TECH TALK: India’s Next Decade: The New WWW

(This column is part of an ongoing series on “India’s Next Decade”.)

Look back to 1994-95. That was the time Mosaic had just been launched by the team led by Marc Andressen (who later co-founded Netscape). HTML made it so easy to create web pages. The hyperlinks made it possible to connect documents together and from a user’s point of view, leap across worlds just like the mind navigates through ideas. Experiencing the 1994 World Wide Web was like a million mind bombs going off. Suddenly, there were so many opportunities, so many possibilities. Suddenly, there seemed to be infinite futures imaginable.

Look even further back (perhaps, to the 1980s) to the first we time we interacted with a computer – in school, college, at work or at home. Remember that feeling? It was man and machine in communion, like a different world which was opening up in front of us. My first experiences with a computer was in 1983 when a friend showed me his new ZX-Spectrum at home and my father bought one for his office. I was in college then. I still remember wanting to rush to the office and try and out the new BASIC program I had written. I even made a game which would play out one-day cricket matches. I also programmed the Monopoly game. That rush of excitement, that feeling of exhilaration, the notion that anything is possible, that the old way of doing things is now going to change, that a new order is emerging – its coming back.

Cut to Kevin Werbach of Release 1.0:

Listen carefully. The old grassroots energy is coming back. Web services, Weblogs and WiFi are the new WWWThe new WWW makes software, content and connectivity into resources that may be shaped and combined into new ways. The three new W’s all have openness and critical mass going for them. They are built on standards, and have managed to gain the support of large platform vendors and independent developers alike.

(Esther Dyson’s Release 1.0 should know. Dyson has chronicled the PC revolution since 1975. Tech Talk too has covered these topics in the past few months: Web Services, Blogging and Wireless. Also read: Emerging Enterprises and Emergent Networks.)

Email, Instant Messaging and the Web have glued us together. Hundreds of millions of computers, cellphones and people are now inextricably connected together. But this is just a small beginning. There is much about life and business which can be made
better. There are still hundreds of millions in the emerging markets of the world who are not yet fully integrated into the global network because technology is still too expensive for them.

XML, XML-RPC, SOAP, WSDL, UDDI, Oultiners, OPML, Weblogs, RSS, 802.11 are the Legos for the new emerging world.What is now interesting is to see how the new WWW can be put together to spark the Next Revolution, one which will be driven more by the grassroots, the bottom of the (enterprise) pyramid. This is the set of opportunities our generation has to build new companies, and perhaps, a new India.

TECH TALK: India’s Next Decade: The Third Revolution

The world’s infotech industry may appear to be in decline after the heady days of the late 1990s. Even the giants are finding the going difficult. The Nasdaq is back to the October levels, as there is a growing belief that the US recovery is going to take time. For the telecom industry, the light at the end of the tunnel is still not in sight. One bright spot for India has been the performance of the software companies, with almost all of them showing growth in excess of 25-30% in the past year, and projecting at least a 15-20% growth in the coming year. In a market where corporate spending on IT is declining, India’s has been a very creditable performance.

The slow IT spend is what we are seeing on the surface. Underneath, there are some very interesting developments taking place which promise to open up new opportunities for companies willing to look below. This buzz is happening among early adopters, in some of the geeky techie websites and writings, and with the smaller startups. It is almost like an underground network of sorts, with the portents to spark of a revolution in the times to come, even as the establishment (the bigger companies) worry about the present and near-term survival and growth.

We are seeing the start of the third technology revolution in the past quarter century. This started in the 1970s with the mix of chips and software and led to the birth of the personal computer industry. Computers and software had been around for many years, but companies like Intel, Microsoft, IBM and Apple made them available to a mass market through their innovations and marketing strategies. The computer, till today, remains the technology platform for companies and countries. Moore’s Law put silicon on a fast track of continuous improvements. Software made use of the faster processing speeds.

The second revolution came with the advent of the World Wide Web (WWW) in the 1990s, made possible by the use of the HTML language, the HTTP protocol and the Web browser. Together, they made is easy for making information available across computers. The hyperlink broke boundaries and connected documents, just as the Internet connected computers. A new generation of companies was born, bubble economy transmogrified (albeit for a brief time) the world. The survivors – Yahoo, eBay, Amazon, Google, Overture – were names we wouldn’t have recognised a decade ago (because they didn’t exist), and yet every day these sites touch our lives.

The third revolution is now in its formative stage. Writes Tim O’Reilly in an article, “Inventing the Future” (April 9, 2002):

“The future is here. It’s just not evenly distributed yet.” I recently came across that quote from science-fiction writer William Gibson, and I’ve been repeating it ever since.

So often, signs of the future are all around us, but it isn’t until much later that most of the world realizes their significance. Meanwhile, the innovators who are busy inventing that future live in a world of their own. They see and act on premises not yet apparent to others. In the computer industry, these are the folks I affectionately call “the alpha geeks,” the hackers who have such mastery of their tools that they “roll their own” when existing products don’t give them what they need.

The alpha geeks are often a few years ahead of their time. They see the potential in existing technology, and push the envelope to get a little (or a lot) more out of it than its original creators intended. They are comfortable with new tools, and good at combining them to get unexpected results.

Tim’s take on the future: Wireless, Next-generation search engines, Weblogs, Instant Messaging, File Sharing, Grid Computing, Web Spidering

TECH TALK: India’s Next Decade: The Difference A Decade Makes

Consider what a difference the past decade has made in the fortunes of two Asian countries – Japan and China. Ten years ago, it looked like Japan would conquer the world. Writes John Grimond in The Economist in a recent survey on Japan (April 18, 2002):

In the late 1980s, after all, Japan invested $650 billion abroad, nearly half of it in the United States, where such icons as Columbia studios, Pebble Beach golf course and Rockefeller Centre in New York fell into Japanese hands. Americans had already become used to the idea of “Japan as Number One”, as the title of Ezra Vogel’s best-selling book put it in 1979. By the late 1980s, with companies such as Sony, Honda, Toyota and Toshiba sweeping all before them, Japan Inc truly seemed invincible.

