Bus. Std: Selling Software in India

My latest column in Business Standard:

The business of selling software in India is a tough one. For one, there is a small installed base of computers – about 10 million, in contrast with 75 million wired and mobile telephone connections and 55 million cable television households. In addition, only a minority of the users pay for software – the rest are fine with just making illegal copies and using it.

Software production, like other digital products, has a high fixed cost but a low marginal cost. For the most part, it is easy to copy. While the large enterprises need customisation and therefore have to pay for the software they use, the small- and medium-sized enterprises can use standardised solutions to start with. The consumer market does not see the benefits of paying for something that takes a few minutes to duplicate.

India is a market where 90% of population has to do with non-consumption of software. Of the remaining, 90% use pirated software. Legal software in India has only a 1% marketshare. So, even as India creates software for the world, our domestic market languishes. Little wonder then that we have few software success stories in the local market. Software is the oil of the information age – there is no way India can build the next-generation digital infrastructure without it. If software companies and entrepreneurs do not feel they can make money from India, our growth will be hampered in the long-term.

Atanu Dey wrote recently on his weblog (http://www.deeshaa.org): “As someone noted, people don't want a quarter-inch drill -- what they really want is a quarter-inch hole. So also, it is not that people want a personal computer -- they want the services that a PC delivers. Owning a PC is not a great idea if there aren't sufficient number of services one can obtain from one. Whether these services are available or not is not within the control of consumers of PCs. The conclusion therefore is that people will buy PCs only if it fits a larger ecology that is largely outside the control of any one single entity.”

To build the ecology of computing and software in India, there are five issues which need to be addressed: availability, desirability, affordability, delivery and localisation.

First, computer deployment in India needs to increase not by 40% but many times that. India needs to build a base of 100 million computers across its small and large enterprises, governments, schools, colleges, homes, and rural hubs. This will provide the necessary base for developers to look at the market seriously. For this to happen, the total cost of ownership has to come down – not just of the hardware, but also of support and maintenance. What is needed is a rethink of the computer architecture – the availability of cheap silicon and storage and the coming world of cheap and plentiful bandwidth creates a platform to centralising computing and making “thin” and low-cost user devices. For every one new “thick” desktop, we could be deploying four times the number of thin access terminals.

Second, the value of software needs to be demonstrated. There is a need for better communication of what software can do – both for our personal and for our work lives. Look at the computer ads that newspapers have – there is barely a mention of what it can do. The focus is entirely on a gobbledygook of terms which describe the hardware. The “experience” of computers must be brought closer to people. This can be done through the creation of computing centres in every neighbourhood in India – much like the way the STD/PCO booths brought the telecom experience to people.

Third, most software is priced in the Indian equivalent of US dollars. While this needs to change to more locally affordable levels, only clamouring for cheaper software without bringing in other elements is not enough. For example, by making available financing options for software as part of the complete computing solution, the entry costs can be significantly reduced allowing more users to start using it and see the benefits for themselves.

Fourth, there needs to be a change in how software is delivered. As broadband connections start proliferating, it will become possible for software to be delivered as a utility from centralised computing facilities. This utility approach to software will ensure that piracy is all but eliminated. A similar approach to gaming in China has created a large market with users paying on a usage basis. In addition, software needs to be part of a “whole solution” comprising hardware and maintenance.

Finally, there is a need for locally relevant solutions. Two approaches that need to be taken are to create content and software in local Indian languages, along with taking in the local context for business applications.

The software ecosystem needs to be built for businesses and entrepreneurs to thrive. It is not just about commercial or open-source software – both are needed, just as we have the bicycles and the luxury cars. What users need is choice, and the current ones – piracy or non-consumption – are unhealthy for the industry and the country.

Economist Prime Minister and Scientist President

What a week it has been in India. First, a result that no one expected. Next, a drama that was almost unbelievable. Sonia Gandhi withdrew on the doorstep of the highest executive post in the land as she listened to her voice of conscience. And the result: Dr Manmohan Singh, the architect of India's reforms in the early 1990s, is all set to become Prime Minister. The thing that he has in common with President APJ Abdul Kalam is not being a politician. This caps a week of amazing events in Indian politics.

