How do we take individual emerging enterprises from across the world and build emergent networks out of them? In the coming columns, I will describe an approach which combines technology, content, community and services to aggregate SMEs together so they can share, learn and grow.
The starting point is to deploy technology pervasively within the small and medium enterprises (SMEs). In most enterprises, there are very few computers. The cost of computers is a serious drawback, especially for SMEs in emerging markets. In these countries, the price of computers is still denominated in dollars. Tariffs can exacerbate the pricing situation in countries like India, where there is still a 30% duty on hardware.
Yet, for SMEs to be competitive in their business, adoption of technology is a must. SMEs need to adopt the principle of a PC on every desktop. And yet, since for most of them, their earnings are in local currency, it becomes very difficult to spend in dollars. How do we resolve this dilemma?
The solution lies in using lag technology in the form of older PCs which are junked by companies in the developed markets as they upgrade their systems. Typical upgrade cycles in countries like the US where PC penetrations have reached near saturation levels in organisations is 3-4 years. Which means that this year companies will upgrade their systems which they are likely to have bought during 1998-1999. These systems have been fully depreciated and as such are almost worthless to the companies when they upgrading.
Even as these systems are being disposed of, they are functioning computers – we all used them once upon a time and were quite happy with them. They helped us surf the Web, do our emails and write documents.
When one considers that in the US alone this year about 40 million new PCs will be sold, the enormity of the market becomes evident. This also means that about the same number are likely to be available for disposal.
Now, imagine if instead of stripping out the parts of the system, what if the computer itself were to be shipped across to the world’s emerging markets where they can provide computing to people who have never used a computer. For them, using a 1999 computer should not pose problems because it is their first real taste of computing. For most people, given the limited tasks that they do, this computer should be adequate.
Assuming the company disposing the computer got USD 50 for the system and adding USD 50 for shipping, the base price for the system becomes USD 100. Add to this the cost of perhaps upgrading some individual components and adding a support fee, it should be possible to sell this computer for USD 125-150 in emerging markets. In India, such a computer would cost no more than Rs 7,500. This is so much more affordable. The price is less than a quarter of the cheapest computers available today – which have so much more functionality than is needed.
Let’s put this in another way. Would SMEs be willing to spend 10% or less of a person’s annual salary on providing the greatest productivity and communications tool on the desktop? I think the answer will be a resounding yes. This will mean that anyone earning more than Rs 6,500 a month could be given a computer. Such a mass deployment of computing power would make enterprises rethink their businesses and business models dramatically.