William J. Kramer, Beth Jenkins, and Rob Katz
Large Companies, ICTs, Und
Economic Opportunity
The past 50 years have, in many ways, been a revolution in global economic
Wachstum. Yet not everyone has participated in this revolution. More than 65 Prozent
of the world’s population, over four billion people, still lives on the equivalent of
less than $4 per person per day. Even worse, the world’s poor are severely constrained—and often completely lacking—in opportunity to do better for themselves. The business community has both the capabilities and the strategic, business reasons to play a major role in cre- ating these opportunities. For the poor, livelihood choices—in employment and entrepreneurship—are constrained by a wide range of interdependent obstacles, ranging from geographic isolation to market failures to political exclusion. This suggests that when we think about eradicating poverty, we should think broadly about creating economic opportunity. Economic opportunity is not, in itself, a solution; stattdessen, it is a context in which individuals can create their own solutions. It is a combination of factors that enables the poor to manage their assets in ways that generate incomes and options. Creating or expanding econom- ic opportunity could rightly be considered a responsibility of governments toward their citizens. But in today’s global market environment, various risks and oppor- tunities provide reason for business to engage. One key reason, across industries, is for business to leverage its own compara- tive advantage in society. Business activity creates jobs, cultivates inter-firm link- Alter, enables technology transfer, builds human capital and physical infrastruc- tur, generates tax revenues for governments, Und, Natürlich, offers a variety of products and services to consumers and other businesses. Each of these contribu- William J. Kramer is President of the Global Challenge Network; Beth Jenkins is Learning Director for Ashoka’s Full Economic Citizenship Initiative; Rob Katz is a Knowledge and Communications Associate at Acumen Fund. This article is adapted from “The Role of the Information and Communications Technology Sector in Expanding Economic Opportunity,” Harvard University, John F. Kennedy School of Government, Corporate Social Responsibility Initiative, Cambridge, MA, 2007. © 2009 William J. Kramer, Beth Jenkins, and Rob Katz innovations / Winter 2009 155 Von http heruntergeladen://direct.mit.edu/itgg/article-pdf/4/1/155/704299/itgg.2009.4.1.155.pdf by guest on 07 September 2023 William J. Kramer, Beth Jenkins, and Rob Katz Four Essential Business Strategies Creating Inclusive Business Models. Involving the poor as employees, entrepre- neurs, Lieferanten, distributors, retailers, customers, and sources of innovation in financially viable ways. Developing Human Capital. Improving the health, Ausbildung, Erfahrung, and skills of employees, business partners, and members of the community. Building Institutional Capacity. Strengthening the industry associations, mar- ket intermediaries, universities, governments, civil society organizations, and grassroots groups, who must all be able to play their roles effectively within the system. Helping to Optimize the “Rules of the Game.” Shaping the regulatory and pol- icy frameworks and business norms that help determine how well the econom- ic opportunity system works and the extent to which it is inclusive of the poor. tions yields a multiplier effect in terms of development outcomes. In developing countries, companies’ multipliers often fail to reach the scale or leverage of which they might be capable, often due to market failures and governance gaps. More deliberate management attention is required to unlock their full potential. Practical experience and research have identified a number of business strategies (see box) for large companies that wish to be active in the “development-through- enterprise” space. These opportunities—when properly approached—can provide both leverage and scale, and these strategies form the basis of our investigation. THE ROLE OF THE ICT SECTOR IN CREATING ECONOMIC OPPORTUNITY The information and communications technology (IKT) sector has been a pioneer and a powerful catalyst in addressing the needs and interests of low-income com- munities in developing countries. But it was not always so. Only in the past 20 years or so has a self-conscious appreciation for the ICT sector’s role in expanding economic opportunity emerged. One of the principal reasons is that much has changed in a short time. In ICTs, a single 20-year human generation is five technology generations. In the 1980s, “universal access” was a goal, but not the reality, of the legacy PTTs, an acronym for the firms providing “post, Telefon, and telegraph” services. Even the words and services that used to define the sector sound anachronistic. So are the techno- logical and business contexts. The PTTs, comprising much of the ICT sector of their day, were landline-based and, to a large extent, government owned and managed. Services were expensive, and in most parts of the world they had badly deteriorated. Data network capabil- ity was non-existent. Technological innovation, to say nothing of business model innovation, was slow. The name of the game for operators was rent-seeking; Das 156 innovations /winter 2009 Von http heruntergeladen://direct.mit.edu/itgg/article-pdf/4/1/155/704299/itgg.2009.4.1.155.pdf by guest on 07 September 2023 Large Companies, ICTs, and Economic Opportunity is, extracting every dollar of revenue possible from sunk-cost infrastructure. As a means to that end, they suppressed any new, potentially competitive technology, service, or business model, often using the power