How Will Microsoft Reach Its Unlimited Potential?

Overnight, Microsoft expanded its Unlimited Potential program, as the company seeks to add another 1 billion computer users by 2015. To achieve its goal, Microsoft is offering governments a software suite—including Office Home and Student 2007 and Windows XP Starter Edition—for $3 per student, expanding local educational facilities and engaging non-traditional channels for placing computers and software.

Microsoft's logistical challenges are many, including different local cultures and economies, new partner channel engagement and cooperation with—or perhaps work against—other programs such as the $100 PC project. Additionally, Microsoft's ambitions look good at 10,000 feet, but aren't so pretty as seen at ground level. Many details are yet to be worked out and may radically change as Microsoft plows through the aforementioned obstacles.

Over the coming months, Microsoft plans to more actively engage local governments, NGOs, other technology companies and traditional reseller channels. In the process, Microsoft will have to cede some control over the end-user computing experience. For example, Microsoft is offering what it calls the Student Innovation Suite—Learning Essentials 2.0 for Microsoft Office, Microsoft Math 3.0, Office Home and Student 2007, Windows Live Mail Desktop and Windows XP Starter Edition—to governments for $3 per student. While Microsoft provides the software, local governments provide PCs, presumably working with local resellers.

Channel Building
A more fundamental problem: Microsoft may have to jumpstart some of these PC-for-student programs. Orlando Ayala, senior vice president for Microsoft's emerging segments market development group, acknowledged that he knows of no large-scale government program for delivering PCs to students. Three bucks is a sweet deal for Microsoft's student suite, but it's not much of a bargain if no one is buying.

Roger Kay, president of Endpoint Technologies, said that Microsoft would have to "contribute some to setting up the ecosystem. But that part is still a bit vague, as in who is going to actually camp out in Mongolia to make sure the yak herders' PCs are up and going and receiving ads for new Buicks."

Microsoft plans to tap non-traditional channels and traditional resellers, which have financial incentive to sell PCs, to jumpstart government subsidized PC-for-students programs.

"What concerns me is that this is a narrow channel," Kay said. "It may be convenient to just do this one program and get the mass market economies that go with it and let the governments worry about how it will work."

Suite not Sweet?
If the Student Innovation Suite program were philanthropy, Microsoft would subsidize some of the PC's cost.

But the program is not philanthropy, Clive Longbottom, service director of business process analysis for Quocirca, told Microsoft Watch. Microsoft's $3 suite and broader Unlimited Potential program have a "strong commercial angle," he said.

To diminish one potential obstacle, hardware compatibility, Microsoft had to include Windows XP Starter Edition in the student suite rather than its Vista successor. But will governments jump at the idea of giving students an older version of Windows, even for three bucks?

Then there is the contradiction—Microsoft positioning Unlimited Potential as being about education and economic improvement while providing students with older software for which skills would be obsolete. Even if Microsoft shipped Vista Starter Edition, there is capability disparity with other Vista versions.

Kay is concerned about PCs-for-student distribution. "The issue is that governments may not be the best parties to distribute PCs or even organize their distribution," he warned. Money—as in who pays—is part of the reason for the reliance on governments. "Microsoft doesn't want to deal with carriers and microfinancing organizations," Kay said.

But Microsoft may feel that it has no choice but to include government agencies, which would explain some of Microsoft's competitive priorities for expanding Unlimited Potential.

"The size of Microsoft's investment plans probably won't make much of a dent in the problem, but it will at least keep Microsoft engaged from a business perspective with the institutions that hold the reins in these countries," Simon Yates, a Forrester research director, told Microsoft Watch. "To ignore these institutions leaves the door open for competitors to step in and diminish Microsoft's long-term presence."

Cooperation? Maybe Not
Other programs, like Microsoft's PTA (partnership for technology access), are ambitious because of their potential logistical complexity. In countries like Chile, PTA has worked with local governments and resellers to provide Microsoft software on computers. Special financing and other incentives help small businesses obtain PCs.

