SME Tech Utility

Computing and Communications continue to be very expensive for SMEs in emerging markets. The result is low penetration of computer hardware, limited use and/or piracy of software and limited, low-speed connectivity to the Internet. These factors (concomitant with the inherent cost barrier of computers, software and communications) ensure that SMEs continue to be very people- and paper-reliant.

In fact, in India the installed base of PCs is less than 6 million (offices and homes), with the addition of 1.8 million new units annually. This is ridiculously small. In fact, in a shocking state of affairs, PC sales for 2001-2 have been more or less flat compared to the previous year.

Even as the world moves inexorably to ubiquitous connectivity, the lack of appropriate technology deployment within SMEs places them at a significant disadvantage as compared to the bigger companies and their counterparts in the developed markets. This should not be so. SMEs should be empowered with the latest technologies in a cost-effective manner, and as a collective they should be able to wield power, make themselves heard, and garner more business. We want to bring about an epidemic of change in the SME Technology infrastructure.

One point: here, when I am talking of SMEs, I intend to refer to not only the small and medium sized companies, but also those independent decision-making units in the BigCos (especially in the emerging markets) who are cost-sensitive. Many of the ideas described here apply equally well to them because there are few who can afford to spend in dollars per employee (since for most, their revenues are still local currency). This thinking helps grow the market dramatically, and in fact these BigCo SME units could be among the early adopters helping us achieve scale and volumes much faster.

A Connected Computer on every Desktop

My starting premise is that every SME should be able to afford a desktop PC for each employee, regardless of salary. The productivity impact of computers is beyond doubt. Any person in the coming earning more than USD 150 (Rs 7,500) per month should be given a connected computer for no more than 10% of the cost of his salary. Today, PC penetrations in SMEs are perhaps at 5-10% (or less) in countries like India. What we are suggesting is a 5-10x increase in the deployment of PCs, along with the software they need to communicate, collaborate and manage their business.

Our target is to provide a computing and communications platform for SMEs for the equivalent of a one-time, upfront payment of USD 100 (RS 5,000) per person, USD 500 (Rs 25,000) per location, and USD 5 (Rs 250) subscription fee per person per month. For this investment, SMEs should be able to give a desktop computer with connectivity to the Internet to each of their employees and all the software needed from messaging, security, collaboration to the enterprise applications.

Hardware in our case follows the 30-30 Rule: providing 30% of the functionality at 30% of the price. Thus, we dont need USD 300 computers on the desktop but USD 100 machines. Software follows the 10-10-10 Principle: 10 times the applications, 10 times the speed (since it is on the LAN), at one-10th the price (of a single application). Communications is the paradise of the commons, built bottom-up using open spectrum.

Thus, the internal IT architecture of SMEs will be as follows:

Used PCs as Desktops, serving as Thin Clients, running Linux and a Windowing System; without hard disks and CD drives; booting off the network. The used PC configuration can be as low as 486 machines with 32 MB RAM. By simplifying the desktop PC, maintenance becomes very easy: in the event of any problem, just replace it with another PC. In fact, the PCs too are interchangeable since all data is stored on the server.

Current Desktop as an Enterprise Server, at a cost of about USD 500. This will host all the software and content for the desktops, along with the mail, files and preferences. The desktops work as thin clients, with this thick server. All that is required is to use the latest desktop configuration available in the market as the server. Since all the access from the clients is to the server, there is no dependency on a real-time network connection, even though this is likely to be there.

Communications: Use 802.11 technology within the enterprise and for external connectivity. 802.11b works with open spectrum (2.4 Ghz) at 11 Mbps, which puts it in the same range as the 10 Mbps Ethernet we have been familiar with. By using 802.11 within the enterprise, it simplifies the whole networking exercise. No need to lay cables, which again requires maintenance. Put a wireless access point in neighbourhoods (managed by entrepreneurs, akin to how the cable TV revolution began in India in the early 1990s). This ensures that there is high-speed, shared bandwidth available across multiple enterprises. 802.11 technology can also be used in rural and semi-urban areas through the use of directional antennas to support access over greater distances. What is effectively an alternate (adjunct) technology in countries like the US can become a mainstream technology in countries like India.

Software: Software will be available on the Enterprise Server. By making all software available on the Enterprise Server on the LAN, we bypass the low-speed and real-time Net connectivity bottleneck. So, its an ASP model, but the ASP sits on the corporate LAN. The software created, especially the enterprise software, will need to adhere to the various business process standards that are being drafted ebXML and RosettaNet are two examples. My belief is that SMEs will be willing to change some of their business processes they have anyways evolved their processes internally. By standardizing business processes, we can now do three things: create more standardized software for use by increasing numbers of SMEs, standardize the data flow via XML across enterprises and also allow SMEs to work together for bigger projects (since they start resembling an extended, virtual company).

