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Thursday, April 19, 2007

Next Billion Customers? Intel's Already a World Ahead

By Rob Katz

Intel's World AheadLast week, I sat in a conference room full of DC development-types over lunch, listening to a presentation sponsored by the Society for International Development.? It was standard stuff - the woman next to me was reading the New York Times as folks shuffled in, and I spotted a few people I know who work for DAI, Chemonics, and other development contractors.

As the event was gearing up, however, it became clear that it was no regular brownbag lunch.? First, the room was totally full - no offense, but these sort of events aren't usually so compelling as to attract 50 people on a Wednesday.? Secondly, I started to see people I know from outside the "development" world.? Fred Tipson, Microsoft's Senior Policy Counsel here in DC, slipped quietly into a chair towards the back of the room.? Then Eric Gundersen and Alex Barth of Development Seed, a local website development firm, sat in my row.? Not the usual lunchtime crowd for a SID event.The large, diverse crowd had come to hear from Jeff Galinovsky - and I can't blame them.? Jeff manages Intel's Emerging Markets Platform Group, and is intimately involved in their World Ahead program.? He's an interesting guy, to say the least.? Trained as an engineer, he's worked for Intel for 14 years and has seen their emerging markets strategy evolve over time.?

Back in the day, an "emerging markets strategy" for Intel involved taking their older technologies (n-1, n-2 in Jeff's engineer parlance) and selling them overseas.? Simple - but not that effective.? Seeing an untapped market opportunity, Jeff and his boss pitched the idea of a for-profit Rural Connectivity Platform to Intel CEO Paul Otellini.? The platform would go local to assess needs first, then move into product development - a reversal from what Intel had done in the past.? It seems straightforward, but for a major tech firm in the post-dotcom era, the Rural Connectivity Platform concept was and is a big stretch. ?

Meanwhile, Intel's philanthropic arm and their capital department began to work in emerging markets.? To make them all work together, Intel developed World Ahead, a sort of umbrella to tie the business side in with the philanthropy and the investment parts.? World Ahead is driven by four elements - Accessibility, Connectivity, Education, and Content.?

When Intel says Accessibility, they don't only mean last-mile connectivity solutions or local language software.? The company thinks in terms of "purpose built solutions" - meaning locally-appropriate and engineered to meet the needs of BOP communities.? The Community PC and the Classmate PC are both results of this approach.? To reach their accessibility goals, the World Ahead team launched platform centers around the world - of the 150 people working in Jeff's Emerging Markets group, only 8 are based in the United States - the other 142 are located in Sao Paolo, Cairo, Bangalore, and Shanghai.? Simply put, "Accessibility" means bottom-up development of products and services that BOP communities need.? Not many companies are willing to invest in this as much as Intel.

The second pillar of World Ahead is connectivity - hey, what good is that Classmate PC if you can't hook up to the web?? This is actually where the presentation started getting really good, because the audience asked great questions.? First off, Intel's connectivity work is around WiMAX, long-distance WiFi and other backhaul solutions.? Their goal - which Jeff says they'll reach in 6 months - is to have a $350-$500 per antenna price point for WiFi backhaul - that's less than $1000 per village.? Once you're in the village, you can set up a LAN, wireless network, or mesh network to get everyone connected.

While $1000 per village sounds expensive, it's a huge step forward from what you'd pay for a WiMAX base station - the other option to get connectivity from urban centers with existing pipe out to unconnected rural areas.? One WiMAX base station costs $50,000.? A couple good questions were raised at this point about the $100 laptop, mesh networking, and how all of this plays together.? First of all, the $100 laptop (which is really going to cost between $150 and $200 when all is said and done) uses mesh networking between laptops to extend connectivity.? But they have to get that connectivity in the first place - which is where this backhaul stuff comes into play.? So they don't compete on connectivity.? Another good question came up about power - Intel's long-distance WiFi antennas use only 5 watts of power, and are equipped with a rugged solar power unit to keep them charged.? So far, so good.

Intels' connectivity work doesn't end with the Rural Connectivity Platform - the philanthropic arm is involved as well.? Some might be familiar with their Digital Villages initiative, which hooks up entire BOP communities using a suite of Intel technologies.? Frankly, these remind me of HP's ill-fated i-communities and Digital Villages back in the e-inclusion days.? Interestingly, someone brought that up exactly, questioning Jeff as to what's new.? I second that thought - why is Intel donating all this stuff when they could be supporting for-profit, sustainable, and scaling kiosk models?? Don't think they work?? Just check out Drishtee, an Acumen Fund investment in India that is now the fastest growing franchise of any kind in India - yes, that includes fast food.

Education is the third element of World Ahead.? Jeff's wife is a second grade teacher, and his personal committment to education in BOP communities is palpable.? This is really where Intel's philanthropy plays an effective role.? We've covered before how their training programs have reached 1.5 million teachers and will expand to reach millions more over the next few years.? Jeff explained Intel's belief that teacher training is the most effective way to make technology useful in the classroom - another point where he and Nicholas Negroponte (of the OLPC or $100 laptop initiative) diverge.? "We think teachers are first," Jeff said.? "Nick thinks they aren't effective."? He added, "The nice thing about our products - you don't have to buy a million" - a clear shot at the OLPC, which has purchasing minimums to help reach economies of scale and keep costs down.? Regardless of where you stand on the OLPC debate, what Intel is doing seems to be worthwhile - introducing low-cost laptops (the Classmate PC) and helping teachers learn how to use them most effectively.? It's a competence-driven philanthropy strategy that's not just smart PR or bluewash - it's good business.

What's next for Intel?? Right now, their profit margin is in the hardware - not surprising.? They'd like to work with software companies to keep developing the right kinds of tools for BOP markets.? With the open-source community in mind, Intel has made their RCP products compatible with Windows and Linux.? With this in mind, the Drupal folks at Development Seed are working on an easily adaptable software package for schools and hospitals in BOP communities.

Intel also wants to develop social impact metrics to measure how well they address poverty issues.? Jeff put it this way: "It's not just making money, it's social impact.? But we're a business - we strongly believe that there's a fortune at the base of the pyramid.? These are our next customers."? Pretty heady stuff - and nice to hear coming not from a CEO in front of a bunch of cameras, but from an in-the-trenches manager responsible for making this vision a reality.

Kudos to SID-Washington for hosting, and to Jeff for making the trip out.
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