Growth in Technology Markets at the Bottom of the Pyramid

As technology markets in developed countries are slowing down, firms are looking to emerging markets in newly industrializing and developing countries for opportunities. In his book, The Fortune at the Bottom of the Pyramid, C. K. Pralahad argues that there is a 4 billion person market opportunity for corporations to develop products for the world’s poor (those who make less than $2 per day). He also argues that reaching those markets will require innovations in technology, products, services, and business models. In response, many firms are developing new information technologies designed for such markets. Examples include local wireless networks, information kiosks, cell phones, low cost computers, and technologies which can run on battery power or even human-generated power where electricity is unavailable. There are also efforts to link information technologies with other products such as housing and new IT-based business models over the Internet. Presently, most of these efforts are at the R&D, proof of concept, or promotional stage.

For example, since 1999 Brazil has been trying to develop an inexpensive PC, the “Popular PC”, that would allow large numbers of people to connect to the Internet. Yet, each effort has failed to get beyond a program on paper, or to come within an affordable price when it did.

The development of such products can be problematic for major players as piracy is often a factor. Consequently, we see companies such as Microsoft urging the design of a $100 computer for developing countries in the hopes that low-income buyers will then be able to afford to purchase their software, thereby stemming piracy. However, the branded PC makers have another solution to reducing cost. Dell and HP have been selling $299 desktops in China with DOS installed for free. The implication is that pirated software (operating systems, applications) will be installed by users or some third party.

There are many efforts to create affordable products for developing countries, but it is questionable whether they can be successfully brought to market. For example, India’s first low cost computer, the Simputer, failed because of inadequate technology and lack of applications. The Personal Internet Communicator, a more sophisticated device launched by AMD (Advanced Micro Devices) last year, has failed to gain momentum as yet. A key limitation to these initiatives is the lack of a broader support infrastructure. Technology, and especially computer technology, is a “package” of hardware, software, people, practices, physical networks, and social and institutional infrastructure. It requires reliable power, telecommunications and network infrastructures, skilled professionals to establish and manage the infrastructure, users capable of learning to use it, people ready to train users, and a human/business network that encourages entrepreneurial and social use by low-income segments. The mere production of a low cost technology is often insufficient to encourage or even enable use without broader social and institutional support.

It is an article of faith in the development community that new technologies enable developing countries to leapfrog earlier technologies and begin to bridge the techno-economic gap with developed countries. This issue of The CRITO Review profiles research by Sanjeev Dewan, Dale Ganley, and Ken Kraemer on the digital divide. Their research findings support this idea, but also show that more than technology diffusion is required. In a study of the intergenerational diffusion effects of mainframes, PCs and the Internet, the newer technologies are diffusing faster and more widely than the earlier ones. Moreover, they show that in the case of the Internet and PCs, there is an interactive effect where PC diffusion speeds Internet diffusion, which in turn expands PC diffusion in a virtuous cycle that increases the overall level of access to technology. While concluding that the divide in access to technology is decreasing, the authors point out that access is not the same as use and that future research on the digital divide needs to examine whether the gap in use is also closing.

It is clear that meeting the needs of people in developing countries is not just a matter of making technological products more accessible or affordable, but to design those products with an approach that emphasizes the understanding of the local perspective. Conditions and challenges such as lack of continuous electricity, illiterate users, or environmental elements, have to be carefully studied in order to derive the requirements for the technology. A similar approach is currently shaping the efforts of the Real Paraiso housing project in Tecámac, Mexico. Conectha, an ISP (for Connect Habitat), in partnership with Intel, Microsoft, the Mexican government, a local builder (Real Paraiso), and a local computer company are creating a new generation of technology-enabled houses in a technology-enabled secure community for people with low-incomes. This issue contains details of a new project by Victor Gonzalez and Professor Alladi Venkatesh that CRITO will launch in January 2006 to study this venture and examine the proposition that the development of technological solutions should be based on a design approach that focuses on the whole environments that those solutions aim to create.

Another look at how lives are changing and new markets are opening in developing countries is observed in Alladi Venkatesh’s essay, “A Visit to India.” CRITO faculty associates are continually attuned to the ways in which information technology impacts organizations and society, at the bottom of the pyramid and elsewhere.