Bus. Std: The ADAM and EVE of Computing

My latest column in Business Standard:

A recent cover story entitled “The Digital Village” in the Asian edition of Business Week (June 28, 2004) showcased how technology is helping India fight poverty. The magazine said in an editorial: “A fascinating technology revolution is underway in India. No, we’re not just talking about [India’s] success in software and outsourcing work. Rather, it involves an explosion of projects that are making creative use of technology to deliver basic goods and services to India’s 700 million poor, most of which live in isolated villages…By promoting local innovation and entrepreneurialism, the tech-for-the-masses movement could not only stimulate economic development in the countryside but also help find the key to turning the world’s poor into the next major source of global growth.”

Rural India is just one of the segments in India that can be transformed by entrepreneurship and innovation. There is a lot about India that needs to change – right from the way we deliver education to hundreds of millions of children to how we can automate millions of businesses to how we can find information about what is happening in our neighbourhood. India’s digital infrastructure needs to be built in a hurry to make up for the lost time. Many technology revolutions are being compressed in the space of a few years – creating an amazing array of opportunities for entrepreneurs, provided they are willing to look at the market within.

One of the primary challenges that we face is making computing a utility, by bringing down the cost of usage to that of a cellphone. We need to provide access to a connected computer accessible to every family, employee and student in India. How can we do it?

To start thinking about possible solutions, there are four challenges that need to be addressed simultaneously. Think of them as the ADAM of computing – affordability, desirability, accessibility and manageability.

Affordability: The existing solution, created by and for people with very high incomes, is too costly for most people in developing countries. While hardware costs have dramatically and monotonically declined over time, software has become more expensive to own and manage. Consequently, the total cost of ownership of computing solutions is still very high. (Piracy is a commonly used workaround when it comes to software. But most have to take the non-consumption route when even the pirated software plus the hardware costs exceed their budgets.)

Desirability: The utility of computers derives primarily from the services that it provides users. Even if the total package of hardware and software was affordable, people will not buy unless the services they derived from the computer were relevant to their lives. Furthermore, while the utility of computers is a necessary condition for their widespread adoption, it is not sufficient. People have to be knowledgeable about the utility of computing.

Accessibility: Given the low per capita incomes of developing countries, only a relatively small fraction of the population can afford to own even low-cost computers. Yet a significant number of people who cannot afford to own computers can still derive benefits from having access to computing services and be able and willing to pay for these.

Manageability: Computers require significant amounts of back-end support because of the complexity of the software. The cost and complexity of administration, support, and defense against spam, spyware and viruses act as significant deterrence to using them.

The present PC paradigm evolved 25 years ago in a world when networks barely existed. The PC, together with the Internet and cheap connectivity, has engineered the technology and productivity revolution in developed markets in the recent past. Spam, viruses, and spyware are increasing support costs, even as a saturated market for computers in the developed world is making technology companies look at emerging markets as the next big opportunity.

The issue is deeper than mere affordability; users in many of the developing countries have solved the software affordability issue by piracy. It is about building the computing ecosystem in these markets which brings utility and value of technology to daily life. The question then is: what is the new computing architecture that can leverage the availability of broadband communications networks and dramatically reduce the prices so that technology becomes more relevant, affordable, desirable, and accessible to the next generation of users?

To make computing a utility for emerging markets, there are many possibilities. Could the cellphone be the computer? Can we create an architecture around thin clients and server-centric computing? Can there be neighbourhood computing centres just like STD/ICO booths? Whatever be the solution, we need EVE to tackle ADAM – a combination of Entrepreneurship, Venture capital and E(i)nnovation.

Microsoft's Emerging Market Strategy

WSJ writes:

U.S. software giant Microsoft Corp. will discuss with the Association of Southeast Asian governments the introduction of a cheaper version of the Windows operating system, company Chairman Bill Gates said Tuesday.

"We will talk with other governments about whether they have programs to get very, very low-cost computers to their citizens. When they have programs like that, we will talk about which versions of Windows will make sense for them," Gates told reporters.

He was speaking at a press conference after signing a memorandum of understanding with the Malaysian government to collaborate in information technology-based education in public schools.

ASEAN comprises Malaysia, Singapore, Thailand, Indonesia, Philippines, Brunei, Vietnam, Laos, Cambodia and Myanmar.

Last week, Microsoft introduced a starter version of Microsoft XP operating system for Malaysia and Thailand.

Microsoft faces increasing competition from cheaper rivals - such as those based on "open source" Linux technology - in developing markets, and faces a continual challenge to combat piracy of its products.

Earlier Tuesday, he met Prime Minister Abdullah Ahmad Badawi for a half-hour and pledged to invest 10 million ringgit ($1=MYR3.80) to train teachers and improve information technology in 10,000 schools over five years.

