Emergic Picture

I drew up a picture of what I wrote yesterday on Emergic. It needs some more detailing, but its a good overview of what we want to do. Amazing how much difference a picture can make in helping one visualise on what we want to do!

Emergic – Simplified

I was drawing out the picture in my book today, and its falling nicely into place (the thinking part). I’ll make it into a Visio picture sometime soon. For now, here’s the text:

Objective
– create low-cost technology solutions for SMEs in emerging markets
– a computer on every desktop (courtesy: Bill Gates)

Messaging (what we currently do)
– Mail, IM, Firewall, Proxy, Anti-Virus on a Server on the LAN for companies — this is part of our MailServ product [on a Linux platform]
– extend to add Calendaring, Scheduling, VPN support

Thin Client-Thick Server
– second hand PCs as thin clients (USD 100 / Rs 5,000)
– extend the server to manage files, preferences, printing, etc.
– run a limited set of apps on the thin clients from the server (KDE Desktop, Mozilla for browsing, Evolution for mail/calendar/contacts, OpenOffice (word processor, spreadsheet, presentation), GAIM (Instant Messaging), GIMP (imaging) and a PDF viewer

Digital Dashboard
– a new read-write environment
– combine outlines, blogs and RSS syndication
– emphasise sharing, collaboration, narration, story-telling

BlogStreet
– a blog directory and search engine
– apply the tech within enterprise on the blogs

Enterprise Software
– integrated eBusiness suite
– ERP+CRM+SCM
– Website, Intranet, eCommerce
– visual business process development environment
– build using Web Services
– build to business process standards (eg. ebXML, RosettaNet)

Content and Community
– Emergic.org (my blog)
– an Enterprise “reader’s digest”
– Slashdot-like community blogs of SMEs in verticals
– SME Marketplace

Emergic Thinking Update

This Sunday, I was going through my notes on Emergic of a year ago — then, I used to refer to it as “SME Tech Utility”. It is always an interesting exercise reviewing older thoughts and then just thinking reviewing the progress one has made. As I read, I realised that one space I had not allocated enough resources to was on the Enterprise Software side. Even the way we are doing things currently is too conventional (wanting to develop an accouting+sales package for SMEs which will run off the Thick Server on the LAN and be web-enabled), and needs to change.

What become clear to me is that Emergic needs to have 3 pillars:

1. Thin Client and Thick Server: includes the Digital Dashboard which will over time become the de facto Desktop, Messaging, Collaboration, System (files and preferences) and Publishing (website, ecommerce) applications. This is the “SME OS” — like MS Windows. We need to think of us as a “platform” for us and others to build upon.

2. Enterprise Software: This is the enterprise equivalent of MS Office — an integrated suite of eBusiness applications that an enterprise needs. Needs to be crafted like Lego blocks, which can fit in together.

3. Content and Community: This covers this weblog, BlogStreet.com (the blog directory and search engine), and other sites to build out the SME Clusters and Marketplace. Like a cross between Yahoo and eBay for SMEs.

Plenty of thinking still to happen:
– who will be our early adopters, and how do we roll out
– sequence of activities and milestones for next 6/12/18 months
– the business model: how will we make money
– marketing and distribution: how do we reach out to SMEs
– need to figure out the second hand PC value chain
– do we worry about the home market
– missing: communications (WiFi) and service (eg. microFinance, Outsourcing)

I am confident we’ll get answers as we go along. Have to jump in the water to learn swimming. We’ve started climbing the rocks. We’ll stumble a little, need to go back at times, but we’ll climb the mountain.

SME Tech Utility

Computing and Communications continue to be very expensive for SMEs in emerging markets. The result is low penetration of computer hardware, limited use and/or piracy of software and limited, low-speed connectivity to the Internet. These factors (concomitant with the inherent cost barrier of computers, software and communications) ensure that SMEs continue to be very people- and paper-reliant.

