Micro-payments - μMoney

To avoid confusion with "Micropayments" this page has moved to:

http://tropicalmanager.blogspot.com/2006/11/micro-money-money.html

Micro-money - μMoney

Alok Mittal wonders if businesses around the theme of providing a service to a million users at $100 a year (1m x $100) works in India. Or at least I assume he means in India. Of course, we don't speak the dollar language so I assume he means (1m x Rs. 5000) a year.

Specifically, Alok mentions:
1. Online DVD rentals
2. Online photo printing
3. Online tutoring (export oriented - ok more like 100k x $1000 here)

The theme behind such sites is - pay smaller amounts of money for a service rather than a product. You can rent, say, 2 DVDs for Rs. 200 a month, or pay Rs. 4.5 per photo to get it printed. Or get lessons off the net, with a real person delivering a course, at about Rs. 1000 per month.

I think such sites are the future for the software business in India, which is littered with software pirates. Piracy is so rampant that creating any "client side" software is a dead proposition from the start, unless you are able to build and sustain market share and then, hopefully, charge for it. I call this the Microsoft strategy, which has worked in India in the past, in the form of the Tally Solutions strategy.

But small entrepreneurs can usually not wait that long - after all, cashola is the king. Plus, if your solution can be pirated, it will be. The answer is to take the solution online: after all, no one can pirate your site and use it for free, and if they do you can fix it fairly easily.

I call this concept "MyuMoney" - a name for "Micro Money". Micro, in greek, is the letter "myu", so MyuMoney is written like this:

μMoney

μMoney is the concept of charging small amounts of money for a valuable service. An amount so small for a value large enough that it flies under your customer's radars and therefore, she pays for it.

It's not something I invented. It's been there for decades, perhaps centuries. But it's new to the Indian software world. Why? Because we have been exposed to the US style of micro-money till now. In the US, μ meant $10 - $50 a month. To individuals and businesses this is so small it is under the radar. In fact for businesses, even $200 a month is an "below-the-radar" price to pay for a service.

Converted to rupees, this translates to Rs. 450 to Rs. 2250 a month. Not cheap by Indian standards. Cheap for businesses, perhaps, but not cheap enough. I can get an accountant to visit the office weekly, enter all my vouchers and invoices into an accounting software, reconcile bank statements and even prepare individual returns for Rs. 2,000 a month. I can get photos printed offline for Rs. 4.5 per photo. I can buy books at 15% discount offline (minimum).

So any service that's online must give me a deal that is just below my radar for a monthly service, or below the price paid for a similar offline service.

I should be able to pay monthly or per unit - anything that asks me to pay upfront for a year, or tells me they will send me 12 magazines and charge me annually, is off the radar. The yearly or multi-unit options are supplementary; I should be able to pay per unit if I choose to.

Further, online payment options are nice, but they must include Indian netbanking links (like ICICI or HDFC netbanking) and also have a "drop box" facility to drop cheques or make payments in cash (for sufficiently large sites). This is not easy but it's mandatory if you want a site to grow in India over the next three years.

So let me prepare the rules for μMoney:

1) It must cost between Rs. 200 to Rs. 500 a month for an online service. Ticket size should be less than Rs. 500.
2) I must be able to pay monthly.
3) I don't want to pay more online than I do offline.
4) I must provide online and offline payment methods for people who want to pay.

The unwritten deal is that I need to provide value for the money I charge; and the value should visibly be large enough for customers to know they're getting an absolute deal.

Who's available? Let's see:
- Shaadi.com, the online matrimonial service charges between Rs. 282 to Rs. 425 per month.
- Real estate sites like 99acres, (charges Rs. 500 for 2 month).
- Share Trading advisories like PowerYourTrade (Rs.500 per month)
- Personal finance sites like personalfn (Rs. 300 per year)
- Photo printing services like PicSquare (Rs.3 per photo)
- Mobile games and songs and ringtones (usually Rs. 50 a pop)

Who isn't?
- Most online job sites. They cost upwards of Rs.5000 per month for jobs.
- Many stock trading advisories or magazines that charge annual fees upwards of
- Most other sites that don't even bother to offer this option.

