The IT and telecom industry has seen then creation and growth of two large industry segments in the past 15-20 years. The first has been in IT and business process outsourcing. The second has been in the mobile space, with the creation of an industry that now generates over $20 billion (Rs 100,000 crore) in annual revenue.
There is a third revolution that is waiting in the wings to happen – in mobile data.
In the years to come, the contribution of MVAS (non-voice services) to the ARPU is likely to grow. What else can be done to provide a healthy, competitive environment in which operators and MVAS companies can both compete and co-operate to create solutions which make the mobile a magic lamp in the hands of consumers, make India a world leader in mobile data, and hopefully, help in the creation of the next Microsoft / Cisco / Google in the world?
In this context, some of the posts I have written on my blog over the past year are useful backgrounders. Here is a list in reverse chronological order:
So, what should the MVAS Agenda for India be?
This is excerpted from an article I wrote four years ago:
If broadband has to boom in India, the computing industry will need two innovations to reinvent both its architecture and business model. After all, what will people do with fat pipes without affordable and manageable access devices and a variety of services for users to access.
To reinvent the computing architecture, we need to take a leaf out of the industry’s past in centralised computing and create zero-management access devices. Think of these as “thin clients.” To build these multimedia-enabled network computers, move the guts of today’s personal computer (the high-end processor and the storage) to the server, and replace it with the innards of a mobile phone (with a low-cost processor and limited memory). The “thick server” delivers the virtual desktops to users over broadband connections.
This server-centric computing model has many advantages. First, the access device can now be dramatically simplified and has the potential to reduce the cost to about Rs 3,000. (Keyboard, mouse and monitor would cost an additional Rs 4,000). Second, the computers require no maintenance and can now be easily bundled with the connectivity without the worry of house (or office) calls for support. Third, piracy will be eliminated since all software and content is delivered via the server, and can be controlled and monitored by the service provider.
The second innovation needed is on the business model. Instead of asking users to make upfront investments, computing needs to become a utility – available on a subscription basis for monthly payments. The pay-as-you-go model is what the world of mobile phone users and cable TV watchers is already very familiar with. This reduces the entry barrier dramatically for new users and provides a full solution at an affordable price.
Using thin clients and server-centric computing, it should be possible for service providers to offer a bundle including broadband connectivity and support for no more than Rs 700 per user per month – which is about what is paid most mobile phone users in urban India. This is the point where computing will take-off and spur the creation of a wide variety of services making broadband a catalyst of transformation across homes, offices and educational institutions.
The next platform will consist of network computers as zero-management access devices, ubiquitous broadband networks, server-based computing and storage grids as the underlying infrastructure, centrally accessible services built around hosted software and content and utility-like subscription-based payment model. This is what will take the power of computing to the next billion users globally.
Our goal this year is to consolidate the enterprise business streams so we can create a foundation that can grow 75-100% year-on-year. This business generates ideas, revenues, customer relationships and profits. In parallel, we are also building out the consumer business – something we had slowed down over the past year. This is something that I am personally driving.The shift of focus to the enterprise business is for the reason of sustenance of business in the short-term
and not necessarily the ultimate goal (though it will continue as an important contributor even in the long run). Our passion still lies in consumer business which means both advertiser pay and consumer pay. Both of these will take time and that is a reality we have accepted. The name of the game is constant re-think yet continued efforts to make our original plans (consumer monetisation) ultimately successful, even though in a re-jigged format.
During our last Board meeting, we asked one of our Board members about the ups and downs we had faced. His response was that unlike some other companies, we had adapted quite well to the changed environment. We had recognised that a specific strategy (consumer monetization through ads on mobile) wasn’t working well, and instead of just sticking to it because “it was part of the plan”, we changed our approach and built out the enterprise mobility business. Now, we were ready, from a stronger base, to take another look at the consumer business with a modified approach.
For me, every year as an entrepreneur is one to be savoured because of the learnings. Just because I did something right in the past does not guarantee success in the future. Building a business is hard. There are moments of joy – but there are many more moments of pain. However experienced one is, situations are different and have to be dealt with accordingly. More than anything, one has to be optimistic and keep the big picture in mind for what one wants to do. It is that vision of the future that keeps the enthusiasm and morale high even during difficult times. For me, the journey matters as much as reaching the destination.
Over the past few months, I have also started doing what I should have done a year or two ago – going out and meeting customers. If there is one learning that I have from the past couple years, it is that customer interaction should not be delegated to the sales team only. While building businesses based on breakthrough ideas, top management has to lead from the front by interacting closely with potential and existing customers.
