http://www.springboardresearch.com/emergingmarketsA Springboard to Emerging MarketsOlympics has finally completed with splendid fireworks above the sky in Beijing.  In the meanwhile, top 4 Chinese telcos have posted their first 6 months earnings in the past week. Both mobile carriers China Mobile and China Unicom posted above expectation results with 45% and 98% profit growth compared to same period in 2007.  On the contrary, fixed line operators China Telecom and China Netcom posted net profit decline of 4% and 5% respectively for the same period. The first 6 months performance proved that the gap between mobile and fixed operators in China will become even wider, if further reform of the telecom market in China does not happen as soon as possible.  That was why the Chinese government has announced the restructuring of the top telecom operators in China to form 3 full licensees in the country earlier this year. After announcement of the restructuring of Chinese telcos, the actual split and formation of the new 3 telecom operators have not officially taken place because of Beijing Olympics. Recently we have seen significant movement from China Telecom, announcing winners for CDMA network upgrade, which they have bought from China Unicom through this restructuring process.  The over $1.5 billion first phase investments is the first move of China Telecom trying to retain their existing customers and explore new opportunities in mobile market.  China Telecom has seen subscriber decline for its fixed telephone users for the first 6 month in 2008.  That is why it is extremely active to start the network upgrade to CDMA 2000 EVDO, though the actual network transfer will only complete in October. From China Unicom, with the sales of CDMA network, it can finally focus on its GSM network and upgrade it to the most commonly used 3G standard WCDMA.  It has a plan of approx. $15 billion in the next 3 years for 3G network construction.  However, the merger with China Netcom will potentially last for 12 months and it may bring challenges to integrate over 200,000 of China Netcom employees into their much smaller organization at China Unicom currently. Uncertainties also remain for the giant China Mobile.  With largest mobile subscriber number and as the most profitable telecom company in the work, China Mobile may need to use home-grown TD-SCDMA as its 3G standard.  There are challenges regarding the limitation of handset availability and technology immaturity of the Chinese local standard.  Also, with very limited fixed network through its acquisition of China Railcom, China Mobile may need to fight very hard with new China Telecom and new China Unicom, who will try to bundle fixed and mobile services to most consumers.  So we have seen China Mobile’s announcement last week of building TD-SCDMA 3G network in another 28 cities in China.  It is trying to get comprehensive 3G network faster than competition, to maintain high end customers. Therefore, telecom equipment manufacturers will see another peak period of heavy investment on 3G mobile networks in the next 3 years for a total market opportunity of over $50 billion.  That is surely good news for struggling Alcatel-Lucent and Nokia Siemens Networks.  This round, they will face stiff competition from stronger Chinese vendors Huawei and ZTE as well. By Bryan Wang8/31/2008 11:52:00 PMhttp://www.springboardresearch.com/emergingmarkets/comments.asp?id=170It’s always tempting to seek signs that a vendor with total domination over a particular market may finally face a challenge. Everyone (except the dominant vendor, of course) benefits from competition and choice. It’s pretty tough to find a more dominant product than MSFT Office. Wishful thinking aside, though, it appears that MSFT is facing the biggest challenge to Office dominance in a very, very long time. Free office productivity software solutions are steadily gaining awareness and interest. MSFT Office still has overwhelming marketshare and this won’t change dramatically in the near future. However, with powerful backing from IBM (Symphony), Sun (StarOffice), Google (Docs) and other offerings (primarily based on the open source OpenOffice project), the alternatives are viable and increasingly credible options. It’s a simple fact that most users do not use the majority of features in their office suite beyond the basic functionality. Free alternatives to MSFT Office are compelling in part because they typically focus on the basic functions that most users require, making them less feature-rich and therefore less complicated to use. Before we get too excited, it’s worth remembering that nothing is free. There is of course a cost associated with switching over to an unfamiliar application (even a free one), particularly in the areas of technical support and training as users get comfortable with an unfamiliar user interface. Another primary issue to consider is potential compatibility issues between free offerings and MSFT Office. OpenDocument Format (ODF) has steadily gained traction over the past 2-3 years. Malaysia is one of many countries evaluating its usage and adoption as a standard for public sector ICT initiatives. But MSFT continues to push its own alternative called Open XML. Technical translators are available and can help resolve some compatibility issues but they are far from perfect. Text typically translates easily between products, for instance, while fonts and formatting may not. MSFT will continue to