Thursday, February 26, 2009

Success for Alternative PC Form Factor in Brazil

Though it hasn’t been officially confirmed by the Brazilian government, the Canadian company Userful announced last week that they and their Brazilian partners had won a contract to supply computing access to 360,000 students in all 5,560 local municipalities. Userful offers a software solution that allows up to 10 people independent use of one desktop PC. The solution, which runs only on a Linux platform, reduces the initial per-seat cost of computing to less than $100.

The Brazilian project was prefaced by a similar mega-deal in Macedonia in 2007; that 180,000-seat contract was awarded to Userful’s main rival, NComputing. PC companies probably feel the sting of losing a Brazilian tender a little more than a Macedonian tender because of the comparative size and prominence of the markets. But both deals demonstrate a critical aspect of the emerging-market business environment that may alarm traditional market leaders – that is, some emerging-market governments (and officials in key segments like education) are becoming more open-minded to alternative platforms and form-factors. The primary concern for public sector officials in emerging markets is getting the most from a limited budget. They may also be less concerned with legacy systems, particularly for greenfield and rural deployments, and some harbor an overt bias against leading mature-market companies.

The shifting decision-making environment creates opportunities for smaller hardware and software companies, training and service providers, and software developers. Companies like Userful and NComputing overcome resistance to abandoning the 1:1 computer-to-user model by offering a compelling price advantage. They may also win points by partnering with local hardware providers, a common concern among local officials who want to see a direct benefit to the local computer industry. The increasing willingness of emerging-market buyers to adopt alternative form factors and business models increases the importance of strong local relationships (among potential buyers and partners). It also means that traditional market leaders must broaden their list of possible competitors in an environment where cost savings are paramount to decision-makers in both mature and emerging markets.

Thursday, February 19, 2009

mHealth Alliance Launched in Barcelona

At the Mobile World Congress in Barcelona this week, attendees saw fewer new product announcements than in years past. But some exciting opportunities were still to be found. One such opportunity was the timely announcement of the global mHealth Alliance to be launched in the coming year. The organization is intended as a collection of private-sector companies, governments, health organizations and non-profit foundations that aim to support mobile health initiatives through research, funding, advising and promoting common standards. The mHealth Alliance is spearheaded by global founding partners including Vodafone Foundation, Rockefeller Foundation and the United Nations Foundation.

Vital Wave Consulting played a role in the creation of the mHealth Alliance, facilitating an international mHealth conference in Bellagio, Italy last July and authoring the United Nations Foundation and Vodafone Foundation Technology Partnership’s mHealth for Development report. Research on early mHealth initiatives showed overwhelming interest and support among all participants – public health practitioners, government officials, NGOs and corporate managers. It also revealed a promising industry that has the opportunity to achieve sustainability and broad geographic impact while addressing some of healthcare’s more critical issues such as a global shortage of healthcare workers and the continuing spread of communicable diseases. Industry leaders interviewed as part of the report agreed that scale is essential and its potential is dependent on the services’ ease-of-use for healthcare workers, adaptability to low-end handsets, and the ability to install and maintain on operator networks. Without scale, such programs have the potential to be relegated to corporate social responsibility programs rather than revenue-generating enterprises.

To accelerate the growth of mHealth and fully unleash the potential of its applications, dynamic multi-sector collaboration is needed between groups as diverse as governments, multilateral organizations, and the private sector. Joint action such as the mHealth Alliance has the potential to create a global mHealth infrastructure that lays out common standards and guidelines, and serves as a repository for shared resources and best practices. Private-sector stakeholders in mHealth, mBanking and other mobile service areas would do well to participate in emerging alliances to support the scale of applications, services and business models that have clear social benefits and tremendous potential for profitable returns.

Thursday, February 12, 2009

Low-cost Devices Take Heat for Poor Low-cost Strategies

Initially heralded as a lifeboat for the PC industry and the single largest growth area for handsets, low-cost devices are now taking a beating in the press. Analysts last week blamed Motorola’s dismal quarterly results on their overly eager entry into the ultra-low-cost market and claimed Intel’s foray into netbook-powering Atom processors is disastrous for the company and the industry.

What you’re hearing is the common industry lament over razor-thin margins and the limited buying power of emerging-market consumers. Such challenges caused some low-cost PC manufacturers to abandon emerging markets to sell second devices to current technology users in mature markets. For other manufacturers, miscalculated strategies in developing countries have caused hiccups in their growth. Motorola’s low-cost handsets, for example, sold well, but the slow pace of innovation and lack of breadth in their product portfolio sent their customers to other companies when it was time for an upgrade.

In spite of (or due to) these missteps, there are still large, relatively untapped markets in developing countries. Business managers who explore new business models will find that low cost does not necessarily mean low margin. Support for alternative payment strategies can bring down the perceived cost of a device and help bring technology to first-time buyers and new customer segments, offsetting (rather than further eroding) declining sales in mature markets. Alternative payments require the right partners and new business models. Companies that put rigor behind all aspects of their emerging-market strategies will follow the demand for affordable devices into new markets and find a better balance between revenues and growth.

Friday, February 6, 2009

Emerging Markets Definition and World Market Groups

Apparently, Michael Dell and Vladimir Putin don’t agree on the definition of a developing country. In a surprising exchange at the World Economic Forum in Davos last week, Mr. Dell asked the Russian prime minister how the IT sector could help Russia make the best use of its talent and technology. Putin replied that Russia doesn’t need any help and is a technologically advanced country with strong science and math programs and a robust software industry.

Putin may see Russia as highly advanced, but technology executives like Dell, who closely monitor the country’s market potential, view it as firmly seated among the ranks of other developing countries. Russia’s per capita gross national income (GNI) rests at $14,400, similar to Argentina, Mexico and Libya, and, like other developing countries, it still suffers from neglected infrastructure, rising inflation and food costs, and a large disparity of wealth between urban and rural residents. Though the debate over emerging market definitions does not generally happen on such a big stage, it is commonly discussed by analysts and business managers, since there is no single accepted definition. For business leaders like Dell, the classification of individual countries can have a profound effect on investment decisions and business strategies. Depending on the product or service offering, target customer segment, or geographic focus, these analyses may include data on infrastructure availability, distribution of wealth, technology diffusion, education levels, business climate, and governance, to name a few.

Emerging market definitions that rely solely on broad economic indicators provide a useful high-level view of the market opportunity for technology companies (see Vital Wave Consulting’s Emerging Markets Definition and World Market Groups). However, the actual market for certain products and services is often determined by a range of non-traditional, hard-to-find data. While most technology companies are focusing heavily on Brazil, Russia, India and China (BRIC), there may be an opportunity for medium-sized enterprises (or product groups within larger corporations) to gain a competitive advantage in strategic, second-tier emerging markets which, if measured appropriately, may have comparably-sized addressable markets.