TECH TALK: Massputers, Redux: The Time Has Come

Last week has an interesting one from the point of view of affordable computing solutions. Microsofts Steve Ballmer talked about the need for $100 computers, and AMD announced a $185 computer ($249 with monitor). I will discuss the significance and impact of these developments. But first, let us look at the motivation that is driving the need for computers for the next users what I will refer to as Massputers (a term coined by Om Malik).

There are two key factors which are making computer makers finally wake up to the opportunity in emerging markets:

Slowing Growth in Current Markets: The developed world is awash in computers there are over 500 million users across these countries. This is now primarily an upgrade market almost everyone who needs a computer has one. While computer growth continues to be strong (176 million computers will be bought in 2004, according to ZDNet which quotes IDC), this is being driven by two factors: depressed growth in previous years, and increasing offtake in emerging markets. The next new fast machine is no longer a driving factor in purchase, as evidenced by Intels decision to de-emphasise clock speeds for its processors.

Increasing Demand in Emerging Markets: The developing countries of the world are where the next users of computing are going to come from. China and India are emerging as two hot growth markets. China overtook Japan in 2003 to become the second largest PC market with sales of over 13 million units (US led with 51 million units), according to India is expected to have sales of about 3.5-4 million computers in 2004. Affordability is going to be increasingly important in these markets.

The emerging market opportunity was elaborated on by Om Malik in his Massputers blog post: Technologys biggest opportunity that is staring them in the face. It is what I call a Massputer a computer that costs $300 for the computing hungry masses in emerging economies like India, China and Brazil. Users of this massputer should be able to do basic tasks like writing documents, Internet surfing, email and perhaps some business-related tasks like data entry. There are nearly four billion people who live in these emerging markets and assuming that only 10 per cent of them can afford $300 it is still a market of 400 million.

Business Week did a cover story recently entitled Techs Future and wrote: During the first 50 years of the info-tech era, about 1 billion people have come to use computers, the vast majority of them in North America, Western Europe, and Japan. But those markets are maturing. Computer industry sales in the U.S. are expected to increase just 6% per year from now to 2008, according to market researcher IDC. To thrive, the industry must reach out to the next 1 billion customers. And many of those people will come not from the same old places but from far-flung frontiers like Shanghai, Cape Town, and Andhra PradeshLed by China, India, Russia, and Brazil, emerging markets are expected to see tech sales surge 11% per year over the next half decade, to $230 billion, according to IDC. What makes these markets so appealing is not just the poor, but also the growing ranks of the middle-class consumers.

The time has come for the IT industry to look at, the fortune at the bottom of the pyramid and the next billion.

I will argue in this series (as I have often done on my blog) that the strategies being currently adopted by the likes of Microsoft and AMD are deeply flawed. Affordable $100-200 computers is just one dimension for attracting the next users of computing. What is needed is a fundamental reinvention of the computing architecture and business model. The IT majors are reluctant to do this because it threatens to be disruptive to their business. And that is where the real opportunity lies for innovators.

Tomorrow: Ballmer Talk

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Rajesh Jain

An Entrepreneur based in Mumbai, India.