TECH TALK: Disruptive Bridges: The Coming Computing Shift

There’s some interesting activity afoot in the world of technology. Even as the industry reels from one of its worst slumps in recent times, some very interesting shifts in strategies can be seen.

Business Week has a story on IBM's decision to put $1 billion into services R&D and asking if it marks the end of the hardware era and the emergence of software services as the primary technology drivers.

Simply put, the age of hardware supremacy is on the wane. Chips -- and the computers and gadgets they power -- will continue to get faster. But speed itself will matter less and less, thanks to a host of confluent trends.

On the other hand, services will increasingly be where both the value and the interesting activity are. "The whole [info-tech] industry is becoming more services-based. The growth of services is outstripping the growth of hardware and software," says Paul Horn, an IBM vice-president who heads its R&D operations.

The handwriting for hardware is on the wall. For starters, the network truly is becoming the computer, as Sun CEO Scott McNealy has long proclaimed. The Internet now reaches over 150 million Americans. Their connections are increasingly fast, with close to 20 million users surfing the Net on broadband connections and dial-up users now achieving regular download speeds approaching 56 kilobytes per second. As a result, more and more computing is being offloaded to central servers.

Those servers, however, are more likely to be cheap boxes that can be easily stacked and configured in ways to handle the majority of computing tasks. So, faster and faster chips and computers have a marginally smaller return when IT managers can simply throw another box in the rack and add 10% more power and processing speed, as needed.

Another key factor in ending the hardware era is simple satiation. Hardly anybody outside a corporate IT shop fills a 100-gigabyte hard drive. And for the average consumer, the marginal difference between a 2-gigahertz Pentium and 2.4-gHz processor is virtually zero. That might change somewhat as video and other more processor-intensive applications take off. But even those new uses for computers seem unlikely to push hardware capabilities to now-undreamed-of levels.

The reasons why Big Blue is putting more emphasis on software and services research will only accelerate as computing becomes increasingly commoditized.

What’s Microsoft thinking about this?

Tomorrow: The Coming Computing Shift (continued)

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TECH TALK: Disruptive Bridges: The Coming Computing Shift (Part 2)

The latest Economist has a cover story on “Computing’s new shape”. It talks about the emergence of smartphones and wireless-enabled handheld computers as the next digital devices, marking a possible end of the PC era. Writes the Economist:

Mainframes ruled the computer industry until the rise of the PC; another 20 years on, the PC's reign now seems to be coming to an end. Previous generations of computers live on—mainframes are widespread, and PCs are certainly not going away—but each successive generation of computing devices is smaller, more personal and more numerous than its predecessor. Mainframes filled whole rooms, and belonged to single companies. PCs sit on desks and are used by individuals or households. Phones are truly personal pocket-sized devices that are carried everywhere. More than a billion people around the world now have one.

The switch to mobile devices is thus a logical long-term step.

Adds the Economist on Microsoft’s strategy:

Microsoft's once-visionary mission statement—“a computer on every desk and in every home”—now seems dated. Instead, the company talks of “empowering people through great software, any time, any place and on any device”. This is an acknowledgment, concedes Ed Suwanjindar of Microsoft's mobility division, that the PC is no longer king, and that “mobile devices are totally critical to the new extended vision for the company.”

In other words, the desktop is out, and mobility is in.

What is very interesting about both these stories is that two of the world’s leading computer companies (IBM and Microsoft) are making bets away from the personal computer. The world’s 6 billion people only have 500 million computers. In fact, India and China’s 2 billion people have less than 40 million computers between them. Are these not important markets? Do these people not want a computer on their desks and in their offices? Or will they leapfrog to a smartphone in their pocket?

As we contemplate these questions, here’s a wider perspective from Cisco’s John Chambers (quoted in a Business Week interview):

If you're growing [productivity] at 1% per year, like we were for almost three decades, every 72 years you double the standard of living of your country. If you grow at 3% per year, you double the standard of living every generation, which means that our children will have twice the standard of living that we did. Their children will have twice the standard of living that their parents did. If you grow at 5%, you double it every 14 years. That's what business and government leaders around the world understand.

I believe that as productivity goes up, profitability goes up. Then small-to-medium businesses will be the area where the biggest consumption of new jobs will occur.

What I'm worried about is that increased productivity and technology will, over time, push companies to be located wherever the best-educated workforce is. So you're going to see global competition -- not just for jobs, but for companies -- in a way that we've not seen before. The jobs will go where the best-educated workforce with the best infrastructure, with the right supportive government [are]. That's why I'm so impatient about education.

Even as technology makes available new opportunities for the world’s developing countries, the digital divide is all but too gaping.

Tomorrow: The Digital Divide

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TECH TALK: Disruptive Bridges: The Digital Divide

The technological divide in the world runs deep. Even as the developed markets are awash, even satiated with computers, the world’s developing markets have very low penetrations. China has an installed base of less than 30 million computers, India about 8 million. Both have populations in excess of 1 billion. (On the other hand, China’s 180 million cellphones dwarf India’s 10 million.)

The hard truth about computing technology is that it has not made itself affordable to the developing world. Pricing continues to be dollar-denominated, creating a market only at the top of the pyramid. Take for example, Microsoft Windows and Office. Together, they cost in excess of USD 500 (Rs 25,000) which may be small amount in the US but is definitely not an insignificant sum for most users (and even enterprises) in the developing countries.

So, even as the developed nations have adopted computing and raced ahead in terms of productivity, the developing countries are faced with a Hobson’s choice: spend a lot of money in dollars to make computing part of their DNA, or stay away and risk being left behind. For the most part, consumers and enterprises have chosen the second option.

The obvious solution – a reduction in the cost of computing to affordable levels – has not happened, because it does not benefit the primary players – Intel and Microsoft. Intel spends a lot on its fabs and needs to keep getting users to upgrade every few years to its faster chips. Microsoft runs margins of 85% for its Windows software division, and that is not a gravy train it would like to see slowing anytime soon because it uses profits from this and its “information worker” division (MS-Office and other applications) to plough into new markets.

