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Technology and Business in India. Ashok Jhunjhunwala Tenet Group, IIT Madras [email protected] I. Market. Untapped Market. Developing countries have large untapped Market India has 1 billion people 180 million households What is the market size ?. Example 1. In mid 1980’s

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technology and business in india

Technology and Businessin India

Ashok Jhunjhunwala

Tenet Group, IIT Madras

[email protected]

untapped market
Untapped Market
  • Developing countries have large untapped Market
  • India has 1 billion people
    • 180 million households
  • What is the market size ?
example 1
Example 1
  • In mid 1980’s
    • detergent market was small
      • Surf was used by 1 to 2 percent households
    • Nirma reduced the price by a factor of three
      • market size increased immensely
      • detergent reaches almost 15 percent of Indian households today
example 2
Example 2
  • Cable TV
    • did not exist in Indian homes in 1992
    • today reaches 40 million homes
      • costs Rs 60 to 150 per month
      • affordable to almost 50% of households
  • TV reaches about 75 million homes in India
      • Black and White TV at Rs 1200
example 3
Example 3
  • Less than 5 million homes had telephones in 1990
  • Introduction of
    • one fourth rate STD tariff in the night
    • STD PCOs everywhere
  • As a result
    • over 20 % of Indians today make STD calls
      • STD PCO available on every street and in every small town
      • PCOs contributes to 20 % of total income for DOT and MTNL
market size depends on affordability
Market Size depends on Affordability
  • Nirma made detergent affordable
  • low operation cost made cable TV affordable
  • STD PCO coupled with night-time STD tariff made STD calls affordable

on the other hand . . .

is telecom and internet affordable
Is Telecom and Internet Affordable ?
  • Investment required to install a telephone and Internet line: Rs 35,000
    • with 15 % finance charges, 10 % depreciation and 10 % operation and maintenance cost
      • Rs 12,000 annual recurring revenue (Rs 1000 per month) required per line
      • not affordable to more than 2 - 3 percent of Indians
telecom affordability in india
Telecom Affordability in India

64%, 6500

32%, 12500

8%, 25000

1.6%, 40000

Total number of Households = 180 million

Assumptions: 7% of family income spent on communications

35 % of investment required per year to break even

affordable telecom and internet
Affordable Telecom and Internet
  • India requires Rs 10,000 per line Telecom and Internet connection
    • will be affordable to 50 % of Indian households
    • India will then be a market for 150 to 200 million Telecom and Internet connections
sum up market
sum up - market
  • Indian and developing countries market is very large
    • but at affordable prices
r d focus in west
R&D focus in West
  • Telecom connection in West costs $ 1000 per line
    • needs a $ 350 annual recurring revenue
    • $ 30 per month affordable to 95% of population in West
  • Bringing down costs does not further expand market in the West
    • focus of R&D shifts to providing a larger basket of services at same cost
enhancing features and services
Enhancing features and services
  • Same phenomenon in Personal Computer

in 1983 : PC with 8088, 128 KB memory, mono monitor costs $ 1000

today : PC with Pentium processor, 128 MB memory, color monitor, large HD, CD costs $ 1000

  • but there is no low-end $ 100 PC
    • because $ 1000 is affordable at large in West
    • focus on enhancing features rather than reducing costs
technology from west
Technology from West
  • Technology developed for Western market and affordable in West
    • affordable to only 1 to 5 % of Indians
    • not affordable at large
r d tasks for india
R&D tasks for India
  • costs of products need to be brought down further by a factor of 3 to 5
    • will make it affordable at large
    • market size in hundreds of million in India
    • large market in other developing countries
but is such cost reduction possible
But is such cost-reduction possible ?
  • Why not ?
    • A challenge for R&D
      • attempt what does not appear to be possible and make it happen
  • Rewards are great
    • large Indian and developing countries market

In bringing down costs by a factor of 3 to 5, one becomes technology leader

that it is possible an example
that it is possible…. an example
  • Efforts of TeNeT group at IIT Madras
    • aim to bring down cost of Telecom and Internet connection
      • from Rs 35,000 to Rs 10,000 per line
  • last five years of effort
    • incubated five product companies at IITM
    • developed WiLL, DIAS, FiLL and NMS products
    • brought down costs to Rs 18,000 per line
cordect wireless in local loop
corDECT Wireless in Local Loop


35/70 kbps Internet plus simultaneous telephone

To Internet

direct internet access system dsl on copper
Direct Internet Access System dsl on copper



Always ON permanent Internet connection

in a similar way
In a similar way . . .
  • Technologically possible to bring down cost of home PC
    • from current Rs 25 - 30 K to Rs 5 - 10 K
    • has a large market in India
sum up technology
sum up - technology
  • Developing countries require
    • Disruptive technological Innovation*
      • expands market drastically with an inferior product
      • soon the new product overtakes the old even in quality
          • The Innovator’s dilemma : Clayton M. Christensen
indian economic sectors
Indian economic sectors
  • Organised sector
    • works 200 to 225 days a year, 6 to 8 hours a day
  • self-employed sector
    • works 300 to 325 days a year, 9 to 12 hours a day
    • manpower costs 1/3 to 1/4 of that in organised sector
    • STD PCO, cable TV, milk distribution, roadside shops
      • make goods and services affordable at large
      • a challenge to make business plan for this sector
large market penetration
Large Market penetration
  • To make a product or service affordable at large require
    • the use of self-employed small sector
  • to achieve 150 to 200 million telecom and Internet connections
    • imperative that Access network, the most expensive and difficult part of telecom network, is franchised
    • operated like cable TV connection
sachet economy boom
Sachet economy boom
  • Pay and use in very small quantity
    • affordable, even though expensive in long run
      • shampoo, paan-masala
      • PCO
      • Internet Kiosk
    • Can technology provide low-cost telecom and Internet access for infrequent use
      • shared infrastructure
sum up distribution
sum up - distribution
  • Innovative distribution mechanism required to expand market
    • involving self-employed small sector a must
from services to products
From Services to Products
  • India has made a mark in service sector
    • providing sophisticated and simple service
    • but with quality
    • can we take service sector to small towns
  • Can we make a mark with products in the world
    • without having significant home market for these products
    • or can we tap potential home market
      • and prepare for world market
sum up
sum up
  • India presents a unique business challenge
    • has a large potential untapped market
      • of size equal to that of the rest of the world (excluding China)
    • require affordable products to be designed
    • innovative mechanism to produce and distribute
    • sound business built on values
old and new economy values
Old and New Economy Values
  • employees are naukars
      • or partners in every sense
  • shareholders taken for granted
      • management is a trustee of shareholders
  • where will customer go
      • customer is God
  • vendors to be squeezed
      • strong vendors make you strong
  • one has to manage law
      • business conducted legally in letter and in spirit