There are four types of software which are needed (the first three are common across industries, while the fourth is customised per industry):

Server Software to enable Messaging (Email, IM, SMS) and Collaboration this is akin to what is available in MS-Exchange and Lotus Notes today. Along with this, we also want to make available software for Website management, Content management (especially, weblogs), software for the creation of Intranets within the company, and Security Software (firewall, proxy, anti-virus and VPN). The Server software will interact with its peers within the company (in the case of multiple locations) to replicate data; this will be done via the Central Servers on the Internet.

Client Applications for Email, IM, Web Browser, Office Productivity (word processor, spreadsheet, presentation with data formats compliant with MS-Office), Acrobat, multimedia (audio, video, image management). These will all run off the server but available via the thin client on the desktop. All storage will be done centrally on the server.

Enterprise Applications (Generic) will be in the form of building blocks which perhaps do 70-80% of what the company and industry needs. One of they requirements for the enterprise applications is integration data should be entered only once, and available across the vertical applications. Enterprise Information cannot reside in silos. This is the notion of an e-business suite which Oracle and others talk about.

Enterprise Applications (Industry-specific) are created by third parties on top of the Web Services platform we will make available. Some of these applications may be priced additionally.

Building an Ecosystem

I dont think we can create every software application that will be needed. What we want to do is to use a Reverse Walmart strategy. In Walmart, as specific products become popular, Walmart looks to replace or complement some of them with cheaper in-store brands, which have higher margins. We will do the reverse. We will start by using in-store software which has been developed by us so that we can seed the entire exercise. At the same time, we will publish the APIs and XML data formats for the modules, so others can develop replacements (or in fact, better versions) for the software. These then can be made available to SMEs for small, additional fees depending on their needs.

This strategy helps us to build an ecosystem around what we are doing. We want to build the platform, and not necessarily all the applications. Over time, this makes us an SME aggregation and distribution system (like Walmart is a mass market customers aggregation and products distribution system).

Used PCs: From Where?

A big question is on the Used PCs. Where are they going to come from? We have to figure out the supply chain of second-hand PCs in the developed markets, especially US and then see how to aggregate them and transport them to India and the other markets, and then test/certify them for use in the SMEs. This is a big challenge and one of the key unknowns as of now. It is also a very critical component in our vision of bringing down the cost dramatically. Unless the cost comes down to the USD 100 level, volumes will not take off. And without the desktops, our software market will be very small (since we are charging per person). The only way, according to me, to bring down the cost to the USD 100 level is by using second hand PCs there is no new PC whatever be the configuration which can be made available at that price point. We do not want to create, we want to aggregate. The PCs are already there, we need to figure out the supply chain to get them to the desktops of SMEs in the emerging markets.

Thin Client, Thick Server

This is our view of the new tech infrastructure for SMEs. Low-cost (USD 100) desktops and USD 5 monthly subscription for software. The Thin Client and Thick Server run Linux. The cost reduction (for the desktop, as compared to what’s available now) will help push computers further down the organisations in emerging markets.

Thin Client: Runs Linux on the desktop (KDE), along with the basic set of applications — Mail (Evolution), Browser (Mozilla), Office equivalent (OpenOffice), and a few others. Later, we’ll add on our Digital Dashboard to extend to a new, simpler and collaborative read-write environment. We should be able to user 3-4 year-old machines as desktops. No local storage. Use a floppy (or later, an in-built EPROM) to boot. The Linux Desktop vision will become a reality via the Thin Clients for the next set of computer users.

Thick Server: All the applications and Linux terminals for the desktop run on the server. Mails, Files and Preferences are all stored on the server. The three layers of applications: System (file, dhcp, print), Messaging (email, IM), Collaboration (calendar, digital dashboard), Enterprise Software (ERP, CRM, SCM, etc.).

We are currently working on deploying the Thin Client-Thick Server architecture within our company for our 30 users. There are three types of users: New Users, Existing users of Linux, Existing users of Windows. A different strategy needs to be used for each of the three sets. Once we have deployed this internally, then we want to talk to some of our Messaging clients and get them to deploy it within their enterprise, empowering the rest of their enterprise with computing.

Digital Dashboard

The aim is to create a new read-write environment on the desktop (thin client) built on instant outlining and weblogging for use within the organisation. This takes the idea of blogs (knowledge blogs, narratives, story-telling) to its logical conclusion in the context of the enterprise. This will be built using XML-RPC/SOAP, RSS, OPML and Jabber as the building blocks.