Other computer companies like IBM and Dell can do little if the cost of components does not fall. IBM has set up a super services organization, but its focus is on the world’s large enterprises and reducing their complexity of computing. Dell sells what Intel and Microsoft make. Nokia leads on the cellphone front, but the new generation of pricey smartphones are targeted at the current generation of computer users, and not the have-nots.

Developing countries have very limited resources to undertake R&D for developing their own computing solutions. And so, the digital divide persists. Even as the next generation of computing and communications devices takes shape, there is little solace for the non-consumers of computing in the world’s emerging markets. If anything, the digital divide seems set to multiply.

Tomorrow: India 3.0

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TECH TALK: Disruptive Bridges: India 3.0

The first India built on its Independence to become agriculturally self-sufficient and feed its own people. The second India produces more software engineers than any other country and is a force to reckon with in the world of outsourced technology services. And yet, the technology revolution has touched but a handful. Much of India still remains frozen in time. For India to progress, Indians have to progress. For Indians to progress, technology has to become a utility for the masses.

The installed base of computers is 7 million for a population of 1 billion. Annual computer sales are stagnating at between 1.5-2 million since 2000. New computers still cost more than Rs 25,000, with the basic additional software (MS-Windows, MS-Office and anti-virus) costing an additional Rs 25,000. There are only about 6 million Internet connections in India, even as an hour of connectivity still costs more than Rs 30.

Imagine a New India. A million computing and communications centres, each with 10 or more computers connected to the Internet, dot the landscape, making them accessible to everyone across the country. Every Indian is computer-literate, and can email, browse the Internet and compose letters. Citizens can make bill payments, obtain ration cards, check land records, and do other interactions with the government easily and efficiently. Computers in small- and medium-sized companies make them real-time enterprises, ensuring instant updation of information and making them integral parts of global supply chains.

What separates the dream of a New India from the reality of today is the digital divide. It is this rubicon that we have to cross, this divide that we have to bridge. Even as we think of India, the same challenge is present in every other emerging market. There is an opportunity – one last opportunity – for them to use technology to leapfrog into the New World – provided we leverage existing and emerging information and communications technologies smartly.

This opportunity will come through leveraging disruptive innovations.

Tomorrow: Disruptive Innovations

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TECH TALK: Disruptive Bridges: Disruptive Innovations

In an article in the Fall 2002 edition of MIT Sloan Management Review entitled “The Great Leap: Driving Innovation from the Base of the Pyramid”, Stuart Hart and Clay Christensen write:

Disruptive Innovations allow many more people to begin doing for themselves that could only be done either with the help of skilled intermediaries or by the wealthy before the disruptions (examples include the tabletop copier and online trading). In the past, major waves of growth have been created by innovations that have had an impact only on the bottom of developed markets. Disruptive innovations at the base of the pyramid – home to billions of the aspiring poor – have much greater potential than those that begin and end in developed markets.

Developing countries are ideal target markets for disruptive technologies for at least two reasons. First, business models that are forged in low-income markets travel well: that is, they can be profitably applied in more places than models defined in high-income markets.

In addition to having more adaptable business models, disruptive innovators also compete against nonconsumption – that is, they offer a product or service to people who would otherwise be left out entirely or poorly served by existing products and who are therefore quite happy to have a simpler, more modest version of what is available in high-end markets.

Hart and Christensen give the example of China’s Galanz:

In 1992, only 2% of all households in China owned a microwave-oven. Many families did not have kitchens large enough to accommodate the available models, which had been designed to fit into homes in the West. Galanz, a Chinese company, introduced a simple, energy-efficient product at a price affordable by China’s middle-class and small enough to fit in their kitchens. As sales steadily climbed, Galanz stimulated demand by using its ever-declining cost per unit to reduce the product’s price. Galanz’s domestic market share rose from 2% in 1993 to 76% of a much larger market in 2000. Armed with a business model that could earn attractive profits at low price points, Galanz moved upmarket to manufacture large machines that had more features. It began to disrupt the microwave-oven markets in developed markets: By 2002, its global market share was 35%.

The developing countries need the equivalent of many Galanz-like innovations to bridge their digital divides. Think of these divides as separating today’s technology markets from tomorrow’s. The next 500 million users lie on the other side of the divide. What is needed to open up these new markets is the construction of digital bridges with disruptive innovations as their foundation. Let’s call them Disruptive Bridges.

Next Week: Disruptive Bridges (continued)

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TECH TALK: Disruptive Bridges: The Vision

To bridge the technological digital divide in developing countries, we need to look at disruptive innovations. These innovations are ideas and technologies which for the most part are already in existence. Each idea as a singularity may not be earth-shattering, but taken together, they can make a big difference. The whole is much greater than the sum of the parts. I have talked about most of these ideas here in the past, so I’ll summarise them briefly. Then, we will look at three markets which need to be targeted first in our efforts to build digital bridges. We will also consider marketing strategies which can be used to proliferate technology into these markets.

Let us first begin by stating our basic objective. “A computer on every desk and in every home” used to Microsoft’s mantra. We need to think of an adapted version of this vision for the developing countries: “A connected computer accessible to every employee and family.” Let’s look at each of the phrases.

Connected computer signifies the use of both the Internet and the computer. The Internet is crucial – it becomes the window to the outside world. At the same time, we want to make available a full-fledged desktop computer. It is hard to use handhelds or cellphones for many significant length of time.

Accessible does not necessarily imply ownership. This is an important difference. Microsoft’s vision was about giving each worker and home owner a computer. In our world, we want to look at sharing of resources and community ownership to bring costs down. This is akin to the STD/PCO booths in India, where telephones are used by the neighbourbood, rather than owned by an individual. They have proliferated telephony to even the remotest corners of India.