of the state for the purpose. The rate of technological innovation in ICT has accelerated dramatically. The sector today is orders of magnitude larger than it was 20 years ago, and it encom- passes a more diverse universe of players than ever before. Heute, the sector includes hardware, Software, the Internet, telephony, and content, application, and support services, provided by entities ranging from corporate giants to garage entrepreneurs to individual developers and open-source networks. Relevant con- tent and applications are integral parts of the value proposition, and the “network effect” is crucial—technology only increases productivity when lots of people share access. As a result, collaboration has become a key business strategy. Some of the largest and most successful firms have established themselves as “keystones” with- in vast “business ecosystems” in which independent partners, other firms, and even users provide content, applications, and services, thereby increasing the value of their technologies. This article, while acknowledging the incredible diversity in the nature and size of firms in the ICT industry, will focus on such large firms— whether national, regional, or multinational. Unbound from the strictures of the PTT days, ICT has become the foundation of every sector of every economy, everywhere. The reasons for this are, by now, fairly well-known, but are worthy of brief repetition here. Information and communications technologies: • Reduce transaction costs and thereby improve productivity; • Offer immediate connectivity—voice, Daten, visual—thus improving efficiency, Transparenz, and accuracy; • Substitute for other, more expensive means of communicating and transacting, such as physical travel; • Increase choice in the marketplace and provide access to otherwise unavailable goods and services • Widen the geographic scope of potential markets; and • Channel knowledge and information of all kinds. These attributes underlie the important part ICTs have played in firm- and macro-level growth. At the macro level, various studies have shown significant, positive impact on GDP from information technology, telecommunications, and mobile telecommunications investment, in both developed and developing coun- tries.1 At the level of the firm, World Bank surveys of approximately 50 developing countries suggest that “firms using ICT see faster sales growth, higher productivi- ty and faster employment growth.”2 And yet, ICTs are not the entire story. With distressing repetition, the world seems to search for that single, “silver bullet” solution to underdevelopment and poverty. For a while, it seemed ICTs would be next in this category. But ICTs can- not meet development challenges by themselves. As Microsoft has pointed out, „[ICH]n order to realize their potential, these technologies must be part of a mix of innovations / Winter 2009 157 Von http heruntergeladen://direct.mit.edu/itgg/article-pdf/4/1/155/704299/itgg.2009.4.1.155.pdf by guest on 07 September 2023 William J. Kramer, Beth Jenkins, and Rob Katz sound government policies, enhanced workforce skills, and infrastructure invest- ments—[A] recipe of interdependent ingredients which promotes initiative and innovation.”3 To fulfill their potential, most ICTs require clean and consistent power, a robust, zugänglich, and affordable connectivity network; technical literacy; skilled users; and support systems, functional markets, and supportive regulatory and policy frameworks. In developing countries, all of these factors can act as bar- riers, particularly among low-income individuals and small- and medium-sized enterprises. In Beantwortung, large ICT companies have begun to broaden their collab- orative strategies to include actors outside the “business ecosystem,” as traditional- ly conceived, such as government agencies, non-governmental organizations (NGOs), microfinance institutions, and social entrepreneurs—eliminating, or sometimes just working around, such barriers to increase the value of their tech- nologies and enhance their economic opportunity impacts. BUSINESS STRATEGIES FOR THE ICT SECTOR Information and communications technologies help expand economic opportuni- ty by enabling people to enhance their knowledge and skills; identify, apply, and qualify for better-paying jobs; use their disposable income more wisely; manage their own businesses efficiently; and tap into broader markets for their goods and services. ICTs also enhance capacity in industries and institutions of all kinds. Because the technologies themselves have such significant potential for impact, the most important way ICT companies can expand economic opportunity is to get those technologies out there and simultaneously drive the development and diversification of relevant content, applications, and services. Profitable business models are the most sustainable, scalable mechanisms for doing this, and ICT companies are experimenting with a range of them, though product donation and at-cost provision are still common. Companies are also having an additional eco- nomic opportunity impact by working to bring smaller, local firms into their busi- ness ecosystems—for example, as manufacturers, software developers, or retailers. Large ICT companies are also engaging in human capital development on a significant scale. Sometimes these efforts are directly related to inclusive business models, but often they are more philanthropically motivated, with business bene- fits expected to materialize only in the longer term. To a lesser extent, large ICT companies are also investing in institutional capacity-building, Zum Beispiel, through product donation and pro bono time, and engaging with governments to promote policy and regulatory environments conducive to access and innovation. Whereas inclusive business models draw primarily on operational levers to expand economic opportunity, developing human capital, building institutional capacity, and helping to optimize the “rules of the game” seek changes in a firm’s competi- tive context.4 These changes enhance both the commercial viability and develop- mental impact of inclusive business models, in addition to improving the econom- ic opportunity environment more generally. 