In March 2003, Rich Kaarlgaard wrote a great article in Forbes detailing how the coming decade was all about massive reductions in costs and prices, driven by technology. We had grown accustomed to Moore’s Law driving down PC costs. Kaarlgaard pointed out that this was happening across the spectrum of the economy. He was right, but many of the effects were hidden by the credit bubble. When money is so cheap, costs rise. Now we are in for an even cheaper decade, and today’s headlines are showing the way.
Selling to the Bottom of the Pyramid
Today’s news from One Laptop Per Child was about layoffs due to difficulty in raising money. But the mission remains, and the core driver remains technology, as one of the commentors points out:
“You have done a great job so far, revolutionizing Moore’s Law for X86 computing, initiating the industry-wide rush to sell netbooks in the developed countries, thus accelerating the shift to cheaper and lower-power computing.
“The next step I think should be shifting the PC and laptop to the ARM architechture. This would lower cost and lower the power consumption further. And it would accelerate also the industry-wide shift from the wasted CPU cycles and empty processing of X86 to the optimized embedded process and the complete removal of all bloatware from computers. How soon could XO-1.5 or XO-2 be ready with an ARM Cortex A8 core, running some Linux OS with a Sugar interface in collaboration with Google Android as software platform?”
OLPC is not the only outfit with this mission. In India, Novatium has the same mission, and it has a for-profit model. It has been pointed out regularly for a long time that selling to the “bottom of the pyramid” is a good business strategy. It is now more apparent that these strategies will impact developed markets as well. The current downturn will accelerate this as individuals and companies seek to reduce costs.
The Google Price
In manufacturing, we have the China price. In outsourcing, we have the India price. In software-as-a-service, we now have the Google price. Reading the Forrester report on the cost of managing email, what jumps out is how radically lower the Google price is: $8.47 vs. $20.32 for the lowest-priced alternative. Despite all the chants of “You get what you pay for,” most businesses will take that differential pretty seriously. Google has set the new benchmark. Every vendor that sells for more will have to spend a lot of marketing dollars explaining why.
Skype on an Unlocked Mobile Device
The rumor (based on a broken embargo, it appears) that Skype Lite will be available on Android and Java-enabled phones gets us closer to the deal we all want: Skype on an unlocked mobile device. Like many people, I don’t use a landline at work anymore. I use Skype and a mobile phone. So I am okay when in my office, my home, or a friend’s office or home where I can open my laptop and use Skype.
But my mobile bills are way too high. I was intrigued by Validas’ offer to reduce mobile bills by untangling their complexity. But I really want a more radical option, and Skype on an unlocked phone gives me that. I get free Skype-to-Skype and cheap Skype-Out calls wherever I have Wi-Fi. Wherever I don’t, I use a pre-paid mobile calling card. No fixed costs. Big mobile bills… gone! Hint: don’t buy shares in telephone companies.
Don’t Worry Apple, There Will Always Be a Luxury Market
Aston Martins may not be selling so well today, but iPhones and Macs are flying off the shelves, and they are surely not cheap. Affordable luxury — something that makes you feel good but does not really break the bank — does well in a downturn.
But this is a small counterpoint to the massive main trend of cheaper products driven by both technology and the need to sell to the billions who are joining the global economy. Now, if we can only figure out how to enable billions to join the global consumer economy without doing worse damage to the environment, we will be in great shape. Come on Mr. Tata, what about an electric version of the Tata Nano?
