'Good Karma' For Microsoft in Digital Divide? - Putting people first 2006 December - hzfq.com

Microsoft has unveiled a pay-as-you-go model of personal computer ownership, spearheading a drive to narrow the digital divide between industrialized and developing nations.

The initiative allows consumers to purchase full-featured PCs by paying only a third of the cost up-front. They can then pay off the remainder by purchasing pre-paid cards or through a monthly subscription.

The initiative is intended to bring PCs and network connectivity "within the reach of hundreds of millions of families and small businesses in emerging markets so they too can enjoy the many benefits PCs bring in education, entertainment, communication and productivity," said Will Poole, senior vice president of the market expansion group at Microsoft.

But the initiative is also a way for Microsoft to develop stronger relationships with the governments of emerging nations, where open source and other alternatives to Windows could threaten the company's long-term growth prospects.

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For instance, a recent study conducted by IBM and the Economist's Intelligence Unit showed that developing nations "are receptive to open source for its ability to generate savings and serve as a cost-effective gateway into next-generation IT platforms."

The software vendor recently completed a year-long trial run in Brazil, in cooperation with several technology, telecommunications, and retail partners. It will now roll it out generally throughout Brazil, as well as India, Mexico, Russia and China.

Microsoft is in effect patterning this approach after the cell phone market, the growth of which has rocketed in developing markets thanks to pre-paid phone cards.

Poole noted that "there are already more than 1 billion pre-paid mobile phones used around the world."

The initiative, said the company, "supports Microsoft's global commitment to help people realize their potential through the benefits of personal computers."

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But a Microsoft spokesperson also told internetnews.com that the approach is less about reaching low-income consumers as consumers without access to traditional means of financing a purchase.

"It's not so much about people who have low incomes, as people who have unpredictable incomes, or no access to credit," said the spokesperson.

Microsoft has certainly increased its efforts on behalf of those without access to the benefits of information technology since President Clinton raised the issue of the digital divide with an audience at Comdex 2000.

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Author and University of Michigan Stephen M. Ross School of Business professor C.K. Prahalad noted that "Microsoft's trials in Brazil are a small and significant step in democratizing technology."

But he also said that Microsoft's approach would yield more than just good karma.

"By making computing affordable," he said, Microsoft can "convert the 'digital divide' into a 'digital dividend.'"

Craig Smith, a former lecturer at the Kennedy School of Government in Washington, D.C., and founder of digitaldivide.org, said that Microsoft is less interested in reaching out to consumers in emerging markets as it is in currying favor with the governments of those emerging nations, in order to protect its Windows platform and to generate greater support for its anti-piracy efforts.

"In emerging markets, the government is the main customer," said Smith.

"This is about defending the Windows platform at the low end of the market -- because it's at the low end that the open source solution is most viable," he said.

But Smith praised Microsoft's approach, saying that sound business fundamentals would be more effective than pure philanthropy in bridging the digital divide.

He likened it to the 1980s when U.S. banks, under pressure from the government, set aside trillions of dollars for low-income communities and discovered how to make money from those investments.

"That wasn't philanthropy. That was the amount of investment they made in figuring out how to profitably serve the low end of the market in the U.S." he said.

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