dominate the office productivity market but we expect free alternatives to eat away at this dominance over the next 2-3 years. At the very least, this market is getting far more interesting. Interest in MSFT Office alternatives will benefit from a broader interest in SaaS (software as a service). As SaaS solutions gain traction and credibility, we expect organizations, particularly small and mid-size businesses (SMB), to look more seriously at SaaS-based MSFT Office alternatives, with Google Docs being the most likely candidate in this scenario. With strong backing from major IT vendors like IBM, Google, Sun, and Adobe, the market for free office productivity software will grow across Asia Pacific. Organizations with limited resources should monitor the positive experiences of early adopters and the ongoing momentum of ODF as a standard among APAC governments to further spur growth in this market. By Michael Barnes7/13/2008 9:37:00 PMhttp://www.springboardresearch.com/emergingmarkets/comments.asp?id=168In April 2007, Microsoft revamped its Unlimited Potential emerging market strategy by announcing a bold, new initiative to reach the next one billion people with computers and low-cost software by 2015. Microsoft's program to reach developing countries is known as "Unlimited Potential", and through this program the company aims to bring computers to the next 5 billion people by focusing on all aspects of economic and social characteristics of countries such as India, China and others. Since the inception of Unlimited Potential, Microsoft has expanded investments in emerging countries to foster social and economic growth which highlights its increasing focus on developing markets. Aimed at developing nations, low-cost computers having Flash memory, shared computing, mobile technologies, internet-based services and customized software are the main features of Microsoft's long-term efforts. Microsoft is offering local governments a software suite, including Office Home and Student 2007 and Windows XP Starter Edition, for US$3 per student. The company is actively partnering with NGOs, technology companies, and engaging other channels to give push to government subsidized PC-for-students programs. Also, iCafé is the major initiative under the Unlimited Potential program. In countries such as China, India, Indonesia and the Philippines, where PC and household Internet penetration is very low, iCafés are the most important source of Internet access for a significant section of the population. Although Microsoft's emerging market initiative shows inherent potential to be an effective social and business strategy, the close coordination with local governments, NGOs and partners to execute the programs remains a challenge in emerging markets. The slow pace of working and laid back attitude of government agencies is something which needs to be dealt carefully. Also, the rural areas in emerging countries lack with basic amenities such as electricity, water, etc. which could act as a permanent impediment to development. On a technical side, the biggest challenge for Microsoft is to port Windows XP on a Flash-based system. This is something that Microsoft has not done in a great way and progress in this area has been very slow. Also, Vista is deemed too complex to port on a Flash-based system, due to the large number of device drivers that it supports. It will be quite interesting to watch how Microsoft handles the technical issues in the times to come. Undoubtedly, there is a potential business opportunity in the middle and bottom of the social and economic pyramid. However, this opportunity requires new partnerships, distribution models, and customized products that are applicable, accessible, affordable, and sustainable for people in emerging countries. While emerging nations have aggressive plans for technology adoption as a means to economic growth, they also have very limited budgets to purchase even subsidized software. As a result, some governments have encouraged the adoption of Linux which could affect the long-term unlimited potential group goals. I am quite encouraged about the prospects of rural emerging nations in the long term and the leading indicators suggest that the average annual growth rates are accelerating in low-income economies. Microsoft’s strategy to align its business interests with social cause to achieve win-win situation on both the fronts is highly appreciable and will have an unlimited bonus for the company down the road.  The company appears to be moving in the right direction by making regular investments, and putting resources towards this direction. By Manish Bahl Image courtesy peiqianlong7/7/2008 3:36:00 AMhttp://www.springboardresearch.com/emergingmarkets/comments.asp?id=167Telstra recently made an announcement about its platform called T-suite that will supply on-demand business applications to Australian businesses. The offering will enable ISVs to develop and host applications on Telstra’s platform and provide a potential base of captive customers whom Telstra serves. Tata Communications made a similar announcement to offer on-demand managed security solutions in the region, starting with the Indian market. The Tatas have tied up with different solution providers and will provide an integrated solution to end-customers. Tata Communications’ position is different and safer by any judgement. Instead of plunging into the service delivery of SaaS which comes with its own set of challenges and is not its core-competence, the Tata company has opted to play the role of an aggregator and be a channel in the SaaS eco-system. These tentative steps are positive developments that will have huge implications in the take-off of SaaS in the regional market.  