Computer Ownership

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)?

Netcore Career Opportunities

We have career opportunities in our Mumbai office in the following areas in our Enterprise Applications group. In case there is interest, please write to Reena Shah or use the feedback form.

Software

You should be able to design and develop components for multi-tier applications utilizing object oriented design methodologies, RDBMS and J2EE architecture.

* Good level of expertise in J2EE
* Worked on leading edge software technologies
* Very good process skills

Sales

You must be confident meeting customers and prospects face-to-face, analyse their existing information systems, gather user requirements and identify necessary product features and specifications. You must have demonstrated experience in prospecting and growing the opportunities list as well as closing sales.

* Start-up experience in a similar role
* Proactively prospecting and qualifying potential new enterprise accounts
* Handling incoming leads
* Meeting quarterly revenue targets
* Pitching new business
* Developing account and segment strategies

Interface Elegance in Open-Source Software

Steven Garrity writes:

Open Source software is regularly criticized, often fairly, for lacking in ease-of-use and polish. When a developer wants a new feature – he can add it to the software, and if it gets checked-in by the project owners, it will be there for all to use. The obvious fault with this model is the now well known scourge of creeping featuritis – when too many features and options begin to overwhelm and overshadow the core functionality of the software.

One of the most important acts of a software project manager is to say no. No, this patch introduces more code than it should. No, this feature will confuse more people than it will help. No, youre ugly and stupid (sometimes the manager has a bad day).

The open source software model has dealt with the importance of saying no quite well in the realm of code and patches. Projects have a limited set of people with the power to commit code to the project. Anyone can submit a patch, but only the anointed few can accept it. These anointed few are usually determined by right of having founded the project, inherited the project from the founder, or through perceived merit. For more on the issue of project ownership in free software, see Eric Raymonds Homesteading the Noosphere.

When submitted code isnt up to snuff, it isnt accepted (ideally). The practice of saying no to patches in open source software is understood and accepted. Now, some projects seem to be learning the value of saying no to ideas and features that will negatively affect the interface and experience of using the software.

Rather than adding more and more features for the mythical power user, or swing to the other end of the spectrum and dumb-down the interface for the mythical average user, smart developers are learning that good defaults and elegant interface design makes software better for everyone to use, regardless of their level of experience.

Steven gives examples of three projects: Firefox, Gnome and the Spatioal Nautilus, and Gaim.

End Points Control

Telepocalypse makes an interesting point in the context of the news that Comcast cable (in the US) is creating its own set-top box. “This is interesting because it continues an ongoing trend. Imagine youre the network operator or some other middleman in danger of disintermediation. You dont care about being cut out of the picture if you also control the end points of the network. Think subsidized Analog Telephone Adapters locked into Vonage service. iPods locked into iTunes. Cellphones locked to their network operator. Even PCs locked into trusted computing architectures.”

About the set-top box: “Comcast will test the Moxi Media Center…a TiVo-like digital video recorder that stores programming on a hard drive instead of tape, a dual tuner that allows users to watch one program while recording another and networking capabilities that will bring digital photos, music and video clips from the home computer to the TV screen…The media center includes a new user interface that puts all programming — video-on-demand movies, pay-per-view events and recorded programs — on one on-screen list, doing away with the grid-like programming guide that’s awkward to navigate.”

Broadband in India

The Telecom Regulatory Authority of India has released a set of recommendationsintended to boost adoption of the Internet and broadband in India. The aim is to replicate the rapid growth in mobile phones in India. The target is to have 40 million Internet connections and 20 million broadband connections by 2010.

The Financial Express provides an overview:

To start with, if the recommendations are accepted, the fixed line operators have to specifically choose between the two methods of unbundling shared unbundling and bit stream access. They also have to suggest the terms and conditions like pricing for unbundling, which will be reviewed by Trai.

In simple words, local loop unbundling is the method as per which the owners of the last mile copper (primarily the incumbent) are usually mandated to share their infrastructure with other licensed service providers wanting to provide broadband services.

Under shared unbundling, competitive providers have access to either voice or data portion of the line. Under bit stream access, the local loop operator installs high speed access links to its customers and allows competitive providers access to this link.

The regulator has broadly identified eleven main hurdles to growth that need to be addressed like high price for broadband, high cost of equipment, high taxes and duties, lack of locally relevant content among others. Prices for broadband in India are 1200 times higher than in Korea, said Trai chairman Pradip Baijal. Broadband has been defined as an always-on data connection with 256 kilo bits per second of data rate.