I used to meet customers a lot when I was running IndiaWorld during 1995-1999. Later, since there were others to do that bit, I would only do it occasionally in NetCore. Now that I have resumed meeting with customers I realise that I had made an almost-fatal mistake by not going out earlier. New ideas are sold on a vision of a different way of doing things. One has to understand a customer’s problems, and package the tools that exist in the form of a solution. The actual solution doesn’t necessarily exist in a perfect, replicable way. Besides, customer feedback about what is missing and what needs to be one leads to new ideas.
Personally, going out and meeting customers has been something I have liked because it enables me to use the mix of passion, vision and on-the-spot ideation to open opportunities for us. That is what had helped us in IndiaWorld when we were a fledgling start-up. In NetCore’s early days, I forgot my past lesson.
To ramp up revenues, we pushed harder on the enterprise messaging services in both mailing and mobility. There was a lot of interest for our high-volume mailing product, and made sure our sales team pushed that harder, given that we had some unique technology advantages.
On the enterprise mobility side, we created a separate team internally to focus on our top customers, thus increasing the attention and service that we gave them. In addition, a new stream in the form of database marketing was added to the mix and helped compensate for the slowness in mobile advertising.
Although we had set our hearts and minds to being a consumer-centric company in the mobility space, we recognised that it would take time to get there. Therefore we increased focus in the short-term to using our enterprise messaging and marketing services to bridge the gap. Now, with the Digital Services Operator business, we are re-focusing on the consumer mobile space, but with a different idea (consumer pays rather than being limited only to advertiser pays).
All of our efforts over the past year have paid off well, and the burn is now a small, manageable fraction of what it was a year ago. We expect to be cashflow positive soon as a company. The next step will be to make the mobility business profitable on a standalone basis.
It was then that we made a decision to focus on bringing the business to cash profitability in a year or so. This meant that we would have to bring down expenses and work harder to grow the existing revenue streams faster. It would also mean eschewing newer ideas to bring a stronger focus on the things that were working. This was especially hard for me because I always like to experiment and try out new ideas. But the need of the hour then was different.To reduce expenses, we first focused on the two biggest cost heads – staff and SMS costs. We asked a few people to leave (less than 5%). We worked hard to manage our SMS costs better. And on all the other costs, we introduced tighter controls. At a company meeting, we explained our decisions to all the staff.
We also postponed a few projects to put more resources on those projects that would pay off quicker. It was a sudden change of gear, but we managed it quite well. In April this year, continuing in the same vein, we reduced salaries of top management, put the sales team on a higher variable pay, and froze salaries of everyone else for six months. All of these cost management exercises helped us fix our expenses at a figure which was 15% lower than what it was a year ago.
Running a business is exciting and challenging at the same time. There are many decisions one has to make and live with the consequences if they turn out to be wrong. In the past year or so, we at NetCore have faced many such decision points. I want to share some of these moments and the thought process that went into each of those decisions. Hopefully, this can be good learning for entrepreneurs and managers.
Last November, we faced a moment of truth. The burn rate (revenue minus expenses) was very high. And one of our revenue streams (mobile ads) slowed down dramatically. October was our highest revenue month, and November was our worst month. The next month wasn’t looking good either. And all around, there was talk of the impact of the economic slowdown hitting India.
Continuing on the same trajectory would have meant that the burn rate would have gone higher, and it would have put a lot more pressure on the other revenue streams. While we had a certain business plan, it was time to re-evaluate quickly and do a significant course correction. Else, we could just end up becoming a black hole for investment money (which in this case was my own).
I wrote this about a year ago:
What will be the dominant model on the mobile? What will create the $30 billion global market opportunity in the next five years?
…On the mobile, VAS 1.0 was all about generating revenues from consumers. In India, this is a billion dollar business. VAS 2.0 will be using Free SMS Subscriptions as the anchor for monetising the right of way to consumers in multiple different ways. What will be valuable in this case is the Subscriptions Engine. What Search did on the Internet Subscriptions will do on the Mobile – generate an audience and create revenue streams.
The Digital Services Operator idea has been something I have talked about on many occasions in the past. (I used to call it the VAS Operator.) It basically combines three things – a direct-to-consumer reach on the mobile and Internet, a payment/billing relationship which creates a cash balance, and an open publishing platform for services across multiple bearer channels (Net, email, SMS, MMS, voice).
