TECH TALK: Opportunities in Tomorrow’s World: The Intelligent Enterprise

The biggest impact of the Internet is likely to be in the way companies do business. Writes Frances Cairncross in The Economist:

[The Internet] is not simply a new distribution channel, or a new way to communicate. It is many things: a market place, a information system, a tool for manufacturing goods and services. It makes a difference to a whole range of things that managers do every day, from locating a new supplier to co-ordination a project to collecting and managing customer data.The changes that the Internet brings are simply more pervasive and varied than anything that has gone beforeAt the root of the changes is a dramatic fall in the cost of handling and transmitting information.

Management and analysis of this information is where the next set of opportunities will lie. The next generation enterprise applications will be an intelligent extension of the transactional systems in place in large corporations. ERP and CRM applications have been implemented across several enterprises. These ERP, CRM and SCP systems generate huge amount of data, which are stored over multiple databases in the organisation and its trading partners. The Internet now makes it possible to easily possible web-enable these disparate sets of transactional systems and databases – there lies the first real power of the web.

We now also find the second power of web being unleashed. This entails not just linking these transactional systems, but closing the loop between transactional and analytic systems. In today’s fiercely competitive businesses age, most decisions need to be proactive. Hence, we find an increasing need for business intelligent software, coupled with content management tools. These applications help businesses take informed decisions in real time, and help get the right piece of information distributed to the right people in the vast organisational intranets and extranets. These analytical applications generate informed answers to current day complex business problems.

According to Scott Phillips of Merrill Lynch, “[e-business analytics] tell companies what to do and why…They are the foundation layer for unlocking the value of transactional and unstructured data stores to realise the twin goals of e-commerce – namely, efficiency gains and revenue growth.”

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TECH TALK: Opportunities in Tomorrow’s World: Opportunities in Tomorrow’s World

“The Intelligent Enterprise” and “Connected People” are the two themes for the world of tomorrow. The Internet’s impact is still in its infancy. Corporates and Consumers are both being profoundly impacted by the Internet. In the last 5 years, we have seen the visible impact of the Net primarily on people, and the way they communicate, get access to information and how they buy. Companies are only now beginning to start leveraging the Net for more than just putting up websites.

The Net does many things for companies – it works as a distribution system, a marketplace, a communications channel. It gives companies the ability to alter the way business is being done by making companies technology-driven. Unlike in the past where technology was peripheral to the business, it is now moving to the core. The Net is changing the way companies interact with their constituents – employees, suppliers, and customers. Think of the three key drivers here as Enterprise Information Portals, Supply Chain Management and Customer Relationship Management. These are the drivers for eBusiness in the future.

For Consumers, we are moving to an always-on, connected world. Irrespective of where we are, we can always get connected to the Net. This connectivity will come in many different ways – by a telephone line or cable at home, by DSL at work, and by wireless when we are mobile. How will people change when the connection to the Net is a given? How will their interactions with others and companies change in such a world?

As growth in the computer off-take slows, this is being more than made up by increased usage of handhelds and cellphones. In these devices, form factor becomes an issue. Bandwidth is also being dramatically impacted: for us at home in India, from perhaps a 4x increase over the past 4 years, this will explode to a 100x or more increase in the next 2-3 years for perhaps a 5-10x increase in cost. The incredible price-performance ratio of chips and communications makes impossible things which have not yet been imagined.

The number of interactions we have in a day go up. Managing these interactions becomes a challenge. Just in the last 6 years, I have seen probably a 10x increase in the number of things I am doing daily as a manager and the number of people I am expected to interact with on a regular basis. What will we need to cope in this connected world? These are where some of the opportunities of tomorrow lie.

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TECH TALK: Building An Innovation Valley in India: An Innovation Action Plan

To foster Innovation in India, we need to:

Incubate/Fund Startups: the focus should be on technology products/platforms, with a mix of services. What services does is to give an insight into what customer wants, and what the state-of-the-art in that industry is. Most Indian companies tend to stop at services. This is what needs to change. We should work with international funds to create startups in specific verticals.

Build Marketing Bases Globally: India is a great engineering base, but not really a large market for many of the technologies. We need to set up marketing arms internationally – US, Europe and Asia. Companies – and senior management – needs to be close to where the customers are.

