Microsoft and Emerging Markets

News.com has a report on the challenges Microsoft is facing in emerging markets:

The company’s best effort so far at tackling emerging markets may be the basic versions of Windows XP and Office that Microsoft has sold as part of a Thai government program to offer low-cost PCs to the country’s population.

The program managed to get 150,000 computers in the hands of Thai citizens, Price said, though in most cases, the PCs were sold to people already considering buying a computer.

“It was a bit of a mess,” Price said of the program’s execution. “People were actually pretty dissatisfied with the quality of units.”

A similar program just started in Malaysia, but Price said the interest there was lower than in Thailand. “They have not had the same kind of success. They have had a much, much lower volume in terms of orders.”

As a result, Microsoft is still grappling with how to tweak its business model. “We’re trying to test things,” Price said. “The jury is still out in terms of whether, as an industry, this is going to be helpful for us.”

In February, Martin Taylor, Microsoft’s general manager of platform strategy, indicated that the company was considering various approaches that would break with the long-standing practice of pricing Microsoft software the same across the globe.

“How much does a Big Mac cost in India versus in New York versus in Taipei, and how do you map a similar Big Mac index to software?” Taylor said in the February conference call. “It’s a very difficult problem.”

The issue remains a big challenge, Price said. “There’s no silver bullet, and this is not even close to a silver bullet.”

If Microsoft does start adjusting its pricing based on country, analysts say, the company will have an easier time in countries with relatively uncommon languages. That may explain the fervor with which Microsoft is translating its software as part of a new Local Language Program. The company is adding “language interface packs” in 50 countries this year, all but four of which are emerging nations. In the program, Microsoft is working with local universities to help do the translations needed to quickly adapt the most common Windows commands.

“I could see that becoming not just a technical way to get Windows into those markets, but as a precursor to more segmented sales of Windows and Office in those markets,” said Directions on Microsoft analyst Rob Helm.

Helm said Microsoft recognizes that Linux is more of a threat overseas and has moved quickly, assigning a top Linux expert in the company, Maggie Wilderotter, to head worldwide public sector sales.

Another option for emerging countries may be so-called thin clients, PC-like devices that lack a hard drive and store information on a central server. But while devices without a local hard drive are easier to support, they require strong network connections and also have proved unpopular with consumers thus far.

“In fairness, it’s never worked with consumers in the developed world,” Helm said. “It’s not clear why it would work in developing world.”

Helm is wrong. Just because it didn’t work in the developed world does not mean it should not be considered for the developing world.

Here is what Microsoft needs to do in emerging markets:

– Start thinking like Apple to create end-to-end solutions. Apple has a 5% share in the PC world. Microsoft has a 1% market share in emerging markets – 9% goes to piracy and 90% to non-consumption.

– Understand that in countries like India what the customer spends on hardware and software is a constant, and lower than what they spend in the developed markets. So, if people are spending on thick desktops, the money left to spend on software is minimal.

– When it comes to combating piracy, it is an uphill battle and one which is a no-win game for Microsoft. From a user’s point of view, there are two price points: near-zero (for a pirated version) and near-infinity (for a legal version). Guess what users do.

– The total solution needs to therefore have thin clients which cut the cost of hardware, combine with server-centric computing (either on the LAN or on the Internet as bandwidth improves), and offer a monthly payment scheme for software (in fact, the full solution). [There is a precedent: look at the online gaming market in China. Millions are paying a few dollars a month for gaming services.]

Computing needs to become a service in emerging markets in emerging markets – available at price points like telecom. The focus needs to be on the next 99% – those who pirate and those who do not use the solution. They don’t really care much about Microsoft or Linux at this point – what they need is a full solution at reasonable (monthly) price points.

The Knowledge Web

Edge has a note from 2000 by Danny Hills, along with commentaries by various luminaries. Hills calls his concept “Aristotle” and writes: “With the knowledge web, humanity’s accumulated store of information will become more accessible, more manageable, and more useful. Anyone who wants to learn will be able to find the best and the most meaningful explanations of what they want to know. Anyone with something to teach will have a way to reach those who what to learn. Teachers will move beyond their present role as dispensers of information and become guides, mentors, facilitators, and authors. The knowledge web will make us all smarter. The knowledge web is an idea whose time has come.” Hills also has a reference to the Memex vision of Vannevar Bush.

Linux Analyst Views

IBM Linux Portal has an interview with Stacey Quandt of Quandt Analytics, who is “an industry analyst and my focus is Linux and open source software. I identify market trends, and provide advice to end users considering Linux, or whove already deployed it, and to give strategic advice to IT vendors.” Excerpts from the interview:

Large data warehouses running on Linux are inevitable. Collaboration between database vendors and distributions such as Oracle and Red Hat has resulted in improvements in Asynchronous I/O and the 2.6 kernel has better block I/O performance, which is important for data intensive workloads. Increasing data volumes and open source innovation will lead to very large data warehouses running on Linux based SGI Altix, HP Integrity and IBM pSeries systems in the near future.