While mobile operators have done a phenomenal job in capitalising on a variety of value-added services (caller ringback tones, voice portals, content downloads, SMS subscriptions, premium SMS) to create a Rs 5,000 crore marketplace in India, there is much greater potential for this business in India.
We have been working over the past few months to put together a simplified payment mechanism which allows people to create a cash balance (just like they do for voice minutes with mobile operators in prepaid accounts) and a publishing and discovery platform to enable a variety of services to get created and flourish.
I wrote recently that in the Indian digital space there were two things which were critical for survival and value creation: a multi-modal strategy which combined the Internet and mobile, and a multi-monetisation strategy which diversified the revenue streams. One of the reasons few companies have thrived in the digital space in India is because they have not followed both these dictums, and have thus created narrowly focused businesses. This is what needs to change – and my hope is that we can do that via our Digital Services Operator business, which we will launch shortly.
This business group currently has two elements: MyToday SMS and Profiled Database Push.
MyToday SMS comprises the 40-odd channels that we run, which offer free daily updates ranging from news, cricket and stock market, to astrology, health tips, a new word a day, jokes, and more. This service has grown to over 4 million subscribers in India, almost entirely via word-of-mouth. People subscribe by sending an sms (eg. START NEWS to 09223050606) and they can opt-out anytime by sending an equivalent STOP sms.
All content is editorially created by an in-house team. Over the past year, we have partnered with multiple media companies to broaden the content channels. Monetisation is via ads that follow the content on these SMS channels. So, content is typically about 75 characters, and ads are about 75 characters in the 160-char SMS that is sent out. SMS Ads are still a new media category so it will take some time for this business to achieve scale. This is where the second element comes in.
We have a large profiled database of mobile users in India which can be used to send relevant messages to people. This business has shown very good growth over the past few months. Much of this is due to the segmentation and the targeting that can be achieved. SMS is a powerful communication medium, and as long as the communication can be made more relevant to people, it is welcomed by most people.
We also have a set of mobile internet portals (MyToday.mobi and NayaNaya.mobi), but this requires a lot more focus for growth. Though we get a few million page views each month, it is not a business that has achieved scale. It is something we will be looking at more closely in the months to come. Mobile internet portals will become especially important and monetisable once 3G is launched in India – which I think will only happen a year or so down the line.
Tomorrow: Digital Services Operator
As part of Enterprise Messaging Services in NetCore, we focus on two areas: Mailing and Mobility. Both deal with two forms of messages which are integral to our life – email and SMS.
In Mailing, we have a number of products and services for enterprises:
- Emergic MailServ: Linux-based mail server
- Emergic CleanMail: Cloud-based Anti-virus, Anti-spam solution
- Emergic FlexiMail: Cloud-based mailboxes
- Emergic MassMail: High-volume mailing
- Emergic MailArray: Mail archiving
- Emergic Mail2SMS: Push mail sent as SMS to mobiles
- Hybrid Mailing Solution: Emergic MailServ seamlessly integrated with Microsoft Exchange or Lotus Notes to help bring down total cost of ownership in the organisation
- Managed Mail: Complete cloud-based mail management
Of these, MailServ and CleanMail have been our bread-and-butter business for many years. We have about 2,000 organisations in India using these solutions. The two new products that have been doing well are MassMail and MailArray.
In Mobility, we were a late entrant into what is commonly called the “SMS Aggregator” business. SMS usage has grown dramatically in India as organizations use it for both transactional and promotional messages. My estimate is that there are about 3 billion business-related messages (commonly called A2P, or application-to-person) sent each month in India, about 20% of the overall SMS traffic. The industry size is estimated at about Rs 200 crore annually, and it is a very competitive market.
Over the past 18 months or so, we have made good inroads into the market, especially in some of the larger organisations. Our own SMSC infrastructure at mobile operators (a rarity globally) combined with superior technology via our SMSHNG platform has helped in making this our single biggest business line. The focus has been to convert what is essentially a “dumb push pipe” into a “intelligent service pipe.” We are doing this by adding multiple solutions to the standard SMS bulk push:
- mConnector: For rapid database integration and customised 1:1 SMSes
- Invertising: Hotline via permission-based publishing to customers
- mCoupons: A solution that can help the retail industry
- mBiz: An online, do-it-yourself SMS publishing platform (coming soon)
Looking ahead, I see the combination of email ID and mobile number becoming the digital identity of a person, and the combination of Push, Permission and Profile becoming the differentiator as businesses seek to deepen relationships with existing customer and acquire profitable new customers.
