PC users will grow from about 670 million to over a billion in six years, but the new buyers are going to need some discounts.
Staff Writer, CNET News.com
By the end of the decade, a billion people will be clicking away at computers, but generating a profit out of newly wired portions of the world is going to take a lot of work.
The number of PC users is expected to hit or exceed 1 billion by 2010, up from around 660 million to 670 million today, fueled primarily by new adopters in developing nations such as , and India, according to analysts.
"It took more than 20 years to grow the worldwide base of PC users to 600-plus million. By 2010, I expect that to grow to 1 billion, due to opportunities in emerging markets and new scenarios and form factors," wrote in a recent e-mail to employees outlining the company's growth potential.
Selling computers into these countries, however, won't be easy. Poverty, unreliable , a multiplicity of languages, regional laws and education levels are all potentially major obstacles. And they could all get more daunting, rather than easier to manage, as time goes on.
"The problem isn't with the first billion, but the second or third billion," said Roger Kay, an analyst with IDC.
To penetrate these markets, companies are creating the sort of nation-building programs more often associated with organizations like the U.S. Agency for International Development () and the United Nations. Microsoft, for example, has set up an initiative called the Local Economic Development Program for Software, in which company employees advise government officials on building tech programs at local universities, intellectual property laws and other issues. Brazil is one of eight countries in the program.
"A lot of companies want to get into the export business, but you have to build your internal capabilities first," said Maggie Wilderotter, senior vice president of the worldwide public sector division at Microsoft, who, as part of her job, meets with people like Brazilian president Luiz Inacio Lula da Silva and ministers of Jordan's national cabinet.
Designing products to be cheaper is also an issue. Hewlett-Packard's is an early attempt to grapple with the price and management issues. Introduced in South Africa, the computer features four keyboards, mice and monitors, so four different people--in a variety of the local languages--can work simultaneously. The Linux-based computer may get introduced to Southeast Asia later.
If technology can be seeded in a national economy, the GDP will grow and in turn lead to future customers, said Maureen Conway, vice president of emerging market solutions at HP.
"But you've got to start the cycle somewhere," Conway said. "The low-cost access device is critical to product development."
In South Africa, the company has also taken over an abandoned university to train people on call center procedures and PC repair. In September, President Thabo Mbeki will speak at an HP-sponsored event.
, Microsoft and others are developing cheaper components and software for these regions, along with technologies like voice and handwriting recognition.
One billion? Sooner than you think
Hitting a billion in a few years appears inevitable. IDC estimates that there were 670 million PC users worldwide in 2003. A little more than a 152 million PCs will leave factories this year, and that tally is expected to grow over time. With about half of these going to new users, IDC believes the PC user population will grow to 1.2 billion by the end of 2009, a 79 percent increase over six years.
Gartner says there were 631.8 million PC users at the end of 2003 and 661 million now. The number will hit 953 million at the end of 2008 and cross over the billion mark in 2009. While those are huge numbers on paper, the annual compound growth rate is about 8 percent, said Gartner analyst George Schiffler.
Prices, though, will increasingly become an issue as the user population expands. A low-end Windows PC costs around $350 without monitor. That's just above the $340 per capita income of , according to statistics from that country's Can Tho University. Not all the new users will own their own system: Many will likely first learn through places like the in South Korea.
"The success of the PC platform is its ability to adapt to new forms and capabilities," said Smulders. "That is going to be a major influence."
People in these regions also adapt to technology fairly quickly in the right circumstances, said HP's Conway. In India, HP gave a group of village women solar-powered printers and cameras. The idea was that they would create a business out of making ID cards, a requirement for Indians to have but difficult for rural villagers to obtain without hours of bus travel.
The women have tended to double their family incomes, not so much through ID cards but rather portraits. "Instead of owning a camera, they are very happy to have a picture of their children taken every couple of days," Conway said.
In another Indian experiment, the company has stocked a van with PCs and wireless connectivity that drives between villages and allows farmers to test their soil, get information about crop prices, or receive advice from agricultural experts in Bangalore. HP is now looking at ways to turn the van over to local entrepreneurs.
Developing nations are also not necessarily bargain shoppers. China adopted the Pentium 4 at a more rapid rate than the United States, according to Intel.
Many technology companies have also honed the art of breaking into new markets. Company executives hold high-level meetings with local leaders to discuss the growth of the local high-tech industry. , for instance, regularly conducts regional sweeps. Partnering with has become commonplace.
In the end, though, it comes down to a question of the PC's utility.
"If they (potential consumers) see it as a productivity tool, then they can see it as an investment, like a car," said Kay.
Wang Dan of in Beijing and Winston Chai of in Singapore contributed to this story.