158 innovations /winter 2009 Von http heruntergeladen://direct.mit.edu/itgg/article-pdf/4/1/155/704299/itgg.2009.4.1.155.pdf by guest on 07 September 2023 Large Companies, ICTs, and Economic Opportunity Creating Inclusive Business Models Inclusive business models in the ICT sector seem to take on one of two primary types: they can target local individual, household, and SME markets for sales of technologies and services; they can also support the development of local partner networks in developing countries, thus creating opportunities for local businesses to start up and grow. These two essential operational modalities are discussed in more depth below. A series of cross-cutting considerations in the development of inclusive business models in the ICT sector are also highlighted. Selling to local markets We see two essential and interlocking growth strategies in the ICT sector, which can be characterized as “horizontal deepening” and “vertical deepening.” The two strategies are often used in combination. Horizontal deepening is essentially about adding new customers. A company might sell first to the highly concentrated market(S) it can most easily and cost- effectively reach, and then, im Laufe der Zeit, simply extend its footprint. A company could also engage in product extension, marginally adapting its products to appeal to additional market segments, and/or adapt its business model to accommodate their needs. In mobile telecommunications, Zum Beispiel, one could say it was a business model rediscovery that set the wheels in motion for the developing world, in the form of Grameen Telecom’s shared-access Village Phone model. In the advanced industrial countries, telephony was first introduced in shared-access form: party lines. As the industry grew, technologies came down in price, and customers could increasingly afford individual lines. Iqbal Quadir, founder of Grameen Telecom, successfully re-invented shared access, with the added attribute of enabling entre- preneurship among village women. The result is a familiar story now: the creation of Bangladesh’s largest and, incidentally, highly profitable, mobile network. Recognizing the volatility and uncertainty of income flows among low-income individuals and microenterprises, Grameen Telecom introduced a pay-per-use sys- tem. This system reduced capital and maintenance costs and established the viabil- ity of non-subscription mobile services. It has been replicated widely, Zum Beispiel, in Vodacom’s phone shops in South Africa or Ghana Telecom’s Areeba-to-Areeba stations and mobile vans. Other providers, including Globe Telecom and SMART Communications in the Philippines and Safaricom in Kenya, are now offering prepaid airtime in addi- tion to pay-per-use. Such initiatives have become paradigmatic inclusive business models in the ICT sector. ICT companies, such as Reliance Communications, Cisco, and Nortel in India, are even offering services on a pay-per-use basis to SMEs, in response to the perennial cash flow problems smaller firms face.5 Other companies, such as IBM in Argentina and HP in Brazil, are responding with financing programs for technology purchases that address SMEs’ difficulty in rais- ing capital for growth.6 innovations / Winter 2009 159 Von http heruntergeladen://direct.mit.edu/itgg/article-pdf/4/1/155/704299/itgg.2009.4.1.155.pdf by guest on 07 September 2023 William J. Kramer, Beth Jenkins, and Rob Katz Vertical deepening modalities seek to grow markets by connecting technology more directly to opportunities and services that increase productivity, Einkommen, and quality of life, thus strengthening its value proposition to the purchaser. Vertical deepening can be seen as a strategy for achieving horizontal deepening and for increasing revenue per customer. Zum Beispiel, mobile telephony on its own brings a host of potential benefits for users: it can substitute for travel, help keep social and business relationships intact, permit access to information, facilitate job searches, and enable entrepre- neurial activities. As research by Vodafone and others has shown, people are using mobile phones in a host of creative and resourceful ways.7 This has accounted for much of the horizontal growth in the market. Gleichzeitig, Jedoch, mobile carriers are beginning to offer a range of formal services via cell phone, strengthening the value proposition of ownership. Most of these services currently fall into the mobile transactions, or “m-transac- tionen,” category, including deposits and withdrawals, cash and airtime transfers, access to loan applications and credit details, and billing and payment for water, Elektrizität, and other goods and services.8 The availability of these services not only encourages more people to buy phones, but can also help increase revenue per user. While Globe Telecom in the Philippines has entered the m-transactions arena on its own, most providers are currently partnering with banks to add these serv- its main rival, SMART ices to their value propositions. Zum Beispiel, Kommunikation, partners with Banco de Oro (BDO) so that SMART Money mobile accounts are actually BDO accounts, bringing many people into the formal banking sector for the first time. BDO issues