Every Employee needs to have access to a computer. This is what their counterparts in the developed markets have. Computing needs to become central to the enterprise. It needs to become ingrained into every business process. This is the only way we are going to see an increase in productivity. An enterprise may be selling its products and services locally, but it needs to be globally competitive with its product quality and pricing. Competition has no barriers. Competitive organisations imply a productive workforce. We need to use new software concepts to share information, collaborate better, communicate faster and manage customers and the supply-chain better.

Every Family too needs to have access to computing. This will help in many different ways. For starters, it will take away many of the daily pains that are faced in some of the things that we have do – booking tickets, interacting with government agencies, paying bills. Next, it opens up new opportunities for both education and business for the younger generation. Just as the railways blew away the geographical limits in the world on the nineteenth century, the connected computer shatters distance in today’s world. Everyone – young and old – can expand their horizons through the Internet-enabled computer.

At the heart of this vision is the promise of a computer-literate populace, which will serve as the underpinning for both the real-time society and the real-time enterprise. Information and knowledge will become the new rivers, whose flow creates fertile minds and competitive organisations. By empowering their people with technology, the developing countries can create the foundation for bridging the digital divide.

Tomorrow: The Building Blocks

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TECH TALK: Disruptive Bridges: The Building Blocks

The building blocks for achieving the vision of "a connected computer for every employee and family" are many. Just as a collection of Lego blocks can build amazing structures, so also these basic ideas and technologies can serve as the base for constructing our disruptive bridges.

Low-cost computers: We need desktop computers for USD 100 (Rs 5,000). That is the price point at which it can become a mass-market phenomenon. How to make this happen? Recycle computers from the developed countries. As they upgrade, what they dispose can be re-used in the developing countries. [Related Articles]

Server-centric computing: To convert these older, one or more generation-old computers high-performance systems, we need to move processing to servers (which can be new, high-end desktop computers). This is similar in concept to what IBM talks of as "grid computing" and what used to happen with mainframes in the past. The low-cost computers become terminals, but with one key difference: the desktop that end-users see (look-and-feel) and sense (in performance) is very much similar to the ubiquitous MS-Windows desktop. [Related Articles]

Open-source software: Concomitant with the reduction in cost of hardware is a need to reduce cost of software. For this, users in developing countries need to embrace Linux and open-source software. Recent versions of many applications are more than good enough for use. There is a huge library of applications developed by the software community worldwide which can be leveraged and built-upon to create an open and free (both in terms of cost and in the freedom to modify) software applications infrastructure. [Related Articles]

Local Content and Applications: To get over the limitations of bandwidth which is still a bottleneck in most developing countries, content and applications can be replicated on the local server on the LAN. This way, users see very high performance. In a sense, this is again the equivalent of IBM's notion of "on-demand computing" - but with the content and applications coming not off the Internet, but one step closer to the user on the local network. This will optimally utilise the bandwidth that is available to each of the local computing hubs.

Local Language Support: Much of the developing world does not speak English. The need is for both content and applications in local languages. This means supporting data entry via keyboards suitably adapted for local languages, along with the display on the screen using the appropriate fonts. As a start, this means being able to do the basic activities - reading and writing emails and documents, printing and browsing - in the language of the user's choice. [Related Articles]

Tomorrow: The Building Blocks (continued)

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TECH TALK: Disruptive Bridges: The Building Blocks (Part 2)

Digital Dashboard: The complexities of today’s applications need to be hidden from the new users. What is needed is a new desktop what goes beyond the files-folders-icons metaphor. It needs to aggregate the multiple streams of events that one is receiving – be it email, news updates, instant messages or notifications from applications and websites. The digital dashboard should also be the launchpad for various applications. It also needs to present information in a more immersive environment, perhaps drawing ideas from video games and information visualisation. In some ways, we can think of the dashboard as a “microcontent client” (in the words of Anil Dash). [Related Articles]

WiFi: WiFi is the first of what Kevin Werbach calls “the next WWW” (the other two are next up – Web Services and Weblogs). It uses open spectrum to create the high-speed, wireless Internet. Its use has so far for the creation of wireless LANs in homes or offices in the developed countries, but as the technology improves, future generations will allow for its use in neighbourhood networks, thus effectively solving the last-mile connectivity problem. [Related Articles]

Web Services: Built on standards like XML, SOAP, WSDL and UDDI, Web Services can enable the creation of inter-operable, Lego-like software components. What HTML and HTTP did for person-to-application access (via the web browser), these set of standards are doing for application-to-application access, thus creating a more seamless user experience and enabling inter-enterprise exchange of information. [Related Articles]

Weblogs: What started off as the publishing of personal diaries and journals now promises to be the anchor for the creation of knowledge sharing systems among enterprises and communities of practice. Weblogs mirror thinking – be it of an individual or a collective. They are transforming the web from read-only to a two-way, read-and-write web, creating for a much richer flow of ideas that bypasses traditional media. [Related Articles]

Cellphones: They bridge the last-mile to users. Mobile phones and the GSM/CDMA/3G networks being built out by the world’s telecoms are creating an envelope of global connectivity, and ensuring reachability. So far, cellphones have worked as “mobile phones” (for our voices). But SMS has already made them devices for the interchange of microcontent. With the next generation of cellphones sporting features like MMS, digital cameras, faster processors and colour displays, one can start thinking of these as “mobile computers”. [Related Articles]

Visual Biz-ic: This is a term I coined for a software framework which allows business processes, documents and workflows to be defined and converted into software, just as Microsoft’s Visual Basic does for programming. This will leverage a library of existing components, enable the small- and medium-enterprises to rapidly construct the guts of their enterprise software needs. [Related Articles]

Tomorrow: The Building Blocks (continued)

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TECH TALK: Disruptive Bridges: The Building Blocks (Part 3)

Business Process Standards: Standards like ebXML and RosettaNet are helping streamline information flows across enterprises. Traditionally, this has been the pain point – as different enterprises have their own set of processes and documents. Business process standards will help the creation of “extended, real-time enterprises” and be especially useful for SMEs, who have so far been left out of the computerisation process and thus are the weak links in today’s supply chains. [Related Articles]

E-business: Or for that matter, e-payments, e-learning, e-commerce and e-government. The “e-enablement” of activities is crucial to bridge the digital divide. This is not something one entity can do, but something which everyone needs to be committed towards. E-business is a representative term for the collective platform which gets created as business and government start leveraging the Internet for communications, collaboration and transactions. This is where friction starts reducing and the true benefits of the New World, a digitally bridged world, start becoming apparent. [Related Articles]

What these building blocks do is create the base for an alternative computing and communications platform – one which is low-cost, simpler and targeted at the base of the pyramid. What this platform is targeting is “nonconsumption” – it wants to extend the benefits of digital technologies to the masses of consumers and enterprises who have so far not been exposed to it.

