India On-shoring?

The Indian government's Department of Telecommunications quietly released a policy document that should rattle pretty much every global tech company in the world. The National Telecom Policy advocates a huge increase in domestic manufacturing and design, particularly in the areas of microchips, network equipment and computing devices (including smartphones). Designed to meet local demand for relevant products and services, reduce the trade deficit and ensure cyber security, the policy aims to:

• Promote domestic production of telecoms equipment to meet 80% of India's demand and capture more of the global ICT market
• Provide preferential market access for domestically manufactured telecommunication products including mobile devices and SIM cards
• Support development of Indian standards for hardware and software
• Streamline taxes and provide greater access to financial resources for local manufacturers and R&D groups 

For India, this is a well-designed and ambitious policy initiative, and multinational ICT companies can't afford to ignore the underlying reasons for the move. Countries like India and China, which have the design talent (and in some cases the manufacturing capacity) to implement or impose a home-grown ICT ecosystem, are becoming increasingly aware of the inherent vulnerability of buying critical technologies from abroad. Multinational ICT companies may see in the new policy a threat to market access, but it remains to be seen whether the DOT has the broader government backing to implement and enforce it. There are also unresolved questions about the policy, such as whether locally designed products made by multinational companies will qualify as domestic.

Tech companies should also smell opportunities in the new policy. The goals of ensuring at least one e-literate person per household and increasing access to mServices promise a growing market for mobile and low-cost devices. Efforts to support IT purchasing by small- and medium-sized businesses, especially in Tier II and Tier III cities, may also bolster demand. And there will almost certainly be partnership opportunities, particularly for companies that respond to the government's concerns over cyber security by building in or enhancing security features in their chips, network equipment, hardware and software.

For more information about the Indian Government's proposed policy and its implications for your business, contact anne.craib[at]vitalwaveconsulting.com

Battle of the Form Factors: Tablets vs. Ultrabooks

A glance at the headlines over the past several weeks makes clear the battle of computing form factors continues to rage. HP announced it will sell or spin off its PC division, including its struggling TouchPad. Meanwhile, in India, Lakshmi Access Communications announced the launch of a new US$99 tablet computer. The tablet, which runs Google's Android OS and connects to the Internet using both Wi-Fi and 3G networks, comes only a few weeks after Bharti Airtel and Reliance Communications launched tablets to compete with Apple's iPad and Samsung's Galaxy Tab. In the United States, Intel said it would invest US$300 million in companies that develop new technologies for Ultrabooks, a class of thin and light laptops, signaling that the company believes there is still a market for the notebook form factor.


These announcements recall the debut of OLPC's ultra-low-cost XO laptop several years ago and the subsequent netbook craze. The netbook category, which took off and then promptly fizzled, was a response to demand for low-cost computing devices that were lighter, consumed less power and accessed most functions and content via the Internet. Yet its demise illustrated that fickle consumer preferences and technological convergence, especially coupled with the rise of mobile networks, can cause a category to stall just as quickly as it rose. Companies, like Intel, may be hoping that snazzy devices combining the best features of the tablet, smartphone and laptop form factors might help drive demand for devices packing its higher-margin processors. This is especially true in emerging markets where consumers may own just one or two devices and demanding more functionality from each device. 


While it may be impossible to predict device trends with any accuracy (few foresaw the tablet boom), it is fair to say that only categories that address both a deep consumer need and align with market characteristics will have staying power. Purchasing power, evolving tastes and ICT infrastructure will continue to drive consumer decisions in both developed countries and emerging markets. A differentiated device strategy that caters to local market characteristics and needs can help multinational firms capitalize on convergence trends in diverse markets.

Mobile Commerce: A Boon to E-Commerce in Emerging Markets?

South African book retailer Kalahari.com recently launched a mobile version of its website, exemplifying the bet that many retailers are placing on mobile commerce (m-commerce), a market that is projected to reach $119 billion globally by 2015.  Wal-Mart has stated its intent to boost investment in m-commerce, including in emerging markets, and recently demonstrated it by investing in Yihaodian, an e-commerce company in China. British grocery and merchandise retailer Tesco, which has operations in several emerging markets, recently added an Android application to its mobile application offerings that allows consumers to scan and order products for home delivery.  Meanwhile e-tailers such as Latin America's Mercado Libre have also launched mobile applications, and China's Taobao is aiming to have 120 million mobile users by the end of this year. 

However, significant challenges remain before m-commerce can gain widespread acceptance in the developing world.  Smartphone penetration is still less than 10% in nearly all emerging markets, and most users of Internet-enabled feature phones do not have data plans. Also, a majority of consumers lack experience with e-commerce due to low PC and Internet penetration, driving a need for retailers to educate consumers and build their trust in online shopping.  Finally, 72% of emerging-market consumers lack access to banking services, including credit cards, to effectively pay for goods and services over the mobile phone.  