In order to increase broadband penetration via very small aperture satellites and direct-to-home, Trai has suggested open sky policy, removal of various restrictions on size of antenna and throughput. It has also suggested reductions in licence and spectrum fees. Moreover, the authority has called for delicensing of spectrum bands used for wireless broadband technologies like Wi-Fi and WiMax.

The Business Standard adds:

The Telecom Regulatory Authority of India (TRAI) has asked for a reduction of customs duty on optic fiber cables and other supporting equipments for broadband networks to 5 per cent, a five-year service tax holiday for internet service providers and setting up of a group of ministers to push e-governance in order to bring in a quantum jump in internet usage in the country.

TRAI chairman, Pradeep Baijal said yesterday that he was hopeful that if the Centre accepted these recommendations on accelerating growth of internet and broadband penetration in the country, the rates for internet usage would come down to Rs 300 to 400 per month per subscriber from the current Rs 700.

He told reporters that by 2010, the Authority expects the total number of internet subscribers to jump to 40 million which would translate into a penetration level of 3.4 per cent from the existing 0.4 per cent, in the country.

The recommendations would be submitted to the department of telecommunications. These include liberalising the cable television market, by making Direct to Home and VSAT platforms interactive. This would reduce the cost of these services and create an open sky policy in the sector.

The Hindu writes about the current scenario:

On the ground, Indian customers now have multiple options to the dial-up Internet connection:

  • BSNL’s Direct Internet Access Service (DIAS) delivers speeds between 128 KBPS and 2 MBPS at distances ranging from 2.5 kms and 5 km from digital telephone exchanges.

  • Dishnet (its Internet business is now part of VSNL/Tata Indicom) pioneered the use of the Asymmetric Digital Subscriber Line (ADSL) technology where a telephone wire delivers always-on Net connection even while normal voice calls are made.

  • Cable TV network has a lot of unused bandwidth and its use to deliver Internet was pioneered by players like Hathway, In2Cable, Sify and Asianet. However the cost of the special Cable modem has proved a disincentive and various players are still juggling pricing options.

  • Another option that is being tried in housing colonies in many metros by new entrants like ZeeNext is to provide bandwidth in bulk via leased line to neighbourhood servers and then extend it to the individual houses or offices by Ethernet CAT cable.

  • Sify Infoway led in proliferating the neighbourhood cybercafe, first with broadband wired connections and then with WiFi. Indians for the first time could wirelessly connect to the Net from their own laptops.

  • On April 26, Reliance Telecom joined global players like BT and France Telecom to become the latest members of the WiMax Forum, a 98 strong partnership of telecom companies who hope to promote the new broadband wireless standard 802.16, which is theoretically capable of delivering connectivity at up to 70 MBPS and at distance of up to 50 kms compared to the 1-11 MBPS and few hundred metre range of today’s widely used Wifi standard, 802.11b. Only other Indian member is Sify.

  • Google’s SEC Filing

    So, the Google numbers are out. And they are quite something. 2003 revenue of $961 million in 2003, $389 million in the first quarter of 2004 with profits of $61 million, and a cash hoard of $454 million. As of March-end, Google had nearly 2000 employees. The company is planning to raise $2.7 billion in an unusual auction of shares in the coming months. Estimates are that the market cap of the company would be $20-30 billion. WSJ has more:

    The biggest surprise in the filing was Google’s plan to distribute all of its shares through an unconventional auction method. Under the system outlined in the prospectus, which resembles a so-called Dutch auction, investors would register with the underwriting investment banks, indicating how many shares they want to buy and the price they are willing to pay. Those bids would determine a “clearing price,” at which all the shares could be sold.

    The process could create intense jostling among bidders as they try to figure out a price that will get them a piece of the deal. Because anyone bidding below the clearing price doesn’t get any shares, there will be an incentive to bid high. Those who bid above the clearing price will be able to buy at that price.

    Google did not commit to selling shares at the clearing price. Instead, the company and its bankers would take into account other factors, such as reducing the chances for big swings in the share price, in setting an offering price. The filing does not specify whether the bids would be submitted online, or by some other method.

    Adds WSJ: “Google leads in search traffic, but Yahoo is close behind. In revenue, the company trails Yahoo, and trails Web retailers InterActiveCorp, Amazon and eBay. Google tops Amazon in revenue but is behind InterActiveCorp, eBay and Yahoo.”

    News.com has a background, highlights from the filing.

    In an article written before the Google SEC filing, The Economist has words of caution:

    Google owes its massive success to two events. First, Messrs Brin and Page came up with what was for some time the best algorithm for searching web pages. Second, Eric Schmidt, whom they hired as chief executive in 2001, figured out how to monetise Google’s popularity by selling small and unobtrusive advertisements on related topics, so-called sponsored links, alongside the search results.