We are not talking here of competing with an Intel or Microsoft. There will always be room for both. Just as there is room – and need for – both the bicycle and the car (and in fact the buses, trains and metros). Targeting these solutions at mainstream users will only result in non-acceptance and failure. We need to keep in mind that we need to use these building blocks to build solution stacks for the next set of users. The difficulty lies in the fact that these markets do not exist. They need to be envisioned and created.

These building blocks have to spread computing and Internet usage to the (presently invisible) mass-market. At the same time, we need to make sure that our R&D costs are minimal – this means leveraging the newest technologies to leapfrog over current limitations. In parallel, we will need to use marketing ideas which can create a viral impact and adoption – not just in a single community or country, but across the world’s developing nations. This is the challenge – and hidden promise – of our Disruptive Bridges.

While our end objective is to ensure “a connected computer accessible to every employee and family” across the developing countries, it would be presumptuous to assume that we can do this all at once and in a very short period of time. The challenge is vast. Where do we begin? Where do we do create the beach-heads? Which are the first markets we should target to set the ball rolling?

Tomorrow: The First Markets

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TECH TALK: Disruptive Bridges: The First Markets

The first set of markets to target are the cradles of learning – the student community in schools, colleges, vocational institutes and the training centres. The educational institutions are the builders for tomorrow's developers, workforce, managers and entrepreneurs. For a nation, they decide its tomorrow. Computing must become part of the educational curriculum’s DNA.

Students spend the better part of their day in schools and colleges – that is where they learn, individually and collectively. That is where computers and the Internet need to be easily available for them to discover the magic of what’s possible with technology. By targeting the younger generation, we ensure that the nation will have a computer-literate populace in the years to come. At the same time, students are the ones who can spread computing to their families, creating a positive viral effect. Since they’ve been exposed to the benefits of computing and the Internet, they will play the role of evangelists and become the change agents that emerging markets need to bridge the digital divide.

The next step should be to create a franchise of Tech 7-11s. Technology needs to become, to borrow a phrase from IBM, "the next utility" for the people and enterprises on the wrong side of the digital divide. In developing countries, the individual ownership model will come later – community ownership/usage needs to come first. The distribution point for this tech utility needs to be in every neighbourhood and industrial cluster.

Think of these hubs as the equivalent of tech "7-11s". The 7-11 (which stands for 7 am to 11 pm - the store timings) chain of stores dot many of Asia's cities. Most of what families need for their daily consumption is available at these stores. They are a part of life.

The Tech 7-11s also need to become part of the digital life. They can be housed in any number of places: schools, colleges, post offices, existing STD/PCO booths, railways stations, bus depots, bank branches, factory floors, and even hospitals. They serve multiple purposes. They have a 10-40 computers. They also showcase the technologies which can make a difference for the masses, host a digital hub for WiFi data networks, provide Internet access, serve as delivery points for eCommerce transactions, become eLearning centres, and serve as a physical world meeting place for people in the neighbourhood to share and learn.

The focus here needs to be on the Tech 7-11 franchisees, who will set up these centers. They can be institutions or private entrepreneurs. While we can hope for the government to set up these centres, I feel the driving force will be the individual “space owners”, who need a business model which says that for the space they have the best return on their investment can come not from a grocery store or a coffee outlet, but a Tech 7-11.

Monday: The First Markets (continued)

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TECH TALK: Disruptive Bridges: The First Markets (Part 2)

The next market which needs to be targeted is the engine of economic growth in a nation – its small and medium enterprises (SMEs). They are large in number, and provide employment for the majority of the people in a country. But, SMEs are difficult to reach and hard to market to. They also have limited resources – money, staff and time. At present, most SMEs have very limited use of both computers and the Internet. Yet, these SMEs are most in need of technological solutions to make their lives simpler, take their business from the “survival” mode to “growth” mode, and make them integral parts of global supply chains.

Today, most SMEs in emerging markets have a very small computer penetration. This nonconsumption of computing needs to be the next challenge to be tackled. The next market thus becomes the non-users of computers in SMEs. To take computing to this segment which has never used a computer, think of a concept called My First Computer. What this will do is provide a computer to every employee at a price point not exceeding Rs 500 (USD 10) per month. At this price-point, if a connected computer can make a person more productive by just 10%, then the investment is justified for anyone earning a monthly salary of Rs 5,000 or more. Think of this as a Tech 7-11 in the Enterprise, but with individual desktop computers for the non-users, rather than shared access in a community centre.

This provision of a computer on every desktop in enterprises will accomplish two objectives: it will create a computer- and information-literate workforce for an investment of no more than Rs 500 per person per month, and it creates the base for building enterprise applications and other value-added information services.

What is needed next is for the software applications to go beyond just the email-Internet-documents routine, and make SMEs use the computer as a productivity enhancement system. They need given both the tools in the form of the computers for each of the employees and the set of processes that they need to follow for tasks like accounting, manufacturing, inventory control, customer management and sales management. The segment which will make this possible is the community of software developers, which needs to build solutions for SMEs, leveraging open-source and pre-fabricated components.

