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Technology and the developing world

Fortune senior editor David Kirkpatrick discusses reducing the digital divide at a conference held at the United Nations.

By David Kirkpatrick, Fortune senior editor

NEW YORK (Fortune) -- When people ask me what I think is the most important trend in technology today, I always answer the same way. It's not Web 2.0, Open Source software or Google's growing power. The most important trend in technology is how it is boosting economic development around the world.

That's why I'm here.

The simultaneous rise of the internet and use of cell phones worldwide is making information and communications available to a huge portion of humanity that has up to now been excluded from the global economy.

There is no question that the biggest problem facing the world today is the vast disparity in wealth between the relatively small percentage of us who live in the developed parts of the world and the billions who still live hand-to-mouth.

I'm convinced that reducing the digital divide is necessary to reduce the global economic divide.

This technology gives individuals unprecedented new power. Make no mistake, personal empowerment is the most important consequence of the acquisition of technology tools. And most of us still underestimate the impact that will have on our institutions, whether it be business, government or the press.

Much of what I'm going to tell you about today has to do with specific technologies and programs and companies that are having an impact in the developing world.

But it's important when one gets excited, as I do, about the extraordinary potential of IT around the world to remember that to get the benefits of the technological revolution now underway, countries are going to need to change.

As a new document from Microsoft puts it, "the effective use of ICT is not only a technical challenge, but a cultural and institutional one, requiring adjustments in basic patterns of social and individual behavior and ultimately in political attitudes."

Hard as these things might sound, the alternative is far worse. Countries that fail to take these steps and help their citizens enter the information economy will very quickly get left behind.

But some developing countries are starting to understand the historic opportunity before them. I recently asked Paul Mountford, Cisco's head of emerging markets, if there were any new countries he had encountered which were aiming to use IT to speed up growth in the way that Korea, Taiwan and Singapore have done in recent decades.

He said the first country that came to his mind was Libya. And I wasn't even that surprised, because I had recently learned that Libya is the first country in the world to make a firm commitment for the inexpensive education-oriented laptop computers being developed by MIT's Nicholas Negroponte. Libya wants one for every single schoolchild in the country. I'll talk more about this so-called $100 laptop in a minute.

Cell phones

But let's be clear about the technology that is already having the greatest impact - the cell phone. As soon as a person possesses one they acquire a window into the entire world.

More than 80 percent of the world's population, calculates Motorola, already lives in an area covered by wireless networks.

There are an estimated 1.5 billion cell phones now in use in the developing world. That figure will go to at least 3 billion over the next five years. In India alone, 5 million new customers sign up for cell phones every week.

People are starting to talk about owning a cell phone as a basic human right.

The cell phone may not yet seem a very effective window to the world's information. But as the internet gets more and more customized for the cell phone, we will see an explosion of new uses for this small but immensely powerful device.

One good example of what's possible is a little company in Bangladesh called CellBazaar. Closely related to GrameenPhone, the largest mobile phone company in the country, CellBazaar enables the users of cell phones to conduct business on an eBay-like market.

Sellers list products or services in a database, and buyers search this database using only SMS text. CellBazaar doesn't actually conduct transactions, it just makes a connection between the parties, who meet in person to conduct the deal.

This company illustrates several key points about the use of cell phones in developing countries. First, well over 50 percent of cell phone usage there is for business use, mostly very small businesses.

Even in the slums of Mumbai, today a large percentage of residents have a mobile phone, which they use to bring more efficiency to the micro-businesses that occupy almost every home.

Cell phones speed the pace of economic activity and enable far more people to participate actively in the economy. Much of this activity is driven not by voice caling but by SMS - short text messages.

Think of how much more useful these phones will be when they become fully Web-enabled everywhere, allowing multimedia communication with video and photos.

Motorola already has many millions of orders for its new Motofone, built specifically for emerging markets. It will sell for around $30. But it is slimmer than the celebrated Razr, which has proven such a hit in the U.S. Motofone gets up to 400 hours of standby time on one battery charge, enabling its use in environments where electrical plugs are scarce. It uses a new kind of screen-a very large one specially enabled for SMS - that works in reflected light, using no internal lamps.

The Motofone also illustrates one of the most exciting trends when it comes to technology for the developing world - the poorest markets will increasingly be served with the absolutely most sophisticated high technology. To make Motofone both simple and cheap enough for the markets it aims to serve, Motorola had to apply state-of-the art design and electronics.

When my wife heard about it she said she wanted one. But technologies like this will appear first in the developing world, and only later penetrate places like the U.S.

