should be mentioned that we are able to train graduates for the required programming language skills be it C# or Java. However some companies cannot afford to provide such trainings to recruits and it has to be understood that these companies might look for specific programming language skills when they recruit.

By going through some of the posts in this thread it seems that there is a notion, that in order to be a good programmer/graduate one should know the latest programming language skills (i.e. the latest four letter acronym). In my opinion one should exercise caution when selecting and learning programming languages as well. The reason for this is that these new languages might not be around in three to four years time and perhaps no one might be there support or promote them as well. Most of the programming tools are so hyped at the inception but later on we find that the real usability and value of such tools would not live up to the hype. One example for this is "Java Applets". When Java Applets were gaining popularity in late nineties some analysts made predictions to the extent that the Applets will play a key role in web applications in future but nowadays it is not the case.

From a company’s perspective careful research has to go in when identifying programming languages that last before making any significant financial commitments to build up such language skills /software. Similarly it is important for graduates to do his/her bit of research to judge the future of the selected language tool depending on the expected future commitment from his/her side. " 

SLASSCOM Future Careers Documentary

Sri Lanka Association of Software and Service Companies ( SLASSCOM ) together with some of Sri Lanka's leading IT and BPO companies produced a documentary on IT / BPO Industry of Sri Lanka. The 10 minute documentary is aimed at creating awareness of IT/BPO among students and parents.

The video was officially launched on 22nd January 2011 at the EDEX 2011 exhibition held in Colombo. At EDEX 2011, SLASSCOM Future Careers pavilion provided a wealth of information to prospective entrants to IT/BPO industry. The pavilion featured the employers who contributed to the documentary and many others while several among them offered Walk In Interview opportunities.

You can help your friends and colleagues to realize the potential of the IT/BPO industry by sharing this video. The video is provided under Creative Commons (Attribution-NonCommercial-NoDerivs) license. Therefore feel free to use this video for non-commercial purposes such as career fairs, school exhibitions. You can also embed this video in your blog/website by extracting the HTML code from here.

All Roads Lead to Sri Lanka !

Sri Lanka has been getting positive press coverage in the recent past over many aspects of its economy. Prospects in the Tourism Industry and IT and BPO Industry have received wide publicity together with overall economic prospects. Such coverage helps to attract more investors to the country and helps to revive tourism industry which has a vast untapped potential.

Overall Economy

A recent article appeared in the Wall Street Journal inquired if investors have already missed the boat in Sri Lanka, although the post war economic boom just started. The article was referring to the speed at which financial markets have developed since the war ended in May 2009. The Article further states that the market implied sovereign debt rating for Sri Lanka stands at Ba1 ( Moody's) , while Moody's official rating stands three notches below Ba1. Investors widely expect an upward revision of Sri Lanka's rating. A complete chart of ratings awarded by major rating agencies can be found here .

Further confirming the trend the Colombo Stock Exchange (CSE) ended the year 2010 with an All Share Price Index growth of 96 % YoY. However it should be noted that the market capitalization of the CSE reflects only 40% of the GDP of Sri Lanka as of now.

IT / BPO Industry

Most recently top IT Research firm Gartner Inc. included Sri Lanka in its Top 9 IT Offshore Service Destinations in the Asia Pacific region. This positions Sri Lanka among the world's top 30 Offshore IT Service providers as well.

New York Times carried an article highlighting Sri Lanka's potential as an outsourcing center for financial services with particular emphasis on Accounting function. The article also positively commented on Colombo's suitability as a business travel destination. It stated that " Many international executives also quietly admit that Colombo’s colonial architecture, excellent seafood restaurants and proximity to miles of sandy beaches make it a more alluring business travel destination than India’s outsourcing centers. "

Tourism Industry

Tourism industry has been a major beneficiary of the post war revival of Sri Lanka. Tourist arrivals have been steadily increasing towards record numbers where for the year 2010 tourist arrivals stood at 654476 - up by 46.1 % YoY.

Tourism industry received a major boost in 2010 as New York Times picked Sri Lanka as the number 1 place to visit in 2010 among 31 destinations. Among other destinations featured in the same article were Seoul, Copenhagen, Los Angeles, Las Vegas, Kuala Lumpur.

National Geographic channel put Sri Lanka in the number 2 position in world’s 20 best islands . Following is a recorded segment of the NatGeo program on Sri Lanka.

Other Indices

Apart from the above Sri Lanka was ranked high by the World Economic Forum in its Global Gender Gap Report 2010. In the report Sri Lanka was ranked in the 16th position ahead of the USA, Canada and the Netherlands. Sri Lankans was ranked in the 8th position in league with the developed countries in the World Giving Index 2010 developed by the Charities Aid Foundation. The index measures the charitable behaviors of people in countries.

The A380 Experience!