One of the challenges for deeper SaaS penetration in APAC is connectivity, especially in non-metro areas in India, China and ASEAN countries.  With telcos in the fray, SaaS providers have an ideal partner to overcome connectivity issues and telcos can leverage this opportunity to upsell broadband connection and new technologies to existing customers by luring them with on-demand business applications. The participation of telcos is a welcome development as it has contributed to substantially expand the SaaS ecosystem. On the other hand if telcos falter it could lead to a serious set-back in their endeavor to move further into enterprise services, beyond providing connectivity. As an initial step, a safe position is to be a channel partner with SaaS vendors who already have delivery systems in place, instead of treading into a territory that is fraught with challenges. By Balaka Baruah Aggarwal Image courtesy jeremyfoo7/4/2008 5:35:00 AMhttp://www.springboardresearch.com/emergingmarkets/comments.asp?id=164CIOs in China are realizing the benefits and global trends for software as a service in their enterprises. As large enterprises start to change their business model to a more service-oriented focus, cloud computing or Software as a Service (SaaS) will help companies make this transition.  In fact, many financial and manufacturing companies have already introduced collaboration, real-time data streaming, social networks and web 2.0 applications in their business environment.  We are now seeing more Chinese companies starting to look at the next generation data centers and trying to bring cloud computing into their data centers. On June 24, IBM hosted the opening ceremony for its Greater China Cloud Computing Center at its China Innovation Center in Beijing.  Having established its first Cloud Computing Center in China, in Wuxi (near Shanghai), in February this year, IBM is the only company to have two such centers in China. In IBM’s vision, cloud computing is helping to foster the growth of new software companies in China.  Like many new software companies seeking growth opportunities both locally and abroad, these Chinese software companies will rely on technical infrastructures built on open standards and delivered as a service. This open approach to computing will help them deliver innovation and pursue global market opportunities. With more software companies in the country developing business applications that cater to diverse needs of enterprises, cloud computing will help corporate customers to further leverage the latest technology to speed up its expansion in the country, and overseas. The new SaaS or cloud computing concept is also a greener choice for Chinese companies as it promises to better utilize resources and therefore save energy.  In this age of high oil prices, the government is getting more concerned about the increasing energy consumption of IT equipment.  I therefore believe that the Chinese government will also encourage the transition to SaaS- indeed anything that helps control the ever-growing usage of energy in the fastest growing economy in the world, incidentally also ranked number 2 in the energy consumption list. By Bryan Wang6/30/2008 2:10:00 AMhttp://www.springboardresearch.com/emergingmarkets/comments.asp?id=163In late 2007, Adobe acquired Virtual Ubiquity and marked its entry in the online office application market.  Virtual Ubiquity had a free online word processor called Buzzword based on Adobe flash- meaning it was platform-independent and could run on any OS (Windows, Linux or Mac). Adobe Buzzword screenshot By then, Google had already helped establish the concept of online office applications with the launch of Google Docs. There are numerous online office applications available in the market today, such as Zoho, Zimbra (acquired by Yahoo), Microsoft Office Live and Thinkfree. However, one of the features that set Buzzword apart from others is its sleek interface – it can manage and display the document through a graphical medium which gives users a rich document experience. Additionally, one important concept that Buzzword works on is the collaboration (same as Google Docs) where instead of sending documents out to others through email, people are invited online to contribute content or just to add comments. Working on Software as a Service (Saas) model, Adobe is trying to dive deeper into online collaboration area by integrating its existing portfolio with Buzzword. Towards this objective, the company has started offering Adobe Connect, a desktop sharing application. Also, Adobe plans to nurture Buzzword and I presume we would soon see spreadsheet and presentation applications in the future. However, its main focus is to first achieve total integration between Buzzword and its existing product portfolio. Adobe’s attempt to build services around its strong core offerings, with a view to provide a greater value over traditional desktop offerings, is a smart move. The Buzzword integration is a step forward towards collaborative on-line work model and we should not be surprised to see an offline version of the word application based on Adobe Integrated Runtime (AIR) technology in the future as well. Nevertheless, there