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TECH TALK: Disruptive Bridges: My First Computer: Economics

December 18th, 2002 · No Comments

How do we bring the price point of My First Computer to Rs 500 per month? Let us first consider what the components of the price are.

My First Computer needs to be used in a network environment, and not as a stand-alone computer. Considering that we are targeting non-consumer in enterprises and government, this should not be an issue. The two elements of the solution are the thick server and the thin client. The thick server is a standard desktop. A system to support about 10 users would cost Rs 40,000 while one to support 40-users would cost Rs 70,000. The higher-end solution would have a dual CPU, have two disks with software RAID and increased memory. This is because all the processing is happening on the server. Thus, in the 10-cuser situation, we can expect the monthly cost in the case of a rental to be about Rs 1,500, assuming a loan period of 36 months. For 10 users, the cost per user thus becomes Rs 150 per month.

The thin client cost varies from Rs 7,000 for an old (recycled, in quantities of one) computer to about Rs 15,000 for a new one. One option is for users to buy the system of their choice. The client need only have a motherboard and network card, along with the keyboard, mouse and monitor. There is no need for a floppy drive, hard disk or CD-ROM since all storage and processing is happening on the server. The motherboard needs to have just a Pentium I CPU and 16/32 MB RAM.

An interesting variation on how the clients can be funded is the following. Think of the older thin clients as assets whose value depreciates by no more than 10% a year. This is a reasonable assumption because the price points are anyways very low and given that there is (a) software which can leverage these thin clients, and (b) there is a demand for thin clients which there can be, considering that there are hundreds of millions of users who do not have a computer at this point of time, and who could afford one if the price points were lower.

Now, if there is a person or institution with surplus cash, their options for getting more than 10% returns per annum on the cash are very limited. So, if we think of the thin clients as assets which depreciate 10% a year and the need to give more than 10% returns a year on cash, if we can provide a solution which gives a higher rate of return (say 25% or more, to account for the increased risk), then investing in thin clients may be a good value proposition. For a 25% investment return on a Rs 7,000 thin client, the investor needs to get Rs 1,750 per annum, which works out to Rs 150 per month.

Thus, we can think of setting up an investment vehicle to buy thin clients and provide above-market returns to investors. This may seem a far-fetched option considering that this has never really been tried in the world of computing with respect to older computers, but I believe it can be done and in fact, can provide a win-win situation for all entities.

Tomorrow: Economics (continued)


TECH TALK Disruptive Bridges+T

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