The debate will continue on open source versus closed source security. However, the trend for the foreseeable future is that more security features will be added at the operating system level. We will see new thresholds being reached on Linux assurance and an industry shift toward the benefits of an open source operating system.

Within the next three years I believe Linux will overtake Windows as the number one operating system based on new server shipments.

Another milestone to watch for is when Linux gains enough momentum on the desktop to pull in more ISVs. Theres the potential for a lot of innovation that could take place in user space applications on Linux. The desktop is Microsofts last stronghold in the market. So theres a lot of potential for Linux to become a much stronger play there.

I think the milestone to look for is when Linux takes 10% of the market. Its all about when corporate IT says that they will use Linux as their primary desktop operating system. This doesnt mean that users have to give up on Windows applications, but I think we will see a decline in the use of the Windows operating system on the desktop.

A number of companies are doing pilots right now, but I think the timeframe is more like the next two years. In that time well see tremendous growth in the Linux desktop. “Tremendous” means that were going to see it move from being a fringe market to something that ISVs and hardware vendors are porting to and supporting.

Profile Advertising

News.com writes about Tacoda, which “Advertisers will be able to pay to reach a certain demographic of people (for example, high-income men aged 30 to 40 who have expressed an interest in buying a sports car) through sponsored text links that appear on Tacoda partner Web sites.”

Tacoda’s new service will be a hybrid of Google’s service and profile-based advertising–two of the hottest sectors in online advertising today.

The service draws on pay-for-performance search deals–popularized by Google and Overture–in which marketers bid to show up in query results based on specific keywords. Advertisers pay only when visitors click on their sponsored text listings that appear on search results pages. But instead of using search keywords to determine when to place ads, Audience Match draws on profiles of Web surfers. The profiles, culled from online publishers, are then used to tailor ads to visitors’ behaviors and demographics, or what’s called behavioral targeting.

Advertisers will be able to bid online to reach specific demographics of people. And their ads will appear in text listings on publishing partner sites.

To do this, Tacoda will build on its first product, Audience Management System, whose customers include Conde Nast owner Advance Publications, USAToday.com, iVillage and others.

That product is designed to give Web publishers more insight into their visitors so that they can better target their ads. At its full potential, it can create profiles that include a person’s age, gender, location, billing address, e-mail address, Web surfing habits and subscription information to offline publications. To do this, it draws from data-mining technology, tracking software such as cookies and Web site registration information.

Tacoda is not the only company jockeying for attention in the market. Companies including Revenue Science, 24/7 Media, Advertising.com and aQuantive are all selling similar behaviorally targeted advertising, and much of it is catching on with companies.

An earlier post by John Battelle on Tacoda.

Zigbee

Dana Blankenhorn writes about the new wireless standard in the context of the always-on world:

[Zigbee] sits at the “sweet spot” of Always-On, where radios and cheap chips can create revolutions. As a PDF overview of the standard makes clear, Zigbee is designed as a low power, low bandwidth, low range radio standard. Doesn’t sound like much, until you realize what this enables.

It means you can have single-chip radio computers that transmit data when necessary, and run for years. The single-chip could be a medical monitor, or it could be an enviromental monitor. Combine this with the price-performance breakthroughs we’re seeing in biochips and we have the Always-On revolution.

Think about it. A Zigbee radio chip monitors your heart, your blood sugar, your electrolytes, anything your doctor wants monitored. These figures are transmitted, using the radio, to a central “server” you might wear on your wrist or in your pocket. That server can analyze the data, but it also has a Zigbee radio which, when it can, finds the network and dumps the data to the Internet. A simple program could alert you when dangerous readings are found, and the same program could alert your doctor of an emergency service.

Here’s another application. Zigbee radio chips buried in your lawn monitor the moisture level in your soil, and when a certain level is reached the water is turned on just where it’s needed. (Imagine what that can do for golf courses.)

Yet another application. Zigbee radio chips in your office monitor the condition of the air, while other chips monitor to see who is in the room, so that the air conditioner comes on only when it’s needed. Imagine the energy savings.

Best of all, Zigbee can operate in the same unlicensed frequencies as your home LAN. A home server can thus use PC applications and the Internet to link Zigbee data to the world.

Marc Benioff and Salesforce.com

NYTimes profiles Marc Benioff, the CEO of Salesforce.com, which is the other big forthcoming tech IPO:

His company’s revenue has at least doubled every year since 2001, and was $96 million in the fiscal year that ended on Jan. 31. The business has had a profit for three quarters in a row, but showed a $1 million loss in the most recent quarter.

Salesforce also provides the perfect lens for watching one of the more interesting – and potentially significant – trends in computers.