are few challenges for Adobe to face in the area of online collaboration work: The biggest one is to change the mind set of large user base – From corporate to individuals, it will be quite difficult to switch people from typical desktop environment to online collaboration work concept. People like to talk about emerging technologies a lot but hardly use them in daily life. The second one is the flash-dependent platform of Buzzword which works slower than an HTML version. However, a lot of innovation can be expected on this front. The online collaborative work model is interesting and will gain momentum in the future but the implementation in real-life space could be much slower. Nevertheless, Adobe’s move in this space will definitely push other companies to develop better and quicker products in the near future. Go ahead and take a test drive with Buzzword at https://buzzword.acrobat.com/ (You need to download the latest version of Adobe Flash to use the application) By Manish Bahl6/26/2008 5:57:00 AMhttp://www.springboardresearch.com/emergingmarkets/comments.asp?id=162Today, emerging markets represent the fastest growing economies in the world. Growing industry consolidation and slowing growth abroad has drawn focus from multinational companies on emerging countries such as India and China that offer significant untapped growth opportunities. The institutions that operate within emerging markets—governments, education, health and private enterprise—are beginning to recognize that without rural sector development they would not be able to grow significantly or improve the standard of living of their people. Rural India accounts for more than 50% of the GDP and the rural consumption expenditure registers around 60% of the total consumption expenditure in the country. On the other side, the Chinese economy is experiencing unprecedented growth, largely in urban areas, but the need is growing for rural populations to have the same advantages and access to technology as those people living in cities. In order to tap the rural phenomenon more efficiently, initiatives such as Unlimited Potential by Microsoft, One Laptop Per Child concept by MIT Media Labs, World Ahead program from Intel and 50x15 program from AMD are already been in place. The aim of these companies is at providing the low-cost computing/ PCs to emerging nations to create a win-win situation for all. Recently, One Laptop per Child (OLPC) program unveiled the second version of its XO laptop, while Intel announced its next-generation Classmate PC for developing countries. However, low-cost PCs may not be the relevant technology to reach rural people in emerging nations. A sustainable rural mobile development program can create all-round growth in under-developed areas of emerging countries as cellular technology is far more reachable than PC penetration. The rural areas in China and India are experiencing explosive growth in mobile communications, as falling tariffs and rising incomes are bringing mobile phones within the reach of millions of new customers. The Ministry of Information Industry, China announced that the number of mobile phone users had reached 501.64 million by the end of June 2007 and the higher growth came from the rural areas. On the other side, India has emerged as the fastest growing telecom market in the world. The number of rural mobile phone users is around 40 million, accounting more than 22% of the total mobile subscriber base in India. This figure is expected to go up to 35-40% by 2010 in the country. Although I am of the opinion that rural markets in emerging nations will trigger new types of competition in the years to come, there will be a number of issues to face due to a lack of infrastructure, poor coordination among government bodies, funding and technical support in countries such as India and China. The active efforts from companies are just getting started, and we believe it will be early to comment that a particular technology will have a solid impact on rural areas growth. As seen in any emerging country, the cost will play a key attribute based on demand, feasibility, and user needs. It will be interesting to see how the business model of various companies evolves to target the big and untapped opportunity in the rural segment.   By Manish Bahl Image courtesy mckaysavage6/19/2008 11:34:00 PMhttp://www.springboardresearch.com/emergingmarkets/comments.asp?id=160Tucked away in the fourth page of a press release distributed during the SAP Summit held in Mumbai recently, the company announced that Business ByDesign will be available in India. Keeping in line with its quarterly announcement in April this year that it would work with a few select partners and customers to fine tune the Business ByDesign offering, SAP made it available in the India market. There was immense excitement when SAP unveiled Business ByDesign in September last year as it was the company’s first on-demand offering. More importantly, this was the company’s ace to penetrate the SMB market, a shift that was strategic to the company’s continued growth.However, the initiative received a setback when the company announced in April that it was going slow in its rollout plans, including a cut of €100 million investment in Business ByDesign. Expectedly the blogosphere was rife with opinions on the implications of this announcement. Reasons included SAP’s need to address problems related to scalability and a desire to incorporate more