Tomorrow: Mobile Media and Marketing
I have been running NetCore Solutions for more than a decade. For the period from 2000 to early 2005, it was a place where I could experiment with new ideas (Thin Client-Thick Server as a software solution, Visual Biz-ic as building blocks for enterprise software, Pragatee as an all-in-one business server for small businesses, Digital Dashboard, BlogStreet, RSS Aggregator).
I did not spend much time focusing directly on the business that we then had – Linux-based mailing solutions for small- and medium-sized enterprises. As a result, we did not grow much during those five years, even though we tried out many different ideas.
Things changed somewhere around April 2005. We focused on mailing growth with product enhancements and extensions, and also started working on ideas in the mobile space. It was in late 2006 that we launched the MyToday SMS subscription service. From then on, both the mailing and mobility groups within NetCore have grown well.
In the next three posts, I will detail what we do, and what we would like to do going forward. I believe that we now have a strong foundation to build upon. The slow growth in the first part of this decade is now behind us, and there is a strong focus on a limited set of areas with great potential going forward.
The NetCore of today has a staff of about 160 working in three business areas: Enterprise Messaging Services in mailing and mobility, Mobile Media and Marketing and a new business that we call Digital Services Operator. Together, they create the foundation for multi-monetisation: ABC (Advertiser, Business, Consumer) pays.
Tomorrow: Enterprise Tech Services
In November, it will be 10 years since I sold my Internet portals business to Sify. It has been a long journey. Even as I have spent a significant time in NetCore, I have made about 15 investments in early-stage companies as part of what I call the Emergic Ecosystem.
One of the disappointments at a macro level is the lack of scale that Indian companies have achieved in the digital space. That needs to change. And for that to happen, the thinking needs to be different.
In NetCore, we have both enterprise and consumer businesses. For a typical venture capitalist or external investor, this would be anathema. (Maybe, that is why I still don’t have an external investor!) But given the realities of India, it is very important to build multiple related revenue streams. The enterprise business creates a cash cushion and also creates business openings. It allows a company to go and talk to potential customers across other forthcoming streams. It also ensures that the management is not isolated from the market.
Over time, it will be the consumer-centric business which will create the large value. But for that to happen, it needs a technology, customer and cash base on which it can allowed to nurture through the years that it takes for it to achieve scale.
In NetCore, while we have had some clear long-term goals, we have had to adapt our interim strategies on multiple times. We have reversed business decisions because of feedback we got from the market. We have tried to make sure that we continue to focus on revenues and costs to ensure the gap between them is minimal ensuring business longevity. And as long as one is there in business, the new ideas and opportunities will keep coming. At those points, one needs to make bets on the path to take – which is not always easy.
The journey through the years has had many ups and downs – probably more downs, than ups. But that is the life of entrepreneurs and early-stage companies. I have always focused more on blue-ocean opportunities (“uncontested marketspaces”) than entering in existing businesses. Many a time, these decisions don’t pay off because one may be too early. With the coming Digital Services Operator business, I am hoping we are at the right time and place!
Tomorrow: A Brief History of NetCore
This is what I wrote two years ago:
Here are three things I’d like to do in the rest of my life and which will require investments of hundreds of millions of dollars. This is not about philanthropy, but about building the right systems and foundation – in a sort-of self-generating way. Ideally, the Indian government should have been the enabler – but I don’t see that happening with the politicians we have. Indian business has started taking the lead but is not doing this fast enough – and in some cases, is not even doing it right.
First, ensuring access to quality education for hundreds of millions of Indians. Education is a life-enhancer – and nothing comes close. My father was helped by his education to get out of the village he grew up in and created opportunities for himself. How can we do the same for millions in India who are otherwise resigned to a life devoid of opportunity? This is not about trying to build the world’s best school or college, but ensuring that a sustainable and scalable system to provide quality education for everyone in India. For more, read Atanu Dey’s series on Doing Education Right.
Second, we need to build hundreds of new cities to house the hundreds of millions of people who we need to get out from the villages. Our current cities are bursting at the seams. Creating urban slums in not the answer. We need 600 new cities of a million each or 6,000 towns of 100,000 each – or a mix of both. But there is no way we can provide any reasonable future to pockets of 1,000 people living in 600,000 villages. In other words, India cannot afford its villages – and needs to urbanise fast. Else, the demographic dividend will turn out to a big nightmare. Creating these new cities right – in a clean, green, and self-sustainable way – is what I’d like to see us do. For more, read Atanu Dey’s series on Creating India’s New Cities.
