The ‘sponsored’ model for software

When Steve Ballmer (CEO of Microsoft) visited India couple of weeks back, he appeared in a TV show in NDTV profit channel. The program name was ‘Bridging 2 Indias’ and Naraya Murthy (Chief mentor of Infosys), Professor Ashok Jhunjhunwala (Professor at Electrical Engineering department at IIT Chennai and a famous personality who is promoting entrepreneurship in a big way) and Mr. Manvinder Singh(CEO of Ranbaxy) appeared in the panel discussion along with Mr. Ballmer. The theme of discussion was bridging rural-urban India using technology and it was really interesting.

For people who are reading my blogs regularly, would have found out that I am a strong believer in ‘empowerment’. It is the only way to solve major problems that India is facing today. In order to empower people, technology would definitely play a very key role and all the panel members shared the same opinion. Having said that, empowering people using technology (mainly using PC) is not all that easy in rural India because of the following reasons:

  1. The English language is popular only in urban India. So if it really needs to reach people it should to be in the local language.
  2. The pricing is always a challenge as rural folks would not be able to afford costly software.

In the panel discussion Murthy proposed an interesting concept called ‘sponsored model’ for software distribution, which I felt makes really sense in Indian context. What is this software sponsored model is all about? How it can be done? Will it be profitable for companies at the same time serve the rural Indians? Yes. It will. Let me give couple of successful examples for the sponsored model:

  1. The success of print media is mainly because of the sponsorship model. Have you ever thought about how newspapers are making profits even if they sell it at very low price (say Rs.2 and Rs.3)? What about GETIT yellow pages who are giving the news paper for free? It’s profitable because the major chunk of revenue in the print business comes from advertisements rather than subscriptions.
  2. The concept of ‘toll-free’ became a big hit because of the reason. When you dial 1-600 number in India (or 1-800 number in the US) the receiver pays for it. Basically it is sponsored.

Now what if the same model can be applied to software? How about having a Microsoft Windows running in Tamil language with advertisements (say P & G, levers, Pepsi, coke, and some local brands) bundled with the software? Basically the software company (like Microsoft) will tie up with various ‘sponsors’ and they will pay the major fraction of the software’s price. This will create a ‘win-win-win’ situation because of everyone benefits in this model. The software companies can access new markets (mainly the rural markets) not compromising too much on the price. The sponsors can reach more set of people which would help them to build the brand by placing advertisements. The rural folks will get the software at much cheaper price. Doesn’t it sound interesting?

In his famous book ‘Future at the bottom of the pyramid’, professor C.K.Prahlad strongly argues that future customers for all businesses are going to come from ‘bottom of the pyramid’ countries like India. I didn’t get a chance to read that book yet, but he has come to the conclusion based on his research. As the developed markets (like US, Singapore) are getting saturated, new products and business models need to be invented for ‘developing’ countries and sponsored model can be applied for software as well. I haven’t come across any companies who have started implementing this model but it really sounds interesting.

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