Instant Outlining is the first step. Outlining helps people to write hierarchically. Instant Outlining takes what they have written and enables it to be shared with others. Most of the “new users” (new to computers) need a simple read-write environment. The Outliner is a good start. It needs to be placed it in a collaborative context. This is where Jabber can come in — it plays the role of an “XML information router.” Userland’s Radio with its Outliner is a good example, but USD 40 per desktop is too expensive for the market we want to market.

Weblogs are the next step. Outliners are good for short points, and are more likely to be arranged by task/person/project. Blogs complement outliners in that they are naturally suited for longer writing and doing so chronologically (organised by time).

What we want to do is to use Instant Outlining and Weblogs to build a read-write environment which complements (or even reduces the need for) Mail and the Word Processor.

We are currently working on first putting together an Outliner under Linux, which works within a web browser. Then, extend it to become an Instant Outliner, so outlines can be shared across others in the enterprise. Later, add on the Blogging component.

Future

The Digital Dashboard can now become the platform to deliver Web Services. I can subscribe to specific services which can show up as “buddies” in my IM window, along with People and Outlines. Think of the Dashboard as a simpler version of an enterprise information portal.

BlogStreet

We’ve been working on a Weblog Directory and Indexing Engine. I’ve done a niche directory and search engine once before: Khoj, which focused on India, was launched in March 1997. There are some sites already for blogs which aggregate listings and links, namely Daypop, Blogdex, Weblogs.com, among others. Nick Denton’s planning one too. So, what are our plans and what is it that we will do differently?

The Basics: We have to get the basics right. This means launching with the following: a directory of a few hundred blogs, classified into categories (or interests), a search which first looks at the entries and then the botted pages from the blogs (based on both keywords and URLs), updation (add, edit, delete, move, suggest), a blog daily which talks about what’s new in the world of blogs (a bit on the lines of Corante’s MicroContentNews but also focusing more on the weblogs themselves), a reference section and same basic link analysis on the lines of Daypop and Blogdex. Once we do all this, we are ready for launch. We’ve got about 150 blogs categorised, the botting begins shortly, the search engine is based on htdig. We are hoping to launch before May-end. This, though, is just the start — “hygeine”.

Next Steps: There are a number of tracks we intend to work on once the site is launched: grow the listing of blogs (hopefully, with suggestions from readers), focus on the clusters and group networks that blogs enable, enable personalisation and make it two-way. I’ll talk more about these topics in the coming weeks.

Rationale

BlogStreet builds on a theme I like: value-added aggregation. While a Google is always going to be around, there is plenty of room for smaller, niche, nimble players who can focus on doing one thing and doing it well. Its, in Winer’s world, BigCos vs the ISVs, a Microsoft vs Userland. The SmallCo can carve out its own space in the world, and thats exactly what we hope BlogStreet will do in the intersected world of Blogs and Search.

My belief is that blogging is not a fad but is something much more fundamental. It is a very fascinating world of networks and (micro)communities which is being formed. [See: Blogging: an introduction and overview, Emerging Enterprises and Emergent Networks (in this I talk about Knowledge Blogs), and India’s Next Decade (one of the articles in this as part of the discussion on the next WWW is on Weblogs).]

By creating a blog-specific portal, we are hoping we will get recognition and noticed in the right circles (!) globally. It is not necessary for us to be only in US or Europe to be at the cutting edge of the New WWW. Ours is a test case in itself: can a small company out of an emerging market like India use knowledge combined with innovative and entrepreneurial thinking to build out its business. I’ve learnt a lot reading Dave Winer’s Scripting.comin the past year: my goal is to make Emergic.Org and BlogStreet as must-see sites daily for people, wherever they are.

Radio: Window to the World

WSJ.com: In Impoverished Niger, Radio Provides Missing Links in Chain of Development (subscription needed): In today’s world (the one we all live in), life without the computer is unimaginable. But for many in the world, the radio is still the window to the outside world.

Radio “is the missing link in the development chain,” says Steven Ursino, director of the United Nations Development Program, or UNDP, in Niger. With its manageable, cheap technology, it goes to places the Internet can’t, beyond the reach of electricity and telephones. It demands the participation of the villagers and can become the soul of a community. Above all, it stimulates communication in the local languages that is vital in attacking problems such as AIDS. “It gives the people a voice,” Mr. Ursino says.

At Radio Goudel, the digital divide between Niger and the developed world opens wide. In one room of the station, several computers are covered by plastic sheets, rendered useless by a lack of spare parts. In the next room, technicians from stations around the country learn how to repair the simple wind-up radios from the Freeplay Foundation of London, which is mainly funded by the Freeplay Energy Group, maker of the self-powered products.

I still begin my day listening to the BBC World News on my shortwave radio — a habit which was formed in my childhood. There’s just so much happening in the world to know about. Radio lets me concentrate on the event and the news, rather than be distracted by the pictures.