a MasterCard debit card with each account and facilitates inward international remittance transfers, as well as direct deposit by employers.9 In Nigeria, Celtel has launched a new bundle of services explicitly targeting the SME market. The bundle includes a dedicated range of phone numbers, affordable rate structure, entrepreneurship training and exhibition opportunities, and a busi- ness tool-kit on CD. Celtel has even partnered with Leadway Assurance Plc to offer SMEs a 70 percent discount on auto insurance through the bundle.10 In fact, vertical deepening modalities in the ICT sector can be closely inter- twined with inclusive business models in many other sectors—financial services, agriculture, retail—anywhere companies seek to target low income customers or involve small producers and SMEs in their value chains. Zum Beispiel, ICTs are enabling the agricultural trading unit of ITC Ltd., a diversified conglomerate, to facilitate sourcing from India’s thousands of small farmers through its well-known e-Choupal network. ITC supplies computers and connectivity to village-elected farmers who access market prices locally and around the world every day, in order to assist farmers in attaining the best price available. ITC guarantees next-day purchase of the farmers’ crops at the day’s clos- ing market price, with fair weight, immediate payment, and bonuses for high-qual- ity crops. ITC also uses the e-Choupals to sell seeds, Werkzeuge, fertilizers, and other 160 innovations /winter 2009 Von http heruntergeladen://direct.mit.edu/itgg/article-pdf/4/1/155/704299/itgg.2009.4.1.155.pdf by guest on 07 September 2023 Large Companies, ICTs, and Economic Opportunity products of its own and of partner companies. The system allows farmers to bypass the government-run markets, or mandis, which have bad reputations for under-weighing, keeping poor payment records, and generally inadequate service. Since its creation in 2000, the e-Choupal system has grown to include 5,200 kiosks, reaching 3.5 million farmers in 31,000 villages in eight states.11 The government of Chile is also using ICTs to facilitate procurement from small businesses, using a very different model. When the government initially switched to doing all of its procurement online, it struggled because the portal was inaccessible to so many potential bidders. Insbesondere, many SMEs were uncon- nected. Through its Partnerships for Technology Access initiative, Microsoft was able to construct a multi-party deal that offers entrepreneurs and small business owner-operators training, Software, and connectivity to the e-procurement portal, which increases their willingness to invest in PCs, as well as low-interest, unse- cured, 36-month loans to finance their purchases. Since then, competition for contracts has more than tripled from 1.7 Zu 5.7 million bids, and the number of companies registered to bid has grown to more than 200,000. For the government, the system has increased transparency and generated cost savings of $60 million a
year.12
Developing Human Capital
Effective use of technology to expand economic opportunity at the national, orga-
nizational, and individual levels, requires a certain set of skills. Large ICT compa-
nies are therefore employing deliberate human capital development strategies aim-
ing to develop employees, business partners, and customers, both present and
future. The ICT sector has always suffered chronic shortages of technical and engi-
neering skills in the labor force—in both developed and developing countries. To
address this gap, corporate leaders including Cisco, HP, IBM, Intel, Microsoft, Und
others have created robust education initiatives designed to contribute to a steady
pipeline of potential employees and business partners.
The ICT sector also requires a certain level of comfort with technology among
customers. In response, most major firms have implemented technical literacy
Programme. Helping to grow the number of technology users—regardless of which
technologies they are using—lays the groundwork for firms’ own individual future
market growth. Microsoft’s Community Technology Skills Program has reached
perhaps the largest scale, supporting approximately 29,000 Community
Technology Skills Centers (CTSCs) with different combinations of funding, cur-
ricula, hardware and software donations, employee volunteer time, and other
resources, according to local needs and goals. Each CTSC represents a partnership
or set of partnerships with local organizations, ranging from libraries to commu-
nity halls to training centers sponsored by other companies. In South Africa, für
Beispiel, Microsoft has partnered with the forest products company Sappi to train
community members in Kwa-Dukuza. 75 percent of the program’s graduates go on
to further education or employment, mostly with Sappi.13
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Local partner networks
Like other large firms, large ICT companies today have extensive value chains,
often referred to as partner networks or ecosystems, spanning from component
and equipment manufacturers, to independent software developers and ven-
dors, to distributors and retailers, to systems architects, to technical support
services. Zum Beispiel, network giant Cisco Systems has 20,000 channel partners,
from whom the company earns 90 percent of its revenues. SAP, the world leader
in collaborative enterprise software with 50 percent of the market share,
employs 15,000 developers directly but works externally with more than
750,000. Large ICT companies are undertaking a variety of efforts to expand
these partner networks or ecosystems locally in developing countries. Intel, für
Beispiel, uses more than 2,000 small- and medium-sized suppliers in Malaysia
