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TECH TALK: Rethinking Enterprise Software: Whole Solution for USD 20 a month (Part 4)

June 28th, 2002 · No Comments

Let us work out the total computing costs for a 40-person enterprise. One Thick Server can support 40 Thin Clients. I have assumed that the cost of a Thin Client is USD 150 (instead of the USD 100 discussed above). We should look at the costs over a 3-year-periodthe assumption being that even the SMEs will upgrade their systems every 3 years (thus lagging in hardware by no more than 3 years). So, the total costs taken over a 3-year period are:

  • Thin Client: USD 150 one-time, with USD 15 for support per annum. Also, assume there is 1 spare TC kept for every 10 TCs. Thus, the total cost over 36 months is USD 200 per user, or about USD 6 per user per month (pupm).
  • Thick Server: A standard, new desktop can be used as a Thick Server, with the additional need for RAID (to mirror the data on the hard disks). Add to this support for backup. The Thick Server will cost about USD 1,200 with an additional 10% per annum for support. Thus, the total pupm cost becomes USD 1 (or a total of USD 1,440 over 36 months and 40 users).
  • Internet Connectivity: Assuming USD 40 per month for Internet access gives a pupm cost of USD 1.
  • Networking: Putting in place the LAN with the hubs/switches will cost the equivalent of USD 1 pupm.
  • Training and Support: USD 1 pupm.
  • Software: The base modules discussed earlier Enterprise Core and OS, with the Digital Dashboard and Visual Biz-ic should cost no more USD 5 pupm. (If enterprises want specialized components, then they would need to pay extra. This also creates the incentive for software developers to build on the base platform.)

Thus, the aggregate costs for an installation of 40 computers come to USD 6+1+1+1+1+5 = USD 15 pupm. Add to this the costs of marketing and margins for the channels and it should be economically viable to build a profitable business by selling the whole solution for USD 20 pupm. The economic model may be quite simplistic, but one which I think is definitely achievable. Thus, as a whole, the 40-person enterprise pays USD 9,600 (or Rs 5 lakhs) per annum for its entire computing and communications needs. Any company earning a profit of USD 50,000 (or Rs 25 lakhs) can definitely afford to invest 20% of its profits on technology to become a real-time enterprise.

Whats new here is not the technology, but the business model. It has taken the concept of a utility to its extreme, creating the ultimate SME Tech Utility with hardware, software and support being offered as services. Therein lies the trick. For example, if we were to sell the Thin Client for USD 150, there would be few buyers who wants to buy a second-hand computer? But by offering computing as a service (and the TC on a subscription basis as part of a larger solution), IT managers will no longer look under the hood. The analogy is with cars. When we buy cars, we want to make sure they are perfect. When we rent cars (or pay for the service of transportation), we are no longer so concerned as long as the car works and the rental company offers to cover all problems, if any. For SMEs, technology needs to become a utility this will lead to mass-scale adoption by a whole new generation of users.

This then is the overall vision for making technology a utility for SMEs in emerging markets. At its heart is enterprise software built out of inter-changeable components and to standards by a distributed network of factories in the form of the independent software vendors. The software itself is only part of the solution. What SMEs need is a whole solution. All the elements of the solution are actually available today. No new technology needs to be developed to deploy them. What is needed is innovative thinking in ensuring that the whole is truly greater than the sum of the parts.

As we think about how to create new solutions, it would be good to remember these words from Esther Dyson:

In the world we live in, mathematicians and investors have become ever better at calculating risks, assessing outcomes, laying out possible scenarios. But real economic progress comes from taking challenges, not risks, and building something fantastic despite the odds, because you know you’re smarter and more dedicated and more persistent, and you can gather and lead a better team, than any rational calculation would indicate. That’s how new businesses get built, new markets get opened, new value gets created.

And real political, social and ethical progress, likewise, comes not just from negotiating a carefully calibrated “win-win” balance-of-power compromise, matching move for move, but from taking the lead, challenging the other guy to follow, showing the way forward. We make progress by stretching the imagination and doing things we won’t regret. When you cannot predict consequences, then you need to consider your conscience and do what’s right.

We need not calculation, but courage!

Tags: Tech Talk

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