NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

The dream of a low-cost computer for the masses has been around for a long time, gaining increased momentum earlier this decade as awareness grew about the opportunities associated with bridging the global digital divide, as well as the consequences of failing to do so. Initial entrants in this market included Wipro’s Janata PC, the Simputer, the iStation, and Brazil’s Popular PC. Despite the promise and hype surrounding these devices, none managed to reach commercial viability or the level of success that was initially hoped for.

In spite of such early setbacks, the demand for low-cost computers continues to grow. Even a small drop in price creates millions of new customers. As a result, manufacturers are aggressively developing new devices aimed at this market. Nowhere is this more apparent than in India, where several companies are trying to break the $200 barrier.

Bangalore-based Encore Software and the Council of Scientific and Industrial Research (CSIR) are introducing two new computers this year. The low-end model, dubbed SofComp, includes a 15? monitor and will cost just Rs 10,000 (US$ 230). Costing up to twice as much, the Mobilis functions as both a desktop and a laptop. Both offer local language support, employ open-source software, use built-in memory in lieu of a hard drive, and can be powered by batteries for up to 6 hours.

HCL Infosystems and Sahara Computes and Electronics Limited (SCEL) have both begun offering a Rs 10,000 (US$ 230) PC that includes a 1 GHz Processor, 128 MB RAM, 40GB HDD, and a 52x CDROM. Both will support all standard applications, including office software, Web browsing, and audio/video playback. The HCL system, as well as a similar system by Xenitis Infotech, also include a 15? monitor.

Another Indian company is pushing prices even lower. Chennai-based Novatium Solutions has introduced a ?thin client? system that costs only US$ 100, and is capable of handling most routine office work including Internet browsing. With their low costs, ease of maintenance, and protection against viruses, the systems are ideal for use in situations where multiple PCs are required, such as in schools and cyber cafes.

Computer innovation at the edge of the PC market is not just happening in developing countries. Multinational AMD has gone even further, producing an inexpensive computer specifically designed for use in the most challenging conditions at the BOP. It’s Personal Internet Communicator (PIC) is a complete solution, supported through a local service provider, that includes monitor, keyboard, mouse, and pre-installed software. The sealed unit does not contain a fan, in order to minimize damage from humid or dusty environments. Its portability also allows it to easily be secured in the evenings, if it’s used in a school or Internet caf?. Costing about $250 with a monitor ($185 without), the PIC is the first product of AMD’s 50X15 initiative, a global commitment to empower 50% of the world’s population with basic Internet service and computing access by the year 2015.

Finally, researchers at MIT’s Media Lab are already talking about and developing prototype designs for the next threshold: the $100 laptop. While still a goal and not a reality, the portability and low-power requirements of the design would make it ideal for use in developing countries, where security and adequate supplies of electricity are a concern. Likewise, companies such as Rolltronics are developing potentially very low cost screens and display devices.

Two points to underscore here. First, the majority of firms leading this market are not Western-based. When the first initiatives to dramatically lower the price of PCs were announced in 2000, they were met with a lot of skepticism among the established computer manufacturers. At the time, the base price of most PCs hovered around $1000. Although the first efforts failed to scale, both the number and size of manufacturers tackling the BOP market has expanded significantly, and what they are offering far surpasses the earlier initiatives. Western-based manufacturers initially reluctant to cannibalize their own market by offering cheaper systems may soon find themselves behind the competition when local firms that are producing low-cost systems globalize their operations.

The second thing to take note of is that most of the low-cost PCs discussed use open-source software to reduce their costs. This has implications for both software and hardware manufacturers. When the government of Thailand’s Peoples PC initiative began selling a subsidized Linux-only PC aimed at the masses, Microsoft dropped the price of its Windows/Office package in the country 85% from nearly US$600 to $37. However, most first-time PC users in Thailand found that the free Linux Thai Language Edition was easier to use than Windows, and the dramatic price cuts were not enough to allow Microsoft to retain a majority share of the market. Moreover, local Linux-only PC manufacturer Laser Computer replaced HP as Thailand’s top PC seller. Microsoft is now competing more strenuously for this market with low-priced, reduced feature, local language versions of Windows XP Home and is testing other products and services for low-income market segments.