allein. Cisco has partnered with Citigroup, GE Capital Solutions, and Standard
Chartered Bank to offer $2 billion in short-term inventory financing to its chan- nel partners in emerging markets. Other examples include: Hewlett-Packard’s Jundiaí factory in Brazil: HP has announced that it will open a new factory producing PCs for the SMEs in Brazil, with a focus on niche markets such as graphics and communications. The firm has signed agreements with local resellers for distribution. Microsoft Innovation Centers: Through 110 Innovation Centers in 60 Länder, Microsoft works with local universities, industry associations, govern- ment agencies, and NGOs to offer training, mentoring, and incubation services to help individuals and entrepreneurs establish careers and businesses in the software industry—at the same time laying critical foundations for its own future growth. Building Institutional Capacity ICTs fundamentally create institutional capabilities. Within companies, govern- ment agencies, and civil society organizations alike, they help “reorganize and speed up administrative procedures, [increase] the volume and speed of informa- tion […] Und [permit] greater collaboration and sharing of experience.” 14 These functions are critical in the context of expanding opportunity because “there is increasing evidence that a dense and complex layer of social institutions, formal and informal groups, and networks of interaction and common interest between the individual citizen and the state is good for both the stability and responsiveness of the political system and for the economy.”15 Because of the fundamental role ICTs play, sales strategies can have direct insti- tutional capacity-building effects. Large ICT companies are also engaging in dedi- cated efforts to build institutional capacity. These may target local universities and research institutes, industry associations, training and business development serv- 162 innovations /winter 2009 Von http heruntergeladen://direct.mit.edu/itgg/article-pdf/4/1/155/704299/itgg.2009.4.1.155.pdf by guest on 07 September 2023 Large Companies, ICTs, and Economic Opportunity Intel’s Emerging Markets Development Group: In Intel’s experience, there is often some initial pushback against brand-new technologies that challenge fundamental paradigms—exactly the kinds of technologies that are critical to providing access in the developing world. The R&D arm of Intel’s Emerging Markets Development Group now develops technical specifications for new devices and provides the product references for free. According to Intel’s Marzyeh Ghassemi, the company’s goal is “to make it as simple, easy, and con- vincing as possible to produce and advocate low-cost devices, so that anybody can pick up a reference design and decide for themselves whether there’s a busi- ness opportunity in it.” Mobile telecommunications carriers are also finding a great deal of scope for local partnering in developing countries. In den Philippinen, SMART and Globe have created a business worth more than $200 million a year to more than a mil-
lion small retailers by adopting business models based on prepaid, rather than
subscription-based, usage. These airtime retailers, found in kiosks and shops all
over the country, play many roles for their larger partners. They provide bill-
boards for advertising; local access points for airtime purchase, resale, und trans-
fer; trust among populations with many good reasons to see big companies as
remote and exploitative; Und, perhaps most importantly, front-line knowledge
about what customers want and need. These retailers have served as primary
drivers of service innovation in the industry. In Kenya, Vodafone and
Safaricom’s M-PESA mobile transactions service operates through a network of
thousands of agents based in gas stations, supermarkets, and cybercafés or act-
ing as independent small retailers. In South Africa, Wizzit, which issues
Maestro-branded debit cards in conjunction with m-transactions accounts,
employs young adults called “Wizz Kids” who educate and recruit new users in
low-income areas.
ice providers, and other institutions vital to the development of healthy local ICT
ecosystems. They may also target government, nonprofit, and collaborative insti-
tutions. Just a few examples include:
• E-Government: Information and communications technologies, einschließlich der
Internet, can enable governments to deliver entitlements and public services
with greater efficiency, Transparenz, and accountability to citizens
• Economic opportunity-related civil society organizations: Capacity-building
within this segment often includes equipment or software donations and train-
ing or support services in the form of pro bono time.
• Enabling collaborative governance: Expanding economic opportunity requires
collaborative action among the different stakeholders involved.
Helping to Optimize the “Rules of the Game”
Large ICT companies are helping to optimize the “rules of the game” for econom-
ic opportunity, primarily by advocating for standards, Vorschriften, and policies
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William J. Kramer, Beth Jenkins, and Rob Katz
that support innovation and growth in the sector. A number of issues or dilemmas
are of specific importance to the sector in expanding economic opportunity for the
poor. Zum Beispiel:
• Access and infrastructure: Many ICT companies are addressing access and
infrastructure issues through business investment and innovation—Intel’s low-
cost devices and WiMax technology for rural connectivity are two examples
among many. Public policies, incentives, and other forms of support are partic-
ularly important when it comes to building infrastructure.