In fact, in India the installed base of PCs is less than 6 million (offices and homes), with the addition of 1.8 million new units annually. This is ridiculously small. In fact, in a shocking state of affairs, PC sales for 2001-2 have been more or less flat compared to the previous year.

Even as the world moves inexorably to ubiquitous connectivity, the lack of appropriate technology deployment within SMEs places them at a significant disadvantage as compared to the bigger companies and their counterparts in the developed markets. This should not be so. SMEs should be empowered with the latest technologies in a cost-effective manner, and as a collective they should be able to wield power, make themselves heard, and garner more business. We want to bring about an epidemic of change in the SME Technology infrastructure.

One point: here, when I am talking of SMEs, I intend to refer to not only the small and medium sized companies, but also those independent decision-making units in the BigCos (especially in the emerging markets) who are cost-sensitive. Many of the ideas described here apply equally well to them because there are few who can afford to spend in dollars per employee (since for most, their revenues are still local currency). This thinking helps grow the market dramatically, and in fact these BigCo SME units could be among the early adopters helping us achieve scale and volumes much faster.

A Connected Computer on every Desktop

My starting premise is that every SME should be able to afford a desktop PC for each employee, regardless of salary. The productivity impact of computers is beyond doubt. Any person in the coming earning more than USD 150 (Rs 7,500) per month should be given a connected computer for no more than 10% of the cost of his salary. Today, PC penetrations in SMEs are perhaps at 5-10% (or less) in countries like India. What we are suggesting is a 5-10x increase in the deployment of PCs, along with the software they need to communicate, collaborate and manage their business.

Our target is to provide a computing and communications platform for SMEs for the equivalent of a one-time, upfront payment of USD 100 (RS 5,000) per person, USD 500 (Rs 25,000) per location, and USD 5 (Rs 250) subscription fee per person per month. For this investment, SMEs should be able to give a desktop computer with connectivity to the Internet to each of their employees and all the software needed from messaging, security, collaboration to the enterprise applications.

Hardware in our case follows the 30-30 Rule: providing 30% of the functionality at 30% of the price. Thus, we dont need USD 300 computers on the desktop but USD 100 machines. Software follows the 10-10-10 Principle: 10 times the applications, 10 times the speed (since it is on the LAN), at one-10th the price (of a single application). Communications is the paradise of the commons, built bottom-up using open spectrum.

Thus, the internal IT architecture of SMEs will be as follows:

Used PCs as Desktops, serving as Thin Clients, running Linux and a Windowing System; without hard disks and CD drives; booting off the network. The used PC configuration can be as low as 486 machines with 32 MB RAM. By simplifying the desktop PC, maintenance becomes very easy: in the event of any problem, just replace it with another PC. In fact, the PCs too are interchangeable since all data is stored on the server.

Current Desktop as an Enterprise Server, at a cost of about USD 500. This will host all the software and content for the desktops, along with the mail, files and preferences. The desktops work as thin clients, with this thick server. All that is required is to use the latest desktop configuration available in the market as the server. Since all the access from the clients is to the server, there is no dependency on a real-time network connection, even though this is likely to be there.

Communications: Use 802.11 technology within the enterprise and for external connectivity. 802.11b works with open spectrum (2.4 Ghz) at 11 Mbps, which puts it in the same range as the 10 Mbps Ethernet we have been familiar with. By using 802.11 within the enterprise, it simplifies the whole networking exercise. No need to lay cables, which again requires maintenance. Put a wireless access point in neighbourhoods (managed by entrepreneurs, akin to how the cable TV revolution began in India in the early 1990s). This ensures that there is high-speed, shared bandwidth available across multiple enterprises. 802.11 technology can also be used in rural and semi-urban areas through the use of directional antennas to support access over greater distances. What is effectively an alternate (adjunct) technology in countries like the US can become a mainstream technology in countries like India.

