Monthly Archive for February, 2006

What ails unlimited Broadband in India?

February 25, 2006

Here’s something I’m unable to figure out – why are Broadband tariffs in India still metered either by time or by data transfer? What is preventing providers from launching fixed-rate plans on a monthly basis?

Is it that such a plan requires economy of scale, or a certain critical mass of customers to become viable, and that mass is not there in India yet? Such a case would be a bit of a chicken-and-egg situation, where subscribers won’t take up broadband plans because they aren’t attractive (either price-wise or feature-wise), and cable companies/telcos won’t provide these plans until there are enough subscribers. I think some vendor as large as Reliance Infocomm is in the best position to absorb short-term losses (which I’m sure they did for Reliance India Mobile) in return for a large (and captive) chunk of a new market.

And there is definitely a large market. In 2005, the number of Internet connections in India was 50.5 million (pathetically low, yes). But even in August 2005, the number of broadband connections were about 0.5 million! As opposed to China with 28 million, Japan with about the same, and the US with 42 million! Even tiny South Korea has well over 10 million (and broadband penetration is well over 70%!).

Is it that there is too much effort and risk involved in laying the infrastructure for providing Broadband to enough homes to reach that critical mass that’ll allow vendors to manage large enough margins with unlimited broadband? Given the state of roads everywhere in India, where your cables could be dug up, damaged, cut by the municipal corporation during road repairs, before you can say Jack Robinson, there isn’t too much incentive to lay cables,especially when they’re fibre-optic ones. Perhaps wireless could be a wonderfully clean alternative, but as I’ve mentioned in the past, it can be more messy than its worth.

Or is it that providers are used to reaping large margins on the (albeit small) base of broadband users in India, and would be loath to see those margins fall? Such a case would be sheer shortsightedness – trying to squeeze more out of a small market instead of attempting to expand the market.

Commoditization of Science, and Art as the Differentiator.

February 19, 2006

Basics: Why do US firms send maintenance/support jobs to India? Because our standard of living is lower than theirs, and we can do the same tasks at least as well as American workers, at a small fraction of their wages.

So the crux of the matter is low price. We are concerned about rising salaries in the IT sector in India, about us becoming uncompetitive and less attractive vis-a-vis Vietnam, the Phillipines, even China. The all-important relation is

Rising Salaries => Uncompetitive, Less Attractive

And just what does that relation imply? Two things.

1.) That means that we compete purely on price. As long as workers at an offshore development centre do the job as well as American workers, it’s fine. If they do better, well, nothing like it. But “as well as” is good enough. Hence, having the ability to innovate is not going to result in any major gains. If there is another country which can do the job at cheaper rates than India can, a US firm will move jobs there. The costs of training are quite small when compared to the savings on wages. When volumes are higher, the incentive to shift to lower wages is higher.

2.) These skills are completely transferrable (I’m not sure if fungible is the correct word. Is it?). That is, a bunch of people in the Phillipines can do the same job as well as another in India. The exact same skill set skill level can be replicated in another region/country.

What does that teach us? That “software development” skills, technical skills are a commodity, are available in abundance from a number of vendors. The only differentiator is price. And I do not think that India ought to be building an entire industry where the only product is a commodity. Even steel is different – first, it does not depend as much on people as IT, there aren’t as many vendors as in IT, the long-term capital sinkage is very high. Hence it isn’t as easy to shift your steel supplier as it is to shift your IT services supplier.

Technical knowledge is a science which can be learnt to acquire a equal level of skill by many peoples, many countries. In time, the only differentiator among the practitioners of these skills will be price.

The alternative, then, is to compete in an area where skills are not a commodity – and that does not mean simply moving to a different area of technology where skills can be commoditized in due course of time.

Skills which cannot be reduced to science, which are an art, will never be commoditized.

What skills are unique, in the technology domain?

1.) Products, as opposed to services. It is an art to make products. It is not an art to service and maintain products made by someone else.

2.) Management skills. Project, People and Business management. You cannot replicate a good manager. Management is an art.

3.) Products and services targeting the local market. I have said this many times in the past, and will repeat again. There is a huge market in India, in domains as diverse as telecom/internet infrastructure (including wireless Internet), mobile applications, supply chain management optimization (and I mean SCM optimization for B2C systems that already exist – such as farmer-to-retail, post, government, anything). And no one knows our market as well as we do.

Call to arms for the Indian Technology Industry: Focus on skills which are an art, not science.