μMoney is all about flying under the radar. In the Indian context, it means approaching masses. Selling software at Rs. 500 a pop. Retailing at 99 cents a song - yes, that model will work in India, but not for songs. Think about TV serials. Cricket match highlights. On CDs, not just downloadable. Heck, I love that idea but it needs more money that I have and higher time to returns than I can get capital for.

But the concept remains exciting: Make small payments for a service that can give you much greater value. μMoney is the way forward for Indian startups; and a way for the Indian Software Industry to finally mean 'software' rather than the types of Infosys and TCS. It's time we finally came around. It's time for μMoney.

I have just registered myuMoney.com - I will build that site and list all the μMoney sites for India. And maybe,

Personally, I'm working on a site for India on the same front. It's based on the concept of "fool.com" - an online stock advisory that helps you become more knowledgeable about your investments. My idea is more than stock recommendations though - there are too many of those sites - and more of a complete investor tool. I've been writing about investing per se at http://theinvestorblog.blogspot.com, a basics and intermediate level site for the Indian investor.

Some of my thoughts includes tax accounting for investors, providing a look-see into "real" growth, comparing investment options, cash-flow analysis and a slew of other things that work for intermediaries.

I will expand on this in the future, and give you an insight into this "startup" which initially focusses on information, but in the end, aims to be the first stop for the Indian investor.

If anyone's interested - drop me a line at deepakshenoy at gmail.

Another idea I have, which I will not take up because I'm involved with the above, is an online "testing" tool focussed on companies testing candidates. I will write more about this, later, if I have some time.

Let them leave

Nirav Mehta loses two programmers without notice to L10NBridge (yes, that's a name), whose Human Resources (HR) person, when told about it, felt no remorse and threatened to hire the rest of Nirav's QA team with him (Nirav) helpless to do anything about it. Further, a request for action to be taken against the errant ex-employees was refused.

Nirav's rant is that:
a) Employees shouldn't sell their soul. Values matter more than money.
b) Lionbridge shouldn't have bought their soul. If you force employees to break contracts, what example are you setting?

Well, comments have flown back and forth and Vulturo has posted in detail that:
a) The blame is squarely on Nirav for not retaining his employees.
b) Employees aren't slaves, and they should be allowed to buy their way out of a notice period.
c) Money's a big factor. If you can't afford to match or beat the industry standards, it's your problem.
d) Nirav shouldn't be demanding explanations from LionBridge. They're just doing their job.

I think there are two definite aspects to this. The first one is an ethical dilemma: Should people just quit for the heck of it, without proper notice? And the second one is: If they do, shouldn't the hiring company be adamant that they complete their notice period, and get relieved properly?

This would not be a complex answer but for the "asshole employers" that dot the marketplace. The disappointment at losing key personell grows to resentment and vengeance is extracted, too often, by delaying relieving letters, not paying dues properly, and creating arbitrary hurdles to a smooth exit.

Would you buy a computer today if Microsoft told you that before you load Linux on that machine you would have to get a court approval to do so? Would you enter a shop that refused to let you leave unless you bought something?

Creating barriers to exit is a downright stupid thing to do, and employees are nothing less than your customers. You have to make it easy for people to leave, and perhaps even help them when they resign; it's not extremely difficult. Discuss it openly at company meetings: If anyone is looking for a job, let them talk about it. Organise farewell parties in the office for all those that decide to leave; not on the last day, but just after they resign. Stretch the notice rules; transition can always be worked out separately. Always tell them, "Look, if for any reason you don't like it there, come right back. We'll just forget this happened". Keep it simple, your paths may (and most likely, will) cross later.