Mr. Benioff is inclined to use the word “revolutionary” to describe his service, and not without reason. Unlike most software makers, Salesforce does not sell a product that is installed in the buyer’s computer. Instead, the company leases software to subscribers who pay a monthly fee. The company maintains its customer-related software on its own computers; subscribers can visit Salesforce.com whenever they choose, courtesy of an Internet browser much like one that would connect to, say, Amazon.com.

Mr. Benioff did not invent this notion of software as a service. It dates back to mainframe computers in the 1960’s. But he has become its most forceful advocate, taking any opportunity to declare the era of installed software dead and to taunt larger foes who use that method. He has focused mostly on the $7 billion customer-relations market, now dominated by Siebel Systems. But he has said in the past that the simplicity of his software-as-service strategy will allow him to cash in on other rich markets, including human resources software and invoice management.

His formal career began in 1986, when he was 22: he was offered a phone sales job at Oracle shortly after it went public. Mr. Benioff quickly climbed the Oracle ladder, working a variety of sales and marketing jobs with increasing responsibility. At 26, he was named marketing director of the company’s fledgling efforts to secure its core database product a place on personal computers – in no small part, he said, because he had quickly become a favorite of Mr. Ellison.

Salesforce has signed up 10,000 customers and nearly 140,000 users, each of whom pays $65 to $125 a month for access to smartly organized storehouses of information about their customers and potential clients that Salesforce maintains on its computers. Mr. Benioff says he is convinced that more and more companies will lease their software via the Internet.

One percent of Salesforce’s profits are diverted to a foundation that Mr. Benioff created when founding his company, and employees get six extra days off a year to volunteer in any community program. The foundation also owns 1 percent of Salesforce’s stock. That, too, has become a cause. Just as he has spent much of the last five years declaring the end of software, he now calls for an overhaul of corporate philanthropy.

Tomorrow’s Web Search

Business Week writes on what to expect:

Exclusively for You: The most imminent change in search technology will likely arise from personalization — honing results to fit a searcher’s location or preferences.

Paving Memory Lane: Today, search engines such as Google provide a current snapshot of information and views on specific topics available on the Web. But there’s no reliable way to discern how that snapshot changes over time.

Here, There, Everywhere: Probing the Internet is valuable. But much of what a user wants may be tucked away elsewhere — stashed in a Word or PowerPoint file on a hard drive, or in e-mail archived on a server somewhere else. Grabbing such data isn’t easy right now, but companies ranging from Lycos to Microsoft are exploring ways to dig out information from these sources with a single search tool.

Getting Better Results
The average search query contains 2.5 words, leaving plenty of room for interpretation. As a result, searches typically turn up hundreds of links, many of them irrelevant. A handful of startups, from Vivisimo to iXmatch Inc., are using so-called clustering technology that organizes several hundred search results into subject-specific folders.

TECH TALK: Two Blog Years: The Blog and I

Yesterday, I completed two years of blogging. This is how I had started off my in my first post: Emergic.Org will talk about our work in creating the cost-effective tech solutions for SMEsEmergic.Org will also give my views on the world of technology. The vantage point is an emerging market. We need technology, but cannot afford to pay it in dollars. The digital divide needs to be bridged. It is time we entrepreneurs in countries like India became leaders in technology products, rather than pure service centres for the rest of the world. Lets become the anchor store in the world mall, not a discount outlet. Lets lead, not follow.

Today, two years later, the vision for both what I do and what the blog does has expanded. The focus of my work (reflected in what I write and post on the blog) is to put together solutions which can catalyse and capitalise upon the development of economies via affordable computing-enabled solutions for emerging markets. Countries like India have a great opportunity to rapidly out their digital infrastructure on next-generation computing, information and distribution platforms. Many revolutions are happening simultaneously from the explosion of mobile devices to the emergence of broadband, from lower-cost access devices which make computing affordable to the middle of the pyramid to community tech centres which make it accessible to the bottom of the pyramid. The challenge lies in accelerating the process with the right innovations, so India and the other emerging markets can do in 5-10 years what the developed world did in 25 years.

Against this background, the primary focus of the blog has been to present a daily digest of news and commentaries (typically 5-6 items daily) I find interesting at the intersection of emerging markets, technologies and enterprises. Over time, the blogs role has expanded. Personally, it serves as a memory extension a place where I can post and find everything of interest to me. It has become my other memory. Writing on the blog also helps me think better and this has been reflected in the way many of my ideas have changed over the past couple years and the blog has captured this incremental evolution.

It has been a fascinating two years, and I look ahead to many more. Today, I can imagine being without an email or a cellphone for a day, but not without blogging. It has become a daily addiction, driven in part by the knowledge that there are hundreds of readers for whom this weblog has also become a part of their daily life. Blogging is mind food for all of us!

Tomorrow: All In A Days Work