Semiconductors

The technology industry has a wonderful force on its side as it attempts to serve the vast markets in the developing world - the continuing power of Moore's law, and the amazing magic of semiconductors. These chips are at the core of every electronic device.

Moore's law, formulated by Intel co-founder Gordon Moore, suggests that the complexity and capabilities of a computer chip doubles approximately every 18 months, even as its size and price remains constant.

So because of that exponential effect described by Moore's Law, chips are getting smaller and cheaper even as they grow ever-more complex. And the price of a chip - or any sophisticated technology product - goes down even faster when it gets built in larger numbers.

That has the wonderful effect of making the stuff that tech companies are building for the people of the developing world in many cases the most sophisticated products they have ever built. They will be less expensive simply because there are so many of them.

Another good example of this trend is the famous $100 laptop, promoted by Nicholas Negroponte, founder of MIT's Media Lab. The program is called One Laptop Per Child, or OLPC. The device is intended for elementary schoolchildren in undeveloped regions.

It will include full internet connectivity and be capable of receiving audio and video, and has a screen which can be used either as in a conventional laptop or twisted around so it can be read like a book.

The $100 laptop is just now going into production for pilot units. Negroponte expects it to be shipping in large volumes by next year, though initially it will cost more like $150 per unit. The $100 target will be achieved, OLPC hopes, as production volume rises.

As I mentioned, Libya has made a huge commitment. But other countries which have shown great interest in equipping their schoolchildren with this powerful device include Argentina, Brazil, Nigeria and Thailand.

To make such a laptop cheap enough but still powerful Negroponte had to invent fundamentally new technologies. The screen, the power source, and the physical design are all breakthroughs.

Many wonder if this radical device will ever really get used by the poor children of the world, but just by talking so much about it Negroponte - a master marketer - has sped up the process of getting technology to the world's poor. He's motivated a number of tech companies to radically increase their own efforts.

Increased interest

Indeed, one of the most promising recent developments for those of us who are committed to greater tech access for the world's developing regions has been the increased interest on the part of the biggest tech companies.

This is one area where the forces of globalization are working to everyone's benefit. Now Microsoft (Charts), Google (Charts), Intel (Charts), AMD, Cisco, Sun (Charts), Motorola (Charts), and Nokia (Charts), among others, are resolutely focused on the opportunity presented by the developing world. They are interested because of a wonderful combination of social concern and greed.

This is the largest market any of these companies have ever seen.

And it is a market developing incredibly rapidly. Just to give one example, a recent survey by the AMI Partners research firm determined that 40 percent of small businesses in India that don't already have a PC intend to buy one within the next year. That means many millions of new PCs just in that market alone. And even in Indonesia and the Philippines, about 25 percent of such small businesses expect shortly to purchase their first PC.

The business theorist CK Prahalad has had a huge impact in the tech industry with his theories about the opportunities offered by the developing world market. His book "The Fortune at the Bottom of the Pyramid" has been widely read and studied among the largest tech companies.

He is the one who first explained how attractive a business proposition it can be to serve the world's poor, and also explained that - as my wife's reaction to the Motofone demonstrates - products developed for developing countries can prove tremendously powerful in developed ones as well.

AMD, for example, has undertaken a major corporate initiative it calls 50X15. In support of the UN Millenium Development Goals, AMD is working to do its part to help get 50 percent of the world's population onto the internet by 2015. Today, only 17 percent of the world's population is online.

One step AMD has taken is to support Negroponte's OLPC project. The $100 laptop uses an AMD microprocessor. AMD also has developed its own inexpensive computer it calls the Personal Internet Communicator, which it has started deploying in some parts of the world in conjunction with local internet service providers.

AMD's Mario Rivas will be speaking later and I expect he will tell you more about this.

AMD's much-larger rival in microprocessor production, Intel, is also focusing more and more on devices for the world's poor. In its World Ahead program it has committed to investing over $1 billion over the next five years to develop better low-cost computers, increase the deployment of wireless broadband internet access technology, and help teachers use the internet in education.

Intel has several new PC designs for developing regions. One is a low-cost desktop for first-time computer users that is small and energy-efficient, intended for dense living environments. Intel is already working with governments and telecoms companies to make these available in Mexico, Egypt, Ghana, Brazil and Nigeria.

Intel also has what it calls the "Community PC" for shared use in rural villages. This machine is designed to resist dust, humidity, and extreme temperatures. Experience especially in India has shown that shared machines can be very valuable in villages, especially for farmers, fishermen and others. They can monitor market conditions and be much better informed about how to get the best price for their commodities.

