By R. Sukumar

This isn't one of those bleeding-heart stories on random acts of corporate philanthropy. Companies everywhere are waking up to the fact that it is possible to sell to the poor, profitably. A few years ago, when management maven C.K. Prahalad first articulated this hypothesis, there weren't too many takers. Companies did not believe they could integrate issues related to cost, sustainability, and pofitability into their product- and market-strategies. Now, faced with mature markets, the idea has morphed from a non-starter to a no brainer.

The world knows of Hewlett-Packard's high-profile CEO Carly Fiorina and her ambitious e-inclusion initiative targeting poor communities in poorer countries (See "H-P is on a never ending journey...", BT, May 21, 2001). H-P has some e-inclusion plans for India as well, notably a tele-medicine project in Siliguri in West Bengal.

The four reports that follow are about more than mere plans. There is the experience of the country's largest consumer goods marketer Hindustan Lever Ltd. in the district of Nalgonda in Andhra Pradesh, where its use of self-help groups is helping it reach farther. There is the tale of how the Simputer Trust, an academia-industry alliance is testing out a cheap hand-held computer in Jattipalaya, a village outside Bangalore. There is the case study of N-logue, a company that wishes to ride a disruptive technology to become a rural internet- and telecom-service provider. If it's motivation they need, the three could look at Aravind Eye Hospitals, arguably the most profitable healthcare provider in the country-and it's a charity.

The common thread that links these reports is the profit motive. Selling to the poor, profitably doesn't take alchemy; what it does take is an innovative business model. Doing so may require a fundamental rethink on products, services, and channels. It may involve the long-term play of increasing the income of local communities and, consequently, their consuming capacity. Each of the companies mentioned here boasts business models that are all these. Over the next year, all, with the exception of Aravind, which is already a five-hospital chain, will move from the promise-laden domain of pilot projects to the harsher realities of doing business in the real thing. Maybe, just maybe, it is really possible to sell to the poor, profitably.

N-LOGUE/MIDAS/TENET
Wiring Up The Hinterland

Ashok Jhunjhunwala is in his element. It is an evening in the second week of May, and the professor, head of the department of electrical engineering, at the Indian Institute of Technology, Madras, is on stage, delivering a talk at the Department of Science and Technology-organised Technology Day celebrations. The setting is the huge convention centre at a South Delhi hotel, the audience includes two ministers, assorted bureaucrats from various ministries, and a few private sector types. The man knows how to strike the right chords: he emphasises the need to increase tele-density; and he stresses, repeatedly, the Indian-ness of the technology whose use he is advocating. His passion is infectious; halfway through the lecture the audience, stirred out of its somnolence by something the prof just said, breaks into spontaneous applause. That Jhunjhunwala belongs more in a pulpit than a classroom is evident. Proselytizer is a label that fits the 46-year old Jhunjhunwala, just like the several other tags that do: academic, technopreneur, visionary...

The professor's philosophy is simple: looking to developed countries for technology won't do any good; none of these countries and the companies in them are interested in reducing the cost of technology because even a 50 per cent decrease is not going to help them reach out to more people; thus, their focus is on 'features'. ''What we need,'' says Jhunjhunwala, ''are disruptive technologies that can reduce, say, the cost of access from Rs 30,000 to Rs 10,000 (the numbers are based on the average cost of a telephone line in India)''. Along with a few like-minded academics, Jhunjhunwala created the TeNet (Telecommunications and Networking) Lab in IIT Madras in 1991. To date, the lab has incubated six companies, Midas Communications Technologies, Banyan Networks, N-logue Communications, Vishal Bharat, Vembu Systems, and Nilgiri Networks. And yes, TeNet and Midas have managed to come up with a disruptive technology all their own.

The technology is called cordect, it works on a Wireless in Local Loop platform, and it costs, not Rs 10,000 a line, but Rs 18,000. Midas and TeNet own the intellectual property of cordect, and have licensed companies like HFCL, Shyam Telecom, Crompton Greaves, and Electronics Corporation of India to manufacture cordect systems. MTNL and the Department of Telecommunications are customers, as are companies in 10 other countries. In 2000-01, Midas registered a turnover of Rs 10 crore, but not many service providers appeared keen to exploit the advantages of cordect: simultaneous telecom and internet access; a bandwidth of 70 kbps; and low cost. So, in early 2001, TeNet incubated its latest hatchling, N-logue.

This company has already acquired licences to operate as an ISP in Tamil Nadu and Andhra Pradesh, and has applied for a national one. The company hopes to eventually become a telecom service provider as well. Its efforts to lobby the GOI into creating a new category of telecom operators, Rural Service Providers, hasn't borne fruit so far. But it is hoping it can forge alliances with companies that already have licences to offer telecom services, but aren't keen to do so in rural areas. That is in the realm of the possible, but may require some changes in the regulatory environment.

Meanwhile, the company is firming up its business model for the ISP part of the business. N-logue, along with a Local Service Provider will invest (start-up costs: Rs 13,000 to Rs 17,000 per line) in a base station at district headquarters. The LSP will identify entrepreneurs willing to invest in internet kiosks in neighbouring villages. Each base station can connect 1,000 internet connections. N-logue will charge the LSP Rs 20 a hour; the LSP can charge each kiosk owner between Rs 15-Rs 20 a hour; and the kiosk-owner can charge users for a variety of services like training, e-mail, and downloading. ''Every tier of this business model needs to be viable,'' says Shirish B. Purohit, Director, Midas, who is part-holding the fort at N-logue while a CEO is identified. ''The kiosk-owner should be profitable for the LSP to be profitable; and the LSP should make money for N-logue too.'' By the end of 2001, N-logue hopes to set up access centres across the country, each catering to villages within a 15 km radius. The company has even identified local language content- and operating system-providers, like Chennai Kavigal, a company that develops a Window-like operating system in Tamil.

N-logue has launched several pilot projects. In Nellikuppam in Tamil Nadu, it is partnering with EID Parry to form an online community of sugarcane farmers. In Dhar in Madhya Pradesh, it is helping the state government manage an e-governance initiative. And Melur near Madurai, it is part of MIT Media Lab's Sustainable Access in Rural India (SARI) programme focussed on e-learning. On paper, N-logue's business model looks just great; the pilots have shown that it works too; now, it is up to the company to prove that it is scalable. 

-Nitya Varadarajan

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