Finally, I want to create a Santa Fe-like institution in India. It should be a place where multi-disciplinary thinking is the norm. It should be a magnet for smart people to spend time interacting with the best in different areas so they can forge multiple mental models which can then go out and solve problems right. We go wrong in solutions because we have partial knowledge and so we do not understand the real problem. This leads to what I call brain-dead decisions. An institution like this will ensure that we make the right decisions for the future. It will create a platform for the innovations we will continue to need.
The day after we had sold IndiaWorld for $115 million in November 1999, my wife, Bhavana, told me: “We are custodians of God’s money. If God has given us money at such an early age, there must be something He has in mind for us. We have to utilise this wealth for the greater good.” These are words which have formed the bedrock of my life since then. Till then, I was an entrepreneur trying to prove that I could, even after repeated failures, be successful at least once. Since then, I have come to believe that what good we need to do, we have to do in our present life – while we still have the physical and mental energies.
As I look ahead to the 43rd year of my life, there are many things I would like to make happen. I don’t know how successful I will be, but it is important to have some goals.
NetCore’s foundation needs to be strengthened, so we can grow revenues at 100% or more each year for the next few years. This will mean getting our VAS Operator idea to work.
I want to help create a centre-right policy foundation in India – one that can provide the intellectual underpinnings for the BJP and other centre-right leaning parties.
Education has been an area of interest for some time, and this year will hopefully see me take some steps in creating initiatives both at the K-12 level and the other end of the spectrum (in higher education).
I want to do a lot more of two things year: blogging and meeting people to open up new business opportunities. My best ideas for the future come from these two activities.
I have not been able to spend much time in the past year with the dozen-odd ‘Emergic ecosystem’ companies that I am invested in. This is something I need to change in the coming year.
I also need to start paying attention to my health, which will mean more vigorous exercise.
Finally, I want to be with Abhishek as he continues his voyage of discovery into the world.
As I look back over the past year, some memories stand out.
The talk I gave at the November Web 2.0 summit in San Francisco. Even though I said all that needed to be said, I realised later that I had substituted passion in speech with completeness of words. I will not do that again.
Our Board Review meetings in NetCore – which began the year on a disappointing note, but ended upbeat. There were times when I was beginning to doubt that we would manage to turn things around and grow our business (there is only so much of cost cutting that one can do). These quarterly reviews have been working very well since they also make us introspect on the three months that have just gone by.
The first big Friends of BJP event that we did in Mumbai at Ravindra Natya Mandir. We had no idea how many people would show up, and were delighted to see a full house.
The disappointment the day the election results came out.
The day Abhishek got his letter of admission from Aditya Birla World Academy. Our (tense) search for a school had just ended.
The London trip with Abhishek and Bhavana – a week of togetherness, with no constraints of time.
Perhaps, the most abiding memory of the year came at the end. During the Parents Orientation day at Abhishek’s school, we visited his class (Lower KG – Caterpillars). There, on one of the walls, was a face that Abhishek had coloured (badly!) along with anyone else. The words at the bottom will stay with me for a long time. In response to a question that he had been asked (and which the teacher had transcribed) was this sentence: “I am happy today because I played with the train and tracks with my Papa.”
Tomorrow: Looking Ahead
The third pillar of this year has been my son, Abhishek, who turned four in April. This is the year when our interactions matured and we started having plenty of conversations about lots of different topics. Sometime in the past few months, he opened up as a person, and began talking a lot. The London trip that we took together as a family (with my wife, Bhavana) was a memorable one for the time that I got to spend with him.
There was some apprehension midway through the year about his school. Luckily, he got admission into the Aditya Birla World Academy in the IGCSE programme. From the first day of school we knew we had made the right choice when he announced that this was a “fun school.” A few days ago, we got a tour of the school as part of the Parents Orientation day, and both Bhavana and I came back very impressed that this education was going to be different, wider and deeper from the one we had gone through.
Even as work (NetCore) dominates, I do try and spend as much time as possible with Abhishek. We play board games (Settlers of Catan, and now, Monopoly), read books, and go to bookshops. Currently, Abhishek is fascinated with the world’s metro (underground train) networks, the result of the recent London tube travels.
I know that as Abhishek grows up, he will get more involved with his own world. These are the years where Papa (along with Mamma) means a lot to him – and I hope I can keep it that way.