Here is a profile of the Manmohan Singh (from Indian Express):

Soft-spoken and mild-mannered economist-turned-politician Manmohan Singh shot into prominence after he steered the economy from the pits of a severe balance of payments crisis and saved the country from the verge of defaulting its external payments in 1991.

Known as "Mr clean" and a gentleman politician, the Oxford-Cambridge educated architect of the country's economic reforms changed the face of India in the global comity of nations during the five years he held the post of Finance Minister from 1991-96.

Born in Gah (West Punjab), now in Pakistan, on September 26, 1932, Singh, as Finance Minister in the Narasimha Rao's Congress government had changed the fundamental way the corporate India thinks and with it the life of millions of middle-class Indians by liberalising the economy.

The economic czar changed the outlook of foreigners towards India, whose economy was in a shambles in the early 1990s, with an unsustainable fiscal deficit of close to 8.5 per cent of GDP and the economy stagnating at a Hindu rate of growth of 4.0 per cent.

An unassuming personality, Singh has held several positions, including chief economic advisor and finance secretary before becoming governor of Reserve Bank and then deputy chairman of planning Commission and UGC chairman in 1980s and early nineties.

Singh, who unshackled the country from the bureaucratic controls and licence-permit raj, had taken the economy from the brink of bankruptcy to a high growth path of 6-7 per cent during his five years stint at North block.

The 72-year-old Rajya Sabha member from Assam has been welcomed by trade and industry as an instant choice for the coveted post because of his impeccable credentials, bureaucratic experience and intimate knowledge of international economics.

Singh, who is universally well regarded, was educated at Punjab University first and then in Oxford and Cambridge. His potential was evident when he won Cambridge's prestigious Adam Smith Prize in 1956.

The following year, he returned to India as a university lecturer and for the next nine years remained at Punjab University before being posted for international duty with UNCTAD (1966-69).

He then joined the Delhi School of Economics as a professor. Two years later, his academic career was cut short and he joined the government to serve in various capacities.

In all these positions, those who worked with him have nothing but admiration for Singh's talent and conduct. Hard-working, meticulous, charming and "such a nice man", they all said about Singh.

The first two challenges before Manomohan Singh are to appoint the Cabinet of Ministers and get the Common Minimum Programme sorted out with the supporting parties. And then, hopefully, stop the nonsense of giving free power to farmers that the Southern CMs are doing (YS Reddy started it in Andhra Pradesh, and Jayalalitha has followed in Tamil Nadu). It is better get some paid power for half the day, than no power for the whole day.

Google plans Desktop Search

NYTimes writes about Google's plans "to introduce a powerful file and text software search tool for locating information stored on personal computers":

The Google software project, which is code-named Puffin and which will be available as a free download from Google's Web site, has been running internally at the company for about a year.

The project was started, in part, to prepare Google for competing with Windows Longhorn, which according to industry analysts will dispense with the need for a stand-alone browser.

The disappearance of the Web browser and the integration of both Web search and PC search into the Windows operating system could potentially marginalize Google's search engine. Google, well aware of this threat, hired a Microsoft product manager last year to oversee the Puffin project as part of its strategy to compete with Microsoft's incursion into its territory.

Google's strategy is to move quickly while Microsoft is still developing its Longhorn version of Windows, adding programs and services like its recently announced Gmail electronic mail program. The intent, say people who are aware of the company's strategy, is to lower its vulnerability to Microsoft by adding businesses that are "sticky" - in other words, businesses that create strong customer loyalty or are hard to switch away from.

Internet searching is widely seen by industry executives as a powerful commercial service, but one that is difficult to defend. It is widely presumed that Internet users who find a search service that is better than Google's will be willing to defect.

Searches for information stored on a PC, however, could offer an advertising arena that is more readily defensible. Indeed, desktop searching might be particularly valuable for Google's commercial advertisers, which may be willing to pay dearly for the ability to place targeted ads in front of personal computer users.

Server-based Applications

ASPnews has an article by Jim Wagner:

Analysts say enterprise infrastructure has evolved to a point that enables more sophisticated applications to be served up, on demand, with information shared from client to client.

Mike Gotta, an analyst with the META Group, said the enterprise has been moving away from the desktop since the late 90s, with the advent of integration-minded server technologies.