Flexibility will be key as PTA expands. In countries where people live on less than $1 day, food is probably greater concern than buying a new PC. Microsoft, governments and local resellers will need to facilitate Internet cafes and community purchased PCs; these kinds of programs can be tug and pull because of the number of parties that are involved and potential conflicting interests.

Microsoft's biggest challenge may be working with other capitalists or relief groups offering other PC programs for emerging markets. There, cooperation already is sketchy. A seemingly natural fit would be Nicholas Negroponte's $100 One Laptop Per Child initiative.

Ayala told Microsoft Watch that there had been discussions with Negroponte.

"We are now running Windows on that device," Ayala said. But running Windows on the $100 PC isn't the same as shipping it. Ayala hinted but didn't clearly say that there was a difference about philosophical approach.

"We see some danger in approaches that are overly simplistic," he warned.

Perhaps, Microsoft's $3 Student Innovation Suite and the $100 laptop are contradictions. Microsoft's position has been that students need to develop computing skills on products they will use in the marketplace, with the presumption being Microsoft software.

More importantly, the $100 laptop uses open-source software, which is contrary to some of Microsoft's unstated reasons for expanding Unlimited Potential.

"Within the countries where this is being done, it is to defend against open source," Longbottom said. The cost to Microsoft is much less than the risk in countries like China where open source has some traction, he added.

Technology Skip
Where Unlimited Potential comes up short, at least for now, is the overemphasis on the PC.

Many emerging markets jump over one technology and go directly to another. For example, my sister does social work Guatemala, where few people have traditional landline telephones. Guatemalans skipped right to cell phones. Similarly, more people are more likely to have cell phones than PCs.

Worldwide cell phone shipments topped 1 billion units in 2006, up 22.5 percent year over year, according to IDC.

"Device shipments into emerging economies in Asia/Pacific, Central and Eastern Europe, the Middle East, Africa and Latin America have surpassed shipments to mature markets, and the difference between the two continues to grow," said Ramon Llamas, IDC research analyst, in a January statement accompanying the 1-billion shipment announcement.

For many people in these markets, the first computing and Internet-capable device is the cell phone. Many, perhaps most, of these cell phone users will never own a PC.

Ayala conceded Microsoft hasn't really addressed cell phones in today's announcement, but there would be future programs.

"There are 2.5 billion of these devices, and 70 percent are roaming," he said.

For now, Unlimited Potential is really limited by its PC focus. Considering Microsoft makes most of its profits from just two products, Office and Windows, the PC approach isn't shocking.

"Hopefully as they bring out more of the messaging, it will move more away from the PC focus," Longbottom said. "They realize that the PC is going to be a rare commodity in many of these areas."

Related:

• Microsoft's $3 anti-Linux Weapon, Linux Watch, April 19, 2007
• Microsoft Offers $3 Software for Developing Countries, eWEEK, April 19, 2007
• Why Is Microsoft's Unlimited Potential?, Microsoft Watch, April 19, 2007
• What Is Microsoft's Unlimited Potential?, Microsoft Watch, April 19, 2007
• Tellme About Dial Tone 2.0, Microsoft Watch, March 16, 2007
• One Man's Trash..., eWEEK, Feb. 12, 2007
• Windows Mobile Turns Six, Microsoft Watch, Feb. 8, 2007
• It's the Gulag or Linux for Some Russian Schools, Microsoft Watch, Feb. 7, 2007
• Microsoft Q2 2007 by the Numbers, Microsoft Watch, Jan. 25, 2007
• What the HP-Microsoft Deal Really Means, Microsoft Watch, Dec. 14, 2006
• Microsoft Launches 'Pay As You Go' PC Trials, Microsoft Watch, May 22, 2006
• Will Vista Pump Up Microsoft's Future Profits, Microsoft Watch, Feb. 3, 2006
• Microsoft Readies Two More Cut-Rate Windows Bundles, Microsoft Watch, Aug. 11, 2004