The focus with SMEs needs to be automating business processes in SMEs and making them real-time enterprises. Most SMEs do not tend to very efficient in the processes that they follow, with a significant manual and repetitive element in what they do. Many of these systems evolve more out of need and expediency, more trial-and-error than planning.

Today, the lack of an infrastructure of domestic users in most emerging markets handicaps software developers seeking to build solutions for the local users. As a result, enterprises at the base of the pyramid are caught in a no-man’s land: the packaged software they need for improving their business efficiency is both too expensive and unsuitable for their needs since its primarily developed for the larger enterprises who can afford to pay for it, and getting software custom-developed software is not a viable alternative since it is both costly and time-consuming, and may result in automating of flawed business processes.

This is where the software developers need to come in. They need to create solutions which can create libraries of SME business processes and then customise these for specific verticals and organisations.

These are the first set of Digital Bridges – Disruptive Bridges – that need to be built. By targeting these segments – students, Tech 7-11 franchisees, non-computer users in SMEs and software developers, we can create a “tipping point” of technology usage in developing countries. Taken together, they will provide affordable computing and Internet access for most of the people most of the time. It may not be a perfect solution of “a computer on every desk and in every home”, but it sure comes close – at a fraction of the cost.

The two concepts we will explore in detail are the Tech 7-11 and My First Computer.

Tomorrow: Tech 7-11

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TECH TALK: Disruptive Bridges: Tech 7-11

Imagine: a computing and communications centre as omnipresent as telephone booths (STD/PCOs) are in India today. You can walk into one of them, use the computer to check your email (which could be coming right off the local server, in case you’ve so designated), access your files, write letters, take printouts, browse the Internet and even, if you happen to be running a small business, do your accounts. The centre also lets you make phone calls using VoIP (Voice-over-IP), cutting down on your long-distance and international phone bills.

You can also widen your knowledge base by taking any one of the hundreds of training programs available on the local server. You can also indulge yourself in the newest multi-player game that’s just gone live. The centre is also a “trust point” – where you can make payments for various goods and services that you may have bought online. A wireless access point lets you use the Internet connectivity of the centre from the computer in your home.

Welcome to the world of the Tech 7-11.

The Tech 7-11 is much more than the cybercafe that we know today. The cybercafe, of which there are tens of thousands across India, has a few limitations: it offers a window to the Internet, but is not a home; it offers communications and Internet access, but not much by way of computing functionality; its business upside is limited to the computers that it has within its four walls and the hourly rate it can charge. In India, the cybercafe needs to morph into much more than an Internet access point – it needs to become a “tech utility” for the people in the neighbourhood.

Think of the local kirana or grocery store. It offers all the essentials that are needed for one at home. Abroad (especially in many of the Asian cities and towns), a franchise has sprung up: 7-11. The name comes from the timings that the stores are open: 7 am to 11 pm. They are within walking distance for most people. They offer most of life’s daily needs. More importantly, there is some sort of relationship that gets formed between the store proprietor and the people who frequent the store – an underlying trust. In a sense, the local store has become a utility in our lives – a kind-of remote utility, because it does not come into our home, like the other utilities, but a utility nevertheless.

That is what the Tech 7-11 needs to become – a utility fulfilling all the technology needs of a neighbourhood in the world’s developing markets. It has the computers, if you can’t afford one (which is probably true for 990 of 1,000 people in India and 950 of 1,000 people in China). It has the connectivity to the Internet, so you don’t necessarily need it. It has the storage and backup facilities, so you can access a lot of information very rapidly rather than over low-speed lines. It has trained attendants to help you navigate the still-complex world of technology.

In other words, the Tech 7-11 can do for computing what the STD/PCOs did for telecom: by emphasising community over individual ownership, it can make it accessible to a much wider group of people. As these people learn how computer can make a difference to their lives and their income levels rise, there is a strong probability that they will opt to buy one. Even then, the Tech 7-11 is there – continuing to serve as the processor, storage and network connector.

What is the technology needed to make this happen? Luckily, all the components are already available.

Tomorrow: Tech 7-11: Technology

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TECH TALK: Disruptive Bridges: Tech 7-11: Technology

Each of the Tech 7-11s has a “thick server” and any number of “thin clients”. The thick server is a new desktop, costing no more than USD 1,000-1,500 (Rs 50,000-75,000) and capable of supporting upto 40 thin clients. A thin client can be any old or used computer – without a hard disk, CDROM or floppy drive. It has a boot-ROM on its network card to get it started, and then uses the processor on the server for all its computation. The thin client provides the user interaction points – the keyboard, mouse and monitor. By simplifying the thin client, we can bring down the cost of these diskless terminals to less than USD 150 (Rs 7,500) – in bulk, prices could go even as low as USD 100 (Rs 5,000). There is an almost infinite supply of these machines available as the developed nations upgrade their desktops.

In this server-centric computing architecture, all processing and storage happens on the server. The client is a dumb terminal, but wait! Linux and other open-source software can transform the client into a full-featured Windows-like desktop. It can provide a graphical user interface and all the base set of applications that most users need: an email client, a personal information management application, an office suite with a word processor, spreadsheet and presentation application which can read and write MS-Office file formats, a web browser, an integrated instant messenger which can connect up with all of today’s IM systems, and a PDF reader and writer. All this in a virus-free environment at a fraction of the cost of what a new desktop with Windows would cost.

The Tech 7-11 would also provide Internet connectivity. This connectivity could be via leased line, dial-up, VSAT or even WiFi using directional antennae to increase the range dramatically. Printers can be connected to the thick server or the thin client as the case may be. Some of the thin clients can also have support for multimedia.

In addition, the Tech 7-11 would have a wireless access point, using the 802.11 protocols. Such an access point is available for between USD 100-150. What this will do is offer connectivity in the neighbourhood to anyone who has a WiFi-enabled computer. WiFi cards are available for USD 50-100, and falling in prices. As their range increases, the WiFi network with the Tech 7-11 as the hub could extend beyond a few hundred metres. This means that in a village, the thin clients could now be at local schools or homes or government offices, and use the Tech 7-11 as the thick server via the wireless access point.

