Scott Johnson has a cool idea: adding a new Feedster feature daily for the next month. This is what we should do for our Info Aggregator. There’s a certain excitement to doing a lot of things in a time-bound manner — and letting the world of its progress via a blog.
This is a good example of an innovative idea – shows the power of what a smart person can do. Business model? Google Ads, Amazon Referrals. Business partner? RSS, which will deliver the feed to my mailbox every day (in which case I don’t see the ads). Overall, a neat idea – one that makes me think why didn’t I think of it!
Times of India has a report on OracleWorld, with a quote by Sun’s Scott McNealy: “On the digital divide, McNealy said that countries like India could have ‘thin clienting’, a model that envisages a lot of not-so-powerful computers connected to servers at the backend to keep down the costs of spreading IT at schools and remote areas.” This is exactly what I have been advocating for emerging markets like India – affordable computing via the use of thin clients, thick servers and open-source software. [via Veer Bothra]
NYTimes writes about a software from SplitTheDifference which “makes proposals on behalf of insurers, relying on algorithms to gauge what discount a doctor might accept in exchange for a faster payment…The software, which has been used in 20,000 negotiations over the past 18 months, is just one of the ways in which computers are playing a larger role in a growing variety of everyday transactions. The innovations are rooted in advances in mathematics that enable computers to mimic human behavior and in some cases replace them altogether.”
Software advances have extended the automated negotiators’ potential scope. Instead of considering price alone, computers can weigh the relative merits of variables including quantity, delivery time and technical specifications. Computers have moved beyond merely matching bids with offers or arbitrating between adversaries; they now can incorporate into the negotiations factors that people may not have considered.
The trick to making automated negotiation software work is finding a niche where the humans involved will not feel either that the computer is fleecing them or giving too much away to the other side. To be effective, the software must give both sides some control over the process.
Now, only if computers could automate the marketing process and help us sell more software….!
The last couple of days, this blog has reached another landmark – more than 1,000 unique IP addresses daily. So, here is how the timeline looks:
– May 9, 2002: I started blogging
– Feb 12, 2003: 500 unique hosts (9 months from start)
– Sep 11, 2003: 1,000 unique hosts (16 months from start)
I have been thinking about the packaged software market for SMEs in India. (Maybe the same is true for other emerging markets.) The simple reality is that it does not exist. Neither are the buyers used to paying for software, nor are the sellers (in this case, the channel) used to charging for software. There isnt much of a marketplace for software as piracy and non-consumption are the two options available simply copy for a nominal price whatever one can copy (MS Windows, MS Office, accounting software), or dont use anything that isnt available at a very low price point (database, CRM software, mini-ERP).
There is little incentive for software developers to create appropriate software because they know that it is highly likely to be pirated and therefore there isnt much money to me made anyways. As a result, whatever software gets sold isnt cheap, because the seller has to make the assumption that only a small fraction of the eventual users will actually pay. In addition, the SME buyers, while spending the money on hardware, have come to assume that software is free. This forces the channel to provide the software, but not support it because there is no money to be made in the process.
The need is for creating a software distribution network targeted at SMEs. This network should:
Nothing like this exists in India. Is there an opportunity to build something like this? Are there parallels we can draw upon from other industries? Can this be a profitable business?
Let us consider the economics of the solution. The desktop (virtual PC) costs USD 100-150. Let us assume the higher figure. Assume an annual maintenance costs of 10%, with a replacement happening every 5 years (even though in theory there is no need for a change or upgrade). Thus, the total costs over five years are USD 150 + USD 60, for a total of USD 210. The server will cost USD 750 for about 10 users in an SME, going to USD 5,000 for about 100 users to support a small residential colony. Assume a 15% annual maintenance cost on the server and another 10% for upgrades. Thus, over five years, the maximum per user cost comes to USD 150. Taken together, the client and server costs come to USD 360 per user over a five-year period, or USD 6 per user per month. [Financing costs have been ignored for now.]
Let us assume a software subscription cost of USD 2 per user per month. Thus, for an SME with 10-users, the software company gets a realisation of USD 240 per year, which should be good enough to deliver all the utilities and applications that are needed. In addition, we need to add costs for setting up the networking infrastructure, which at best would be USD 50 per user, adding USD 1 to the monthly per user cost.
Thus, the entire technology infrastructure can be set up for about USD 9 per user per month. Add financing, support costs and profit margins for the distribution channel, and a figure of USD 10 per user per month for hardware-software-support is definitely achievable. This would compare with todays costs of about USD 600 for the hardware and USD 400 for just the OS and Office suite, with a 4-year upgrade cycle. It comes to about USD 30 per user per month. Compare this with our USD 10 price point we are looking at a cost reduction by two-thirds. There is little doubt then that end users would adopt PCs at homes and at work.
Wheel of Penetration
To get to a mass market for computers and computing, it is necessary to build out the complete ecosystem think of this as the wheel of penetration. Besides hardware, software and support, we also need to think in terms of banks who need to get involved in helping finance the solution to reduce the upfront costs that need to be paid, training institutions who can educate users on the various tasks that can be done with computers, engineering colleges who can provide the human resource for providing the support and applications development, the existing assemblers who can serve as the distribution channel, and software and content developers who can develop solutions given the large user base that will emerge.
In other words, the entire value chain will benefit by piggybacking on the new architecture. Today, the industry is in a low-equilibrium state, with low or no profits and small growth. By co-ordinating its actions, the industry can move to a high growth situation, which would be beneficial for everyone.