Real-time Enterprises, Software Components, Visual Biz-ic, Digital Dashboard all may seem as good concepts. So also do a lot of items in showrooms on Fifth Avenue in New York. The question is: how much is it going to cost?
Heres my answer to what is needed to make this a mass market: hardware, software, training and support for no more than USD 20 per person per month. For this price, an employee working in a company should be a given a desktop computer, all the software needed, the training needed to use it and the support to ensure uninterrupted usage.
By bringing down the total cost of ownership to USD 20 per user per month (pupm), it now becomes possible to look at making computing available to everyone in a company earning more than USD 200 per month, with the assumption that the computer will make that employee at least 10% more productive and thus pay back for the investment.
In the SMEs (small and medium enterprises) today, penetration of computers is limited to a few. In India for example, there are no more than 4-5 million computers in enterprises (small, medium and large), with the number increasing by 1 million each year. This is because at price points of over USD 1,000 (for hardware and legal software), desktops are given to only the top managers and a limited number of people in each department. This is what needs to change, and this is why we need to we worry about computing when we are actually talking about enterprise software.
Software needs to be sold on a subscription basis few SMEs will be able to make large up-front investments for it as most enterprise software of today demands. It is, therefore, important to increase the installed base of computer users. SMEs in the emerging markets need a whole solution so even as focus on enterprise software, the problem cannot be looked at in isolation.
The challenge is to realise Bill Gates vision of a computer on every desktop (and in every home). But this will not happen at the current price points of hardware and software. What is needed is a dramatic reduction in the cost of the desktop computer the hardware and the software. The objective should be to bring down the cost of the desktop to USD 100-150 (Rs 5,000-7,500) and the cost of software to USD 5 (Rs 250) per person per month.
As we think of the possible solutions, it is useful to keep the following excerpt from a recent Business Week special report on Innovations:
One of the most important rules of successful innovation is to develop technologies for new markets where industry stalwarts have no status quo to protect — and no need to steal someone else’s customer to succeed. In management-speak, this is called “taking root in disruption.”
One example [Clay] Christensen points to is the rise of the personal computer. The original Apple II computer was targeted at kids — the only customers willing to play around with such a dorky machine. But as PCs improved, parents started paying attention. By listening to these new customers, Apple and rival PC makers were able ultimately to unseat the computing incumbents, who were still focused on mainframes and other large, professional computers.
According to Christensen, a company with a new technology has only a 6% chance of success if it tries to make a similar but better product than an incumbent and sell it to the same customers. By contrast, he says, the chances of success for a “disruptive strategy” are 33%.
Equally important is the principle that new technologies should disrupt competitors, not customers. Too often, new technologies try to make customers change the way they do things. Instead, Christensen says, innovation should help customers do things they already do more easily, conveniently, and for less money.
So, what are our disruptive strategies to bring down the cost of computers?
Tomorrow: Whole Solution (continued)