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TECH TALK: Tech@Enterprise: Creating a Virtuous Cycle: The Right Mix

November 15th, 2001 · No Comments

The consumer market has seen much more innovation in business models than has the enterprise market in recent times. The video game and the cellphone industries have built up large audiences by using a “loss leader” (the hardware) to build up content and services business that become profitable over time. The Internet portals too tried something similar, but other than AOL which established a strong franchise thanks to its billing relationship, the others have not yet proved that is possible to create a positive feedback ecosystem.

How can we create just such a virtuous cycle for enlarging the enterprise technology market? First, let us re-state the objectives. The aim is to increase dramatically the adoption of technology (hardware and software) by enterprises. This means making technology much more affordable and also meaningful to enterprises. The primary target market would be the small and medium enterprises (SMEs) in emerging markets like India. The goal is to make these SMEs globally competitive, because competition is no longer limited by geography. By using technology appropriately, these enterprises should be able to cut costs, increase sales, and build closer relationships with their suppliers, customers and employees. SMEs, which have been traditionally been islands of information, need to be bridged into the world trade (and information) networks.

Innovation is needed in building out services for the SMEs, who invariably get caught between the two other markets which are much easier to reach: consumers and large enterprises. Mass marketing helps reach consumers while direct marketing gets companies into the limited set of the large enterprises. SMEs are much harder to reach so it’s a market few have been able to tap successfully so far. By using a mix of a game console-like subsidised server to create a large installed base, by leveraging independent software vendors to create the valuable Lego-like software blocks and distributing these over the Internet, and by pricing the software and content services cheaply, it should be possible to create a mix which addresses the technology needs of SMEs.

The first building block of the enterprise solution is a Low-Cost Enterprise Server. This server is akin to the video game console and the i-mode handset. It is the platform on which services will be offered. So it is important to build up a critical mass of these to be able to attract developers to build on this platform. The Server is the Trojan Horse on the Enterprise LAN: it is the entry point for offering services to the enterprise. In emerging markets like India which are still bandwidth-challenged, the ASP model of offering services from the Net will not go too far – services will need to run off the LAN, and this is where the Enterprise Server becomes the anchor.

The Enterprise Server cost can be reduced in many ways. Firstly, one does not have to use the latest hardware – one generation lag technology will do just fine. In fact, one could look at the desktop systems as servers since there is no real need for the huge processing power that CPUs today offer. Secondly, one could even consider using systems which have been disposed off by the developed countries (where regular upgrades / replacements) are the norm. Secondly, by using open-source software like Linux, Apache, Mozilla and StarOffice, licencing fees can be eliminated. Finally, the system can be sold at a discount to speed up adoption. The cost of a headless server (without monitor, keyboard and mouse) should be brought down to about Rs 10-12,000 (USD 200-250). A leasing can ensure a payment of no more than Rs 1,000 (USD 20) a month for the system.

Tags: Tech Talk

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