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TECH TALK: Disruptive Bridges: Tech 7-11: Business Model

December 12th, 2002 · No Comments

The key to making the Tech 7-11 a commercial success lies in its business model. The Tech 7-11 occupies space. So, any space owner who is looking to franchise this needs returns which are better than alternative uses of the space. Consider first a cybercafe with 10 computers charging Rs 30 an hour (USD 0.60). Assuming 12 hours of operation, the maximum daily revenue that it can generate is 10 computers * Rs 30 / hour * 12 hours = Rs 3,600. Contrast this with a Barista outlet in India which has a footfall of about 400 a day and generates average billing of Rs 60 per person for a daily revenue of Rs 24,000. While we definitely need to look at costs of operation and the net margins, the clear message is that unless we are able to ramp up the revenues of the cybercafe by a factor of 7-10, it is not a viable model for franchising.

Of course, one could rely on the generosity of space owners, especially government and quasi-government institutions. As a result, cybercafes could (and some have) spring up in post offices, railway stations, bus stations, and other such places where the notional cost of space can be taken as close to zero. But that is not a model which can scale up to one in every neighbourhood and stay in the face of other commercial options. The small-business entrepreneur in the private sector holds the key to success if he sees value in the concept, then he will set it up. We have to make it worthwhile for this private entrepreneur just the way a McDonalds has done across the world.

So, back to the question: how can we transform a cybercafe earning a maximum of Rs 3,600 a day to a Tech 7-11 earning Rs 24,000 or more a day? The answer lies in leveraging the two innovations of the Tech 7-11: the thick server and the wireless access point.

The thick server makes it possible to offer various services locally. This means faster access and less dependency on a slow Internet connection. Yes, there will be broadband wide-area networks, but we should not be dependent on them. In the foreseeable future, I still do not see cost-effective LAN-like speeds (10-100 Mbps) happening over a wide area network. By offering storage for the users mail and documents, and making content and applications available locally, the Tech 7-11 can now do two things: increase the earnings from a single user, and charge more per unit of time.

For example, mail can be downloaded automatically to the local thick server, thus enabling speedy access to email. It also means offline access for email and documents, in case the Internet connection is not available at that instant of time (as may be the case in many rural areas). In addition, training courses can be offered from the local thick server, and the charges for these could be Rs 50-100 per hour, or more. The value lies in the content, and not the time spent. This is what the Tech 7-11 is leveraging.

The Tech 7-11 could even charge for printouts Rs 10 for a land record, Rs 5 for a ticket, and so on. These are like the beverages in a McDonalds cheap in terms of raw materials used, and with very high profit margins!

Taken together, these ideas create the platform for a Tech 7-11 to offer value-added services which go far beyond the time-based charging that a cybercafe of today does. This is good for the users who come to the Tech 7-11. Can we also leverage the others in the neighbourhood?

Tomorrow: Tech 7-11: Hub-and-Spoke Extension


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