Today, the calm exterior hides the internal crisis across the economy. Writes Grimond:

Imagine a country where the streets are clean, drugs cause few problems and muggings are almost unheard of. Imagine further that the trains run on time, most people are well dressed and many-at least to judge by the giggling girls shopping in the capital’s swankiest area-are able to afford the most expensive trifles that money can buy. In such a prosperous country, life would be long, taxes modest and unemployment certainly lower than in Europe, probably even than in America. People would be polite, thrifty and unbelligerent. Rather, they would be munificent givers of foreign aid, vigorous investors abroad and profuse lenders. Such a country is Japan, and to many it might seem paradise. Yet open a newspaper and you will see that this is a country in crisis.

Unemployment stands at 5.3%, just below its recent post-war record of 5.6%-and the official figure, because it excludes those too discouraged to register, understates the true picture. Electronics giants such as Fujitsu, Hitachi and Toshiba have been laying off workers in droves. Supermarkets, such as the huge Mycal chain which went bust last September and even bigger Daiei which was bailed out in January, are shedding jobs all the time, as are building companies such as Aoki and Sato Kogyo, which collapsed in December and February respectively. The number of bankruptcies last year had been surpassed only once since the war, in 1984.

Consider the changing equation between Japan and China. Writes James Brooke in the New York Times (April 21, 2002) in an article entitled, “Japan Braces for a ‘Designed in China’ World“:

In recent decades, Japanese companies invested to make China the “factory to the world.” In recent months, Japan’s blue-chip manufacturers announced investments to make China the “design laboratory to the world.”

The crumbling of an informal wall that long kept assembly in China and research [in Japan] may spell the end of Japan’s last great competitive advantage over its low-wage neighbor. And it is yet another step in China’s rise, one that means both new opportunities and wrenching change for Japan, which has lately been coasting on wealth built up in earlier, high-growth decades.

Today’s young Japanese have grown up in affluence, taking for granted high wages and their nation’s status as the world’s second-largest economy. But older Japanese returning from visiting Chinese factories and laboratories report that the hard-working, self-sacrificing Chinese workers remind them of the Japanese workers of the 1960’s.

As more and more Japanese manufacturing migrates to China, the research and development activity is gradually following, to be close to production.

“China is quickly becoming a country of low wage and high tech,” Yotaro Kobayashi, chairman of Fuji Xerox, warned recently, echoing the spreading insecurities in Tokyo. “They are going to prove to be extremely competitive with Japanese companies.”

It is not just companies and industries where leadership can change – even countries can rise and ebb.

Indians need to invent the future, not just be the plumbers and electricians in that world. From where we are, even doing the plumbing may be much better since we’ll probably get paid in dollars. But, from where I see, there’s a new technological future which can be built in which India has the opportunity to lead and be the anchor store, not a discount outlet.

TECH TALK: India’s Next Decade: World Server

India is now pinning its hopes on the IT-enabled services business: If 1 million Indians can serve the world answering phones and emails in contact centres, developing software, analyzing x-rays and providing medical advice, processing insurance claims at even an average of USD 10 (Rs 500) per hour, it would add USD 20 billion a year. Nothing wrong with this picture, especially considering that we have no shortage of Indians to service the world. In fact, the latest mantra among the Indian software companies is BPO – business process outsourcing. There’s plenty of opportunity targeting the Fortune 1000 companies who are seeking to outsource to reduce costs. Falling bandwidth costs are making it easier to locate many back-office centres outside of the US, and India has emerged as a prime candidate.

Write Howard Rubin, Margaret Johnson and Susan Iventosch in SiliconIndia (April 2002) as part of a cover story on IT Sourcing:

India continues to be on top of the IT outsourcing market. The number of technical professionals in India is growing and now totals upwards of 4.5 million. The nation’s language (English), education system (IITs in addition to 1,900 educational and polytechnical institutions) and superior IT training programs have propelled it into its current prominent position.

Software has served India well in the past decade with exports touching USD 8 billion. It has helped India get recognition the way China has captured attention for its manufacturing prowess. The next spin-off from software is the world of IT-enabled services and BPO. All indications are that these sectors too will do well in the coming years. So, then what’s to worry about? After all, all our top software companies in cash and even though growth rates have come crashing down from the 100 percent a year days to 20-25 percent a year, that in itself is a great achievement considering what the tech sector has been through in recent times.

My worry is that we are following, not leading. We are being satisfied creating intellectual property for others, and not attempting to do so ourselves (other than a handful of Indian companies). The labour arbitrage and the dollars per hour model lulls us into a false sense of security. We send a mission to China which announces that India has nothing much to worry about: we are five years ahead of them. There are not enough of us exploring the new frontiers of technology, trying to envision the world of tomorrow and then working to build that. A quote from CK Prahalad and Gary Hamel’s “Competing for the Future”:

There is not one future but hundreds. Getting to the future first is not just about outrunning competitors bent on reaching the same prize. It is also about having one’s own view of what the prize isImagination is the only limiting factor.In business as in art, what distinguishes leaders from laggards, and greatness from mediocrity, is the ability to uniquely imagine what could be.

India’s is not a mission impossible. Look back 10-15 years. Japan was the top of the charts, there were plenty of self-doubts in the US about its competitiveness and China was an international pariah thanks to Tianamen Square. Today, the US is being talked of as an “empire” (like the Roman and British empires of the past), China is surging ahead to become the next big economic superpower, and Japan is in the doldrums.

TECH TALK: India’s Next Decade: China Comparisons

“A decade ago, India and China had roughly the same GDP per capita. Now India’s is about $460 and China’s $840. If India continues to grow at 5.4%–a rate it has never been able to sustain over any length of time–it would take 12 years for it to reach China’s current income level and decades more to reach that of Thailand or Korea.”, writes
Anthony Paul in Fortune
.

Paul mentioned South Korea. It may be hard to believe today but “in 1960, India and South Korea were both very poor. India, at least until the 1990s, was not much involved in the world economy. South Korea staked its future on engagement in the economy. Today, its per capita income is about 20 times higher than India’s.”, writes Daniel Yergin in the International Herald Tribune.

There is little doubt that China has left India behind in the most important race that matters – the economic one. Writes John Thornhill in the Financial Times (April 12, 2002):

China and India, the two dominant powers in mainland Asia, seemingly have a lot in common. Both countries boast ancient civilisations, spicy cuisines, nuclear missiles, diverse populations of over 1bn people, and apparently limitless economic potential. They also share many problems: mass poverty, growing urban-rural divides, oppressive bureaucracies, and widespread corruption.