On the 8th of July, I had my first flight aboard the new Airbus A380 aircraft. The Singapore Airlines flight was from Singapore - Changi airport to Tokyo -Narita Airport. Singapore Airlines being the only operator that uses A380 at the moment, you have to be traveling to or from this part of the world (Asia) in order to Experience this.

The Super Jumbo : An A380 in the terminal 3 of the Changi Airport - Singapore

First thing that you feel could be the relative quietness of the aircraft, compared to Boeing 747-400s or Boeing 777s that Singapore airlines operate. The economy class seats that I flew onboard the A380, were very spacious and they were more like the Business Class seats that that can be found in some Airbus A330 aircrafts operated by other airlines.

Onboard A380 : Economy Class seats in the Main Deck have more space

The Airbus A380 is a double-deck, wide-body, four-engine aircraft. It is designed to carry 555 to 840 passengers. This is about 35 percent more than the Boeing 747. There were many manufacturing delays in the A380 project and it appears that EADS have finally got hold of the control of project. The early manufacturing delays were said to be mostly due to problems in the cabin wiring system.

Boeing responded to the challenge posed by A380 in a different way, by moving ahead with their 787 Dreamliner project which is also currently plagued by production delays. The 787 is supposed to be a is a mid-sized, wide-body, twin engine aircraft.

The two Aircraft Manufacturers have different strategies to meet the future demand for Air Travel. Due to the size of the A380 aircraft it is capable of flying large number of people between major hub airports. Singapore Airlines already fly to London, Tokyo and to Sydney from Singapore. However Boeing have put their faith in carrying relatively less number of passengers between many smaller airports frequently.

Making the aircraft fuel efficient remains one of the key priorities common to both the programs. In this aspect Boeing has an edge due to the fact that in order for A380 to be fuel efficient it has to fill up most of its seats. Even a small number of empty seats could raise the amount of fuel consumed per passenger. This was probably the case in the flight I took.

Google Earth on Web!

In my blog post created on the 15th of April 2008, I highlighted that Google has an opportunity to make browsing of Geographic Information (KML) and Web Content seamless. This was after they standardized their Mark-up language for Geographic Information Representation KML.

On the 28th of May 2008, Google announced the availability of a Plug-In which enables web browsers to run Google Earth 3D application inside browsers. This opens up new opportunities for software developers to make the web more interesting by creating Mash Ups that include Google Earth. Currently “Google Earth Web” provides a limited set of features that can be found in Google’s proprietary Earth Browser. However in the long run, I believe that Google will provide the full functionality found in Google Earth over the Plug-In.

This also opens up exciting opportunities for Google to deliver Google Earth to mobile phones, in a manner similar to which they deliver Google Maps for mobiles. In order to make this a reality Google has to certify the Plug-in (Modify if necessary) for Mobile browsers.

O’rielly provides an interesting article about new Google Earth features and the video below was released by Google demonstrating some possibilities.

Innovation and the “Quarterly Company”

Trying to meet Wall Street Analyst’ targets, by focusing on the short term goals can do much harm than good for technology companies. This is mainly because of the fact that sustainability of a technology company is highly dependent on the innovation it brings to the marketplace. If a company loose the focus on the long term strategy due to “external influences”, a company might find itself running the company from “quarter to quarter” - and effectively becomes a “Quarterly Company” with hindered innovation .

Recently there was a good discussion provoked by ZdNet’s Larry Dignan related to the influence that the Wall Street has on the technology companies. However it should be stressed that it is futile to say that shareholders should not be taken seriously. Ultimately it’s shareholders money that companies are spending. However it helps to have at least some majority shareholders who have a sight in the long term strategy of a company. Keeping them enlightened about innovation and R&D strategies of companies is one way of getting the buy-in of such shareholders.

However companies like Amazon and Google have more luxury than some of the small time tech companies to invest more in innovation. Apart from that they have the power to withstand the pressure / criticism of the Wall Street when pursuing high risk long term goals. A recent BusinessWeek magazine’s interview (April 28th 2008 issue) conducted with Amazon’s Jeff Bezoz clearly indicates this fact. Bezoz claims that“I believe you have to be willing to be misunderstood if you're going to innovate”. The mis-understanding stems from the fact that when you are innovating you do not have the freedom to enlighten all the stakeholders of the companies on your strategy in an in-depth manner. If you do so this can very well help your competition. Adding to that there is no clear cut path that leads to innovation as well. This makes it even more complicated to spell out a strategy.

At the same time Google does not guide the investors on their future earnings and yet apparently earns the respect of majority of investors. The article titled “No More Earnings Guidance? Hallelujah” provides a brief insight into the “No Guidance policy” of Google. The Reuters article “No guidance" policy jolts Google investors again” echoes the sentiment of some sections of the Wall Street with regard to the said policy.

At the same time, there are examples of companies who got a beating in the innovation side trying to focus on the short term profits. Introducing Six Sigma to increase the efficiency of 3M Corporation was one such example where the creative culture was put on a back foot while attempting to increase the short term profitability.