And then Intel is also doing something else - what it calls "a small-form-factor, low-cost laptop PC that incorporates unique software and hardware features to serve educational needs." Sound familiar?

Intel has been significantly motivated to act by the growing global interest in Negroponte's OLPC project. It aims to show that devices powered by its own processors, not AMDs, will be most suited to the world's children.

But hey, why not? Competition is what drives growth. The more companies attempting to solve the problem the better, no matter what motivates them.

Intel plans to help train 10 million teachers worldwide on the effective use of technology in education. [It is conducting research on how to best achieve all these goals at four new design centers in Cairo, Mumbai, Sao Paulo and Shanghai.]

In addition, Intel has put big money and efforts behind the growth of wireless broadband networks, specifically the standard called Wi-Max, which is undergoing field trials worldwide right now.

If Wi-Max works as many hope, it will be the lowest-cost way to bring new billions into the internet economy. This techology should enable wireless networks which extend in a radius as large as 30 miles while providing broadband connection speeds to PCs or mobile phones.

Microsoft, for its part, has radically reduced the price of its Windows and Office software for developing countries, and created a new program that makes them much easier to translate into local languages, however obscure. Microsoft is also contributing hundreds of millions of dollars into programs that train students and teachers in technology use.

It's also creating what it calls Community Technology Learning Centers in places like Gabon, where people of all ages can gather to use the net, learn how to use computers or participate in community activities. Often Microsoft has donated the computers to a school which at night becomes a community tech center.

There isn't time to explain all the things that other companies are doing, but Sun Microsystems stands out for its work to advance what it calls the "Participation Age."

Cisco Systems now operates more than 10,000 Networking Academies in 150 countries. These programs, located in high schools, technical schools, colleges, universities and community organizations, teach the basic skills necessary for the operation of computer networks. Over 1.6 million students have graduated from these academies so far.

In addition to Motorola's efforts with Motofone, but other mobile technology companies including Qualcomm and Nokia are also focusing on making technologies for the people of poorer regions.

Software

When it comes to software, many in the developing world are excited about the potential of open source to speed the technologization of resource-poor economies. Open source software is, by definition, free. And the range of software available is now staggering - spanning everything from the most basic applications for individuals to the most sophisticated server infrastructure for large businesses.

However it is worth noting that even if it can be acquired free open source software can cost a substantial amount to maintain, just as any software would.

One company, Zimbra, is now making an open source email product. Any organization can download this full-featured product for free, and get features which aren't even available in Microsoft's Office and Exchange. If you want service and support, you pay, but not much.

Executives at Zimbra were surprised where it got its first paying user - the University of Guatamala, which now maintains 25,000 email mailboxes on Zimbra.

Sanjiva Weerawarana is a Sri Lankan who spent many years at IBM Research in Westchester County. A couple years ago he moved back to his home town of Colombo. Now he owns his own software company there, called WSO2. It's building an open source middleware product.

Middleware is one of the most expensive and important kinds of software used by any big company. IBM, who you will be hearing from shortly, and BEA Systems are the two most important companies that sell it. But here you have a competitor emerging in the most unlikely location with a product which it intends to make available for free.

WSO2 shows that open source not only enables customers in the developing world to acquire more inexpensive software, but that open source software can readily be built in the developing world. That's because it is made from components that are available to anyone.

Weerawarana told me that a critical factor which makes it possible for him to operate WSO2 in Colombo is the availability of high-quality IT graduates from the local university.

A project of Sun Microsystems shows the potential of open source for projects other than software. In 2004 it launched its Global Education and Learning Community, or GELC, which aims to bring the principles of open source to education. In open source development, anyone can contribute improvements to a product and some sort of central body decides which ones to accept and incorporate.

Sun's GELC, now being assisted with great energy by its former CEO Scott McNealy, is working to creat a free universal curriculum for Kindergarten through 12th grade in every major subject. Any educator or researcher will be able to contribute ideas or improve and modify text. This curriculum will be kept up to date and can be translated into any language or modified to meet the needs of any country or local government.

In a recent conversation McNealy seemed perplexed why school districts around the world spend so much money on textbooks, when the basic information in them is well known and, in most fields, standardized.

If this development gets traction, which I suspect it could, the world's primary and secondary educational systems could save a huge amount of money on textbooks which would enable us to bring more children into the world's schools.

There's another parallel trend to open source. Software no longer needs to be purchased. It can be used as a service, either for free, as we all do when we use Google, or for a fee.