Yet to outside investors the differences appear starker than the similarities. While China’s relentless economic expansion continues to mesmerise foreign investors, India remains something of an afterthought in investment terms. While the sleeping giant that was China has woken with a vengeance, India still appears to be quietly dozing in the corner.

That impression is certainly reflected in the hard statistics. In 1999, China sucked in more than $ 40.3bn in foreign direct investment compared with $ 2.1bn in India. Foreign portfolio investors too have been busily buying into giant Chinese corporations while largely ignoring India’s smaller companies.

At $ 54.7bn, the market capitalisation of the China Mobile, the country’s most valuable company, equals 45 per cent of the total value of the Indian stock market. “China is a must-have in any global equity portfolio,” says one fund manager. “India is still not in that category.”

The latest Business Today (April 28, 2002) has a cover story on China. Begins the story:

In today’s global economy, countries are either on the bus or off it. China is firmly on it. India is sometimes on, sometimes off. China has constructed some 50,000 kilometres of expressways in the past decade, 25,000 kilometres since 1998, or a little over 17 kilometres a day. India still can’t get over the 13,151 kilometre long Golden Quadrilateral that will be in place by 2007.The Shanghai skyline, by some estimates, has seen the emergence of 20,000 high rises over the past 10 years. India is still raving over Delhi’s satellite township Gurgaon and Mumbai’s Bandra Kurla complex which together, boast less than 100 high rises.China has 160 million phones, India has a mere 6 million.

The Financial Express has been carrying a series of reports on China. One of the articles by Rajeev Jayaswal talked about how China’s tourist traffic has skyrocketed in recent times:

A conservative estimate puts China’s total inbound traffic at 60 million annually, whereas India has been able to attract a mere 2.5 million tourists annually.

China has set a goal to become the number one destination in Asia with 130 million foreign visitors by 2020. According to comparative data of World Tourism Organisation, China’s total inbound traffic grew to 27 million in 1999 from 10.5 million in 1990, whereas India’s total inbound traffic could only grow from 1.7 million in 1990 to 2.5 million in 1999.

This is mainly because China has adopted a policy of focusing growth in the core regions including Beijing, Xian, Guangdong and Shanghai. Now all provinces are in competition to attract tourists, said Mr Bhoothalingam, Manas Advisory chief executive. As a result, the country has been able to offer over 6,000 star-rated hotels, 126 airports, and 1,286 international travel services.

So, even as China powers ahead, India ponders and flounders. The areas that India is ahead of China is in software and IT services, which are now seen as India’s hope for the future.

TECH TALK: India’s Next Decade: India Today

Shekhar Gupta’s column in the Indian Express about “The Hindutva Rate of Growth” asks: what else do you get when Modi’s indispensable, Sinha’s expendable? [Narayan Modi of the BJP is the chief minister of Gujarat where hundreds died in communal riots recently; Yashwant Sinha is the finance minister and his budget has been blamed by elements within the BJP for the party’s poor showing in the Delhi municipal elections.] Writes Gupta (Indian Express, April 19, 2002):

The political debate has now moved out of the realm of reform, development, growth and other such mundane, governance-linked issues. Secularism, real or pseudo, sounds much more like an election slogan than better governance.We now face the prospect of our politics receding into the 1989-90 phase of stagnation when we kept on fighting over mandir and Mandal while an interim government had to airlift gold reserves to prevent a sovereign default.Mercifully, given the momentum reform has given our economy over the past decade, it is unlikely that we will lapse into the old Hindu Rate of growth (2-3 per cent). The band in this phase of bankrupt politics will be 4-5 per cent[think of it as] the Hindutva Rate of Growth.

A 5 percent growth rate takes India nowhere. The latest Fortune (Asian edition, May 6, 2002 issue) has a cover story on India entitled “
India taps into the future (but can it escape it’s past?)
“. Writes Anthony Paul:

Even as India tries to catch up, it is falling further behind. In most Asian countries, the number of young adults is declining. In India the percentage of the population in the 15-to-24 age group is rising 1.6% annually.

That means the economy is headed for a rendezvous with demographic destiny: To keep all those young people employed, it will have to create no fewer than ten million jobs a year between now and 2010. In order to do that, says a recent report prepared for the government by the McKinsey Global Institute, the Indian economy needs to grow 10% a year. The best the country has managed since independence in 1947 is far short of that–7.8% in 1996 and 1997. The current level of growth, 5.4%, translates into just four million new jobs a year.

In principle, McKinsey argues, India can do it–as China, Thailand, and Malaysia have all proved. But reaching and sustaining 10% growth will require an enormous effort, starting immediately. And while a recent visit to the country turned up some reasons for optimism–an $11 billion national highway improvement program, an extraordinary display of information technology, a grassroots microeconomics movement–it also provided plenty of evidence that India won’t make it.

Fortune’s report card on India is telling: Business Climate C-, Jobs D, Productivity D, Infrastructure F, Trade C, Competitiveness C-. Only Inflation merits an A.

Incremental solutions will not do India much good. By moving at the rate we have done in the past will actually put us even further behind. Especially as compared to China.

One country India is invariably compared with is China. As of now, it is a no-contest.

TECH TALK: India’s Next Decade: The Choice We Face

Indians wants to move ahead, but India doesn’t. Our politics, bureaucrats and our heritage hold us back even as the people want a better life. This has been the story of the past half-century. What will it take for us to become an economic success? I will argue that Indians need to forget (or at least try and ignore) the bottlenecks and pain points that we face, look beyond just IT services, and think into the future, using technology and grassroots entrepreneurship to drive us forward. It may be seemingly impossible, but as we will see, a number of technological developments are opening up very interesting opportunities. We can either sit back and accept or curse our present, or whole-heartedly embrace the challenge to build the future.

Just because we are in India does not mean we are in anyway less intelligent than people in the developed markets like US, Western Europe or Japan. Being in India is no excuse for being second-class. The battle for the future is a battle of ideas, a battle of wits, a battle of vision. We have to play against the world’s best and win.

