Wednesday, December 17, 2008

Where is the Timex of Laptops?

Analysts at DRAMeXchange forecast last week that the marriage of netbooks and solid-state drives (SSDs) is teetering and likely to end in a messy divorce as early as next year. SSDs featured prominently in as many as 70% of netbook devices at the beginning of 2008. That percentage may fall to less than 10% by the end of 2009, as traditional hard drives make their way into more and more devices.

This should not come as a great surprise to anyone following the development of the low-cost device market. Several factors have contributed to the change in the type of memory, but none more than the shift in target markets. Netbook manufacturers still give lip service to selling a first computer to poor people in developing countries, but they are following their own distribution channels and market knowledge to sell second or travelling machines to people in developed countries. These consumers have different expectations for performance, compatibility and storage capacity than their emerging-market counterparts, and these expectations are more easily met with traditional hard drives.

The steep decline in SSD for netbooks suggests that consumers (in any market) are not particularly aware of or concerned with the advantages or disadvantages of the competing types of memory. In fact, SSDs have several advantages over traditional hard drives that should matter to emerging-market buyers. Lower-capacity SSDs consume less power, operate at a cooler temperature, and are more rugged. The lack of moving parts makes them more tolerant to extreme temperatures, high altitudes, impact shock, and dust. For the time being, they are slightly more expensive than comparable hard drives, but the price for SSDs has been falling by 50% annually as production capacity and supply of materials increase. Netbook makers who are shifting their focus to mature markets may be leaving the back door open to a competitor who develops an SSD-based laptop “that takes a licking and keeps on computing.” Ruggedization is a serious concern for many emerging-market buyers, particularly in the education segment, where fear of breakage and maintenance costs dissuades many from considering laptops for student or teacher use. Timex has been trading on their reputation for durability for decades. Would a robust, well-marketed netbook equivalent find the same success?

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Wednesday, December 10, 2008

Not Your Father’s Internet

The results of a Nielsen survey on mobile Internet usage were presented in a Nigerian newspaper last week, and mobile service providers, content providers, operators and handset manufacturers may have felt some early holiday cheer. According to the study, the number of Nigerians who access the Internet through mobile phones, while still almost five times smaller than those who access the Internet through a PC, grew 25% in the last 6 months, compared to a mere 3% rise among PC users. The report also noted that mobile Internet users are younger than their PC-using counterparts, and they favor different websites. On a computer, people are likely to use Google or entertainment-oriented sites, while mobile Internet browsers go to the BBC News website, or check the results of sports, weather or local events.

Since the study doesn’t appear to be available for review, the reported results prompt some questions and comments. It is unclear whether Nielsen accounted for the difference between urban and rural populations. The expansion of mobile infrastructure in rural areas may make mobile connectivity the preferred (or the only) way to access the Web for many Nigerians. Or, if rural areas were excluded from the study altogether, the results may reflect the different interests, needs or preferences of urban respondents, who are often wealthier and better educated. The variables impacting mobile Internet usage in Nigeria (and elsewhere) include access, network infrastructure, disposable income, and needs. The rate of adoption will be determined by how quickly handset functionality expands, prices fall, and infrastructure develops.

Regardless of the pace of mobile Internet adoption, the results of the Nielsen study add another layer of support to the argument that mobile phones are becoming an increasingly important computing device for a large number of Africans (and many other developing-country residents). Content and service providers, handset manufacturers and mobile operators have an undeniable opportunity for business growth, as long as they maintain a sharp focus on the user preferences and infrastructure limitations in these markets.

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Thursday, December 4, 2008

Mainstreaming Emerging Markets

For the second year, the annual International CES in Las Vegas, the world’s largest tradeshow for the consumer technology industry, will feature a dedicated session that focuses on the role technology plays to further economic growth in developing countries. The second annual Technology and Emerging Countries Program (TEC) will feature two keynotes and a panel on “Creating the Global Tech Ecosystem.” This is no side-lined breakout event. The opening keynote speaker is Intel’s Chairman, Craig Barrett, and the closing keynote will be delivered by Cisco’s Chairman and CEO John Chambers. That CES is dedicating plenary sessions to emerging countries, and the fire power behind the speaker lineup for these sessions, speaks to a shift occurring across most of the top technology companies.

Microsoft, Intel, Cisco, Nokia, IBM, Dell, Google, HP and many others have adjusted their strategies, operations, product designs or organizational structures to make emerging-market business growth a more central focus for their mainstream businesses. Corporate announcements, new products and partnerships relating to these markets are no longer couched in terms of corporate social responsibility. Mainstream business units appear to be taking a lead in their company’s revenue growth in emerging markets, bringing more efficient processes and abundant resources to the effort. A few years ago, it was difficult for companies to justify asking their mainstream businesses to take on performance metrics relating to emerging markets. Now, the development of Intel’s Atom processors, the creation of Microsoft’s Unlimited Potential Group, and organizational changes at Cisco demonstrate that this is changing.

Vital Wave Consulting sees this as a very positive trend. Many emerging-market-focused organizations outside of mainstream business units have struggled within large companies to deliver on internal expectations. Incubation of these special strategies can be effective, but only to the point where these groups learn what systems, products and practices need modification within their company. Networking opportunities such as the TEC program at this year’s CES are a good chance for emerging-market focused business managers to share best practices and learn from industry leaders how to shift the responsibility for emerging-market growth from smaller, exploratory groups to stronger and more effective mainstream businesses.

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