    But the IPO hype around Google and its likeable and soon-to-be fabulously rich founders, Sergey Brin and Larry Page, obscures a more subtle point. Not only is Google less strong than it looks, but an IPO might make it even weaker at a crucial moment, since Google is about to face simultaneous onslaughts from two fearsome rivalsYahoo!, an internet portal that offers free e-mail and other services, and Microsoft, computing’s software superpower, which runs an internet portal of its own.

    In search, Google is now vulnerable because the barriers to entry to its market are low. This is the big difference between Google and eBay, the firm held up by the bullish analysts as a valuation benchmark. The auctioneer keeps ahead of rivals due to network effects that draw traders to the most liquid market, whether in shares, cars or second-hand junk. In search, network effects do not apply. Hence, in the late 1990s, Google was able to displace the cognoscenti’s engine of choice, AltaVista. Hence, too, Google may in turn be oustedperhaps by a bright new upstart, such as Mooter, an Australian engine that draws on psychology to improve search results, or, more likely, by Yahoo! or Microsoft.

    Google now knows that it must match Yahoo! by gathering more information about users and making them more loyal to its website. Matching Microsoft will require something even bolder. Google has decided to try to turn its own technology into, in effect, a new operating system, which will run on the internet rather than the desktop, so making Windows irrelevant. Microsoft and Google, in other words, share the idea that users should no longer care whether files are located on a personal computer, a remote computer, a digital video recorder, a cell phone, a car stereo or any other connected gadget; but they clash because each wants its own software to do the locating and retrieving.

    Google has another disadvantage. Microsoft is still primarily a vendor of software licences, earning fat profits that it can use to subsidise a search war almost indefinitely. Google relies for its revenues on selling sponsored links. On search pages, this is a $3 billion market growing by 20% a year, according to US Bancorp Piper Jaffray, a bank. But competition is fierce, not only with Yahoo!’s advertising arm, Overture, but with smaller players such as FindWhat.com and Kanoodle.

    The search advertising market is mature, says Mark Josephson, Kanoodle’s marketing boss, adding that future growth can come only from placing sponsored links on the 95% of web pages that contain not search results but content. Google knows this. It is trying to use its algorithms to crawl newspaper articles, web journals and so forth to identify their subject area and place contextual ads. Its problem, says Mr Josephson, is that advertisers are not buying keywords anymore, they’re buying topics, which requires a different approach. As Google spreads out from search pages, he says, its people are getting further and further away from their expertise. In trying to morph into an operating-system firm or online ad agency, Google is less a leader than a novice.

    TECH TALK: Letter to Arun Shourie (Part 5)

    7. Change the way we fund Research in India

    There is plenty of government funding which goes to various institutions across India. While there is some commercialisation which happens, that is not good enough. Can we look at alternate models which would encourage innovations to make their way out from the labs into the market? There are plenty of problems waiting to be solved from the low-cost energy to connectivity in rural areas, from creating business process maps for SME sectors to creating rural hubs. We need funding which has a get-it-to-market focus. We need funding which concentrates on creating public goods which private investors and entrepreneurs would not be able to do. We need to focus on disruptive innovations which can help us leapfrog. We need to make R&D stand for research and deployment.

    8. Start a Weblog

    My last suggestion may sound odd, so let me explain. India needs the collective intelligence of many to move ahead fast. There are many people who have sound, practical ideas. They need to be encouraged to communicate. Your blog will send out the message that you are listening. By sharing your ideas (even though they may not be fully formed), you will garner the best wisdom and learnings that exist in people. Your blog (and it has to be written by you) will become a magnet for people to start coming together to build the New India.

    In Conclusion

    This is what I wanted to tell you that day in Bangalore when you couldn’t make it. Is this all that needs to be done to transform India’s technology space? By no means. I have put a few ideas which came to my mind. I am sure there are others who can improve on these ideas and even suggest many better ones. My focus has been on the market within India. This is a market beyond the IT services and outsourcing we are doing so well.

    I believe that IT and Telecom can continue be transformative tools in Indias future development whats needed is the right vision to see it through. Unfortunately, we are still hobbled my some short-sighted policies which stifle growth in the domestic segment. I feel that unless we may adequate attention to building out India’s digital infrastructure, we will not do much to impact the millions of domestic businesses and hundreds of millions of Indians outside the major metros and big towns. For the first time in our post-Independence history, there is a positive momentum. If we can give it the right catalytic push, India can unleash its entrepreneurial energies across the board and ensure that growth and development happen in a balanced manner. And you, Sir, as the Minister responsible for IT and Telecom, can make it happen.

    Thanking You,

    Rajesh Jain.

    PS: The full series is available here.