As companies and entrepreneurs based in India, we have to make a choice. We can be kings of neighbourhood living happily ever after. Or we can take on the Goliaths of the world using knowledge as our competitive advantage. Yes, we will have far less resources than the world’s big companies (or even the smaller companies in the developed markets) have. But if we are willing to think through a vision of tomorrow and work determinedly towards inventing that future, the India of tomorrow will be one in which our future generations can live happily – provided we are willing to put in the efforts now.

As entrepreneurs and companies out of India, we may have limited money, resources and branding. But there is one resource which can help not just level the playing field but also be our source of strength. The Internet has made available in near real-time a vast pool of information ores which can be refined by us into knowledge and insights – if we are willing to put in the efforts.

The stage of competition is not limited by national boundaries. We may be in India but it should not make a difference. Many of us have the option of being anywhere we choose. We have made India our home and base – either out of our own free will or due to some pressures. But once the choice is made, let’s put that behind us. The chess game that we are embarking on is in a global theatre. There are few prizes for being also-rans. We have to use our intelligence, our knowledge, our clusters to outmaneuver, outthink and outsmart our competitors.

The coming columns will explore various technologies and the new future that is being created. Embedded in the whitespaces are the next set of opportunities. The next Intel, the next Microsoft can come from India – if we believe it can.

We will start our journey with a look first at where India stands today.

TECH TALK: The Digital Divide: Tech 7-11s, Digital Dividend

7. Tech “7-11s”

As we have seen over the past few columns, technology can definitely help in bridging the digital divide through the right mix of computing and communications. 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. 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” can serve multiple purposes. They can showcase the technologies which can make a difference for the masses, serve as retail outlets, help in installation and training for customers, host a digital hubs for Wi-Fi data networks, provide an Internet access centre, serve as a physical world meeting place for entrepreneurs in the neighbourhood to share and learn, and perhaps even a “MicroBank” (in the context of offering MicroFinance).

Digital Dividend

Says R Ramaraj, CEO of Satyam Infoway:

Digital technology is not a luxury item. It is not necessarily a “Rolls Royce” solution. It is the key that opens the door to the knowledge economy. It gives even the under-privileged an opportunity to participate in the new economy of the 21st century.

“Bridging the digital divide” does not mean guaranteeing equal access to every new technological development. At the same time, it means more than just bringing Internet connectivity to a few selected “model” villages and classrooms. The global effort underway among governments, businesses, and NGOs to bridge the digital divide isn’t about distributing sophisticated technology to the disadvantaged; it’s about expanding access to information and communication technologies to promote social and economic development.

To bridge the digital divide with effective, practical applications of technology, three elements are crucial: entrepreneurship, government policy encouraging and supporting equity, and ground level programs with local community participation.

As one of the farmers in Warna (Maharashtra) says, if we do the groundwork today, our grandchildren will not able to imagine life without tools such as computers and the Internet. We should probably think of it as our investment in their future.

Solutions that bridge the world’s digital divides (across countries, their people and companies) offer the next set of opportunities. An amazing array of technologies lie in front of us. The question is how can we put them together to create “digital delight” across the “digital divide” and thus reap the “digital dividend.”

TECH TALK: The Digital Divide: MicroFinance

Bridging the digital divide has to be a bottom-up effort. It has to be powered by innovative entrepreneurs – of whom there is no shortage in the world’s emerging markets. What these entrepreneurs need is, among other things, some capital to help bootstrap or grow their business. Bank loans can be onerous and time-consuming, besides being out-of-reach of small entrepreneurs who have no collateral. This is where MicroFinance comes in.

Organisations like Bangladesh’s Grameen Bank and Bolivia’s Banco Solidario have helped provide finance to millions of entrepreneurs. Writes Professor Robert Kennedy in a Harvard Business School case study on Banco Solidario (February 18, 2002):

The term microfinance (also microcredit) is used to refer to the provision of financial services to low-income people and entrepreneurs, many of whom work in the informal sector. Informal sector workers have traditionally been cut off banks for both social and economic reasons. They generally have no formal employment status or documented salary, lack formal title to property for use as collateral, and have small credit needs and low savings generation.

These factors make serving the informal sector expensive and lead to the perception that the risk of doing so is high. Informal workers do, however, have financing needs, which are often met by informal lenders (either vendors or loan sharks) who make short-term loans at high weekly rates. Microfinance institutions aim to provide a more effective and institutionalized solution for the informal sector.

Here’s an example of how it works (Alkman Granitsas and Deidre Sheehan writing in the Far Eastern Economic Review,

in an article on MicroCredit entitled “Grassroots Capitalism”, July 12, 2001):

Grameen-style banks demand a sort of “social collateral”–in effect, peer pressure. It works like this: Each of the women (most microloans are only made to women) is tied to four others in her lending circle. The first loan is made to one woman, but all five members of the group are collectively responsible for repaying the loan. Until the first borrower has paid back at least half of the loan, the second in line won’t get a cent, and so on. Each week, all new loans, all loan repayments and all family financial problems have to be aired at the weekly centre meetings in full view of a roomful of gossipy village women. Peer pressure and potential loss of “face” keeps repayments high.

But ironically, keeping up the peer pressure is costly. Each loan officer is responsible for visiting just 200 to 300 clients every week. But some of those clients are miles apart down rutted dirt roads and where travel between villages can take the better part of a day. And with no mechanical aids, each and every transaction must be laboriously copied and recopied by hand in ledger books.

With loans of just $150 a piece on average and interest earnings of just a few cents a week, administrative costs can eat up as much as one third of the total value of the loan. In effect, microlenders are operating with a cost structure more closely related to private banking than general retail banking. So although the loans are profitable, the incremental profits are so small that it usually takes over 10 years for the microlender to grow to sufficient critical mass and break even.

Perhaps, some of the innovative tech solutions we have discussed here can help MicroFinance by connecting borrowers and lenders.

TECH TALK: The Digital Divide: Software

4. Software

The USD 100 Desktop Computer in a thin client-thick server configuration provide the computing base to help proliferate technology much beyond the numbers we have seen in the past 25 years. In the past quarter century, coinciding with the dominance of Microsoft in software, the installed computer has gone from nearly nothing to 500 million. There is an opportunity of a similar magnitude in the next 7-10 years: to build the software platform for the next 500 million computers which will be adopted by people and organisations living and serving the other side of the digital divide.