Software: Software will be available on the Enterprise Server. By making all software available on the Enterprise Server on the LAN, we bypass the low-speed and real-time Net connectivity bottleneck. So, its an ASP model, but the ASP sits on the corporate LAN. The software created, especially the enterprise software, will need to adhere to the various business process standards that are being drafted ebXML and RosettaNet are two examples. My belief is that SMEs will be willing to change some of their business processes they have anyways evolved their processes internally. By standardizing business processes, we can now do three things: create more standardized software for use by increasing numbers of SMEs, standardize the data flow via XML across enterprises and also allow SMEs to work together for bigger projects (since they start resembling an extended, virtual company).

There are four types of software which are needed (the first three are common across industries, while the fourth is customised per industry):

Server Software to enable Messaging (Email, IM, SMS) and Collaboration this is akin to what is available in MS-Exchange and Lotus Notes today. Along with this, we also want to make available software for Website management, Content management (especially, weblogs), software for the creation of Intranets within the company, and Security Software (firewall, proxy, anti-virus and VPN). The Server software will interact with its peers within the company (in the case of multiple locations) to replicate data; this will be done via the Central Servers on the Internet.

Client Applications for Email, IM, Web Browser, Office Productivity (word processor, spreadsheet, presentation with data formats compliant with MS-Office), Acrobat, multimedia (audio, video, image management). These will all run off the server but available via the thin client on the desktop. All storage will be done centrally on the server.

Enterprise Applications (Generic) will be in the form of building blocks which perhaps do 70-80% of what the company and industry needs. One of they requirements for the enterprise applications is integration data should be entered only once, and available across the vertical applications. Enterprise Information cannot reside in silos. This is the notion of an e-business suite which Oracle and others talk about.

Enterprise Applications (Industry-specific) are created by third parties on top of the Web Services platform we will make available. Some of these applications may be priced additionally.

Building an Ecosystem

I dont think we can create every software application that will be needed. What we want to do is to use a Reverse Walmart strategy. In Walmart, as specific products become popular, Walmart looks to replace or complement some of them with cheaper in-store brands, which have higher margins. We will do the reverse. We will start by using in-store software which has been developed by us so that we can seed the entire exercise. At the same time, we will publish the APIs and XML data formats for the modules, so others can develop replacements (or in fact, better versions) for the software. These then can be made available to SMEs for small, additional fees depending on their needs.

This strategy helps us to build an ecosystem around what we are doing. We want to build the platform, and not necessarily all the applications. Over time, this makes us an SME aggregation and distribution system (like Walmart is a mass market customers aggregation and products distribution system).

Used PCs: From Where?

A big question is on the Used PCs. Where are they going to come from? We have to figure out the supply chain of second-hand PCs in the developed markets, especially US and then see how to aggregate them and transport them to India and the other markets, and then test/certify them for use in the SMEs. This is a big challenge and one of the key unknowns as of now. It is also a very critical component in our vision of bringing down the cost dramatically. Unless the cost comes down to the USD 100 level, volumes will not take off. And without the desktops, our software market will be very small (since we are charging per person). The only way, according to me, to bring down the cost to the USD 100 level is by using second hand PCs there is no new PC whatever be the configuration which can be made available at that price point. We do not want to create, we want to aggregate. The PCs are already there, we need to figure out the supply chain to get them to the desktops of SMEs in the emerging markets.

Emergic

Emergic is at this stage a concept. It means combining emerging technologies to create solutions for emerging enterprises (SMEs) in emerging markets like India. Emergic is about taking the vision of “computing and communications for all” to the next 500 million users in the world — most of whom are in the world’s developing markets. They cannot pay for technology denominated in dollars. They need cheaper hardware, software and communications.

Some of the key ideas in Emergic are Thin Client-Thick Server, Digital Dashboard, Integrated eBusiness software, WiFi for Community Networks, Weblogs (BlogStreet and Emergic.Org) and SME Clusters.