Initiate Research at Educational Institutions: There is little leading edge research going on at India’s educational institutions. This needs to change. We need to have faculty-led research spanning not just months, but years. We need to create centres of excellence at our universities. This is where the alumni can play a role, especially those outside India. We also need to have students work at companies outside India in their practical training to get a sense of what is happening at the cutting edge.

Partner with Complementary Companies in Asia: Imagine being able to combine Taiwan’s hardware skills, Japan’s design excellence and India’s software skills. Can we partner with companies in Asia to create end-to-end solutions? For example, Korea and Japan are leaders in wireless technologies, with Korea also having excellent broadband infrastructure. Indian companies must look at leveraging skillsets to create technology platforms for these emerging areas of wireless and broadband.

The challenge ahead of us is to create 2-3 success stories in the next 12-18 months in India – the equivalent of an ICQ or a Chromatis in Israel. India Inc’s mission should be to help Indian entrepreneurs transform their technical expertise and ideas into successful global enterprises that build cutting – edge products and services, companies that are leading the revolution.

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TECH TALK: Building An Innovation Valley in India: Building An Innovation Valley in India

Venture Capital availability in India has risen dramatically in the past few months. Just in the last month, over USD 500 million of commitments have been made. And yet, one is seeing few investments, post the dot-com era earlier in the year. Many of the investments that are being made in the area of software services, where intellectual property (IP) is being created for someone else. What does it take for India to create new technologies, new platforms, set standards? What does it take for India to become an innovation hub?

Why is it important for India to create Innovation? We are seeing limits on the talent front – the demand for quality engineers far outstrips supply. Today, when an engineer works in India, he gets a salary of USD 10-20,000, whereas the company charges about USD 20-30/hour (USD 40-60,000 per annum). The same engineer posted abroad can generate USD 60-100/hour (USD 120-200,000 per annum). When the engineer is part of a team that is creating core technologies, the value of the group can be upwards of USD 1 million per engineer. (Witness some of the recent acquisitions by companies like Cisco, or the red-hot demand for fibre optics engineers). So, if we need to move up the value chain, the solution does not lie in just increasing the hourly billing rates, but also looking for opportunities to create IP.

What we need to do in India is make Innovation part of the entrepreneurial process. We need to create, like what Israel has done, a series of successful technology start-ups, which become leaders in their chosen business segments. We need to build on the engineering-in-India, marketing-outside-India formula – India is still not a market for most new technologies. We also need to build a base of research-driven innovation. This will not only better leverage India’s strengths in software, but also offer significant wealth-creation opportunities far beyond what stock options offer. In doing so, we can create many Innovation Valleys in India.

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TECH TALK: Mass Market Internet: Building the Mass Market Internet – 3

How do you get the first 10 million users? Four interesting target audiences to begin with would be teenagers, traders (stock), NRIs for their family in India and kirana store owners.

Teenagers Plus (15-25 years) constitute a very significant audience on the Net. This audience has the power to spend – cash. They do not have credit. They are more likely to use the new services that we introduce at our Access Points. They have more in common with their peers internationally. This is the audience Japan’s NTTDocomo targeted with its I-mode service so successfully.

Many million Indians own stock. Internet Trading by itself may not be much of an impact unless the device problem is solved. Hence we need a version of the device geared for financial services, with banks/FIs perhaps even agreeing to give them free in order to lock the customer in. For stock trading, the device will need to support wireless access. This way, stock quotes can be sent and trades be executed from anywhere. Banks also have an incentive to strengthen the customer relationship – if Internet banking is encouraged, then the bank’s costs come down. The device offers a mechanism for banks to offer multiple products to the customers.

NRIs can also play a crucial role here: they can gift these devices and the Net service to their family in India. The devices can be used for messaging to begin with. This can later be extended to having them gift these to schools/colleges of their choice, enabling them to contribute to India’s IT growth.

Kirana Store Owners should be persuaded to have these devices at their outlets so that people can walk in, and get a glimpse and use these devices. Once people start using them, they will then want to get them at phone. Also, it provides a ubiquity in terms of access in every neighbourhood.

These are the Early Adopters. The eventual goal is to get the device into every home, every telephone booth, every village in India. Perhaps, the Income-Tax department could offer a device free for all tax-payers!