This software platform cannot cost hundreds of dollars for software. The result at these price points is there in front of us: large-scale piracy which hinders the incentive for software makers to targets these markets. Software has to be thought bottom-up in an innovative manner which that the entire suite of applications is available for no more than USD 5 (Rs 250) per person per month. This calls for an organisation to investing the equivalent of Rs 10 per business day on each of its employees for software. They will do so if they can see the productivity improvements at least yielding them that much benefit per day. Thought of in this manner, software becomes much more of a utility than an IT accessory.

To achieve these price points, software will need to be built on an open source platform, but with incentives for developers to spend time localising and customizing applications for the needs of their markets. The building blocks already exist: Linux as the operating system, KDE and Gnome as the graphical user interfaces, Mozilla as the email client and Web browser, Jabber for instant messaging, OpenOffice (which has served as the base for Star Office – Sun will soon be charging USD 100 for Star Office) for the suite of desktop productivity applications (including a word processor, a spreadsheet and presentation software) and Apache as the web server. What is needed is for software developers to build “Lego-like” on top of these applications and contribute their work back to the open source community, strengthening and extending the base.

Software applications for bridging the digital divide will need to support local languages and voice input/output. In India itself, there are over fifteen languages in use. Technology must connect to the people in their language. Voice becomes important because the keyboard may not always be the best mode of input, especially given the complexities of some of the languages. With a limited vocabulary, it should be possible to make voice recognition work well to interact with a much larger mass of people than just English can enable.

TECH TALK: Digital Divide: Cellphones

5. Cellphones

The number of mobile-telephone subscribers will overtake that of fixed subscribers this year, according to new figures from the International Telecommunications Union, says the Economist (April 6, 2002). It continues: “The boom in mobile telephony has helped the world’s least developed countries above the important threshold of one telephone subscriber per 100 inhabitants.” This compares with 120 fixed lines and mobile users per 100 inhabitants in advanced countries and 20 in emerging countries.

Phones (fixed and mobile) are a great way to bridge the digital divide. A phone cuts away the isolation of the individual. It becomes a window to the world (just like television) – the difference being that the phone can be used much more as business tool. The cost of a GSM phone has fallen dramatically and is available for less than USD 100 (Rs 5,000). Prepaid phone cards are helping the bottom of the pyramid adopt a mobile phone as the primary mode of communications.

In many places, a cellphone helps provide connectivity to a community. Writes Kumar Venkat: “[In each village in Bangladesh], an entrepreneur purchases cellphone service from a subsidiary of Grameen Bank, and operates a pay-per-call service that in effect connects the whole village to the telephone network.”

The cellphone can also open up better business opportunities. In Kerala, for example, fishermen use their cellphones to check prices of fish with different seafood markets. Writes Saritha Rai in The New York Times (August 4, 2001):

In the seas southwest of Bangalore off the coast of southern India, the steady drone of motorized fishing boats is often interrupted by the ringing of mobile phones. Even as they land their catch in the boats, fishermen are already in touch with the dozen-odd seafood markets around here, checking prices at different ports.

One fisherman, Ratish Karthikeyan, says that since he acquired his BPL mobile service over a year ago, his profit on each eight-day fishing run in his trawler has doubled. Two months ago, for instance, Mr. Karthikeyan, 35, netted an extra $1,000 by using his phone to compare prices at Cochin with those at Quilon, a port 85 miles away.

The 5,000 fishermen who work off the coast of Kerala state are not alone in embracing wireless technology. From garment exporters in Tiruppur in the south to farmers in Punjab in the north, rural India has discovered the convenience of doing business on mobile phones. Many areas have never had conventional fixed-line service.

“As farmers and small-business men realize the impact of mobile communications on the pace and efficiency of their lives, usage is shooting up rapidly,” said Sandip Das, the chief executive of Fascel.

“Life without a mobile phone,” said Mr. Karthikeyan, the Cochin fisherman, “is unthinkable.”

TECH TALK: The Digital Divide: Statistics

Before we continue with our ideas to bridge the digital divide, a couple quotes to start this week to help put the digital divide in perspective. The first is from an email sent by a friend (not clear where it originated, but the point made is striking):

If we could shrink the earth’s population to a village of precisely 100 people, with all the existing human ratios remaining the same, it would look something like the following:

There would be:

57 Asians
21 Europeans
14 from the Western Hemisphere, both north and south
8 Africans

52 would be female
48 would be male

70 would be nonwhite

30 would be white

70 would be non-Christian
30 would be Christian

80 would live in substandard housing
70 would be unable to read
50 would suffer from malnutrition

1 would be near death

1 would be near birth

1 (yes, only 1) would have a college education
1 would own a computer

An article by Kumar Venkat in IEEE Spectrum (February 2002) adds additional perspective:

More than 96 percent of computers connected to the Internet are in the wealthiest nations, home to 15 percent of the world’s population. Nearly 60 percent of the US population has some access to the Internet, a distribution that is highly correlated to with household income.

In India, less than 0.5 percent of the population has Internet access – which translates to about 5 million with high enough income levels, education, and computer skills in a country of one billion people.

A Deutsche Bank research report (August 15, 2001) adds:

  • The high-income countries (annual per capita income more than USD 4,650) make up a mere 15% of the world population but possess more than 60% of the global telephone lines and almost 70% of all the mobile telephones in the world.
  • GreaterTokyo has more telephone connections than Africa.
  • Low-income countries (annual per capita income below USD 470) account for 60% of the world population but only 5% of all internet users.
  • 30% of all inhabitants of high-income countries use the internet, as opposed to a mere 1.5% in low-income countries.
  • There are more internet users in New York City than on the entire African continent.
  • Annual per capita investment on information infrastructure in 2000 aggregated USD 115 in the OECD countries but just USD 19 in the rest of the world.

The mix of “emerging markets, emerging technologies and emerging organisations” is what we in India should be thinking of – if we can make innovative solutions work in India, we definitely can extend them to the other markets which have similarities to India. The numbers are on our side: the emerging markets are home to more than 4 billion (two-third of the world’s population) and perhaps 15-20 small and medium enterprises. Bridging the digital divide is perhaps the biggest challenge and opportunity for our generation.

TECH TALK: The Digital Divide: Thin Client and Thick Server

2.The Thin Client.