"We are eager to work with the government of Malaysia to help change how education is delivered," Gates said in a statement.

So, this seems to be Microsoft's strategy for the emerging markets:
- talk to governments directly
- get them to source low-cost computers (probably, AMD or VIA based systems)
- offer Windows XP Starter Edition in local language at a discounted price bundled
- probably expect large volume guarantees
- offer the bait of investments in teacher education (or development centre) in return for commitments on Windows usage

This is not going to work. As I write in my Business Standard column, affordability is just one of the dimensions of the problem. What also needs to be looked at is manageability. The strategy Microsoft, Intel and the others should be looking it is:
- sell not hardware or software, but "commPuting" as a service (hardware, software, communications, support)
- the price point needs to no more than $15 (Rs 700) per user per month
- solution should be thin clients and server-centric computing (the latter will eliminate piracy)
- push broadband deployment across the country
- create a platform for relevant local content
- create community centres (Tech 7-11s) locally where people can experience the new computing platforms

Taking computing to the next markets needs a paradigm shift in the way we think about computing., and about making computing available as a utility. Only then will the next billion users become consumers of computing.

Social Spreadsheets

Phil Windley writes from Supernova:

These are some comments and thoughts from a panel called "The Network is People." Esther Dyson, Ray Ozzie, Mena Trott, and Christopher Allen were the panelists.

Spreadsheets were amazing because they sit in the middle, between calculators and the corporate accounting system. They let people not just change the numbers, but to change the models and to build new models. The power of the spreadsheet is the power to persuade people (some might say "beat them into submission"). Spreadsheets are as much about group interaction as presentation software is.

Social networks have a problem in that they let you record relationships, but they don't give you power to control interactions. They provide too many opportunities for "friend inflation." They don't accurately reflect people's real social networks. What we need is a "wiki for transactions." We need a way for users to manage their workflow in a flexible way--a spreadsheet for social interactions.

Would you rather have ten networks with 700,000 people in them or 700,000 networks with ten people in them? This is an interesting question. Linked-In is the first. Blogs are the second.

Additional views of the panel from Fast Company's blog and eWeek.

Marc Canter adds: "Esther's idea for a social software spreadsheet are right on. She wants someone to be able to author their own sequence of events to 'script' their own social software actions. Sort of like roll your own LinkedIn.She said this right after folks were attacking the entire premise of explicit social networking - saying that it was too artificial for expressing real-life relationships.But I say that without explcit social networking - we'll never be abel to deliver Esther's social software spreadsheet."

India Outsourcing Increasing

WSJ writes that Indian companies have benefited from the outsourcing controversy in the US - what that did was publicise India's low costs and expertise.

In the high-technology hub of Bangalore, two to three Western companies are opening operations in the city every week, say officials at Software Technology Parks of India. More companies are turning to India to do everything from software development to back-office work.

Revenues for call-center businesses grew by 46% to nearly $4 billion, or about €3.3 billion, during the year ended March 31. And the number of workers in India's technology sector is projected to have jumped by 23% to more than 800,000 in the period, according to the National Association of Software and Service Companies, or Nasscom, the Indian technology industry's trade body. Nasscom expects India's exports of software and services to jump more than 30% to $16 billion in the current year ending next March, about the same growth rate as last year.

Many Indian and American executives say the U.S. criticism of outsourcing is generating important buzz for Indian technology companies, highlighting their low costs and expertise. "During the last six to nine months, we've received hundreds of millions of dollars of free advertising," said Vikram Talwar, chief executive officer of Exlservice Inc., a New York company that processes financial claims for U.S. banks and insurance companies in India.

There are signs that the outsourcing trend is broadening. U.S. companies continue to make up roughly 80% of the companies outsourcing work to India. But now, Chinese, Japanese and a number of European firms are opening offices in Bangalore and other cities. Companies like Chinese telecommunications-equipment maker Huawei Technologies Co. and Switzerland's STMicroelectronics NV are using India's English-speaking engineers and designers to expand into new markets and create new products. And a growing roster of smaller companies are beginning to outsource work to India.

Selling to the Poor

[via Suhit] CK Prahalad and Allen Hammond have written an article in Foreign Policy:

Markets in the developing world can nurture global business through their sheer size, rate of growth, and consumer demands. Consider three examples: cell phones, table salt, and cosmetics.