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TECH TALK: Mass Market Internet: Building the Mass Market Internet – 2

Service providers should tie-up with banks, and other organizations for whom the customer relationship is critical. These companies can help “guarantee” the payments in return for co-branding on the device. For example, a bank or a finance company who can leverage a relationship can actually waive the initial payment from the user, and pay us. A connection with the bank will also increase the level of the trust of the user. In fact, companies could team up with the public sector banks to roll out this – it gives them an entry point into the ecommerce area which they so desperately want, and helps leverage their existing customer relationships.

Keyboard
This must be given free of cost to the user, and hence needs to be subsidized. The way to do this is to have one-click access to websites. Thus, we can have the standard keyboard with 15-odd buttons on it, each with a direct click on the websites. Our cost of the keyboard is likely to be about Rs 1,000. The customer can pay Rs 250 and the 15-odd websites can pay Rs 50 per customer.

Access Network
To begin with, one can work with the telephone network. Here people will still need to pay Rs 25/hour for the access. We can use the paging network for 1-way incoming pre-specified information. Outgoing will still be via the telephone. Think of it this way: Paging for the async incoming data, while dial-up for the synchronous real-time interaction on the net. Next step would be to move to 2-way wireless: either through 2-way paging or the GSM/GPRS network of the cellco (provided the price point is attractive).

Send in your feedback to techtalk@samachar.com.

TECH TALK: Mass Market Internet: Building the Mass Market Internet – 1

The Internet in India needs a dramatic rethink if we are going to achieve a penetration which can have significant economic impact on our people. The five components that are required to make this happen: low-cost access to the Internet via cheaper devices, an alternate access network which bypasses the telco and cellco thus eliminating the local call charges, Internet community centres, payment systems to facilitate ecommerce, and applications and services which make a difference to the lives of the masses in India. The cost of access and these services must be no more than Rs 250 per month. If we can achieve this price point, I think we can reach out to 100 million people in 3 years. Let us examine each of these areas further.

We need low-cost access to the Net. We discussed the need earlier for a device which can be rented for Rs 150 per month to homes. This device needs to do just two things: connect to the Internet, run a Web browser. A useful third thing would be to be able to “output” on to a printer or a memory device which can then be printed later.

Economic Model
How can we rent this device out at Rs 150 per month? Assume that the cost will be in the region of USD 50-70 (Rs 3,000). We can charge Rs 2,000 up front, of which Rs 1,000 is a one-time payment, Rs 1,000 is an advance for ecommerce given back to the user in the form of a smart card with the cash loaded on to it. This also bootstraps the ecommerce part of our business. Minimum usage is for 12 months. Thus, in 12 month, at a minimum, we would have recovered Rs 2,800 from the user. This excludes the ecommerce margins that we are likely to have. The only issue here is that people may stop paying us after a few months in which case we lose out. One way to prevent this is to give the ecommerce credit to the user as Rs 100 per month over 12 months. If I know that I need to use it to get that credit, I am more likely to do so.

Send in your feedback to techtalk@samachar.com.

TECH TALK: Mass Market Internet: The Killer Apps

How can the Net make a difference to our lives? In India, those applications will do well which either save us time or money. The Net needs to become a utility service. Examples of such services:

  • Messaging: Email is undoubtedly the killer app. We must enable email through the browser, in regional languages and via voice. Instant Messaging and Chat will also be key drivers for this.
  • Utility Payments and Ticketing: Queues are the real pain of life of India. Anything which can be done to bypass queues can be a big success.
  • Personal: Calendar, Reminders, Diary, ToDo Lists, etc. These need to be actionised via alerts sent at specific times to the user on the Device.
  • Neighbourhood: Whats On in the 2-km radius from my home – deals/talks/etc. I should give in my pin codes of interest and we then combine this with the information that we make my neighbourhood life more interesting.
  • General Information: News, Stock Quotes, Astrology, Search, etc. I should be able to create a package of information that I am interested in and it should be delivered to me without my having to request it all the time. Use this information to create a customizable first page.
  • Egroceries: 57% of retail spend in India is on food and groceries in SEC A and B households across the top 20 cities. Also, 77% of retail spend happens within a 2 km radius of people’s homes. For eCommerce in India to take off, groceries have to be a significant part of that.
  • Education: Everyone likes to and wants to learn. We need to build on this urge. It could be learning words, English, about new places through quizzes, etc. Some of these could be on a subscription-basis.
  • Entertainment: Along with email, this can be a big driver. Three categories: music, multi-player games, and contests linked to TV. Indian audiences haven’t gamed much, so there is a huge opportunity out here. Music is obvious – but the ability to call-up music on demand will be good. Since TV is an integral part of the home, along with the schedules (like a TV-guide), we can have contests linked to the programmes to enhance loyalty.

