Bus. Std: The Cheap Revolution

My latest Business Standard column:

In a world where affordability, value-for-money and reduction in total cost of ownership are increasingly becoming themes driving technology purchases, there is an emergence of what Pip Coburn of UBS Warburg has called cold technologies. Richard Karlgaard of Forbes has labelled it as the Cheap Revolution.

Coburn wrote in a research note in early 2003: A cold technology issue is one that commands a major portion of the agenda while having neutral revenue or even anti revenue attributes. A hot technology has the potential to generate revs. So, in 1980, whether one was a fan of the PC or not, both would agree that if the PC took off the tech pie would expand. The PC was a hot technology. Linux is a cold technology. It will shrink the pie. Cold technologies often are issues that are not product related but gain a disproportionate share of the agenda. The migration of the food chain into China is a cold technology issue.

More recently, David Kirkpatrick wrote about technology in turmoil in Fortune: The technology business is in a state of turmoil that was unimaginable just a couple of years ago. Industry icons are under threat, market leaders are at risk, and the whole pantheon of tech greats seems to be under renovation…Microsoft and Sun face open source, Intel seems weakened, outsourcing threatens services playersthese are just a few of the recent shifts in the firmament.

Barrons wrote about technology spending in the US context: [None of the current trends] seems monumental enough to drive a big wave of tech spending in the next 12 months. Sure, companies are still ga-ga over open- source software like Linux, they are adopting voice over IP phone services, they are buying densely packed blade servers and they are spending generously on security software. They also are forking over large sums to meet the stringent audit and reporting demands of Sarbanes-Oxley. But the dollars involved in all of those simply aren’t enough to move the needle on tech spending, given the huge size of the overall technology business.

In the past, the technology industry built it, and the users kept coming wanting the next new thing. But this is no longer true. There is a shift in thinking in enterprises big and small the focus now is getting the maximum value from new investments. In developing countries like India, cold technologies are even more important. They will help the market expand beyond the top 10%.

So, which are these cold technologies? In this and two future columns, we will look at some of the cold technologies that are giving enterprises and consumers more bang for the buck from their investments.

Open-Source Software

The remarkable growth of Linux and open-source has provided alternatives across the software stack. The Apache web server, PostgreSQL and MySQL database software, JBoss application server, OpenOffice desktop productivity suite and Asterisk IP-Telephony solution are some examples of open-source applications which are taking money away from commercial applications by offering alternatives at significantly lower price points.

Forbes wrote recently in an article on no-frills software: The future will be dreadful for software vendors like IBM, Microsoft and Oracle. Customers will balk at ever-escalating prices for mainstream products and will opt whenever they can for bargain-basement software based on freely available code, such as MySQL or the Linux operating system. They’re using the mere threat of installing this open-source software to browbeat Oracle and Microsoft into coming back with better prices.

The International Herald Tribune wrote about the new wave in the software industry: As software vendors end a second year of single-digit growth, MySQL and other second-generation open-source companies are booming. Most are doubling sales annually and adding staff as they transform the industry by distributing basic, powerful software for free or at a small fraction of the market price For the second-generation companies, the key to making money in the open-source universe is simple: Give and ye shall receive.

Software as a Service

The emergence of companies like Salesforce.com (customer relationship management) and Ketera (spend management) which offer software as a service is challenging existing incumbents like Siebel and Ariba. The traditional software industry model has been to charge upfront for software, with additional charges for upgrades and maintenance. The new generation of application service providers now offers software delivered over the Internet for a monthly fee just like a utility company. Thus, while the old paradigm used to have a high initial fixed cost, the one is where there is no fixed cost but only a variable periodic cost.

Marc Benioff of Salesforce.com said in an interview with InfoWorld: This is about a new paradigm thats just lower cost and easier to use than the old paradigm. And traditionally in our industry, that can become a huge success Youve got to look at eBay and Amazon. These are the best solutions: written on big database servers with high-performance systems, high-performance hardware, massive amounts of storage, scalable app servers delivering pages under 500 milliseconds Selling things on eBay is a lot cheaper than setting it up on your store.

This series will continue in the next column.

Personal Communicator and Computer

Ramesh Jain writes:

The quality and functionality of mobile phones keeps on improving at a rapid rate. Combine this with the increasing availability of video content on phone and increasing bandwidth, and you clearly see what will be the real multimedia client for information and communication technology.

I do believe that for many reasons, mobile phones are real PCs (Personal Computer) or really PCCc(Personal Computer and Communicator). Currently computers have evolved to be the most common means for ICT (information and communication technology). This was natural because ICT evolved out of computing. Now we are at a very important point in the evolution of mobile phone technology. Due to miniaturization of sensors, processors, and storage, it is becoming possible to bring enough computing power in mobile phones. This computing power is definitely not comparable to today’s computers, but definitely can be compared favorably with lap top computers of a few years ago. The more important thing is that the computing power is becoming enough to utilize mobile phones as a powerful client, more powerful than traditional clients of modern road warriors the lap top computer. Why do I think that it will is a better device to replace a lap top for many uses?

Are there any inherent limitations in phones? I really dont think so. The screen size is the one that people will mention. I think that in future screens will be very good quality, of course they will be smaller than your media room’s 65 inch TV, but for mobility I am willing to settle for a smaller screen as long as it gives me good quality video. And that is already started it is not yet there but will be there soon.