The two key differences from a cybercafe environment are: the presence of the thick server, which can now become a content and applications server (replicated to and from Internet servers), and WiFi, which can now extend the computing endpoints to beyond what is there in the physical space of the Tech 7-11. As we shall see, both these innovations have the potential to increase by 10x the earnings of the Tech 7-11 and make it a viable and profitable franchise.

Tomorrow: Tech 7-11: Business Model

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TECH TALK: Disruptive Bridges: Tech 7-11: Business Model

The key to making the Tech 7-11 a commercial success lies in its business model. The Tech 7-11 occupies space. So, any “space owner” who is looking to franchise this needs returns which are better than alternative uses of the space. Consider first a cybercafe with 10 computers charging Rs 30 an hour (USD 0.60). Assuming 12 hours of operation, the maximum daily revenue that it can generate is 10 computers * Rs 30 / hour * 12 hours = Rs 3,600. Contrast this with a Barista outlet in India which has a footfall of about 400 a day and generates average billing of Rs 60 per person for a daily revenue of Rs 24,000. While we definitely need to look at costs of operation and the net margins, the clear message is that unless we are able to ramp up the revenues of the cybercafe by a factor of 7-10, it is not a viable model for franchising.

Of course, one could rely on the generosity of “space owners”, especially government and quasi-government institutions. As a result, cybercafes could (and some have) spring up in post offices, railway stations, bus stations, and other such places where the notional cost of space can be taken as close to zero. But that is not a model which can scale up to one in every neighbourhood – and stay in the face of other commercial options. The small-business entrepreneur in the private sector holds the key to success – if he sees value in the concept, then he will set it up. We have to make it worthwhile for this private entrepreneur – just the way a McDonalds has done across the world.

So, back to the question: how can we transform a cybercafe earning a maximum of Rs 3,600 a day to a Tech 7-11 earning Rs 24,000 or more a day? The answer lies in leveraging the two innovations of the Tech 7-11: the thick server and the wireless access point.

The thick server makes it possible to offer various services locally. This means faster access and less dependency on a slow Internet connection. Yes, there will be broadband wide-area networks, but we should not be dependent on them. In the foreseeable future, I still do not see cost-effective LAN-like speeds (10-100 Mbps) happening over a wide area network. By offering storage for the user’s mail and documents, and making content and applications available locally, the Tech 7-11 can now do two things: increase the earnings from a single user, and charge more per unit of time.

For example, mail can be downloaded automatically to the local thick server, thus enabling speedy access to email. It also means offline access for email and documents, in case the Internet connection is not available at that instant of time (as may be the case in many rural areas). In addition, training courses can be offered from the local thick server, and the charges for these could be Rs 50-100 per hour, or more. The value lies in the content, and not the time spent. This is what the Tech 7-11 is leveraging.

The Tech 7-11 could even charge for printouts – Rs 10 for a land record, Rs 5 for a ticket, and so on. These are like the “beverages” in a McDonalds – cheap in terms of raw materials used, and with very high profit margins!

Taken together, these ideas create the platform for a Tech 7-11 to offer value-added services which go far beyond the time-based charging that a cybercafe of today does. This is good for the users who come to the Tech 7-11. Can we also leverage the others in the neighbourhood?

Tomorrow: Tech 7-11: Hub-and-Spoke Extension

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TECH TALK: Disruptive Bridges: Tech 7-11: Hub-and-Spoke Extension

The second innovation in the Tech 7-11 is the wireless access point. This extends the network beyond the physical space that the Tech 7-11 occupies. This has a dual benefit: it can now offer connectivity to anyone with a WiFi connection in the neighbourhood, and going beyond, offer the same set of services of processing and storage to the computers in the vicinity, thus ensuring that a thin client costing no more than Rs 7,500 (USD 150) can be used as this remote computer.

Let us discuss both these benefits further. In the first case, as more and more devices are WiFi-enabled and the WiFi range increases due to the trajectory of innovation, users can leverage the wireless access point for Internet connectivity without actually being in the Tech 7-11. This is similar to the strategy being used by Starbucks in the US. It has set up wireless access points in its more than 1,00 of its outlets in the US in association with T-mobile, charges USD 30 per month for unlimited Internet access. One could of course be in the Starbucks or just outside. Starbucks is using its existing real estate and network to offer a service which goes beyond just its varieties of coffee!

In the second case, the thin client with a WiFi card can extend the network and reach of the Tech 7-11. Current WiFi speeds are upto 11 Mbps for 802.11b and upto 54 Mbps for 802.11a and 802.11g. The key limitation at present is the range – limited to 100 metres or less. This may not be good enough at present, but as happens so often with disruptive technologies, there is enough work happening to increase this range. Recently, at least two WiFi companies have announced that using special antennae they can extend the range to 10 kilometres.

What this will do in the future is to extend the neighbourhood that can be served. Think of this as a hub-and-spoke network, with the server as the hub and the thin clients as the spokes. The WiFi-enabled thin client spokes are connected to the thick server which does the processing and storage. The result: for an investment of Rs 7,500 or less, anyone can get a “connected computer”. From the Tehc 7-11 point of view, if it can service 100 such computers in a neighbourhood and charge Rs 1,000 for both the computing and connectivity per month, it generates an additional revenue of Rs 100,000 per month using the same infrastructure that it already has. This same user base could also be targeted for additional value-added services.

There is another interesting by-product of the server-centric computing architecture. The client desktops can be controlled from the server, which means that an advertising revenue stream can also be opened up. In short, a spectrum of value-added services can help increase the earning potential of the Tech 7-11.

The Tech 7-11 in the form of a community computer and communications centre is the first mechanism in making computing available to the masses. In this scenario, the computer is a shared device. What if we wanted to have the computer in the enterprise? After all, the enterprise is where a large number of people spend their work day. A slight variation on the same basic idea of the Tech 7-11 can make this happen. Think of this concept as “My First Computer”.

