ET Story on Software’s Rising Prices

There’s a story in today’s Economic Times by Sangeeta Kulkarni which talks about how “the basic O/S and application software costs, in which Microsoft has an overwhelming market share, have more than doubled during the past couple of years even as entry-level PC prices have stagnated or even fallen.”

The story has a mention of the work Netcore is doing on low-cost PCs, and quotes me.

Even as attempts to introduce sub-Rs10,000 PCs by vendors such as H-P and Wipro floundered, some lesser-known local vendors like Via Technology and Netcore Solutions are trying to introduce low-cost PCs.

According to Rajesh Jain, the entrepreneur who sold IndiaWorld to Sify, and who is currently the managing director of Netcore Solutions a company developing software for low-cost computers a reduced cost of ownership for PCs would help reduce piracy.

“The legacy of existing operating systems has led to a lack of awareness of an alternative environment for the O/S, and also prevented the need for a low-cost alternative on the desktop.”

Netcore is working towards manufacturing computers priced at Rs 5,000 by using recycled computers from developed markets such as the US, which disposes more than 25m PCs every year.

Mr Jain says that there would be firms offering older lower configuration PCs that work better than powerful computers, when used as part of a network. Gartner’s country manager Partha Iyengar agrees with Mr Jain when it comes to low awareness for cheaper alternative O/S.

“The O/S cost has been increasing since developers are increasing its functionality with every new release,” he says. Linux would not have a significant price impact on the Indian O/S market since it would have to reside on servers before it makes an entry into user desktops, according to Mr Iyengar.

I am not too sure about us “manufacturing computers priced at Rs 5,000”! What we are doing is enabling low-cost / low-configuration computers to be used as networked desktops. But, yes, we will probably look at branding these and selling them as a hardware-software bundle, like what William Gurley mentioned in his Software In A Box article.

I would have liked to see a table with the story which showed hardware and software costs over the past 6-7 years – this is what I had suggested to Sangeeta when she met me. It would have added a lot of weight to the story and the basic premise, which is absolutely right. My guess is that in 1996, computers would have cost about Rs 35-40,000, with the OS (Windows 95) costing about Rs 3,500 (10% of hardware). Today, the computer sells for Rs 25-30,000 with the OS (Windows XP) costing Rs 5-6,000 (20% of hardware). If one adds MS-Office (Rs 15,000), then the software can cost as much as 60-70% of the hardware.

This is the opportunity for Linux, open-source software and Emergic Freedom. The first challenge is to show that the alternative environment is a workable one, and one that does not take away from an individual’s productivity. This means creating an increased awareness – most people don’t even think of an alternative to Intel-AMD and MS Windows-Office.

I had written a detailed post yesterday discussing the cost savings if organisations used Via’s PC Terminals and Emergic Freedom software.

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Rajesh Jain

An Entrepreneur based in Mumbai, India.