New Software for New Solutions

As low-cost laptop sales in developing countries heat up, the discussion of appropriate operating system software has gotten louder. Some recent press reports say Linux may not be the answer because users find it hard to use and Asus, the segment leader, believes that Eee PCs with Windows XP preloaded will account for 2/3 of all sales worldwide. Others argue that using Linux operating systems enables manufacturers to offer a full software suite at a dramatically reduced purchase price and that Windows Vista won’t work on the stripped-down hardware configurations of the low-cost laptops. Microsoft, which has opted to continue to make Windows XP available to hardware vendors beyond its original retirement date, has so far stuck to its revised June 2008 deadline to end all Windows XP sales - making this a critical issue for low-cost laptop manufacturers.

Most industry watchers would agree that the emerging low-cost laptop segment is gaining traction because of its "purpose-built" approach. Rather than creating lower-performing versions of existing models, manufacturers, which many say were inspired by the One Laptop Per Child Initiative, created entirely new solutions. This disruptive technology was not over-loaded with bells and whistles – as many engineering achievements are – but instead focused on a few core requirements and delivered “just enough” functionality. To date, the software industry has focused less on a purpose-built approach for emerging markets and more on identifying which existing software suites fit the hardware requirements.

Business leaders developing strategies for low-cost laptops in emerging markets would do well to put aside the debate over Open Source versus proprietary software and instead focus on the modifications that suit both the platform and the target markets. The recent success of new laptop characteristics such as low-cost, low-power, ruggedized laptops demonstrates that solutions designed specifically for the unique requirements of rapidly expanding emerging markets are needed and valued by users. The opportunity for the software industry is to build or modify operating systems that both address the features and functionality desired by developing-country users and operate efficiently on low-cost laptops.

Also in the news:

• Desktop Eee PC may hit the market
• Reuters offers mobile data downloads for Indian farmers
• Low-cost handsets drive mobile market

You Can't Get There From Here

Nugget readers who have traveled in emerging markets have surely witnessed ineffective distribution channels. One Vital Wave employee recently shared a ferry to an island off the coast of Tunisia with a truckload of sheep. Upon arrival at the island dock, she saw an identical truckload of sheep waiting to board the return ferry to the mainland. Distribution channels, especially for physical goods, plague most emerging-market business ventures, and well-intentioned programs are often derailed by this obstacle. OLPC’s Chief Connectivity Officer, Michail Bletsas, highlighted the distribution issues in a recent interview: “Actually, what we're trying to do is not distribute any PC ourselves….but right now, no one else is trying to do that.” Other organizations are naively ignoring this hurdle. The Australia-based “Be A Hero” aid organization and Bigshop.com announced plans last week to provide underprivileged artisans in Thailand, Cambodia, Papua New Guinea, Manilla, Kenya, Zambia and Zimbabwe with the opportunity to sell their wares to a global audience. There is no mention of how the organizations will manage business process issues such as payment, quality control, distribution, warehousing, delivery or support.

Organizations such as Peoplink and Novica have built similar businesses and continue to struggle with distribution. Delivery times can exceed one month, and the need to warehouse stockpiles of products drives up costs. Distribution presents challenges for all suppliers – those selling products out of the developing world into the developed and vice versa. Some of the predominant issues include lack of reliable infrastructure (roads, railways, electricity, fuel access and postal service), corruption (stolen merchandise and unjust taxes), and extreme environments (dust, rain and heat). While reliance on volunteers and aid organizations may get a program off the ground, distribution is more likely to be successful when sustainable business models provide clear and compelling incentives along the entire distribution chain. Thamel.com, a Nepal-based marketing company that provides gift-giving services for the Nepalese diaspora, stresses the importance of business benefit for all involved. Even with one of the more successful developing-world distribution networks, Thamel.com sometimes puts the burden of product distribution, at least for goat delivery, on the gift recipient.

For businesses expanding into developing-country markets, whether delivering goats or laptops, it is essential to address distribution with creative and reliable solutions. Business managers may be required to invest in local infrastructure to ensure reliable product delivery. For this level of investment, businesses would do well to work closely with senior government leaders to ensure benefits for such investments (similar to traditional benefits given for investments in manufacturing facilities). Local partners, such as Thamel.com, have regional knowledge and established delivery systems that can also point to successful distribution strategies. As effective distribution models are built in developing countries, local industries will benefit from increased efficiencies, and fewer truckloads of sheep will pass each other on the dock.

Also in the news:

• HCL releases Classmate PC for consumers
• Sears sells sub-$200 Linux desktop PCs
• Businesses make progress in designing for developing world

Microsoft’s Gambit Strengthens Intel’s Hand

April 25, 2007

Microsoft’s Gambit Strengthens Intel’s Hand

Bill Gates’ splashy announcement last week in Beijing that Microsoft will begin to offer a $3 software package called the “Student Innovation Suite” to emerging market schools put the low-cost PC ball in the manufacturers’ court.

The terms of the deal – governments can only get it by providing free computers to students – suggest Microsoft is trying to compete with One-Laptop-per-Child’s $100 laptop, which runs on a version of Linux. Vital Wave Consulting notes, however, that Mr. Gates wasn’t sharing the stage with PC manufacturers, so Microsoft’s strategy may not be to compete directly with OLPC, but to stunt its growth by removing Windows as a barrier to offering low-cost PCs.
Microsoft’s announcement, together with a production delay for OLPC’s first shipment, presents an opportunity for local manufacturers and global PC companies. Chinese or Indian PC makers are working hard to market ultra low-cost PCs, but they will have trouble scaling outside their own countries. HP, Dell, Toshiba or Acer may eventually capture this market, but the real near-term beneficiary is Intel, whose Classmate PC can run on Windows or Linux. How long will it be before Intel announces the marriage (and resulting cost savings) of their Classmate PC and Microsoft’s Student Innovation Suite?

Also in the news this week

• How will mobile search business models differ from PC Search?
• Motorola stumbles with low-cost handset strategy
• Free mobile directory assistance launched by MS and Google

Social Entrepreneurs Can Help Build Emerging-Market Portfolio

April 11, 2007

This week’s news coverage of the world’s largest conference for social entrepreneurs lamented the lack of funds for developing-country projects. Entrepreneurs at the Skoll World Forum said fundraising and courting corporate partners is their biggest challenge.

“I believe corporations, especially ICT companies, should be actively investing in these enterprises,” said Kevin Jones, a principal with Good Capital and self-described serial entrepreneur. “Given the strong growth in emerging markets, all types of investors should see the advantages of partnering with international social entrepreneurs.”

Vital Wave Consulting understands the hesitancy of corporations. In many socially-oriented partnerships it is difficult to align incentive structures or demonstrate ROI. With social entrepreneurs, however, successful partnerships are more likely as both parties share the profit motive. Social entrepreneurs who do their homework and present a bullet-proof business case with an effective business model are certain to reduce the challenge of finding investors.

Corporations stand to benefit from these partnerships, as well. Social entrepreneurs can deliver expertise in target geographies, deep understanding of user needs and usage models, and in-country relationships. Successful social ventures are also excellent acquisition targets – for talent, technology and business models. Such partnerships could help speed the transition of emerging-market activities from the corporate social responsibility brochure to the company’s annual report.

Also in the news this week

• China Mobile adds 53M subscribers in 2006 for a total of 301 million

• Emerging markets capitalize on VoIP trends

• Innovation gets outsourced to “Chindia”