Next Week: My First Computer

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TECH TALK: Disruptive Bridges: My First Computer

“My First Computer” is an idea to bring the computer on the desk of every employee in enterprises and government who are presently not using computers for no more than Rs 500 (USD 10) per month. First, we will discuss the concept in more detail, consider the economics of the solution, and how this can serve as the foundation for creating a platform for developing a variety of software and information services.

A word of caution: the approach outlined here may seem like a set of retrograde steps from our vantage point as power PC users, but let us remember that we are looking at users who have not in the past 20 years tasted computing. For every person who us using a computer, there are 10 others who are not – perhaps because they cannot afford one, or they cannot use one, or their employer feels they do need one. This is the segment we are focusing on, and these are the problems we are trying to tackle: affordability, usability and need, and for which “My First Computer” is the answer.

The Rs 500 per month per person is an important psychological barrier. Considering that the computer can be thought of as a productivity enhancement tool, any person earning Rs 5,000 per month or more can become a candidate for using one if it can result in a 10% productivity increase. Looking at what the computer can do and what employees are typically doing in a company, a 10% increase in the efficiency of tasks they do should be an achievable target.

At a Rs 500 price point, what the employee gets on the desktop is a system which (a) enables letters to be written, read, stored and printed (b) allows for basic tabular data to be written and manipulated – for contacts or phone numbers (c) serves as a communicator - with messages to sent to others (d) offers a window to browse the Internet, and (e) is an extensible platform on which new services can be added.

Note that we are not talking of the operating system and applications (yet). Instead, the focus is on what the computer can do – the tasks and scenarios in which it can be used. This is where I think we have grossly under-utilised the computer and what it can do. (In fact, I cannot imagine any other investment where the asset is used at less than 5% of its capabilities.) We need to think of and explain to end-users what the computer can do for them. This must have been done in the early days of the computers. The same selling points need to be revisited now because we are selling to non-consumers. The big difference from 20 years ago: we are selling at a price point of a mass-market product for the bottom of the pyramid – almost like a razor-blade shaving system. We need to explain the benefits of the solution (in case the connected computer) and show how the enterprise can get a return on its investment in terms of the increased productivity of the employee.

Tomorrow: My First Computer (continued)

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TECH TALK: Disruptive Bridges: My First Computer (Part 2)

In talking about “My First Computer”, we are also (yet) thinking of connecting the employees to existing applications or databases. Our competition is paper and manual processes. What we are offering is a system which can automate some of the basic, repetitive tasks that people do – and more.

A telephone operator, for example, can use it as a phone and address book. Instead of storing details of missed calls on scraps of paper, the operator can now send an email or an instant message to the concerned person. Is one call that may have otherwise been missed worth Rs 500? A librarian can use it to record books and magazines that have been borrowed, enabling employees to electronically browse what the library offers. Is their time saved worth Rs 500 each month?

One could think of many such scenarios depending on the people involved. Giving a computer with a basic set of applications (email, calendar, tasks manager, contact manager, browser, word processor, spreadsheet, presentation application, instant messenger) and more importantly, instructions and guidance to use these applications in day-to-day activities can definitely play a role in making their users more productive.

In addition, I feel that the empowerment and confidence that today’s non-users will get with “My First Computer” will result in a more pro-active workforce. The computer can have that magical effect on people. All we have to do is to look back to the exhilaration we felt when we used our first PC. That feeling needs to be permeated across every employee in the enterprise.

The interface that is seen on “My First Computer” cannot be the one we currently see. Files-Folders-Icons along with the Start-Menu may be fine for today’s power users. Is there something simpler we can offer to the novice users? It should be something which does not make feel that they’ve been given a cheaper, poorer version of today’s MS-Windows interface. In fact, they should feel delighted with what they have, not disappointed. There is a wonderful opportunity to rethink the first screen that users see and use for this next set of users. What we do them to feel is that they have a superior version of a new product, rather than an inferior version of an old one.

What is needed is the equivalent of a “Digital Dashboard” on the PC, which becomes the gateway for performing tasks, the aggregator of information, and the launchpad for applications. It is the one screen which users can think of as their “electronic home”.

“My First Computer” along with a set of ideas that simplify computing for today’s non-consumers in enterprises can create the first step in opening up a whole new world of opportunities for the workforce. It is the key component in creating a new technology ecosystem in the world’s developing countries. It is the first step in creating nations whose populace is computer-literate. The biggest challenge and question which we have to answer is how can we make this possible (profitably for the entire value chain) at the price point we had talked of: Rs 500 per person per month.

Tomorrow: Economics

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TECH TALK: Disruptive Bridges: My First Computer: Economics

How do we bring the price point of “My First Computer” to Rs 500 per month? Let us first consider what the components of the price are.

“My First Computer” needs to be used in a network environment, and not as a stand-alone computer. Considering that we are targeting non-consumer in enterprises and government, this should not be an issue. The two elements of the solution are the thick server and the thin client. The thick server is a standard desktop. A system to support about 10 users would cost Rs 40,000 while one to support 40-users would cost Rs 70,000. The higher-end solution would have a dual CPU, have two disks with software RAID and increased memory. This is because all the processing is happening on the server. Thus, in the 10-cuser situation, we can expect the monthly cost in the case of a rental to be about Rs 1,500, assuming a loan period of 36 months. For 10 users, the cost per user thus becomes Rs 150 per month.

The thin client cost varies from Rs 7,000 for an old (recycled, in quantities of one) computer to about Rs 15,000 for a new one. One option is for users to buy the system of their choice. The client need only have a motherboard and network card, along with the keyboard, mouse and monitor. There is no need for a floppy drive, hard disk or CD-ROM since all storage and processing is happening on the server. The motherboard needs to have just a Pentium I CPU and 16/32 MB RAM.

