Beat the digital divide

Gopal Srinivasan

THERE are two faces of IT in India - One, of an upbeat, confident nation, with $2 billion worth of software and services export, covering a customer base that boasts of 185 of the Fortune 500! One that includes 4 million persons of Indian origin in the US which has become the richest ethnic group in the US. One where e-commerce is expected to touch $4 billion in 2002 (Goldman Sachs).

The other, away from the urban, the comfortable and the affordable, is a terribly poor nation where more than 250 million live below the poverty line with annual earnings of less than $500. While the economic reforms have helped reduce a little of the gap between the economic haves and the have-nots, the Internet and its access have accentuated the gap between the digital haves and have-nots. General Colin L. Powell calls this the Digital Apartheid - in addition to India's own economic apartheid.

Impetus for change

The Indian IT hardware industry produces around Rs 3000 crore worth of products - accounting for around 30 per cent of the total consumption of hardware. Faced with competition from imports for the last five years, Indian vendors have mainly chosen either to diversify into software services or distribution, reducing their dependence on their low-margin, small hardware businesses, or simply sell off or close down.

I believe that the causal link was the focus of the Indian IT industry - for the last two decades - on the ''creamy layer'' of the market. The part often called the ''top of the pyramid'' consists of businesses and government organisations that employ around 25 million people. The penetration of IT in this sector hovers between 50 per cent and 93 per cent - in terms of at least computers in the organisation. This sector effectively comprises around 55 million potential households as per the socio-economic break-up. To be sure, this is where the growth and initial impetus came from. I would even argue that the entire bulk of the Indian IT industry, including the ''software exports business,'' is the offspring of focussing on this pinnacle of the Indian economic pyramid. This is precisely the sector that the Indian domestic IT industry strives to serve, where the global brands compete best. In a span of just over six years, the entire competitive space has been ceded to those global brands, down to the very fact that each of their domestic operations is led by managers from precisely the same Indian companies! Hence the outcome was of Indian companies in the IT hardware and domestic software shrinking to less than 20 per cent of the domestic market's size, with some notable exceptions in the sunset product areas.

The opportunity

Let's take a look at the so-called ''industrial poor'' of India, a term often used to refer to the small and micro industries employing less than 50 people and to the retail and service establishments employing less than 25 people. Two million employees in the organised sector and 30 million manufacturing employees in the unorganised sector generate over 30 per cent of the economic activity in the manufacturing sector. Compare this with just 7 million employees in the private manufacturing sector and 30 million in the government and quasi- government industries.

There are over three million units in the SSI sector that employ over 10 million people and many more in the unorganised units.

Going to the retail business, the Ninth Plan estimated that over 40 million are employed in many million business establishments. Nearly 80 per cent of the retail distribution is sold through these units that employ less than 10 people per unit. In the grocery sector alone, the annual retail turnover is over Rs 40,000 crore. There is here a hidden, but huge potential, to break the ''digital divide'' and turn it into a ''digital opportunity,'' because that is what really confronts us today - an unprecedented opportunity for developing countries to move swiftly towards development. IT capabilities, which in the past were possessed only by large and powerful organisations, can be developed by individuals and small organisations in all walks of life.

Obstacles

This large constituency has, in all nations, constituted a large part of the IT services market. The barrier to accessing them has been a combination of the cost of the sale, as you have to sell them one at a time, and their perceived affordability. In an era that did not have the Internet, this was indeed a major issue. In the US, several companies have become very successful in serving this sector. One is Quicken, which sells an accounting solution backed by a slew of back-end services for less than one day's minimum wage, and the other is Great Plains.

Closer home, we have the classic model of the Public Call Offices (PCOs). In a country with 22 lines only for every thousand members of society, access to telephony has become near universal with the installation of over 650,000 PCOs. It is said - and I cannot vouch for accuracy - that from 80 per cent of Indians, who had not used a phone in 1980, over 65 per cent of Indians have now used a telephone! Recently, there have been examples of Sanchar Dhabas - PCOs converted to surfing centres with low-cost equipment.

The author is Director, TVS Electronics Ltd.