My latest column in Business Standard:
The recent bid by Comcast, the largest cable company in the US, for Disney, one of the worlds foremost entertainment companies, highlights how technology is disrupting industries. Through Disney, Comcast is seeking ownership of content for its fat pipes. The driving force in media and other industries is digitisation of text, audio and video, and the availability of a high-speed internet for distribution.
Rapidly increasing computing horse power, smart software and broadband networks have accelerated the process of digitisation by providing users and organisations the ability to manipulate content and transmit it cheaply and quickly anywhere across the world.
The impact of digitisation is not limited to media and entertainment. The telecom world is also being shaken up as voice-over-internet protocol (VoIP) services cut the cost of making phone calls and eat into the revenue of telcos. In fact, the US Federal Communications Commission is preparing rules that would allow delivery of the internet through power lines and make online phone calls cheaper. In some countries, WiFi networks are already providing an alternative to the cellular networks in providing ubiquitous internet access.
Digitisation puts power in the hands of the users. Napster forced the music industry to rethink its pricing and distribution policies, with the result that now many online music stores offer songs for as little as 99 cents (Rs 45). Apples iPod is one among a whole new generation of small, portable devices with the capability of storing and playing thousands of songs.
The creators of Kaaza, a decentralised file-sharing software which has become the most downloaded program and is now on over 300 million computers worldwide, recently launched Skype, a peer-to-peer VoIP service. Skype allows computer-to-computer phone calls over the internet for free without the need for any centralised switching system. As Fortune magazine put it, it is disruptive for even the emerging IP telephony service providers: It costs the top provider of paid Internet telephony (Vonage) US$ 400 to add a customer. It costs Skype US$ 0.001.
Personal Video Recorders (PVRs) like TiVo in the US are allowing users to timeshift content. The TiVo allows TV programs to be recorded on a computer hard disk at home, for viewing at the users convenience. TiVo users can skips ads (or replay the ones they like). Imagine the potential for PVRs in a TV-crazy country like India no longer does one have to worry about being home at a specific time to watch ones favourite soap operas.
Highspeed networks are also proving disruptive to the traditional software industry model of selling software for a high one-time price (with incremental payments for periodic upgrades). Now, a new generation of application service providers (ASPs) like SalesForce.com offers software on a rental basis for a small monthly fee via the internet. Updates are instantaneously available to all users. The same concept is being applied to online multi-player video games and is driving internet usage (and profits) in countries like South Korea and China.
So far, digitisation has had only a limited impact in India. But this is about to change. Two key factors offer India an opportunity to leapfrog into the digital world: affordable products and broadband networks. India will benefit from the incessant drive by technology providers to keep lowering the prices of their products. We have seen it with TVs and cellphones, and are now seeing it with DVD players and computers.
This will be complemented by the availability of always-on, high-speed network connections which are becoming available in pockets across the country. From telcos to cellcos, from cable companies to energy providers, everyone wants to build the digital bridges.
As the digital infrastructure gets built, a process of creative destruction and reconstruction will take place. It will be possible to deliver music, movies, software and games electronically from centralised computers, thus combating piracy which has been the bane of the various industries for long. Video-on-demand can open up new opportunities not just for the entertainment companies, but also for training and education. The combination of 802.11-based wireless networks and VoIP have the potential to offer flat-rate telecom access.
Consider one of the areas which digitisation can have a positive impact education. In India, there are great disparities in the quality of education imparted across institutions in urban, semi-urban and rural India. India needs quick and scalable solutions to deliver quality education to hundreds of millions of children and youth to prepare them for the world of tomorrow. The availability of low-cost computers and high-speed networks can completely transform education through its value chain from content creation, translation, delivery and facilitating teacher-student interaction.
The force of digitisation is here. It brings change and opportunity. Old and new economy entrepreneurs and managers need to understand and embrace it, and see how it can be integrated into their way of doing business and life. Because their customers already are.