• Standards-setting: As new technological capabilities emerge, new standards
need to be developed so that markets can be imagined, created, and served—
expanding economic opportunity for individuals, entrepreneurs, and institu-
tions of all types and sizes. Standards-setting is, by nature, a collaborative ven-
tur, involving trusted, broadly representative standards-setting bodies (wie zum Beispiel
IEEE and ISO) along with technologists, manufacturers, regulatory bodies, Und
end-user communities.
• Intellectual property rights regimes: Intellectual property (IP) rights are criti-
cal to sustained innovation in the ICT sector, and yet as knowledge becomes
privatized, commoditized, and expensive, developing countries risk being
priced out of the market for the knowledge they need to advance.
• Regulatory harmonization: Non-aligned or even competing institutional inter-
ests among regulators can interfere with the clarity and stability required for
business investment and planning. Competing interests among telecommuni-
cations regulators and import/export commissions around tariff and non-tariff
barriers to new technology imports, zum Beispiel, can hinder experimentation
and dissemination of technologies that could prove critical to rural economic
Entwicklung. Harmonization between telecommunications and financial regu-
lators will be key to enabling innovation and experimentation with business
models that cross traditional industry lines, such as providing financial services
via mobile phone, or storing health information on data cards.
CONCLUSION
All three of the authors of this piece started our current careers in a program opti-
mistically labeled “creating digital dividends.” The knowledge we acquired along
the way demanded that we change the name to “development through enterprise.”
The cone of activity we envisioned nearly a decade ago is becoming reality, as more
stakeholders find their active roles—from grassroots institutional development
and capacity-building, to organizing serious capital markets, to enabling large
numbers of companies to focus seriously on the BOP in emerging markets. Wir
remain optimistic.
That said, the ICT sector, while deservedly a poster child for how business can
engage with low-income communities, is still searching for ways in which to
understand how best to succeed at the BOP, and how to integrate such understand-
ing into day-to-day operations, to say nothing of long-term strategy. Objectively
164
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Large Companies, ICTs, and Economic Opportunity
analyzed, the role of emerging markets and their BOP populations remains con-
fined to small circles within most ICT companies, and funds to explore, to exper-
iment, and to “fail” are scarce. When “scale” happens, it remains more an unexpect-
ed outcome than a purposeful, planned process.
The current economic crisis, which began in rich countries and has now
spilled over to emerging markets, could cut in one of two ways: either further con-
straining the will and capacity to break out of comfortable business models and
habits, and hence to invest aggressively in new spaces; oder, forcefully driving home
the realization that, at least for a few years to come, the growth of the firm will be
highly positively correlated to success in creating economic opportunity at the
BOP. The evidence, while admittedly still scattered and inconclusive, is shaping up
as rather compelling. The smart businesses will not wait until the jury retires to
deliberate, but will actively build the case for economic opportunity powered by
ICTs.
ANNEX.
MICROSOFT’S PARTNERSHIPS FOR TECHNOLOGY ACCESS
Microsoft is creating market opportunities by catalyzing “virtuous cycles” in
which eCitizens and eGovernments interact to drive social progress. Es ist
Partnerships for Technology Access are customized, multi-party deals designed to
transform the ability of governments to provide public services and the ability of
citizens to receive the benefits—with technology as an enabler.
Drivers. Demands on developing and emerging country governments are
exceeding their ability to deliver—for example, in areas such as education, private
sector development, and public health. These governments have the potential to
transform the way they address these demands using technology—using
eGovernment solutions that Microsoft can provide. For Microsoft, eGovernment
is a sizeable business, and one the company would like to grow. Bedauerlicherweise,
eGovernment solutions are a hard sell in markets where the majority of citizens
lack access to technology.
Technology penetration in developing and emerging countries is low. Das ist
partly a function of price, but not entirely. For someone earning $3,000 a year— more than three times the international poverty line of $2 a day—a personal com-
puter (PC) will be a significant purchase, even at cost. That person will need
financing options and, am wichtigsten, a reason to make the financial sacrifice a
PC purchase entails. He or she must see a clear value proposition. eGovernment
services can be part of that value proposition if entitlements can be delivered with
more accountability or enhanced responsiveness; but an existing base of eCitizens
is critical to the value proposition for eGovernment. Microsoft has turned this
classic “chicken and egg” scenario into a business opportunity through an operat-
ing framework that uses collaboration to empower eCitizens and eGovernments at
die selbe Zeit, creating “virtuous circles” that advance policy objectives.