Send in your feedback to techtalk@samachar.com.

TECH TALK: Mass Market Internet: Payment Systems

To make the mass market net work, we need an effective payment solution, so that people can pay for services and purchases. In India, credit cards and debit cards have a limited user base (about 3-4 million, mostly credit cards). The market that we are targeting is not likely to have credit histories! Billing and collecting money after the service is rendered is not going to be a viable option. The only way to collect money is to get people to pre-pay.

The entire consumer Internet access business in India is pre-paid: ISPs sell hours or months of access. About half of the cellular business in India is also pre-paid. By eliminating billing, companies not only reduce costs of collection and also the risk. Pre-payment in the form of cash cards or smart cards are the solutions for electronic payments in India.

Pre-paid cash cards can be made available at kirana stores across the country. Each card needs to have a unique number with a password. When the customer purchases a card, he can login either from home or an Internet community center and update his account by entering the number and password. This adds the amount paid to the “virtual bank account” of the customer. Now, this money can be used for access or commerce. It can also enable micro-transactions. The challenge here is to keep the distribution overhead for the cash cards small (to under 2% of the face value).

Smart cards can offer a more secure solution: the key here is to put in place readers and refill points in every neighbourhood. Another issue is also the initial cost of the card – which would be Rs 100-150. It is unlikely the customer will pay an additional amount. Smart cards do have an advantage: they can be integrated with loyalty programs. They can also serve as ID cards, and store other information on the card.

In India, pre-paid cash cards is the way to begin, with smart cards coming in over a period of time. The payment problem needs to be solved before we can think of Internet access and commerce starts making a difference to people’s lives.

Send in your feedback to techtalk@samachar.com.

TECH TALK: Mass Market Internet: Internet Community Centres

India may have 25 million phone lines, but nearly the entire country of 1 billion has access to telecom. This is because 1 million of the phone lines go into Public Call Offices (PCOs). These manned telephone booths are there in every neighbourhood of the country. Similarly, we need Internet Community Centres, which provide need-based access to the Internet for the masses.

Cybercafes have sprung up across India, offering access for Rs 25-50 an hour. They may not be economically viable if they offer only Internet access. There is an opportunity to go beyond plain vanilla narrowband Internet access and do a lot more at these locations to build a business which makes money. India can learn from South Korea, where there are 20,000 PC Rooms. These Internet Community Centres can:

  • Have the Access Devices or Multimedia PCs connected to a LAN, with high-speed Net access (512 Kbps, or more). Today in India, home users typically have better bandwidth (33-56 Kbps) than people in the office (shared 64 Kbps ISDN)! With high-speed access, the centres become attractive even for home users.
  • Install Webcams, so that we can enable video chatting and video mail.
  • Install Gaming Consoles like Playstation, so that these can become entertainment arcades. People can also participate in gaming via the PCs.
  • Enable Communications by adding cellphone rentals and sales. As cellphone growth take off, there is an opportunity to build an incremental annuity revenue stream from sales and talk-time. A model here are Hikari Tsushin’s HIT stores in Japan.
  • Offer Ecommerce fulfillment, like 7-11 in Japan. People should be able to place their orders, get delivery and pay at these access points.
  • Enable Auctions fulfillment, by making these centres the meeting point for people who have bid in auctions so that they can exchange goods and money.

By creating multiple revenue streams and offering innovative applications and experiences, these Internet Community Centres offer the way forward for the mass market in India.

Send in your feedback to techtalk@samachar.com.