If that is in place, your employees will want to be nice about it. Of course you have the bummers who won't, but you don't want them in your company anyway. (Give them that farewell party though)

Note here that I'm not saying Nirav made it difficult for his employees to leave. He does say that his company tries to treat employees like family - unfortunately a family position is much more difficult to sustain. The ability to separate gracefully is rare in Indian families; why would the soapy tear-jerkers (movies and TV) make so much money otherwise? So your employees are bound to dither and feel ashamed when they wanted to leave; and for as small a thing as money. It's not small, is it?

Now, should the new company be wary of have-not-properly-exited hires? They should, but even they are aware of the "asshole employers" concept. Also, HR targets are to get the best people as soon as possible, and that links directly to rewards. And finally, if they don't have the integrity, what can you do about it?

You definitely can't - or shouldn't - call and berate them. An email perhaps, if you can make it sound non-vindictive and helpful, but definitely not a phone call. They should be the ones calling you for a reference, but if they don't, you will not make matters any better by calling them. The exception here is if you know someone high enough at a personal level.

And most importantly, if you expect relieving letters and notice periods served etc., expect the same when you hire. I've noticed that often, in small and big companies, HR expects you to join "today, or potentially, yesterday", but will try to enforce a notice period when you leave. Chances are that will not be taken kindly.

While employers can't force a notice period down a person's throat, there are necessary approvals that they can withhold: Like a PF transfer form signature, or encashment of leave etc. It's illegal to withhold them, but relief is only possible through a civil suit, an option most people are loathe to use.

The question of references comes in often: Should you check references? Well, if you don't, then expect that people will leave you high and dry at the worst time possible; after all, you may hire someone who hasn't been as kind to her last employer. Should you give references? Only to those who were nice in leaving, and that you want to recommend. The lack of a positive reference is equivalent to a negative one, so you don't need to write a negative word in a reference. (In India, you can legally give a negative reference)

Oh and I forget about Bonds: companies routinely make employees sign bonds that they won't leave before X years, or else they pay Y money back. The justification is that this is training money spent; If so, I say take the money upfront. Return it once they complete X years. Suddenly the option doesn't sound all that great right? If you take money upfront you must train properly, and give a real certificate that means something to the employee. In most of the "bond" cases, none of that is happening. Bonds add no value, they only take away the trust in the relationship. Once you've lost the trust, no amount of legal threats etc. will bring it back to normal.

Lots of people think that such abrupt departures with no notice and SMS "break-ups" are bad for the industry in the long term. They are not. In fact, they build better businesses. The ability for your lousy employees to leave by just sending you an SMS is the best thing that can happen to you.

If you do not understand, let me tell you this. Marriages are better when the option to divorce is available. Cars are better if the only color you can choose is not black. Business are better if they can fire as well as they can hire. Online buying is better because there is no customs department involved.

The ability for employees to get up and leave in whatever manner they choose affords you the knowledge of who chooses to leave nicely and who does not. And in the same vein, to do whatever you can to keep those that goes the extra mile to keep it courteous.

Cybercafes: Alive and Kicking

Someone asked in the Venturewoods blog if Cybercafes are dead. " If you consider urban penetration of PCs, it will be close to 75%, If you look around who doesn’t have PC at home.", was the comment, specifically.

Cybercafes and dead? Urban penetration of PCs is still less than 15% from my experience. Heck, in Bangalore, with an urban population of 7 million, there are less than 300,000 home PCs. [1]

Cyber cafes are the choice for a huge number of people, which is why the Satyam Infoways and the Reliance Webworlds are doing so much business. In fact there are “remote” courses (basically those that involve long distance learning) that enforce testing Reliance Webworlds (including the IIMs!)

Also, the next big thing in cities (and even small towns) nowadays is to use cyber cafes for stock trading. And this is so popular that broker have set up their own terminals for the day traders, becoming vertical versions of cyber cafes. The money is in the brokerage, not in the lending of a computer for a few hours.