functionality into the product before making a more aggressive launch sometime during 2009. A more plausible explanation however is a need to please Wall Street sentiments as the company witnessed an 18% fall in operating income during the first quarter compared to the same quarter last year. By shaving off €100 million investment in the product, the company expects to boost its operating margins in 2008. The move also underlines a fear that software license revenues could be cannibalized as customers and prospects gravitate towards a subscription model. Ironically, SAP focused on short term market sentiments and sacrificed the product that was envisioned to accelerate growth after an initial blip. Despite these set backs, Business  ByDesign is still core to SAP’s product portfolio. India and China are the two early markets in Asia Pacific that currently have this offering. Since the China roll-out happened in the beginning of last quarter, it already has a few partners and customers. The endeavor in India will also be to build its eco-system of partners and work with a few customers to get feedback which will be incorporated into the product. SAP has positioned Business ByDesign as an application for sophisticated SMB users and Business One for those that have more limited functionality requirements. My reading is that Business ByDesign is likely to find good traction in the Indian market given that the hosted model of Business One has found many takers, that too when the company is not facilitating hosting provisions. Customers who have businesses in different geographic locations have contracted hosting providers and organized their own requirements. However, pricing could be a tricky issue and SAP will have to tread carefully in that territory as both India and China are extremely price sensitive markets and $149/user/month may not appeal to the target segment. Although SAP is reluctant to reveal too much at the moment, that’s a call the company says it will take after its initial roll-out. By Balaka Baruah Aggarwal6/17/2008 10:31:00 PMhttp://www.springboardresearch.com/emergingmarkets/comments.asp?id=159Steve Jobs finally announced 3G version of iPhone this Monday and brought down its price to $199 for 8GB model, compared to the $399 price for the current model that has neither 3G nor GPS. Customers in Asia have reasons to be excited since iPhone will now be available in Australia, Hong Kong, Japan and New Zealand from July 11, while it will be available for more regional countries, including India, later this year. With several other countries across the globe launching iPhone 3G, Apple expects to exceed its sales target for 2008. Within Asia, consumers are known to change their mobile handset every 12 months. This huge regional market gives Apple a great opportunity to reenact the iPod success all over again. However, its ambition in this regional market will be impacted by following challenges: • In markets like Japan and Korea, domestic manufacturers have garnered a huge market share in the music phones segment – leaving Apple no choice but to fight and squeeze some market share. • A limited coverage of Apple’s iTunes music store service in Asia will also lower the business potential per consumer for Apple. • Absence of powerful camera functions will limit iPhone’s appeal to Asian consumers. • If Apple tries to copy the AT&T partnership model in Asia, it will lose a large portion of youth market that does not wish to pay a premium monthly data service package to enjoy iPhone. On the other hand, Apple still enjoys the support of a large group of loyal customers. There are approximately 500,000 iPhones in use by mainland Chinese consumers currently, though Apple is yet to announce a plan to enter China. The company’s negotiations with China Mobile failed earlier this year. With better price positioning, Apple is expected to grab market share from Nokia and Sony Ericsson, who has been actively pushing their music phones in the region. We may see overwhelming response for iPhone at least in the first six months. By Bryan Wang6/12/2008 2:37:00 AMhttp://www.springboardresearch.com/emergingmarkets/comments.asp?id=158The global outsourcing industry was worth an estimated US$70 billion in 2007 and witnessed 30% growth in 2006.  Though India dominates the industry with a 2/3 market share, a "talent crunch" has contributed towards a growing trend among Indian firms to re-export their services to the Middle East and Africa (MEA).  Indian IT giants Satyam and Wipro set up shop in Egypt in January and August 2007 respectively. Low wages, relevant language skills, improved ICT skills and recent reforms within these countries make the MEA a more attractive business climate than was the case only a few years ago. Many governments are also offering a range of generous tax benefits to lure in foreign firms.  This eagerness is also illustrated by ICT strategies in countries such as Ghana, Kenya, Morocco, Egypt and Jordon where a great deal of emphasis is placed on the role that outsourcing can play in fostering ICT development as well as broader socio-economic development.  In Egypt alone estimates for total IT export services range from $450-900 million.  If the outsourcing industry continues to grow at the pace we have seen in recent years, we can expect the MEA to capture and increasingly larger slice of the BPO pie. By James Erickson6/8/2008 11:35:00 PMhttp://www.springboardresearch.com/emergingmarkets/comments.asp?id=157