"Now that we have XML , now that we have Web services, portals and services-oriented architecture coming down the pipe, why don't we re-visit the end user platform and see what we can do differently now?" he said. "The good news is that IBM is making a statement about the value of the end-user platform."

IBM and Sun take the same approach -- build server-residing shells and put applications inside them that can be accessed by any kind of device, be it a workstation PC, PDA or laptop. Whether the end user is working in a cubicle or killing time at the airport, all their data resides on the corporate network, not inside a desktop PC (read: no more having to synchronize your PDA before leaving the office).

"Essentially, what you have is a shell for housing applications," said Red Monk analyst Stephen O'Grady. "For Joe office worker, I can open one application and have all my applications I need in one place.

"This is the goal portals have been aiming for for some time," he added. "But you can also do it with rich clients, so I get rich client functionality in a user experience similar to a portal."

The potential cost-savings are huge. Software updates and patches are done at one location, the server, instead of relying on individuals to upgrade when they have the time. Software costs are also reduced when end users don't have to buy a license for applications they never use.

The knock against the technology, however, is its reduced functionality and performance hiccups on the presentation layer that can result from using productivity tools that reside on a server.

"There are all kinds of people using thin clients and are unhappy with the limited functionality," said Mark Stahlman, an analyst at Wall Street investment firm Caris & Company.

According to Stahlman, the market for the technology is going to get much bigger in the coming years, especially in the Asian markets.

Three other related articles:
- The Second Coming of ASPs?
- Can Remote Access Costs Be Cut While Increasing Productivity?
- NetSuite

Pitch Time Draper on Business Idea

Tim Draper, managing partner with Draper Fisher Jurvetson, is asking readers again to post their billion-dollar ideas. He will then select 10 for a videoconference.

Here is a reminder of what I'm looking to receive from you:
-What is your billion-dollar idea?
-Tell me a bit about yourself (background, education, experience, and so on).
-What is unique? Why are you excited about it?

Please submit your ideas by Monday, June 21, 2004.

TECH TALK: An Agenda for the Next Government: Technology

After the defeat of Chandrababu Naidu in Andhra Pradesh and SM Krishna in Karnataka, there has been much alignment of their technology initiatives. There is a resonance of the view that technology and votes do not go hand-in-hand. Nothing could be further from the truth. If anything, Naidu and Krishna did not go far enough in their use of technology. And if India has to bring about change in the next five years, technology has to be at the cornerstone of much of what we do – not just in states like Andhra Pradesh and Karnataka, but even in the hinterlands of Bihar and Uttar Pradesh.

I take technology to mean not just information technology, but more representative of new developments in different fields (especially education and energy) which can help us bridge the huge gaps that we have in many of our value chains. India needs to commit and encourage innovation across the board so we start creating locally relevant solutions – be it for affordable computing, wireless communications, language content or alternative energy, to name a few areas. Indian entrepreneurs need to encouraged to look at the market within. Technology can bridge many of the gaps that we face in making services available.

One of the problems in India has been that we are trying to use IT to automate what are inherently flawed processes. The first step that needs to be done is to look at how ubiquitous presence of technology can re-engineer the workflows we use.

Here's an example. I recently went to get my passport renewed. As part of that process, the neighbourhood police station needs to give a clearance. I spent 75 minutes waiting at the police station – I was fifth in the queue. For every person, the police officer would search and dig out papers from multiple stacks, re-write information on another form (much of which had already been filled in at the time of the passport application), take a few more photos, and then create a dossier which would probably be couriered to the passport office. The question that needs to be asked: in an era of “commPuting”, why all this repetitive entry of data, and wastage of time?

If India needs to catch-up, we cannot have our citizens spending time doing mindless, wasteful activities. What happened to me during the passport renewal process is repeated millions of time for different activities across India every day. This is what creates the friction in our lives.

What we need is a through examination of the various processes, suggest improvements and then see the role that IT can play in automating them. We need to be engaged in income-enhancing activities, not things that dissipate energy and time. Every facet of our daily life in urban and rural India can be done more efficiently through the transaction-costs reduction capabilities of IT.

More generally, what the new government needs to do is to re-examine itself, the way decisions are made, and use “disruptive thinking” along with new technologies to create a leaner, meaner government – one which genuinely works for its people.

Tomorrow: Marvels of Indian Democracy