The Model. Microsoft’s Partnerships for Technology Access (PTAs) are public-
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William J. Kramer, Beth Jenkins, and Rob Katz
private partnerships (PPPs) designed to transform the ability of governments to
provide public services and the ability of citizens to receive the benefits. Each PTA
PPP is a customized, multi-party deal assembled according to the specific needs
and objectives of the government partner and its constituents. As a result, beide
PTA offerings and the partners put in place to provide them can vary substantial-
ly. A “typical” PTA offer might include a combination of favorable financing, weich-
ware, hardware, Ausbildung, government services, and technology support. In ADDI-
tion to Microsoft itself, “typical” partners include government agencies, financial
institutions, independent software vendors, hardware providers, and Internet serv-
ice providers. Non-governmental organizations are often part of the PPPs as well.
Eight business development managers worldwide are responsible for identify-
ing and building PTAs within their regional coverage. Each business development
manager has specialized experience spanning public policy, sales, and technology.
His or her job is to engage closely with government, civil society, and other actors;
keep current with policy developments and objectives; and identify opportunities
where Microsoft’s core competencies and technologies could be applied, in part-
nership with others, to create solutions. Um dies zu tun, a business development man-
ager must think carefully about what the government partner—including individ-
ual policymakers—will need to get out of the alliance in order to justify it. Als
Diana Pallais, worldwide Managing Director of the PTA initiative, puts it, “Every
government leader has a short list of priorities where they intend to effect positive
impact. If we can understand those priorities and determine that technology can
be of use to them, then they will have an incentive to engage with us on terms that
will be more sustainable all around. In sum, we have to structure win-wins or it
won’t fly.”
Once an opportunity is identified, the business development manager will
then approach and negotiate with potential partners, ultimately bringing them
together in PTA consortia. Establishing and aligning incentives within these con-
sortia, and maintaining that alignment as implementation proceeds, requires
active leadership on Microsoft’s part. Pallais states that, in addition to the idea
selbst, convening the consortium and project leadership are perhaps the most valu-
able contributions that Microsoft makes.
Each PTA deal must meet three criteria:
1. Affordability. As discussed above, affordability is rarely just a question of
price. Is it possible to put together a financing package that will make the technol-
ogy affordable for citizens?
2. Access. Does the local supply chain exist to get the technology to citizens? Are
electricity and Internet connectivity available and accessible?
3. Relevance. Endlich, and most critically, what is the value proposition to the
citizen? How will the technology—and the content and services it enables—
improve citizens’ lives?
PTA deals must offer “wins” for all parties involved in order to move ahead.
Microsoft believes this makes them more sustainable, such that the “virtuous cir-
cle” they create can continue even after Microsoft has exited from a formal role.
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Large Companies, ICTs, and Economic Opportunity
For Microsoft, the “win” is the ability to tap new markets. For governments, es ist
the ability to provide public services more efficiently and effectively, hopefully
translating into political gains. Non-governmental organizations typically have
mission-based incentives to participate, and other private companies participate
for customer acquisition purposes, as offering products and services through pub-
lic programs can help increase affordability and value to the customer.
Wichtig, citizens are also considered parties in PTA deals—they are, schließlich,
being asked to pay for the technologies on offer—and so there must be “wins” for
them as well.
Activities. Government partnerships are at the core of the PTA model. Oft
the government partner is already experimenting with some degree of online serv-
ice provision. The PTA deal may include some support to ensure that these servic-
es are accessible to the target population in terms of language, navigability, Und
Funktionalität. The PTA deal will also address accessibility through the sale of PCs.
While many programs to disseminate mobile or shared access technologies exist,
including within Microsoft, PTAs aim to place PCs into homes and small business-
es. By the same token, while many PC donation programs exist, PTAs involve citi-
zens as paying customers. Embeddedness within a public policy objective helps to
increase the relevance and value proposition. Even so, customers tend to come
from the middle of the economic pyramid, rather than the base. They are people
with some disposable income, but for whom a PC purchase would nevertheless be
out of reach without financing. Many have no credit histories or even bank
accounts. To secure financing for them, Microsoft has worked with public and pri-
vate partners on a number of options to reduce risk, such as payment by payroll
deduction or using the PCs themselves as collateral. Commercial banks, govern-
gen, and government banks will sometimes offer loans at low interest rates, Und
occasionally small product discounts are offered, but the key to affordability with-
in the PTA program is access to credit. An additional dimension of the PTA model,
which is key to its economic opportunity impact, is its reliance on value chain link-
ages with local hardware and software vendors and distributors. PTAs expand these
partners’ markets, which helps create jobs and multiply local business opportuni-
Krawatten. As discussed earlier, PTAs are custom designed and therefore vary dramati-
cally. Two examples are described briefly below.