TECH TALK: Mass Market Internet: The Access Network

Today, in India, it costs Rs 24 (USD 0.50) per hour to be connected to the Net – this money goes to the local telephone company. This is a bottleneck for growth and usage of the Internet. Are there alternative networks to bypass this? Options: Paging, Cellular, Cable, Fibre, WLL.

Paging is the one that is the most intriguing. Paging networks have not done as well in India, but they do exist in 30+ cities. These one-way networks will need to be upgraded to two-way networks. In Shanghai, GWcom offers stock quotes and trading on a custom device over a paging network. Paging networks offer narrowband connectivity, but that is what is needed for the mass market to begin with.

Cellular (GSM) networks are circuit-switched, and as such can get quite expensive for connectivity. In India, costs vary from Re 1 to Rs 4 per minute for connectivity to the cellular network. The opportunity for this is in the future, with the packet-switched GPRS networks, which are expected to be rolled out in the next 6-12 months in major metros.

The current cable network is not two-way. It can be attractive because this also gives an always-on connectivity to the access devices. Significant investments need to go in to make it two-way.

Reliance is building out a 115-city optical fibre network, Spectranet has laid a fibre ring in Delhi. IIT-Madras’ Prof. Ashok Jhunjhunwalla has a CorDECT solution which also could be cost-effective to provide a Wireless Local Loop (last-mile solution).

An interesting alternative would be to perhaps use the emerging 802.11b (wireless Ethernet) protocol to create a relay network, by linking together neighbourhood points of presence (post offices, railway stations, petrol pumps, banks). A Big, People’s Network in every city, perhaps?!

What is clear is that India needs cheaper, easy-to-rollout mass market network. The question is which of these solutions can address the needs for today. Perhaps the answer is still the humble telephone line, and the doing away of the connect charges for Internet time.

Send in your feedback to techtalk@samachar.com.

TECH TALK: Mass Market Internet: The Ideal Device

What would be the characteristics of the ideal low-cost access device for countries like India? The focus is on a narrowband transactional device, one which uses the Internet like a utility.

Inputs: on-screen keyboard (the mass market does not know how to type) with support for multiple local languages, audio (everyone can speak), and handwritten text captured as an image. Handwriting recognition is useful, but not critical.

Outputs: a display (like the Palm or Visor — monochrome would do just fine), speakers (combined with audio input, they would be great for internet telephony, which is still illegal in India). The speakers can also enable playback of MP3 music. Connectivity to a printer or a TV would be useful for “larger” displays would help.

Communications: a telephone line RJ-11 jack with a software modem. To start with, it could have IR or Bluetooth support so it can work well in the home, and doesn’t have to be in a fixed place.

Buttons: 4 buttons to offer easy access to email, instant messenger, a personalized page, and one for bookmarks to link to other favourite sites. Pressing any of the buttons should automatically connect the user to the Internet.

Storage: some flash memory, so this can also serve as an offline music/audio player.

Power: batteries, and external power. The batteries combined with IR/Bluetooth allow the device to be moved and used within the house.

OS: Linux, so no royalties need to be paid out.

Cost: USD 50, so that it is rentable for less than USD 4 per month.

Additional useful add-ons:

  • One-way Pager, so that the device can receive alerts when email arrives or other such one-way communications. Later, this can become a Two-way Pager allowing for instant messaging (the equivalent of SMS on cellphones).
  • GSM support, so it can use the cellphone network, thus enabling mobility
  • Smart card reader for enabling payments
  • A digital camera
  • GPS support to enable location-based services

Do we have answers for 4 billion people in the world?

TECH TALK: Mass Market Internet: The Ideal Device

What would be the characteristics of the ideal low-cost access device for countries like India? The focus is on a narrowband transactional device, one which uses the Internet like a utility.

Inputs: on-screen keyboard (the mass market does not know how to type) with support for multiple local languages, audio (everyone can speak), and handwritten text captured as an image. Handwriting recognition is useful, but not critical.

Outputs: a display (like the Palm or Visor — monochrome would do just fine), speakers (combined with audio input, they would be great for internet telephony, which is still illegal in India). The speakers can also enable playback of MP3 music. Connectivity to a printer or a TV would be useful for “larger” displays would help.

Communications: a telephone line RJ-11 jack with a software modem. To start with, it could have IR or Bluetooth support so it can work well in the home, and doesn’t have to be in a fixed place.