The USD 100 desktop computer needs to provide all the functionalities that users are accustomed to seeing on a computer in the corporate environment: a Graphical User Interface (GUI) with multiple windows, email, instant messaging, a Read-Write Environment for documents, spreadsheets and presentations, and a web browser. But none of these applications actually need to run on the local desktop.

Think back to the late 1980s and early 1990s when Novell ruled the networked environment. The desktop was almost like a dumb terminal with applications coming from the thick server. To achieve the price point of USD 100 on the desktop, the hard disk and CD need to be eliminated and applications need to be served from the “thick server”.

This “lite desktop” makes for easy management and administration of the desktop – there really isn’t much to do! If a desktop hardware gives a problem, simply replace it with another system since all desktops are uniformly featureless. A person can use any desktop to connect to the server.

3. …and Thick Server

The Thin Client talks to a Thick Server, which could be any machine being marketed as a desktop today.

All the mails, files and user preferences are stored on the
server. All applications are also stored on the server, which is
connected to the Internet for updates. The thick server simplifies the
IT infrastructure management dramatically and lends itself well to
remote management. This is important because many of the small and
medium enterprises will not have the requisite technical staff to
manage the servers (which by themselves will need little
administration).

The Thin Client-Thick Server combination may seem a radical idea in a world of USD 1,500 desktop machines which have 1 GHz processors, 1 GB RAM and 40 GB hard disks as base configuration. But let’s not forget our target audience: users who are being exposed to computers in businesses for the first time. For such a tech-starved audience, a beginning needs to be made. Remember our first taste of computing in universities? It is more than likely it was a simple terminal. The next 500 million users are just as hungry as we were a decade ago.

The Internet is the one big difference from the early 1990s. It is the glue to interconnect people and enterprises, and also serves as the distribution medium for content and software. Sun’s vision of the “Network as Computer” is perhaps much more relevant as a platform to bridge the digital divide and build a foundation for making computing a utility.

TECH TALK: The Digital Divide: The USD 100 Desktop Computer

1. The USD 100 Desktop Computer

It is an idea I have talked about before. The computer may not be the panacea, but it is a very important component of the technology world. It is an extremely versatile device. In the last 20 years, the installed base of computers has exceeded 500 million. The majority of these computers are in the developed world – in companies, government and homes. In countries like the US, whoever needed a computer has one now. With the price of a computer being a fraction of the monthly salary of a person, the computer has made huge inroads as a productivity and entertainment platform.

Computers are critical components in the entire enterprise value chain at every stage. This is not the case yet in many of the developing markets. In most enterprises, no more than 1 in 20 people uses a computer. This needs to change. This means that the price of the computer has to be a fraction of the monthly salary of a person – in local currency.

We still see 10-year-old cars on the roads. Companies buy second hand manufacturing plants. But somehow, with technology, we always want things new. I don’t see why this has to be the case. The Wintel combination and their partners have done a great marketing job in creating a demand for the newest machines and software they keep coming up with it.

The result is that it is impossible to find a 486-based system or Windows 98 or Microsoft Office 97 being sold in the market even though they may be adequate for many of our needs. The industry’s interest is in moving us forward. That may be true for a small fraction of users on the wrong side of the digital divide but certainly not for the masses.

To make computing an integral part of business and personal lives, the price point for the next 500 million computers needs to be reset to USD 100. This is not going to happen by creating new computers (which means RD expenditure and time) but through the use of discarded computers from the developed markets. As the developed countries upgrade their systems, the older computers can be moved to the emerging markets. The base price of the system now becomes a handful of dollars, to which gets added shipping, distribution and support costs.

Computers have become an environmental problem for the developed markets. Disposing and recycling computers – most of which are in perfectly working condition – is not easy in countries like USA and Japan. Not only would sending these 3-4 year-old machines to the emerging markets solve the disposal problem, it would also create a potentially bigger market for the entire industry in a few years as the bottom of the pyramid tastes computing.

TECH TALK: The Digital Divide: Building Bridges

Can Information and Communications Technologies (ICT) bridge the digital divide? Over this week and next, I will present a number of ideas which can help. Taken individually, they may seem like small, incremental steps. But taken together, I believe they can help developing countries like India and many of the small and medium-sized enterprises pull up to a level-playing field.

First, a brief discussion on the characteristics that the ideas need to have:

Cost: The price-points have to be affordable to the mass markets. This limits usage technology priced in the local currency equivalent of US dollars. Such technologies need to be shared but cannot be adopted by markets of one. Cost is perhaps one of the most critical factors which will govern adoption.

Integration: We need to think in terms of a “whole solution” rather than providing just the components. The whole has greater value than the sum of the parts.

Localisation: This becomes important because we are dealing with many markets. Each market has its nuances which have to be factored in. This means that we need to perhaps provide a significant part of the solution as a platform with room for some customisation for specific markets and verticals.

Low RD: One has to leverage the work done in the past by the developed markets. Spending on research and development is not something which is affordable – both in terms of time and cost.

Standards: These ideas should try and stick to established standards, rather than try and create new ones. A good example is the adoption of GSM in the East Asian countries for the mobile telephony business. This decision has helped these countries (including India) leverage off the work done by the cellphone companies in Europe and keep the costs of the phones down, leading to much broader adoption.

Technology may not be the only answer to bridging the digital divide. But it provides the foundation on which many solutions can be built. Writes the Economost (July 12, 2001):

The evidence that technology helps development is strong. The decline in mortality rates that took more than 150 years in the now-developed world took only 40 years in the developing world, in large part thanks to antibiotics and vaccines. Technological innovations in plant-breeding, fertilisers and pesticides have doubled the world’s cereal output in a mere 40 years, compared with the 1,000 years that it took English wheat yields to quadruple. More recently, the development of oral rehydration packets, a simple solution of sugar and salt that increases the absorption of liquids, has cut the cost of treating diarrhoea and saved millions of lives.

In these columns, my focus will be more on ideas with an infotech slant. Obviously, advances in other areas like biotech also can make a big difference. The aim is to spur thinking and seed entrepreneurial thinking. Many of us live in (or have come from) the world’s emerging markets. Who better than us to solve the problems we are most familiar with?

TECH TALK: The Digital Divide: Comments

Let us take a look at what various commentators and journalists have said about the digital divide. First, Stuart Brotman writing in the Technology Review:

[The digital divide] conversations encompass multiple perspectives and options-everything from giving schools, community organizations and citizens of lesser-developed countries broader access to computers and the Internet to simply letting market forces run their course.

