Dividends for the Emerging Market Knowledge Account

Dell announced the formation of a new emerging-markets group this week to concentrate on growth opportunities in developing countries. This announcement echoes similar efforts by Sun to create a dedicated emerging-markets business unit and IBM’s late-2007 “significant shift” to focus on emerging markets. These multinational technology companies represent a second wave of re-organizations aimed at cracking emerging-markets; nearly a decade ago HP, AMD and Cisco started pioneering programs focused on understanding emerging economies.

The contingent of ICT professionals focused on emerging markets is still relatively small but it is growing quickly as large corporations continue to make organizational and financial investments to better address these growing markets. Emerging-market business professionals in Silicon Valley came together Wednesday at Vital Wave Consulting’s third anniversary celebration and networking event in Mountain View, California. In attendance were long-time emerging-market practitioners as well as those new to the discipline. Collectively, they possess extensive experience and hard-earned knowledge of successful business growth in emerging markets. At the gathering, conversations ranged from segmenting the market for an alternative energy generation and storage device to the scalability of social capital investments in emerging markets. “It’s great to see more large companies investing in emerging economies,” said Janine Firpo, executive director of Sevak Solutions and former head of HP’s Microfinance Development Program. “In the early days at HP, there was really no one else doing this type of work.”

With the surge of mobile phone and low-cost laptop sales in emerging markets and recent media attention on the vibrant business opportunities in these countries, corporate executives are determined to develop appropriate strategies for these new markets. The broad and varied projects discussed at Vital Wave Consulting’s event this week demonstrated the momentum that has resulted from investment in ICT business growth in emerging economies. By building on lessons learned, those new to the discipline of emerging-markets business will be better equipped to quickly and effectively enter these exciting and challenging markets.

Also in the news:

• Agilent benefits from China 3G standard investment
• SanDisk launch new solid-state drive
• AMD to launch low-cost processor

Investing in Teachers Makes Good Business Sense

Researchers released illuminating results last week from a study of Romanian school children with access to computers. Students who bought PCs through a state-sponsored assistance program spent less time sleeping or doing homework and performed worse on tests than their peers without computers. This may surprise some, given the perceived advantages of educational computing. But the devil is in the details. In Romania, the computers were provided and used with no meaningful supervision or guidance from parents or teachers.

Commentators correctly point out that the findings weaken claims by the One Laptop Per Child initiative that students can construct their own learning with the right equipment and little or no help from teachers. The “constructivist” approach sounds great in theory, as teacher training expenses – a major cost component for school technology projects – could be dramatically decreased. But it does not resonate with career educators who emphasize the crucial role of teacher training in successful IT implementations. To truly reap the benefits of computers in education, teachers need more extensive and continual multi-faceted training, onsite support, a platform for meaningful collaboration, and access to relevant content.

The education segment is one of the most strategic markets in developing countries because the budget is reliable and today’s students are tomorrow’s consumers. A few multinational companies have developed programs that help reduce the cost of teacher training for emerging-market schools. Microsoft’s Partners in Learning program and the Intel Teach program have made considerable contributions in many countries, but training is often limited to the conveyance of basic computer literacy, and online resources require reliable, affordable Internet access. There is an opportunity for MNCs to win greater brand loyalty among all education stakeholders by broadening their teacher training and content development assistance. When MNCs address this significant pain point for schools, education officials will be able to prove the value of tech expenditures and justify continued and larger investments.

Also in the news:

• Acer says it prefers Linux over Microsoft
• PC forecasts raised by IDC and Gartner
• OLPC redux
  

mServices to Ride in on Next Wave of Emerging-market Mobile Growth

The International Telecommunication Union (ITU) recently reported that mobile phone subscriptions topped 3.3 billion worldwide with global growth reaching 22% annually. Mobile phone users in developing countries are continuing to make communication a priority and are even demanding more advanced features such as multimedia capabilities. Mobile penetration rates exceed 100% of the entire population in nearly 40 countries, including several emerging markets in Asia and Eastern Europe. Other countries that are not saturated, such as India and China, already had a robust population of mobile phone subscribers – 232 million and 547 million respectively – at the end of 2007, with those numbers increasing rapidly every year.

Penetration rates, particularly in emerging markets, continue to amaze industry watchers who, until recently, greatly under-estimated low-income consumers’ willingness and ability to purchase mobile phones. Operators, however, need more than increased subscriber numbers to claim victory in emerging markets. The average revenue per user (ARPU), the primary metric upon which operators are valued, has historically fallen as lower-income consumers adopt mobile technology. But ARPU doesn’t have to suffer in emerging markets. While developing-country consumers may have a limited budget for communications, they do allocate funds for other expenses that are increasingly being provided as mobile applications - healthcare, finance, education and entertainment.

The delivery of mobile-based services that capitalize on expanding mobile phone penetration is key to increasing ARPU in developing countries. In many cases, basic services (e.g., banking and healthcare) are underdeveloped or concentrated in urban areas but could reach far greater markets through mobile platforms. The success of many small mBanking and mCommerce programs indicates that mobile phone users in the developing world are willing to utilize their mobile phones to access value-added services. By providing robust and varied services to address basic needs, mobile companies are helping to transform the mobile phone into a life tool upon which even low-income consumers could be willing to spend a significant percentage of their monthly income. These types of mServices have the potential to counter diminishing ARPU and infuse incremental revenue into the mobile communications industry.

Also in the news:

• Intel launches Atom for low-cost PCs
• CTL launches sub-$400 PC
• Yahoo! bets on online ad growth in emerging markets

WiMax Stays in the Spotlight

The WiMax drumbeat continued this week, signaling enduring interest among media, business and global standards organizations. Intel, the most vocal corporate proponent of the new standard, argues that WiMax has clear benefits in emerging markets, where the majority of the population is unconnected and there are fewer barriers from legacy systems. The company recently announced they would be making strategic investments in India-based WiMax firms and they are omnipresent at the 2008 WiMax Expo, which kicked off Monday in Taipei. At the Expo, hardware manufacturers are showing off WiMax-capable devices, such as a newer, larger version of Asus’ popular Eee PC.

As WiMax becomes more prevalent and begins to connect emerging markets previously underserved by DSL and cable services, there will be increasing opportunities for convergence of information and communication technologies. WiMax (with one foot in both IT and telecommunications), 3G-capable laptops, voice-over-IP, and other hybrid technologies represent both a convergence of technologies and of the value chains that deliver them. The convergence of products and distribution invites new players into the value chain, creating competition for revenues.

Companies with large, diverse product and service portfolios (e.g., HP, IBM, Sony) would do well to monitor converging technologies and capitalize on the opportunities presented when value chains overlap or merge. MNCs are well equipped to pursue these new business lines through acquisitions of smaller, nimbler companies or through internal growth. By diversifying their roles and broadening their control of the value chain in emerging markets, MNCs can benefit from entirely new revenue streams, making it easier to weather ongoing changes in global markets.

Also in the news:

• Dell confirms it has a low-cost laptop
• Mobile growth still strong in Africa
• Via takes on Intel's Atom