Atanu writes his thoughts on a discussion we were having as to why PC ownership is so low in India even among those who can afford to have one:
If one ponders the question of why cobblers’s children often go barefoot, one comes to the obvious conclusion that cobblers are traditionally poor and cannot afford the luxury of the same shoes that they produce for others. It is not that they don’t desire shoes; only that shoes lose out in a cost-benefit analysis.
This line of thinking was prompted by another question: Why don’t most Indian employees of a leading global software vendor have PCs at home? Again the obvious conclusion: PCs lose out in the cost-benefit analysis. Superficially, they can afford to buy PCs. But upon deeper reflection, a few other factors reveal themselves.
First, the costs. The total cost of ownership of a computer is not just the hardware and software price you pay at the store. It also has to include the cost of maintenance and administration, which is an ongoing cost. Then the benefits. The benefits arise from the utility of the PC. How useful a PC is depends on factors many of which are outside one’s control. The utility of most goods are dependent on the availability of other goods. Substitutes goods decrease the utility of the good, whereas complementary goods increase the utility.
For an employee of a software company, PCs at work are a given and act as a substitute good. PCs require a lot of complementary goods the absense of which decrease the utility of a PC. For instance, power is a complementary good for the PC. Uncertain and poor quality power reduces the appeal of a PC. Poor connectivity like-wise does not enhance the desire to own a PC at home. So also, the lack of services delivered through a PC.
As someone noted, people don’t want a quarter-inch drill — what they really want is a quarter-inch hole. So also, it is not that people want a PC — they want the services that a PC delivers. Owning a PC is not a great idea if there aren’t sufficient number of services one can obtain from one. Whether these services are available or not is not within the control of consumers of PCs. The conclusion therefore is that people will buy PCs only if it fits a larger ecology that is largely outside the control of any one single entity.
All the above leads me to the point that I never tire of making: an ecological approach to change. You cannot just change one bit in a system and expect that change to stick. Any intervention has to be sufficiently supported by other bits of the system for that intervention to be effective. You cannot simply pick up a bunch of computers from a store in Mumbai and stick them into a village kiosk and expect to transform the village magically. Nor can you put students through a canned “computer course” and expect that they will become instant IT workers.
Computers have very “deep back-ends”. What you see on the surface is just — how shall I say it — on the surface. The utility of computers also arises from the availability of a deep structure. If that deep structure is missing, as it is in most developing world context, it is not at all surprising that computers don’t work as advertized in the developing world.
So, what can we done to increase the PC penetration in India (besides lower prices) – any thoughts?
To provide some context: the installed base of computers in India is about 10 million, with a quarter in homes, and more than half in enterprises, with most of the rest in government and education. In the last 12 months, sales have been at about 3 million.
I think there is an potential to sell 70-100 million computers in the next 5 years in India. How does one tap into that opportunity and build out India’s digital infrastructure? Affordability of hardware and software is one dimension – what are the others?
A related question: how can we bring down software piracy levels in India? Is there any hope, or are software makers – especially those addressing the home and SME segment – doomed to competing with a price point of near-zero (which is what the pirates sell at)?