Online News Sites

News Sites Repeat Mistakes Of the Past by Steve Outing: An excellent article on what’s wrong with news sites and what they need to do (via Arun Katiyar). Here’s an extract:

Online news managers need to look deeper. Look at what others in the online community space are doing. They’re not hard to find. Look at Slashdot.org, or the newer Kuro5hin, both online communities where the users control the experience. Kuro5hin is designed to be the antithesis of the typical news organization. Its users come together in an online community and select the content they want to publish, comment on it, and debate. It’s a debating society melded with a news publication.

Kuro5hin founder Rusty Foster (who is a programmer, not a journalist) told an audience recently at the USC Online Journalism Conference, “Traditional media needs to get this.” What they need to get is the concept that it’s good to invite readers into your community, and develop online tools to serve that community — to facilitate the building and maintenance of communities of interest.

One of Foster’s ideas that I really like is the notion of building communities of interest (lots of them) around reporters and columnists. Get journalists to go beyond fielding e-mails and participating in discussion forums. Encourage them to use software tools to build an online community where they are at the center, surrounded by readers, fans, and critics who react to what’s been written, suggest new ideas, and even correct the journalist.

This is one thing I’d love to see. People like Louise Kehoe of FT, Walter Mossberg and Rebecca Buckman from WSJ, Peter Lewis from Fortune can become the hubs around which online communities can be built. These are the strengths, the assets of the news sites. They need to set hiding their crown jewels.

In recent months, one of the changes I have seen in our own consumption of news is that I visit weblogs as often, if not more, than the traditional news sites.

BigMac Index and PPP

Economist.com – Big Mac Index: Useful for getting an idea of the Purchasing Power Parity.

An article recently in the Economic Times mentioned India’s PPP factor vs the dollar as 5.24 (or thereabouts), implying a realistic exchange rate Of Rs 9.50 or so to the dollar.

This is useful when we apply it back to tech pricing. It means that a computer costing USD 700 or so in the US should effectively cost 700 * 9.50 = Rs 6,650 in India as against 700 * 50 = Rs 35,000. So, if we can bring down the price of a computer to the PPP equivalent in a country, one will definitely see sales shoot up, creating the IT infrastructure the country needs.

TECH TALK: Reinventing the Future

(Part of the India’s Next Decade series)

Think of what we have seen in the last 20 years of the technology revolution as version 1.0. This has provided a base of 500 million computers and an equivalent number of Internet users worldwide, most of which are in the developing countries. Companies like Intel, Microsoft, Oracle, IBM and Cisco rode the technology transformations well to build out huge power bases and clout. The version 1.0 had as its center of power the US. This was a dollar-denominated technology revolution. What this meant was that only those companies and individuals which would be willing to pay in dollars (or its local currency equivalent) could participate. The doors were closed for everyone else.

Version 2.0 of the revolution will take place in the next decade. It will empower the rest of the world with the benefits of computing and communications. This is a revolution which will be based on purchasing power parity (PPP), which effectively means that the price points have to 10-20% of what they have been in the past. But this revolution will is unlikely to be driven by the likes of Intel and Microsoft. The innovators of the past have an existing gravy train which they will not be willing to give up, creating the opportunities for upstarts to come from below for the next 1 billion users, most of whom are now going to be in the emerging markets of the world. This is the disruptive innovation opportunity which lies ahead for Indian companies.

India has no excuse now to miss out capitalising on the new set of opportunities in the coming years. In 1994, when the previous big disruption happened, it was still early days for India and its software industry. It took until August 1995 to get commercial Internet access in India. Now, in 2002, we have everything going for us a base of engineering talent, inroads into all the top companies in the world and for most of the software companies, and plenty of cash. What we have shown ourselves to be lacking in is envisioning the future.

To invent the future needs thinking which is very different. Computers for Rs 5,000 (the PPP equivalent of USD 700), Software on rent for Rs 250 per month and rock-bottom prices for broadband communications. This is about creating a mass market which does not yet exist it is about creating this market. Think of Amul and its Rs 20 pizza versus the Rs 200 price-point of Pizza Hut and Dominos. It is not that the high-end pizza eaters migrate to the lower price-point, but that a whole new set of pizza eaters are created. Like in a pyramid, the markets at the bottom are many times bigger. Each user may not be able to pay much, but the numbers can more than make up creating an equivalently large opportunity.

This is the context in which we should look a the new WWW Web Services, Weblogs and WiFi. They provide the foundation to think of a very different technology infrastructure one which has its roots in the worlds emerging markets. It is not about using out-dated technology. It is about using the latest ideas and technologies, but looking at them and arranging them differently. More on this next week.