I think of the PCC as the “network commPuter.”

The Phone Platform

Om Malik has a guest column by Angus Davis:

I believe IP-powered telecommunications will usher in a new range of enhanced voice services, changing the way people and businesses use the telephone. While standards like SIP enable innovation at the network transport layer, VoiceXML opens new possibilities at the application layer. Calls will get a range of new voice features; two-party voice calling will shift towards multimodal and multi-party communication as isolated applications give way to integrated services. Smart carriers will use these new voice services to differentiate and provide more value just as cable providers used ESPN and HBO to sustain growth in adoption and revenue per subscriber in the television business.

Drawing on the same technologies as the Web applications before them, next-generation phone applications created with VoiceXML can include ringback tones or call soundtracks from a record label, or sports scores and entertainment information from a content provider. Basic calls will be easier thanks to a smart networked address book, fast voice-activated dialing, and a simpler, better voice mail service designed for everyday people. One-on-one voice calls to friends and colleagues (Call Mom) will grow to include new forms of ad-hoc multiparty calls (Call my whole family or Add my brother to this call). The phone will be more fun and more valuable thanks to integration of premium content like music, entertainment and sports that make it possible for teenagers to share favorite music with friends on every call or for sports fans to discuss the plays from premium voice chat rooms. These applications, designed for broad adoption, allow carriers to differentiate and drive value on the basis of core voice services instead of niche gimmicks.

Ross Mayfield has more on the same theme.

Yahoo and Google

John Battelle has two [1 2] posts disucssing the different strategies being adopted by the tweo companies – Yahoo’s media focus and Google’s technology focus.

Yahoo is a natural media company – the company is willing to have overt editorial and commercial agendas, and to let humans intervene in search results so as to create media which supports those agendas. Google, on the other hand, is repelled by the idea of becoming a content- or editorially-driven company. While both companies can ostensibly lay claim to the mission of “organizing the world’s information and making it accessible” (though only Google actually claims that line as its mission), they approach the task with vastly different stances. Google sees the problem as one that can be solved mainly through technology – clever algorithms and sheer computational horsepower will prevail. Humans enter the search picture only when algorithms fail.

While there is no question that Yahoo has and employs world class technology and Google has media experience, I believe the distinction of “media vs. tech” is important when thinking about how each company might approach Hollywood so as to make paid content easily available to all of us at a value proposition that works for all players – content owner, consumer and distributor.

Reliance Infocomm’s R Connect Card

I recently bought a RIM R Connect card. It is a PCMCIA card which goes into the laptop, and works as both a modem and mobile phone. I use the modem part to connect to the Internet while travelling. Has been working very well. The speeds are moderate – I’d say about 30-odd Kbps or so. The card uses Reliance’s CDMA networks which are in 1,000+ cities and towns across India. So far, I was recommending this card to others for connectivity but had not got it myself since I hardly travelled. But of late, the travelling is increasing and so I decided to get it.

The card is more convenient than using the cellphone with a data cable (though it is also more expensive). It takes about 5 seconds to get connected. The tariffs: Rs 14,700 for the card, and Rs 650 per month for 1 GB downloads. There is also a Rs 1,500 option for unlimited data transfer.

TECH TALK: Tomorrow’s World: Five Markets

The next set of users in the emerging markets can be divided into five major segments:

Small- and Medium-sized Enterprises (SMEs): The large companies will probably continue to use the Wintel PCs for the foreseeable future. But the SMEs now can automate their businesses in a flash. Instead of going from 1 computer for every 10 employees to perhaps 3 in 10 in the coming year, they can get a computer on everyones desktop immediately since all it will cost is Rs 700 per employee per month. Which means that anyone earning more than Rs 7,000 ($150) salary needs to become only 10% more productive for the business to benefit. With computers for a small fraction of users, even email is not a mission-critical application. But with a computer for every employee, they can now think: with this digital infrastructure, how can I do my business differently? This will lead to the creation of real-time enterprises.

Educational Institutions: Educating Indias 200 million students is no ordinary challenge. We are building Indias future. And yet, at the ground level, we are hobbled by teachers who are either not competent, or worse, not available. That is not a problem that can be solved overnight. But by putting together a school-in-a-box for the million schools in India and a library-in-a-box for the colleges, we can at least start offering students an opportunity to learn and perhaps help the teachers teach better. Take for example, a college with 1,000 students. Today, it is likely to have no more than 20-25 computers. In that event, each of the students would barely get an hour a week with a computer. Now imagine if that same college had 250 computers, each available for Rs 700 a month. Each student can now get a couple hours a day, for no more than Rs 6 per day. Put this infrastructure in place and now think: how can we deliver education differently?

Homes and Shops: The enigma that Indias computer industry faces is why computers rank at the bottom of the top ten wish list of household appliances. It is not just a question of affordability: over 15 million homes can afford computers, but barely 3 million have actually bought one. It is the issue of desirability where are the compelling applications? With rampant piracy, few developers have the interest in creating the relevant applications and content which can make the computer ascend up the wanted list. This can change if applications and content can be delivered centrally for a monthly subscription fee. The same applies to the other singleton market: the millions of small shops which make up the last mile of the retain supply chain. If their transactions were automated, companies could build to order and do real-time replenishment just like Wal-mart plans to do with its RFIDs!

Tomorrow: Five Markets (continued) and Five New Opportunities

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