Argentina. There are four million pensioners out of a total population of about
40 Million. The government pension agency has the second largest budget in the
country. The agency had a reputation for slow processes, even for very simple
transactions, and wanted to innovate in the way it connected with its constituents.
It did have a handful of services already online which offered clear value. Für
Beispiel, pensioners in Argentina are entitled to receive their spouses’ benefits
when they die, but to do so they must declare a status change. Done manually, Das
takes an average of four months. At an average pension of $500 a month, this rep- resents an opportunity cost to the pensioner of $2,000. Online, the same process
takes 15 minutes. The PTA response has been to offer seniors the opportunity to
buy PCs through the pension agency, which underwrites a loan of three years at
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William J. Kramer, Beth Jenkins, and Rob Katz
zero percent interest. Microsoft invests in computer literacy and training, welche
are provided through an NGO network focusing on senior citizens. The opportu-
nity cost savings represent such a compelling value proposition for seniors that up
Zu 2,000 PCs are now being sold each month through this program, with no dis-
count in the price of the machines and no advertising.
Chile. All government procurement is done online via the ChileCompra e-pro-
curement portal. At first, the system struggled to achieve its objectives because the
portal was inaccessible to so many potential bidders—in particular, small and
medium enterprises lacking access to computers or the Internet were locked out of
the market. The PTA response has been “Mi PYME Avanza” or “My Small Business
Grows.” The program offers entrepreneurs and small business owner-operators
Ausbildung, Software, and connectivity to the e-procurement portal, which increases
their willingness to invest in PCs, as well as low-interest, unsecured, 36-month
loans to finance their purchases. Jetzt, the number of companies registered to bid
has grown to more than 200,000, and competition for contracts has more than
tripled from 1.7 Zu 5.7 million bids. For the government, the system has increased
transparency and generated cost savings of $60 million a year.
Ergebnisse. PTA deals do not follow a typical Microsoft sales cycle; according to
Pallais, they take a lot of time and a lot of shepherding. Jedoch, once incentives
are aligned, trust is built, and consortia are in place, roll-out tends to happen
quickly. In the three years since the program began (it was formally branded a year
and a half later), mehr als 50 Partnerships for Technology Access have been cre-
ated. For Microsoft, the number one indicator of success for the Partnerships for
Technology Access—as for the company generally—is license sales. By June 30,
2007, Microsoft had sold 500,000 PCs with genuine Windows operating systems
through PTAs worldwide. Microsoft expects to approach one million PC sales in
fiscal year 2008 allein. PTAs are also measured according to conventional business
metrics, such as return on investment (ROI) and revenues. Measures of satisfac-
tion among partners and citizens are monitored as well.
Even more important, Microsoft tries to ascertain whether each PTA succeeds
in catalyzing the kind of “virtuous circle” described above, with eCitizens driving
demand for eGovernment driving demand for eCitizens. The company is also
working to develop indicators that will allow it to gauge whether a deal will be sus-
tainable after it exits from a formal role.
Lessons Learned. Microsoft’s Partnerships for Technology Access are gaining
increasing traction within the company and in the marketplace. There are a num-
ber of potential threats; for instance, because the ROI on a PTA is significantly
lower than usual for the company, it is possible that a severe downturn in the
industry could jeopardize the business model. Ähnlich, while governments and
other development-oriented organizations are currently keen to work with the pri-
vate sector, the pendulum could always swing in another direction. All else con-
stant, Microsoft has found that the success of a PTA in catalyzing “virtuous circles”
of eGovernment and eCitizenship depend in large part on aligning incentives
among the various parties involved. Critically, this includes customers’ incentives;
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Large Companies, ICTs, and Economic Opportunity
PTA deals are crafted on the basis of clear customer value propositions. Aligning
incentives also involves setting and managing expectations. According to Pallais,
other corporate partners must recognize that while this is business, it is not busi-
ness as usual—it costs more to play and it involves adjustments in standard oper-
ations. Microsoft bears an often disproportionate share of the difference, einschließlich
the bulk of the convening and leadership up-front, but the remainder needs to be
shared for the deal to be sustainable. All partners must expect considerable learn-
ing and adjustment to take place. Companies in different industries, government
agencies, non-governmental organizations, and others rarely understand each
other the way they understand themselves. They must be prepared and invested in
starting to develop that understanding in order for their PTAs to succeed.
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world.”
< h t t p : / / w w w. vo d a f o n e . c o m / e t c / m e d i a l i b / a t t a c h m e n t s / c r _ d o w n l o a d s . Pa r. 9 7 5
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In
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