Thin Client-Thick Server: Computer penetration in SMEs in countries like India is very low. The installed base of computers in India for example is about 6.5 million, of which about 3.5 million PCs were sold in the last 3 years. Software on the desktop is mostly pirated. The root of the problem lies in the cost of the PC. It is USD equivalent * Exchange Rate + some duty component. It needs to be priced according to PPP (Purchasing Power Parity) — roughly USD 100 for the desktop, and not USD 700 as it is currently. How can we make this happen? Use Second-hand PCs from the western world — these should be available at very low-cost. Keep the motherboard and the monitor, dump the hard disk and CD-ROM drives. Make the machines as thin clients. Use Linux on the Thick Server (any current desktop).

Digital Dashboard: Use Instant Outlining and Knowledge Blogs the first building block of a new, shared collaborative workspace on the Thin Clients. A simple reading and writing environment, integrated into the IM client and the Browser. Within the enterprise, this becomes the primary RTW (read-think-write) platform, and one which can be easily shared across employees. This is different from the “thick client” and P2P platforms in the developed markets — this is because we want to use the newest technologies but on 3-4 year-old PCs.

Integrated eBusiness Software: ERP+CRM+SCM+ERM+whatever else is needed within the enterprise. But, a fraction of the functionality of what the BigCos like SAP, Siebel, i2, Oracle, etc. provide at no more than USD 5 per person per month. All the apps are integrated together using Web Services. Its what Larry Ellison talks about — the ultimate enterprise software suite.

This is the SME Tech Utility. Think about it. All the computing one needs at USD 100 in the first year (for a 3-year period, with USD 10 per annum for maintenance in the next 2 years) and software for USD 60 per annum. Over a 3-year-period, the total cost of this “Tech Utility” is no more than USD 300 (or roughly USD 10 per month). Now, anyone earning more than USD 100 per month (Rs 5,000) can be given computing (hardware and software) on the desktop. As long as they can improve their productivity by 10%, the investment is recovered. This is where the next 500 million users are going to come from — they are the ones who have not been using computers so far because they cannot pay for it. They are at the bottom of the enterprise pyramid. This is the Emergic Opportunity that lies ahead of us.

WiFi can be used to build high-speed public access community networks. WiFi (802.11b) is being seen as the solution for wireless LANs. But in emerging markets, what is needed is low-cost, high-bandwidth connectivity to the network. Cable, DSL, etc. will take a long time to roll out. WiFi uses open, unlicences spectrum. Let entrepreneurs set up wireless access points and start offering the services in the neighbourhoods, taking bulk bandwidth from the ISPs.

Weblogs can become the SmallCo’s marketing tool. This is the approach we have chosen. We intend to tell you all our ideas, thinking and actions — what we are doing to implement this vision. Weblogs empower the amateurs in writing and the SmallCos in marketing. Weblogs are also a discontinuity in the world — for the first time, the Web is becoming two-way. Our efforts are in two directions: to keep you updated through this Weblog on what we do, and how we see technology and events from a non-developed-country perspective, and secondly, by launching shortly a Weblog directory and indexing engine. Google is great for the Web, but we need something smaller and different for the blogs. Watch out for BlogStreet!

SME Clusters is what will get formed as SMEs create their own blogs and community blogs. As the small people and companies of the world come together, it will have a magical effect — Emergence, where the whole will be much greater than the sum of the parts. SMEs can together make a big difference to the world of trade and commerce. The Internet has so bridged them only from a communications point of view. Imagine if they can, using software standards like Web Services and business standards like ebXML, combine their businesses together like Lego — what will the whole look like?

Think Hobbits and Middle-Earth, and then extrapolate to Middle-Enterprise.

Middle Enterprise

Middle-Enterprise is the world which exists between the consumer/Soho market and the BigCo enterprise market. There are 6 billion consumers and 10,000 Big Companies. Between them are 25 million Small and Medium Enterprises (SMEs), what we call Middle-Enterprise.

