Will Bridging Common Devices Be a Bridge to New Users?

Has Microsoft shifted its thinking on how to win the hearts, minds and wallets of the world’s low-income consumers? Dan Nystedt, a sharp-eyed tech writer at IDG News Service, suggested last week that new management in the company’s Unlimited Potential Group may favor mobile devices over low-cost PCs and shared computing in the effort to increase technology access in emerging markets. Though details are few and a release date is not on the calendar, Microsoft has been working on a low-to-mid range smart phone that connects to a TV docking station, so data on the handset can be displayed on a TV screen, essentially lowering the cost of computing for the poor.

Vital Wave Consulting likes the simple logic of bridging two common and accessible pieces of technology in developing-country homes – the TV and the mobile phone. There are over 850 million households with TVs in the developing world, and mobile penetration is extending to the most remote corners of the globe. The learning curve for each device is relatively flat and global ownership is an indication of affordability. But in one-TV homes there may be stiff competition between PC-time and regular television programming.

Microsoft is the right company to make such a technology work. It’s primarily a software issue, and the company’s experience with Windows Mobile could speed innovation and acceptance in the market. Adding applications and functions to a handset and turning the TV into a monitor could alter the fundamental perception of each device’s utility. It could also convert the handset into a family tool, rather than a private device. By partnering with Microsoft, mobile operators have two ways to increase ARPU – offer more services and increase the number of users on a single handset. Broadening the utility of existing technology devices is a good strategy for all technology companies. Emerging-market consumers are able to justify spending precious resources on technology that solves more problems for more people in the household.

Also in the news:

• IBM's developing-country service corps ramps up
• Microsoft defines requirements for XP on low-cost PCs
• Apple signs non-exclusive deal to get into emerging markets

Focus on Affordability Would Help Low-cost Device Makers

2008 is off to an interesting start for the technology industry. Analysts are forecasting slower growth in IT spending globally and banking on emerging-market growth to keep the global economy afloat. Topping the list of IT drama this week is the collapse of the partnership between Intel and OLPC. Though this may not be earth-shattering for the industry, it hurts an initiative that has influenced the growth strategies of many computing device companies.

Even before Intel’s move, it was clear that OLPC is a troubled organization. Many industry and education experts have provided candid recommendations on how the organization can improve its business model, support and installation plans, and usage models in the education environment. However, there remain many positive opinions of the XO machine itself, which features great innovations – a useful monitor, low power consumption, a simplified user interface, and a pull-cord generator. These innovations, accompanied by bold claims and abundant PR around the OLPC initiative, prompted some of the world's largest companies to develop rival low-cost computing solutions. In this way, the OLPC initiative has changed the landscape of the PC industry in developing countries. Regardless of whether this non-profit organization can move beyond its current challenges to successful scale, recent sales and shipments suggest that, at least for now, the OLPC initiative is competing in some way against industry giants.

The dramatic price reductions of low-end PCs are an enormous step for the IT industry in penetrating low-income markets. But IT organizations keen on maximizing their growth, and doing so profitably, would do well to understand the difference between low-cost and affordable. Vital Wave Consulting research shows that affordability is less aligned with actual price than it is with customer cash flow. The majority of computing customers in developing-country markets struggle to make a one-time payment even at the lowest end of PC (and even mobile handset) prices. Yet, they are increasingly willing to take on debt to accelerate their ability to purchase a computing device. Technology acquisition in emerging markets would be dramatically increased through business models that provide a financing component to overcome the cash flow limitations of aspiring yet low-income customers. These business models would also relieve the pressure for ever-decreasing prices and allow the providers of computing devices to maintain reasonable profit margins.

Also in the news:

• Samsung competes for low-end mobile space
• OLPC to dual-boot Windows and Linux
• Laptop sales growing faster in emerging markets