Cellular technology was originally developed as a luxury for the rich, but today poor countries drive the explosion in wireless communications. Sub-Saharan Africa is now a leading region in percentage growth of cell phone usage, expanding 37 percent during 2003. India boasts 22 million cellular customers and is adding around 1.5 million new customers every month. By 2005, China, India, and Brazil will have a combined 500 million cell phone users, compared to 150 million in the United States. The sheer size of these markets will necessarily change the dynamics of the business—shifting to the poor the power to determine both the preferred features of cell phones and their technological makeup. The pacesetting customers will no longer be found in Tokyo and Rome, but rather in Xian and Bangalore.

Selling to poor consumers also requires innovative research and development. In rural India, for example, only four out of 10 households use iodized table salt, even though iodized salt provides a critical and convenient nutritional supplement. Due to India's environmental conditions, much of the iodine in salt is lost during transport and storage. The remainder often disappears in the Indian cooking process. To overcome this problem, Hindustan Lever Ltd., a subsidiary of Europe's Unilever Corp., has developed a way to encapsulate iodine, protecting it from transportation, storage, and cooking, and releasing the iodine only when salted food is ingested. The new salt required Hindustan Lever to invest in two years of advanced research and development, but if its salt sells successfully, the company could sharply reduce iodine deficiency disorder, a disease that affects more than 70 million people in India and is the country's leading cause of mental retardation. The lesson: Successful product development requires a deep understanding of local circumstances, so that critical features and functionality—salt with protected iodine—can be incorporated into the product's design.

Modernizing distribution channels is also crucial for companies hoping to reach low-income markets in the developing world. “Person-to-person” cosmetic giants Amway Corp. and Avon Products, Inc. use direct-distribution strategies in India and Brazil, respectively, to sell beauty products among a wider circle of customers—increasing the corporations' reach and employing poor people as entrepreneurs. Amway, for example, has enlisted around 600,000 self-employed individual distributors in India. Hindustan Lever is mimicking the approach with a direct-distribution system for personal-care products. The company expects to sign on more than 500,000 self-employed Indian distributors within five years.

TECH TALK: Tech Trends: Utility Computing

Server-based Computing

Server-centric computing is the second mechanism to lower the total cost of ownership. By moving processing and storage to a centralised computing platform, it becomes possible to reduce the investment necessary on the client computers and reduce the administration costs since only the servers need to be managed. Despite the benefits, thin clients have not become the norm. They make up only 1% of the worldwide computer sales. Is the picture likely to change in the future?

In developed markets, the issue is manageability rather than affordability. This is where thin clients can shine. The current generation of thin clients provide the performance of thick desktops without the attendant problems in terms of administration of the desktops. The next two years will see more than 200 million desktops being upgraded in the developed markets. This is an excellent opportunity for thin clients to be deployed in enterprises.

In emerging markets, thin clients can open up new markets. Unlike the developed markets all employees already have computers on their desktops, the computer penetration in emerging markets is very low. This is where thin clients combined with server-centric computing can provide an opportunity for today’s non-users to be equipped with computers. This is when organisations can start thinking of automating their business processes.

Software-as-a-Service

Look at some of the most successful Internet companies: Yahoo, Google, eBay and Amazon. One of the attributes common to all of them is their use of a scalable technology platform which has given them immense leverage. In the area of business applications, companies like Salesforce and NetSuite are aiming to do the same. They are building out applications on the server which businesses can use through a web browser. In addition, they are also fundamentally changing the software pricing model from a large upfront charge with annual maintenance fees to one which is subscription-oriented monthly fees. From the financial point of view of an enterprise, this reduces the entry barrier to deploying software applications.

ASPNews wrote recently about the new crop of application service providers (ASPs) and the benefits they offer organisations:

These companies have had several years now to develop their products to match -- and often exceed -- the functionality found in traditional client-server applications. They have built up their customer bases steadily, so that now the true rewards of a subscription-based model can be reaped.

They have also used the unique attributes of the model to their advantage, creating applications that are highly customizable, quickly and seamlessly upgradeable, and quickly implementable. New features that take a year to get into the development cycle of packaged software can be deployed in an ASP product in a matter of months.

The result is that there is now a core group of service providers who have proven their long-term stability, who have a mature product, and who can deliver features that the traditional vendors cannot, and they can do it for less.

In fact, the nature of the subscription-based model makes it more customer-friendly than an installed software model. Once a traditional software vendor sells the product and cashes its large up-front check, it has a minimal incentive to satisfy that customer. There are ongoing maintenance revenues to consider, but the big payoff has already come and gone, and the software company has moved on to new targets.

Sun too has now got into the game with its President Jonathan Schwartz making a statement recently that hardware will be free. While I do not see that happening, it is possible that hardware will be subsidised in enterprises much like handsets and gaming consoles. What is likely to happen is that the entire solution (hardware and software included) is likely to become available on subscription-basis for monthly fees.

Tomorrow: India Action: Computing as a Utility

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