It is a world which is hard to reach, it is a world which has for long been neglected. And yet, this is where most of the worlds economy is driven from. Middle-Enterprise is todays Middle-Earth. A lot of the Middle-Enterprise comprises the corporate poor of the world, the bottom of the corporate enterprise pyramid. This is what has been largely left untouched, especially in the emerging markets of the world, with all the technology revolution of the past 10-20 years. In this world, for many, it is like time has stood still. This is the next battlefield. This is the Final Frontier.

Target Market: the SMEs of the world, especially in Emerging Markets
Holy Grail: make SMEs Intelligent, Real-Time Enterprises
Objective: Reduced Cost of Computing and Communications in the Enterprise
How: SME Clusters, aggregations of SMEs; building a fellowship, a coalition
Solution: SME Tech Utility, Emergic
Economic Driver: Profit per SME Cluster
Trojan Horse: Building an SME Distribution System

The scope of what we want to do is awesome: first, we are trying to combine hardware, software and communications to create a new enterprise technology architecture for SMEs; second, we are combining technology with content to attract SMEs; third, as SMEs come together, they will aggregate into SME Clusters, which become micromarkets; fourth, we will help SMEs grow by providing an infrastructure for microcredit and putting them in touch with other SMEs, creating a virtuous positive cycle to attract new SMEs. Growth is the only survival technique for SMEs. This is what Emergic will enable.

In Jim Collins book Good to Great, in the chapter on The Hedgehog concept, he asks three questions which I have answered here:

What can we the best at? Aggregation of technologies, concepts, SMEs. Have the worlds best clusterings. And from these clusters build emergent behaviour. This means we are not inventing new things. Assimilation, imbibing new things as they come and applying them into our framework. Good at copycat, imitation, low-cost. Also, leveraging the Internet as a medium for distribution and aggregation. We should be the best at using the Internet it runs in our blood since 1994. Its what I spend most of my day at! Better use of existing tech, better integration than anyone else.

What drives our economic engine? Profit per SME is one way to think of it. Obvious. Wont cause us to think out of the box. It will cause us to milk each SME which will be counter-productive and self-defeating. Better is Profit per SME Cluster, per SME micromarket. This changes the game. First, it makes us look at aggregations/clusters/groups as we should. Need to market indirectly. Second, makes us think of all the kinds of groupings by industry, profession, social, affiliation, association. Keep on thinking how best to segment SMEs. Think of each cluster as a Walgreens convenience store and work on maximizing profit per store. Yahoo eGroups has the micro-classifications but they havent taken it to the next level. Need to build an emergent/self-organising layer. In fact, we can even think of SME Clusters being present in the BigCos think of clusters as decision-making units.

What are we passionate about? The Underdogs, bottom, the ordinary, the average. The forgotten masses, people and cos. like us in countries, markets, areas no one really cares about. The Ants individually little, but collectively great. Bldg a new India. Leverage new tech and the Internet. Leapfrog over the BigCos and the Developed Markets.

A Personal View

Emergic is a venture on a large scale (in terms of how many things we have to sync together). For us to succeed, we have to get lots of the details right. The 3 cornerstones of this will be built around:

Aggregation / Integration — of various technologies: we are not necessarily going to create new things, but we have to integrate existing things (content, tech) better than anyone else. In Samachar, we aggregated content; now, its going to with technologies. There is no way sitting in Bombay we can invent the next new thing. Innovation has to come from the way we put these things together.

Clustering — leverage the micromarkets and communities which exist by providing them a platform to interact; create SME clusters in a self-organising manner so its scalable. The economic driver (a notion from Jim Collin’s Good to Great) to maximise: profit per SME Cluster.

Understand the Internet better than others — this is what I think is a strength of mine. It is what helped in 1994 (for IndiaWorld) and this is what will help me now. Just the time spent and knowledge of what is possible and not possible in the “virtual” world. If we can leverage this, it also means we can achieve economies of scale without spending a lot of money. We have to push the envelope in what can be done with the new Web, the two-Way Web and the new WWW — Web Services, Weblogs and WiFi.