But the masses have still not adopted home computing. The masses do not include people who sip coffees at barista or pay Rs. 250 for a movie ticket or eat at restaurants where each dish costs more than Rs. 200. And the masses are more than 90% of our population.

1. My estimate. I haven't googled enough to back this up.

Bangalore Barcamp: The Geek Freedom Jam

The next Bangalore Barcamp will be on December 2 and 3, 2006, at:

ThoughtWorks
2nd Floor, Tower C,
Corporate Block, Diamond District,
Airport Road, Bangalore.

Registrations are on.

This is going to be my first barcamp. I really like the concept: an open geek event with the ability to network, interact, find like minded folks, and quite interestingly, open up avenues for startups.

The last barcamp looked like fun. Lotsa familiar faces.

A good time to be had. And perhaps an insight into whether there's enough geekhood in this otherwise nutty city.

(You'll notice I used "Freedom Jam" instead of the ubiquitous "Woodstock". Many bangaloreans will know Freedom Jam - the free-to-all concert held on Independence Day)

PC and Internet penetration in India

Alok Mittal had posted a note on how India Today's cover story mentioned how "most of India's 200 million middle class homes now have computers". The comments there ranged from speculation of whether it meant "microprocessor based devices" (i.e. cellphones) or whether the magic figure was 10 million? or 50?

What do I think?

There's a difference between the number of domestic households owning a computer, number that access the Internet, and the number of computer owning households.

Firstly, the number of PCs sold in India was around 4.3 million in 2006 (IDC). I would estimate the total base at around 30 million (we were 5 million in 2001) and corporates + cyber cafes to have about 85% of that. About 4 to 4.5 million PCs are in houses, and I think even that is an overstatement. I have three PCs at home. Chances are that the real number of PC owning households is around 3 million.

PCs that have a net connection: I think that figure, on a per household basis,is less than 2 million.

Number that access the net - if you consider the huge number of cyber cafe visitors in comparison to PC owners, I'd say 35-50million people was a fair figure. Note that time based visitors to cyber cafes means there's very little internet commerce capability, limited to airline tickets or such. Netbanking and Online credit card sales penetration is still fairly low.

There's a feel good factor, yes. Growth is heady for the top bracket. Penetration is not low because of lack of money; it's the void in reach and infrastructure. By 2015 India will, at the rate it's growing, reach around 150 million PCs with about 10 million in households. Still not anywhere close, I think, to the figures touted.

Other links:
A post on BusinessWorld's May 2006 report on Indian consumers
Forbes.com report

Demos to VCs in India: When, where, etc.

If you're an entrepreneur and want to demo your product to venture capitalists, note the following events.

Venture Intelligence Demo, Bangalore
Date: December 12, 2006
Deadline to submit: November 15, 2006

Arun Natarajan of Venture Intelligence has organised this as part of a Mobile VAS connect meet, and involves product demos only (no powerpoints) for product companies planning to release within 12 months. (Submit Demo Here)

TiE-Canaan Entrepreneurial Challenge, New Delhi
Date: Sometime in December.
Deadline to Submit: November 24, 2006. (Check here)

A business plan competition for existing entrepreneurs only. Plans to be honed through INSEAD, Singapore, and the Indian Band of Angels might invest.

Submit proposals via e-mail to challenge@tienewdelhi.org using their template.

Proto.in, Chennai
Date: Jan 20 and 21, 2007
Deadline to submit: 30 Nov 2006

A two day event, 30 companies, 10 minutes each. Prefers "itchy fingers", i.e. companies that want VC investments. Okay, why else would one...uhm, yeah, backspace and all that. I think I'll go attend.

Also read the corresponding venturewoods post.

What a great time to be an entrepreneur. And it's just beginning.

Money, the root of all evil?

You cannot help but smile at the logic of Tim Harford's reply to that question.