Salesforce.com is the best example of the fee-based software as a service model. [Its product, which costs $80-100 per month per user, helps companies keep track of their customers and business prospects. It replaces software from companies like Siebel Systems which often cost $4000 or more, and even after that companies had to install the software on their own servers and hire technicians to continually maintain them.]

Just like open source, Software-as-a-service shows how powerful tools are getting more affordable and accessible. You can acquire capabilities without spending much money or taking much risk. That means businesses can get started more easily, and in any part of the world. That's a great thing for developing countries. It levels the playing field, and again, speeds the pace of economic development.

Surprising possibilities for the developing world also exist in other new techologies, like online virtual worlds. You may have heard about Second Life, for example, a 3D virtual world that is free to enter and enables people to interact in many of the same ways they do in the real world.

Second Life has developed an internal economy in which its participants build clothing, buildings, landscapes and other objects and sell them to one another.

Inside Second Life it is not that hard to make $200 a month selling virtual goods.

Think about that. If you have broadband internet access it doesn't matter where you live. You can still make that $200 even if you live in Rwanda. But in Rwanda $200 a month will allow you to live a very nice lifestyle.

We all know how the existence of the internet has enabled the emergence of the global software and services outsourcing business. But in a similar way individuals can now run their own businesses online, and from anywhere.

Wireless technology

In order to realize all this potential, any country ought to be focusing its efforts on how to improve its broadband networks. Many countries still don't recognize how significant this one factor is.

But it's possible for developing countries which make the right decisions on data networks to leapfrog developed countries like Korea has done. The better your country's internet network, the more economic potential there will be for your citizens and companies.

Intel thinks the broadband solution is WiMax wireless. Some telcos are betting on 3G and 4G cell phone networks. Others are putting their hopes in the highest-capacity systems - fiber line hardware sent directly to peoples' homes. In countries like Japan and Korea these systems now give some customers data at 100 gigabits per second. (In the US, most people still get less than one gigabit per second.)

In general, wireless technologies are likely to be the way developing countries modernize their infrastructures, simply because they don't require nearly so much digging. Wireless technology is a gift to the developing world.

Once broadband becomes available in a region, then lots of new opportunities arise. For instance, the use of Voice over Internet Protocol, or VOIP. Skype has popularized the largest system for VOIP so far, and in many developing countries it has become a routine way to stay in touch with relatives who have emigrated for higher-paying work in developed countries.

But this is yet another trend that poses challenges for the existing infrastructure players and governments. VOIP is free or extremely inexpensive. Tolls for long distance calls have been, along with cigarette taxes, among the most lucrative revenue sources for governments worldwide, since in many countries the government has owned the telephone company.

Government intervention

It may be as hard as quitting cigarettes, but every country MUST find a way to allow its citizens to take advantage of these new inexpensive communications and computing technologies, no matter what harm it brings to the long-established local monopolies.

To best take advantage of technology, the role of enterprise will be crucial. Countries that impose limitations on companies' ability to operate because of corruption or tax policy or favoritism for local suppliers risk seeing the growing investment dollars of the world's technology providers invested elsewhere.

For companies like CellBazaar or WSO2 to operate successfully in a developing country, they need to be certain they can count on laws being enforced and the protection of intellectual property. They need to have strong local educational institutions to work with.

It also can make many governments nervous to see technologies that increase the power of individuals. In some cases governments have tried to keep the power of citizens in check. We could all name a few.

That attitude will not work anymore.

The UN, of course, has a role in pushing towards change. It has tried several times to significantly boost efforts in IT for development. But in general, those efforts have failed to engage the IT industry players whose energies and knowledge is crucial.

For example, the World Summit on the Information Society did not elicit much enthusiasm from the technology industry. Frankly I blame the companies more than the UN and ITU for this failure.

I have not been impressed with the US government's role, either. There has been little effort on its part to help educate other nations about what it takes to successfully participate in the information revolution.

Some efforts, like the US participation in the G8 Dotforce project on IT and development, got a good start under the Clinton administration and were promptly squashed by the Bush one.

I hope the US will help lead, not sit idly by.

Nonetheless, the latest organizational effort, the Global Alliance for ICT and Development, of which this program is a part, seems to be achieving more buy-in from business.

The fact that its steering committee is chaired by former Intel CEO Craig Barrett I consider a positive sign. I hope more IT companies get involved.

In coming years we will see an explosion of new technologies for broadband, for mobile computing, for education and health care - and the first place in the world many of these will take root will be in developing countries where there is no legacy system problem, no installed base - just a huge mass of hungry eager people.

The next five years will be the beginning of a golden era for technology to empower the poor.

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