The Luddites, for example, argue that no digital divide exists because technology doesn’t really organize anything. The Technologists believe that with a few government policy tweaks, hardware and software dispersion through the marketplace will address any gaps. The Market Adherents say that market forces will eliminate the divide without any government involvement. Meanwhile, the Digital Egalitarians want to mandate equal access to technological tools throughout all strata of society, the Digital Democrats seek a political order that enables all people to participate as e-citizens in a cyberdemocracy, and the Globalists view the divide as proof that the United States is digitally isolating itself from the rest of the global economy. In short, there are many perspectives, but no encompassing view.

The digital divide is not only about offering Internet access to every citizen, nor is it only about social policy or computer penetration. The stakes are in fact much greater. Creating what I call the “digital dividend” will enable businesses to thrive at a new level of postindustrial innovation. The digital dividend is the set of outcomes that the private sector can achieve by promoting widespread penetration and use of digital technologies. Within companies, this can translate into better-trained, more productive employees; outside, it can lead to expanded sales and marketing opportunities at home and abroad, as well as a more diverse supply chain.

CK Prahalad and Stuart Hart, in their article in Strategy+Business entitled “The Fortune at the Bottom of the Pyramid” talk about how the low-income markets present a (counter-intuitive) opportunity for the world’s wealthiest companies:

Doing business with the world’s 4 billion poorest people – two-thirds of the world’s population – will require radical innovations in technology and business models. It will require MNCs to reevaluate price-performance relationships for products and services. It will demand a new level of capital efficiency and new ways of measuring financial success. Companies will be forced to transform their understanding of scale, from a “bigger is better” ideal to an ideal of highly distributed small-scale operations married to world-scale capabilities.

At the very top of the world economic pyramid are 75 to 100 million affluent Tier 1 consumers from around the world. This is a cosmopolitan group composed of middle- and upper-income people in developed countries and the few rich elites from the developing world. In the middle of the pyramid, in Tiers 2 and 3, are poor customers in developed nations and the rising middle classes in developing countries, the targets of MNCs’ past emerging-market strategies.

Now consider the 4 billion people in Tier 4, at the bottom of the pyramid. Their annual per capita income – based on purchasing power parity in U.S. dollars – is less than $1,500, the minimum considered necessary to sustain a decent life. For well over a billion people – roughly one-sixth of humanity – per capita income is less than $1 per day.

The perception that the bottom of the pyramid is not a viable market also fails to take into account the growing importance of the informal economy among the poorest of the poor, which by some estimates accounts for 40 to 60 percent of all economic activity in developing countries. Most Tier 4 people live in rural villages, or urban slums and shantytowns, and they usually do not hold legal title or deed to their assets (e.g., dwellings, farms, businesses). They have little or no formal education and are hard to reach via conventional distribution, credit, and communications. The quality and quantity of products and services available in Tier 4 is generally low. Therefore, much like an iceberg with only its tip in plain view, this massive segment of the global population – along with its massive market opportunities – has remained largely invisible to the corporate sector.

TECH TALK: The Digital Divide

A friend of mine called asking if I had any articles on the “digital divide”. He was making a presentation on that topic. As I searched through my collection, I found quite a few which I emailed him. But it also set me thinking: what exactly is the digital divide? What can be done to bridge it? Is it ever going to get bridged? What are the success stories from which we can learn?

The “digital divide” is the gap in technology (computing and communications) usage and access. This manifests itself in many different ways: between the big companies and the smaller companies, between the people in developed markets and those in the emerging markets, between the urban and rural populations in the emerging markets.

From bridges.org comes a more formal definition:

Simply put, “the digital divide” means that between countries and between different groups of people within countries, there is a wide division between those who have real access to information and communications technology and are using it effectively, and those who don’t.

Since information and communications technologies (ICTs) are increasingly becoming a foundation of our societies and economies, the digital divide means that the “information have-nots” are denied the option to participate in new ICT jobs, in e-government, in ICTs improved healthcare, and in ICT enhanced education.

More often than not, the “information have-nots” are in developing countries, and in disadvantaged groups within countries. The digital divide is thus a lost opportunity — the opportunity for the information “have-nots” to use ICTs to improve their lives.

The divide is brought about by differences in education, language and income levels. The education divide limits the usage of computing. A computer is a versatile platform, and it needs the users to define what they can do with it. With illiteracy levels still high in many of the emerging markets, the adoption of technology is minimal. Language in countries like India is another barrier because most software is still only in English. The perceived market is too small to make investments in creating software for the mass market in many different languages, because companies are not sure if they will recoup their investments. Income levels are a huge obstacle – most technology is still denominated in dollars, which makes adoption beyond the scope of most individuals and enterprises, for whom earnings are in local currencies with unfavourable exchange rates against the dollar.

The result is the division of the world into two – one which has access to computers, communications and the Internet, and one which does not. Taking ideas and technologies from the first to the second does not work well because the two worlds are quite different. What is common is the need for the use of technology – that is the undeniable truth of today’s life and business. What is needed are technologies which can bridge the digital divide and create a digital dividend for the have-nots.

TECH TALK: Emerging Enterprises and Emergent Networks: Looking Ahead

For the first time, the Small and medium enterprises (SMEs) of the world, especially those in emerging markets, are being empowered by technology. As technology becomes affordable, it will downstream to the bottom of the enterprise pyramid creating a world of business very different from the one we see today, one in which the smaller companies can also make a difference, especially if they can form online clusters.

Look at some of the numbers. There are, according to Dun and Bradstreet, 3.2 million small-scale industries (SSIs) in India. The computer base in India is about 6.5 million, of which 3.5 million computers have been sold in the past 3 years. Of this, about 1 million would have gone into homes and at least 1 million would have been bought by the bigger companies. The SMEs have thus bought less than 1.5 million computers in the past 3 years. The SMEs put together, by my estimate, must be employing well in excess of 50 million people.

The problem of course is the cost of technology, which is dollar-denominated. In the US, it is easy to spend USD 3,000 on computing (hardware, software, maintenance) for a person. It amounts to less than 10% of the salary of the person using it. In India, that figure remains the same (assuming people have to buy legal software). But the same money in India becomes a multiple of a person’s salary, rendering it unaffordable for the mass corporate market.