Despite these challenges, retailers can reap benefits by developing a long-term m-commerce strategy. Multinational retailers would do well to consider local payment and handset capabilities when designing mobile applications and target m-commerce initiatives where low-cost smartphones, mobile broadband, mobile money and e-commerce systems are gaining traction. Implementing technologies such as Near Field Communication - which allows for transactions with the touch of a NFC-enabled device - and linking with mobile money payment models could accelerate m-commerce acceptance. Partnerships with banks and mobile payment firms can also be employed to help increase familiarity and confidence with mobile commerce alongside mobile payments. Finally, utilizing social networks to promote m-commerce and e-commerce more broadly can help introduce these systems to early adopters. 

Emerging-market Social Networks Defend Their Turf

Social networks have been dominating technology industry headlines in recent weeks.  LinkedIn's red-hot initial public offering in May intensified speculation as to when Facebook (which recently hit 750 million users) will go public and allow a closer look at its finances. New entrants are stirring up the space as well. The strong start for Google+ indicates that while Facebook is the unquestioned market leader, there is plenty of room for innovation.

While Facebook is being challenged in its home market, it is also facing stiff competition in a number of important emerging markets, such as China (Tencent) and Russia (V Kontakte and Odnoklassniki). In some cases, cultural and political factors can influence the success of social networks. The Iranian government's limiting of access to Google's Orkut and censorship efforts against Twitter and Facebook have allowed local networks, such as Cloob, to spring up and fill the market opportunity.  Yet in other countries, the need for competitive advantage and the hunt for elusive profitability have led to innovations that keep consumers loyal to local brands. China's Tencent QQ instant messaging service allows users to buy "Q coins" at 1 Q coin per RMB, which allow users to buy virtual goods including items for games or accessories for a user's avatar.  This is similar to the Facebook Credits payment system. As Tencent's earnings show, catering to the Chinese consumer culture of playing games and charging them for virtual goods has led to a huge payoff. By facilitating the purchase of digital goods, these networks can spark an entire industry of games and applications that bring in additional revenue.  

Multinational firms doing business in these markets can benefit by paying attention to trends in the social networking space, given the sector's status as a bellwether for consumer technology tastes and preferences. Capitalizing on these trends requires paying attention to social and political factors, finding a way to capture revenue from innovative revenue models and building software with local device capabilities in mind (many emerging-market consumers access social networking sites through their mobile devices, for example). By engaging social network users, firms can not only gain an in-depth understanding of their client's tastes and preferences, they can add potentially lucrative new sales and marketing channels as well. 

New Incubation Labs Boost Mobile Innovation in the Developing World

Egypt's Technology and Entrepreneurship Center recently announced agreements with Nokia to establish mobile application incubation initiatives in Egypt known as mLabs. The partners will provide training, certification, business mentoring and other services to local universities, entrepreneurs and developer communities in order to encourage growth of local mobile applications and content. Incubators - like the mLabs network  supported by infoDev, Nokia and the Government of Finland - seek to build a community of mobile technology entrepreneurs and accelerate development of locally oriented mobile businesses. mLabs typically offer services such as technical training, business training and access to important players in the mobile ecosystem like mobile operators or investors. As the mobile application market is expected to reach $15 billion in revenue in 2014, with over $10 billion going directly to mobile application developers, mobile incubators are expected to multiply in the coming years.

Vital Wave Consulting research has shown that the number of mobile incubators are increasing globally.  However, they are still at a nascent stage and exhibit a range of business and operating models.  These findings are part of a larger report Vital Wave Consulting recently authored for infoDev, Finland and Nokia to support mLabs - and other mobile application laboratory initiatives globally - in the development of sustainable business models. A global landscape analysis of incubators included in the report reveals that there is a spectrum of laboratory-types. At one end are grant-funded laboratories that focus on social returns and assist NGOs and local governments in the delivery of public services. At the other end are profit-driven incubators that work with entrepreneurs to develop commercially viable mobile applications to compete on a broader national or international scale. Other incubators combine these two models to achieve profitability and social returns. Public or private organizations, or a consortium of public and private entities working in partnership, can be equally well suited for sustainability.

While the mLabs movement is still in its early stages, and critical success factors and lessons learned are still evolving, it is clear that many different approaches for operating these programs have enjoyed initial success. Regardless of the business model, mobile application incubators will have increasing impact on the local mobile industry of developing countries, especially in the area of value-added services (VAS). The private sector would do well to pay attention to the growth of mLabs and to the development community as an influencer and investor in application development. Furthermore, for all stakeholders involved - such as development agencies, network operators, handset manufacturers, investors and mobile platform providers - promoting local business models and enabling entrepreneurs to build applications relevant to their local communities are essential components to driving demand for the products and services they offer.