An interesting variation on how the clients can be funded is the following. Think of the older thin clients as assets whose value depreciates by no more than 10% a year. This is a reasonable assumption because the price points are anyways very low and given that there is (a) software which can leverage these thin clients, and (b) there is a demand for thin clients – which there can be, considering that there are hundreds of millions of users who do not have a computer at this point of time, and who could afford one if the price points were lower.

Now, if there is a person or institution with surplus cash, their options for getting more than 10% returns per annum on the cash are very limited. So, if we think of the thin clients as assets which depreciate 10% a year and the need to give more than 10% returns a year on cash, if we can provide a solution which gives a higher rate of return (say 25% or more, to account for the increased risk), then investing in thin clients may be a good value proposition. For a 25% investment return on a Rs 7,000 thin client, the investor needs to get Rs 1,750 per annum, which works out to Rs 150 per month.

Thus, we can think of setting up an investment vehicle to buy thin clients and provide above-market returns to investors. This may seem a far-fetched option considering that this has never really been tried in the world of computing with respect to older computers, but I believe it can be done and in fact, can provide a win-win situation for all entities.

Tomorrow: Economics (continued)

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TECH TALK: Disruptive Bridges: My First Computer: Economics (Part 2)

So, we now have a thin client for Rs 150 per month and a thick server available to 10 users or more for Rs 150 per user per month. (There may be some additional costs for the network hub and cabling, which I have not considered here.) Add to this a per-user cost of software of Rs 100 per month, and a support and maintenance cost (paid to a channel partner who also does the marketing and installation) of Rs 100 month (including keeping a spare thin client for every 10, just in case any of the older thin clients stop working and we have a solution which costs Rs 500 per user per month.

From the enterprise point of view, another way to look at what is on offer here is a group of people need to pay Rs 5,000 per month to get a 10-user thin-client and thick server solution. This could be used by 10 users or a group of 25. In fact, I expect that as the benefits of computer literacy become clear to people, they may even contribute a part of the money from their salary – there is no other way for them to get to use a computer for as little as Rs 20-25 a day.

Consider the alternatives: a single new computer even today costs Rs 25,000. Legal software to match what is available on the thin client – MS-Windows and MS-Office – will cost an additional Rs 25,000. Instead now, for less than 25% of the cost, the enterprise is able to get a computing solution. Or in other words, instead of buying one new computer, it can get four thin clients connected to a thick server, providing computing to three people who did not have access to computing earlier.

One of the key players in this value chain is the channel partner who also becomes the facilities manager for these enterprises. These figures by themselves may not seem large from the viewpoint of a service provider, but multiplied over 10 or more installations can provide a good financial base to offer its services and thus become a bridge for the last-mile. For supporting a 10-person organisation, the service provider gets Rs 18,000 a year.

What I have described here may seem like wishful thinking. Why would an enterprise want to give computers to the ones who don’t have it – as the argument goes, everyone who needs one already has it. Also, who’d want to finance an old computer? What about the collection problems? How do we reach all these enterprises? The marketing costs would be just enormous. The questions are endless.

I don’t have a whole lot of answers. The way I look it as that a connected computer for every employee needs to become part of the fabric of an enterprise, just like they are provided with a table and chair. This desire (or demand) needs to become a bottom-up one (by the beneficiaries – the employees) and be driven top-down by the employers, who will also benefit through increased employee productivity. For the emerging markets and emerging enterprises, computing needs to be thought of not as a luxury, but as a competitive weapon which can give their people and their organisations an edge in the marketplace.

Tomorrow: Scaling Up

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TECH TALK: Disruptive Bridges: My First Computer: Scaling Up

The basic set of applications and tasks which are present on “My First Computer” are just the beginning. The cluster of these computers with the thick server in the enterprise can now be the base for a host of additional services. The Trojan Horse in this case is the thick server. Armed with its 80 GB (or higher capacity) hard disks and its presence on the LAN with a small pipe connecting it to the Internet, the thick server can now become the local distribution for a wide variety of information services and applications. Specialised content, training programmes, stock quotes, e-books, company portfolios and databases, self-development courses are some of the services which can be offered via the thick server.

The LAN presence overcomes a number of key limitations in today’s web-centric world: low wide-area connection speeds in most emerging markets, unreliability of these connections, and billing. The thick server, in its avatar as the local content and applications repository, provide access at LAN-speeds, is always-on and facilitates the billing process by being able to add the appropriate charge to the monthly service bill for the user or the enterprise. Interestingly, the thick server is not limited in any way to offer services to just the thin clients – any of the other users in the organisation can also do so. (That is why I termed it a Trojan Horse!)

How does one update the thick server with new content? This can be done in two ways. Content which needs to be accessed in near real-time like stock quotes can be updated as a stream on thick server and then distributed to users on their desktop. Other content can be distributed periodically via a CD, and can be copied over to the hard disk. Storage space is cheap and plentiful.

On the applications front, the thick server becomes the delivery point for the enterprise software applications which will be created by the domestic software developers. In addition, there is a huge base of open-source applications already available. After appropriate testing and debugging, these applications can be made available on the thick server, with the emphasis being on how they can make a difference to the users, and how they can be used. The software may be free, but some time and investment will need to put in by intermediaries on making these applications usable and task-centric, so that they just do not become an additional “feature” of the system.

As the critical mass of thick servers and thin clients – and Tech 7-11s and My First Computers – develops, we will find software companies coming forward to create specialised (and localised) applications. As these low-cost computers proliferate, the network effects will work positively for the solution and pass a “tipping point”. In addition, the same building blocks which can even spread computing in homes: a WiFi-enabled thin client (“My First Wireless Computer”) which connects to a neighbourhood Tech 7-11 can do the trick.

The ideas presented here present a framework for realizing the vision of “a connected computer for every employee and every family.” The result will be the creation of an alternative computing ecosystem for the developing countries, one which is affordable to the mass-market and whose evolution is driven by the community. These “disruptive” ideas are the bridges which will take computing across the digital divide to where computing’s next 500 million users await their turn for using one of the greatest inventions of the past century, and entering the Information (and Connection) Age.

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