What if this were to change? What if the real cost of computing were to be brought down to 10% of the salary of the person in India? This means a 70-90% reduction in the cost of technology. This would dramatically change adoption levels – my bet is that sales of computers would go up by a factor of 3-5. The amplification power of the penetration of technology within enterprises would be huge across the economy as people start interacting electronically and technology makes possible the “near-real-time economy” in India. Productivity would go up, inefficiencies across the supply chain would come down, and a computer-literate workforce by the millions would open up global opportunities for their enterprises.

Small businesses have typically lagged big businesses in technology adoption by 3-5 years. SMEs are only just starting to adopt technology. As they do so, there is an opportunity for entrepreneurs worldwide to empower SMEs using a mix of existing technology components and innovative thinking. This new enterprise mass market thinks of technology as a utility, as a way to bridge the digital divide across companies and across markets.

As employees and enterprises go online with a PC on every desktop, online clusters of enterprises and people will give greater voice and power to the group hitherto which has mostly been only partially connected to global networks. This may be as unimaginable as the prospect of a million bloggers was a year ago. But it is a future which is rapidly emerging at light speed.

TECH TALK: Emerging Enterprises and Emergent Networks: Journalism 3.0

A pivotal moment in the world of journalism happened last week at the PC Forum in Arizona. Dan Gillmor of the San Jose Mercury News was blogging a panel discussion being made on his website through a Wi-Fi connection. As it turned out, one of the panelists was reading Gillmor’s blogs and actually corrected one of the points made by Gillmor, which Gillmor promptly posted on his blog. The feedback loop was completed. Gillmor later posted his thoughts about “Journalism 3.0”:

It’s based on several principles, including:

  • My readers know more than I do;
  • That is not a threat, but rather an opportunity;
  • We can use this together to create something between a seminar and a conversation, educating all of us;
  • Interactivity and communications technology — in the form of e-mail, weblogs, discussion boards, websites and more — make it happen.

In the near-term, expect changes in the way we get our news. Amateur journalists have already started providing views on developments as they happen on their weblogs. They may not have the finish of an edited article in a mainstream publication, but that’s more than made up by their freshness and rawness. News in the future is going to be more inclusive as many more people have the ability to write and be read.

This is echoed by Dave Winer, a blogger himself (Scripting.com):

As with personal computing, the early days of Web publishing belonged to the hobbyists, reveling that it worked at all. But the Web is maturing, the tools are getting easy, as the understanding of the technology has become widespread. Serious professional journalists use the new tools, moonlighting, publishing the news they don’t or can’t sell to the big publications who employ them.

At the same time, we’re returning to what I call amateur journalism, people writing for the public for the love of writing, without any expectation of financial compensation. This process is fed by the changing economics of the publishing industry which is employing fewer reporters, editors and writers. But the Web has taught us to expect more information, not less, and that’s the sea-change that the NY Times and other big publications face — how to remain relevant in the face of a population that can do for themselves what the BigPubs won’t.

Writes Dale Peskin in an article entitled “The Future of News: Preparing for the Coming Era of Participatory News”:

As an interconnected society moves toward participating in the news, the Brotherhood of News seeks to protect its values and exert its control. Just as zero changed the equation shaping humanity’s vision of the universe, accessible media changes the equation that shapes news and informs society. Everyone is a journalist in the age of access. But for most news organizations, collaboration with their audience is an irrational concept, a dangerous idea.

Storytellers – specialists in the art of conveying human emotions — rule this future. And in this future, everyone is a storyteller. Everyone creates the collective experience. Everyone creates the collective intelligence.

We would travel backward and forward in a loop. Time is never linear. Neither are its stories. They are organic, always growing and changing. They have no beginning, middle or end.

How to travel? The Web. From there we go where imagination leads. On the Web, imagination takes an interconnected society on a journey of timeless discovery through words, images and interaction. Instead of writing essays we would build a site. We would create experiences. We would make stories.

Our stories will take us beyond convergence to emergence. There, news becomes the product of a universally distributed intelligence that develops from an interconnected society enabled by interactive media. It occurs in real time, self-regulating, constantly enhanced. The connections enabled by media lead to mutual recognition and enrichment of individuals, rather than a cult of communities and institutions.

The calculus for the fundamental unity of knowledge emerges. The guiding tenets: No one knows everything. Everyone knows something. All knowledge resides in humanity.

Something similar can happen in the world of business, driven by the emergent networks formed by the small and medium enterprises.

TECH TALK: Emerging Enterprises and Emergent Networks: Emergent Networks

Small and medium enterprises (SMEs) have long remained in silos, isolated and islands of information. At best, they have been hubs connected to the spokes (the bigger companies, whom they may be doing business with). They have never been able to easily connect together. This is what the combination of the technology infrastructure within the SMEs along with the creation of self-organising SME Clusters on the Web makes possible – for the first time, they can now interact much more deeply with each other. The Ants start talking. These interactions and feedback will help build out an Emergent system, where the collective intelligence is far greater than that of the individual entities.

Why is this important? Because in today’s world, the voice of business belongs to the ones who are Big and can spend the most, and not necessarily to the majority. Look at what happened just before the Indian Budget in February. The newspapers were full of reports of the “representations” made by various industry associations on their demands for the Budget. But whose voices were they? In most cases, only those of the bigger member companies who could afford to send people to make pitches before the managing committees. The smaller companies just go about doing their business, silently.

But what if this silent majority could interact together? It is not easy (from a logistics and cost point of view) for the smaller companies to meet up together physically. This is where the SME Cluster Blogs come in – on the Net, they can voice their opinions and collectively, push up the good ideas and pull down the bad ones. No single entity can dominate, and yet collectively, they will wield enough power to make themselves heard. The SME Clusters give voice to the silent majority.

The only way this can happen is via the Internet. Just like an eBay could never have been possible in the physical world. For this, it is important first for SMEs to build up their own IT infrastructure and get “plugged” into the flow of information – through cost-effective hardware, software and communications. The logical next step then becomes to aggregate the SMEs together into online communities.

A lot of this may seem very speculative or implausible. But changes are afoot in the world of technology, which are going to make these emergent networks happen in the coming years. One indication of this is how journalism is going to change in the near future.