Buttons: 4 buttons to offer easy access to email, instant messenger, a personalized page, and one for bookmarks to link to other favourite sites. Pressing any of the buttons should automatically connect the user to the Internet.

Storage: some flash memory, so this can also serve as an offline music/audio player.

Power: batteries, and external power. The batteries combined with IR/Bluetooth allow the device to be moved and used within the house.

OS: Linux, so no royalties need to be paid out.

Cost: USD 50, so that it is rentable for less than USD 4 per month.

Additional useful add-ons:

  • One-way Pager, so that the device can receive alerts when email arrives or other such one-way communications. Later, this can become a Two-way Pager allowing for instant messaging (the equivalent of SMS on cellphones).
  • GSM support, so it can use the cellphone network, thus enabling mobility
  • Smart card reader for enabling payments
  • A digital camera
  • GPS support to enable location-based services

Do we have answers for 4 billion people in the world?

Send in your feedback to techtalk@samachar.com.

TECH TALK: Mass Market Internet: Low-Cost Internet Access

To put our Internet access discussion in context, let us look at some India numbers:

  • 1 billion Population
  • 150 million (mm) consuming Middle Class
  • 65 mm TVs with 30 mm Cable TV homes
  • 25 mm phones (0.6 mm telephone booths / PCOs)
  • 4 mm PCs
  • 3 mm Net users (about 1.3 mm Net accounts)
  • 2.5 mm Cellphones
  • 1 mm Pagers

So, what are the options for people to access the Net? PC, TV or cellphone?

The PC base in India is still quite small, and the cost of ownership at Rs 35-40,000 is still quite high. PC penetration is growing at 40-50% per annum, but will not achieve mass market penetration in the near-term due to the cost and complexity of usage.

Can the TV be the answer? I don’t think so. TVs serve as entertainment devices for the entire family while Internet browsing or e-mail is a personal exercise. In addition, the Internet TVs launched recently in India are still of the order of Rs 10,000, while TVs with set-top-boxes still cost in excess of Rs 7,000.

What about cellphones? The cheaper cellphones are available at about Rs 4,000 today, which is good. The problems are the small display, text entry on the 12-button keyboard, and the airtime costs (currently at Rs 2-4 per min, or Rs 1-2 per SMS message).

What India needs a low-cost, small foot-print access device for the mass market in India, a device which costs about Rs 2,500 retail (USD 55), and can be rented out for Rs 150 per month. At these price points, we can look at a target market of 25 million (similar to the phone lines / cable penetrations) in India alone, and a base of 4 billion people in the world like us in Asia, Eastern Europe, Africa and Latin America. What does it take to do this?

TECH TALK: Mass Market Internet: The Vision

In August this year, India completed 5 years of commercial Internet access. We have just over a million unique Internet accounts, and about 3 million users. More new cellphone users are being added in India than are new Internet accounts. The Internet in India is still too elitist and growth still too slow. How can we change this? How can we get 10 times the current growth rate? How can the Internet impact the lives of 100 million Indians in the next 3 years? How can the Internet remove pain from our lives, how can it make a difference to us daily? How can the Internet become a utility in our lives — just like electricity and the phone?

What we need is creative thinking in terms of “emerging market technologies and solutions”. We need local solutions to our local problems. India has more in common with China and Latin America than with the US. The Internet in India will unravel very differently from the experiences of US, Europe and Japan over the past 5 years.

There are 5 components to building a mass market Internet and making it a utility service:
– Access Device: Multiple options are becoming possible for accessing the Net. What will be the mode of access? Will it be the PC, TV or cellphone?
– Access Network: The telephone company still makes Rs 25/hour when we connect to the Net — significantly more than the ISP itself! Are there alternatives?
– Community Centres: 1 million telephone lines going into PCOs serve the communications needs of 75% of India. Can something similar happen with the Internet in India?
– Payment Systems: Few Indians (about 3 million) have credit cards, fewer are keen on using them on the Net! Can we eliminate billing and use pre-paid? Are smart cards the answer?
– Applications and Services: How many Indian sites make you visit them daily?

To make a difference, the Internet has to add value to our lives. How can the Net remove pain from our lives? What will be the killer apps in India?